Journal of Intellectual Capital

Managing intellectual capital dimensions for organizational value creation

Antonio Lerro Roberto Linzalone Giovanni Schiuma
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Antonio Lerro Roberto Linzalone Giovanni Schiuma , (2014),"Managing intellectual capital dimensions for
organizational value creation", Journal of Intellectual Capital, Vol. 15 Iss 3 pp. 350 - 361
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JIC GUEST EDITORIAL

15,3
Managing intellectual capital
dimensions for organizational
350 value creation
Antonio Lerro
Department of Engineering, University of Roma 3, Rome, Italy and DiMIE,
University of Basilicata, Potenza, Italy
Roberto Linzalone
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DiMIE, University of Basilicata, Potenza, Italy, and

Giovanni Schiuma
Innovation Insights Hub, University of the Arts London, London,
UK and DiMIE, University of Basilicata, Potenza, Italy

Abstract
Purpose – This introduction paper to the special issue on “Managing intellectual capital dimensions for
organizational value creation” aims to focus on the relationships between intellectual capital (IC), innovation,
performance improvement and competitive advantage in private and public organizations. The purpose of
this paper is to review and underline some relevant theoretical pillars and contribute to the ongoing debate on
how knowledge assets may impact organizational performance and innovation dynamics.
Design/methodology/approach – The paper is based on a deep analysis of the managerial literature
addressing the nature, the role and the relevance of the IC dimensions for organizational value creation.
The conceptual background sets the foundations for a better understanding of the strategic importance
of knowledge-based value drivers for innovation and sustainable competitive advantage.
Findings – This paper provides a framework summarizing the key assumptions at the basis of a
better understanding the strategic relevance of the knowledge-based value drivers for competitiveness.
Originality/value – The value of this paper is the definition of a conceptual framework outlining the
relationships between IC management, innovation, performance improvement and value creation capacity.
Keywords Innovation, Intellectual capital (IC), IC management, Organizational value creation,
Value creation capacity, knowledge-based value drivers
Paper type Research paper

Journal of Intellectual Capital
Vol. 15 No. 3, 2014
pp. 350-361
r Emerald Group Publishing Limited
1469-1930
DOI 10.1108/JIC-05-2014-0063
1. Introduction
In the last decades, a set of political economic, social and technological discontinuities
have increased the importance of knowledge and intangible resources and accelerated
the pace of innovation to support companies’ value creation dynamics.
In the current globalized competitive arena, intellectual capital (IC) may be a crucial
(potential) source of competitive advantage for firms. It may be also a fundamental
mechanism to restore sustainable growth in advanced economies, which were severely
hit by the global crisis.
It has been widely recognized how knowledge assets contribute to improve innovative
capacity of an organization (Schiuma et al., 2008; Subramaniam and Youndt, 2005;
Teece, 2000, 2007), support the competitive differentiation in many sectors (Teece, 1998),
stimulate the process of organizational learning (Kang et al., 2007; Kang and Snell,
2009), enhance individual and organizational performance and particularly innovative
behaviour (Carmeli and Tishler, 2004; Damanpour, 1991; Youndt and Snell, 2004).
 Despite the many benefits touted by scholars, consultants and managers, the Managing IC
accumulated evidence indicates that the effectiveness of the IC management on dimensions
organizational performance and the return on investment on IC-related dimensions are
difficult to achieve and assess.
Established firms confront severe obstacles when engaging in the development and
exploitation of knowledge assets. In fact, the actual relationships between businesses
and IC management appears still emergent in nature, i.e. they do not respond to a 351
planned strategy, but rather they are often the result of singular and sporadic
links. This means that often these relationships are not part of a specific innovation
management strategy. Moreover, it is possible to say that even most companies involved
in IC management do not identify, assess and measure properly the results and the
impacts achieved through the IC management projects and initiatives. This is a further
indicator of the lack of recognition among companies of the role that the IC can play to
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foster the development, transformation and value creation of an organization.

