Intellectual Capital in Public Universities

INTELLECTUAL CAPITAL IN PUBLIC
UNIVERSITIES:
A PERFORMANCE-ORIENTED
APPROACH TO MANAGE INTANGIBLE
Miguel González-Loureiro(*), European PhD

Associated Professor. Department of Management and Marketing, University of Vigo,
Faculty of Social Sciences and Communication, Campus A Xunqueira, s/n 36005, Pontevedra
(Spain)
email: mloureiro@uvigo.es
Antonio Moreira Teixeira, PhD
Professor. Department of Education and Distance Learning, Universidade Aberta and Centre for
Philosophy, University of Lisbon.
(*)
Acknowledgements: This research was partially supported by Laboratório de Educação a
Distância - LEaD da Universidade Aberta, Lisbon without a specific fund or grant.
Authors would like to give thanks to the researchers who contributed with their suggestions to
the overall improvement of a previous version of this paper, during the MSKE-2011 Conference held
in Famalicão, as well as in the ACEDE-2011 Conference held in Barcelona.
Intellectual Capital in Public Universities: a performance-oriented approach to ..., pp. 95-125
Abstract: The paper reviews the main initiatives concerning the

measurement, management and disclosure of intellectual capital (IC) in public
universities. Those organisations also are facing the challenge of managing
intangible in their value creation process.
Several researches have linked some elements of IC (human, structural and
relational capital) to performance indicators in firms. However, IC is still not
being sufficiently implemented in universities and similar knowledge-based
organisations. Three main initiatives are remarkable throughout the academic
literature: (1) the ICU-Report; (2) the Danish IC Guidelines; (3) the Austrian
Research Centres initiative.
The lack of a more holistic model for managerial purposes is addressed.
An original matrix is proposed in this paper, including performance indicators
of the three missions of a university (teaching, researching and transferring),
trying to relate them with their possible causal IC elements. This original IC and
performance-oriented approach could help university managers to deal with
their intangible management challenge.
Keywords: intellectual capital; intangible management; universities

management; performance; mission.
1. The challenge to manage intangible in universities
The main aim of this paper is to review the current initiatives concerning
intangible management in public universities. Authors suggest in this paper
a more holistic approach to manage intangible in such organisations from the
literature review done: an intellectual capital approach to a performance-oriented
model, where the main goals of universities are considered.
European public policies regarding Higher Education are highlighting
the role of such institutions in the knowledge-based economies. As stated by
European Commission (2003), the main goals of universities must be production,
diffusion and knowledge transferring. Other authors, who define the main goals
of a university today, state similar idea (Gibbons et al., 1994; Bueno Campos,
International Journal of Engieenering and Industrial Management 3 97

Miguel González-Loureiro e Antonio Moreira Teixeira
2007). Those goals are closely related with the resources and capabilities available
in any innovative sub-system (González-Loureiro and Figueroa Dorrego, 2010).
Such linkages have several linkages with the triple-helix model developed by
Etzkowitz and Leydesdorff (1996, 2000), where the key agents come from public
sector and universities, as they positively interact with business system.
Moreover, the Bologna Declaration´s challenges for universities go beyond
the simple statement of a European Higher Education Area. It suggests the
path to achieve the excellence in the educational and, in a lesser extent, in the
research function of any university (European Ministers of Education, 1999).
Consequently, public sector starts developing systems to acquire and assure
the quality of the universities. Nevertheless, those systems are too focused in
evaluating the human capital (the researcher-professor) and they do not pay
attention to other intangible elements (e.g. relational capital).
Intangible and, more specifically, knowledge management in firms are
widely recognised as key factors in the creation and the maintenance of sustainable
competitive advantages (Sveiby, 2001). Intellectual Capital (IC, henceforth) is
referred to those intangible, hidden assets and knowledge resources, which help
in the process of value creation in organisations, increasing their competitive
capacity (Stewart, 1997; Sveiby, 2001; Yi and Davey, 2010: p. 328). It is stated that
every time a knowledge transfer or a conversion is done, the organisation´s value
grows (Sveiby, 2001).
The most successful firms are those that use their knowledge assets best and
quickest than their competitors do (Bontis et al., 1999; Teece et al., 1997). Therefore,
adequate system to measure the IC through the management performance
indicators are required (Roos and Roos, 1997; Marr et al., 2003), because “what
you measure is what you get” (Kaplan and Norton, 1992: p. 71).
Further research is needed to apply such statements to public universities,
thus helping to disclose what the key elements are in their process of value
creation. It is emphasised the relevance of outcome and return of the universities
to meet the needs of their diverse stakeholders: business system, society, public
sector and academia (Sánchez and Elena, 2006). Consequently, there is a clear
need for management systems to identify and to measure one of the main assets
of any organisation: the value of its knowledge.
Public sector has specific, different needs than business system has.
Therefore, it is suggested to take into account those differences in the development
of management systems in public sector (Serrano Cinca et al., 2003; Bossi Queiroz
et al., 2005; Sánchez and Elena, 2006). Particularly, they highlight that public sector
organisations have multiple non-financial objectives and goals, so they must be
managed by measuring and controlling adequate performance indicators (mainly,
non-financial). Although universities are not profit-oriented organisations, they
have been involved in the competition for performance in value-generating
processes (Cañibano and Sánchez, 2009). They are been forced to search for greater
efficiency and effectiveness schemes (Bueno Campos et al., 2006).
98 International Journal of Engieenering and Industrial Management 3

