Research On The Value Creation Mechanism And Process Of Enterprise Knowledge Capital

Knowledge has become the dominating resource in the contemporary knowledge-based economy, and is far more important than land, capital or labor. Knowledge capital can improve the total factor productivity, help enterprises realize the transformation and upgrading, and optimize the industrial structure. The foundation of enterprise survival and development is value creation, and value maximization becomes the primary goal of enterprise financial management. In the intensive change and increasingly fierce competition, enterprises must find ways to make them more creative and improve the ability of value creation in order to survive and grow. The value creation ability of the enterprises depends largely on the investment and management of the knowledge capital. The complementarity and accumulation of knowledge plays an important role in the creation of value, because the complementarity and accumulation of the knowledge capital has been increasing returns and scale effect. The value creation of enterprise knowledge capital is still a "black box". Based on the theory of factor capital, this paper has carried out a systematic research on the value creation mechanism and process of enterprise knowledge capital. The paper puts forward relevant propositions of knowledge capital value creation and investment, which provide the theoretical basis for the subsequent empirical study. The proposed model is grounded on principles underpinning the systems thinking approach and strategy maps. This represents a critical issue to face in order to make managers able to take better informed management decisions with regard to knowledge capital allocation and management.In the accounting field, knowledge capital (intellectual capital) is mainly synonymous with intangible assets, and is the difference between the book value and market value of enterprises. This "grand" theory in the research field of knowledge capital has been accepted by many scholars. However, a critical study of the knowledge capital accounting has emerged recently. Previous researchers focus on the measurement and disclosure of knowledge capital. The main reason is that people fall into an "evaluation" trap. They are influenced by the motto of "no measurement, no management". The measurement and disclosure of knowledge capital majorly concerns the stock of static knowledge capital, ignoring the practice of knowledge capital "in action". This paper has done the research along the knowledge capital critique — restatement the meaning and elements of knowledge capital—value creation mechanism of enterprise knowledge capital — the process of value creation of enterprise knowledge capital—enterprise knowledge capital investment decision-knowledge capital management. First, this paper restates the meaning and elements of knowledge capital, builds a knowledge capital framework and explains the social reality. Secondly, it makes a research on the knowledge capital value creation mechanism, and analyzes the characteristics of the knowledge capital value creation. Thirdly, in order to have an insight into value creation process of knowledge capital, using the method of causal mapping and systems thinking, the paper puts forward the causality diagram of knowledge capital value creation. Then, respectively establishes knowledge capital investment model under the complete rationality and limited rationality, and analyzes the effects of different factors on knowledge capital investment decision. Finally, the paper puts forward some countermeasures for improving the value creation ability of enterprise knowledge capital.In accordance with the above logic, this paper adopts the normative analysis and case analysis as the main research methods. This paper also uses literature analysis, causal mapping, and evolutionary game analysis method. Based on the knowledge theory, enterprise theory, accounting and financial theory, evolutionary economics and cognitive economics theory, this paper has carried out a systematic research on the value creation mechanism and process of enterprise knowledge capital and knowledge capital investment. The main conclusions are as follows:First, knowledge is a justified true belief (idea), which is used in the process of enterprise production and trading, and can influence the resource allocation or value creation. Knowledge has tacit and explicit dimensions, and connects with action; different knowledge will lead to different behavior. Not all knowledge is knowledge capital. Knowledge needs three conditions to transform to knowledge capital:being input into the production process; registering document of title; completing the transaction process. Therefore, knowledge capital is the total of various kinds of explicit and tacit knowledge owned or controlled by an enterprise, which can bring value added to the enterprise. According to the different attachment carriers, knowledge capital is divided into personal knowledge capital, team knowledge capital, and enterprise knowledge capital. Enterprise knowledge capital includes the enterprise vision, enterprise culture, organizational routines and institutions and enterprise brands. Personal knowledge capital and enterprise knowledge capital are interacted, and mutually transformed, which constitutes the process of knowledge capital spiral. The entrepreneur is a special human capital, the values and beliefs of the entrepreneur generate the decisive influence on the formation of enterprise knowledge capital.Second, the characteristics of knowledge capital are complementarity, accumulation, path dependence, complexity, non-competition, partial exclusion and scarcity. Among them, complementarity, accumulation, path dependence and complexity are the main features of knowledge capital. Due to the limited capacity of the human brain, workers specialize in certain areas of knowledge. The production of sophisticated goods and services involves in the cooperation of these specialists. Since knowledge is costly to acquire and transfer, deeply influenced by the culture of the enterprise and subject to a high level of specialization, it