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The Relationship between Human Capital and Enterprising’ Public Services: A Critical Review of the Literature and Proposals for Further Research Refereed Paper

Stacey Bushfield Department of Management, University of Glasgow

Keywords: Public Sector; Human Capital; Intellectual Capital; Public Value; Innovation

Abstract Contemporary public policy advocates a shift in focus from short-term results and efficiency towards the broader notions of client satisfaction and public value . Public value embraces all aspects of government performance and is thought to be enhanced when innovative public services work collaboratively, dynamically adapt to their complex environments and develop new solutions to the problems of ever- increasing expectations. To create such innovative public services, organisations must have the human capabilities and capacities to develop new ways of working and new models of management. Consequently, the Scottish public sector has invested heavily in its human capital through training and development, leadership programmes, and increased spending on doctors and teachers among others. However, recent reports from the Auditor General have suggested that a good deal of this investment is based on an act of faith: there is a great deal of uncertainty regarding exactly how much has been spent and whether it has led to tangible or intangible benefits for clients or public value.

In this paper, which is based on the first stage of a project funded by the Scottish Government and Economic and Social Science Research Council PhD Scheme 1, we critically review the intellectual capital, human capital, strategic HRM, and public policy literature to develop a model linking human capital investment to innovation and public value. The core of our argument is that although investment in individuals might be a necessary condition it is rarely a sufficient condition for intellectual capital development and innovation in management and service delivery. Drawing on previous studies within the private sector, we identify the need for a rigorous and systematic evaluation of the impact of human capital investment on public service outcomes, especially since it is heavily dependent on complementary investments in social and organisational capital to become effective. This paper also outlines the first stage of a longitudinal study aimed at developing specific causal models of human capital management and its effects on intellectual capital development, innovation and improved public service delivery in two strategically important areas of public services reform in Scotland - the Scottish National Health Service and Scottish Schools Systems.

It is anticipated that this study will provide policy makers with (i) a better basis for prediction of what is likely to result from particular types of human capital investments, (ii) greater understanding of the relationship among human capital and other types of capital investment, including social and organisational capital, and (iii) more effective allocation of future resources. The project will also contribute to an under-researched field of human capital effectiveness by showing how causal modelling can be used to assess value creation and value capture, and predict the impact of human capital and other forms of investment on intellectual capital development and, ultimately, public value.

Abbreviations : Intellectual Capital = IC Human Capital = HC

1 1: Introduction and Background

The past thirty years has been a period of radical change for public sector services in the UK. Successive governments have restructured and reformed the way they are managed and delivered (Flynn 2002; Hebson et al. 2003). The 1980’s and 90s saw the promotion of new public management (NPM), emphasising short-term performance and the achievement of predetermined targets (Wall 2005). More recently, public policy has advocated a shift in focus towards the broader notions of client satisfaction and public value . The second of these notions has recently become influential within the UK government. Public value is considered to embrace all aspects of government performance including: outcomes, means of delivery, trust and legitimacy (Kelly et al. 2000). It is enhanced when innovative public services work collaboratively, dynamically adapt to their complex environments and develop new solutions to the problems of ever-increasing expectations (Horner et al. 2006; Moore 1994; 1995; O’Flynn 2007; Pinnock 2006). Thus, it can be related to the concept of dynamic capabilities, which refers to an organisation’s ability to integrate, build, reconfigure and renew its resources and capabilities in response to rapidly changing environments (Teece et al . 1997; Wang and Ahmed 2007).

Moreover, it is widely acknowledged that an organisation’s ability to innovate and create value is strongly related to its intellectual capital (IC) (Subramaniam and Youndt 2005). In the public sector context, intellectual capital has been defined as an organisation’s ability to use its knowledge resources for organisational learning, innovation and improved service delivery (Bontis 2002; Kelly 2004). Given that stocks and flows of human capital (employees’ genetic inheritances, education, knowledge, skills and attitudes) are considered to be a primary driver of stock and flows of intellectual capital (Bontis and Fitz-enz 2002; Lepak and Snell 1999; 2002; Nerdrum and Erikson 2007), it can be argued that to create public value, organisations must have the human capabilities and capacities to develop new ways of working and new models of management. This assertion is supported by a well-established literature on the importance of human capital to organisational performance, written from the perspective of educationalists, economists, sociologists, psychologists and human resource development specialists (Carmeli 2004; O’Connor et al . 2007; Wolf 2003).

