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Influence of Intellectual Capital in The Organizational Innovation
Influence of Intellectual Capital in The Organizational Innovation
2, April 2012
I. INTRODUCTION
Many organisations have realized the important fact that
their real value is not reflected in their materialistic capital,
but in their intellectual capital. This view has required of the
manufacturing companies the complete transformation from
present structures, perceptions and approaches in
management and organisational ambiance. One of the
approaches processing this transformation possible is the
acquired intellectual capital.
Accordingly, this research gives a primary conceptual
model for KM, intellectual capital and their role in creating
organisational capital. This view is based on the premise
Fig.1. The drivers for organisational learning and knowledge [7].
which considers that the intellectual capital is nowadays a
strategic element in industrial enterprises. [1] has considered Accordingly, there were many views and propositions to
intellectual capital as the most strategic source for the determine and give clear vision for the components of
intellectual capital. Sveiby believes that intellectual capital
consists of workers and efficiency of the internal structure of
Manuscript received February 1, 2012; revised March 19, 2012.
the management, organisation and software, the organisation
Mohammed A. Ahmed AL-DUJAILI is with the School of Mechanical, culture (the external structure represented in the
Aerospace and Civil Engineering/University of Manchester, M13 9PL, UK, benchmarking), and organisation culture and relationships
(e-mail: mhammedaldujaili@yahoo.co.uk ).
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International Journal of Innovation, Management and Technology, Vol. 3, No. 2, April 2012
with customers [8]. Devenport and Prusak have limited intellectual capital, knowledge management and
intellectual capital by three sorts too: human capital, technologies collectively is a thrilling challenge to
intellectual property, and individual capital [9]. Stewart leaderships. This allows creating institutions with the
identifies also three types of intellectual capital: human possibilities of modern information [17]. This means viewing
capital, structural capital and customer capital [3]. At the the knowledge as roots to intellectual capital, which will
same time, Edvinsson says the main distinction is between result in future benefits to the companies [18].
human capital and structural capital, which can then be
divided into organisational capital and customer capital [10].
As well, Edvinsson explains that the main differentiation is IV. ORGANIZATIONAL INNOVATION
between human capital and structural capital, which can then Innovation nowadays is considered the fundamental
be divided into organisational capital and customer capital source of value creation in companies. Therefore, it has been
[10]. From the above we note the existence of a convergence defined in many different concepts. One of these concepts is
of views on the components of intellectual capital. Therefore, defined as the creation of new knowledge and ideas to
the study will be based on three components (human capital, develop new products and facilitate business operations
structural capital, customer capital) as variables relied upon continually, with the aim of enhancing processes and internal
in this research. business structures to create market-driven products [19, 20].
In this sense, innovation is the principal mechanism of
competition for many companies, particularly in technology
III. KNOWLEDGE MANAGEMENT SYSTEM and knowledge-based industries. Commonly, the innovation
KM is nowadays the hottest topic. This is because practice can be understood as a complex activity in which
knowledge is actually “a fluid mix of framed experience, new knowledge is applied for commercial ends [21].
values, contextual information, and expert insight that Accordingly, study of the relation between innovation and
provides a framework for evaluating and incorporating new intellectual capital should take into account the various types
experience and information”. It “originates and is applied in of innovation to cover the gap. Where some authors have
the minds of knowers” [11]. In other words, new knowledge classified the innovation as administrative and technical, this
acquisition is indispensable in the development and type of innovation refers to the changes in organisational
improvement of new skills in work. That is because ease of structure and processes, such as authority, task-structuring,
understanding and effectiveness in learning by employees are personnel recruitment, resources allocation and rewards.
significant considerations for organisations in corporate Technical innovation indicates the knowledge that links
knowledge acquisition [12]. methods, components, and techniques with processes to
Furthermore, for many organizations, innovation is at create a product or service. Radical innovation is the main
present a required and fundamental element of the firms’ change that represents a new technological pattern, and
sustainability in the marketplace. This is because it considers requires more organisational capabilities and superior
significant and complex dimensions of learning in work due profundity of knowledge. Finally, incremental innovation is
to using a mix of rationale, the spontaneous processes defined as slight technological changes in organisation to
affecting practising communities [13], whereas according to create products or services. However, these authors have
Liao, knowledge acquisition and creation are considered considered these sorts of innovation as main reasons to a
internally in the companies as the first steps in acquiring survival and growth of companies [22, 23, 24, 25, 26, 27].
