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Strategic Management of Intangible Assets and

Value Drivers in R&D Organizations

Article in R& D Management · May 2005

DOI: 10.1111/j.1467-9310.2005.00377.x

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Strategic management of
intangible assets and value
drivers in R&D organizations
Stephen Pike1, Göran Roos1,2 and Bernard Marr2*
1
Intellectual Capital Services Ltd., 46 Grays Inn Road, London WC1X 8LR, UK
2
Centre for Business Performance, Cranfield School of Management, Cranfield, Bedfordshire
MK43 0AL, UK. bernard.marr@cranfield.ac.uk
*Corresponding author

This paper takes a resource-based view of the R&D process. Based on the literature, we
forward a theory that allows us to predict the dynamic interaction and transformation of five
key resources, namely human, relational, organizational, monetary, and physical. Utilizing
visualization tools allows us to test this theory on various levels in order to draw insights from
the data. The output of the analysis improves the strategic understanding of an organization.
In particular, it improves the understanding of how intangible resources drive the value
creation in an R&D organization. Further analysis of the data allows us to identify resources
that are either under utilized or over utilized, which might indicate inefficiencies in the
organizational performance.

1. Introduction that determines differences in R&D performance

(Del Canto and Gonzalez, 1999).

A s global competition intensifies, research and

development (R&D) organizations need to
enhance their strategic management in order to
become goal-directed communities for innovation
(Judge et al., 1997) and allocate their resources
consistent with their overall R&D strategy (Har-
rison et al., 1993). It is now widely acknowledged
that intangible assets are a key driver of innova-
tion and organizational value in R&D organiza-
tions (Coombs, 1996; Del Canto and Gonzalez,
1999; Bounfour, 2003). The appropriate alloca-
tion and deployment of intangible resources is an
important strategic decision for organizations in
general and R&D organizations in particular
(Halliday et al., 1997). However, Knott et al.
(2003) and Dierickx and Cool (1989) conclude
that the accumulation process of intangible assets
per se is not an isolating mechanism for increased
R&D performance. It is the effective management
of the available resources, tangible and intangible,
Much of the work on resource allocation in
R&D organizations is focused on financial re-
sources and staffing (Harrison et al., 1993; Scho-
lefield, 1994). Little research has concentrated on
how to best deploy and utilize intangible re-
sources within R&D organizations. At the same
time R&D companies often struggle with causal
ambiguity and a strong interconnectedness of
assets (Dierickx and Cool, 1989). This means
that R&D organizations often do not understand
how resources rely on each other to create value
which leads to an R&D process that is often
stochastic and discontinuous (Dierickx and
Cool, 1989). Without a solid understanding of
the key value drivers and their dynamic interac-
tion it is difficult to strategically manage and
effectively allocate resources.
The aim of this paper is to understand the
dynamic value creation of resources in R&D
organizations. Especially, we seek to understand

