Rethinking Resource Scarcity: The Need For A New Paradigm In Economics
António Eduardo Martins, Felipa
Lopes dos Reis, Open University, Portugal
ABSTRACT:
The constant evolution of
society requires a continuous effort to develop new paradigms. The management
of intellectual capital of organizations is of crucial importance. Presenting
an update of the state of the art the present paper describes the general
methodology that the researcher used to synthesize an intellectual capital
model. The empiric study developed shows the relevance of a new explicative
paradigm in economic science. The conclusions allow evaluation of the relevance
of the study of intellectual capital for the management of organizations in the
knowledge society.
Keywords: Economic science, Intellectual capital, Knowledge economics, Knowledge management
1. Introduction
Understanding how an
organization develops knowledge is a prior condition to manage both knowledge
and intellectual capital. Sharmer (2001) introduced the concept of
“self-transcendental” knowledge; this is the tacit knowledge before
its incorporation, namely, the ability to detect the potential, to see what
doesn’t exist yet. This is, generally, associated with artists e.g.
Michelangelo supposedly said, about the sculpture of David: “David was
already in the stone. I just took away what wasn’t David”. The
ability to see David where the other ones just see stone is what distinguishes
the truly great artists.
Indeed, the growing
difference between the companies’ stock market capitalization (their
market value) and the value expressed in balance sheets reveal their respective
intellectual capital. To some, this is an evidence of the emergence of
information society where immaterial resources, more than material ones, are
the sources of value creation (Drucker, 1993; Reich, 1991). The references of
intellectual capital indicated in this study foreground the performance of
intellectual capital in companies, clearly bringing forth this factor
(Edvinsson e Malone, 1997; Lev e Zarowin, 1998; Stewart, 1997; Sveiby, 1998).
Although the difference isn’t explained, it is used to develop various
notes or even autonomous reports beyond the financial annual report.
Brenann and Connel (2000)
developed an interesting structure to compare different plans in the main
classification, summed up in table 1.
Table 1: Plan Classification
|
Developed by |
Structure |
Classification |
|
Sveiby (1998; 1997) |
Intangible Assets Monitor |
Internal Structure External Structure Personal Competency |
|
Kaplan e Norton (1992) |
Balanced Scorecard (weighted evaluation) |
Business Process perspective Customer Perspective Learning and Growth Perspective Financial Perspective |
|
Edvinsson e Malone (1997) |
Classification of Sources Skandia Value Scheme |
Relational Competency Human Capital Structural Capital |
After all, many of the
structures share the same three comprehensive classification categories –
human capital, customer capital and intellectual capital. However, the classification
of this plan is present, distinctively, in each one the identified models.
2. The Role Of Executives
In Knowledge Management
Management is described as
something which “has systematizing implications, supplying of structures,
and contributes to the global coherence of the organization” (Addleson,
“Organizing to Know”, 200, 138). Other management attributes
include coordination, control, integration and the handling of of people,
processes and strategies for attaining a goal. In knowledge management, the
main goal is to administer the tacit and explicit knowledge inside an
organization. To manage explicit knowledge, organizations must:
¨
Generate, create or acquire knowledge;
¨
Encode and organize knowledge to ease its access;
¨
Make the knowledge available to the others through communication or
internal publications;
¨
Provide access to knowledge and ease its recovery;
¨
Use and apply knowledge to solve problems, support decisions, improve
performances, conduct and analyse situations and processes in order to sustain
business activities.
Hence, the major role of
information technologies (IT) becomes evident. Indeed, IT can be a powerful
booster and provide effective and efficient tools to the many aspects of
knowledge management, such as the acquisition, share and application of
knowledge.
IT applications and its
skills in searching, ordering, indexing, filing, selecting and conveying
information may facilitate and improve the organization, ordinance,
classification and broadcasting of knowledge. Such technologies, like the
relational database management systems, document management systems, Internet,
Intranet, web search engines, work tools, performance support systems, decision
support systems (DSS), data improvement
and storage tools, e-mail, videoconferencing, news circulation and group
discussions can perform a pivotal role in order to ease knowledge management.
However, IT isn’t
inherently the core of knowledge management, likewise a project doesn’t
apply knowledge management just because it uses or includes IT applications.