knowledge from the external environment to turn it into
effective action that can be applied or used within
organizations [14]. Consequently the companies must work V. METHODOLOGY
hard and quickly in disseminating knowledge practically in
all of its districts to create innovation among employees. A. Research Method
According to Puranam is believed that the organisational The study in the methodology has adopted the
learning process during knowledge acquisition is considered questionnaire survey that was conducted in Iraqi
as ‘grafting’, as its purpose is to acquire complex patterns of manufacturing companies. The industry is concentrated in
information or knowledge [15]. This is because clusters in the Middle Euphrates region, especially in
knowledge-grafting through imitation is faster from Babylon, in two organised industrial zones, where there is
knowledge acquisition with experience, and therefore the Automaker, which represents the only company to use an
firms are lunged towards a grafting of the new capabilities at assembly line for the vehicle production in Iraq. There was a
the organisations’ current knowledge base in order to line to small oil refineries production. In addition, there was a
develop the processes of the manufacturing, when human company in the textile industry that contains two plants for
resources contain knowledge offered by employees in the production of the miscellaneous fabrics.
formats of capacity, commitment, motivation and loyalty, Fig. 2 and 3 explain the theoretical research model and the
additionally in form of advice or comments. relationships among all the variables. The study model has
Consequently, some of the master components are highlighted the influence of intellectual capital in the
experience, technical expertise, and problem-solving organisational innovation through a diagnosis and
competence, innovation, education, attitude, and determines the relationship and the effect between the
entrepreneurial spirit [16]. At the present time, the companies components of intellectual capital and organisational
have considered that the combination process between creativity for the companies of the study field.
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International Journal of Innovation, Management and Technology, Vol. 3, No. 2, April 2012
Fig. 2. Research framework. TABLE II: DISTRIBUTION OF THE SAMPLE ACCORDING TO AGE
Age Frequency Percentage
20-25 6 19%
26-30 5 16%
31-35 8 25%
36-40 9 28%
41UP 4 21%
Total 32 100%
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International Journal of Innovation, Management and Technology, Vol. 3, No. 2, April 2012
TABLE V: FREQUENCY DISTRIBUTION AND RELATIVE FOR ANSWERS OF the fifth question. The question checks whether the efforts
STUDY SAMPLE’S ON HUMAN CAPITAL
are directed by the company to engage customers in its
agree nor
Disagree
disagree
disagree
Neither
operations; average value was 3.6. The highest average has
Agreed
Mostly
Mostly
agreed
been achieved in the first question, which confirms that the
Average %
Item R R R R R company operates at full capacity in order to satisfy
F F F F F customers. Also, with question six, which emphasizes that
% % % % %
The company the company is struggling to gain potential for new customers,
relies on the average was 4.7, which was a good result.
employees
with TABLE VI: FREQUENCY DISTRIBUTION AND RELATIVE FOR ANSWERS OF
20 63 8 25 3 9 1 3 - - 4.5
experience STUDY SAMPLE’S ON STRUCTURAL CAPITAL
and skill in
agree nor
Disagree
disagree
disagree
job.
Neither
Agreed
Mostly
Mostly
agreed
The company
Average %
has
employees 20 63 9 28 3 9 - - - - 4.5 Item R R R R R
with great F F F F F
confidence in % % % % %
the business The firm
performance supports the
and without patents and
5 16 1 3 4 13 10 31 12 37 2.3
hesitation. carries out
The operations.
employees Firm buys
have a level of the
19 59 7 22 4 13 2 6 - - 4.3 copyright
high-skill 17 53 6 19 7 22 1 3 1 3 4.2
developed. of its
The job employees.
