This document discusses intellectual capital and its importance to organizations. It defines intellectual capital as comprising of knowledge embedded assets such as employee skills, relationships, innovations, and machines. Intellectual capital theorists view these knowledge assets as more important than traditional financial and physical assets. The document also describes the different components of intellectual capital, including human capital, organizational capital, and customer capital. Finally, it discusses the levels of knowledge within intellectual capital - explicit knowledge that is documented, and tacit knowledge based on experiences and interactions. Intellectual capital management is needed to access and utilize these knowledge assets for competitive advantage.

1. F
actors such as organization’s external
globalization that structure such as brands,
leads to new reputations, relationship with
technology, free flow of customers and suppliers.
capital, increased competition, Stewart (2002), on the other hand,
demand for innovation, changes in Knowledge embedded assets like suggests that knowledge embedded
customer demand, changes in ideas, practices, talents, skills, assets comprise of talents, skills,
economic, and political structures know-how, know-what, know-how, know-what,
are constantly reshaping the way relationships and innovations, that relationships and also include
business is carried out (Buckley and arise from the creation of machines and network that can be
Carter, 2000; Thorne and Smith, intellectual capital, have become a used to create wealth to an
2001). Previous research has pre- organization. In short, many
acknowledged the fact that intellectual capital theorists
organizations have begun to realize termed the knowledge embedded
that sustainable advantage relies assets as intellectual capital (e.g.,
on managing intangible resources Demediuk, 2002; Sullivan, 1999;
such as the knowledge embedded Stewart, 1997).
assets. According to Stewart (2002), eminent economic resource and the
in the 21st century, knowledge basis for competitive advantage
embedded assets have become more (Stewart, 2002; Finney, Campbell There is a multi-faceted description
important to the organizations and Powell, 2004; Demediuk, 2002; of intellectual capital as proposed
than financial and physical assets. Graves, 2002). According to Sveiby by intellectual capital theorists.
Therefore, in order to compete in (1997), knowledge embedded assets According to Stewart (2002), the
this millennium, organizations can be found in three areas: the term ‘intellectual capital’ seemed to
must have the ability to create competencies of the employees; have first appeared in 1958 when
value, be agile and sensitive to the organization’s internal structure two financial analysts reported
market. such as patents, models, computer that the intellectual capital of
and administrative systems; and several small science-based

2. companies is perhaps the most factors of intellectual capital (e.g.
Employee
Human Capital Brainpower
important element in the competence Roos and Roos, 1997; Saint-Onge,
organizations’ financial Standard
1996). In order to remain forefront
Organizational Software and
statements. The analysts termed Capital patent
operating
procedure
and maintain competitive edge,
the high stock valuations as an organizations must have the
intellectual premium (Stewart, Customer
Capital
Supplier capability to retain, develop,
2002), and, for a quarter of century, organize and utilize their
this idea remains unchallenged. In a leading thinker in intellectual intellectual capital (Kalling, 2002;
the 1980s, however, discussion and capital from Skandia Insurance Wiig, 2000). They must also be able
debate on resource-based theory classifies intellectual capital into to consolidate their intellectual
had nurtured the ideas of three dimensions: human capital capital faster than their
intellectual capital. A study by (including employees’ collective competitors. Literature has argued
Sveiby (1987), for example, competence, capabilities and brain that the value of an organization is
proposed that knowledge-based power), organizational capital largely based on the management
assets could be found in three (such as a firm’s policy and and utilization of intellectual
places; the competencies of procedures, customized software capital (Ukkola et al., 1999; Chris
organization members, its internal applications, research and and Emma, 1999; Beveran, 2002).
structure such as patents, models, development programs, training Thus, intellectual capital must be
computer and administrative courses, patent and the like), and explicitly managed so that the
assets, and its external structure customer capital (comprising of competitive advantage will emerge
such as brands, reputation, relationship with customers, from the way a specific knowledge
relationships with customers suppliers, industry associations is applied to production factors
(Sveiby, 1997). Meanwhile, and market channel). (Aranda and Molina-Feraz, 2002).
Edvisson (1997) Most of the definitions and Thus, to explicitly manage the
frameworks of intellectual capital intellectual capital, an
includes human, customers, understanding of how knowledge is
suppliers, and organizations as formed and how people and

3. organizations learn to use Tacit knowledge also determines
knowledge is essential1. how an organization makes
decisions and shapes the collective
behavior of its members (Saint-
There are two levels of knowledge Onge, 1996). Haldin-Herrgard
within intellectual capital: explicit (2000) suggests that tacit and
knowledge and tacit knowledge explicit knowledge should be
(Hall and Adriani, 2002; Kamiki managed differently. Much of
and Mphahlele, 2002). Explicit existing literature discusses more
knowledge is articulated on philosophy and concepts of
knowledge and it can be embodied intellectual capital and less
in the form of documents, standard attention has been given on the
operating procedures, and value creation aspect of intellectual
blueprints. Tacit knowledge, on the capital. in summary, intellectual
other hands, includes the intuition, capital theorists argue that
perspectives, beliefs, and values intellectual capital can only
that people form as the result of generate value when it is accessible
their interactions and experiences and utilized. intellectual capital
(Hall and Adriani, 2002; Kamiki management is applied to access
and Mphahlele, 2002). In an and utilize intellectual capital for
organization, tacit knowledge is an organization.
made up of the collective mindsets
Tuesday, February 26, 2013
of everyone in the organization.
This includes the way how a leader Mohd Nor Sohlihin Bin Ismail
of an organization perceives his A141663
industry and his organization.
1
“These are the objective of this article”