In this challenge, IC has been proved as a useful approach. IC framework

is supported to enhance public sector efficiency and the quality of its services.
Cañibano and Sánchez (2009) state these main reasons:
- it can help to identify strengths and weaknesses within the public
organisation, because IC management implies a categorisation of
resources and capabilities;
- it can help to reveal the current state of the university´s mission, because
IC reports on the value added by the organisation´s intangible assets and
how they are aligned with its goals;
- it can be used as a controlling and monitoring instrument, because IC
is a set of indicators that can be communicated and, thus, encourage
discussion on what has to be managed.
In short and following Fazlagic (2005): «the measurement of Universities´

performance is essential if higher-education system is to continuously regenerate itself by
the intelligent use of knowledge management».
The topic is still underdeveloped, although there are an increasing number
of scientific production around it. A search by keywords shows it, particularly
since 2007 (see Table 1). In this case, a query was done for instance at the ISI-Web
of Knowledge by selecting the keywords “universit*”1 and “intellectual capital”.
The database used was the “Social Sciences Citation Index (SSCI)” from 1956 to
December 2010 and the “Conference Proceedings Citation Index- Social Science
& Humanities (CPCI-SSH)” from 1990 to December 2010. This query returns 105
papers indexed in such database for that period.
Therefore, further and deeper research is required to achieve wide-extended
conceptual bases and the required tools to manage IC in universities. Following
Leitner (2004) and Etzkowitz and Leydesdorff (1996, 2000), those bases and
tools must include the current challenges of such organisations, as well as the
main goals of a university. Namely, production, diffusion and transferring of
knowledge through its main functions: Education, Research & Development
(including its diffusion), Transferring (innovation, commercialising of research
results, entrepreneurship, technological services).
1
The wild card “universit*” was used to cover both words “university” and “universities” in the
topic.

Record % of Bar
Year
Count 105 Chart
Table 1 Number of papers with “universit*” and 1993 1 0.9524 %
“intellectual capital” as keywords in the topic 1994 0 0.0000 %
1995 1 0.9524 %
1996 2 1.9048 %
Record count reflects the number of Papers indexed 1997 2 1.9048 %
in the Social Sciences Citation Index (SSCI) from 1956 1998 1 0.9524 %
to december 2010 plus the number of Conference 1999 2 1.9048 %
Proceedings indexed in the Conference Proceedings 2000 6 5.7143 %
2001 1 0.9524 %
Citation Index- Social Science & Humanities (CPCI- 2002 6 5.7143 %
SSH) provided by ISI-Web of Knowledge 2003 3 2.8571 %
2004 5 4.7619 %
2005 8 7.6190 %
2006 4 3.8095 %
2007 13 12.3810 %
2008 9 8.5714 %
2009 22 20.9524 %
2010 19 18.0952 %
Source: ISI-Web of Knowledge
The remainder of the paper is organised as follows. Section 2 offers the

main conceptual framework based on IC statements. In section 3, it is reviewed
the main approaches and initiatives in reporting IC in universities. Section 4
concludes with the findings about the existing initiatives. There it is proposed
the bases of the model for discussion. Such model is intended to be applied in
future research.
2. Intellectual Capital framework
IC is widespread among enterprises and businesses all over the world. The
theoretical base of IC came from the Intangible Management theories developed
in the 90s, focused in five main research topics:
i. knowledge systems (Probst and Büchel, 1997; Davenport and Prusak,
1998);
ii. knowledge transformation process (Polanyi, 1962; Nonaka and Takeuchi,
1995);
iii. organisational learning (Senge, 1992; Argyris, 1993; Handy, 1995);
iv. capabilities management (Prahalad and Hamel, 1990; Zack, 1999);
v. intellectual capital (Edvinsson and Malone, 1997; Sveiby, 1997; Stewart,
1997).
Two main approaches are used for the latter: the strategic approach, dealing
with classification, creation, management and use of IC; and the measurement
approach, which develops metrics and measurement models to determine IC
status (Roos et al., 1997; Tan et al., 2008).

General models of IC usually include three main categories of intangible

assets: human, structural and relational (Stewart and Kirsch, 1991; Saint-Onge, 1996;
Edvinsson and Sullivan, 1996; Bontis, 1996 1998; Sveiby, 1997; European Commission,
2006). There are several definitions for each element, summarised as follows:
- Human capital (HC, henceforth) can be defined as a set of values, attitudes,
qualifications and skills held by employees that generate value for the
organisation (Roos et al., 1997; McGregor et al., 2004);
- Structural capital (SC, henceforth) is the worth and value created within
the organisation that remains when employees go home. Therefore, it
requires a high level of formalisation to avoid dependence on people
and to remain it within the organisation (Roos et al., 1997; Boisot, 2002;
Ordóñez de Pablos, 2004);
- Relational capital (RC, henceforth) is the result of the value generated by an
organisation in their relations with the environment, including suppliers,
buyers, competitors, shareholders, stakeholders, and society (Bontis,
1996; Stewart, 1997). It is the result of an organisation’s ability to interact
positively with members of the community to increase wealth creation by
enhancing HC and SC (Viedma Marti, 2001; Nazari and Herremans, 2007).
Intangible assets are enablers, as they transform productive resources into

value-added assets (Hall, 1992), and this should be a key issue for universities.
Cañibano and Sánchez (2009: p. 95-97), report some reasons for the possible
utility of IC approach to the management of such organisations:
i. The need for creating value. IC can contribute by disclosing the hidden
value (where, who or what) and its linkages with performance indicators
(how many);
ii. The corporate social responsibility. Universities have to provide crucial
information to a wide range of users, namely, society, public sector,
business system, academia and science community, students, and that
kind of stakeholders. IC can help providing a new approach to university´s
managers, focusing on its main goals and performance-oriented;
iii. Alliances and networks. There is an increasing importance of relationships
and networks, as they have a positive impact on the innovative capacity
of a region. This leads universities to pay attention to the assessment of
such relationships, even by quantifying its effect over performance. IC
contributes with the RC dimension.
Spite of the research developed, there is still a need for developing further
models and clarify how, why, and where value is generated through the
management of intangible (McAdam et al., 2010).
The Table 2 synthesises the four general models of IC measurement,
including authors, constructs included in each model and the type of measurement
developed.