On the other side, small and medium enterprises are strongly involved to assure
efficiency in daily operations, and face serious obstacles in rallying human talents and
knowledge resources for developing innovations, and assembling the complementary
assets necessary for exploiting them.
Accordingly, the research on this topic is still open and requires further investigation.
This special issue of Journal of Intellectual Capital is dedicated to identify and
analyse how the management of different dimensions of the IC may support companies’
innovative dynamics and in turn their performance improvement and value creation
capacity. The purpose is to share some relevant practices and contribute to the ongoing
debate on the relationships between knowledge assets, innovation, performance
improvement and value creation. Specifically, the focus will be about the role of the
cognitive and intangible resources and assets for innovation and competitive advantage,
and the identification and management of the IC-related moderating and enhancing
factors in supporting innovation dynamics, performance improvement and value
creation both in public and private organizations.
In this introduction to the special issue, we first provide a brief rationale about the
knowledge foundations of companies’ organizational value creation. Next, we discuss
the relationships among IC and value creation, and how IC dimensions may support
innovation paths, performance improvement and competitive advantage. Finally,
we present an overview of the main contents of each of the included papers of the
Special issue.
This special issue is an outcome of the IFKAD 2013 Conference held in Zagreb,
Croatia. At this conference, leading experts shared ideas and practices and promoted a
scientific debate on the role of the knowledge assets as value drivers for business
performance and economic growth.

2. Rationale for the knowledge foundations of companies’ organizational

value creation
There are several reasons to assume that to manage IC may have advantages:
. First, it is widely recognized that the value creation dynamics are the result of
a continuous improvement of organizational performance. In fact, through a
performance improvement, an organization is able to better satisfy the wants,
needs and expectations of its stakeholders. In order to improve performance, an
organization needs to continuously improve its effectiveness as well as efficiency.
 JIC It requires the ability to design, implement, manage and develop the organizational
15,3 processes at the basis of the production of organization’s output and outcomes.
This is possible only through a continuous development of organizational
competences. The competencies are rooted in the organizational knowledge
assets which build the IC of the organizations. Consequently the assessment
and management of IC play a fundamental role to support the improvement of
352 organizational performance and value creation dynamics (Carlucci and Schiuma,
2005; Marr et al., 2004a, b).
. Second, in today’s knowledge economy, the definition and formulation of a
strategy, aimed to support and drive company’s value creation in global business,
have to consider the knowledge nature of the organization and of its components
as well as of the business (Marr and Schiuma, 2001). This involves that the
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identification of the strategic organizational knowledge assets at the basis of

company competitiveness needs to be taken into account both as intrinsic objects
of a company’s strategy and as instrumental lever to achieve strategic outcomes.
In this regards, organizations can adopt two main approaches in designing a
strategy: managers can explicitly and directly focus their attention on knowledge
assets and include their development in the objectives of the company’s strategy;
and/or managers can focus the strategy definition around business and
performance objectives and afterwards to identify the strategic organizational
knowledge resources grounding the achievement of the targeted strategic
objectives. In the implementation stage of a company’s strategy, the assessment
of knowledge assets allows to align strategic objectives with knowledge asset
management initiatives. The alignment between knowledge asset management
initiatives aimed to develop the organizational knowledge domains, with the
strategic business and performance objectives is of fundamental importance to
support the growth of organization’s competencies (Schiuma et al., 2008).
. Third, the IC assessment and management is at the cornerstone of the development
of new business models which through the valorization of intangible and
knowledge resources are able to prompt creativity, imagination, energy and passion
within organizations (Schiuma, 2011). These represent the new competitive factors
for creating value in the global business. Moreover, the management and the
assessment of knowledge assets support the governance of an organization not
only by improving the strategy planning, but most importantly by affecting
the organizational behaviour. Indeed, by means of measures, it is possible to
highlight the role and the relevance of knowledge assets for company’s success and
the importance of taking care of organizational knowledge resources. For an
organization, defining a measure equals to state that the object of the assessment
is important. Indeed, measuring corresponds to spotlight issues. In addition, the
definition of measures for knowledge assets allows to describe the organization
position in terms of knowledge resources endowments, and to identify the
knowledge asset development priorities (Marr et al., 2004a, b).
. Fourth, a variety of IC management approaches in different companies is a
necessary precondition for comparisons and benchmarking. It allows the
managers to learn from experience developed in different contexts, in terms of
size, industry, localization and so on, and to identify and adopt best solutions.
However, as far as variety can cause additional effort, it could also be a source
of complexity.
 These reasons provide a strong rationale for a better understanding of managing IC for Managing IC
company’s value creation. dimensions
3. IC and organizational value creation: identifying, managing and maximizing
the relationships
3.1 IC, performance improvement and competitive advantage
In the last decades, the complexity and the turbulence of the economic and socio- 353
cultural scenario has highlighted that the competitiveness of firms, systems of firms
and, in general, of any organizational system is based not only on the traditional
tangible assets and financial capital, but great relevance is played by the intangible
resources, in the form of knowledge assets, able to create sustained competitive
advantages (Delios and Beamish, 2001; Itami and Roehl, 1987; Nahapiet and Ghoshal,
1998; Teece, 2000).
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New theories of strategic management such as the resource-based view (RBV)

