Value Creation, Reporting, and Signaling for Human Capital and Human Assets : Building the Foundation for a Multi-Disciplinary, Multi-Level Theory

Tables 1.1 Possible criteria of human potential 1.2 Demonstration of a possible assessment of human potential, based on the example of the criterion "possibilities of personnel development" 2.1 Identified components of IC 2.2 Selected examples of important factors influencing (sustainable) competitive advantage 2.3 Intertwining concepts-overlaps between IC, HRM, OL, and KM in the literature 2.4 The main elements of knowledge management and their respective meanings 2.5 Conclusions about the measurement of KM, OL, and (S)HRM based on literature review 2.6 Examples from literature about difficulties and insufficiencies of measurement and evaluation of KM, OL, and HRM 3.1 Descriptive statistics and correlations 3.2 Results of regression analyses 4.1 Similarities and differences in conceptualization of human and social capital 5.1 The managerial performance model's parameters 5.2 The company value model's parameters 5.3 ERGMs main component estimations 5.4 Managerial performance model GoF selection-structural parameters selection 5.5 Managerial performance model GoF selection-firm attribute parameters 5.6 Company value model GoF-structural parameters 5.7 Company value model GoF-firm attribute parameters xii Tables 6.1 Social statement standardization efforts: key organizations and documents 6.2 Key performance indicators 6.3 The results of the comparison between the intangibles ratio and the income relating to these assets 7.1 Selected studies on human capital and intellectual capital disclosure 7.2 The Weber scheme 7.3 Descriptive statistics of human capital disclosure 7.4 Extent of human capital indicators 7.5 Human capital quality analysis 7.6 Interactions between human capital items and quality dimensions ## Foreword Leif Edvinsson ## Perspectives on Human Capital "Human Capital is our most important asset" is a common phrase, among others, in executive speeches and annual reports. However, this might need rephrasing or a deeper understanding of other perspectives. This impressive book with all its references adds to this deeper understanding of human capital (HC). HC is a multidimensional, multilevel, interdependent, and very complex issue. To start with, capital means "head" in Latin. So HC would then mean "human head." Is it the cranium or its content processing that is HC? Arago 21 is the name given to a most important discovery, which dates back about 450,000 years, the cranium of our ancestors. In the small village of Tautavel, in the Roussillon region south of France, there is a cave, where one of the oldest archaeological remains in Europe, homo erectus tautavelensis, was discovered, and then named Arago 21. Perhaps the dimensions of the head and brain are the most intriguing, with our recent research discoveries in neuroscience. Just think of the discoveries of mirroring neurons as critical brain flow for learning. HC might carry the intelligence for knowing as well as a capability to renew. This perspective might be the most intriguing. The term "human" capital implies that it is different from "physical" capital. In the above quote, HC is regarded as an asset in the accounting perspective. It is also regarded as a soft asset, so accounting rules might be less apt. Consider the challenge of having a vast number of employees, or citizens. Does this automatically imply or create a greater HC? Then think of Singapore or WhatsApp with a relatively limited amount of HC but a lot of value creation, as financial capital (FC)! xiv Foreword In Japan and Asia, the term HC often relates to intangible values. Should HC be regarded as a liability or a "renting of talent"? This perspective is based on the idea that HC is organic, potential, renewable, and also volatile. Such a perspective might stimulate us to think in terms of how to nourish and realize human potential, This perspective might lead to the longitude dimension of HC. This is the third dimension of management, beyond altitude and latitude. Something that I addressed in a book on knowledge navigation, see www.corporatelongitude.com. The value dimension of HC might be outside itself. It is found more and more in the networking capability, as an externalized variable. Today, this is often referred to as the relational capital. This is visible in the new, so-called networking economy or even more visible in the App economy. This new phenomenon, according to the European Commission in a recent report on App ecology, is to grow in Europe from close to 2 million jobs in 2013 to around 5 million jobs in 2018! And then look at WhatsApp, with around 50 employees and more than 500 million daily active users, as of April 26, 2014 . . . (and recently its stock was valued at 16 billion USD by Facebook). Are those traditional employment jobs, or networked contracting jobs more