chapter 4 - recognizing a firm's intellectual assets

Question 1

knowledge economy

Answer 1

“In the knowledge economy, wealth is increasingly created by effective management of knowledge workers instead of by the efficient control of physical and financial assets.

The growing importance of knowledge, coupled with the move by labor markets to reward knowledge work, tells us that investing in a company is, in essence, buying a set of talents, capabilities, skills, and ideas—intellectual capital—not physical and financial resource

Human capital is growing more valuable in virtually every business. This trend has been going on for decades as jobs become catered towards creative thinkers and creators, and less focused on menial job tasks.

Question 2

intellectual capital

Answer 2

Many writers have defined intellectual capital as the difference between a firm’s market value and book value—that is, a measure of the value of a firm’s intangible assets.

This broad definition includes assets such as reputation, employee loyalty and commitment, customer relationships, company values, brand names, and the experience and skills of employees. Thus, simplifying, we have

intellectual capital = market value of firm - book value of firm

Question 3

How do companies create value in the knowledge-intensive economy?

Answer 3

The general answer is to attract and leverage human capital effectively through mechanisms that create products and services of value over time.

Question 4

human capital

Answer 4

First, human capital is the “individual capabilities, knowledge, skills, and experience of the company’s employees and managers.”

This knowledge is relevant to the task at hand, as well as the capacity to add to this reservoir of knowledge, skills, and experience through learning

Question 5

social capital

Answer 5

Second, social capital is “the network of relationships that individuals have throughout the organization.” Relationships are critical in sharing and leveraging knowledge and in acquiring resources.

Social capital can extend beyond the organizational boundaries to include relationships between the firm and its suppliers, customers, and alliance partners

Question 6

explicit knowledge

Answer 6

Third is the concept of “knowledge,” which comes in two different forms. First, there is explicit knowledge that is codified, documented, easily reproduced, and widely distributed, such as engineering drawings, software code, and patents

Question 7

tacit knowledge

Answer 7

The other type of knowledge is tacit knowledge that is in the minds of employees and is based on their experiences and backgrounds.

Tacit knowledge is shared only with the consent and participation of the individual

Question 8

processes in which all successful organizations must engage to build and leverage their human capital

human capital: three interdependent activities

Answer 8

Hiring is only the first of three processes

Firms must also develop employees to fulfill their full potential to maximize their joint contributions

1. attracting human capital
2. retaining human capital
3. developing human capital

Question 9

human capital: three interdependent activities - 1. attracting human capital

Answer 9

The first step in the process of building superior human capital is input control: attracting and selecting the right person.

Human resource professionals often approach employee selection from a “lock and key” mentality—that is, fit a key (a job candidate) into a lock (the job). Such an approach involves a thorough analysis of the person and the job.

1. Hire for Attitude, Train for Skill
2. Recognizing the Geographic Preferences of Talent The race for talent extends far beyond Silicon Valley.
3. Using Algorithms for Selection

Question 10

human capital: three interdependent activities - 3. developing human capital

Answer 10

Training is an obligation we owe to our employees. If you want high growth and high quality, then training is a big part of the equation

1. Encouraging Widespread Involvement
2. Mentoring - Mentoring is most often a formal or informal relationship between two people
3. Monitoring Progress and Tracking Development Whether a firm uses on-site formal training, off-site training (e.g., universities), or on-the-job training, tracking individual progress—and sharing this knowledge with both the employee and key managers—becomes essential
4. Evaluating Human Capital In today’s competitive environment, collaboration and interdependence are vital to organizational success. Individuals must share their knowledge and work constructively to achieve collective, not just individual, goals.

Question 11

360-degree evaluation and feedback systems

Answer 11

To address the limitations of the traditional approach, many organizations use 360-degree evaluation and feedback systems.

Here, superiors, direct reports, colleagues, and even internal and external customers rate a person’s performance.

Managers rate themselves to have a personal benchmark. The 360-degree feedback system complements teamwork, employee involvement, and organizational flattening. As organizations continue to push responsibility downward, traditional top-down appraisal systems become insufficient.