R&D Management 35, 2, 2005. r Blackwell Publishing Ltd, 2005. Published by Blackwell Publishing Ltd, 111
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
Stephen Pike, Göran Roos and Bernard Marr
the importance of intangible assets in the value
creation of R&D companies. For this aim we first
ground our research in the resource-based view of
the firm. We define resources and intangible assets
in an R&D context and then discuss the inter-
connectedness and dynamic nature of these re-
sources in the value creation process. From the
literature we derive a generic model of resource
dynamics in the R&D process, based on the value
shop model by Stabell and Fjeldstad (1998).
Subsequently, we outline our research approach
and the dynamic mapping tools used to visualize
the resources and their interactions to create
value. We then discuss the findings of three in-
depths case studies conducted in leading R&D
organizations, before we conclude with final re-
marks and future research opportunities.
2. A resource-based view of R&D
Teece et al. (1997) distinguish (a) models of
strategy as emphasizing the exploitation of mar-
ket power, such as competitive forces (Porter,
1980) and strategic conflict (Sharpiro, 1989),
and (b) models of strategy emphasizing efficiency,
such as the resource-based perspective (Penrose,
1959; Wernerfelt, 1984) and the dynamic capabil-
ities approach. For the research presented in this
article we take a resource-based view of strategy
(Wernerfelt, 1984; Dierickx and Cool, 1989; Pra-
halad and Hamel, 1990; Barney, 1991a; Grant,
1991; Petergraf, 1993). This view of innovation-
based competition, increasing returns and devel-
opment of strategic competence was first framed
by Penrose (1959) and then later picked up by
Wernerfelt (1984) and Rumelt (1984) who are seen
as developers of the modern resource-based view
of the firm (Foss, 1997). The resource-based view
concentrates on the antecedent role of internal
resources and understands firms as heterogeneous
entities characterized by their unique resource
bases (Nelson and Winter, 1982) with different
distinctive competencies (Selznick, 1957). Trans-
action cost theories show that organizations
should concentrate on core capabilities and not
necessarily use excess capabilities to enter a multi-
product or diversification strategy (Teece, 1980;
Montgomery and Wernerfelt, 1988). This means
that firms need to strategically deploy and utilize
their resources in order to gain a competitive
advantage (Petergraf, 1993).
According to the resource-based view, sustain-
able competitive advantage results from resources
that are inimitable, not substitutable, tacit in
112 R&D Management 35, 2, 2005
nature, and synergistic (Wernerfelt, 1984; Rumelt,
1984; Barney, 1991a; Teece et al, 1997). There-
fore, managers need to understand what are the
key resources and drivers of performance and
value in their organizations. Traditionally, those
resources were physical, such as land and ma-
chines, or financial capital. More recently intan-
gible assets have been identified as key resources
and driver of organizational performance and
value creation (Itami, 1987; Roos and Roos,
1997; Nahapiet and Ghoshal, 1998; Teece, 2000;
Delios and Beamish, 2001; McGaughey, 2002)
and it seems that this holds especially true for the
R&D process (Henderson and Cockburn, 1994;
Del Canto and Gonzalez, 1999; Quelin, 2000).
Itami (1987) was one of the first to articulate the
notion of intangible assets such as technology,
accumulated consumer information, brand name,
reputation, and corporate culture as the critical
resources of firms and sources of competitive
power. Hall (1992) divided intangible assets into
intangible properties and intangible resources. In-
tangible property is defined as knowledge related
to legal ownership, for example patents, trade-
marks, copyrights, trade secrets, registered designs,
brands as well as computer software, contracts and
databases. Instead intangible resources are mainly
formed by an individual’s experience, organiza-
tional routines, and relational resources such as
reputation, client loyalty, as well as the firm’s
relationships. The literature provides further meth-
ods of classifying intangible assets (Roos and
Roos, 1997; Sveiby, 1997). One frequently quoted
classification is the model proposed by Skandia
which split market value into financial capital and
intangible assets (Edvinsson, 1997). Skandia, di-
vided intangible assets into human capital, custo-
mer capital, process capital and innovation capital.
Multiple taxonomies of intangibles have been
suggested over the past decade, however, it seems
that the distinction between human capital, orga-
nizational capital, and relational capital are the
most commonly accepted categories (Bainbridge et
al., 2001; Pike and Roos, 2001).
2.1. Resource definition
As noted above, intangible resources are usually
categorized into three main groups – human,
organizational, and relational. To these are added
the two familiar tangible resource groups of the
firm namely physical and monetary resources.
Human capital is a core asset for R&D firms as
they rely on highly educated scientists and tech-
r Blackwell Publishing Ltd. 2005
 Assets and value drivers in R&D organizations