In 1999, after almost three hundred years of a shared British government, the devolved Scottish Government was formed. This new administration assumed responsibility for a number of local policy issues including: health, education, local government, justice, rural affairs, and transport. The UK government retained responsibility for employment, economic policy, taxation, benefits and pensions, foreign affairs, and defence. Since its inception, the Scottish Government has invested significantly in the human capital stocks and flows of the public sector through various training and development initiatives, leadership programmes, and increased spending on pay and rewards for doctors and teachers among others (Scottish Executive 2006). However, a recent report by the Auditor General (2007) suggested that a good deal of this investment has been based on the human resource assumption that investing in attracting, motivating, developing and retaining talented individuals pays off directly in terms of more effective organisational performance. As yet, this human resource assumption is unsupported by evidence in the Scottish

2 Government; initiatives have not been systematically evaluated. There is a great deal of uncertainty regarding exactly how much has been spent and whether it has led to tangible or intangible benefits for clients or to public value (Bennington 2006). Subsequently, recent policy discussions among Scottish public sector chief executives have called for an examination of the role of human capital in public sector reform (Government Forum II, Airth Castle, December 7-8th 2006).

Much of the existing work on human capital has been carried out in the private sector. The growth of a knowledge economy has led to both practitioner and academic interest in the management and measurement of intangible assets. While there is a strong case for accepting the general hypothesis that investing in human resources will pay dividends in terms of client satisfaction and organisational value (public value in a public services context), much work remains to be done in showing how investment in individual human capital feeds forward into intellectual capital and organisational learning through value creation and value capture in specific contexts (Lepak, Smith and Taylor 2007; Martin, Pate and Beaumont 2001). Moreover, the relationship between human capital and organisational value creation is mediated by an organisation’s stock and flow of intellectual capital, and so is subject to a number of other causal variables, including social and organisational capital (Bontis 2007).

Using a systematic process this paper critically reviews 110 academic articles from the existent human capital and public value literatures. It aims to identify the distinct areas and key conceptual models within the field that offer an insight into the complex relationship between investment in human capital and the creation of public value within public sector organisations. Section 2 discusses the methodology used to identify, categorise and select applicable articles. Following this, section 3 identifies the key themes within the human capital literature; critically reviewing the key conceptualisations, while section 4 evaluates the existing measures of human capital. Section 5 then overviews the public value literature, specifically examining the existing management and measurement models. Section 6 concludes by considering the contribution and limitations of this review. In addition, it discusses the implications for future development of the field and proposes that an empirical study that investigates the role of human capital in public sector reform and consequent value creation is required.

2: Method - A Systematic Review

2.1: Approach Two main areas of literature are particularly relevant for this review: human capital and public value. Both topics have strong practitioner foundations and are relatively underdeveloped in terms of academic research. Nonetheless, combining them provides a substantial body of literature, drawing on several academic disciplines including: human resource development, accounting, finance, economics, strategy, psychology, and politics (Nazari and Herremans 2007; Smith 2004). To adequately review such a vast and varied literature a researcher must find a balance between breadth and depth (Saunders et al. 2003). Thus, to complete this review we followed the systematic review approach as prescribed by Tranfield et al . (2003). This approach seeks to minimise bias in the review by being both systematic and explicit about how the review has been conducted (Petticrew and Roberts, 2006). This involves using a stepwise approach to determine relevant keywords and search

3 string as well as deploying a specified methodology to exclude articles based on a prior determined relevance and quality criteria. The specific methodology is now discussed.

2.2: Search Criteria The first stage of the review was to identify relevant literature. Initially, this was done by conducting keyword searches in six relevant academic databases including: EBSCO; Emerald Fulltext; Emerald Management Reviews; Blackwell Synergy; ISI Web of Knowledge; and Elsevier Science Direct - encompassing articles published between 2000 and 2008. Keywords were entered in various combinations and included: Capital; Intellectual; Human; Measure*; Organisational; Public; Resource*; Sector; Service*; Social; and Value. To ensure thorough coverage, manual reviews of three additional sources were conducted. Firstly, the 2000-2008 volumes of the Academy of Management Review, Academy of Management Journal, Strategic Management Journal and the Journal of Management Studies were reviewed as these journals are often cited as high quality within management literature (see, for example, Serenko and Bontis 2004). Secondly, specialised journals, beyond the scope of human resources, such as the ‘Journal of Intellectual Capital’ and the ‘Journal of Knowledge Management’ were reviewed. Thirdly, principal policy documents and government reports were gathered from local and national policy organisations. Following these initial searches, the references of key papers were examined to identify major authors and theories within the field. Finally, to decrease the risk of publication bias, the personal websites of key authors of the research were examined for additional material.

2.3: Selection Criteria Relevance The product of these searches was a large volume of articles (920 articles), which was subsequently categorised and condensed according to relevance (Saunders et al. 2003). This review is focused on literature representing human capital at the level of the organisation and public value as defined by Kelly et al . (2002): “Public value refers to the value created by government through services, laws regulation and other actions”. Thus, at a general level, studies eligible for review were those explicitly integrating theory and concepts from both human capital and public value . At a more specific level, some studies were explicitly positioned to the measurement of an organisation’s human capital or focused on the relationship between innovative public services and public value creation. Further articles discussed the broader notion of intellectual capital and its impact on innovation and organisational performance.

