INTELLECTUAL CAPITAL MANAGEMENT, INFORMATION AND COMMUNICATIONS TECHNOLOGY AS CORRELATE OF ORGANIZATIONAL PERFORMANCE OF UNIVERSITIES IN SOUTH-WEST, NIGERIA.
1.1 Background to the Study
Universities are social organizations with long life cycle. Irrespective of form of organization, be it private sector or public sector, there is a general agreement that human capital are crucial to keeping organizations effective as well as maintaining a high level of organizational performance.The institutions of higher learning are exceptional organizations in their structure, purpose and applying a suitable and strategic management is crucial because the management and activities held are different from those of industrial, productive or service organizations.
In other words, universities are not unitary institutions. Faculties and schools have diverse task of preparing students for admission into specific professions and including them into intellectual backgrounds and research methods according to academic discipline. Universities are in pursuit of knowledge creation and knowledge transmission, performance measurement in universities has been focused on academic excellence. In the past decade, the ideology of university as a corporate actor has increasingly gained importance in systematic coordination in recent years (De Boer, Ender, and Leisyte, 2007).
In order to capture the performance of universities, dimensions need to be developed from the functions in the universities. It might be helpful and clear to distinguish between university academic function and management function related performance. The distinction is in line with the overall university academic and business-like structure.According to (Xiaocheng 2010) it creates two focal dimensions in capturing the performance of universities. Academic and management activities are closely linked with each other in university practices.
In general, the concept of organizational performance is based upon the idea that an organization is the voluntary association of productive assets, including human, physical and capital resources for the purpose of achieving a shared purpose (Robert 2004).Organizational performance of universities reflects the effectiveness and efficiency of the university system. Effectiveness in a general sense refers to the accomplishment of university objectives while efficiency indicates whether these objectives were accomplished in a timely and costly manner. Thus, effectiveness and efficiency are judged according to the university objectives.
Conceptualization of intellectual capital management, information and communications technology and organizational performance is an exciting challenge to leaders wishing to create an information age institution. When a university becomes a learning organization with shared vision and shared institutional awareness, with participation by all, a dynamic interactive environment emerges where the lines between Teaching and learning, education and training are blurred and lifelong education is the norm (Childs 2001).
Knowledge is increasingly regarded as an essential growth factor in any voluntary human association. Intellectual capital is described as an assets related to the employee’s knowledge and expertise, the customer confidence in the organization and its products, and the organizational assets. Thus, aspects such as human capital, structural capital and customer capital are important variables of the whole intellectual capital management. Intellectual capital is the ability to transform knowledge and intangible assets with wealth crating (Edvinsson 2002).
There are numerous challenges facing universities in Nigeria, few among them are:
The extended competition with other organizations such as the creation of new public and private universities
The increasing level of the internationalization of education and research
Absence of clearly defined career development profile for academic and support staff.
Student unrest and lack of discipline
Increased demand for transparency and accountability from the public funds
Implementation of new research models
Pressure to harmonize the different national university systems.
To face up these challenges and increase the role of universities in the new knowledge based economy. It will be necessary to develop intellectual capital models to reach the strategic objectives of universities.
In this context, intellectual capital management becomes critical at universities, mainly done to the fact that “knowledge” is the main output as well as input in universities. Yoanda (2013) assert that universities are knowledge producers per se; their most important output is knowledge, incorporated in research results, publications, educated students and productive relationships with their stakeholders. Among their most valuable resources are their researchers, managers and students with their organizational processes and network of relationships (Warden 2004). These are resources are part of its intellectual capital and despite its importance, universities seldom deal with them in a specific manner, up till now, only few universities in Nigeria have taken the challenge of trying to measure, manage and report on their intellectual capital.
However, Intellectual Capital Management (ICM) is a set of managerial activities aimed at identifying and valuing the knowledge assets of the organizations, leveraging these assets through knowledge sharing and creating new knowledge (Easterby & Lyles 2003).
Intellectual capital is a key driver of innovation and competitive advantage in today’s knowledge based economy (Teece 2000). At the same time, knowledge management is recognized as the fundamental activity for obtaining, growing and sustaining intellectual capital in organizations (Marr and Sehiuma 2001). This means that the successful management of intellectual capital is closely linked to the knowledge management processes an organization has in place; which in turn implies that the successful implementation and usage of knowledge at management ensures the acquisition and growth of intellectual capital.