nicians with know-how in the relevant areas. In
this context it includes the experience, knowledge,
judgment, abilities and skills of individuals asso-
ciated with the firm (Barney, 1991a). Research
suggests that in R&D environments university
degrees, diversity of backgrounds, as well as
knowledge depths are strongly associated with
innovation (Caroll, 1967; Devar and Dutton,
1986; Souitaris, 2002).
Organizational capital includes brand, intellec-
tual property (IP), strategy, culture, reputation and
image of an R&D firm. Teece (1986) shows that
such commercial resources can become important
for the suitable exploitation of R&D activities.
Furthermore, evidence exists that in an R&D
context a strong market orientation improves
innovative capacity (Rothwell, 1992) and organi-
zational culture is a critical success factor (Pearson,
1989; Damanpour, 1992).
Relational capital for an R&D organizations
include partnering agreements with suppliers, ex-
ternal subject matter experts, research centers, or
universities as well as relationships with regula-
tory bodies. Quelin (2000) finds that by nurturing
relationships with external research laboratories
and universities R&D organizations can develop
and nurture their competencies. Similarly, Hen-
derson and Cockburn (1994) find that encoura-
ging and maintaining flows of knowledge across
the boundaries of the firm and across scientific
disciplines leads to more productive R&D efforts.
In addition, Chung and Kim (2003) discover that
higher level of supplier involvement has positive
effects on R&D performance.
Physical capital includes land, buildings, infor-
mation technology, equipment, materials and
products of an R&D organization. Results in
R&D organizations often depend on highly valu-
able and specialized equipment, tools or software
applications. Del Canto and Gonzalez (1999)
confirm that successfully carrying out R&D ac-
tivities often requires highly sophisticated equip-
ment and technology, which is added to the
productive system of the firm.
Monetary capital in the R&D context includes
any financial assets, which are equivalent to or
can be converted into cash. Cash flow generated
by the firm make future R&D activities possible
(Baysinger and Hoskisson, 1989; Goolsbee and
Klenow, 2000) and in turn R&D activities gen-
erate future cash flow (Mansfield, 1965; Minasian,
1969). For an overview of the resource categories
see Figure 1.
2.2. The dynamic nature of resources in
R&D
The concept of performance drivers suggests
causal relationships between resources and orga-
nizational value creation. Penrose argues that it is
never resources themselves that create value, but
the services that the resources can render (Pen-
rose, 1959, p. 25). Resources are not just static
assets but they dynamically interact with each
other to be transformed into value (Roos and
Roos 1997; Roos et al., 1997; Teece et al., 1997).
Dierickx and Cool (1989) talk about intercon-
nectedness of asset stocks and argue that asset
accumulation might depend on the level of stocks
of other assets. The example they give is new
product development, which often finds their
origin in customer requests or suggestions and

Resource group Scope Ownership Control

Resources which are intrinsic to
Human people such as their creativity, By employees By company
behavior, education and ability
Resources which the company has
developed such as brand, image,
Organizational By company By company
IP, know-how, culture, systems &
strategy
External resources which the
company needs or which affect
By the other By the other
Relational the company such as the
party party
suppliers, customers, regulators
and partners
The company’s land, buildings,
Physical IT, equipment, materials and By company By company
products
The company’s cash or other
financial assets which are
Monetary By company By company
equivalent to or can be converted
to cash

Figure 1. Resource categories.

r Blackwell Publishing Ltd. 2005 R&D Management 35, 2, 2005 113

Stephen Pike, Göran Roos and Bernard Marr
Problem Problem
Finding and Solving
Acquisition
Choice
Control /
Execution
Evaluation
Figure 2. Value shop.
that it may be harder to develop technological
know-how for firms without an extensive service
network. It is also argued for time compression
diseconomies (Dierickx and Cool, 1989), for ex-
ample that the existence of a superior stock of
R&D know-how puts firms in a better position to
make further breakthroughs and add to their
existing stock of knowledge. Klein et al. (1998)
discuss the interactions and relationships between
core competencies and skills in R&D environ-
ments. They state that in an R&D domain, in
which the role and value creation is complex and
often called in question, understanding and vi-
sualizing a network of interacting core competen-
cies can be useful for firms to understand and
characterize themselves.
Research is usually considered to be an iterative
process whereby knowledge is increased by devel-
oping and extending that which is already known.
Even significant theoretical advances have been
attributed to this process.1 The process of extend-
ing knowledge, codifying it and having it taken up
by others which in turn leads to new avenues of
research makes research an essentially cyclical
process and many have described it in such terms
(Boisot, 1998).
In business terms, this process has a parallel in
the business logics described by Stabell and Fjeld-
stad (1998). They describe alternative business logics
to the Porterian value chain, especially introducing
the value shop and the value network. The former is
particularly applicable for professional services, as
found in medicine, law, engineering, management
consultancy, and R&D. The process of the value
shop chain is depicted in Figure 2.
The process starts with a problem that is
discovered or acquired (top-left). Then possible
solutions to the problem are identified. Subse-
quently, the most appropriate solution is selected
and executed. Finally, the outcome of the execu-
tion is evaluated and learning takes place. Post-
114 R&D Management 35, 2, 2005
execution evaluation can then feed back into a
new problem definition and a new problem-find-
ing activity.
The value shop process shows clear parallels with
the scientific method and R&D activities, which
starts with the observation of a phenomena fol-
lowed by the development of a hypothesis. The
hypothesis is then tested to see whether it can
predict the outcome of further experiments. At
this stage the hypothesis can be codified. It is then
tested by others to ascertain its match with reality.
If it fails to match real-world experiments then the
hypothesis is modified and the process starts again.
In resource terms, this can be expressed as the
use of cognitive abilities (human capital) to gen-
erate new hypotheses, which are tested and then
codified (organizational capital). This covers the
first three steps of the cycle above. Testing is
carried out in the real world with real client
problems and the evaluation generates the need
for a new cycle (relational capital). The testing of
the hypothesis will also lead to internally gener-
ated modifications to the hypothesis, before it is
tested in the real world. This is a transformation
of organizational capital into human capital. Hu-
man resources will influence organizational re-
sources which will, in turn, influence relational
resources. Both relational and organizational re-
source will influence human resources in the next
round of thinking. Stabell and Fjeldstad (1998)
continue the argument by adding that success
breeds success creating a virtuous cycle. Dierickx
and Cool (1989) show that this is especially true
for the R&D process. Best people attract best
projects, which attract the best people, which
successfully solve the problems, which creates
success and reputation. The above outlined dy-
namic interactions are depicted in Figure 3.
We contend that in any R&D organization, this
basic structure should be visible. Of course, there
will be variations and additions to accommodate
the characteristics of the organization under scru-
Organizational
Human
or Human
Relational
Figure 3. R&D Dynamics.
r Blackwell Publishing Ltd. 2005