Table 2: General Models of IC measurement
Authors Constructs included Type of measurement (*)
No monetary measurement (it

Balanced Business • Financial perspective
includes both no monetary and
Scorecard • Business internal processes
monetary measurements)
1990-1996 perspective
Index values of the four
(Kaplan and Norton, • Learning and growing perspective
constructs included, does not
1992, 1996) • Customer perspective
include a single IC value
No monetary through the
Intangible Assets
• External structure indicators measurement of growth and
Monitor
• Internal structure indicators renewal, efficiency and stability
1988-1997
• Competence indicators of the three elements, and its
(Sveiby, 1997)
aggregation in a single IC value
• Financial focus Addition of monetary and

Skandia´s Navigator
• Customer focus non-monetary measurements,
1992-1996
• Human focus to reach a single value of
(Edvinsson and
• Processes focus CI (CI index) expressed in
Malone, 1997)
• Renewal and development focus nonmonetary terms
Non-monetary measuring,
• Market assets
Technology Broker even though it does not reach
• Human assets
1996 the definition of quantitative
• Intellectual property assets
(Brooking, 1996) indicators, but it is based on a
• Infrastructure assets
review of qualitative questions
Source: own draft from cited authors in the table and Bontis,
2001 and (*)Tan et al., 2008
From these, up to 42 models of IC measuring have been reported (Sveiby,

2010). Several researches have been developed linking some elements of IC to
performance indicators in diverse business sectors (Bontis, 1998; Do Rosário Cabrita
and Bontis, 2008; Halim, 2010). For instance, Bontis (1998) developed a model that
links elements of IC and a set of business performance variables. He concluded
that causal relationships exist between various elements of IC and explanatory
variables for corporate performance. Similar conclusions are achieved when
models of IC-performance are applied to innovative firms (González-Loureiro and
Figueroa Dorrego, 2010). Therefore, it seems that managing some elements of IC
could be a key of success in the overall improvement of performance.
An IC approach helps identifying the combination of activities and intangible
resources (HC, SC, RC) of an organisation. This approach enables organisations
to transform a set of material, financial and human resources to a system capable
of creating value for stakeholders (European Commission , 2006).
It is stated the higher the interactions among HC, SC and RC, the higher
the value generated (Petrash, 1996). Therefore, it is advisable to follow the
guidelines opened by researchers in assessing IC elements and their influence on
the organisational performance.

3. Intellectual Capital in universities: main approaches review
In this section, the main current initiatives and approaches of IC applied to

universities are summarised.
The International Accounting Standards Committee and their national
correspondents have faced the need for standardised accountancy information.
They try to disclose the hidden value of organisations ‑mainly firms‑, i.e.
their IC (Bontis, 2001: p. 59). Models are fitted and applied to various types of
organisations and to public sector. For instance, they are applied to universities
(Tsai and Ghoshal, 1998; Caba Pérez and Sierra Fernández, 2001; Cañibano and
Sánchez, 2009; Xiuyan et al. , 2009; Bezhani, 2010) and even to national or regional
territories ‑National IC‑ (Malhotra, 2000 ; Bontis, 2004). Most relevant initiatives
are summarised in Table 3.
Table 3: Relevant initiatives in IC measurement in Public Sector
Year approx. Denomination Main authors Measurement description

An EU funded project to develop a general IC
model specially designed for public administrations
and a technological platform to facilitate efficient
2010 SICAP Ramírez, 2010 management of the public services. The model
structure identifies three main components of
intellectual capital: public human capital, public
structural capital and public relational capital.
ICU is a result of an EU-funded project to design
an IC report specifically for universities. Contains
Sánchez et al.,
2009 ICU Report three parts: (1) Vision of the institution, (2)
2009
Summary of intangible resources and activities,
(3) System of indicators.
Japanese Intellectual asset-based management (IAbM) is
Ministry of a guideline for IC reporting introduced by the
Economy, Japanese Ministry of Economy, Trade and Industry.
2009 IAbM Trade and An IAbM report should contain: (1) Management
Industry. philosophy. (2) Past to present report. (3) Present to
(Johanson et future. (4) Intellectual-asset indicators. The design of
al., 2009) indicators largely follows the MERITUM guidelines.
Regional
Uses the concept of the Knoware Tree with four
Intellectual Schiuma et al.,
2008 perspectives: (hardware, netware, wetware,
Capital Index 2008
software) to create a set of indicators for regions.
(RICI)
Intellectus Knowledge Forum of Central
Investigation on the Society of Knowledge.
Intellectus Bueno The model is structured into 7 components,
2006 model in Public Campos et al., each with elements and variables. Structural
Sector 2006 capital is divided in organisational capital and
technological capital. Relational capital is divided
in business capital and social capital.