Information and Communications Technology (ICT) is the technology that supports activities involving the creation, storage manipulation and communication of information together with the related methods, management and applications. ICT enables organizations to record, store, process, retrieve and transmit information.
Information and Communications Technology encompasses modern technologies such as computer, telecommunication, fascinate and micro-electronics. Thus ICT in today’s world refers to those technologies that determine the efficiency and effectiveness with which we communicate and the devices that allows us to handle information.
However, Information and Communication Technology or Information and Communication Technologies are sometimes used with Technologies in the plural. Originally, only information and communications technology (with communications in plural form) was considered correct since ICT refers to communications (in the sense of method, Technology or system of sending and receiving information specifically telephone lines, computers and networks) not communication etc.Soneye (2012) assert that information and communications technology is professionally acclaimed terms used in any research work.
Modern economy requires knowledge sharing activities to be as an important source of practice which is supported by the use of ICT. This is because ICT can reduce barriers in knowledge sharing activities and it also could save time (Casmir et atl., 2012). Past researchers agreed that ICT is one of the factors that influence knowledge sharing activiteis among worlers which is also corss geographical boundaries and functions of parts. Grace’s study (2009) has found that knowledge sharing activities using ICT can increase the rate of knowledge sharing among educators in educational institutions. According to Fadilah (2013) the activity can also narriw down the knowledge gap. Therefore, organizations which manage ICT systematically is able to make the organization more competitive and have added advantage (Raab et al., 2014).
ICT management is part of the management aspects of the organization trying to achieve its vision and mission. Weak ICT management contributes to tehdifficulty of achieving the goals and performance of the organization (Norashikin, 2013). University organisations need to understand which aspects of ICT affect the operations of their organization thus, findings ways to put more emphasis consistently on ICT management such as planning, maintaining, financing and managing human resource.
Intellectual capital is generally believed to be associated with “human capital” or “knowledge”. The terms Intangible Assets, knowledge Assets/Capital or Intellectual Assets/Capital are often used as synonyms. Thus, the term Intangible Assets can often be found in the accounting literature, whereas the term knowledge Assets is used by Economists and Intellectual Capital is used in the management and legal literature but specifically all refers essentially to the same thing, the intangible value contained in the heads and relationship of employees, management of staff, customers and other stakeholders(Fizlagic 2005).
Furthermore, Intellectual Capital of a university consists of human capital and structural capital. The human capital relates to individual competencies of researchers. In the global economy and growing demand for qualified research staff, the human capita of universities is very unstable.Fazlagic (2005) observed that there was high risk of brain drain in those universities that do not invest in their human capital. When knowledge has become the primary result of economic input, intellectual capital (IC) has become hidden gold steward 1999). In not-for-profit organization, knowledge is a strategic lever for sustainable performance and organizational legitimacy. Mouristen, Larsen and Bukh (2005) underline the value of IC as related to questions about corporate identity, such as “who you are and what you want to be”.
From universities perspective, intellectual capital was define by Fazlagic (2005) as the intangible value contained in the heads and relationship of employees, management staffs, customers and other stakeholders that encompasses not only the contents of employees’ minds but also the complex intangible structure that surrounds them and makes the organization function. It is an intellectual material that has been formalized, captured and leverage to produce a higher value asset and has been characterized as hidden assets because they are sometimes difficult to identify and assign an economic value (Kok, 2005).
According to Leitner (2002) interpreted intellectual capital which comprise of human capital, structural capital and relation capital as the input for the knowledge – production process suchas research, education, training, commercializing of research, knowledge transfer to public, service and infrastructure within universities which will give impact to stakeholders. Torres (2006) asserted that intellectual capital includes those intangible assets of an organization that are not recorded in financial statements but constitute 80% of the market value of an organization.
However, intellectual capital is not merely an operational objectives but a strategic component of the mission; an identity crafted around the ability and knowledge of what an organization can do (Roos, Roos, Dragonetti & Edvinsson, 1997). Gollmar (2008) observed that organizational effectiveness and reputationwhere positively affected by capacity building, activities that an organization engages in to better achieve it mission.
Individual competence is essential for organizations, people’s capacity to act in various situations which includes: skills, education, experience, values and social skills. People are the only true agents in business; all assets and structures, whether tangible physical products or intangible relations, are result of human action and depend ultimately on people for their continued existence. People create knowledge, new ideas, and new products and they established relationship that makes process truly work. In other words, when people leave, they take along their knowledge including internal, external, formal and informal relationships.
