Proceedings of the 8th International Conference on Intellectual ...

Generating Wealth Through Innovations: Is it Necessary to
Manage Intellectual Capital?
Helen Mitchell 1 and Dennis Viehland 2
1
Department <strong>of</strong> Management and Marketing, Unitec Institute <strong>of</strong> Technology,
Auckland, New Zealand
2
School <strong>of</strong> Management, Massey University, Auckland, New Zealand
hmitchell@unitec.ac.nz
d.viehland@massey.ac.nz
Abstract: The aim <strong>of</strong> this paper is to discuss <strong>the</strong> management <strong>of</strong> intellectual capital as an avenue through which
organisations can create a culture to encourage <strong>the</strong> sharing <strong>of</strong> knowledge that will lead to <strong>the</strong> emergence <strong>of</strong> ideas
and development <strong>of</strong> innovations. The literature points to <strong>the</strong> intellectual capital <strong>of</strong> an organisation as <strong>the</strong> avenue
through which it can create value and generate wealth. The significance <strong>of</strong> people knowledge within <strong>the</strong>
operational activities <strong>of</strong> an organisation points to <strong>the</strong> importance <strong>of</strong> managing intellectual capital to influence <strong>the</strong>
potential for increasing innovative activity that in turn will provide <strong>the</strong> means for enhancing sustainability and
wealth. A case study approach was taken to investigate <strong>the</strong> degree to which <strong>the</strong> management <strong>of</strong> intellectual
capital was occurring in a New Zealand organisation. Senior managers and staff were interviewed and a survey
<strong>of</strong> additional staff was carried out to obtain a wider perspective <strong>of</strong> <strong>the</strong> views <strong>of</strong> employees. Although recognising
<strong>the</strong> knowledge <strong>of</strong> its people, and having a record <strong>of</strong> innovative activity, no process was in place to manage
intellectual capital. However, it was agreed by senior management that <strong>the</strong> managing intellectual capital provided
<strong>the</strong> potential to fur<strong>the</strong>r encourage knowledge sharing and <strong>the</strong> opportunity to encourage and accelerate <strong>the</strong>
development <strong>of</strong> innovations. The study was undertaken in a large New Zealand corporation and this can be
viewed as a limitation. However, <strong>the</strong> organisation had restructured into a number <strong>of</strong> independent business units
and <strong>of</strong> <strong>the</strong> business units in <strong>the</strong> study six were in New Zealand and three were in Australia. The research
revealed that senior managers were aware <strong>of</strong> <strong>the</strong> importance <strong>of</strong> knowledge but understanding <strong>the</strong> relevance <strong>of</strong>
managing intellectual capital was not immediately recognised as an approach to be taken to encourage <strong>the</strong>
development <strong>of</strong> innovations. An additional outcome indicated <strong>the</strong> value <strong>of</strong> a closer working relationship between
academics and practitioners to develop strategies for <strong>the</strong> management <strong>of</strong> intellectual capital.
Keywords: Intellectual capital, innovations, wealth, culture
1. Background:
Interest in intellectual capital arose during <strong>the</strong> late 1980s early 1990s when it became apparent that
<strong>the</strong> value <strong>of</strong> some company shares did not equate with <strong>the</strong>ir “book value”, raising <strong>the</strong> question about
how this occurred (Sveiby, 1997). The divergence between book value and market value for a long
time puzzled investment analysts, but <strong>the</strong> widening gap became more evident from <strong>the</strong> burgeoning <strong>of</strong>
organisations associated with <strong>the</strong> technology industry. As awareness <strong>of</strong> what was happening
emerged through those interested in <strong>the</strong> financial aspects <strong>of</strong> an organisation, it was inevitable that
early interest in intellectual capital took a financial focus. Authors (such as Sveiby, 1997; Stewart,
1997; Jordan and Jones, 1997; and Klein, 1998) recognised that intangible assets, as with tangible
assets, require to be managed. Previously intangibles appeared on <strong>the</strong> balance sheet under <strong>the</strong>
general rubric <strong>of</strong> goodwill. Intellectual capital (intangibles) available to an organisation is made up <strong>of</strong>
human intellect, experience, expertise, information, problem solving capability, intellectual property
and managerial skills. There is general agreement amongst <strong>the</strong> authors cited above that <strong>the</strong> ability to
generate wealth and enhance value will only be achieved if an organisation manages its intellectual
capital. This has led to greater awareness that intellectual capital makes a significant contribution to
<strong>the</strong> wealth <strong>of</strong> an organisation. However, many organisations, particularly smaller businesses, may not
realise <strong>the</strong> value <strong>of</strong> <strong>the</strong>ir intellectual capital, but if <strong>the</strong>y do, are <strong>the</strong>y managing it?
Managing intellectual capital involves looking to create and extract value. For this to occur it is
necessary to ensure that intellectual capital is focused on providing maximum development and
benefit to meet not only <strong>the</strong> future needs <strong>of</strong> <strong>the</strong> organisation, but also for it to be successful in <strong>the</strong>
constantly changing environment in which it operates. The economist’s perspective is directed
towards focusing on what can be gained from an economic good. Value creation for sustainability
emphasises <strong>the</strong> need to utilise intellectual capital in <strong>the</strong> most efficient and effective manner.
It is stated by Steenkamp and Kashyap (2010) that an organisation’s intellectual capital impacts on its
business performance and ability to innovate, and improves its earnings potential. Wealth is
generated by enhancing <strong>the</strong> value <strong>of</strong> products and services in response to <strong>the</strong> needs <strong>of</strong> customers
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