Applied mathematics in Engineering, Management and Technology 2 (4) 2014: 298-303 www.amiemt-journal.com Knowledge Management, Social capital and Intellectual capital Relationships in Process-Oriented Organizations Mohammad Reza Zare Mirakabad, Administrative and support manager, Civil Aviation Technology College Yahya Chaghouee*, A member of ATC department, Civil Aviation Technology College (Corresponding author) chaghouee@catc.ac.ir Abstract In today's competitive market characterized by its uncertainty, firms are able to compete that implement knowledge management well. According to the knowledge management link provided by the Rastgoi (2002), social capital formation in organizations considered as one of the most important factors affecting knowledge management implementation. Knowledge management effects social capital positively and both of them strengthen organization intellectual capital. On the other hand, continuation of this cycle requires a specific infrastructure. Process approach in organizations strengthen this relation and also make the necessary preparations cause to its continuity. Therefore it seems to increase the likelihood of successful KM projects, Business Process Reengineering (BPR) required to be implemented priory. Keywords: Process approach, Knowledge management, Social capital, Intellectual capital 1.Introduction In today's competitive market characterized by its uncertainty, firms have the ability to compete that create and distribute new knowledge and also convert it to goods and services. Thus, knowledge provides competitive advantage for organization and makes it possible to solve problems and seize new opportunities (Gholamian et al, 1385). Knowledge management appeared as a basis for competitiveness analysis in business strategy literature and in Holy Grail view considered as an ability to acquire, archive and favorable access to selected knowledge and ability to make decisions on behalf of employees and managers for individual and group behavior (Bergeron, 1386). Based on Robins (Ray, 2008) knowledge management can be defined as the process of organizing and distributing an organization's collective wisdom so the right information reaches the right people at the right time. According to Gholamian et al (1385) knowledge management empowers, supports and strengthens following important functional elements: - Processes of discovery or construction of new knowledge and refining existing knowledge (knowledge stock creation) - Knowledge sharing between individuals and across all organizational boundaries (managing the flow of knowledge) - Creating and using knowledge as part of individuals daily work and decisions (application of knowledge) Three reasons why it is necessary to use knowledge management in organizations are included of (Ray, 2008): - Knowledge is as important as physical and financial assets. - Knowledge value is determined just the time that specialists leave the workforce. - Knowledge management systems proved their role in waste reduction and productivity increasing in organizations. To achieve an optimal knowledge management and creation of new knowledge, firms must develop the absorptive capacity- the ability to use prior knowledge to recognize the value of new information, assimilate it, and apply it to create new knowledge and capabilities (Gold et al, 2001). In other words, the absorptive capacity is the ability to identify, assimilate and integrate information both inside and outside of organization (Sporleder & Moss, 2002). On 298
the other hand, all the resources including knowledge will be created through two generic processes: combination and exchange. To combine and exchange knowledge to create new knowledge in the organization requires strong social capital (Nonaka, 1994). 2.Social Capital In a historical review of the concept of social capital, this term used first time in researches conducted in order to conceptualize survive and establish of urban neighborhood. Jane Jacob (1965) employed this concept in his work entitled The Death and Life of Great American Cities. She considered social capital as a complex network of human relationships developed over time and can foster a sense of civic responsibility. If this capital lost for any reason, benefits would be lost until a new capital to be accumulated and gradually formed. Other researchers have shown their attention to this concept and developed its dimensions. Baker limited his view to the communication infrastructure networks about this concept. Bourdieu (1986, 1993) and Putnam (1995) (Zarei & Chaghouee, 1388) considered actual and potential sources of social capital that can be accessed through the networks in their conceptualization. Putnam (1995) defined social capital as a set of concepts such as trust, norms, communication networks between people in a community. Social capital is a means to achieve political and social development in different political systems. Putnam (1995) emphasize on trust. In his view trust and reciprocity in social networks are the resources of community members action (Alaghe Band, 1384 as quoted by Maffei, 1387). Summary of social capital definitions can be concluded as the sum of actual and potential resources embedded within, available through, and derived from the network of relationships of an individual or a social unit in a social environment (Nahapiet & Ghoshal, 1998). So what is clear from the definitions and the historical trend of social capital concept is that social capital is formed in a social environment and considered the result of establishing communications between members of the network. Trust development between members is one of the most important elements for communication formation. In fact trust is a belief that developed over time, and