Articles excluded from the review included those with a focus on human capital at the level of the economy or those that considered the impact of a country’s education system on its national human capital. Similarly, public value has been studied in a number of contexts. However, this review focuses on how the concept relates to the management of public sector organisations, thus studies outside this remit where removed. After reviewing titles and abstracts in relation to the objectives of the study, and removing overlaps from the sources 194 articles where identified for full text review. To compensate for the mechanistic approach of a systematic review 32 additional articles were manually included in the review, based on recommendations from academics within the authors’ expert review panel. The

4 full text review resulted in 55 articles being excluded on the grounds of lacking relevance to the topic. This yielded 171 articles for the quality appraisal.

Quality As this research adopts a ‘realist synthesis’ approach, it was not possible to review articles based on quality criteria before the synthesis started. In line with Pawson et al. (2004) quality was instead established in relation to synthesised elements of the reviewed articles. Thus, a paper with a highly original conceptual contribution may be included in the review even if the empirical work suffered from quality problems. Moreover, due to the relative nascence of the fields in terms of academic research, conceptual as well as empirical papers were included for review. One particular issue evident in past reviews of management literature (Marr and Moustaghfir 2005; Petty and Guthrie 2000) is deciding what literature constitutes academic research. This review has used three factors in discriminating against what literature to use revolving around the journal in which the work was published, the nature of the empirical research, if any, and the perceived quality of the Journal. Another guide used was the Journal Quality List (Harzing 2007). Moreover, selection was made by looking at the journal remit and intended audience. Journals intended for practitioner-based audiences as apposed to an academic focus were examined and referenced as appropriate, although they were not subject to in-depth critical assessment and therefore do not form part of the main discussion. During the synthesis process, 61 articles that had passed the relevance test did not meet the quality criteria. The result was a total number of 110 articles for full text review (see appendix).

2.4: Strengths and Weaknesses of Review Examining human capital in terms of performance and public value creation generates a multidimensional field of research that attracts authors from different disciplines who introduce different theoretical frameworks, different levels of analysis and different methodological traditions (Nazari and Herremans 2007; Smith 2004). By using a number of databases, key journals and established references the review was able to consider those authors that have published across disciplines in recognised ‘leading’ journals as well as those who have been cited by these authors. However, the comprehensive nature of the review - despite the relatively large numbers included - can be questioned. The key words used were limiting as some authors; for instance, those studying knowledge management may not use the words human, capital, or intellectual within their papers. Yet, their research may well be relevant to theory development within the field. Furthermore, searches were limited to articles published between 2000 and 2008. Thus, to minimise the risk of omitting relevant papers prevalent references within existing papers were also examined.

5 3: Human Capital

This section discusses the various theoretical propositions that inform the human capital literature. Figure 1 illustrates the four main bodies of literature that shape our understanding of human capital development.

ECONOMIC RESOURCE THEORY BASED VIEW

HUMAN CAPITAL

INTELLECTUAL DYNAMIC CAPITAL CAPABILITIES

Figure 1 - Human Capital Theory: The Fundamental Propositions

3.1: Theoretical Overview There is an extensive literature on the strategic importance of human capital in improving performance and creating value (Hatch and Dyer 2004; Kuvischana 2006; Nerdrum and Erikson 2001; Petty and Guthrie 2000). Human capital is generally understood to consist of the individual capabilities, knowledge, skills, attitudes and experience of the company’s employees and managers, as they are relevant to the task at hand, as well as the capacity to add to this reservoir of knowledge, skills, and experience through individual learning (Dess and Picken 1999; Subramaniam and Youndt 2005). The key point of our proposition is that human capital is considered a major source of innovation and strategic renewal within organisations (Bontis and Fit- enz 2002; Lawson and Samson 2001; Subramaniam and Youndt 2005). This assertion has strong a theoretical background with various theories all testifying to the importance of strategically managing human capital (Carmeli 2004; Galunic and Anderson 2000; Luthans and Youssef 2004). These include: human capital theory, the resource based view, strategic human resource management and organisational learning models (Barney 1991; Becker 1993; Becker and Gerhart 1996; Bontis et al . 2002; Hitt et al . 2001; Huselid 1995; Pfeffer 1994; Martin, Pate and Beaumont 2001).

Moreover, stocks and flows of human capital are perceived to be a fundamental driver of stocks and flows of intellectual capital (Lepak and Snell 1999; 2002). Intellectual capital refers to the total knowledge resources that an organisation can use to create sustainable value (Bontis and Fitz-enz 2002; Nahapiet and Ghosal 1998; Youndt et al . 2004). Over the past decade, the rising importance of knowledge and the knowledge-based economy has meant that intellectual capital has gained prominence with practitioners and academics (Petty and Guthrie 2000). As a result, several academic studies have sought to investigate the antecedents and outcomes of intellectual capital development. There is some debate among commentators as

6 regards to the exact nature of intellectual capital; yet most known authors agree that it has three antecedent elements: human, organisational (structural), and social (relational) capital (Namasivayam and Denizci 2006; Subramaniam and Youndt 2005). It is the interaction between these three elements that creates long-term organisational success. Thus, recruiting and retaining the best employees is only part of the equation, organisations must also leverage the skills and capabilities of its employees by encouraging individual and organisational learning and creating a supportive environment, in which knowledge can be created, shared and applied (Wright et al 2001). The background to human capital theory is now examined.

