Editorial

Intellectual capital and company’sperformance improvement

Giovanni Schiuma and Antonio Lerro

Summary

Purpose – The purpose of this research is to show how the variety of ways of performing throughknowledge and intangible resources exploitation raises the question of how these kind of resources canbe coherently and successfully declined into companies’ processes and operations, what are the

‘‘right’’, or appropriate approaches to manage intellectual capital (IC), and how these approaches candisentangle the mechanisms by which those resources contribute to improve companies’ organizational

performance. In this introduction to the special issue some conceptual interpretations are developed toinvestigate IC-based approaches, methods, tools and factors of companies’ performance improvement.

Design/methodology/approach – The approaches, evidences and insights discussed in this

introduction are largely based on the discussion of the topics of the conference ‘‘International Forum onKnowledge Assets Dynamics’’ organized in June 2007 in Matera, Italy. At this conference, leading

experts discussed the importance of IC for organizational performance improvement, the IC key-valuedrivers of the performance management and measurement, and theoretical concepts of, and practical

approaches towards, a high-performing IC management.

Findings – The outcomes of this introduction and of all the contributions to the special issue reflect the

current discussion about better operationalization of IC management constructs. This discussion islargely focused on the importance of space for IC management activities, on the main knowledge assets

that drive companies’ processes improvement, the diversity of the relative relevance of each knowledgeasset and the necessity for strategic and managerial decision-makers to learn to apply general

approaches, methodologies and instruments in specific companies. In this context, managing IC wasmostly dealt with as a means to reach performance targets.

Originality/value – This introduction as well as all the contributions to the special issue deal with

different aspects, which are important in the discussion of needs for a better understanding of therelationships between IC management and companies’ performance improvement as well as the

approaches, tools, methods and techniques to better disentangle the mechanisms by which knowledgeassets, separately or interdependently, contribute to improve companies’ organizational performance.

Keywords Intellectual capital, Performance measures, Business improvement

Paper type Research paper

1. The question

This special issue of Measuring Business Excellence is devoted to the intellectual capital

(IC) management supporting companies’ performance improvement.

Globalisation of markets, dynamic technologies development, product life cycles ever

shorter and fast changing of customers demand have involved that company’s

competitiveness is more and more strongly related to the ability to satisfy customer’s

wants and needs by creating and incorporating higher value into products and services.

This forces companies to improve their capability to create and deliver value to stakeholders

and particularly to customers, defining effective business models, executing valuable

innovation processes, leading to innovations in new products, services and processes,

exploiting strategic resources to drive organizational competences and superior business

DOI 10.1108/13683040810881153 VOL. 12 NO. 2 2008, pp. 3-9, Q Emerald Group Publishing Limited, ISSN 1368-3047 j MEASURING BUSINESS EXCELLENCE j PAGE 3

Giovanni Schiuma is based

at the Center for Value

Management-DAPIT,

University of Basilicata,

Potenza, Italy and Centre

for Business Performance,

Cranfield School of

Management, Cranfield

University, Cranfield, UK.

Antonio Lerro is based at

the Center for Value

Management-DAPIT,

University of Basilicata,

Potenza, Italy.

performance results. In this scenario, IC, as a bundle of knowledge assets, represents an

essential factor for best enhance and support organizational performance improvement

(Marr and Schiuma, 2001; Schiuma and Carlucci, 2007).

Up to the present, the academic discussion about performance improvement has largely

stressed the strategic importance to leverage and manage knowledge assets for

organizational performance improvement and companies’ competitiveness (Carlucci and

Schiuma, 2007; Marr, Schiuma and Neely, 2004a; Schiuma et al., 2007).

Although the basic relationship between IC and companies’ performance is on the whole

persuasive, more remains to be understood about the links between IC management and

performance improvement. The variety of ways of performing through knowledge and

intangible resources exploitation raises the question of how this kind of resources can be

coherently and successfully declined into companies’ processes and operations, what are

the ‘‘right’’, or appropriate approaches to manage IC, and how these approaches can

disentangle the mechanisms by which those resources contribute to improve companies’

organizational performance. The contributions to this issue deal with the question by

investigating IC-based approaches, methods, tools and factors of companies’ performance

improvement. What are benefits and costs, advantages and disadvantages of defining and

implementing IC management programs and actions potentially supporting companies’

organizational capabilities and performance improvement?

