Grasping knowledge-based value creation dynamics in 21st century organizations

Citation

Carlucci, D. (2014), "Grasping knowledge-based value creation dynamics in 21st century organizations", Measuring Business Excellence, Vol. 18 No. 1. https://doi.org/10.1108/MBE-11-2013-0056

Grasping knowledge-based value creation dynamics in 21st century organizations

Article Type: Guest editorial From: Measuring Business Excellence, Volume 18, Issue 1

Nowadays organizations are continuously challenged to find new routes to accomplish the strategic business objectives and to deliver value to stakeholders.

Significant changes in business environments, the emergence of new technology, including social media, the pressure of new social concerns, are calling into question established conceptualizations of competitiveness, wealth creation and growth.

New and unaddressed set of issues regarding how public and private organizations manage and invest their resources to create sustainable value have been brought to light.

For example, the relatively recent increasing focus on environmental and social themes has suggested new dimensions to be taken into account in the value creation dynamics.

All this calls for a shift of main management concerns which cannot longer be tied only to efficiency, but they have to involve more and more outcomes and impacts of organizational business process. Value creation dynamics have to be conceived adopting a holistic approach to social, cultural, economic and environmental features.

This requires to organizations to have the capacity to develop new capabilities, to be agile, intuitive, imaginative, flexible to changes and innovative, as well as to rightly manage and retain talented people, build flexible operations, change their way to devise and operate their strategies, exploit strategic resources to create sustainable value.

During the last decades knowledge resources have been largely acknowledged as important drivers of value creation dynamics and the academic and practitioner interest about why and how to assess, leverage and manage these resources for improving organizational performance has greatly increased (Carlucci and Schiuma, 2007a; Grant, 1996; Schiuma et al., 2007; Sveiby, 1997). Concepts like human, relational and structural capital have been introduced to describe the whole features of knowledge resources as well as to deal with managerial need of identifying and evaluating company’s intangible resources. Intellectual Capital (IC) concept has been proposed as such an umbrella concept, offering a broader view on organizational knowledge resources and a better understanding of the potential patterns of coexistence among the subcategories of intangibles (Carlucci and Schiuma, 2007b).

Several management models of IC have been proposed, dealing with two main purposes, closely interrelated and complementary each other, i.e. the “value management” and the “value communication” purposes (Lönnqvist et al., 2009; Schiuma, 2009).

The “value management” purpose concerns the collection and communication, especially throughout the organization, of information about IC (e.g. IC disclosure; IC measures), and the processes of creating and developing IC in order to support organizational value creation and performance improvement. In comparison, the “value communication” purpose, concerns the communication and the reporting, internally and/or externally, of the value related to IC and generated and/or incorporated by the organization.

Over the years around the themes of “value management” and “value communication” of knowledge resources, a huge amount of academic research and practitioner studies has been produced. The studies have been characterized by several perspectives of analysis. In this regard Carlucci et al. (2004); and Carlucci and Schiuma (2005) suggest three main IC management perspectives, i.e. strategic, managerial and operational.

The strategic perspective considers the set of approaches that highlight the strategic importance of knowledge and its management in a company’s strategy. This perspective highlights the importance of defining an IC management strategy that, to be successful, needs to be integrated with the company’s strategy. This has great relevance in the definition and implementation of IC management supporting performance improvement, since it stresses the importance of defining IC management initiatives coherent with key company’s strategic objectives.

The managerial perspective comprises approaches and methodologies for organizational knowledge assessment and management. In this perspective, two main research streams can be identified: knowledge development and knowledge assessment. The first is strongly linked to the literature on learning organizations and involves all approaches and processes for creating and managing knowledge within an organization. The knowledge assessment is aimed at providing methodological approaches and tools to identify, classify and evaluate knowledge within a company. In this area, successful examples are the variety of approaches for measuring IC, such as Skandia Navigator, IC-Index Approach, Intangible Asset Monitor, Knoware Tree, and so on.