tiny. Furthermore, the relative influence of each
and the transformations between them should be
that none is inordinately different from the others.
3. Research approach2
The aim of this research was to identify the key
value drivers – especially the intangible assets – in
the R&D process and visualize their dynamic
interaction in order to gain further insights into
the value creation process. Three firms were se-
lected which represented large R&D organizations
among members of an internal research network.
The CEO’s agreed to the research project and
became the primary sponsors of the project.
In order to understand the importance of re-
sources and their interaction we conducted be-
tween five and 10 structured interviews of decision
makers as well as a set of workshops in these three
organizations over 1 to 2 months.
The first set of interviews were directed towards
understanding the resource structure of the orga-
nization. In a structured interview of decision
makers, guided by our resource classifications,
we identified the critical resources and established
their relative importance. These were then con-
solidated in a first workshop with all participants.
The detailed nature of these resources is defined
by obtaining a consensus view on the sub-divi-
sions of each category, that is, each category is
defined by its parts. This sub-division process is
carried out until all ambiguity is eliminated about
the meaning of resources descriptions. In addition
the sub-division process yielded a minimum set of
resources, which were distinct, complete and
independent. Resource categories outlined in
Human Organisational
Resources Resources
R&D Intellectual
capabilities property
Commercial Organisational
alignment culture
Management Processes
capabilities Organisational
Partnering structure
capabilities Organisational
Learning strategy
Brand and
image
Figure 4. Example of level two resources.
r Blackwell Publishing Ltd. 2005
Assets and value drivers in R&D organizations
Figure 1 are termed as level one resources. Level
one resources can then be sub-divided into level
two resources, which again could be broken down
into further parts. An example of a possible level
two categorization of level one resources in R&D
is shown in Figure 4.
In order to address the dynamic interactions
between resources a second workshop is devoted
to a discussion of how the resources, identified in
the first phase, interact with each other (Gupta
et al., 2002; Marr et al., 2003; Neely et al., 2003).
For example, do ‘R&D capabilities’ influence ‘IP’
or does the ‘brand image’ influences ‘regulatory
bodies’ or ‘customers’ and if an interaction exists,
how important is this interaction compared with
the other interactions? For example, does ‘brand
image’ interact stronger with ‘customers’ or ‘reg-
ulatory bodies’? The results from these weightings
are normalized and combined with the ‘static’
resource weighting to give an absolute weighting of
each possible transformation. The resultant data is
used to generate a conceptual map of resource
deployment, a so-called Navigator (Gupta and
Roos, 2001). The relative importance of transfor-
mations between resources is determined by a
consensus process on a ratio scale.
Theoretically, if N resources have been defined
as important then there will be N2 possible
transformations between them. If there were 20
defined resources then the navigator could theo-
retically contain 400 transformations. This can
lead to overload and difficulty in interpretations.
If too many resources and transformations are
detected it might be possible exclude the resources
of low importance or to combine related re-
sources as long as the combined resource can be
meaningfully discussed at a higher level.
Relational Physical
Resources Resources
Regulators Facilities
Customers Stored
Strategic products &
alliances materials
Market makers Service
Influencers infrastructure
Local
community
Monetary
Resources
Budget
R&D Management 35, 2, 2005 115
Stephen Pike, Göran Roos and Bernard Marr