3.2: The Evolution of HC Theory The term human capital (HC) is relatively new; however, the philosophy behind it dates back to William Petty, the seventeenth century economist, who argued for the inclusion of the “value of workers” in accounting for wealth for actuarial purposes (Nafukho, Hairston and Brooks, 2004; Nerdrum and Erikson 2001). A century later, in his seminal text ‘ The W ealth of Nations’ Adam Smith examined the importance of employees’ knowledge and skills on the production process and the quality of output. He argued that wages should be determined by the efforts in time, energy and money spent by workers to gain the skills required for their working tasks (Sweetland 1996). Education and learning should be considered as “investments” in human beings (Nerdrum and Erikson 2001; Zula and Chermack 2007). These principles together with Irving Fisher’s (1906) capital theory, which proposed that all types of stocks could be conceptualised as capital when producing services, formed the basis of the early HC theory that emerged in the second half of the twentieth century.

Since the 1960’s, HC theory has developed considerably; three authors who have particularly influenced this development are Theodore W. Schultz, Jacob Mincer, and Gary Becker (Lepak and Snell 1999). They conceptualised HC as an independent capital category comparable to conventional capital with respect to economic and productive characteristics (Zula and Chermack 2007). Schultz (1961) studied HC from a macro-economic perspective: seeking to clarify the investment process and the incentives to invest in HC, while Mincer (1970) and Becker (1964) took a micro-economic approach which focused on the effect of HC on the level and distribution of earnings. Building on this early work contemporary HC theory proposes that the cost of labour should be measured relative to the return on investment (that is, future productivity) for developing employees’ skills and knowledge through education and training (Nerdrum and Erikson 2001; Lepak and Snell 1999: 2002). Moreover, it asserts that employees own their own HC and invest in themselves through formal education and productive knowledge in the hope of increasing their capacity to achieve greater productivity and higher wages (Zula and Chermack 2007).

A central theme within HC research is the assessment of returns from investment in different types of HC (Nafukho, Hairston and Brooks, 2004; Zula and Chermack 2007). According to Becker (1993), there are three types of training or knowledge investment, which are directly related to HC accumulation. These three types of training or knowledge are:

7 (1) On-the-Job Training: “learning new skills and perfecting old ones while on the job” (p. 31). This concept can be broken down into two types of training; general training (those skills which are useful in many firms); and specific training (training that relates only to the current organisation and would not be useful in other firms); (2) Schooling: “an institution specializing in the production of training, as distinct from a firm that offers training in conjunction with the production of goods” (p. 51); and (3) Other Knowledge: any other information that a person obtains to increase their command of their economic situation.

Although employees own HC, it is assumed that organisations will seek to protect themselves from the transfer or loss of their HC investments to competitors through careful management of training and development initiatives. Thus, human resource development (HRD) practitioners must evaluate how best to invest in individual employees and determine the impact of education and training interventions (Zula and Chermack 2007).

3.4: The Resourced Based View The resource-based view proposes that resources that are simultaneously valuable, rare, imperfectly imitable and non-substitutable are a firm’s main source of sustainable competitive advantage (Barney 1991). It draws on the Ricardian approach to the determination of economic rent and the view of the firm as a collection of capabilities as described by Edith Penrose and George Richardson (Barney 1991; Makadok 2001). Valuable resources generate rents, which are then ‘captured’ by the organisation (Carmeli 2004; Wang and Ahmed 2007). Economic rent, described by some as the ‘value added’, is what firms earn over and above the cost of the capital employed in their business (Hamel and Prahalad 1994). Under this theory, capital employed encompasses both tangible (such as buildings) and intangible resources (such as reputation or know-how) (Bowman and Swart 2007). Moreover, resources can be built or bought; thus, strategic human resource theorist’s propose that investments in employees are important assets in shaping organisational success (Carmeli 2004; Becker and Gerhart 1996; Boxall 1996; Carmeli 2004; Snell et al 1996; Stiles and Kulvisaechana 2003).

Nevertheless, the resource-based framework stresses that only organisation- specific HC is likely to generate organisational value, since it is those assets that are likely to inimitable and rare (Coff, 1997; Galunic and Anderson 2000). Individual expertise and its associated HC may or may not stay within organisations and can change depending on the hiring, mobility, and turnover of employees (Hatch and Dyer 2004; Stovel, Meaghan and Bontis 2002; Subramaniam and Youndt 2005; Wezel et al. 2006). Thus, employers are recommended to invest in organisational-specific training and support rather than more generalised initiatives (Lepak and Snell 1999). However, referring to the psychological contract literature, Galunic and Anderson (2000) propose that more generalised investments in HC are worthwhile as they improve employee morale and commitment which in turn improves their performance. Similarly, Martin, Pate and Beaumont (2001), in their study of company-based education programmes, found that company-based education programmes can promote the transfer of knowledge and create communal knowledge that can be used to foster innovation within the organisation.