Finally, the operational perspective of IC management includes the set of organizational and managerial activities and projects such as teamwork, meetings, benchmarking of best practices, community of practice and so on. This perspective also includes projects to implement ICT tools designed for the development and use of knowledge.

Recently one of the topics that has greatly drawn scholars’ attention regards the complex dynamics through which knowledge resources take part to company’s value creation (e.g. Carlucci and Schiuma, 2007a; 2009; Carlucci et al., 2004; Carmeli and Tishler, 2004; Daum, 2002; Fathian et al., 2008; Grossman and McCarthy, 2005; Hsu and Wang, 2011; Liebowitz, 2005; Martin, 2004). This is because even if there can hardly be any doubt that knowledge resources and their management may have significant positive effects on organizational performance, more remains to be understood about how these resources can be coherently and successfully converted into value, what are the and “right”, or appropriate approaches to assess and manage these resources, and how these approaches can disentangle the mechanisms by which those resources contribute to improve companies’ capability to compete in today’s competitive scenario.

Scholars have investigated the mechanisms through which knowledge resources translate into value according to several views and contexts of investigation. In particular it seems possible to classify the studies according to:

* an atomistic versus a holistic view of value creation; where the atomistic view denotes the focus on one or few specific process performances (e.g. R&D productivity, customer satisfaction) while the holistic view stands for performances generally linked to market/profit measures (e.g. market to book value, Gdp);

* an atomistic versus a holistic view of organizational knowledge resources; where the atomistic view denotes single knowledge resources (e.g. motivation, brand, management practices) while the holistic view stands for knowledge resources taken as a whole and, generally, evaluated in monetary terms (e.g. VAIC; EVA; Tobin’s Q); and

* a micro (e.g. company) versus a macro (e.g. cluster, region, country) context of investigation.

Additionally studies have been developed according to “a single point in time” perspective versus a longitudinal perspective (See Figure 1).

To date, despite the great amount of theoretical and practical contributions, the value generated from knowledge resources and their management remains still difficult to quantify, especially using only money as unit of measurement. This is because any knowledge resources management initiative tends to meet different needs which are subjective, idiosyncratic, context- and time-related.

Figure 1 A view on the perspectives of analysis

Moreover, its effects on individual and organizational change are basically intangible in nature, elusive and hard to quantify, especially in economic terms.

Additionally, evaluating the effects of knowledge resources management is complex given that these effects are often indirect and long-term. They may take a long time to surface and may occur in unexpected places. In fact an investment in knowledge, even if intended to improve a single dimension of performance or to reach a specific objective, usually produces multiple effects throughout the organization. Therefore it is not always possible to identify a direct cause-effect link between knowledge resources management initiatives and the changes occurred within the organization. Besides, there may be effects that are outside our range of vision.

Therefore how to “prove” causality between knowledge resources management activities and their impact on realized value and performance still represents a challenge.

The contributions to this special issue deal with different aspects, which are important in advancing knowledge concerning how knowledge resources and their management contribute to improve performance and value created in twenty-first century organizations.

In particular, the issue provides a substantial contribution to the subject in terms of methodology and investigations in the field according to different perspectives of analysis, atomistic vs holistic view of knowledge resources as well as of value creation, and in a variety of contexts.

The selection of articles collected in this special issue is largely based on the works of the conference “International Forum on Knowledge Assets Dynamics – IFKAD 2013”, held from 13 to 15 June 2013 in Zagreb, Croatia. At this conference leading experts explored the relevance of the knowledge resources and their management for supporting business organizations as well as regional and urban systems to evolve and become smarter.

Main topics are traced back in the role of knowledge resources, as a single resource and as a whole, in the improvement of organizational performance and value creation.