(Barney, 1991; Drucker, 1959; Penrose, 1959; Peteraf, 1993; Rumelt, 1984; Wernerfelt,
1984), the competence-based view (Davenport and Prusak, 1998; Prahalad and Hamel,
1990) and the knowledge-based view (Nonaka and Takeuchi, 1995), during the time,
have introduced in the economic and managerial literature new theoretical planning,
frameworks, techniques and tools finalized to examine, directly or indirectly, the
increasing importance of the knowledge resources for organizational performance
improvements. It emerges that competitive advantage is achieved more and more
through the bundling and revitalizing of multiple, distinctive firm-specific resources
and competencies in order to create valued outputs (Penrose, 1959; Wernerfelt, 1984;
Rumelt, 1984).
Teece (1998), in particular, highlights that “the competitive advantage of companies
in today’s economy stems not from market position, but from difficult to replicate
knowledge assets and the manner in which they are deployed”. The essence of a firm
resides than in its ability to create, transfer, assemble, integrate and exploit knowledge
assets (Teece, 1998, 2000).
Coherently with the wide acknowledgement of knowledge as a strategic resource for
organizations competitiveness, the concept of IC has been introduced and developed as
new interpretative category of such resources. It can be considered a conceptualization
of the cognitive and intangible resources that answers in a better way to the
managerial needs to have interpretative and operative tools for their identification and
evaluation.
Schiuma et al. (2008) define IC as “the group of knowledge assets that are attributed
to an organization and most significantly drive organizational innovation and value
creation mechanisms for targeted key stakeholders”, where the knowledge asset can be
considered “any organization resource made of or incorporating knowledge which
provides an ability to carry out a process or an activity aimed to create and/or deliver
innovation and value” (Marr et al., 2004a, b).
Along the time, different studies have addressed the issue of the relevance of IC
and how it can contribute to improve business performance and create value for
organizations (Brooking, 1997; Carmeli and Tishler, 2004; Edvinsson and Malone, 1997;
Marr and Schiuma, 2001; Schiuma et al., 2008; Sveiby, 1997).
However, the process of how IC management affects organizational performance
remains unclear. Little guidance is provided, in fact, on how knowledge assets are
identified, nurtured, enriched, revitalized, bundled, converted and integrated into
strategic and distinctive core-competences and how these context-specific resources
 JIC that are socially complex, causally ambiguous and path dependent are in turn used to
15,3 generate superior performance and impact on business performance.

3.2 IC and innovation

Innovation is a very wide topic within economic and managerial fields. Debate about
its nature, processes, extent, location, determinants and consequences is vigorous and
354 wide ranging. As a concept, innovation evokes images of mystery, skill, inspiration
creative genius, toil and serendipity. The etymological root of innovation is “innovare” –
to renew. Implicit within its origins is, therefore, a sense of newness and change. However,
there has been considerable debate about the meaning, location and nature of “newness”
and “change” (Becker and Whisler, 1967; Damanpour, 1992).
Various theoretical perspectives have been employed in efforts to understand
innovation as it happens across the full range of organizational levels. Among them,
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the RBV has played a pivotal role.