Management
capabilities

Learning R&D
capabilities Commercial
alignment

Partnering
capabilities

IP Processes
Regulat-
ors

Systems

Organisational Suppliers
strategy
Customers
Organisational
culture
Organisational R&D
structure Facilit- budget
ies

Figure 5. Example of a navigator plot (PharmaWorld).

In the diagram, the size of the circles represents

the importance of the level two resources, the
Influences

H
arrows represent the transformations between
OR
resources, and the thickness of the arrow repre-
R
sents the importance of the transformation. Note
Is influenced by

Resource importance P
that there are no bi-directional arrows since the M
meaning of transformations from resource A to
resource B is entirely different from and not
reciprocal to a transformation from resource B
to resource A. Figure 5 shows such a map with 12
Figure 6. Example of an effector plot.
transformations and 8 resources connected.
Mathematically, the data from the weighting
processes can be expressed as a combined matrix area are termed ‘sinks’ of value. The reverse is
of transformations. The matrix representation true for output resources.
facilitates further analysis of results (Holmberg The data collected in our case study companies
et al., 2002). was used to obtain the above diagrams in order
The navigator matrix comprises of rows whose to:
meaning is taken as the absolute influences a
1. Understand whether the pattern of resource
given resource has on all resources, including
use in the navigator of the R&D organizations
itself. The columns of the matrix represent the
aligns with the generic pattern identified in the
degree to which a resource is influenced by all
literature.
resources, including itself. The ratio of these two
2. Identify the characteristics of resource deploy-
entities can be thought of as an analogue to a
ment
‘return on assets’ figure in influence space. This
3. Gain an insight into the resource utilization,
ratio can be plotted against the absolute impor-
i.e. how effective are the resources used?
tance of the resource to yield an ‘effector’ plot
depicted in Figure 6. Above the x-axis, ‘means to
an end’ resources affect other resources more than 4. Findings
they are affected themselves and so are classified
as ‘sources’ of value. Below the x-axis the reverse Below we outline the key findings gained from our
applies and ‘means to an end’ resources in this case study research in three R&D organizations.3