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There are two further limitations of the resource-based approach. Firstly, it assumes that the boundaries of resources are easily identifiable, and secondly, that there are no tensions or struggles of ownership between actors in the process (Bowman and Swart 2007). Yet, within knowledge intensive industries resource ownership is often ambiguous (Kay 2004). Bowman and Swart (2007) refer to the notion of embedded capital, which exists when there is ambiguity surrounding the rent creating contributions of HC. Embedded capital is thought to evolve over time and encompass a complex combination of human, organisational, and social capital – an amalgamation that resists separation into the constitute parts ( ibid ). Therefore, value capture can be conceptualised as a bargaining process between the organisation and its various stakeholders (Lepak, Smith and Taylor 2007). In some instances customers, employees or suppliers will have greater bargaining power. For example, in knowledge intensive industries (such as law, medicine, or financial services) or creative industries (such as music or movie production) it is difficult for employees to explain how they do what they do and as a result it is difficult for employers to replicate it, thus giving employees greater value capture (Hitt et al . 2001).

3.5: Dynamic Capabilities The resource-based view has recently been extended to reflect dynamic markets (Teece et al . 1997). The dynamic capabilities framework attempts to explain how and why certain organisations have competitive advantage in situations of rapid and unpredictable change by adopting a process approach (Eisenhardt and Martin 2000). An organisation’s capabilities refer to its ability to deploy resources, usually in combination, and encapsulate both explicit processes and those tacit elements (such as know-how and leadership) embedded in the processes (Makadok 2001). Hence, the concept of dynamic capabilities encompasses an organisation’s ability to develop new resources and resource configurations in response to the changing business environment (Teece et al . 1997). It is presumed that by responding quickly to external changes and being innovative in its processes an organisation can make better use of its resources and create sustainable competitive advantage (Wang and Ahmed 2007).

The dynamic capabilities literature is relatively new and there is debate as to the exact nature of its meanings and conclusions; however, from the literature, it is apparent that dynamic capabilities refer to collective activity that no one individual can embody (Bitar 2004; Helfat and Peteraf 2003; Winter 2003). Dynamic capabilities encompass technological, organisational, and managerial (collective and social) processes that typically must be built and nurtured, as they cannot be bought (ibid ). Hence, the manipulation of knowledge resources, in particular, is believed to be especially crucial in managing dynamic markets (Eisenhardt and Martin 2000; Winter 2003).

3.6: Intellectual Capital There is widespread agreement that the nature of economic activity has changed dramatically in the last 30 years (Bontis and Fit-enz 2002; Carlaw et al. 2006; Lev 2001; O’Regan et al . 2001; Pedrini 2007). The rapidly changing dynamics of this ‘new economy’ mean that it is increasingly recognised that the ability of organisations to achieve sustainable competitive advantages derives primarily from their intangible resources, that is, their intellectual capital (Bontis, 1999; Carmeli and

9 Schaubroeck 2005; Lynn 2000; O’Regan et al . 2001; Petty and Guthrie 2000). Despite this recognition, as a field of academic research intellectual capital is again relatively new. Existing theory is set firmly within practice and there is a need for more empirical research that investigates the true nature of the concept (Bontis and Nikitopoulos, 2001; O’Regan et al . 2001; Roos et al. 1997). At its most basic, intellectual capital (IC) can be described as the total knowledge resources of an organisation, which it can use to create value (Bontis 2001; Nahapiet and Ghoshal 1998; Youndt et al. 2004). This definition allows for a wide range of interpretations and there is some debate among commentators regarding the exact nature of intellectual capital.

Table 1: Selected Definitions of Intellectual Capital (Intangible Assets) Author(s) Date Definitions Gratton and 2003 Human Capital consists of the Intellectual, Social and Ghoshal Emotional Capitals of Individuals and Organisations. Intellectual capital refers to fundamental individual attributes such as cognitive complexity and the capacity to learn, together with the tacit and explicit knowledge, skills and expertise an individual builds over time. Johnson 2002 A firms intellectual assets encompassing human, structural and relational capital. As all innovation comes from the intellect or knowledge set of human beings it is apparent that all intellectual capital originates first from human capital OECD 2000 Economic value generated by two categories of intangible assets of a company: organisational capital and human capital Nonaka et al. 2000 Firm specific resources that are indispensable to create value for the firm Stewart 1998 The intellectual material – knowledge, information, intellectual property, experience – that can be put to use to create wealth Lev 2001 Intangible assets are non-physical sources of value (claims for future benefits) generated by innovation (discovery), unique organisational designs, or human resource practices Kaplan and Norton 2004 Intangible assets consist of human capital, i.e. skills, talent, and knowledge; information capital, i.e. databases, information systems, and technology infrastructure; and organisational capital, i.e. culture, leadership style, ability to share knowledge Subramaniam and 2005 The sum of all knowledge firms use for competitive advantage – Youndt three prominent factors human, organisational and social capital. Marr and Schiuma 2001 The group of knowledge assets that are attributed to an organisation and most significantly contribute to an improved competitive position of this organisation by adding value to the defined key stakeholders. It includes human assets, relationship assets, culture assets, practices and routines, intellectual property assets, and physical assets