The RBV suggests that sustainable competitive advantage can be achieved through
the expeditious exploitation of resources internal to the firm. In general terms, the RBV
explores the link between firm’s internal resources, which are defined as all assets,
capabilities, organizational processes, firm attributes, information and knowledge
controlled by a firm that enable the organization to conceive of and implement
strategies that improve its efficiency (Barney, 1991), and performance.
The RBV provides also a useful theoretical framework in which to consider
resources for innovation. Grant (1996, p. 110) interprets the RBV as presenting the firm
as a “unique bundle of idiosyncratic resources”, that are optimally deployed. Barney’s
(1991) framework for exploring whether or not a particular resource might be a source
for sustained advantage emphasizes that, in order for them to contribute, resources
must be unique, valuable, rare, imperfectly imitable and capable of being operationalized
by the firm. That is, they must be heterogeneous across organizations; exploit
opportunities or nullify threats; be difficult to trade, to copy or, to imitate. Teece et al.
(1997) describe the ability of an organization to combine its competencies and resources
advantageously as its “dynamic capability”. This suggests a purposeful approach to
innovation and is consistent with Tranfield and Smith’s (1998) view of strategic
advantage being driven from the “inside-out”. According to the main insights of a RBV
literature review, the resources that are identified as mainly influencing innovation are
knowledge, technical knowledge, specialization and professionalism.
Competitive pressure and the rapid as well as pervasive growth of information
and communications technologies have forced companies to review the sources
of their competitive advantage and value creation capacity. This has resulted in a
focus on both innovation and knowledge. Accordingly, the concept of knowledge
has received a deal of attention in recent years. The concept of knowledge has
emerged as a strategically significant resource for the firm (Grant, 1996; Milio, 1971;
Mintzberg et al., 1976) and it has been asserted to play a significant role in the
innovation process (Song and Montoya-Weiss, 1998) as well as in supporting
organizational innovation capacity (Grant, 1996; Schiuma et al., 2008; Subramaniam
and Youndt, 2005).
Indeed, the complexity of skills and processes needed in the development of today’s
products and services requires that managers attend to the processes of managing
knowledge combination as the very basis of innovation (Leonard and Sensiper, 1998).
Mingers (1990) conceptualized innovation as both an exploration and synthesis
involving a process of the combination and exchange of knowledge (Nahapiet and
 Ghoshal, 1998). Galunic and Rodan (1998) report that firms are encouraged to innovate Managing IC
by searching out new resources or finding new ways of using existing resources. dimensions
Sometimes innovation consists of a recombination of knowledge and other resources
that were previously in existence (Cooper, 1988). Cheesbrough (2003) considers the
importance of accessing and exploiting outside knowledge while liberating internal
expertize for others’ use as a good strategy to support open innovation.
Other scholars define new product development process as a dynamic and iterative 355
problem-solving process in which complex interactions and inter-temporal integration
activities are required to build new capabilities that meet market demand (Marsch
and Stock, 2003; Brown and Eisenhardt, 1995). Gardner et al. (2012) examines how
teams can develop a knowledge-integration capacity to dynamically integrate
members’ resources into higher performance. Miles et al. (2009) suggest an innovation
form of organizations designed to enhance knowledge sharing and capable of
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generating economic value through collaborative entrepreneurship within networks

and communities.
Grant (1996) suggests that organizations accumulate knowledge over time, learning
from their members. Organizational knowledge is created through the interactions
of individuals. Diverse and disparate individual knowledge is moulded, integrated
and reconciled (Grant, 1996) with the collective whole through story telling (Brown and
Duguid, 1991), metaphor and analogy (Nonaka and Takeuchi, 1995) and, common
cognitive schema (Weick and Roberts, 1993), which may or may not come to be
captured in explicit form.
Technical resources and technical knowledge, measured by the presence of a
technical group or technical personnel, has been shown to have a positive impact on
technical innovation. The greater the extant technical resources within the innovating
system the more likely new technical innovations can be understood (Damanpour,
1991). The construct is similar to that of administrative intensity which posits a
relationship between the ratio of managers to employees and administrative innovativeness.
This is echoed by Daft’s (1978) dual-core model of innovation that argues that
administrative innovations emanate from the administrative core and technical innovations
from the technical core.
Also specialization has been shown to have a positive relationship with innovation.
Measured by the number of job titles, a greater variety of specialists provides a broader
knowledge base (Kimberly and Evanisko, 1981) and increases opportunities for the
cross-fertilization of ideas (Damanpour, 1991). Finally, the professional knowledge,
measured in numbers or percentage of staff with specified educational backgrounds,
of organizational employees has a positive relationship with innovation: it has been
shown to be positively related to high levels of self-esteem, develop confidence and is
associated with increased boundary spanning activities (Damanpour, 1991), which
positively impact innovation.
Although the basic relationship between knowledge-based factors, innovation
dynamics and companies’ performance is on the whole persuasive, different and relevant
issues remains to be understood and require further investigation. In particular, the
variety of ways of performing through knowledge and intangible resources exploitation
raises the question of how this kind of resources can be coherently and successfully
declined into companies’ innovation processes and operations, what are the “right”,
or appropriate approaches to manage knowledge and how these approaches can
disentangle the mechanisms by which those resources contribute to improve companies’
innovation dynamics and global organizational performance.
 JIC 4. Overview on the contributions of the special issue
15,3 The contributions to this special issue deal with different aspects, which are important
for a better understanding of the relationships between IC management and companies’
value creation as well as of the approaches, tools, methods and techniques to better
disentangle the mechanisms by which knowledge assets, separately or interdependently,
contribute to improve companies’ organizational performance.
356 The research contributions fall into two groups. First, there are three contributions
focused on the analysis of the IC dimensions and their links with the organizations’
value creation capacity (Kianto et al.; Galabova; Morariu); the other three contributions
provide specific and detailed conceptual models and empirical evidences on IC
practices and their relationships with innovation performance (Cabrilo et al.; Mura
et al.; Borneman and Wiedenhofer).
The contribution of Aino Kianto, Henri Inkinen, Paavo Ritala and Mika Vanhala
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deals with the interaction of IC assets and knowledge management practices in