vacancies in The
company processes
dictate a staff of assessing
22 69 8 25 2 6 - - - - 4.5 the quality
of experience
and highly of the 20 63 8 25 3 9 1 3 - - 4.5
skilled. firm’s
Emphasises products
the company's are good.
ongoing The firm is
21 66 7 22 5 16 1 3 - - 4.7 interested
promotion of
qualified with 16 50 4 13 2 6 3 9 7 22 3.6
personnel and trademark
does not allow and gives it
upgrade of special
those who attention
have weak due to its
performance. importance
The company to the
is struggling company
to provide and the
workers with customer.
practical skills The firm's
from thorough 23 72 7 22 - - 2 6 - - 4.6 information
intensive system 19 59 4 13 6 19 - - 3 9 4.1
training works very
programs. well
because it
allows
B. Structural Capital transfer of
the required
Table VI indicates that the highest average was in information
paragraphs 2 and 3, where the average for both items was 4.8. from all
This indicates that the company is concerned with the over the
intellectual rights to develop the quality of its products and company.
The
stimulate employees to continue in creating innovative ideas. regulations
Also, it indicates these ideas are employed in the company and
for excellence in work. A low average has been achieved in regulatory
procedures
the first paragraph, which confirms that there is not support in the firm
18 56 8 25 1 3 - - 5 16 3.6
by the company to patents, where there has been an average are
value of 3.2. supporting
innovation.
C. Customer Capital
Table VII shows the results of the sample answers about
the customer capital, where the lowest average was found for
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International Journal of Innovation, Management and Technology, Vol. 3, No. 2, April 2012
TABLE VII: FREQUENCY DISTRIBUTION AND RELATIVE FOR ANSWERS OF TABLE VIII: FREQUENCY DISTRIBUTION AND RELATIVE FOR ANSWERS OF
STUDY SAMPLE’S ON CUSTOMER CAPITAL STUDY SAMPLE’S ON ORGANIZATIONAL INNOVATION
Neither agree
nor disagree
agree nor
Disagree
disagree
disagree
Disagree
Neither
Agreed
disagree
Mostly
Mostly
agreed
Agreed
Mostly
Mostly
agreed
Average %
Average %
R R R R R R
R R R R Item F F F F F
Item F F F F F % % % % %
% % % % The firm
%
The firm enhances and
operates at develops its
full capacity products based
24 75 6 18 2 6 - - - - 4.7 21 65 5 16 6 19 - - - - 4.5
to satisfy on existing
customers. skills and
experiences.
The firm is
conducting The firm is
21 66 5 16 4 12 2 6 - - 4.4 continually
dialogue
with modifying the
customers to performance of 16 50 8 25 6 19 2 6 - - 4.2
identify their production
needs and processes.
desires. The firm is
The firm is holding down
working on the
the amendments on
exchange of the composition 14 44 6 18 4 13 3 9 5 16 3.7
information of raw materials
that within the
contributes labour.
to opening The firm is
17 53 8 25 4 13 3 9 - - 4.2 designing new
new
horizons for production 13 41 12 38 5 16 2 6 - - 4.1
cooperation processes.
with The production
customers. processes are
The firm enhanced by the 10 31 14 44 6 19 - - 2 6 3.9
seeks to 19 59 7 22 1 3 3 9 2 6 4.2 capabilities and
reduce the expertise
solution of available in the
problems firm.
with The firm is
customers. using computer
The firm is systems in the
seeking the 23 72 6 19 3 9 - - - - 4.6
administrative
participation processes.
of customers
in its The firm has
12 38 9 28 3 9 2 6 6 19 3.6
operations introduced a
and modern 21 66 5 16 - - 3 9 3 9 4.2
transactions. information
system to help
The firm is
complete the
struggling to
processes.