At one extreme is the notion that that IC is part of HC, that is, HC subsumes IC, and also includes within it social capital and emotional capital (see, for example, Gratton and Ghoshal 2003). At the other end of the spectrum is the suggestion that IC is the overarching concept, which includes HC as one of its key dimensions (see, for example, Andereou et al. 2007; Mayo 2000, Nazari and Herremans 2007; Stewart 1998). The majority of commentators favour the latter interpretation, differing only

10 by the emphasis they place on different components (OECD 1999; Nahapiet and Ghoshal 1998; Johanson et al. 2001; Petty and Guthrie 2000; Wright et al . 2001) (see table 1). Past research has identified three prominent aspects of IC: human (the knowledge skills and abilities of people), organisational (structural - the processes and routines within the firm), and social (relational - the valuable relationships among people) capital (Booth, A. L., Booth, A. L., Bryan, M. L., and Bryan, M. L. 2005. Testing Some Predictions of Human Capital Theory: Edvinsson and Malon 1997; Namasivayam and Denizci 2006; Nazari and Herrmans 2007; Subramaniam and Youndt 2005).

Thus, the relationship between HC and organisational value creation is mediated by an organisation’s stock and flow of IC, and so is subject to a number of other causal variables, including social and organisational capital (see figure 1) (Bontis 2001; Kinnie and Swart 2006; Lin and Haung 2005; Litschka et al . 2006; Nazari and Herremans 2007). These forms of capital, according to some evidence at least, can have a greater impact on IC in certain circumstances; furthermore, they can have an earlier impact (Bontis 2007) – an important factor that is often neglected in ROI calculations (Russ-Eft and Preskill 2005).

Figure 2: Modelling Intellectual Capital Development and the Fundamental 'Attributional’ Error .

HR and OD Human capital antecedents investment and Attributional error depletion Outcome measures of Social Capital Intellectual investment capital innovation and service delivery

Organisational capital investment

Yet, practitioners often commit the fundamental ‘attributional error’ of over- emphasising individuals and their talents (or lack of them) as the cause of organisational performance and under-emphasising the social and organisational context in which performance occurred (talented followers, supportive systems and cultures, etc) (Rosenzweig, 2007). A longitudinal study of 208 US firms found that increased emphasis on human capital had a negative impact on an organisation’s capacity to produce radical innovation and only had a positive effect when combined with social capital investment (Subramaniam and Youndt 2005).

Other studies have explained why such counter-intuitive findings may have occurred: for example, Groysberg et al. (2003), in a longitudinal study of financial services analysts, have recently highlighted major risks associated with hiring ‘stars’ on the basis of past performance and then expecting them to repeat similar levels of performance in new contexts; the evidence points to the likelihood that both the

11 performance of the star and the recipient organisation will decline for some considerable time following hiring. This was because stars relied on a supportive context for them to perform effectively in their original employment, which could not be transferred to their new employment; moreover, disruption and low morale often resulted from parachuting in stars into unreceptive contexts for change. Thus, by talking up the value of individual human capital, there is a danger that we neglect to invest in these other key elements of context, most notably, social capital and organisational capital (Litschaka et al 2006; Wright et al . 2001).

3.6.2: Social Capital Social (relational) capital has been defined as the goodwill displayed by stakeholders towards an organisation and the trust they place in it through internal, ‘bonding’ ties to produce a strong sense of corporate identity and external bridging social capital , in which individuals and organisations benefit from wide and dense networks of relations with other individuals and external organisations (Adler and Kwon 2002). For Nahapiet and Ghoshal (1998) “the central proposition of social capital theory is that networks of relationships constitute a valuable resource for the conduct of social affairs…much of this capital is embedded within networks of mutual acquaintance” (1998, p243). It is proposed that individuals or social units’ foster social capital through relationships, networks, trust and co-operation, which in turn improves the efficiency and productivity of transactions (Kay, 2006; Nahapiet and Ghoshal 1998).

