SUPPORT STAFF AND INTELLECTUAL CAPITAL: EVIDENCE FROM THE UNIVERSITY OF OTAGO GREG GEORGEL A thesis submitted for the degree of Master of Business (Accounting) at the University of Otago, Dunedin, New Zealand ACKNOWLEDGEMENTS I would like to offer my great appreciation to Professor Ralph Adler for his valuable input and constructive criticism which helped guide me towards completing this research to the best of my ability. Ralph, your willingness to give your time and effort towards this project has been much appreciated. I would also like to thank Dr Helen Roberts for teaching and assisting me with the use of STATA. Her generosity in helping me led to a greater understanding of the methodological approaches used in this research and their importance.
I also wish to thank the various contributors from the University of Otago who were willing to donate their own time to this study and allowing access to data which otherwise is confidential. To the staff over in Financial Services, Mr Grant McKenzie, Mr Brian Cunningham, and Mrs Brita Fields, your generosity in collecting the financial information allowed this project to be feasible. And from the Human Resources, Mrs Carolyn King, who collected information on staff numbers; your time and effort was greatly appreciated. Finally, I would like to thank my parents, Kay and Murray, for their support, interest, understanding and encouragement, without this I would be unable to complete this research.
The constant reassurance received from Anita has helped me stay on track through the duration of this research, for this I am grateful. Many thanks have to be given to my friends who have appreciated my work and motivated me to ensure this is the best work of my ability. i ABSTRACT Intellectual capital is quickly becoming a source of competitive advantage. Therefore, it is important to ensure intellectual capital, consisting of human capital, structural capital, and relational capital, is being created and managed in an efficient way.
Previous studies have demonstrated that the interaction between the three forms of capital significantly increase intellectual capital in private sector organisations. This study focuses on what has been argued as the largest producers of intellectual capital, higher education institutions; more specifically this study focuses on the University of Otago. The aim of this study is to determine whether ancillary support staff assist in the creation of intellectual capital at the University of Otago. As the University of Otago is a public organisation, it is important to ensure intellectual capital is managed efficiently to improve organisational performance.
ii TABLE OF CONTENTS 1.1 THE KNOWLEDGE ECONOMY .2 THE KNOWLEDGE ORGANISATION.1 History of Intellectual Capital .2 Defining Intellectual Capital .4 TRIPARTITE DIVISION OF INTELLECTUAL CAPITAL .1 Increase in Support Staff .6 HOW IS INTELLECTUAL CAPITAL CREATED?.7INTELLECTUAL CAPITAL CREATION AT UNIVERSITIES .8 STRUCTURAL CAPITAL MAINTAIN VALUE. RESEARCH MODELS & HYPOTHESES .1 Model 1: Support Staff Create Intellectual Capital .2 Model 2: Support Staff Maintain Intellectual Capital .1 MODEL 1: SUPPORT STAFF CREATE INTELLECTUAL CAPITAL .2 MODEL 2: SUPPORT STAFF MAINTAIN INTELLECTUAL CAPITAL .3 POST-HOC TESTS.1 Primary Support Staff .2 Secondary Support Staff .1 What is this study about?.2 What do the Results suggest? .1 Changing the Role of Support Staff .3 LIMITATIONS AND FUTURE DIRECTIONS. 64 iv LIST OF TABLES Table 1: Definition of Intellectual Capital, taken from Garcia-Alvarez, Mariz-Perez and Alvarez, 2011, p. 12 Table 2: Definition of Structural Capital, taken from Garcia-Alvarez, Mariz-Perez and Alvarez, 2011, p.
16 Table 3: Regression of Revenue on Academic Staff (t-1). 35 Table 4: Summary of change in R-squared. 36 Table 5: Regression of Revenue from Research on Academic Staff (t-1). 37 Table 6: Summary of change in R-squared relating to Research.
37 Table 7: Regression of Revenue from Teaching on Academic Staff (t-1). 38 Table 8: Summary of change in R-squared relating to Teaching. 39 Table 9: Partial Correlation between Revenue and Support Staff. 39 Table 10: Partial Correlation between Revenue from Research and Support Staff involved with Research.
40 Table 11: Partial Correlation between Revenue from Teaching and Support Staff involved with Teaching. 40 Table 12: Summary of change in R-squared relating to Primary Support Staff. 42 Table 13: Partial Correlation between Revenue and Primary Support Staff. 42 Table 14: Summary of change in R-squared relating to Secondary Support Staff.
43 Table 15: Partial Correlation between Revenue and Secondary Support Staff. 44 v LIST OF FIGURES & MODELS Figure 1: Creation of Intellectual Capital. 21 Figure 2: Intellectual Capital creation in Universities. 22 Figure 3: Structural Capital maintain Intellectual Capital.
24 Model 1: Support Staff create Intellectual Capital. 25 Model 2: Support Staff maintain Intellectual Capital. INTRODUCTION As physical capital becomes a common commodity within competing organisations, knowledge and intellectual capital is becoming increasingly important as a form of competitive advantage. It is important to understand how to manage intellectual capital and competitive advantage to ensure a successful future.
As the driving factors of the economy change from physical capital to knowledge capital, organisations need to rethink their systems, structures and processes to make better use of their intellectual capital. This study focuses on the role of support staff in the production of intellectual capital at the University of Otago. Over the past seven years support staff 1 have increased by 18%. With large increases in support staff at the University of Otago, and many other higher education institutions, their value is coming under scrutiny (Phipps, 2011).