Year approx. Denomination Main authors Measurement description

A modified version of the Skandia Navigator
National
for nations: National Wealth is comprised
2004 Intellectual Bontis, 2004
by Financial Wealth and Intellectual Capital
Capital Index
(Human Capital + Structural Capital)
An IC model for public sector. It adds two
perspectives to the traditional three of
particular importance for public administration:
Bossi Queiroz, transparency and quality. It also identifies
2003 Public sector IC
2003 negative elements, which generate intellectual
liability. The concept of intellectual liability
represents the space between ideal management
and real management.
A recommendation by government-sponsored
Danish
Mouritzen research project for how Danish firms should
guidelines
and Bukh, report their intangibles publicly. Intellectual
2003 Intellectual
2003; DMSTI, capital statements consist of 1) a knowledge
Capital
2003 narrative, 2) a set of management challenges, 3) a
Statement-ICS
number of initiatives and 4) relevant indicators.
An extension of the Skandia Navigator
Edvinsson, framework incorporating ideas from the
2002 IC Rating™
2002 Intangible Assets Monitor; rating efficiency,
renewal and risk.
IC reporting It separates this item in performance processes
Leitner et al.,
2001 for Austrian and impact. It includes both financial and non-
2001
universities financial performance indicators
A matrix of non-financial indicators arranged
Value Chain in three categories according to the cycle
2001 Lev, 2001
Scoreboard™ of development: Discovery/Learning,
Implementation, Commercialization.
An EU-sponsored research project, which yielded
a framework for management and disclosure of
Intangible Assets in 3 steps: 1) define strategic
Meritum Sánchez et al., objectives, 2) identify the intangible resources,
2001
guidelines 2001 3) actions to develop intangible resources. Three
classes of intangibles: Human Capital, Structural
Capital and Relationship Capital. Meritum final
report.
An IC measuring model for public sector
IC measuring Caba Pérez based on the European Foundation Quality
model for and Sierra Management Model (EFQM). It integrates the
2001
public sector Fernández, elements from the EFQM model in three blocks
based on EFQM 2001 which compose intellectual capital: human
capital, structural capital and relational capital.
Intangible An IC measuring model for public sector
García
2001 assets based on the IAM with Indicators of: growth/
Arrieta, 2001
statement renovation efficiency and stability.
Source: elaborated mainly from data in Sveiby , 2010 and (*) Leitner, 2004.

Knowledge management and IC are the main sources of competitive

advantages for firms (Viedma Marti, 2001: p. 150). Nevertheless, such linkage is
hard to be done when speaking about public organisations, due to their special
characteristics (Bossi Queiroz et al., 2005 identify several of them).
Only three main initiatives, which deal with IC in universities, could be
highlighted in the existing academic literature:
i. the ICU-Report, in the framework of the Observatory of European
Universities and the PRIME Project, funded by the European Commission
in the V Framework Programme (Sánchez et al., 2001);
ii. the Danish IC Guidelines (Danish Agency for Trade and Industry (DATI),
2000; Mouritzen and Bukh, 2003; DMSTI, 2003);
iii. the IC reporting model for Austrian universities, developed by Leitner
(2004), which is mandatory for Austrian universities since 2006.
Despite the existence of those initiatives, there is a lack of a general model

for universities. That model would allow showing more clear linkages between
IC elements and the performance obtained from their management. It is advisable
that the model considers the diverse goals and mission of such an organisation.
It can be reported some others works, following the premises suggested by
the latter three main initiatives:
i. the Poland initiative (Fazlagic , 2005) which does only include HC and SC;
ii. the experiences in Spain (Ramírez et al., 2007; Sánchez et al., 2009), Italia
(Palumbo y Di Berardino , 2009), Romania (Dumitru y Dumitru , 2009),
Taiwan (Lee, 2010) and United Kingdom (Bezhani, 2010). Although they
are focused in academic (research and teaching) performance, as they do
not cover all the missions of a university.
Some researchers have reported some interactions among the diverse

missions of a university. Ponomariov (2008) have found that the academic quality
of universities was negatively related to the interaction with firms. Therefore,
high academic performance seems to reduce the likelihood of high performance
in transferring, because researchers are focused in creating but not in transferring
knowledge.
In the short term, transferring is an increasing trend due to the Bologna´s
process. It is expected that, in the long term, the academic prestige of a university
will attract firms´ funds by transferring mechanisms (i.e., licenses, patents
royalties, start-ups, spin-offs, and similar ones). Hicks et al. (2000) highlighted
the relevant linkage between the excellence in science processes of a university
and the transferring goal, because the top 1% cited papers in United States are the
more cited in US patents.
Consequently, three of the main initiatives are analysed in the next
subsections. The systematic analysis follows the next guidelines:
a) What the missions comprised by each initiative are. Accordingly to

European Commission (2003), the main missions to be analysed will

be: teaching, researching and the so-called third mission, transferring
knowledge.
b) What the IC elements included by each initiative are. In this case, the IC
elements to be analysed will be the reported by the general models and
the commonly accepted disaggregation (Saint-Onge, 1996; Edvinsson and
Sullivan, 1996; Bontis, 1996, 1998; Stewart, 1997; Sveiby, 1997; European
Commission , 2006): HC, SC, RC.
c) What the performance indicators included in each initiative are. In this
case, it will be categorised in financial and non-financial indicators,
following the premises stated by Kaplan and Norton (1992).
Initially, it must be highlighted that the initiatives are focused in IC
reporting rather than in managing intangible.
3.1. The ICU Report and the Autonomous University of Madrid
The Observatory of European Universities (OEU) was a pilot project

undertaken by researchers of 15 universities and research institutes from 8
European countries (Observatory of the European University, 2006). One of the
outputs of such project was a methodological guide where it is suggested the
measures and the framework (Sánchez and Elena, 2006). The last chapter of the
guide is the Intellectual Capital Report (ICU Report), focused in universities. Due
to constrain in budget and time, the exercise was limited to research activities
(Sánchez et al., 2009: p. 313).
In Sánchez et al. (2009), it is documented the main characteristics and the
test developed at the Autonomous University of Madrid – AUM.
One of its main contributions is the broad definition of performance
indicators categorised into the three IC elements (HC, SC, RC). The system of
indicators is summarised in Sánchez et al. (2009) and it can be further read in
OEU (2006). It was developed an analytical and comprehensive framework,
called Strategic Matrix, focused in the governance of the research activities. The
full statement can be read in Schoen and Thèves (2006) and it is summarised in
Table 4.
Performance indicator includes both financial and non-financial metrics.
In the Strategic Matrix, there are five thematic dimensions (funding, human
resources, academic outcomes, third mission, governance) and five transversal
questions (autonomy, strategic capabilities, attractiveness, differentiation profile,
territorial embedding), as it is further explained in Sánchez and Elena (2006).