organizational value creation. The paper draws on IC and knowledge management
literature to build a theoretical model on how intellectual assets and their management
practices interact in producing organizational performance. Lidia Petrova Galabova, in
her contribution, identifies and examines the extent to which managers of Bulgarian
entrepreneurial firms recognize and manage intangibles and the role that these factors
play in achieving performance improvement and competitive advantage in their
business. The contribution of Cristina Maria Morariu is aimed at identifying and
empirically examining the relationship between IC performance – measured by Value
Added Intellectual Coefficient model (VAICTM) – and traditional corporate performance
in a sample of Romanian companies. Sladjana Cabrilo, Leposava Grubic Nesic
and Slavica Mitrovic in their contribution present an empirical research of human capital
across Serbian industries and an identification of a series of gaps related to innovation
performance, which might be the basis for the elaboration of more effective
innovation strategies and policies in Serbia. The main objective is to assess the
current potential of value drivers in human capital in order to identify some relevant
managerial gaps to be filled. Matteo Mura, Giovanni Radaelli, Nicola Spiller, Emanuele
Lettieri and Mariolina Longo in their contribution analyse the effect of social capital
on knowledge exploration and exploitation – in particular modelling the moderating
effect of environmental dynamism – in healthcare organizations. Finally, the contribution
of Manfred Borneman and Roswitha Wiedenhofer aims to apply the concept of IC to
assess intangible resources as crucial for the quality of the educational processes as well
as to identify patterns of interdependence between drivers of IC and generic processes of
educational institutions as a prototype study in Austria.