GianPaolo Iazzolino, Domenico Laise and Giuseppe Migliano in their contribution adopt a holistic view of organizational knowledge resources and value creation and propose a comparison between VAIC (Value Added Intellectual Coefficient) and EVA. Their analysis shows that there is no linear correlation between these two measures of performances. In particular the authors, using a sample of 2,596 companies operating in Northern Italy in different industries, prove that EVA and VAIC refer to the Value Creation but the first is linked to a shareholders’ point-of-view; whereas the latter is linked to stakeholders’ viewpoint. Hence, they propose that the two visions can be integrated within a multicriteria dashboard such as Balanced Scorecard. In particular, according to the authors, VAIC concept can be included into the Learning andamp; Growth perspective; whereas the EVA can be considered as part of the financial perspective.

VAIC figures also in the contribution of Domenico Celenza and Fabrizio Rossi. The authors analyze 23 Italian listed companies with the aim of investigating the relationship between VAIC and the performance of the firms in the sample. The analysis includes two parts. In the first part, the relationships between the market-to-book value and the VAIC and between the business performance indicators and the VAIC are tested. In the second stage, the relationship between variations in the Market value and the variations in the VAIC are tested. The analysis of the observations of the first phase shows no statistically significant relationship between financial indicators and the VAIC, nor between the ROI, ROE and the VAIC. Regarding the market-to-book value, it doesn’t seem to be affected by the influence of intellectual capital. Regarding the results of the second phase, it appears that the VAIC is able not only to explain changes in the Market value but also to improve the explanatory power of the linear regression, especially if it interacts with the ROE, ROS and ROI.

Roberto Palmieri and Carlo Giglio focus on management of innovation. The authors deal with the management of the innovation process and analyze the mutual relationships among Creativity, Knowledge and Innovation (CKI). They provide a framework for a wider analysis of a CKI interaction system along with an overall measurement of its possible outcomes. According to Palmieri and Giglio, the proposed CKI perspective is useful for deepening the analysis of some fundamental paths across the three variables. In particular, it allows one to understand the dynamics that can be established between creativity vs knowledge resource policies (creativity-based approach vs knowledge-based approach) and innovation goals. The framework is also described as a tool to help the assessment of the impact of both innovation plans and operating actions at any level, as well as to support both decision making and control tasks in several operating contexts.

Further insights on innovation can be found in the work of by Karl Joachim Breunig, Tor Helge Aas and Katja Maria Hydle. The authors analyse how intangible resources, such as innovations practices, are incentivized and controlled to ensure sustained innovation performance. For this purpose they develop an explorative research design involving 25 semi structured interviews within five large scale-intensive service firms. According to the authors, the study suggests two main findings. First, innovation performance benefits from incentives and performance measures to enable innovation practice. Second, to enhance innovation performance there should be incentives and performance measures directly linked to the promotion of innovation practices and not just general performance measures.

Relationships between management practice and performance are addressed also in the studies of Giacomo Di Foggia and Valentina Lazzarotti. The authors analyze the role and scope of revenue management activities and its impact on competitiveness of Italian tourism Industry. In particular using data from a web survey, the scholars investigate the influence of revenue management on performance of Italian SMEs of hospitality industry as well as how exogenous factors affect revenue management related activities.

Further insights on management practices can be found in the work by Roberto Linzalone and Antonio Lerro. In their work, the scholars explore the social service sector in order to identify management model’s gaps. According to the authors, given the deep changes, e.g. social and demographic, occurring in public economy, social enterprises are called to a management innovation, shifting from a traditional management model based on “solidarity” to a “business oriented” one. Through a survey administered to 344 enterprises, the study reveals management variables and management factors of the social enterprise with business orientation.

Finally, Lara Agostini, Roberto Filippini and Anna Nosella focus on a specific knowledge resource, i.e trademarks, and investigate their impact on economic and financial performance of SMEs belonging to the fashion industry, trying also to shed light on the different effect that corporate and product trademarks may produce on SMEs’ performance.