These are just a supporting tool in knowledge management; by itself, they
don’t promote knowledge.
While IT help individuals
to locate information, people have to determine in what form the information is
obtained and relevant according to their specific needs, therefore, they have
to analyse, interpret, understand and locate the information in its context so
it can be converted to knowledge.
Hereby, identifying a group
of main guidelines has assumed great importance, namely the identification of
markers in the human factor qualification and organizational change, if we aim
to make the investments on information and communication technologies pay off.
In this matter, we follow
the recommendation of Quinn (1991), who recognizes the need to study the
organizational reality from several dimensions, paradoxically disposed,
standing that business management reveals itself a polarized dichotomy which is
difficult to describe, both by theory as by practice. The process of knowledge
creation (Nonaka e Takeuchi, 1997) comprises a key factor in the innovation
model which represents, in the age of knowledge, a competitive factor more and
more relevant.
On the other hand, it can
be asserted that the competitiveness of an economy relies upon the intensity of
existing knowledge in a society which, on its turn, depends on the
competitiveness of the education, science and technology system, and of the
production system, also known as national innovation system (Gouveia e
Teixeira, 2005).
The innovation, as the core
of the knowledge creation process itself, of its essential elements, models and
quantification, is a stronghold of our society, where the short life of
business models, labour relations, social models and even of the nation-state
seem to be definitely a reality. The study underlying this article is formed
basically by various tools to collect information.
In the first place,
questionnaires have been applied to several organizational agents included in the
REDE Programme, implemented by IEFP (Institute of Employment and Vocational
Training in Portugal) – which is a programme promoting Consulting,
Training and Management Support to the SMEs under their Training to Small and
Medium Enterprises Programme.
Thus, the REDE Programme is
exclusively oriented to SMEs executives and workers (below 50 employees), with
no regard to their economic sector or development stage. By turning to this
data, we’ve aimed the creation of a work basis and the establishment of
the main determinant vectors of performance to micro and small companies, which
allowed us to consolidate a solid research line.
This questionnaire was
analysed through SPSS software, and carried out in subsequent years (2002,
2003, 2004, 2005 e 2007). In 2006 it hasn’t been produced any evaluation
of REDE Programme’s application and evolution, due to structural reasons
outside our research. From these works, it has been prepared a questionnaire
outline forming the basis to the quantitative study which was submitted to a
pre-test, of which analysis pointed out some important aspects to the
validation of the data collecting tool.
3. Research Problem
The evolution of
Solow’s paradox is fundamental to determining this research’s
context, that is, the difficulty to find a relation between the investments in
information and communication technologies (ICT) and improvement of the work
factor productivity, instead of what used to happen in the industrial age, when
investment was almost always synonymous of productive growth.
By this mean, it can be
systematized three main solutions of answering to these challenges of knowledge
economy: the necessity of exponential raises of ICT, thus, the required
training of individuals and, finally, the subsequent organizational change.
The overall literature
allows us to formulate the research through the following parameters: how are
the small companies managing his intellectual capital, according to the ITC
investment they were forced to carry out and from which, being small and flexible,
they don’t have apparently to alter their organizational structure.
Therefore, our goal was to study the existent relation between intellectual
capital dimensions and organizational variables (training and changeover) of
enterprises in the studied economic tissue.
4. Research Paradigm
By this mean, we intended
to assert the extent of a methodology concerning intellectual capital
withholding among micro and small companies, using for this purpose the primary
data of REDE Programme, from IEFP, which focus precisely that reality.
In fact, we can see this
growth in two forms. On the one hand, we identify growth through the
application of REDE Programme, and in the other hand, the companies’
organic growth. In empirical terms, a considerable platform of questionnaires
is actually available, distributed by the correspondent stratification and
through a timeline covering the years 2002, 2003, 2004, 2005 and 2007. In these
terms, works have been produced in order to extract conclusions about the
variables innovation, continuous professional training, processes (since the
reliable processes are the ones who encourage cooperation) en average quality
measured by customer (which is a guarantee of reliability), through the scheme
in Table 2:
Table 2: Quality Schema
|
Training ó team |
Innovation óindividual capital |
|
Processes óqualified personnel |
Quality óflaws |
The debate on productivity
is, long ago, a constant concern by academics and executives, coexisting peacefully
the doctrine that reduces it to the work and capital determinants, with the
permanent uncertainty about the predictability it needs, being work and capital
both factors with known variations.
