The Growth of Intellectual Capital: An Organizational Lifecycle Approach
Ming Chuan University
Department of Arts and Creative Industries
July 13, 2008
The idea of Intellectual Capital (IC) helps executives to elucidate and evaluate intangible resources and knowledge components of organization. However accumulation of Intellectual Capital is a dynamic and continuous process. Given the limited resources firms are able to engage in the creation of intellectual capital at a certain given time period, different weights are distributed to different subcomponents of IC. The question of when and why firms prioritize one dimension over the others and the relationship between the organizations' priorities and market performance are therefore pragmatic.
Competitive success of a strategy is dependent on the firm's invisible assets. But the dynamic of invisible assets is also largely determined by the content of that strategy (Itami, 1987: p.2). The issue of fit among organization, resources and environment is a dynamic process. The alignment between organizational system, structures, processes and changes in the environment significantly impact organizations' behavior in resources acquisitions and performance. Whether such adaptation is environmentally derived or managerially autonomous (see Hrebiniak and Joyce, 1985 for more discussion on organizational adaptation), the history of organizational changes depicts the progress of organizational life.
The notion of Life cycle is used to capture maturational and generational processes driven by mechanisms of reproduction in natural populations (O'Rand and Krecker, 1990). One of its metaphorical uses in social science is Organizational Life cycles (OLC). A basic tenet is that the evolution of organizations tends to follow a pattern that is usually characterized by sequences of progressive stages. The creation, transformation and decline of organizations could be described as the results of reactions to environmental forces and organizations' strategic choices (Greiner, 1972; Hannan and Freeman, 1977; Aldrich, 1979; Kimberly and Miles, 1980). Organizations in different stage of life cycle would implement different internal structures and processes in the hope to respond to change in the environment. This process of organizational evolution corresponds to the scientific metaphors "punctuated equilibrium" or "phyletic gradualism" in evolutionary biology that organizations adapt to new environmental challenges over the course of organizational life and gradually becoming what they are today. Because their criteria of effectiveness change over different life cycles, behaviors of younger organizations are thus perceivably different from mature ones (Cameron and Whetten, 1981; Quinn and Cameron, 1983).
Extant research in IC has emphasized on antecedents of IC and the casual relationship between IC and market performance. Little is surveyed on why components of IC evolve relatively different and on the causal relationship between certain IC component and market performance at a certain period of time. In terms of the generally accepted consensus on the content of Intellectual capital, there are interdependent components: Human Capital, Structural Capital and Social Capital. Discussions in this paper focus on these three dimensions. An evolutionary view of intellectual capital that incorporates the theory of Organizational Life cycles (OLC) will be conceptualized for a further understanding toward development of intellectual capital. Using IT industry of Taiwan as an example, empirical evidences are discussed.
Keywords: organizational lifecycle, intellectual capital, human capital, structural capital, social capitalworking papers series
Date posted: July 14, 2008
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