The selection of articles collected in this special issue is largely based of the conference

‘‘International Forum on Knowledge Assets Dynamics’’ that the guest editors organized in

June 2007 in Matera, Italy. At this conference, leading experts discussed:

B the importance of IC for organizational performance improvement;

B the IC key-value drivers of the performance management and measurement; and

B theoretical concepts of and practical approaches towards a high-performing IC

management.

2. Rationale for knowledge foundations of company’s performance

There are several reasons to assume that to manage IC may have advantages:

B It is widely recognized that the value creation dynamics are the result of a continuous

improvement of organizational performance. In fact, through a performance

improvement, an organization is able to better satisfy the wants, needs and

expectations of its stakeholders. In order to improve performance, an organization

needs to continuously improve its effectiveness as well as efficiency. It requires the ability

to design, implement, manage and develop the organizational processes at the basis of

the production of organization’s output and outcomes. This is possible only through a

continuous development of organizational competences. The competencies are rooted in

the organizational knowledge assets which build the IC of the organizations.

Consequently the assessment and management of IC play a fundamental role to

support the improvement of organizational performance and value creation dynamics

(Carlucci and Schiuma, 2005; Marr, Schiuma and Neely, 2004a).

B In today’s knowledge economy, the definition and formulation of a strategy, aimed to

support and drive company’s value creation in global business, have to consider the

knowledge nature of the organization and of its components as well as of the business

(Marr and Schiuma, 2001). This involves that the identification of the strategic

organizational knowledge assets at the basis of company competitiveness needs to be

taken into account both as intrinsic objects of a company’s strategy and as instrumental

lever to achieve strategic outcomes. In this regard, organizations can adopt two main

approaches in designing a strategy: managers can explicitly and directly focus their

attention on knowledge assets and include their development in the objectives of the

company’s strategy; and/or managers can focus the strategy definition around business

and performance objectives and afterwards to identify the strategic organizational

knowledge resources grounding the achievement of the targeted strategic objectives. In

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the implementation stage of a company’s strategy, the assessment of knowledge assets

allows to align strategic objectives with knowledge asset management initiatives. The

alignment between knowledge asset management initiatives aimed to develop the

organizational knowledge domains, with the strategic business and performance

objectives is of fundamental importance to support the growth of organization’s

competencies.

B The intellectual capital assessment and management is at the cornerstone of the

development of new business models which through the valorization of intangible and

knowledge resources are able to prompt creativity, imagination, energy and passion

within organizations. These represent the new competitive factors for creating value in the

global business. Moreover, the management and the assessment of knowledge assets

supports the governance of an organization not only by improving the strategy planning,

but most importantly by affecting the organizational behaviour. Indeed, by means of

measures, it is possible to highlight the role and the relevance of knowledge assets for

company’s success and the importance of taking care of organizational knowledge

resources. For an organization, defining a measure equals to state that the object of the

assessment is important. Indeed, measuring corresponds to spotlight issues. In addition,

the definition of measures for knowledge assets allows the description of the

organization’s position in terms of knowledge resources endowments, and to identify the

knowledge asset development priorities (Marr, Gray and Schiuma, 2004, Marr, Schiuma

and Neely, 2004b).

B A variety of IC management approaches in different companies is a necessary

precondition for comparisons and benchmarking. It allows the managers to learn from

experience developed in different contexts, in terms of size, industry, localization and so

on, and to identify and adopt best solutions. However, as far as variety can cause

additional effort, it could also be a source of complexity.

These reasons provide a strong rationale for a better understanding of managing IC.

3. What may ‘‘IC-based performance’’ mean?

Intellectual capital management for companies’ performance can mean a variety of things.

This becomes particularly clear when regarding different aspects of a concept that should

be declined in some way. In order to better shed in light the different aspects of IC

management, it may be helpful to distinguish three main IC management perspectives:

strategic, managerial and operational (Carlucci and Schiuma, 2005). These perspectives

are helpful to understand both the contents and aims of IC management as well as to

address the development and implementation of IC management initiatives within

companies.

The strategic perspective considers the set of approaches that highlight the strategic

importance of knowledge and its management in a company’s strategy. This perspective is

supported by the resource-based view, the competence-based view and, more generally,

by the knowledge-based theory which interpret knowledge as a driver for the definition and

implementation of an organizational strategy. The strategic perspective highlights the

importance of defining an IC management strategy that, to be successful, needs to be

integrated with the company’s strategy. This has great relevance in the definition and

implementation of IC management supporting performance improvement, since it stresses

the importance of defining IC management initiatives coherent with key company’s strategic

objectives.