Table 4 Framework of the Observatory of European Universities:

Strategic Matrix
Source: Sánchez et al. , 2007 and Observatory of the European University, 2006
Despite of their larger contributions to the disclosure and the extension of the
IC management at universities, the model also has some improvable questions:
• There is not a clear separation between what are inputs and outputs in
the value creation process. As stated by the managerial theories and the
New Public Management, it is advisable to separate inputs, processes
and outputs. This proposal was also suggested by Leitner (2004: p. 133).
In the ICU Reporting model, performance indicators regarding inputs
and outputs are mixed within each IC element, with the only exception
of academic outcomes. Therefore, for managerial purposes, it is more
difficult to know what the key to be improved are.
• There is a need for extending the framework to other activities as, for
instance, education and transferring, besides the research activity. It must
be highlighted the relevance of a well-established system of scorecard
from the goals in order to help managing activities. Thus, it raises the
question about the complex missions that a university must develop,
considering the demand from their stakeholders in a knowledge-based
economy (Sánchez and Elena, 2006: p. 530-532).
• There has not been established a clear linkage between measurements
(mainly, based on IC elements) and the achievement of the strategic goals.
Thus, the university managers have no enough information about how
to manage each IC element for enhancing the overall performance, i.e.
adequate tools to manage intangible resources and capabilities.
The Table 5 summarises the findings of the systematic analysis developed

about the ICU-Reporting model. IC elements are a summary of intangible
resources and activities describing what the institution can mobilise to achieve
its goals. However, IC elements are the performance indicators and, therefore,
it is not clearly identified what the inputs and the outputs are. Besides this, the
missions would be widened to the teaching and transferring dimensions.

Table 5 Missions, IC elements and performance indicators

of ICU REPORTING model
Missions IC elements Performance indicators

Only the research mission It comprises the commonly The system of performance
has been incorporated, due to accepted categorisation of IC indicators should allow to the
constrain in time and budget. elements: internal and external bodies
However, the ICU Report • Human Capital assess the achievement of
is organised in three parts. • Structural Capital goals and estimate the future
The first section is focused • Relational Capital of the institution.
in identifying the vision of Performance indicators
the institution (main general They are a summary of are categorised following
objectives, strategy and key intangible resources and the taxonomy of human,
drivers). activities, describing what structural and relational
the institution can mobilise capital.
to achieve its goals. They are elaborated in
absolute and relative terms.
It is the second section of It is the third section of the
the ICU-Report. ICU-Report
Source: own analysis from Observatory of the European University, 2006;

Sánchez and Elena, 2006 and Sánchez et al., 2009
3.2. The Danish IC Guidelines and the Poznan University of Economics
Another remarkable initiative is the Danish Agency for Trade and Industry
(DATI henceforth), (Danish Agency for Trade and Industry (DATI), 2000; DMSTI,
2003). Although it has been developed for the application in firms, the model has
interesting items useful to the purpose of this paper. The Table 6 illustrates the
model and the analysis tool developed with the aim of helping firms to evaluate
their IC assets. It disaggregates the model in the called “knowledge narrative”.
Subsequently, it assigns each management challenges, initiatives and indicators
to the respective knowledge narrative. As defined in DATI (2000: p. 20), the
knowledge narrative is:
“[…] how the company’s products or services benefit the users and how
they improve their situation. The knowledge narrative explains what it
takes to create this improvement and what resources are required within
the company in order to achieve it. […]”
These guidelines were developed following the premises of the MERITUM

project, as described in Bukh and Johanson (2003).
The knowledge resources are employees, customers, processes and
technologies. The model analyse how those knowledge resources (inputs) are
managed (activities) to obtain another resources (outputs) and, thus, what

effects (impacts) they have. Further information about the idea of knowledge as
narrative is discussed in Mouritsen et al. (2002), where five examples of Danish
firms serve to illustrate how the objects of IC statements were constructed.
Table 6 Intellectual capital statement-ICS model and analysis model for ICS
Source: DMSTI, 2003: p. 6-7
Following this model, Fazlagic (2005) developed an IC measurement matrix

for universities, which is summarised in Table 7. He states that, thanks to this
taxonomy, it is possible to understand the current paradox in the knowledge
creation process in universities:
“[…] why well-established European universities do not produce top

quality knowledge” because “the high potential (resources) residing in
the universities in many cases does not go hand in hand with their low
performance (results) […]”. Fazlagic (2005: p. 4).
Nevertheless, the IC framework followed by this author is arguable because

it only comprised HC and SC and it did not include the RC (the value generated
in the relations with the environment of the organisation).

“[…] the intellectual capital of a university consists of human capital and

structural capital. The human capital relates to individual competencies of
researchers […]” Fazlagic (2005: p. 4)
Table 7 IC measurement matrix in the Poznan University of Economics
Source: Fazlagic, 2005: p. 5
One of the limitations of this model is the lengthy and complicated process
to full implementing a scorecard tool at a university (Fazlagic, 2005: p. 6). He also
recognises the relevant cultural barriers to the measurement of IC at universities:
uncompetitive remuneration, weak leadership due to the tenure of rectors, the
high societal status and the self-replicating organisational culture (Fazlagic, 2005:
p. 7).
Therefore, the foundations of its definitions are weakness, due to its limited
scope: only the research and teaching missions are included and it is only
comprised the HC and SC elements of IC.
Neither is it a clear linkage on how each element of IC influence the overall
performance of a university. The Table 8 summarises the systematic analysis
developed.