Song (2007) observed that rapid advances of ICT provides an unprecedented opportunity to access and search for much broader sources of information in a much faster manner and at much cheaper. To support this, Jackson (1999) noticed that the application of ICT offers the potential for faster and cheaper means of communication that could greatly facilitate organizational knowledge sharing. The use of ICT provides new means of interactivity and association, facilitating the process of conversion between information and knowledge.
According to Edvinsson (2002) Intellectual Capital Management is not a management technique but rather a fundamental approach to the management of resources and assets in the organization. The reputation of any organization may be the product of its management approach, but certainly is the result of the rational intellectual capital of the organization.OECD (1999) defines intellectual capital as the economic value of two categories of intangible assets of a company, organizational (structural) capital and human capital. Structural capital refers to things like proprietary software systems, distribution networks and supply chains. Human capital includes human resources within the organization and also customers and suppliers of organization. Often, the term “intellectual capital” is treated as being synonymous with “intangible assets” or knowledge assets.
However, OECD considered “intellectual capital” as a subset of overall “knowledge assets”.
Management of intellectual capital is becoming the prime importance strategy for university in knowledge – based economy (Ramirez, 2012) since the growth in this economy depends on the production, transmission, dissemination and use of knowledge. Therefore, the investment in intellectual capital in essential in order to maintain an organization’s competitive position and ensure its future viability. Bontis (1999) and Warden (2003) referred intellectual capital to all organization non tangible or non-physical assets, including processed, capacity for innovation, patents, the tacit knowledge of its members and their capacities, talents and skills, the recognition of society, its networks of collaborators and contacts, etc.
Li and Ding (2010) asserts the H – S – C structure of intellectual capital and he thought that the content of intellectual capital should include human capital, structural capital and customer capital. Customer capital means the management assets such as marketing channel, customer’s loyalty and enterprise reputation. Human capital includes various skills and knowledge possessed by employees for the sustainable development of the enterprise and they are the important base of enterprise intellectual capital. Structural capital includes the organization structure, the system standards and the organizational culture of the enterprise.
Many practitioners suggest that intellectual capital consist of three elements. Saint (1996), Sveiby (1997), Bontis (1998) and KOK (2007)
Human capital, which includes experience, the know-how, capabilities, skills and expertise of the human members of the organization
Structural capital (or organizational capital), which includes the systems, networks policies, culture, distribution channels, other “organizational capabilities” developed to meet market requirement as well as intellectual property.
Relational (customer) capital, which includes the connections that people outside the organization have with it, their loyalty, the market share, the level of back orders and similar issues.
University system of education is one of the most important and complicated products of human achievements. Universities are social system which have been known as the centre of knowledge and information as well as thinking bases for leading societies. In today’s complex, competitive world, intellectual capital is considered as a competitive advantage for organizational and indication of a part of the organization economic function.
The definition of intellectual capital to be examined inthis study will sees intellectual capital as a dynamic system of intangible elements whose effective management is essential to value creation in universities. Necessities like the increasing stakeholder demand for greater autonomy push universities towards the adoption of new reporting systems which should necessarily incorporate intangibles (Sanchez et al, 2009).
According to Fattah and Mina (2014) intellectual capital provides the concept of knowledge management that helps managers to identify and to classify the knowledge components of an organization. In view of the realities of the present finding system in university education in Nigeria, and the need to exploit alternative forms of income, mostly the “Internal Generated Revenue” (IGR) where funds are earned from other sources than students and government universities. Universities in Nigeria will be required to exploit their intellectualproperty rights to a far higher level than has been the case in the past.
Furthermore, industries in Nigeria have to realize that research results emanating from tertiary educational institutions are no longer regarded as being in the public domain to be exploited or retrieved free of charge, KOK (2007) assert that universities are under an obligation to strike a balance between their obligations internally to their employee and student inventors and externally to their potential commercial partners. Despite the fact most knowledge management and intellectual capital analysis developed during the last decades refers to private companies; there is a growing interest in academic institutions, such as universities and research centres. Canibano and Sanchez (2004) observed that the universities main goals are the production and diffusion of knowledge and their most important investments are in research and human resources.