Question 12

human capital: three interdependent activities - 2. retaining human capital

Answer 12

“It has been said that talented employees are like frogs in a wheelbarrow: They can jump out at any time. By analogy, the organization can either try to force employees to stay in the firm or try to keep them from jumping out by creating incentives

1. Identifying with an Organization’s Mission and Values
2. Challenging Work and a Stimulating Environment
3. Financial and Nonfinancial Rewards and Incentives

Question 13

Enhancing Human Capital: Redefining Jobs

Answer 13

Nearly half of U.S. firms reported a shortage of skilled workers in 2021.69 In response, some firms are taking steps to expand their talent pool, for example, by investing in apprenticeships and other training programs.

However, some are going further: They are redefining the jobs of their experts and transferring some of their tasks to lower-skilled people inside or outside their companies, as well as outsourcing work that requires less scarce skills and is not as strategically important.

Redefining high-value knowledge jobs not only can help organizations address skill shortages but also can lower costs and enhance job satisfaction

Question 14

Enhancing Human Capital: Managing Diversity

Answer 14

A combination of demographic trends and accelerating globalization of business has made the management of cultural differences a critical issue. Workforces, which reflect demographic changes in the overall population, will be increasingly heterogeneous along dimensions such as gender, race, ethnicity, and nationality

Question 15

Six other areas where sound management of diverse workforces can improve an organization’s effectiveness and competitive advantages are

Answer 15

(1) cost,
(2) resource acquisition,
(3) marketing,
(4) creativity,
(5) problem solving, and
(6) organizational flexibility.

Question 16

cost argument (of where sound management of diverse workforces can improve an organization’s effectiveness and competitive advantages are)

Answer 16

As organizations become more diverse, firms effective in managing diversity will have a cost advantage over those that are not.

Question 17

resource aquisition argument (of where sound management of diverse workforces can improve an organization’s effectiveness and competitive advantages are)

Answer 17

Firms with excellent reputations as prospective employers for women and ethnic minorities will have an advantage in the competition for top talent. As labor pools shrink and change in composition, such advantages will become even more important.

Question 18

marketing argument (of where sound management of diverse workforces can improve an organization’s effectiveness and competitive advantages are)

Answer 18

For multinational firms, the insight and cultural sensitivity that members with roots in other countries bring to marketing efforts will be very useful. A similar rationale applies to subpopulations within domestic operations.

Question 19

creating argument (of where sound management of diverse workforces can improve an organization’s effectiveness and competitive advantages are)

Answer 19

Less emphasis on conformity to norms of the past and a diversity of perspectives will improve the level of creativity.

Question 20

problem solving argument (of where sound management of diverse workforces can improve an organization’s effectiveness and competitive advantages are)

Answer 20

Heterogeneity in decision-making and problem-solving groups typically produces better decisions because of a wider range of perspectives as well as more thorough analysis.

Question 21

organizational flexibility argument (of where sound management of diverse workforces can improve an organization’s effectiveness and competitive advantages are)

Answer 21

With effective programs to enhance workplace diversity, systems become less determinant, less standardized, and therefore more fluid. Such fluidity should lead to greater flexibility to react to environmental changes. Reactions should be faster and less costly

Question 22

Describe the key role of social capital in leveraging human capital within and across the firm

Answer 22

In a sense, developing and retaining human capital becomes less important as key players (talented professionals, in particular) take on the role of free agents and bring with them the requisite skill.

Rather, the development of social capital (that is, the friendships and working relationships among individuals within and outside the organization) gains importance because it helps tie knowledge workers to a given firm”

Question 23

How social capital helps the firm leverage new and former talent

Answer 23

The importance of social ties among talented professionals creates a significant challenge (and opportunity) for organizations. In The Wall Street Journal, Bernard Wysocki described the increase in a type of “Pied Piper effect,” in which teams or networks of people are leaving one company for another”

Firms can also benefit by maintaining relationships and positive experiences with former employees, what some firms refer to as alumni employees.

Question 24

social network analysis

Answer 24

Social network analysis depicts the pattern of interactions among individuals and helps to diagnose effective and ineffective patterns.