A good example of a dramatic performance improvement strongly related to the strategic

identification and the exploitation of the IC-dimension is the Italian Ducati’s turnaround

program (Schiuma et al., 2008). Ducati is one of the most important Italian motorcycle

manufactory companies. At the beginning of 1990 Ducati was in a very critical financial and

production crisis. However, after its acquisition from an American private fund – the Texas

Pacific Group – the Italian managers decided to launch a global improvement performance

project. This project was strongly based on the development and exploitation of knowledge

VOL. 12 NO. 2 2008 jMEASURING BUSINESS EXCELLENCEj PAGE 5

resources. The fundamental idea of Ducati’s managers was to transform the company from a

manufacturing firm to an entertainment firm based on specialized know-how. In particular,

the following initiatives were defined and implemented: the development of

knowledge-intensive activities as well as the identification and transferring of best

practice within operations processes in accordance with the lean production principles; the

development of the networking capital through an improvement of the suppliers relationship

management an the creation of a new distribution channels – the Ducati Stores; the

strengthening of the organization culture with the creation of both an external and internal

community; the improvement of the learning and innovation ability through the development

of the Ducati design team, dedicated to the creation of new knowledge and/or the

combination of existing knowledge; the development of the Ducati brand through the Ducati

People project.

The managerial perspective comprises approaches and methodologies for organizational

knowledge assessment and management. In this perspective, two main research streams

can be identified: knowledge development and knowledge assessment. The first is strongly

linked to the literature on learning organizations and involves all approaches and processes

for creating and managing knowledge within an organization. The knowledge assessment is

aimed at providing methodological approaches and tools to identify, classify and evaluate

knowledge within a company. In this area, successful examples are the variety of

approaches for measuring IC, such as Skandia Navigator, IC-Index Approach, Intangible

Asset Monitor, Knoware Tree and so on (Marr, Gray and Schiuma, 2004).

Finally, the operational perspective of IC management includes the set of organizational and

managerial activities and projects such as teamwork, meetings, benchmarking of best

practices, community of practice and so on. This perspective also includes projects to

implement ICT tools designed for the development and use of knowledge.

These examples illustrate that IC management has many facets and can mean several

different things. It entails a large spectrum of topics of which academic research and

practitioner studies has tackled only a fraction in some details, while large areas have been

still unexplored.

4. Overview on contributions to this issue

The contributions to this special issue deal with different aspects, which are important in the

discussion of needs for a better understanding of the relationships between IC management

and companies’ performance improvement as well as the approaches, tools, methods and

techniques to better disentangle the mechanisms by which knowledge assets, separately or

interdependently, contribute to improve companies’ organizational performance.

Main topics are the theoretical analysis of the dynamics of knowledge assets and their link

with the companies’ performance (Moustaghfir), the variety of the operationalization of IC

management, at corporate level (Kujansivu) and at processes level (Linzalone) as well as the

instruments for stimulating performance improvement through IC exploitation (Parisi and

Hockerts; Costa and Evangelista; McCutcheon).

Karim Moustaghfir in his contribution reviews the recent developments in the theory of

knowledge assets management supporting firms’ performance improvement. He

particularly highlights the role of dynamic capabilities in creating and sustaining a

competitive advantage, furthering our understanding about the theoretical foundations of

knowledge assets; how knowledge management practices improve the quality of business

processes through shaping and renewing of organizational competencies; and the role of

dynamic capabilities in providing sustainable competitive advantage, improving

performance and increasing profitability.

The contribution of Paula Kujansivu deals with the important issues of the approaches to

manage IC as well as of the factors affecting the choice. In her paper the concept of IC

management is used to refer to various managerial activities that focus on identifying,

measuring, controlling and developing an organization’s intangible resources. IC

management is considered ‘‘an umbrella activity’’ that contemplates IC holistically.

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Nevertheless, IC management is regarded not as an independent management discipline

executed by a specific organizational function but as a set of tasks related to immaterial

issues carried out at different levels of an organization.