The theory of intellectual
capital allows a complete response to this question, since the ultimate answer
to this problem may be in the intangible assets field, which has been, long
ago, in the core of organizational analysis.
This indicates a new
productivity equation, formulated as:
Productivity ↔ f (Capital; Work; Intellectual Capital)
Thus, diverse field work
was performed in order to validate the key postulates underlying this theme,
Quantification of Intellectual Capital in Organizations, and our research goals
were:
¨
To identify the main and most influential determinants in knowledge
management, beginning from the existing theoretical frame;
¨
Forthwith, through the analysis of a first questionnaire applied to
Portuguese SMEs, we tried to isolate the knowledge creation and withholding
vectors of that business universe.
By this we mean it was our
idea to test and validate the following starting presuppositions:
H1)
Team factor, importance given to customer, business processes and importance
given to individual capital, are expected to assume a non-equal importance in
the analysed sample;
H2)
The importance given to individual capital is expected to assume a more
significative importance whenever dealing with more qualified individuals in
the areas of business and ITC, as we find a more balanced distribution.
In fact, as shown by
Martins (2000), we can assert that our initial hypotheses presume that the main
determinants of intellectual capital are related with a combination of factors:
individual, team, customer and process.
The research method that
we’ve chosen is constituted in three parts, providing by this a serial
evolution of the research guideline. In a first stage, as said before, it was
realised a documental analysis over the essayed problematization, aiming to
consolidate the research theoretical basis and to make possible the approach to
various research questions and hypotheses, attending, namely, to the diverse
research that has been produced surrounding this theme. Next, by turning to
case study methodology, it was realised the qualitative study, having allowed
to identify a cluster of relevant variables, which were not highlighted yet.
Afterwards, through the realization of interviews to experts (both in theory
and practice) in this research area, we have proceeded to primary validation.
The quantitative study
constitutes the third and last part of this research, having been performed,
through questionnaires, an evaluation of the presented hypotheses and allowing
the formation of a marker model for intellectual capital withholding in the
organizations.
We’ve turned to case
study methodology because it makes possible to preserve holistic and
significant characteristics of real-life events, such as the maturity of the
economic sectors (Ryan et al., 1992; Yin, 2005).
The general methodology is
sufficiently efficient and flexible to deal with the diverse social realities,
decision variables and usual restrictions found in Management Sciences area.
5. A Paradigm Change:
Rethinking Resource Scarcity
Prior to 1980, the main
management theories focused in industrial frames as a basis to understand the
competitive advantages. According to neoclassical economies, it’s
supposed that resources can be homogeneously distributed within the industries
and, on the other hand, easily available to competitive organizations.
However, the core of
management is meant to find out clever ways of combining products and markets,
fostering the balance of power with suppliers and customers, and thus promoting
the assessment of the technological substitution potential along with products
and/or services. The primary message of an economist’s reasoning, inward
an “industrial and organizational” structure view (Roos e Roos,
1997) alights in worshiping the environment, rather than the internal
organization.
Incidentally, the studies (and
models) proposed by Porter, so fashionable among the management schools, and
even the strategic competitiveness models of Ansoff, place their main quality
in the strategic position of the organization facing the environment.
In fact, the theories based
in resource scarcity are losing their capacity to produce a global explanation,
and entering into a crisis. Indeed, human resource assets are neither the same,
strictly, as knowledge assets, neither a subset. Human resource assets measure
the delivery of dynamic knowledge assets (submitted to rise or withering)
through an individual. Thus, human resource assets can potentially foster a
raise, but they are limited in his developing range.
On the other hand, a human
resource asset can dwell an individual, group, organization, book or machine.
Knowledge assets are more unchangeable, and they can unfold in a variety of
delivering mechanisms. If the knowledge assets were captured in a specialized
system, they can be, for example, applied in the improvement of another one
performing the same task in the whole organization.