116 R&D Management 35, 2, 2005 r Blackwell Publishing Ltd. 2005

 Assets and value drivers in R&D organizations

4.1 Case study 1 (PharmaWorld) the navigator plot reveals both inefficiency and
ineffectiveness. The navigator at level two con-
The first case study company is PharmaWorld, a
firms this basic diagnosis, but allows extraction of
large international pharmaceutical company. The
further insights.
level one navigator is shown in Figure 7 and
The level two navigator (see Figure 5) reveals
illustrates that human capital is the primary
that regulators are key external influence and not
resource, followed by organizational and rela-
customers or suppliers. In addition, the organiza-
tional capital. The picture follows the logic ex-
tional resources of structure, culture and strategy
tracted from the literature (see Figure 3), but a
play very little part in the running of the R&D
closer inspection of the transformations facilitates
company. Thus, they may be technically excellent
interesting interpretations of the data.
but they are insular, since the only direct external
As can be seen in Figures 5 and 7, while the
influence seems to come from regulators, and
interaction between human and organizational
independent since strategy, culture and structure
capital is evenly balanced, the interactions be-
seems to have no influence on the management of
tween relational capital (regulators, suppliers and
the R&D company.
customers) and the other two resources categories
The effector diagram for this company is de-
(human and organizational) are weak (the custo-
picted in Figure 8. The key resources that need
mer and supplier resources are, as can be seen,
investigation are those that fulfil the requirements
unconnected to the rest). This might suggests that
that they are both highly important and either a
the external input to new directions of research is
clear value source or value sink. In our case, these
weak and that ‘direction’ in terms of R&D is
are the R&D budget, management capabilities
generated by what is known and codified. In this
and R&D capabilities. The importance of the
respect, the organization is behaving more like a
budget is not unexpected but its position as the
traditional university than an externally driven
most important source suggests that there is no
‘for profit’ company.
clear way in which the research group influences
The influence of human capital on relational
those who fund the research. If your boundary
capital is larger than that of organizational capi-
conditions are set without your input their per-
tal on relational capital. This might suggest that
ceived importance will be higher to you (since
new knowledge is retained inside the research
they feel more constraining) than if they are set
group and finds its way outside in an inefficient
with your input. The second most important
manner. The stronger transformation between
source are management capabilities which, as we
human capital to relational capital suggests that
have seen, are largely responsible for the direction
direct human to client transformations are im-
of research. This appears as a critical resource
portant, i.e. the sale of time rather than codified
which takes little input from other resources. This
knowledge.
raises an issue relating to the sustainability, given
In this organization, the necessary basic struc-
the low level of input to this resource. Finally and
ture is in place but the interpretations based on
also not unexpectedly given the previous analysis,
R&D capabilities are the most important sink of
value suggesting that they could be deployed
more effectively.
The insights for the company tended to be in
the areas of:
Human
capital 1. Ineffectiveness and inefficiency in the way re-
sources were used (which could be seen in the
navigator). The consequences were increased
Org. Rel. focus on dialogue (both in terms of knowledge
Org.
capital
capital
capital input and results output) with the external
world, primarily customers and suppliers.
2. The heavy dependence on management for
direction. In order to increase the sustainabil-
ity and reduce the risk inherent in this heavy
P
P
M
M
dependence, action to address the issues of
management volatility, quality, usability and
Figure 7. Level one navigator (PharmaWorld). versatility were contemplated. Secondly, the

r Blackwell Publishing Ltd. 2005 R&D Management 35, 2, 2005 117

Stephen Pike, Göran Roos and Bernard Marr

R&D budget
Suppliers
Management capabilities

Commercial alignment IP
Is affected /Affects

Organisational structure
Partnering capabilities Regulatory influences

The rest
Facilities

Customers
Systems Learning R&D capabilities
Processes

Organisational culture THE REST:

Brand/image, Strategic alliances, Scientific networks,
Organisational strategy Market influences, Community, Competitors, Materials &
products, IT infrastructure, Transport infrastructure, Land

Importance

Figure 8. Effector plot (PharmaWorld).

putting in place of a research management

system that takes into account both top-
down strategic direction and bottom-up re- H
H
search suggestions would both increase the
sustainability of the business and reduce the
dependence on individuals.
M
M O

4.2 Example 2 (HR-Group)

The second case study is from HR-Group, a large
human resource training company with a reputa-
tion for new and innovative approaches. The level
one navigator is shown in Figure 9, and again
illustrates the triangle of human capital, organi-
zational capital, and relational capital. Although
of slightly different proportions than in the first
case study.
The interactions between the resources shown
in the Navigator plot highlights important differ-
ences between HR-Group and our first case
study. In HR-Group the dominant interactions
are between organizational and relational capital.
This is different from the ‘university-like’ feel of
the first case study. The HR-Group navigator
show characteristics of a consulting house in
which the methodologies and their influence on
customers is most important. This is reinforced by
the strong influence of organizational capital on
cash. Human resources seen as less important, but
on aggregate they are clearly influential on know-
how in organizational capital and customers.
Again, the navigator at level two confirms this
basic diagnosis but reveals some concerning de-
P
P R
R
Figure 9. Level one navigator (HR-Group).
tails. The level two navigator (Figure 10) shows
only two strong links and a wide range of less
significant links. Surprisingly, all but two of the
links from human resources have been filtered out;
this indicates that the development of know-how
comes from many sources rather than an in-house
effort. This in fact is the hall-mark of a fast-
follower rather than an innovator; know-how is
accumulated from (perhaps published) external
sources and once they have been proved to be
reliable by others they are applied in-house
(Schneider et al., 2003). At level two, it can be
seen that the most significant transformations take
place between know-how, customers and cash,
which reinforces the notion that this is more of a
consulting house than an innovator.