Table 8 Missions, IC elements and performance indicators of Intellectual

Capital Statement-ICS reporting model

There is no proper defined It comprises only two Originally, it was planned to
mission. However, it can be categories of IC elements: use the Balanced Scorecard
stated that it comprises at • Human Capital logic. However, it includes both
least the teaching function • Structural Capital financial and non-financial
(as it includes the “student measurements. The description
satisfaction” and “the It has not been found areas included are:
university´s graduates” a clear argument for • Strategic management
description areas, as well as this. • Knowledge goals
the research function. It has not • Employee satisfaction
been possible to clear identify • Student satisfaction
whether or not the transferring • The university´s graduates
function is comprised. • Organisational structure
• IC indicators (disaggregated
in human and structural
capital)
Source: own analysis from cited authors in this subsection
3.3. The IC reporting model for Austrian universities
This is maybe the most remarkable initiative and the most used by academic
community and practitioners. The documented initiator was Leitner (2004),
where the author reviewed a previous paper presented in 2002 at the conference
“The Transparent Enterprise. The Value of Intangibles”2.
The application of New Public Management principles is one of the main
contributions of this model. Thus, increased autonomy, output orientation
and performance-based funding are applied, as well as the introduction of
performance contracts between universities and the ministry in Austria (Leitner,
2004: p. 132). Leitner´s model is full oriented to help performance reporting in
Austrian universities:
“[…] an IC model for universities which meets the specifics of their

knowledge-production process […]. the publication of the IC report has
to be parallel to the development of the performance contract and the
performance report.” (Leitner, 2004: p. 132)
As the author states, “[…] this model can be labelled as having a process-
oriented approach […]” (Leitner, 2004: p. 133). It comprises the transformation
process developed by universities when carrying out activities to achieve their
goals (education, research…). Because of this process, outputs affect to several
2
Autonomous University of Madrid and Ministry of Economy, 25-26 November 2002, Madrid, Spain.

stakeholders (ministry, students, industry…), defined as Impact Output in the

model. The model uses the IC elements (HC, SC, RC) as inputs in such process
(see Figure 1). It is remarkable, that the model is very focused in the performance
processes.
Figure 1 Model for IC reporting of Austrian universities
Source: Leitner et al., 2001
Table 9 summarise the analysis of such model following the aforementioned

guidelines. The overall classification of IC elements adopts the widely diffused
and proposed by the MERITUM group, (Sánchez et al., 2001).

Table 9 Missions, IC elements and performance indicators of IC

reporting model for Austrian universities
There is no a clear It comprises the It separates this item in performance

definition of university commonly accepted processes and impact. It includes both
missions. categorisation of IC financial and non-financial performance
It comprises political elements: indicators
goals and goals of each
university, as framework • Human Capital Performance processes indicators are
conditions. • Structural Capital categorised into six:
• Relational Capital • Research
• Education
• Training
• Commercialising of research
• Knowledge transfer to public
• Services
• Infrastructure
Impact measures the influence

of universities activities in their
environment. There is no a full
categorisation of stakeholders.
However, it comprises:
• Ministry
• Students
• Public
• Science
• Community
• Etc.
Source: own analysis from Leitner, 2004
It is, undoubtedly, the most complete model analysed. However, some

suggestions can be proposed:
• There is no clear definition of missions and goals. They are comprised
as framework conditions. As the author states, each university has to
formulate its specific goals (Leitner, 2004: p. 134).
• There is no clear relationship among missions/ goals, IC elements and
how their management influence over performance. As the author
recognise, it is needed further theoretical research of the synergies
between performance measurement and IC theory (Leitner, 2004: p. 139).
• It is no clearly identified how performance processes influence the impact
indicators, nor is it clear how they affect to stakeholders.
The lack of clear missions in the model could difficult the comparison
among universities: different goals-mix could lead into different performance
and impacts over stakeholders. However, the model is quite flexible, as it can be

adapted to different external and internal factors, as well as different goals-mix.

As the author states: “[…] The underlying thesis is that a proper management
of IC at universities has a significant impact on the performance and efficient use of the
invested financial funds […]” (Leitner, 2004: p. 138).
Nevertheless, this is arguable. In such statement, it seems that the unique
resource invested is financial funds, when IC argues that success is based more on
strategic direction and knowledge management as a resource and less on physical
and financial resources (Bontis, 1998). IC theories also state that knowledge is the
most important strategic resource (Choo and Bontis, 2002).
The model was developed to help Austrian Universities in the IC reporting
process and, thus, this fact limited a broader scope. Leitner´s IC model is too
focused in the reporting question to allow universities evaluation, rather
in disclosing the linkages among IC elements that best explain the overall
performance. In fact, the most criticisable issue is the inclusion of “floor space
in squared metres” within SC indicators when this model was applied to
public Austrian universities. It seems that this indicator is inconsistent with IC
streamline of intangible management.
Thus it seems that some trouble exists when going from theory to practice.
Just as the author states: “[…] the definition and measurement of outputs in universities
is problematic” (Leitner, 2004: p. 136). This is due to the fact that “[…] performance
management is the process of defining goals, performance categories and performance
standards and the reporting and communication to the public owners, according to the
National Academy of Public Administration […]”, (English and Lindquist, 1998).
4. Toward a performance-oriented model to manage intellectual capital in

universities
IC initiatives in universities are too focused in reporting about the key

elements in the value generation process, but not in helping university managers
to deal with intangible. The IC elements detected are quite exhaustive, as well
as performance indicators. However, there is still no enough information
about the impact that IC management (inputs) have in general performance of
universities (outputs). Furthermore, it is advisable to deepen in the “whats” and
the “hows”, i.e., the key elements that most influence the overall performance in
the development of the triple mission of university.
IC management in organisations depends on adequate organisational
structures and drivers linking structural, cultural aspects and organisational
climate. All of them should lead to a more effective, efficient IC management
(Isaac et al., 2009). The starting point is usually the HC (Monavvarian and Khamda,
2010; Adam and Urquhart, 2009; Bontis and Serenko, 2009). Moreover, as stated
by several authors, the interactions among the diverse elements in and outside
the system are the keys for the improvement of the overall performance (Metcalfe,