resulted from an occurred behavior that individual expects of the opposite side (Zarei & Chaghouee, 1388). Nahapiet and Ghoshal (1998) model described three categories of social capital dimensions: the structural, relational, and cognitive dimension. Structural dimension described as a dimension of social capital referred to the overall pattern of contacts between individuals. That is how and whom a person has access. The next most important structural aspects of social capital included of the network of relationships between individuals, organizations and networks configured properly. Cognitive dimension referred to resources provided representations, interpretations and systems of shared meanings among groups. The language and the shared code and anecdotes considered as the most important aspect of the cognitive dimension of social capital. Relational dimension described the kind of personal relationships that people can interact with each other because of their former interactions. Trust, norms, obligations and expectations and identity the most important relational aspects of social capital. Nahapiet & Ghoshal (1998) studied the relationship between social capital and intellectual in organization after social dimensions description. They have insisted that social capital formation and strengthening in organization provide the necessary fields (access to different parts to combine and exchange intellectual capital, value exaptation from intellectual capital exchanging and combination, motives existence of intellectual capital exchanging and combination, combination capability) to exchange, combine and the formation of new intellectual capital in the organization. (Figure 1) 299
Social Capital Intellectual capital exchange and combination New Intellectual capital formation Fig.1. Interaction between social capital and intellectual capital in organization- (Nahapiet & Ghoshal, 1998) 3.KM link Rastgoi (2002) believed that knowledge management link involves bonding a dense, dynamic mutual interaction between social capital, human capital and knowledge management. The term link represents the fact that one of these three components absence or poor communication between them makes this pattern liquidated. This link results the formation of intellectual capital (Figure 2). Intellectual capital of the organization is the overall ability in facing with and exploitation of opportunities for continuous value creation. Social Capital Human Capital KM Intellectual Capital Fig.2.KM Link- (Rastgoi, 2002) 4.Process approach and its impact on social capital and knowledge management in organization Due to task-oriented structure problems in meeting the organization needs in competitive environment, different researches suggested process approach as a solution for this impasse (Davenport & Short, 1990; Hammer & Champy, 1993). Organizational approach is fractional in task-oriented structure. In fact, the main problem is how to link the components and build an entire organization in this structure. In Zarei & Chaghouee (1388) view, performing business process reengineering results following major developments that shape the organization and causes strengthening social capital: - Change of the dominant thinking - Thinking from the perspective of the dominant component of each unit changed to system thinking. In system thinking, the events that occur in a unit of a system unit affects another unit of the system and it may also affect the action itself. In re-engineering of processes, identifying efficient placement processes in the system are discussed after process identification. - Changing organizational goal - The goal in task-oriented thinking is just selling the product to the customer. That would only consider selling. But customer considered as the central point of an organization in process approach and ultimate goal of the organization is to identify and satisfy customer needs. This goal setting causes the alignment of activities in organization. 300
- Changing organizational structure - Structures of vertical and hierarchical converted to flat organizations and excess levels of management will be deleted. On the other hand the relationship between the various units that were separated previously, will be established. - Improving performance - the composition and shape of different tasks and processes formation also removing of excess activities, the flexibility of the organization increases. It also reduces the cost and time. - Form of communication By process orientation in organization both internal communications and external communications will be formed and a network of interconnected relationships developed. - Following three main infrastructures causes of social capital maximization in organization: technical, cultural and structural infrastructure (Gold et al, 2001).Structural infrastructure achieved through norms and trust. Partnership themes involving the fields of cultural infrastructure and technical infrastructure will be provided by internal links is through technology. Process-oriented approach maximize social capital through trust, partnership and participation and technological linkages. On the other hand knowledge management processes must occur in a manner that enables the storage, transformation and transmission of knowledge across organization. This processes enables organization for knowledge acquisition, adapting and transferring in the most efficient manner (Gold et al, 2001). Grant (1996) provided a framework for explaining aspects of knowledge integration process. Based on this framework, the integration of knowledge related to three following dimensions: - Integration efficiency - the frequency and variability of processes are the main elements of integration efficiency. - Integration domain - diversity of knowledge in the presence of interconnected processes is necessary to specify the domain alliance. - Integration flexibility refers to the situation in which the organization is able to combine knowledge. Due to the conditions in organizations deployed process approach, two of the three mentioned dimensions are boosted at least. In process-oriented organizations, process changing facilitated and convenient condition developed for knowledge combination. Combination of knowledge and the creation of new knowledge to meet the new needs of customers going to the ideals of the process-oriented organizations. 