**4. Stakeholder model of organizational knowledge assets**

The recent emphasis on knowledge assets as the main driver of organizational value creation has its own historical antecedents. It is imperative that these antecedents be briefly reviewed in order for us to understand why knowledge assets should drive the process of creating organizational value.

Prior to the post industrial period i.e. before the end of World War II, managers thought they operated within a "closed system" that was made up of two main parties- management and employees. Competitors ought to be a third party, but the business environment that preceded the post industrial period was not quite competitive, and so businesses were somewhat insensitive to the activities of competitors. Therefore the only two parties existing within the so called "closed system" of businesses were assumed to be primarily motivated by the need to satisfy their own selfish interests.

The above point was made very clear by Adam's Smith rational economic man concept and his theory of the firm. According to him, while the managers on one hand would seek the maximization of profits for their owners; employees on the other hand sought maximization of their economic gains. However, the selfish tendencies of both parties were only implicitly implied by Elton Mayo's perspective of the human nature and organizational functioning. But it suffices to state that Mayo's social man could only attain psychological uplifting if his social needs at work are satisfied as long as this does not undermine the maximization of profits that the organization pursues. In other words, while the social man is basically

preoccupation of these more recent business models. They only provided many disparate indicators that could be used in tracking down the performance of knowledge assets in organizations. Besides the very tenuous relationship that these business models have with business strategy; they were not unanimous in defining the purpose or role of each of the different knowledge assets in relation to all stakeholders' interests. Given this scenario, what then do these business models portend for the effective management of knowledge assets? First of all, these business models are grossly inadequate in providing the key indicators required for measuring the performance of knowledge assets since they have largely

Secondly, ignoring the interests of some stakeholders may threaten the long term survival of organizations and this is precisely what managers of organizational knowledge assets

Thirdly, without integrating the long term wealth generating capacity of knowledge assets into business strategy it will be impossible to ascertain how they create value for organizations (Andriessen, 2004). In support of this notion, strategy researchers have found out that organizational value creation derives in large part from intangible assets such as organizational learning, grand equity, and reputation (Penrose, 1959; Rumelt, 1984, 1987; Barney, 1986; Spender, 1994; Grant, 1996); and knowledge is arguably the most important

Therefore because the three points highlighted above would not promote the effective management of knowledge assets towards long term organizational competitiveness; I therefore developed a model that recursively links the different knowledge assets to a business strategy that seeks to satisfice stakeholders' interests. This model is referred to as the "stakeholder model of organizational knowledge assets" in this article. The subsequent

The recent emphasis on knowledge assets as the main driver of organizational value creation has its own historical antecedents. It is imperative that these antecedents be briefly reviewed in order for us to understand why knowledge assets should drive the process of

Prior to the post industrial period i.e. before the end of World War II, managers thought they operated within a "closed system" that was made up of two main parties- management and employees. Competitors ought to be a third party, but the business environment that preceded the post industrial period was not quite competitive, and so businesses were somewhat insensitive to the activities of competitors. Therefore the only two parties existing within the so called "closed system" of businesses were assumed to be primarily motivated

The above point was made very clear by Adam's Smith rational economic man concept and his theory of the firm. According to him, while the managers on one hand would seek the maximization of profits for their owners; employees on the other hand sought maximization of their economic gains. However, the selfish tendencies of both parties were only implicitly implied by Elton Mayo's perspective of the human nature and organizational functioning. But it suffices to state that Mayo's social man could only attain psychological uplifting if his social needs at work are satisfied as long as this does not undermine the maximization of profits that the organization pursues. In other words, while the social man is basically

ignored the interests of some organizational stakeholders.

intangible asset that firms possess (Penrose, 1959; Winter, 1988).

**4. Stakeholder model of organizational knowledge assets** 

section provides the basis for the necessity of the model.

by the need to satisfy their own selfish interests.

creating organizational value.

should seek to avoid (Hillman and Kiem, 2001).

concerned with his own selfish social needs, the firm that employs him can only accommodate the satisfaction of these social needs provided its own profits are not tampered with.

Hence the "closed system" that both classical management and human relations theorists espoused before the post industrial period was chiefly concerned with satisfying the selfish interests of just the two parties- management and employees. However, the changing business environment that ushered in the post industrial economy and the subsequent need to view organizations as "open systems" made it expedient for organizations to consider other stakeholders (competitors, suppliers, consumers, government, society e.t.c) of their businesses, apart from management and employees that were hitherto relegated to the background. These stakeholders became increasingly important for business survival. It therefore became imperative for businesses to be socially responsible to these stakeholders.

Consequently, the theoretical landscape of management was altered during the post industrial period by those who thought that businesses could only survive through paying substantial attention to their entire stakeholders. This implies that organizations must be viewed as "open systems" which can affect and be affected by many stakeholders outside its boundaries. Renowned management scholars like Robert Katz, Daniel Kahn, William Scott, James Thompson, Fremont Kast, James Rosenzweig Michael Hannan, John Freeman e.t.c belonged to this management school of thought (Shafritz and Ott, 1996). Due to constraints posed by paper space it will be impossible to discuss some of the unique contributions of these management scholars to the above discussion.

Nevertheless, one debate that typifies the post industrial period and still lingers in mainstream economics and management pertains to the overall motive of businesses that now have to function as "open systems". Are they required to maximize profits given the fact that they need to satisfy a number of stakeholders with diverse interests?

Friedman (2002) posits that profit maximization is the principal responsibility of businesses. According to him, those who proclaim that business must have a "social conscience" are preaching pure and adulterated socialism. For Friedman (2002), profit maximization should take care of all the social needs of business' stake holders.