The analysis is carried out using a fixed effect cross-sectional time-series regression model over a period of ten years, from 2002 to 2011, taking into account the issue related to time-lags between trademark registrations and SMEs’ performance, proxied by sales. The panel dataset comprised Italian SMEs operating in the fashion industry. The results indicate that trademarks do have a positive impact on SMEs’ performance in the fashion industry, in accordance with previous studies.

In particular, the analysis of the impact of corporate and product trademarks on SMEs’ performance separately, shows that only corporate trademarks have a positive impact on SMEs’ performance with four- and five-year aggregates, with five-year aggregate showing the highest estimates, as for total trademarks. Instead, product trademarks do not show any positive impact on SMEs’ performance in the fashion sector.

Conclusions

The dynamic nature of the competitive scenario has renewed the attention of public and private organizations on the development and exploitation of knowledge resources as a means of creating value that is sustainable over time. Over the years several organizations have embarked in extensive knowledge resources management efforts in order to improve their capacity to reach superior performance and establish long-term competitive advantage. Moreover, the wide acknowledgement of the great potential of knowledge resources and their management in determining superior performance has stimulated researchers to analyze, in more depth, the importance of knowledge for achieving business excellence in the new complex economic landscape of the twenty-first century.

Unfortunately, knowledge resources management suffers from the same challenges as many other management issues: managers search always for visible and quantifiable results, but it is not simple and immediate to evaluate the contribution of knowledge resources in value creation paths. This is because several mechanisms and factors intervene to establish business benefits of knowledge resources management.

Looking at ways for evaluating the effects of managing knowledge in order to have proofs of the true worth of knowledge resources management, continues to attract an increasing attention from researchers and practitioners (e.g. Beccera-Fernandez, 2004).

The topics of the contributions to this special issue reflect this emerging discussion and attempts to increase understanding about how knowledge resources translate into value in twenty-first century organizations.

Certainly the development of appropriate and shared models, methods and approaches to grasp knowledge-based value creation dynamics still remains an open room for investigation.

Several questions that are more or less unexplored, deserve further investigation.

There are global trends that are deeply reshaping the twenty-first century business landscape. For example, embedding sustainability into strategy and policy is increasingly becoming crucial both for private and public organizations and traditional management principles seem incapable alone to drive the future organizations’ value creation dynamics. For organizations it has become relevant to adopt a holistic approach to social, cultural, economic and environmental features in value creation dynamics. The management of the strategic knowledge value drivers as well as of the related knowledge management processes may support organizations in developing strategies and practices inspired by sustainability.

This raises questions about how evaluating the contribution of knowledge resources and their management to organizational value creation dynamics according to sustainable growth perspective. This involves the design and the effective implementation of renewed approaches, models and tools for assessing and managing knowledge resources to support the development of sustainable business models.

Moreover, in the new millennium value creation is more and more depending on human based dimensions, therefore organizations have to integrate their knowledge resources with a perspective that recognizes the relevance of people’s experiences, emotions and energy in shaping and influencing the quality and performances of organizational and business models. According to this perspective, a renewed attention should be paid on the evaluation of the impacts of knowledge dimensions such as people’s and organization’s emotions and energy, on value creation dynamics.