It is important to study the role of support staff to determine where they add value. According to Rhoades (1998), support staff create more intellectual capital then what is generally perceived. Support staff play an intricate role as a mechanism to support and satisfy the internal and external challenges (Cabrita and Vaz, 2006). Universities are arguably the largest intellectual and knowledge organisation, not necessarily in terms of organisation size but in knowledge creation and dissemination (Goddard, 1998; Jones, Meadow and Sicilia, 2009).
New Zealand universities are publicly funded, making this study important to ensure the University of Otago is as efficient as possible when employing support staff and managing intellectual efficiently. There are three forms of intellectual capital: human capital, structural capital and relational capital. Human capital is the academic staff of the university because they are the revenue generating professionals. According to Bontis (2001), human 1 Later defined as ancillary support staff.
1 capital (therefore academic staff) are the drivers of intellectual capital creation. Support staff are employed by the University of Otago as a mechanism to assist in optimal intellectual capital and ultimately overall business performance. Existing literature on universities removes relational capital, which encompasses external relationships and the reputation, as an influencing factor on intellectual capital (Sanchez et al., 2009; Fazlagic, 2005; Jones, Meadow & Sicilia, 2009). This research questions whether support staff assist in the creation of intellectual capital in the University of Otago.
Cabrita and Vaz (2006), Bontis (1998) and Agndal and Nilsson (2006) have shown that intellectual capital is created from the interaction between all three forms of capital. They suggest that a lack or inefficiency in one will create lower overall business performance. In the university setting, since relational capital is removed from the equation, the relationship and interaction between support staff and academic staff creates intellectual capital.71) goes as far to say that academic staff are ‘practically useless’ without the assistance from support staff. When analysing the definitions of structural capital, discussed later in this study, there is a debate on the role of support staff.
Camison, Marquis and Devece (2000) believe that structural capital takes into account the knowledge from the past. They believe the role of support staff is to maintain the value of intellectual capital. Jones, Meadow and Sicilia (2009), when measuring intellectual capital at universities, did not include measures of structural capital and only include human capital as the creators of intellectual capital. Without employing structural capital to maintain the value of intellectual capital, then the knowledge created by the human capital would dissipate.
For the University of Otago, once the academic staff generate the knowledge and intellectual capital, the support staff are employed to maintain its value. On the other hand, Bontis (1998) believes that support staff assist in the creation of intellectual capital. 66) says structural capital are the ‘mechanisms and structures… that can help support employees in their quest for 2 optimal intellectual performance.’ The interaction between support staff and academic staff create intellectual capital. Even though academic staff are the main drivers and creators of intellectual capital, support staff can be used to further develop the creation of intellectual capital.
For this study, two models have been created. The first model is to test whether support staff act as a moderating variable in the relationship between academic staff and revenue (a metric used to measure intellectual capital). If support staff are a moderating variable, then there is reasonable support to suggest they interact with academic staff to assist in the creation of intellectual capital. In the second model, revenue is the mediating variable in the relationship between academic staff and support staff.
According to this model, academic staff are employed to generate knowledge, developing intellectual capital, which requires support staff to maintain its value. If there is support for this model then support staff maintain the value of intellectual capital. A total of 12 hypotheses were created to test whether: (1) academic staff are at the forefront of intellectual capital creation, (2) support staff assist in the creation of intellectual capital, and (3) support staff maintain the value of intellectual capital. To determine whether academic staff drove the creation of intellectual capital a time- series-cross-sectional regression was run between changes in revenue and changes in academic staff.
Since support staff could act as a moderating variable, an interaction term was created between support staff and academic staff, which was then added into the original regression explained above. Vuong’s (1989) Model Selection Test was implemented to determine whether the additional variance explained by the interaction term was statistically significant. And finally, first order partial correlation was implemented to determine the relationship between changes in revenue and changes in support staff, while removing the influence of academic staff numbers from both variables. 3 The results indicate the role of support staff is to maintain intellectual capital.
Vuong’s (1989) Model Selection Test suggested the interaction term did not explain significantly more variance in revenue than what was already explained by academic staff alone. The partial correlations between support staff and revenue, although at times not large, were always significant. Therefore, it can be concluded that support staff at the University of Otago are currently employed to maintain intellectual capital. Further analysis of the results has shown revenue has grown faster than support staff, and more specifically revenue from research has grown faster than support staff orientated towards research.
The University of Otago needs to ensure that intellectual capital is efficiently maintained, and so some future research needs to be conducted to determine the optimal ratio of revenue to support staff; this is further discussed later. Another major implication from this study is to focus on the development of intellectual capital. The intricate relationships required between support staff and academic staff may not have formed and developed. But by building and creating an organisation culture focusing on relationship development support staff may better assist in the creation of intellectual capital.
Future research can focus on using the models created as a means to value other aspects of structural capital to determine whether it assists in the creation, and maintenance, of intellectual capital. Literature on how support staff maintain intellectual capital, along with the optimal number of support staff required to maintain intellectual capital, needs to be developed. Future research may also want to focus on the inclusion of a relational capital measure to represent the reputation of the universities, as this could be a contributing factor towards intellectual capital.