118 R&D Management 35, 2, 2005 r Blackwell Publishing Ltd. 2005


The effector plot (Figure 11) shows cash4 and
customers as mild sinks approximately one third
of the way along the plot. The majority of
resources are clustered on the left side of the chart
suggesting that all of them are seen as relatively
unimportant. Office facilities are a significant
source of value. Interesting is the perceived im-
portance of know-how as a source of value. It can
be seen that know-how is the dominant resource
and at the same time it is influencing many other
resources, but is only influenced little by other
resources. This might suggest that investments in
know-how may be insufficient.
As a results of this analysis the HR-Group
undertook a further investigation of the sustain-
ability of their know-how in order to prevent any
sudden collapse in capability.
The insights for the company were as follows:
(1) Improvement potential for the deployment of
Customer relationships, Brands and Know-
how where identified. Actions were initiated
to rectify this.
(2) There were differing views of how the busi-
ness operated within the management team.
System
partner
Outsource
Outsource/
supplier
Technology /
Know-how
Innovation/
Innovation
improvement
Figure 10. Level two navigator (HR-Group).
r Blackwell Publishing Ltd. 2005
Assets and value drivers in R&D organizations
The navigator process became the first step in
a process to harmonize the view of the busi-
ness within the management team.
4.3 Example 3 (StateLab)
The third case study is StateLab, a state-owned
research establishment. StateLap is unusual in its
resource structure as it is the custodian of specia-
list laboratories and equipment that are rare and
considered a national asset. The level one navi-
gator is shown in Figure 12. It is the first of the
three case studies that does not match the ex-
pected pattern outlined in Figure 3. The operation
of StateLab is dominated by importance of the
physical resources, and their development dom-
inates the navigator.
Without the dominant triangular path visible it
could be that this organization operates more as a
Porterian value chain, as opposed to the cyclical
value shop expected of a R&D organization. Put
in basic terms, a value chain in the manufacturing
sense is one in which physical resources are used
to turn physical resources into other physical
resources, assisted by people, know-how and
Products
Products/ /
services
services
Cash
Cash
Customers
IT Systems
Brand
R&D Management 35, 2, 2005 119
Stephen Pike, Göran Roos and Bernard Marr

1 Product/Service [IP]
2 Cash
3 Customers
9 4 IT Systems
5 Brands
15 8 6 Innovation/Improvement
12 7 Technology/Know-how
18 8 Outsource/Supplier
11 1
9 System Partner
17 10 Professional Competence
24 16
11 Conceptual Skill & Meta-
14 4 Competency
10 6 12 IT Facility
26 19 13 Organisational/Culture
7 14 Data
23 13 15 Office
21 5
16 Management Competence
3 17 Leadership
25
18 Integrity
2 19 Human Skill
22 20 Motivation
21 Care for others & Team work
20 22 Recruit
23 Academy
24 Outside Researchers
25 Students
26 Seminar

Figure 11. Effector Plot (HR-Group).

equipment. The lack of any real backward influ-

ence from any resource except for cognitive
competence suggests that the grant of cash is
H
H
ultimately intended for the provision of a ‘free’
service to users of the products of the laboratories.
If the transformations between cash and phy-
M
M O
O sical resources are stripped away and ignored then
the interplay between the usual three resource
groups expected in an R&D organization (hu-
man, relational and organizational) should be
seen. However, they are not found. The effector
plot for StateLab is shown in Figure 14.
P
P R
R The insights for the company were:

(1) The first was that there were two businesses in

Figure 12. Level one navigator (StateLab).
cash. In a navigator, you would therefore expect
an internal physical to physical transformation
with the other resources converging upon it. The
extent to which this interpretation is true can be
seen by inspecting the level two navigator.
Based on the appearance of the level one
navigator, the level two navigator shows no
surprises (see Figure 13). It underlines the fact
that the operation is dominated by government-
originated funding for specialist laboratories and
operation. The first being a repetitive factory-
type business, that is, a value chain. The
second was a typical research and develop-
ment organization (value shop). This insight
led to a restructuring of the way the organiza-
tion operated.
(2) In the value chain part of the business they
increased the emphasis on processes (ISO
standards and SAP were implemented).
(3) The R&D part needed to improve the external
dialogue and actions were implemented along
these lines.
(4) The brand resource was under-utilized in the
present navigator and actions were implemen-
ted to emphasize brand building for both
products, product groups and the organisa-
tion as a whole.