Freeman (2002), disagrees with the above position. Rather he asserts that managerial capitalism is better served by extending the fiduciary relationship from shareholders to include other stakeholders. Business organizations have stakeholders, that is, groups and individuals who benefit from or are harmed by business activities and whose rights are violated or respected by corporate actions (Freeman, 2002).

Albeit, in spite of the heated debates for or against the profit maximization motive of businesses which this article is less concerned about, it is important to note that for the very first time in management history the moral basis or ethical dimension of managing businesses was brought to the fore. And this occurred during the post industrial period.

During the post industrial period, organizations were seen as "open systems" that made use of only tangible resources- land, machines, labour, material, money, e.t.c.- to satisfy the diverse interests of their stakeholders. However, the dawning of the 21st century ushered the global business community into an era of the knowledge economy in which knowledge -an intangible resource- has replaced the traditional factors of production to become the most strategic resources needed for satisfying the pluralized interests of business stakeholders (Chang and Lee, 2007; Houghton and Sheetan, 2000; Hsu, 2009).

Nations are currently being forced to compete in a global knowledge economy where ideas, information and knowledge have no boundaries, but are instead multiplying at a fast pace

A Stakeholder Model for Managing Knowledge Assets in Organizations 87

stakeholders at a given period of time. Therefore it will be useful to develop new concepts about *human knowledge* that effectively capture all organizational stakeholders. Towards this end, five new concepts pertaining to the different facets of *human knowledge* are presented. These are: (i) Human Knowledge about Product Market **(HKPM)** (ii) Human knowledge about Labour Market **(HKLM)** (iii) Human Knowledge about Financial Market **(HKFM)** (iv) Human knowledge about Technological Process **(HKTP)** (v) Human knowledge about

HKPM is tacit knowledge located within the minds of employees about the behaviour of customers in relation to products or services that the organization offers both its actual and potential markets. It also entails employees possessing some form of tacit knowledge about the behavioural orientation of customers towards competing products or services. Consequently, HKPM is basically directed to two organizational stakeholders. These are customers and competitors. However, its ultimate goal is to utilize the entire HKPM to

HKLM corresponds to tacit knowledge domiciled within employees' minds about the nature of both internal and external labour markets in terms of the various skills, values, and competences required for organizational performance. HKLM directs attention to the sources of rare talents required to drive organizational value; as well as the utilization and

HKFM pertains to tacit knowledge resident within human minds about the most viable sources and applications of the firm's financial resources for increasing shareholders' wealth. It also has to do with knowledge about the impact of exigencies occurring within the financial markets on shareholders' wealth and credit worthiness of the organization. Hence

HKTP addresses tacit knowledge about the various inputs, machines, equipment, etc., that is associated with the firm's process of production; as well as other alternatives to this production process. Suppliers of raw materials, valuable inventions and machines are the

HKEE borders on tacit knowledge about the host communities, business laws, as well as the political climate and social values of the country in which business is conducted. HKEE

In terms of quantity of human knowledge available to organizations, two key indicators can easily be identified. These are: organizational tenure of employees and number of employees focusing on all the differentiated forms of human knowledge. It is believed that the longer the employees remain in their organizations, the deeper would be the level of their organizational learning; which ultimately impacts positively on the ability of employees to generate new human knowledge. Also, the greater the numerical strength of employees that specialize in an area of human knowledge, the more likelihood of generating

With regards to the quality of human knowledge available to the organization per time, two key indicators were identified. These are: number of trainings employees have undergone and the number of times employees in the five differentiated areas of human knowledge

The performance of the five types of human knowledge depends on both the quality and quantity of tacit knowledge that is resident in human minds about all organizational stakeholders at a specified period in time within organizations. Therefore, in order to identify the key indicators required for the measurement of their performance, these two

have been rewarded for generating a novel idea within a specific period of time.

focuses on two primary stakeholders. These are government and host communities.

HKFM focuses on satisficing the needs of shareholders and creditors.

main stakeholders that HKTP is concerned with.

higher levels of human knowledge in this specialized area.

parameters must be taken into account.

External Environment **(HKEE).**

satisfice the interests of customers.

development of such talents.

(Petty and Guthrie, 2000). In this knowledge economy, information and knowledge are seen as the principal drivers of value creation and competitive advantage, generating the increasingly critical intangible assets of contemporary organizations. Therefore making the management of knowledge assets very imperative (Cuganesan, 2005).

It is now commonly believed that building better relations with primary stakeholders like employees, customers, suppliers, and communities (Freeman, 1984), could lead to increased shareholders' wealth through the accumulation of knowledge assets that can be sources of competitive advantage (Hillman and Kiem, 2001; Saenz and Gomez, 2008). These knowledge assets in turn lead to a positive relationship between stakeholder management and shareholder value, wherein effective stakeholder management leads to improved financial performance (Hillman and Kiem, 2001; Saenz and Gomez, 2008).

Going by these findings, how can synchronization of the different knowledge assets (i.e. structural knowledge, human knowledge and relational knowledge) towards the satisficing of stakeholders' interests for organizational value creation be achieved? In this article, it is believed that this could be achieved by the development of a business strategy that links the long term wealth generating capacity of highly differentiated and integrated forms of these knowledge assets to the ultimate goal of meeting the diverse interests of stakeholders. This is depicted in the next section. This section shall differentiate and integrate the various facets of the stakeholder model. There after some light will be shed on the theoretical and practical managerial implications of the model.
