The dynamics of intellectual capital

Date of Completion

January 2000


Business Administration, Management|Business Administration, Banking




Research in intellectual capital (IC) involves the quest for understanding “the roots of a company's value, the measurement of the hidden dynamic factors that underlie the visible company…” (Edvinsson & Malone, 1997: 11). In today's knowledge-based economy, two of the most important “hidden dynamic factors” in an organization are its knowledge and know-how which is created by, and stored in its people (human capital), its relationships (social capital), and its organizational information technology systems and processes (organizational capital) (Edvinsson, 1997; Edvinsson & Malone, 1997; Stewart, 1997; Youndt & Snell, 1998). Proponents of IC research suggest that it is the leveraging of these three components that allow an organization to create and sustain a competitive advantage (Edvinsson & Malone, 1997; Stewart, 1997; Youndt & Snell, 1998). ^ IC research has, thus far, emphasized defining and measuring the construct and its components (Edvinsson & Malone, 1997; Stewart, 1997; Youndt & Snell, 1998); and examining the impact IC has on firm performance (Tsai & Ghoshal, 1998; Youndt & Snell, 1998; Youndt, Subramaniam, Snell, and Golden, 1999). However, theoretical questions remain concerning the synergistic, dynamic, and contextual nature of the IC construct. A better understanding of these aspects of the IC construct is needed to better argue that IC is a firm capability that results in a sustainable competitive advantage. ^ Thus, while progress has been made in IC research, this study seeks to contribute to the IC literature in three ways. First, sensemaking and organizational learning theories are used to provide the foundation for understanding how the three IC components interact, and for identifying the specific organizational outcomes that are likely to arise as a result. Second, dynamics capability theory is used to predict that common environmental and industry shifts will affect changes in firms' IC and performance. Specifically, both the occurrence of change as well as the direction of change in firms' IC will be examined over multiple years (to allow for common environmental shifts to occur). The third contribution this study seeks to make stems from its research design, which contains three elements that are new to the IC literature. ^