1995; Lalkaka , 2002; Kayal, 2008). Universities, as research organisations, have an

eminent regional impact (Nelson, 1993, Cooke et al., 1997). Therefore, RC seems
to be a key dimension to be taken into account, through collaborative relations
and closeness with regional agents ‑particularly, firms‑ (Metcalfe, 1995; Lalkaka,
2002; Kayal, 2008).
It is highlighted the education and R&D as the basic factors in the growth
process (Freeman and Soete, 1997: p. 3). However, science is only one of a
plurality of knowledge sources that can induce growth based on knowledge and
innovation in enterprises, where Universities play a key role (Caraça et al., 2006,
2007; Jensen et al., 2007; Caraça et al., 2009).
The development of the performance-oriented approach is mainly based
on the Leitner´s model (three missions of universities, input and output
breakdown) and the ICU-Reporting model (separating input and output within
the comprehensive IC indicators developed).
A novelty of this proposed model is that the performance construct is
disaggregated into the three missions of a university, following the literature
reviewed: research, teaching and transferring. As the literature suggests, the
management of intangible in universities is conditioned by the goals fixed. The
framework condition (political goals, legal framework and so on) is within the
RC construct in the IC theories.
In the following paragraphs, the hypotheses are outlined following a
compendium of researches around IC theories, performance and IC in universities.
Bontis (1998) initiated the research line linking IC elements and performance
through a structural equation model. He developed a pilot study where he
concluded the existence of causal relationships among the three IC elements
and a performance construct in firms. He designed 63 items grouped in three
constructs of IC and one construct grouping performance business.
A recent research is the model linking IC elements with cumulative growth
rate in innovative SMEs (González-Loureiro and Figueroa Dorrego, 2010). They
found that human capital is the basic, initial point to explain cumulative growth.
The key linkage is HC-SC, thus it is necessary internalise the value generated by
people mainly within the organisation. This implies the need for appropriating
that knowledge through the development of organisational culture and shared
values all over the organisation.
The evidences of such model show the weak link from HC to RC (thus,
external relationships outside innovative firms) to explain high levels of
cumulative growth in value added and turnover. This finding emphasises the
relevance of the internal dimension. In the case of IC in universities, the findings
of that model have a double perspective. On one hand, interactions between HC
and SC play a key role. On the other hand, it is found that the degree of universities
usefulness is one of the keys in the RC construct. The latter emphasises the
relevance of the transferring mission for universities.

Figure 3: Path diagram linking IC elements and cumulative growth rate
N.Technology 0.96 0.82

0.91 0.67
training, admin.&fin. Usefulness program
Ehc_01 Erc_01
Dept. ARTE/PYME II (CDTI)
0.79
0.65 N.Technology 0.80 Usefulness program 0.62
Ehc_02
efficiency,
HC concerted industrial Erc_02
admin.&fin. dept. research(CDTI)

0.01
0.58 0.76 0.85 Usefulness 0.72
Ehc_03 E_rc Erc_03
N. Technology COTEC Publications
training, HR dept. 0.10
0.93
Satisfaction
0.48 databases/ 0.87
Erc_04
Organisational publications Reg. Gov.
0.74 system helps 0.86 RC
Esc_01
employee work 0.82
0.91 Usefulness
Erc_05
universities
0.60 Company Value 0.77

Esc_02
shared with the staff 0.80 Usefulness 0.64
SC entrepreneurship Erc_06
centres(CEI)
0.55 culture to transfer 0.74 0.10
Esc_03 0.87Satisfaction Public 0.76
experiences to new E_SC Erc_07
research centres
workers 0.25
0.23
0.52 Adaptation 0.72 0.83 0.69
Esc_04
Satisfaction Erc_08
to changes Universities
0.07
E_abgr
CUMULATIVE
GROWTH RATE
Chi-square=280.363
Degrees of freedom =117 0.74 0.88
CMIN=2.396
CUMULATIVE GROWTH CUMULATIVE GROWTH
Probability level =0.000
GFI=0.836 RATE OF VALUE ADDED RATE OF TURNOVER
NFI=0.861 0.55 0.77
IFI=0.914 E_VA E_T
AGFI =0.786
CFI=0.913
RMSEA=0.093
Source: González-Loureiro and Figueroa Dorrego, 2010
Following the Strategic Matrix tool developed by Sánchez et al. (2007),

the proposed framework for discussion is a matrix including the missions, IC
elements and performance indicators (see Figure 4). The IC elements are incomes
(means) applied in the process of achieve the goals fixed in each mission. This is
evaluated by performance indicators.