This view is confirmed by the empirical analysis of the importance of the assessment of

knowledge assets to improve new product development (NPD) process performance in

Italian sofa manufacturing industries by Roberto Linzalone. He analyses how

organizational knowledge assets, properly identified, assessed and managed, can

contribute to improve NPD process performance and provides empirical evidences

based on multiple case studies delivered in three sofa industry leading firms. Important

results of his analysis consist in collecting empirical evidence of the relevance of

knowledge assets assessment and management for improving NPD process

performances, and discerning a set of managerial implications for driving managers in

designing and implementing knowledge asset management initiatives aimed to support

product development improvements.

According to the great relevance recently dedicated to the adoption of holistic performance

measurement systems (PMSs) such as in particular the Balanced Scorecard and the

success map (Neely, 2004) to measure the performances of organizations, the contribution

of Cristiana Parisi and Kai Hockerts investigate the possible use of causal maps in the

performance management and measurement of corporate social responsibility (CSR)

related intangibles. Their analysis stems from the study of the detailed and multifaceted links

between intangibles and CSR and look at a framework based on the formal modelling

technique of ‘‘causal mapping’’ designed to assist performance measurement. Aim of their

study is to analyse the use of this instrument in the process of corporate strategy formulation

related to CSR activities, and consequently in the definition of companies’ performance

measurement systems. An important result of their analysis is that the use of causal maps

can contribute to improve the selection of indicators for the companies’ Balanced

Scorecard, so that a financial evaluation of the returns of investments aimed at increasing the

value of CRS related intangibles can be made. They conclude arguing that the use of causal

maps systematically internalise the positive financial effect of investment into CSR related

intangibles and that, in this way, the quality of existing performance measurement systems of

companies are expected to improve.

The contribution of Roberta Costa and Simonluca Evangelista proposes a new method to

evaluate the impact of brand intangible assets on a firm performance and value creation

process and provides an approach based on analytic hierarchy process (AHP) technique,

illustrating its efficacy in the measurement of the value of brand intangible assets and its

capacity to overcome the flaws of current methods. Through an application on a relevant

multi-brand company, they underline that the outcomes of the AHP application should be

considered as a key performance indicator enabling management to optimize brand

investments and strategies. They conclude arguing that research results provide consistent

guidelines for marketing actions and strategic investments.

Finally, Gavin McCutcheon stresses the managers’ need to better understand how to

assess the value generated by IC management initiatives, underlining that many

organizations embark on IC management initiatives without a clear idea of what business

benefits they could expect. However, since an IC management initiative is very

expensive, McCutcheon highlights the importance of understanding what are the benefits

related to an investment in IC. Specifically, he argues that, as reliance on intellectual

assets increasingly becomes the dominant factor within business innovation and

development cycles, application of conventional valuation models is becoming

consequently less reliable. Discounted cash-flows do not adequately depict the future

value of such IA-rich businesses and do not reflect their transformational nature.

Operating within turbulent markets where the capacity to continually adapt and redefine is

crucial, a new valuation model is clearly required to compliment existing financial tools.

According to this perspective, he presents the estimated value via intellectual capital

analysis (EVVICAe) as a model to analyse human, relational, and structural capital in

conjunction with the renewal capacity of a business. It is based on combining alternative,

VOL. 12 NO. 2 2008 jMEASURING BUSINESS EXCELLENCEj PAGE 7

possibly simultaneous, revenue generation possibilities related to the strengths and the

weaknesses of the business proposition as well as on the ownership and use of

intellectual assets to support sustainable change and effective companies’ business

models.

5. Conclusions and research implications

There can hardly be any doubt that the management of IC may have significant positive

effects on companies’ performance. Traditional and complementary assets and resources

continue to play an important role as determinants of the success of a company and

managers and decision-makers still need to better understand what are knowledge assets,

how they are linked and affect business performance, how to manage and measure

knowledge assets, how to design and implement strategies and actions for knowledge

assets development in order to enhance innovation organizational capabilities and

companies’ performance and value creation dynamics.

Given this prevailing feeling of such an approach in IC management, there are obviously

large potentials for improvement. The topics of the contribution to this special issue reflect

the current discussion about a better operationalization of IC management constructs quite

well. This discussion was largely focused on the importance of space for IC management

activities, on the main knowledge assets that drive companies’ processes improvement, the

diversity of the relative relevance of each knowledge asset and the necessity for strategic

and managerial decision-makers to learn to apply general approaches, methodologies and

instruments in specific companies. In this context, managing IC was mostly dealt as a mean

to reach performance targets.