gain
potential for The firm aims
22 69 5 16 2 6 3 9 - - 4.4
new by improving
customers. processes to
increase
productivity 22 69 3 9 1 3 - - 6 19 4.1
D. Organisational Innovation and efficiency.
The firm uses
Table VIII explains that the highest average value
practical
achieved in the sixth question confirms that the companies methods to
have used computer systems in the administrative processes, improve the
and the ninth question confirms that the company uses design and 24 75 3 9 5 16 - - - - 4.6
computer-assist
practical methods to improve the design and ed processes
computer-assisted processes (automation). (auto-mation)
The average value for both questions was 4.6. This result The firm’s
indicates that the company is using the process methods in created outputs
are consistent
the design of production processes. The lowest average was with the needs 16 50 10 31 6 19 - - - - 4.3
achieved in the third question, which confirms that the of customers.
companies are holding down the amendments on the
composition of raw materials within the labour and the
average value was 3.9. However, in order to verify the analysis of morale by
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assumptions underlying the research, the study has used other greater than the tabular value of 5.12, with degree of freedom
statistical methods to test hypotheses of morale between the of 1.9. This indicates acceptance of the relationship
independent variable and dependent variables. Accordingly, statistically, showing in Table X that the value of the
the study launched components in analysis of intellectual coefficient of determination R2 = 0.38, which explains a high
capital that were adopted in this study, and represented in explanatory ability.
organisational innovation (human capital, structural, and
customer).The study has used the following equations to TABLE X: RESULTS OF TESTING THE RELATIONSHIP BETWEEN HUMAN
CAPITAL AND ORGANIZATIONAL INNOVATION
account of regression coefficient and Adjusted R2
D.F R R2 T Test F Test
respectively in Tables 9-12, and as follows;
Tab. Cal. Tab. Cal.
R= β 1 =
∧ ∑ ( x − x )( y − y ) and βˆo =
i i
y − βˆ 1 x (2) 1.9 0.65 0.38 1.88 2.12 5.12 5.87
∑ ( x − x) i
2
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International Journal of Innovation, Management and Technology, Vol. 3, No. 2, April 2012
TABLE XII: RESULTS OF TESTING THE RELATIONSHIP BETWEEN CUSTOMER of Iraq. Also, this research has been supported by the Iraqi
CAPITAL AND ORGANISATIONAL INNOVATION
organisations, through the manufacturing firms. Therefore,
D.F R R2 T Test F Test the author wishes to acknowledge those companies’ support,
Tab. Cal. Tab. Cal. and their contribution during the development of ideas and
1.9 0.21 0.011 1.88 0.37 5.12 0.19
concepts suggested in this research.
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ACKNOWLEDGMENT
and time-to-market during new mobile service development,”
The author hereby acknowledges support from his sponsor, International Journal of Service Industry Management, 14(1), 120-147,
2003.
in the Ministry of Higher Education and Scientific Research
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[25] H. O. AL-Enzi “The capabilities of information technology and its role Mr. Mohammed Assi Ahmed AL-DUJAILI is
in strategic innovation: Case study in a sample of the mobile companies currently a PhD candidate at School of Mechanical,
in Iraq,” Unpublished master thesis, University of Mussel, Iraq, 2008. Aerospace and Civil Engineering, University of
[26] S. Forge and E. Bohlin, “Managed innovation in Korea in Manchester, United Kingdom, undertaking a
telecommunications-moving towards 4G mobile at a national level,” research in the area of knowledge systems, decision
Telematics and Informatics, 25(4), 292-308, 2008. support systems and organizational performance.
[27] H. Gruber, “Competition and innovation: The diffusion of mobile Mr. AL-DUJAILI is Professional in Quality Control
telecommunications in central and eastern Europe,” Information and Six Sigma. As well, Mr. AL-DUJAILI has many
Economics and Policy, vol. 13, no.1, pp. 19–34, 2001. papers are published in different Journals about knowledge systems and
quality control in journal of mechanics engineering and automation at USA,
and journal of Total Quality Management and Business Excellence at UK.
Mr. AL-DUJAILI is now reviewer in Journal of mechanics engineering and
automation. Additionally, Mr. AL-DUJAILI has many conference papers
have published at Italy, Malaysia and Egypt. Mr. AL-DUJAILI also has
Book authorship about Quality Control systems in production and service
organizations, AL-Yazori publishing House / ISBN: 978-9957-12-196-9,
2010, Jordan.
135