Theorists have investigated social capital at many different levels of analysis, ranging from the individual to society-at-large. At the individual level, research has suggested that individuals with greater social capital, that is individuals with stronger contact networks, will receive workplace gains through, for example producing positive career outcomes or increasing supervisors’ perception of their potential (Lin and Haung 2005). Thus, it is proposed that they will “earn higher rates of return on their human capital” (Garavan et al 2001: 52). Alternatively, at the level of society, social capital is perceived to be the foundation for positive social policy and a key driver of social change (Kay 2006). However, it is at the organisational level that we are particularly interested in. Social capital is thought to promote organisational learning, innovation and improved performance behaviours; therefore it is regarded as highly important to organisational success (Jones 2005; Kulvisaechana 2006). It is argued that social capital facilitates the development of intellectual capital by generating the conditions necessary for the exchange and combination of resources to occur (Adler and Kwon 2002; Nahapiet and Ghoshal 1998). Consequently, social capital sets the context in which other forms capital interact and it is instrumental in the process of conversion between human capital and intellectual capital (Dakhli. and De Clercq, 2004; Garavan et al. 2001; Swart 2006). However, like intellectual capital, social capital cannot be bought rather it must be built before it can be of value (ibid ).

3.6.3: Organisational Capital Organisational (structural) capital, is different from the other two components because it is neither the property of individuals nor groups; instead it encompasses the institutionalized knowledge and codified experiences residing within organisations in the form of databases, filing cabinets, patents, manuals, organisational structures,

12 routines, processes and culture (Bontis 1998; Bontis and Fitz-enz 2002; Subramaniam and Youndt 2005). The principal role of organisational capital is to link the resources of the organisation together into processes that create value for customers and sustainable competitive advantage for the firm (Dess and Picken 1999; Huiyan and Run-Tian 2006). Therefore, it is thought to enhance both the human capital and social capital of an organisation (Bontis 1998; Johson 2002); the interactions between its dimensions are important in providing employees with the motivation to develop and use their skills and knowledge for the collective good (Kulvisaechana 2006).

Some dimensions of organisational capital are particularly important to the creation of intellectual capital. For instance, the cultural dimension of organisational capital plays a significant role, as only certain types of cultural capital will be conductive to innovation and learning (Battu et al . 2004; Kulvisaechana 2006; Martin, Pate and Beaumont 2001). Similarly an organisation’s performance management and incentive structure will influence human capital development. It is argued that intellectual capital is increased when skilled and motivated employees are directly involved in determining what work is performed and how this work is accomplished (Delaney and Huselid 1996). Furthermore, according to Rumelt (1984), the routines and processes that act as the glue for organisations can either enhance or disable co- operative working and the development of knowledge (cited in Stiles and Kulvisaechana 2003). Hence, poor organisational capital can have a negative impact on the value an organisation can gain from its human and social capital (Kor and Leblebici 2005).

3.7: Knowledge Creation and Performance So, while few practitioners and management academics would suggest that the case for HC and talent management is not a compelling one, it is apparent that this is only part of the story: it is the connections between human, social and organisational capital that produce IC. This in turn impacts the management of knowledge within the organisation. Knowledge has long been recognised as a valuable resource by economists and has been a focus of significant attention in the HC literature, in particular the issues of knowledge generation, leverage, transfer and integration (Carmeli and Schaubroeck 2005; Dess and Picken 1999; Nonaka 1994, Sveiby 1997; Wright et al 2001). Given the importance of knowledge in the organisation it becomes crucial that the employees who are the source of knowledge are managed well (Nonaka 1994, Martin, Pate and Beaumont 2001). This requires that firms “define knowledge, identify existing knowledge bases, and provide mechanisms to promote the creation, protection and transfer of knowledge” (Wright et al 2001: 713). Pfeffer and Sutton (1999) propose that the knowledge-doing gap (translating knowledge into action) is at least as important as accumulating knowledge in the first place.

Within the HR literature there has been a focus on developing individual knowledge through training and providing incentives to apply knowledge (Carmeli 2004; Lepak and Snell 2001; Sennet 2006). However, the IC literature is concerned with the sharing and transfer of knowledge; the greater the sense of social community within an organisation, the more likely it is that knowledge will be created and transferred (Huiyan and Run-Tian 2006; Lin and Haung 2005; Nahapiet and Ghoshal 1998; Youndt et al. 2004). Despite the evidence supporting the assertion that IC and its component parts influence knowledge creation and are a key determinant of

13 enterprise value there is uncertainty surrounding the links between the value drivers and outcomes of IC (Choo and Bontis 2001; O’Regan et al . 2001; Yount et al. 2004). Consequently, several researchers have begun to investigate ways in which investments in intangibles such as HC can be measured and managed more effectively (Bontis 1998; Bontis and Fitz-enz 2002; Nazari and Herremans 2007; O’Regan et al . 2001; Saenz 2005).

4: Measuring Intangibles

4.1: Traditional vs. Intangibles The money that organisations spend on human resources has traditionally been reported in the accounts as a cost to be minimised, rather than as an investment to be nurtured (Chen and Lin 2003; Johanson 1998a; Petty and Guthrie 2000; Roslender 1997). Yet, the growth of the “knowledge economy” has placed greater emphasis on the strategic role of HC in the creation of innovation within contemporary organisations (Andereou et al. 2 007; Bontis 1998; 2001; Litschka et al . 2 006; Stewart 1998; Subramaniam and Youndt 2005). Traditional financial and management accounting instruments are unable to capture these intangible assets; thus there is demand from practitioners and academics for an appropriate corporate reporting structure that allows managers to measure and manage their intangible resources effectively (Booth et al., 2005. Nazari and Herremans 2007).

