The interaction of intellectual capital assets and knowledge management practices in organizational value creation

Abstract

Organizational performance is increasingly grounded on knowledge-related issues. The two key academic discussions addressing knowledge in organizations are the intellectual capital (IC) and knowledge management (KM) literatures. However, there are very few earlier studies systematically combining these approaches and demonstrating how IC assets and their management mechanisms might interact in organizational value creation. Therefore, the purpose of this paper is to develop and argue a theoretical model depicting the connections between IC, KM practices and organizational performance outcomes. The paper draws on IC and KM literatures to build a theoretical model on how intellectual asset assets and their management practices interact in producing organizational performance. Several conceptual models and related discussion on the interaction of IC and KM practices are put forth. Organizational value creation is based on both static (IC assets) and dynamic (KM practices) aspects of organizational knowledge, in various combinations. In this paper, potential interaction effects between IC assets and KM practices in terms of moderation and mediation were conceptually analysed, and four alternative models were proposed on how the knowledge-based issues affect organizational performance. The paper is purely theoretical without empirical evidence. The paper suggests that organizational value creation is a function of both possessing valuable intangible assets as well as being able to manage these assets systematically. The four models concerning the interaction of IC assets and KM practices in value creation presented in the paper provide managers with tools to reflect about their own thinking model concerning how knowledge produces value in their own firms. By addressing both the “static” asset aspect of IC as well as the “dynamic” perspective of how leveraging IC assets can be enabled by systematic managerial activities, the paper combines the key issues in IC and KM literatures and demonstrates how intangible resources should be managed to produce value. The authors are not aware of any previous studies explicitly combining and distinguishing IC and KM fields to this extent. The paper therefore contributes to the literature on knowledge-based issues in organizations at large and potentially offers a theoretical grounding for many empirical and theoretical future studies.