Human resource assets are
evaluated, partly, by perspectives based in the employees’ potential, in
order to promote future discoveries and inventions, or to suggest
innovations/improvements. Thus, it’s common to see the human resource
assets (measured by salary) being firmly appraised in the beginning of their
careers. On the contrary, knowledge assets (at least the ones captured in a
specialized system) are evaluated by the current knowledge they possess, and by
their diffusion range. Unless we have any mechanism to reformulate and modify
them, the knowledge assets are, frequently (but not always), steadily
depreciated as time passes by.
The questions about
ownership are also differently appreciated. In
The speed whereat knowledge
assets can be applied varies substantially. When unfold by a human system of
delivery, the speed of reasoning is controlled by the processing rate of human
reasoning. When captured in a specific system, the speed of reasoning is
limited by the inference efficiency of motor/knowledge basis and by the computer’s
processing speed. When captured in books or manuals, the unfolding speed is
limited by time spent in locating, interpreting and pondering over the
information. These differences are summed up in the following table 3.
Table 3: Comparison between Knowledge
Assets And Human Resource Assets
|
Knowledge Assets |
Human Resource Assets |
|
Economic life determined by the
rate of occurred changes in the area The company or the employees can
be the owners It can dwell in the organization and
used by individuals, books, machines, etc. etc Capacity restricted to
self-improvement, required maintenance Value determined by diffusion
range and unchangeable base knowledge Speed of use controlled by the
conclusions system speed |
Economic life determined by their
permanence in the organization The employees are the owners Dwells in the use of a single
individual Possible active learning Value includes prospective and
retrospective components Speed controlled by the processing
rate of human reasoning |
Source: António Eduardo Martins, 2008
The expression
Knowledge-Based Economy (KBE), turned to a commonplace in latter years, states
something emergent, about to happen, more than a consummated economical system.
It contains, thus, a headstrong, apologetic element of wishful thinking, for
what it’s important, even in this knowledge matter, not to mix wishes and
realities (Murteira, 2005).
The central position
occupied by the industrial worker in the past is, in this typical and strategic
economic category, nowadays occupied by the knowledge worker, with higher
education, being himself, often, a manager of knowledge-intensive tasks.
6. Research Data
The frailties in the
socio-economic constituted by the SMEs universe are well-known, being related
to the fact that, as it happened in the Industrial Revolution transition
(wherein the national companies fell behind in the modernization process), it
weren’t equally gathered, now, the conditions for the transition to the
knowledge society.
In effect, it’s
common to say that
In the beginning of 21st
century, the training of small businessmen and their workforces seems to be the
path necessary towards the knowledge society, especially if conjugated with the
recruitment of young technical staff, better prepared to take advantage of new
ITCs, which, if correctly mingled with traditional wisdom, should become a true
booster to sustained growth. Some studies point that, even among the top
Portuguese SMEs, the value growth factors, measured by productivity and
associated to the notions of Knowledge or Intellectual Capital, don’t
represent more than 20%.
A significant part of
economic tissues – small, micro and medium enterprises – is
confined, thus, to a traditional exploration of capital and work factors, like
the Industrial Revolution times. Mechanisms of raising value to the national
products are still roughly managed: a pair of shoes made in Portugal is sold,
in London, at price three times lower than an Italian pair produced in the
exact same factory.
Looking through another
perspective to this reality, we could establish the huge growth potential of
SMEs, hence they focus their activity in developing factors suitable with the
knowledge society. The value growth among Portuguese SMEs is derived, according
to our recent researches, from four main types of action, described next:
¨
Workplaces modernization with a correspondent recruitment of new
technical staff, aiming to generate efficiency, processes liability and
work reorganization, and allowing its update in view of an eventual unstable
environment;
¨
Workforce training, not only over the technical know-how, but most of
all in the relational and emotional levels, essential to the creation of
teamwork spirit, in order to develop competencies and circulate know-how among
all workers;
¨
Focus on quality, in order to cut flaws, monitor customers
satisfaction and controlling complaints and returns, aiming to reinforce
customers and partners loyalty, trying, altogether, reach the zero-error.
¨
Focus on products and market development, with the collaboration of
individuals embraced in critical spirit, debate, incident analysis and
continuous improvement, cultivating success and good practices as inspiration,
and gathering all these around innovation.
These are the factors which
determine, nowadays, productivity and value creation, besides the capital/work
combo. These lines of reflection can help to give a context to what we’ve
been doing, optimizing some inquiring and enhancing aspects in the evaluation
of intellectual capital.