or less outside the traditional statistical employment codification? If so, what about the distortion effects on unemployment statistics especially of youngsters? Many of those dimensions are integrated in the concept of intellectual capital (IC). I have been pioneering this subject for more than 20 years (see more in Journal of Intellectual Capital 14, no. 1 (2013)). IC actually means future earnings capabilities, as well as derived insights of head value. And, to simplify, it is HC combined or multiplied by structural capital (SC), which involves relational capital (RC) as well as organizational capital (OC) systems. WhatsApp might be an intriguing illustration at an enterprise level. To address the interdependencies of HC, Professor Jay Forrester at MIT started to develop systems dynamics simulations in the 1970s, both for enterprises and for nations. In early 2000, this was adopted and refined into a very successful approach for enterprises in Germany. The Ministerium fur Wirtschaft initiated and supported a nationwide program in Germany. For more details, see www.akwissensbilanz.org. In Germany, it is called wissenskapital, or knowledge capital. For more details on the system dynamics approach and application in several EU countries, see www.incas-europe.org. However, this is also applicable at the macro level. Then it is called national intellectual capital (NIC). Emerging research is now progressing with interesting databases and studies. See www.NIC40.org Countries like Singapore, United States, and the Nordic countries are in the top league. A call for chapters challenged potential authors to consider a unifying, multilevel theory of HC arriving from different academic traditions and perspectives. The authors were invited to contribute to the book based on approved proposals. Each complete chapter received external, blind review in addition to the editor review. The author thanks Kelly Anklam for her assistance in editing this introduction, and also wishes to thank the Frederick E. Baer Professorship in Business and the Philip J. and Elizabeth Hendrickson Professorship in Business at UW-Green Bay for partial financial support. Finally, the author hopes that the discussion of creating a unifying, multilevel theory of HC will continue based on the chapters presented in this volume. The issues discussed in this book are the building blocks needed for an interdisciplinary theoretical framework that will allow for value creation and reporting by the most important assets organizations have, its human capital. Value Creation, Reporting, and Signaling for Human Capital and Human Assets provides a platform for a broad scope of theory building discussion regarding human capital and assets and, more importantly, by encouraging a multidisciplinary fusion between diverse disciplines. The content of the book is formed around three major issues grounded in the praxis of human capital and assets while providing for a triangulation opportunity to analyze human capital and assets issues from diverse academic traditions, perspectives, and theories. The three issues are: definitions, origins; value creation; and reporting, signaling. This book is focused on the accounting, human resource, strategic, social, behavioral, and systems-networks perspectives. Presently, human capital and assets are measured and managed by different financial and economic indicators based on currency as a unifying economic measure which communicates only the constraints of present economic resource scarcity. But, assuming continuous economic growth without including the constraints on substitution among production factors, resulting from including energy and environment is not sustainable for the long-term. Breaking the silos between the traditional academic perspectives the book presents new frameworks and definitions for human capital and proposes a new unifying research paradigm Front Matter....Pages i-xvii Homo Sustainabiliticus and the “New Gold”....Pages 1-16 Front Matter....Pages 17-17 A Measurement Approach to Human Potential in the Context of a Sustainable Corporate Management....Pages 19-47 Links and Evaluation Possibilities of Intangible Value Creation in Organizations: The Importance of Human Resources Management, Knowledge Management, Organizational Learning, and Intellectual Capital (Management)....Pages 49-86 Human and Relational Capital as a Growth Factor: The Case of Korean New Technology-Based Venture....Pages 87-112 Bridging Human Capital and Social Capital Theories....Pages 113-140 Front Matter....Pages 141-141 A Social Network Analysis of Managerial Migrations: The Case of Large Companies in the United Kingdom....Pages 143-178 Intangible Assets: Current Requirements, Social Statements, Integrated Reporting, and New Models....Pages 179-211 A Comparative Analysis of Human Capital Disclosure in Annual Reports and Sustainability Reports....Pages 213-241 Back Matter....Pages 243-263