120 R&D Management 35, 2, 2005 r Blackwell Publishing Ltd. 2005

 Assets and value drivers in R&D organizations

Behaviours
Cognitive
Cash Competence

Just in Functional
Time Pr
Products Competence

Production
Equipment
Culture

Major
facility
Management
Processes

Research
Laboratories Customer 1
Customer 2

Figure 13. Level two navigator (StateLab).

Grants /appropriations

Behaviours

Suppliers Cognitive competence

Stored materials Cash
Brand Facility 1 Functional competence
Distributors Culture
FDA
Local Customers
authorities Standards Facility 2
Owner
Users IP Production equipment
TGA Board Regulator
Image
Environmentalists
Quality plans
Service supplier
Research labs
Research
Management
partners Just-in-time products
processes
Image company
Internal committees

Figure 14. StateLab effector plot.

r Blackwell Publishing Ltd. 2005 R&D Management 35, 2, 2005 121

Stephen Pike, Göran Roos and Bernard Marr
5. Discussion and final remarks
In this paper, we grounded our research in the
resource-based view of the firm and emphasized
the importance of intangible assets as value dri-
vers in the R&D process. We then highlighted the
dynamic nature of resources in the R&D context
and derived a theoretical model of how intangible
assets dynamically interact to deliver value. Based
on the opinion of senior managers in three leading
R&D organizations we used visual mapping tools
to depict the importance of intangible assets in the
R&D process as well as the dynamic interaction
of these assets in the value creation process.
The research presented in this paper illustrates
how the resource-based view of the firm can
further our understanding of the strategic config-
uration of an organization. Especially the usage
of the navigators helps to understand the inter-
play and dynamism between the intangible assets
of a firm. This provides supporting evidence for
earlier theories about the importance of intangi-
ble assets in the R&D value creation process and
in particular about their dynamic nature of these
assets (Dierickx and Cool, 1989; Henderson and
Cockburn, 1994; Teece et al., 1997; Klein et al.,
1998).
A further contribution of this paper is the
development of a triangle of dynamic interactions
and transformations between human capital, re-
lational capital, and organizational capital, which
was grounded especially in the theory on value
configurations put forward by Stabell and Fjeld-
stad (1998). We tested this triangle in the context
of our three R&D case study firms and find some
supporting evidence of its existence in two of the
three case study firms. Whereas the sample is
much to small to empirically test this model, it
allowed us to lift the interpretations to a higher
level and extract some valuable insights about the
resource configuration of individual firms.
A third contribution is the extended granularity
of analysis using the second level navigators and
the subsequent visualization in the effector plot.
This seems to further the usefulness of the initial
technique (Gupta and Roos, 2001; Neely et al.,
2003). The resulting analysis provides a deeper
understanding of the resource utilization of spe-
cific resources and it provides an insight into
potential under-utilization or over-utilization of
resources.
We believe that this paper opens up various
avenues for further research. The first challenge is
to demonstrate the usefulness of an improved
understanding of intangible value drivers and their
122 R&D Management 35, 2, 2005
interactions in other contexts, outside the R&D
environment. We encourage researchers to apply
the approach outlined in this paper in other in-
dustries and organizational contexts. A further
challenge for future research would be to test the
generic triangle of dynamic interactions between
human capital, relational capital, and organiza-
tional capital using a broader sample of firms.
The limitation of the limited sample size in this
study could be overcome with further research on a
broader scale in order to collect more empirical
data to test the application of the model. Finally,
we can see other potential usages of the approach
outlined in this article. It might be appropriate to
apply it in a strategy development setting where
firms decide about potential mergers, acquisitions
or diversifications. This requires an understanding
of the nature of intangible assets of the two firms,
how they complement one another and how they
can be leveraged to strengthen the acquirer compe-
titive position (Montgomery and Wernerfelt, 1988).
The approach outlined in this article might be able
to offer interesting insights in such a context.
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Notes
1. For example: ‘if I have seen further, it is by standing
on the shoulders of giants’ is a quotation ascribed to
Sir Isaac Newton concerning the theories of gravity
and mechanics.
2. This process was first described by Roos and Jacob-
sen in 1999.
3. As a result of a strict confidentiality agreement
between the participating firms and the authors it
is not possible to disclose the real names of the
participating organisations, therefore we will refer to
them as PharmaWorld, HR-Group, and StateLab in
order to protect their identity.
4. For cash this is not a bad thing since it indicates that
the company is inherently profitable.
r Blackwell Publishing Ltd. 2005