5.An interactive model of social capital, intellectual capital, knowledge management and process-orientation According to the model proposed by Rastgoi (2002), three concepts of social capital, intellectual capital, knowledge management have mutual continuous synergy. Strengthening social capital in the organization will lead to the formation of strong relationships within and outside the organization. The formation of the communication path provides data transferring. During data transfer, useful information identified, combined and new knowledge will be created. Accordingly, KM concept reinforced in organization and both KM and social capital lead to intellectual capital synergy. On the other hand, intellectual capital reinforcement cause to social capital strengthening based on Nahapiet & Ghoshal (1998). But there is the question here is whether the cycle will continue in every situation? Based on what was presented on the impact of process approach on KM and social capital, it is clear that the process-orientation leads to cycle continuity (Figure 3). Indeed, this approach reinforces this cycle from two perspectives: - Strengthening the concepts of this cycle - process-oriented approach based on the framework provided by the grant will strengthen knowledge management. This strengthen occurs through knowledge integration process dimensions reinforcement. On the other hand, based on the views of Zarei & Chaghouee (1388), process approach strengthen the concept of social capital by providing some of the areas that needed. Each of the concepts reinforcement led to cycle enhancement. - Providing - in the absence of clear processes in organization, even if there is social capital whereas the conditions for the exchange and combination of knowledge and creating new knowledge not provided. Knowledge exchanging and combination among different departments and agencies with clarity, precision processes, customer needs attention and accept the final product is possible. In fact, because of the low social capital and organizational relationships in task-oriented organizations, exchange of knowledge dealt with difficulties and weak social capital couldn t cause to synergies on knowledge management. 301
Process Approach Process Approach Applied mathematics in Engineering, Management and Technology 2014 Social Capital KM Intellect ual Capital Fig.3. Research Conceptual Model 6.Conclusion One of the most important concepts in the new organizations is knowledge management concept. Creation of new knowledge in the organization in order to meet the needs and demands of customers mainly occurs through exchanging and combination of former knowledge. According to Rastgoi (2002), there is a link among the concept of knowledge management, social capital, human capital and intellectual capital of the organization. Knowledge management and social capital with interactional effect on each other lead to strengthen the intellectual capital of the organization. On the other hand for the cycle continuity, the organization must change the approach. Change approach from a task-oriented view to process-oriented one and exact formation of processes develop conditions to continue this cycle. Knowledge management projects are also problematic because they are costly. Reduces the cost of the project causes reducing the market value of the physical assets and capital of the organization. In case of knowledge management implementation project, business process reengineering project must be implemented priory because of the organizational situation will be developed for formation cycle above (Figure 3) and the social capital of the organization will be enhanced. By increasing nonphysical capital, organization wouldn t be suffered from the aspect of market value and knowledge management projects will be more successful. References Bergeron, B (1386), "Principles of Knowledge Management", translation: Ghahreman, M. & Bagheri, M. Management Training and Research Institute, Tehran, 1386. [In Persian] Davenport, T. H., & Short, J. E. (1990). The new industrial engineering: information technology and business process redesign. Sloan management review, 31(4). Gholamian, M.R et al (1385), "Knowledge management in customer relationships", Journal of Tadbir, Issue 178. [In Persian] Gold, A. H., Malhotra, A., & Segars, A. H. (2001). Knowledge management: an organizational capabilities perspective. J. of Management Information Systems, 18(1), 185-214. Grant, R. M. (1996). Toward a knowledge-based theory of the firm. Strategic management journal, 17, 109-122. Hammer, M., & Champy, J. (1993). Reengineering the corporation: A manifesto for business revolution. Business Horizons, 36(5), 90-91. Maffei, V. (1387), "The effect of social capital on entrepreneurial process", MS Thesis, Tehran University, Campus of Qom. [In Persian] Nahapiet, J., & Ghoshal, S. (1998). Social capital, intellectual capital, and the organizational advantage. Academy of management review, 23(2), 242-266. Nonaka, I. (1994). A dynamic theory of organizational knowledge creation. Organization science, 5(1), 14-37. 302
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