It helps identify groups or clusters of individuals that comprise the network, individuals who link the clusters, and other network members

Question 25

social network analysis is helpful because the configuration of group members’ social ties within and outside the group affects the extent to which members connect to individuals who

Answer 25

Convey needed resources.

Have the opportunity to exchange information and support.

Have the motivation to treat each other in positive ways.

Have the time to develop trusting relationships that might improve the groups’ effectiveness.

Question 26

closure relationships

Answer 26

To simplify, there are two primary types of mechanisms through which social capital will flow: closure relationships (depicted by Crystal, Frank, Jorge, and Susan) and bridging relationships (depicted by Mary).

As we can see, in the former relationships one member is central to the communication flows in a group. In contrast, in the latter relationships, one person “bridges,” or brings together, groups that would have been otherwise unconnected

Question 27

closure (implications that understanding social networks has for one’s career success)

Answer 27

Closure - With closure, many members have relationships (or ties) with other members. As indicated in Exhibit 4.3, Bill’s group would have a higher level of closure than Frank’s, Susan’s, or Jorge’s groups because more group members are connected to each other

Question 28

bridging relationships (implications that understanding social networks has for one’s career success)

Answer 28

Bridging Relationships The closure perspective rests on an assumption that there is a high level of similarity among group members.

However, members can be quite heterogeneous with regard to their positions in either the formal or informal structures of the group or the organization.

Bridging relationships, in contrast to closure, stress the importance of ties connecting people. Employees who bridge disconnected people tend to receive timely, diverse information because of their access to a wide range of heterogeneous information flows.

Question 29

implications for career success (implications that understanding social networks has for one’s career success)

Answer 29

Effective social networks provide many advantages for the firm.

They can also play a key role in an individual’s career advancement and success. One’s social network also potentially can provide three unique advantages: private information, access to diverse skill sets, and power.

Question 30

private information (implications that understanding social networks has for one’s career success)

Answer 30

We make judgments using both public and private information. Today, public information is available from many sources, including the internet. However, since it is so accessible, public information offers less competitive advantage than it used t

Question 31

access to diverse skill sets (implications that understanding social networks has for one’s career success)

Answer 31

While expertise has become more specialized during the past few decades, organizational, product, and marketing issues have become more interdisciplinary. This means that success is tied to the ability to transcend natural skill limitations through others. Highly diverse network relationships, therefore, can help you develop more complete, creative, and unbiased perspectives on issues.

Question 32

power (implications that understanding social networks has for one’s career success)

Answer 32

Traditionally, a manager’s power was embedded in a firm’s hierarchy. But when corporate organizations became flatter, more like pancakes than pyramids, that power was repositioned in the network’s brokers (people who bridged multiple networks), who could adapt to changes in the organization, develop clients, and synthesize opposing points of view.

Question 33

women and networking (implications that understanding social networks has for one’s career success)

Answer 33

It is important to discuss some of the challenges that women face when it comes to networking. Sheryl Sandberg, former chief operating officer of Meta, Inc., and author of Lean In, notes that even though women are entering the U.S. workforce at the highest number in decades, gender parity in senior executive roles is still far off.

Question 34

Research suggests that women can take actions to network effectively. Three specific actions women can take are:

Answer 34

Be a bridge.
Women can improve their professional network by making connections across diverse circles that make up their network. For example, this can include actively leveraging connections in their LinkedIn network to solve organizational problems.

Do it your way.
Don’t assume that women can only succeed by connecting in the ways men traditionally have, such as when playing golf. Savvy networkers leverage personal interests into something that can have strategic value for the organization. For example, someone interested in theater can build relationships and potential business with others in their network who also enjoy theater.

Join a women’s professional network.
Women can learn from others who have overcome similar challenges and build strong connections by joining a women’s professional network”

Question 35

the potential downside of social capital

Answer 35

We’d like to close our discussion of social capital by addressing some of its limitations.

First, some firms have been adversely affected by very high levels of social capital because it may breed “groupthink”—a tendency not to question shared belief

Second, if there are deep-rooted mindsets, there would be a tendency to develop dysfunctional human resource practices. That is, the organization (or group) would continue to hire, reward, and promote like-minded people who tend to further intensify organizational inertia and erode innovation.”