is argued that the best use of autonomous stocks of knowledge can be made within an enterprise. Highly specific and path-dependent knowledge can be best—or most efficiently— applied within a single integrative community such as the enterprise.The added value of the enterprise, in comparison to a set of market transactions, does not simply result from the avoidance of transaction cost but from the function of endowing individuals with a enterprise culture and consequently integrating the dispersed knowledge of various specialists. In addition, path dependence is a "double-edged sword", in the form of the enterprise core competitive advantage at the same time, which may also appear rigid. In order to break path dependence, enterprises must reallocate knowledge capital.Third, the enterprise is a value creating entity; tangible capital and intangible capital are combined jointly to create value for stakeholders. The mechanism of knowledge capital is integrated into a series of processes of enterprises, providing the soft environment for the other factor capital. Enterprise knowledge capital can reduce the uncertainty and risk, motivate and coordinate behavior of employees, reduce the transaction cost, improve labor productivity, improve corporate reputation, and improve the enterprise competitive advantage and dynamic capability. Through these ways, knowledge capital increases the enterprise revenue or reduces the cost eventually, creating more added value for the enterprise. This paper puts forward propositions relevant to value creation of knowledge capital.Forth, this study suggests the mapping as a valuable method for assessing how organizational knowledge capital, separately and as a cluster, take part in the value creation of an enterprise. In particular, the study proposes a thinking-based model system for analyzing and evaluating the involvement of knowledge capital in the value creation pathways of an enterprise. The value creation of the enterprise is mainly related to the three abilities:the ability of technology innovation, growth ability and brand building ability of the enterprise. Entrepreneurial knowledge capital and knowledge capital of enterprises play an important role in the process of value creation. The propositions relevant to value creation of knowledge capital are verified: knowledge capital, technology capital, human capital, monetary capital, material capital and information capital create a value net and every element is a node in the network; knowledge capital is the core resource, and decides the allocation, structure and output efficiency of the others. However, the value creation process of the knowledge is path-dependent. To break through the old path dependence, an enterprise should be innovative and reform the knowledge capital. The process requires managers and employees to work together.Fifth, the paper constructs different knowledge capital investment models under the complete rationality and limited rationality, analyzing the process of knowledge capital investment decision and influencing factors. In a completely rational circumstance, policy makers can fully perceive the true information, and if knowledge capital investment can receive expected return, they will invest, but the reverse is not investment. However, policy makers are limited-rational. Knowledge capital investment decision is often influenced by the personal values and previous experience of decision makers, enterprise dominant logic and interpretation system, industry practices and other factors. Because of these factors, policy makers may overestimate or underestimate the expected return of knowledge capital. Knowledge capital investment is excessive or insufficient. Knowledge capital investment can be divided into four conditions:simple knowledge capital fit, knowledge capital deficit, knowledge capital overreliance and complex knowledge capital fit. Enterprises can reap benefits from knowledge investments when the investments resolve uncertain and equivocal problems. When knowledge requirements are not adequately addressed by organizational policy makers, enterprises cannot function effectively and value will be destroyed.The main innovations of this paper are as follows:First, this paper constructs the theory frame of the knowledge capital and explains the social reality using the knowledge capital theory, the research angle is innovative.Second, the paper puts forward four propositions relevant to value creation of knowledge capital:knowledge capital is the adhesive of heterogeneous capital, can improve the productivity of the other factor capitals; there is a complementarily between the knowledge capital and other factor capitals; there is a certain degree of substitution between the knowledge capital and other factor capitals; the process of value creation is dynamic. These propositions reveal the particularity of value creation of knowledge capital, and provide a theoretical basis for further research of knowledge capital. Third, the paper analyses the value creation process by using the method of causal mapping and system thinking. Enterprise knowledge capital is the driving factor of value creation, and creates value for the enterprise together with other capital factors. Through causal mapping, the paper can help decision-makers visualize knowledge capital in the economic activities, optimizes the structure of knowledge capital in the enterprise, and improve the efficiency of resource allocation. Forth, from the view of the system and complexity, we build the knowledge capital investment decision model under complete rationality and limited rationality condition. The uncertainty of the environment and task complexity are two major factors in the demand of knowledge capital. Combined with the internal and external environmental change, the paper constructs a theory model of knowledge capital and value creation. From the perspective of evolution economics, it discusses the enterprise’s mental model (dominant logic) and values and believes of decision makers’influence on knowledge capital investment. These factors may lead to the fact that knowledge capital investment is insufficient or excessive.