Knowledge capital, aka information, intellectual or human capital, is a broad concept which describes all non-material assets of a company or an organization and can refer to either an individual or an organizational capital. It includes but is not limited to assets such as, technology, patterns, innovations, relationships, skills and knowledge of employees. Knowledge capital is also a very significant factor determining growth and development. Companies, which possess a lot of knowledge capital are at a comparative advantage to other organizations, as they seem to be prosper better compared to their competitors (Lehtimaki & Lehtimaki 2016, pp.41-42). Knowledge capital, however, does not have only one definition, as it is depended on context and used accordingly to researchers needs (Lehtimaki & Lehtimaki 2016, p. 42). Therefore, the amplitude of the concept caused many differences between explanations and descriptions over the years. However, the majority of the researchers who took it up for examination created internal divisions of the concept in order to organize specific groups of knowledge capital, all of which display similarities between assets within the particular group.
Yao Ligen & Li Miaomiao (2012) investigated various conceptualizations of knowledge capital theories and came up with a China specific model, in which they distinguished and described four major parts of knowledge capital, specifically human capital reflecting individual education and qualifications, organizational capital referring to organizational assets of non-human nature, technology capital consists of technical affordances and market capital comprises relationship capital (p.1656). Similarly, Lehtimaki & Lehtimaki (2016, p.43) explain that P.E. Sveiby and T. Lloyd (1987), described knowledge capital as a micro-level concept with three categories that can be explained as follows:
- Human Capital- It consist of education of employees, their knowledge and qualifications.
- Structural Capital'- It is everything which is not related to human. It contains all of organization processes, culture, management, intellectual rights, patterns, organizational structure and know-how.
- Relationship Capital- It regards to relationships with customers. In this group we can include permanent relations with customers, brand recognition, general opinion, marketing strategies, individual events etc.
In their own research however Lehtimaki & Lehtimaki (2016) choose to focus on limited aspects of knowledge capital, namely individual and organizational capital. Individual, because it is the most important assent in the company and organizational, because its role is essential when it comes to organization, coordination of workers and tasks and communication within the company (Lehtimaki & Lehtimaki 2016, pp.43-46).
Importance of Knowledge capital
Nowadays, in the time of globalization and dynamic development, knowledge capital became a very strong factor of companies’ development and organizational attainment. Organizations with high level of knowledge capital are the top innovators, market leaders and influencers. (Yao Ligen & Li Miaomiao 2012, p.155). In the market model described by Christopher M. Gunn and Alok Johri in 2011, we can observe how the increase of knowledge capital influences consumption, investment, output, wages, physical capital and capacity utilization. The results clearly show that increase of knowledge capital in a company increases production, employment, output and wages. Furthermore, the increase in demand for goods and services directly speeds up the economic growth, or in other words increases the GDP compared to the previous year (C.M. Gunn & A. Johri 2011, pp. 97-99).
Knowledge-intensive organizations (KIO) are institutions, in which the level of knowledge capital used is very high. Good examples of such institutions are universities, hospitals, and layer companies. In these firms knowledge is much more valuable than all material assets.
“For example, in universities, knowledge (material) is processed in research (knowledge as production technology) and the product is knowledge, which is distributed in education or as research reports (for example Lehtimaki, 1993). This means that KIOs need a relatively higher amount of knowledge capital, instead of physical or financial capital, in comparison to other types of organisations (Lehtimaki & Lehtimaki 2016, p.42).”
- Hanushek A. E. & Woessmann L. (2016), Knowledge capital, growth, and the East Asian miracle “Science”, Vol. 351, Issue 6271, pp. 344-345.
- Johri A. & Gunn M. C. (2011), News and Knowledge Capital, ”Review of Economic Dynamics”, Vol. 14, Issue 1, pp. 92-101.
- Lehtimaki J. & Lehtimaki J. (2016), Impact of Knowledge Capital on Performance of Firms: A Case of Firms in Finland, “Eurasian Journal of Business and Economics”, no. 9 (18), pp. 41-59.
- Ligen Y. & Miaomiao L. (2012), Research on Comprehensive Evaluation of Knowledge Capital of Power Enterprise Based on Membership Conversion, “Physics Procedia” vol. 24, pp. 1655 – 1662.
Author: Wojciech Szabla