Management Theories and Philosophies

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Assignment 8

Management Theories and Philosophies

Module BS4S02-V1

TABLE OF CONTENTS

1. INTRODUCTION
2. INTELLECTUAL CAPITAL

1. Definitions and Classifications
2. Quantifying Intellectual Capital

1. RESOURCE BASED VIEW
2. KNOWLEDGE MANAGEMENT

1. Definitions
2. Tacit and Explicit Knowledge

1. KNOWLEDGE MANAGEMENT FRAMEWORKS AND TOOLS

1. Organizational Culture
2. Knowledge Sharing
3. Technology
4. Transformational Leadership
5. Communities of Practice
6. Balance Scorecard

1. CONCLUSION
2. APPENDIX
3. REFERENCES

INTRODUCTION

The smart corporate entity of the 21st century distinguishes itself by placing much importance on knowledge and information. This emphasis on knowledge and information has been informed by the paradigm shift from the industrial revolution to the knowledge era business climate. Many organizations consistently seek long-term significance and impact. The quest to achieve competitive advantage has forced organizations to take a more critical look at how its intangible assets are managed as tangible assets are fast losing their high importance status in aiding organizations achieve thus. Drucker et al (as cited in Halawi & Aronson, 2005) posits that scholars generally agree that knowledge management stands out as the most important competitive advantage factor for organizations. According to Sudharatna (2013, Pg.1), knowledge is seen to be the most vital part of an organization and also creates the enabling environment for competitive advantage and organizational success. Knowledge is inevitably a key strategic asset for the now as well as the future. According to Taskin, Verville & Al-Omari (as cited in Shongwe 2015) knowledge has become a vital resource in today’s economy; forcing organizations to manage their knowledge assets. In fact the knowledge era has presented either of two options to firms the world over; learn or expire. The resource based view of competitive advantage hinges on the capacity of firms to cultivate and capitalize on intangible assets through knowledge management. Halawi & Aronson (2005 Pg.2) argue that “success in today’s global, interconnected economy springs from the fast and efficient exchange of information.” Indeed knowledge management is a robust engine that lends itself to competitive advantage. It leads to creativity and innovation. Knowledge management, intellectual capital and resourced based view of competitive advantage are intrinsically connected and inter-relate. These topics have over time enjoyed diverse definitions and views which have served to help assure improvement instead of barriers in these areas. They will be discussed in this essay. In this write up the extent to which the creation, sharing and utilization of knowledge is central to the resource based view of competitive advantage as cited above is examined.

INTELLECTUAL CAPITAL

Many organizations the world over have come to appreciate the vital role that knowledge (an intangible asset) plays in their profitability and are therefore beginning to place more value on it. It is becoming all the more critical for organizations to possess a firm grasp of how to utilize this asset to achieve strong competitive advantage. Mentzas (2002) argues that, organizations critically need to develop a comprehensive understanding of knowledge strategies, processes and tools for the creation, transfer and deployment of this unique asset.

Definitions and Classifications

Invisible asset, Intangible asset, Intellectual property, immaterial values and Intellectual Capital (IC) are all terms that pioneering thinkers have brought to bear in recent past. Whilst some see these terms as dissimilar, others use them interchangeably. Smith (as cited in Choong 2008, Pg. 2) suggests that IC comprises “all the elements of a business enterprise that exist in addition to working capital and tangible assets adding, that researchers have categorized IC into three (3) main parts: human, customer and structural capitals.” Kaufman & Bernardez (2012) also suggests social capital as another classification of intellectual capital. According to Kaufman & Bernardez (2012), social capital can be sub-divided into institutional capital, relational capital and organizational capital. Edvinsson (as cited in Bucklew et al) buttresses the intangibility of IC by describing IC as hidden value, using the root of a tree as a metaphor. Nonaka and Takeuchi (as cited in Stevens, 2010 Pg. 1) consider knowledge and intellectual capital as a company’s primary source of production and value. Human capital consists of the collective abilities, skills and knowledge of workmen. Customer or relational capital on the other hand, is defined by Starovic et al (2003, Pg. 6) as “all resources linked to the external relationships of the firm with customers, suppliers or partners in research and development.” It is intrinsically related with human and organizational capital; creating an annex from these two (2) categorizations. Organizational or structural capital can be defined as knowledge that exists within the organization. It comprises organizational practices, procedures and records. To achieve competitive advantage, it is paramount that all these kinds of intellectual capital be quantified just like other tangible assets.

Quantifying Intellectual Capital

Anderson (as cited in Joia, 2007) posits that intellectual capital should be quantified for the following reasons: To enable management of IC, to enhance the management of intangible property, to monitor outcomes triggered by actions, to transit the organization’s from a strategy level to the point of action, to stipulate probable options of action and to enrich the running of the business as a whole. Marr et al (as cited in Joia, 2007) also suggests five (5) fundamental reasons why organizations quantify their intellectual capital: to aid organizations formulate their strategy, to assess the implementation of strategy, to support diversification and development decisions, to use these as a base for compensation and lastly to communicate processes to stakeholders who exists outside the firm or organization. Several scholars have underscored that knowledge in itself does not result in competitive advantage, but rather its effective and efficient application. Quantifying intellectual capital is a big step, managing it is the “chicken that lays the golden eggs.”

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