Daniela Carlucci

References

Beccerra-Fernandez, I., Gonzalez, A. and Sabherwal, R. (2004), Knowledge Management: Challenges, Solutions and Technologies, Pearson-Prentice Hall, Upper Saddle River, NJ
Carlucci, D. and Schiuma, G. (2005), “Knowledge asset value spiral”, Knowledge and Process Management Journal, Vol. 13 No. 1, pp. 35–46
Carlucci, D. and Schiuma, G. (2007a), “Exploring intellectual capital concept in strategic management research”, in >Joia, L.(Ed.), Strategies for Information Technology and Intellectual Capital: Challenges and Opportunities, Idea Group, London, pp. 10–28
Carlucci, D. and Schiuma, G. (2007b), “Knowledge asset value creation map – assessing knowledge asset value drivers using AHP”, Expert Systems with Applications, Vol. 32 No. 3, pp. 814–821
Carlucci, D., Marr, B. and Schiuma, G. (2004), “The knowledge value chain – how intellectual capital impacts business performance”, International Journal of Technology Management, Vol. 27 Nos 6-7, pp. 575–590
Carmeli, A. and Tishler, A. (2004), “The relationships between intangible organisational elements and organisational performance”, Strategic Management Journal, Vol. 25 No. 13, pp. 1257–1278
Daum, J.H. (2002), Intangible Assets and Value Creation, Wiley, Chichester
Fathian, M., Sotoudehriazi, M., Akhavan, P. and AliAmin, M. (2008), “How to assess knowledge management: developing a quantitative model”, International Journal of Electronic Business Management, Vol. 6 No. 1, pp. 10–20
Grant, R.M. (1996), “Toward a knowledge based theory of the firm”, Strategic Management Journal, Vol. 17, Winter Special Issue, pp. 109–122
Grossman, M. and McCarthy, R.V. (2005), “Qualitative approaches to knowledge management assessment”, Issues in Information Systems, Vol. 6 No. 2, pp. 90–95
Hsu, L.-C. and Wang, C.-H. (2011), “Clarifying the effect of intellectual capital on performance: the mediating role of dynamic capability”, British Journal of Management, p. 22
Liebowitz, J. (2005), “Developing metrics for determining knowledge management success: a fuzzy logic approach”, Information Systems, Vol. VI No. 2, pp. 36–42
Lönnqvist, A., Sillanpää, V. and Carlucci, D. (2009), “Intellectual capital management in practice: assessment of implementation and and outcomes”, Knowledge Management Research and Practice, Vol. 7 No. 4, pp. 308–316
Martin, J.W. (2004), “Demonstrating knowledge value: a broader perspective on metrics”, Journal of Intellectual Capital, Vol. 5 No. 1, pp. 77–91
Schiuma, G. (2009), “Managerial foundations of knowledge assets dynamics”, Knowledge Management Research and Practice, Vol. 7 No. 4, pp. 290–299
Schiuma, G., Pablos, P. and Spender, J.C. (2007), “Foreword: intellectual capital and company’s value creation dynamics”, International Journal of Learning and Intellectual Capital, Vol. 4 No. 4, p. 2007
Sveiby, K.E. (1997), The New Organizational Wealth: Managing and Measuring Knowledge Based Assets, Berrett Koehler, San Francisco, CA

Further Reading

Carlucci, D. and Schiuma, G. (2009), “Applying the analytic network process to disclose knowledge assets value creation dynamics”, Expert Systems with Applications, Vol. 36, pp. 7687–7694
Marr, B., Schiuma, G. and Neely, A. (2004a), “The dynamics of value creation: mapping your intellectual performance drivers”, Journal of Intellectual Capital, Vol. 5 No. 2, pp. 312–325

About the Guest Editor

Assistant Professor Daniela Carlucci is researcher at the Center for Value Management – LIEG – at the University of Basilicata, Italy. After gaining her PhD, she has been Visiting Scholar at the Center for Business Performance, Cranfield School of Management (UK) and Visiting Professor at the Tampere University of Technology (Finland). She is actively involved in relevant research and consultancy activities as researcher and has worked in research projects involving national organizations and institutions. Moreover, she is systematically engaged in teaching activities in public and private institutions. Her research interests focus on knowledge management, knowledge assets and intellectual capital assessment & management, innovation, business performance measurement and management, knowledge intensive service, decision making in organizations and decision support methods, organizational behavior. She has authored and co-authored several publications, including chapters of books, articles, research reports on a range of research topics particularly embracing knowledge assets and intellectual capital management. She is regular speaker at national and international conferences. Moreover she acts as a reviewer for several international conferences and journals. Daniela Carlucci can be contacted at: mailto:daniela.carlucci@unibas.it