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Volume 4 Issue 2 April 2006
Generation of Human and Structural Capital: Lessons from Knowledge Management
Henrik Agndal1 and Ulf Nilsson2
1Stockholm School of Economics, Sweden
2Sabanci University, Graduate School of Management, Turkey
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Establishing and maintaining relations is costly, and should be considered as an investment. The research fields focusing on relationships and on capital investments are rarely integrated, however, and there seems to be limited understanding of investments in relationships. The purpose is, therefore, to link the literature on relationships to the literature on intellectual capital and to provide a framework for generating intellectual capital through investments in relationships.
The term intellectual capital roughly refers to the difference between adjusted equity and market value of a firm, although a number of different definitions and categorisations exist. Important sub-categories include human capital (connected to the employees in the firm) and structural capital (connected to the firm). Relationships can be characterised according to the level of analysis with inter-organizational relationships between organizations, and social relationships between people. Social relationships can be seen as part of the human capital of the firm, while inter-organizational relationships can be seen as part of the firm's structural capital.
A case study shows how a Swedish SME uses both structural and human capital to facilitate its internationalisation process. The case also indicates that human capital can serve as the basis for creating new structural capital and vice-versa. To further explore these processes, insights from Nonaka and Takeuchi's (1995) framework of knowledge transformation are used to create an analogous framework of relationship transformation. Four processes are identified: socialization (social to social relationships), institutionalization (social to inter-organizational relationships), personalization (inter-organizational to social), and extension (inter-organizational to inter-organizational).
While some firms are successful in creating relationships and, thus, intellectual capital, this cannot be assumed to always be the case. The processes of intellectual capital generation may, however, be facilitated by the firm through the provision of arenas for social interaction and the implementation of more efficient and consistent routines for tracking relationships.
Keywords:
Intellectual capital, structural capital, human capital, interorganisational relationships, social relationships, relationship transformation.
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