Figure 4 Proposed framework: Intellectual Capital Performance-Oriented

Model in Universities (ICPOM)
IC elements
Structural Relational Mission and goals:

MISSION and Human capital capital capital Performance indicators
GOALS
• NUMBER OF
TEACHING EDUCATION Performance indicators:
• NUMBER OF ROOMS • NUMBER OF • NUMBER OF DEGREES PER YEAR
Education TEACHERS
• TEACHING
EXTERNAL EVENTS • AVERAGE ACADEMIC QUALIFICATION
• …..
• ……. LABORATORIES • …..
• …….
• NUMBER OF RESEARCH Performance indicators:

• NUMBER OF SENIOR • RESEARCH DATABASE ACCESES • TOTAL RESEARCH FUNDS
Research RESEARCHERS LABORATORIES • NUMBER OF •
•
NUMBER OF PATENTS
NUMBER OF PAPERS
• …… • ……… CONGRESSES
• ……
• ……
• NUMBER OF • CONTACTS WITH

ADMINISTRATIVE • TRANSFERRING TRANSFERRING Performance indicators:
AGENTS • TOTAL REVENUES FROM TRANSFERRING
Transferring PEOPLE IN TRANSFER
OFFICE
EQUIPMENT
• SEMINARS • TOTAL CONTRACTS WITH FIRMS
• ……. • …….
• ……….. • …….
INCOMES OUTCOMES
Source: own draft
This proposed framework is the base to evaluate the whole dimension of the
mission and goals of universities in the current environment: education, research
and transferring functions. This is a novelty to be highlighted in this approach.
IC elements are the means of the university to be managed in order to achieve
the adequate performance, and taking into account the mission and goals of such
organisation. The utility of this model could be summarised as follows:
• It can help university managers fixing quantitative and qualitative
objectives in each of the three missions;
• It will help university managers controlling the performance on each
function;
• It could inform about the key IC elements that best help improving each
mission;
• It can inform to stakeholders about the achievements in each function and
about the overall influence of the university activities in its environment.

This proposed model also could contribute to the overall discourse of IC in

universities:
• It rationalises the main existing initiatives by categorising IC in the
commonly accepted elements;
• It includes the three dimensions of the universities´ mission, while current
initiatives are more focused in research (with exception of Leitner, 2004).
Therefore, this approach is more comprehensive while keeping it enough
simple and easy to find conclusions;
• Consequently, it will shed some light on the possible interactions among
research, teaching and transferring functions during the value creation
process in universities, by efficiently managing IC elements.
Further research is required to determine the indicators to measure

performance through IC management related with each mission. It is intended
to use a structural equation system to identify relationships among the three IC
elements and their influence in performance indicators for public universities,
following González-Loureiro and Figueroa Dorrego (2010).
Figure 5 Proposed structural equation model to be tested: Intellectual Capital

Performance-Oriented Model in Universities (ICPOM)
Human
capital
Structural
capital
? Relational
capital
Performance
Performance in Performance in Performance in

the education the research the transferring
function function function
Source: own draft

IC management is the process of extracting value from knowledge, as

stated by the IC literature (Egbu, 2004). Knowledge and IC management are the
main sources of competitive advantages for firms (Viedma Marti, 2001: p. 150).
Therefore, it can be suggested that the latter will be also the key mean to acquire a
competitive edge by every university in the current “competition” for excellence.
Acknowledgements: (not included in this version)
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Intellectual Capital in Public Universities

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Intellectual Capital in Public Universities

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INTELLECTUAL CAPITAL IN PUBLIC

Miguel González-Loureiro(*), European PhD

Abstract: The paper reviews the main initiatives concerning the

Keywords: intellectual capital; intangible management; universities

1. The challenge to manage intangible in universities

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In this challenge, IC has been proved as a useful approach. IC framework

In short and following Fazlagic (2005): «the measurement of Universities´

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The remainder of the paper is organised as follows. Section 2 offers the

2. Intellectual Capital framework

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General models of IC usually include three main categories of intangible

Intangible assets are enablers, as they transform productive resources into

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Table 2: General Models of IC measurement

Authors Constructs included Type of measurement (*)

No monetary measurement (it

• Financial focus Addition of monetary and

From these, up to 42 models of IC measuring have been reported (Sveiby,

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3. Intellectual Capital in universities: main approaches review

In this section, the main current initiatives and approaches of IC applied to

Table 3: Relevant initiatives in IC measurement in Public Sector

Year approx. Denomination Main authors Measurement description

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Year approx. Denomination Main authors Measurement description

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Knowledge management and IC are the main sources of competitive

Despite the existence of those initiatives, there is a lack of a general model

Some researchers have reported some interactions among the diverse

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European Commission (2003), the main missions to be analysed will

3.1. The ICU Report and the Autonomous University of Madrid

The Observatory of European Universities (OEU) was a pilot project

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Table 4 Framework of the Observatory of European Universities:

The Table 5 summarises the findings of the systematic analysis developed

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Table 5 Missions, IC elements and performance indicators

Missions IC elements Performance indicators

Source: own analysis from Observatory of the European University, 2006;

3.2. The Danish IC Guidelines and the Poznan University of Economics

These guidelines were developed following the premises of the MERITUM

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Source: DMSTI, 2003: p. 6-7

Following this model, Fazlagic (2005) developed an IC measurement matrix

“[…] why well-established European universities do not produce top

Nevertheless, the IC framework followed by this author is arguable because

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“[…] the intellectual capital of a university consists of human capital and

Table 7 IC measurement matrix in the Poznan University of Economics

Source: Fazlagic, 2005: p. 5

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Table 8 Missions, IC elements and performance indicators of Intellectual

Missions IC elements Performance indicators

Source: own analysis from cited authors in this subsection

3.3. The IC reporting model for Austrian universities

“[…] an IC model for universities which meets the specifics of their

International Journal of Engieenering and Industrial Management 3 111

stakeholders (ministry, students, industry…), defined as Impact Output in the

Figure 1 Model for IC reporting of Austrian universities

Source: Leitner et al., 2001