1.2 Objectives of the Study
The major objectives of this study is to find out the correlation among intellectual capital management,information and communications technology and organizational performance of universities in South – West Nigeria. Significantly, the study intends to:
Importance of reporting on intellectual capital for Nigeria universities and the information needs of university stakeholders.
To gain a better understanding of relationship between capital management and ICT to develop a theoretical frame work to reflect the new understanding gained.
To analyze the importance of intellectual capital management and ICT to organizational performance of universities in Nigeria.
To present an intellectual capital report specially designed for universities to improve its organizational performance.
To explore the possibilities of combining intellectual and informative and communications technology to leverage organizational performance of universities in Nigeria.
To determine the extent to which different universities stakeholders are demanding information relating to the intellectual capital of Nigeria universities in order to make the right decisions.
To determine which of the three components of intellectual capital (human, structural and relational capital) it is most important to publish information about.
To investigate the role of intellectual capital management in the context of universities in Nigeria.
To study the relationship among intellectual capital management, information and communications technology and organizational performance of universities in Nigeria.
To study the role of ICT in intellectual capital management of universities.
To identify the technologies and tools likely to facilitate the measure and performance of intellectual capital management.
1.3 Statement of the Problem
Universities are under an obligation to strike a balance between their obligations internally to their employee and student inventors and externally to the potential commercial partners. The latter could be business organizations, government and semi-government departments or statutory organizations.
As an employer, the university is bound to be fair and reasonable in its dealings with its employees. Kok (2007) It is well known fact that universities play a role of guardians for the welfare of its students, assuring an in loeo parentis role. Nevertheless, universities must be accountable and prudent (most importantly with state or federal subsidies) and commercial astute a realistic positions (particularly when dealing with corporate world.)
The greatest challenge is to strike a balance between variety of consideration to ensure that, ultimately the university stays tune to its idea of searching for truth and knowledge in the spirit of academic freedom and in applying such knowledge to the benefit of mankind. The question thus arises how universities can manage and measure its intellectual capital as correlates of information and communications technology in the organizational performance of universities.
When human being enters into the time of knowledge economy, the intellectual capital gradually replaces the real capital and changes to the headspring of value enhancement for modern enterprises. In 1990s, the proportion of intellectual capital in the total asset of manufacturing of Japan, US and Germany gradually ascended and the proportion of intellectual capital of Japan had ascended from 10.5% in 1990 to 14.5% in 2001, in US, the proportion of intellectual capital had ascended from 30.6% to 46.9%, in the case of Germany the proportion had ascended from 15% to 30.7% at a particular period of time.
However, some literature recorded the intellectual capital of many Americanhigh-technology enterprises had exceeded 70% of the total assets. Thus, the importance of intellectual capital management is indubitable and how to effectively manage the intellectual capital has been hot and difficult problem in the management theory circle li and Ding (2010).
Rapid advances of technology have changed in the fields of communications and computing, nature of knowledge, abilities, skills and expertise of individuals in the workplace. The world market of information today needs a variety of staff expertise, attitude and intellectual skills in technology-driven environment. Thus, the success of any educational organization in the new economy will be largely dependable on investigations of applicability of intellectual capital and the adoption of information and communications technology tools.
1.4 Research Questions
The following research questions are meant to address some pertinent issues relating to the topic:
1. What is the opinion of the university stakeholders about which intangible assets is most important to publish information?
2. What is the relative importance of each component of intellectual capital?
3. What is the role of universities in the knowledge-based economy?
4. What is the prime importance of intellectual capital management in strategy for university in knowledge – based economy?
5. What is the influence of each component of intellectual capital in the organizational performance of universities in Nigeria?
The following hypotheses have been formulated to guide the study:
H01: There is no significant relationship between intellectual capital management and organizational performances of universities in South-West Nigeria.
H02: There is no significant relationship between information and communications technology and organizational performance of universities in South West Nigeria.
H03: There is no significant difference between intellectual capital and human capital in organizational performance of universities in South West Nigeria.
H04: There is no significant relationship between intellectual capital and the competitive advantage for capacity of university organization to create value.
H05: There is no significant relationship between intellectual capital reporting and information and communications technology apportions in organizational performance of universities in South West Nigeria.
H06: There is no significant relationship between intellectual capital reporting and external demands for greater information and transparency about the use of public funds.