“Third, the socialization processes (orientation, training, etc.) can be expensive in terms of both financial resources and managerial commitment.

Finally, individuals may use the contacts they develop to pursue their own interests and agendas, which may be inconsistent with the organization’s goals and objectives. Thus, they may distort or selectively use information to favor their preferred courses of action or withhold information in their own self-interest to enhance their power to the detriment of the common good.

Question 36

Describe the vital role of technology in leveraging knowledge and human capital

Answer 36

Using networks to share information

As we all know, information can be shared easily through a range of electronic channels, such as e-mail, blogs, vlogs, social network sites, and webinars.

For senior managers, these systems allow for regular communication and interaction with employees. Managing this effectively is important for the firm to foster commitment and action in its employee base.”

“Senior managers can leverage the power of short videos, company-wide electronic forums, and webinars to communicate the firm’s mission, its key initiatives, and its response to environmental dynamics. They can host small focus group discussions with employees to gain insight

Question 37

Explain why virtual teams are critical in combining and leveraging knowledge - virtual teams

Answer 37

Like many organizations, Microsoft has concentrated much of its development on virtual teams that are networked together.

This helps to accelerate design and testing of new software modules. This helps the firm learn how its new technologies can be applied rapidly to business ventures such as cloud computing, video communication, social networks, and entertainment devices

advantages:
- Virtual teams offer multiple advantages.110 In addition to the rather obvious use of technology to facilitate communications, the potential benefits parallel the other two major sections in this chapter—human capital and social capital.
First, virtual teams are less restricted by the geographic constraints that are placed on face-to-face teams
- Second, virtual teams can be very effective in generating social capital—the quality of relationships and networks that form. Such capital is a key lubricant in work transactions and operations.

challenges:
- However, there are challenges associated with making virtual teams effective. Successful action by both traditional teams and virtual teams requires that:
-Members identify who among them can provide the most appropriate knowledge and resources.
-Virtual team leaders and key members know how to combine individual contributions in the most effective manner for a coordinated and appropriate response

Question 38

two kinds of knowledge: tacit and explicit

Answer 38

tacit knowledge is embedded in personal experience and shared only with the consent and participation of the individual.

Explicit (or codified) knowledge, in contrast, is knowledge that can be documented, widely distributed, and easily replicated.

Question 39

Identify the challenge of protecting intellectual property and the importance of a firm’s dynamic capabilities - intellectual property

Answer 39

The management of intellectual property (IP) involves, besides patents, contracts with confidentiality and noncompete clauses, copyrights, and the development of trademarks.

Moreover, developing dynamic capabilities is the only avenue providing firms with the ability to reconfigure their knowledge and activities to build and protect a sustainable competitive advantage

Question 40

intellectual porperty rights

Answer 40

Intellectual property rights are more difficult to define and protect than property rights for physical assets (e.g., plant, equipment, and land). However, if intellectual property rights are not reliably protected by the state, there will be less incentive to develop new products and services. Property rights have been enshrined in constitutions and rules of law in many countries.

Question 41

dynamic capabilities

Answer 41

Dynamic capabilities help to explain competitive advantage in volatile industries. In the past few decades, Internet-based technologies have altered the competitive landscape across a broad range of industries, raising new challenges to the conventional views of competitive advantage.

Question 42

more about dynamic capabiltiies

Answer 42

Dynamic capabilities, therefore, defines the firm’s ability to innovate, adapt, and foster change that is favorable to customers and unfavorable to competitors. Dynamic capabilities can be viewed as consisting of three primary activities:

• Identifying, developing, and assessing technological opportunities (and threats) that relate to customer needs (the“sensing” of uncertain futures);
• Mobilizing resources to focus on needs and opportunities in order to capture value from doing so (“seizing”); and
• Continuing the ongoing process of renewal (“transforming” or “shifting”)

Question 43

three activities of dybamic capabiltiies

Answer 43

These three activities—sensing,seizing, and transforming—are essential if organizations want to sustain themselves in the longer term as customers, competitors, and technologies chang