Given the different aspects of the IC management, several questions remain that are more or

less unexplored and deserves investigation.

Today’s global business is characterised by interconnectedness, interdependence, and an

increasing level of complexity which force organizations to be flexible, proactive and

dynamic. In this emerging global scenario most of the traditional strategies, approaches and

policies no longer work the way they used to. The new challenge, particularly for companies

coping with global business, is the ability to drive their transformation into intelligent

organizations, i.e. organizations that are able to leverage their intellectual capital to achieve

their business objectives and envision new development paths.

It is of fundamental relevance also the analysis of the dynamics that link all these kind of

knowledge assets variables with the other complementary variables of the organizations. In

this regard, a more-in-depth use of a dynamic capability perspective could allow a coherent

enrichment of the theoretical scene, providing important insights for inspiring further

development of conceptual models as well as for defining and developing better managerial

practices. Moreover, much more empirical researches are needed with the aim of showing

the links and the relationships between IC and performance improvement as well as the

benefits of the IC management initiatives. According to this perspective, the use of decision

support methods and systems theory for supporting the assessment and management of IC

could be a potential issues to be explored.

Regardless of the answers to such questions, the contributions to this special issue strongly

suggest that companies could and should exploit in a much bigger way their IC.

References

Carlucci, D. and Schiuma, G. (2005), ‘‘Knowledge asset value spiral’’, Knowledge and Process

Management Journal, Vol. 13 No. 1, pp. 35-46.

Carlucci, D. and Schiuma, G. (2007), ‘‘Exploring intellectual capital concept in strategic management

research’’, in Joia, L. (Ed.), Strategies for Information Technology and Intellectual Capital: Challenges

and Opportunities, Idea Group, London, pp. 10-28.

Marr, B. and Schiuma, G. (2001), ‘‘Measuring and managing intellectual capital and knowledge assets in

new economy’’, in Bourne, M. (Ed.), Handbook of Performance Measurement, Gee, London.

PAGE 8 jMEASURING BUSINESS EXCELLENCEj VOL. 12 NO. 2 2008

Marr, B., Gray, D. and Schiuma, G. (2004), ‘‘Measuring intellectual capital – what, why, and how’’, in

Bourne, M. (Ed.), Handbook of Performance Measurement, Gee, London.

Marr, B., Schiuma, G. and Neely, A. (2004a), ‘‘The dynamics of value creation: mapping your intellectual

performance drivers’’, Journal of Intellectual Capital, Vol. 5 No. 2, pp. 312-25.

Marr, B., Schiuma, G. and Neely, A. (2004b), ‘‘Intellectual capital – defining key performance indicators

for organisational knowledge assets’’, Business Process Management Journal, Vol. 10 No. 5, pp. 551-69.

Schiuma, G. and Carlucci, D. (2007), ‘‘Assessing and managing knowledge assets for company value

creation’’, Knowledge Management Integrated, Heidelberg Press, Heidelberg.

Schiuma, G., Lerro, A. and Sanitate, D. (2008), ‘‘Intellectual capital dimensions of Ducati’s turnaround –

exploring knowledge assets grounding a change management program’’, International Journal of

Innovation Management (forthcoming).

Schiuma, G., Pablos, P. and Spender, J.C. (2007), ‘‘Foreword: Intellectual capital and company’s value

creation dynamics’’, International Journal of Learning and Intellectual Capital, Vol. 4 No. 4, p. 2007.

About the authors

Giovanni Schiuma is a professor at the University of Basilicata, where he is the scientificdirector of the Center for Value Management. He is also Visiting Research Fellow at CranfieldSchool of Management. His research focuses on organization value creation dynamics,knowledge assets and intellectual capital management, performance measurement, andinnovation management.

Antonio Lerro is a Research Fellow at the Center for Value Management, University ofBasilicata. Antonio held his PhD at University of San Marino and joined Cranfield School ofManagement, UK as a Visiting Researcher. His research interests focus on intellectualcapital management and measurement, companies’ competitiveness and organizationvalue creation dynamics, intellectual capital management and regional development.Antonio Lerro is the corresponding author and can be contacted at: antonio.lerro@unibas.it

VOL. 12 NO. 2 2008 jMEASURING BUSINESS EXCELLENCEj PAGE 9

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