H07: There is no significant relationship between the intellectual capital that drive the value creation in an organization and information and communications technology in universities in South West Nigeria.
H08: There is no significant difference between universities that manage their intellectual capital effectively and universities without intellectual capital reporting system.
H09: There is no significant relationship between intellectual capital management and strategy for university in knowledge – based economy.
H010: There is no significant relationship between the component of intellectual capital and organizational performance of universities in Nigeria.
H011: There is no significant relationship between intellectual capital management and information and communication technology in the knowledge – based economy.
H012: There is no significant difference between information and communications technology and information transparency of universities in Nigeria.
1.6 Significance of the Study
The findings of this study will provide updated reporting system to management to improve strategic management and to learn about internal process of value creation. It will also provide an efficient methodology to identify, measure, manage and diffuse knowledge in a proper way to improve internal management and transparency. Significantly, since universities has a continuous external demand for greater information and transparency about the use of public funds and greater autonomy regarding their organization, management and budget allocation. The outcome of the findings would also help in creating transparency about the use of public funds, explain the achievements of research, training and their benefits to stakeholders, illustrate the development of intangible assets, reveal leverage effects and externalities, communicate (new) organizational value and demonstrate their competitiveness.
This study would be useful in evaluating the alignment of result with founding strategies of the university and it will allow to set measurable objectives aligned with the strategic mission of the organization as well as to assess the performance in term of creating human, structural, innovational and rational capital based on the management and reporting of intellectual capital. The measurement of universities performance is essential if university system is to continuously regenerate itself by intelligent use of knowledge management. However, the findings of this study would allow the proprietors of universities (Federal, State and Private individuals or Missionaries) to criticize the current accounting information model in Nigeria universities and to recommend extending the limits of universities annual account so as to include the information on intellectual capital demanded by the different stakeholders.
Specifically, the university stakeholders such as National Universities Commission (NUC), would embrace the disclosure of the following intangible elements: academic and professional qualifications of the teaching and research staff, scientific productivity, teaching capacities and competencies, research capacities and competences (Human Capital): effort in innovation and improvement intellectual property and quality management (Capital Structure); as well as the graduate employability, relations with business world, application and dissemination of research, students satisfaction, the university’s image and collaboration with other universities (Relational capital).
1.7 Delimitation of the Study
The scope of this study covers all universities in South West Nigeria. The rationale for the choice of South – West geo-political zone is because is the only geo – political zone in Nigeria with the highest numbers of accredited universities in Nigeria. Also, there are hundred percent presence of Federal universities, state universities and private universities in South – West geo – political zone Nigeria.
1.8 Operational Definition of Terms
Information and Communications Technology: This is refers to those technologies that determine the efficiency and effectiveness with which an organization communicates and the devices that allows it to handle information that support intellectual capital management process within an organization.
Intellectual Capital Management: Fundamental approach to the management of resources and dynamic system of intangible of elements whose effective management is essential to value creation in universities.
Organizational Performance: This is an organization’s ability to attain its goals by using intellectual capital in an efficient and effective manner.
Universities: An ivory – tower and leading producers of knowledge, a key player in the knowledge – based economy.
Human Capital: This includes the knowledge and skills that the human resource (Lecturers, researchers, P.hD students and administrative staff) would take with them if they have to leave the university.
Organizational Capital: This is the knowledge that stays within the university at the end of the working day. It comprises the governance principles, the organizational routines, procedures, systems, cultures, databases, intellectual property etc.
Relational Capital: This is the organizational formal and informal relations with its external stakeholders and the perceptions that they hold about the organization, as well as the exchange of knowledge between the organization and its external stakeholders.
Intellectual Capital Report: This report gives universities the opportunity to report on their full range of activities and to provide an instrument for internal management tasks and decision making.
Innovation Capital: This is a key success factor for an organization to keep its long term competition excellence.
Intellectual Assets: The tangible or physical description of specific knowledge to which an organization may assert ownership rights (documents, databases, processes, inventions).
Intellectual Property: The subset of intellectual assets for which legal production has been obtained (patents, trade-marks, copyrights).
Knowledge Economy: This is an economy in which wealth is created by processing data, information and knowledge.
Intellectual Capital Structural Capital Organizational
Knowledge –based theory
Knowledge-based economy:This is an economy in which production and exploitation of knowledge plays a key role in economic growth and wealth creation..