Recognizing A
Firm’s
Intellectual
Assets: Moving
Beyond a
Firm’s
Tangible
Resources
Module 4
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Learning Objectives
4-2
After reading this chapter, you should have a
good understanding of:
LO4.1 Why the management of knowledge
professionals and knowledge itself is so critical in
today’s organizations.
LO4.2 The importance of recognizing the
interdependence of attracting, developing, and
retaining human capital.
LO4.3 The key role of social capital and technology
in leveraging human capital within and across the
firm.
The Central Role of Knowledge
4-3
Inthe knowledge economy, wealth is
increasingly created by effective
management of knowledge workers
instead of by the efficient control of
physical & financial assets.
The Central Role of Knowledge
4-4
Intellectualcapital is a measure of the
value of a firm’s intangible assets – the
difference between a firm’s market value
& book value. It includes these assets:
Reputation
Employee loyalty & commitment
Customer relationships
Company values
Brand names
Experience & skills of employees
The Central Role of Knowledge
4-5
Human capital includes the individual
capabilities, knowledge, skills, and
experience of the company’s employees
and managers.
Social capital includes the network of
relationships that individuals have
throughout the organization.
The Central Role of Knowledge
4-6
Knowledge management is critical to
organizational success. Knowledge
includes:
Explicit knowledge – codified, documented,
easily reproduced, and widely distributed.
Tacit knowledge – in the minds of
employees, based on their experiences and
backgrounds.
Human Capital
4-7
Exhibit 4.2 Human Capital: Three Interdependent Activities
Attracting Human Capital
4-8
Hire
for attitude, train for skill
Emphasis on:
General knowledge & experience
Social skills
Values
Beliefs
Attitudes
Attracting Human Capital
4-9
Sound
recruiting approaches to attract
human capital:
Building a pool of qualified candidates
The challenge becomes having the right job
candidates, not the greatest number of them
Networking
Current employees may be the best source of
new ones
Provide incentives for referrals
Developing Human Capital
4-10
Training and development must take place
at all levels of the organization
Requires the active involvement of leaders
at all levels
Includes mentoring & sponsoring lower-
level employees
Monitoring progress & tracking
development
Evaluating human capital
Retaining Human Capital
4-11
Retention mechanisms must prevent the
transfer of valuable and sensitive
information outside the organization:
Help employees identify with an organization’s
mission and values
Provide challenging work and a stimulating
environment
Offer financial and nonfinancial rewards &
incentives
Money is not the most important reason why
people take or leave jobs
Enhancing Human Capital: The Role
of Diversity
4-12
Sound management of diverse workforces
can improve an organization’s
effectiveness & competitive advantages by
making the following arguments:
Cost
Resource acquisition
Marketing
Creativity
Problem solving
Organizational flexibility
Social Capital
4-13
Social capital – the friendships and working
relationships among talented individuals –
helps tie knowledge workers to a given firm.
Interaction, sharing, and collaboration will
help develop firm-specific ties, with a higher
probability of retaining key knowledge
workers.
How Social Capital Helps Attract
and Retain Talent
4-14
Hiring via personal (social) networks:
Some job candidates may bring other talent
with them – the Pied Piper effect
Talent can emigrate from an organization to
form startup ventures
Social networks can provide a mechanism for
obtaining resources and information from
outside the organization
Social Networks
4-15
Socialnetwork analysis depicts the pattern
of interactions among individuals and
helps to diagnose effective and ineffective
patterns
Who links to whom within the network or
cluster?
Who communicates to whom and how
effective is this communication?
Social Network Analysis
4-16
Exhibit 4.4 A Simplified Social Network
Social Network Analysis
4-17
Closure Bridging
Relationships Relationships
The degree to Relationships in a
which all members social network
of the social that connect
network have otherwise
relationships with disconnected
other group people
members. Structural holes
Overcoming Barriers to
4-18
Collaboration
Effective
collaboration requires
overcoming barriers:
The not-invented-here or hoarding barrier
(people aren’t willing to provide help)
The search barrier (people are unable to find
what they’re looking for)
The transfer barrier (people are unable to
work with people they don’t know well)
Overcoming Barriers to
4-19
Collaboration
Toencourage collaboration, leaders can
choose a mix of three levers:
Unification levers create compelling common
goals & articulate a strong value of cross-
company teamwork
People levers get the right people to
collaborate on the right projects through
T-shaped management
Network levers build nimble interpersonal
networks across the company
Social Networks: Implications for
Career Success
4-20
Effectivesocial networks provide advantages
for the firm AND for an individual’s career
advancement:
Access to private information communicated in
the context of personal relationships
Access to public information from sources such
as the Internet
Access to diverse skill sets – trading
information or skills with people whose
experiences differ from your own
Access to power
Social Capital: Limitations
4-21
Social
capital does have some potential
downsides:
Groupthink
Dysfunctional human resource practices
Expensive socialization processes
(orientation, training)
Individuals may distort or selectively use
information to favor their preferred courses
of action
Using Technology to Leverage
Human Capital and Knowledge
4-22
Sharing
knowledge and information
throughout the organization
Conserves resources
Develops products and services
Creates new opportunities
Technology can leverage human capital &
knowledge
Within the organization
With customers
With suppliers
Codifying Knowledge For
Competitive Advantage
4-23
Tacit knowledge Explicit (codified)
Embedded in knowledge
personal ▣ Can be
experience documented
Shared only with ▣ Can be widely
the consent and distributed
participation of ▣ Can be easily
the individual replicated
Has the organization ▣ Can be reused
effectively used technology
many times at very
to codify knowledge for
competitive advantage? low cost
Protecting Intellectual Assets
4-24
Intellectual property rights are more
difficult to define and protect than
property rights for physical assets.
Unlike physical assets, intellectual
property can be stolen.
If intellectual property rights are not
reliably protected by the state, there will
be no incentive to develop new products
and services.
Protecting Intellectual Assets
4-25
Dynamic capabilities involve the capacity to
build and protect a competitive advantage.
This requires knowledge, assets, competencies,
and complementary assets & technologies
This also requires the ability to sense & seize
new opportunities, generate new knowledge,
and reconfigure existing assets & capabilities.
Dynamic capabilities include internal processes
& routines that enable product development,
strategic decision-making, alliances, or
acquisitions.