5. Conclusions and research implications

It is widely recognized that the relevance of managing IC is strongly related to its
impact on innovation dynamics and organizational business performance
improvement. Nowadays, to get gains, private and public organizations have to be
able to transform their knowledge domains into profitable products and services as
well as they have to dynamically renew their capabilities. For these purposes, they
have to continuously and actively identify, acquire, organize, share, apply and assess
their knowledge resources. In this perspective a critical issue for organizations is how
to extract and generate the greatest value from these resources. The full potential of
knowledge resources is realized when they are efficiently and effectively identified
 through easy-to-use models and frameworks as well as managed through proper Managing IC
knowledge processes. dimensions
However, the impact of IC management on organizational business performance
is extremely difficult, if not impossible, to evaluate using money as a unique
measurement unit. Knowledge assets do have an impact on business performance and
particularly on organizational financial figures, but this is fundamentally the indirect
result of the effect of IC – as a bundle of knowledge assets – on the development of 357
different organizational components.
Although the relevance of the knowledge resources and of the knowledge processes
have been extensively analysed and discussed in the strategic, organizational
and managerial literature, currently the debate on the role of the knowledge
resources as well as of the knowledge management processes within organizations is
still lively.
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This Special Issue intends to provide new insights about how through managing
knowledge-based factors it is possible to enhance innovation dynamics and
organizational performance. This discussion is largely focused on the importance of
translating IC management within organizational components for achieving business
excellence, highlighting properly approaches and tools or application in different
contexts of analysis. This represents the core of the understanding from theory and
practice point of view of the role and relevance of IC in the management systems
of organizations.
Given the different aspects of the IC management, several questions remain that are
more or less unexplored and deserves investigation.
It is widely recognized that macro forces are deeply reshaping the twenty-first
century business landscape. These are global trends transforming the competitive
environment and challenging the validity of the traditional management principles,
which increasingly seem incapable alone to drive the future organizations’ value
creation dynamics. In today’s economic and competitive environment the value creation
capacity of an organization is not only linked to the definition of efficient and consistent
systems, as traditionally postulated by the modern management, but it is increasingly
tied to the definition of adaptable and resilient systems able to leverage their IC and to
face through change and transformation the continuous emergent market demands
and competitive challenges.
Nowadays private and public organizations have to face uncertainty, crisis, change,
turbulence and high competitive pressure. In this context it is also critical to understand
particularly what are the new key IC dimensions and traits to be better developed
and managed in order to deal with the fluidity of business. This also involves first and
foremost the acknowledgement of the centrality of IC into organizational value creation
mechanisms and second the understanding that the design and effective implementation
of renewed approaches, models and tools for assessing and managing IC is central to the
development of new business models aligned with the evolution of today’s competitive
scenario.
It is of fundamental importance, in fact, the recognition that, more and more, in the
new scenario, organizations will not only need to manage their knowledge domains,
but most importantly dynamically renew their capabilities. Most importantly, however,
they will need to engage people’s imagination, passion and energy both at an
individual and at a social level. This determines a new role that IC is called to play for.
To create value in the new millennium, organizations have then to integrate their IC
with a perspective that recognizes the relevance of people’s experiences, emotions and
 JIC energy in shaping and influencing the quality and performances of organizational and
15,3 business models.
Future research should identify and explore the IC dimensions that most significantly
will drive the value creation mechanisms of twenty-first century organizations. This has
to be accompanied by the definition and integration into the actual management toolbox
of new frameworks, approaches and tools capable of enriching the management systems
358 so that they can evolve from a modern-based nature to a post-modern one.

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About the authors

Dr Antonio Lerro is a Senior Research Fellow in Management Engineering at the University of
Roma 3 – Department of Engineering, Italy. He is also a Lecturer in Innovation Management at
the University of Basilicata, in Italy. His research interests focus around intellectual capital,
innovation and technology management and policies, both at organizational and community
level. Antonio received his Degree in Economics from the University “Tor Vergata” in Rome and
the PhD in Management Engineering from University of San Marino. During his PhD Antonio
spent one year as a Visiting Research Fellow at the Center for Business Performance in the
Cranfield School of Management, the UK. He has been also Visiting Research Fellow at the
Centre for International Competitiveness in the School of Management of the University of Wales
Institute Cardiff (UWIC), the UK. He is a regular speaker at national and international
conferences and authored or co-authored more than 40 publications, including books, articles,
research reports, working papers.
Dr Roberto Linzalone is a Senior Research Fellow in Management Engineering at the
University of Basilicata. His research interests focus knowledge management, new product
development, innovation and project management. Roberto received his Degree in Civil
Engineering from the University of Basilicata and the PhD in Advanced Systems of Production
from the Polytechnic University of Bari. He is a regular speaker at national and international
conferences and authored or co-authored more than 20 publications, including books, articles,
 research reports, working papers. Dr Roberto Linzalone is the corresponding author and can be Managing IC
contacted at: roberto.linzalone@unibas.it
Giovanni Schiuma is a Professor of Arts-based Management and Director of the Innovation
dimensions
Insights Hub at the University of the Arts London. He is widely recognized as one of the world’s
leading experts in the arts in business and strategic knowledge management. Inspiring speaker
and facilitator, with extensive research management expertize and excellent ability to coordinate
complex projects and lead research teams. Creative and innovative, with international mind-set 361
and openness to address and solve key strategic research and organizational challenges.
Giovanni is a leading international expert on knowledge management and intellectual capital
strategy and widely renowned for his work on the use of the arts for business, as well as his work
on assessing and managing knowledge assets. He Chairs the International Forum on Knowledge
Assets Dynamics.
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