The collation between the
obtained results and the four summoned dimensions conduct us to the following
conclusion: if we consider as representative, in a primary analysis, the data
relative to the identification of residual needs, we verify a tendency
of the executive directors to focus in the processes and training clusters
(example: “create a task manager tool easy-to-use”,
”encourage and motivate the staff towards a better productivity”).
Secondarily, we find concerns with quality and innovation improvement (see
table below):
Table 4: Data Distributed By
Intellectual Capital Vectors
|
|
CONCERNS |
PERCENTAGE |
|
Quality noticed
by market |
·
Improvement of the company’s image |
40,9% |
|
Concerns with Processes |
·
Create a task manager tool easy-to-use |
40,9% |
|
·
Support in the conception/preparation of
booklets |
34,1% |
|
|
·
Create a cost control system suitable to the
task |
31,8% |
|
|
Concern with Staff Training |
·
Encourage and motivate staff towards a better
productivity |
38,6% |
|
·
Promote the staff training in behavioural
area |
34,1% |
|
|
·
Better Time Management |
31,8% |
|
|
Investment in Development and Innovation |
·
Find out the investments in development and
innovation more suitable to the company |
36,4% |
The focus on human capital
is capital, likewise investing more in quality, for example, analysing the
customers’ complaints, examining thoroughly the market. Above all, by
focusing in innovation, by creating research and development team forces for
the product, such as for new markets segments, it is possible to generate a
cluster of small and medium enterprises with the ability of being competitive
and autonomous in face of the market, with satisfactory profitability levels.
A summation of this
research was described by Martins (2008) through the following schema:
Figure 1: Martins’ Intellectual Capital Model
Source: Martins, 2000; Martins and Lopes, 2008
It is important to point out
that the reach and development of this model obviate further research.
7. Conclusion: The
Intellectual Capital Perspective Focus On Value, Instead Of Cost
The raise of turbulence,
the rising change and the need of knowledge have led to more complexity, both
internal and externally to organizations. The focus on intellectual capital is
a direct consequence of these new conditions. It’s expected that
intellectual capital concerns this raise of turbulence, need of knowledge and
shifting necessities. The complexity concerns with the number and types of
existing relations and elements in a system. Complexity is also connected with
the composition, structure and function of the system (Rescher, 1998, p. 1).
According to this
perspective, there is a degree of complexity in every system. In the case of a
high degree of complexity, the behavioural system is easily considered as
chaotic. That is, we’re in the presence of a situation where the system
performance, based in the way the different parts operate, is difficult to
explain. Hence a raise of complexity is verified in a system, the subsequent
expansion has the tendency to follow it (Rescher, 1998, p. 6) – for
example, the complexity nourishes itself. The complexity represents the true
problem, and it’s the management of intellectual capital what can solve
that problem.
This is one of the reasons
whereby “to manage intellectual resources can be the most simple and
important business task” (Stewart, 1997, p. XIII). Intellectual capital,
according to Ulrich (1998, p. 15) is a critical factor within systems because
of the following reasons:
¨
The search for functional knowledge in an expanding economic system is
in is prime (human capital-related entities);
¨
The purpose and significance of work carried out adds importance
(symbolic entities);
¨
The primary line became notoriously important in view of the
customer’s value (network-connected entities);
¨
The learning and innovation became clearly important in the new economy
(structural entities)
The perspective of
intellectual capital achieves the potential for the value creation of a
resource or transformation as a starting point, despite its origin,
complementing, therefore, the structure of accounting. While the previous
model, based in the economic and financial structure of accounting, provides an
excellent study question about the costs related to historical and future
transactions, this new organization allows looking for the value creation
sources and to their path, identifying vectors possible convertible to financial
results, in spite of that sources’ origin.
The future of organizations
relies on the attitude towards this new surrounding reality. In the long run,
we make the path by walking, and this paradigm crisis forces us to rethink
about management and the role of limited resources, for a long time, the centre
of economic theory. This notion is clearly unadjusted to the present
organizational reality, where the long term sustainability and the creation of
intangible value vectors assume a premier role.
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Contact the Authors
Felipa Lopes dos Reis,