There are several difficulties involved in reporting and measuring intangible resources as they are context specific: their worth differs for different people and value is created in relation to the organisation’s wider strategy and other assets (Kaplan and Norton 2004; Marr and Moustaghfir 2005). Moreover, practitioners have, thus far, driven progress in the field with many initiatives being implemented without empirical assessment (O’Regan et al . 2001). This is significant because if a measurement or metric is inappropriate or fails to measure the correct phenomenon it is effectively useless and can negatively impact the phenomenon being studied (Zula and Chermack 2007). An evolving academic literature aims to overcome these issues (Bukowitz et al. 2004; Bontis 2001; Johanson et al . 1998ab; Le et al . 2005; Lev 2001 Marr and Gray 2003; Marr and Schiuma 2001; Stroombergen et al. 2002).

4.2. Intellectual Capital Measurement Contemporary literature regards company value as a combination of financial capital on the one hand, and intellectual capital, represented by human, social and organisational capital, on the other (see section 3.6). O’Regan et al. (2001) propose that this template can be represented by the following basic equation:

Total Value = Financial Capital * Intellectual Capital [People * Internal * External] Or V = ƒ$*P*I*E

Several frameworks have been developed which attempt to identify relevant measures of each component and illustrate the interrelationships between these dimensions (Bontis 1998; 2001; Johanson et al. 1998b; Sveiby 1997; 2001). One model that has received a significant amount of attention is Skandia’s Navigator (Nazari and Herremans 2007). Edvinsson developed the Navigator in the early 1990’s for Skandia. The original Navigator encompassed up to 163 metrics and had five areas of focus: financial, customer, process, renewal and development and HC

14 (Edvinsson 1997). Some metrics were specific to Skandia; thus Edvinsson and Malone (1997) recommend 112 ‘universal’ metrics, which they propose, can aid organisational strategy not only in for-profit businesses but also non-profit organisations such as the public sector (Edvinsson and Malone 1997). Indices include direct counts, dollar amounts, percentages and survey results; however it is recommended that direct counts are compared with other direct counts to produce ratios or are transformed into money, leaving only two types of measurement ( ibid ).

Since its development several commentators have critiqued and developed Scandia’s framework. Some have criticised that the model does not assign monetary value to its IC, but instead uses proxy measures to track trends in the assumed value added (Bontis 2001). Consequently, Pulic (2000; 2004) developed the VAIC (value added intellectual coefficient), which incorporates data from financial statements into the model to illustrate the size and efficiency of IC alongside more qualitative measures. Nazari and Herrmanns (2007) have since further extended the VAIC model to encompass the interconnectivity of IC elements. Alternatively, Roos et al. (1997) argued that the Navigator model was too complex and was not suitable for dynamic environments. So they developed the IC-Index. This synthesises the value-creating processes of a company into one index. It is argued that a summary index is an improvement, as it requires organisations to understand the priorities and relationships that exist between different measures (Bontis 2001). Moreover, it is suggested that the metrics of an organisation’s IC should relate to its business strategy, characteristics and long-term goals (Bontis et al. 1999; Roos et al. 1997). Hence, an IC-Index is context specific and it is useful in measuring changes in an organisation’s IC stocks - its IC flows (Bontis et al. 2001).

Beyond these interconnected IC models there exists a plethora of measurement approaches that aim, to a greater or lesser extent, to synthesise the financial (quantifiable) and non-financial (qualitative) value-generating aspects of an organisation (Johanson et al. 1998b; Litschka et al . 2006; Namasivayam and Denizci 2006). These include basic HR benchmarking and metrics; human resource accounting models (Dawson 1994); economic value added performance measurement (Stewart, 1990:1994 , the MERITUM guidelines (Johanson et al. 1998a,b; 1999), the balanced scorecard (Kaplan and Norton 1992) and the Intangible Assets Monitor (Sveiby 1997). In addition numerous independent practitioner models have been developed (Bontis 1999). However, empirical testing of these models and metrics has been poor. There is still confusion as to how investments in complementary capitals feed forward into IC and organisational learning through value creation and value capture in specific contexts (Bontis 2001; Lepak, Smith and Taylor 2007; Martin, Pate & Beaumont 2001).

4.3: Human Capital: A Causal Map One notable study that begins to explore this relationship is Bontis and Fit- enz’s (2002) IC ROI project, which yields a holistic causal model of antecedents and consequents of effective human capital management in the private sector. Combining quantitative and qualitative measures the structural equation model allows managers and researchers to gauge the effectiveness of an organisation’s human capabilities. It is proposed that the general quantitative antecedents of human capital include management’s ability to continue to invest in human capital, while defending the organisation from human capital depletion. Thus, proxies of human capital investment

15 and depletion include turnover rates and training and development expenditures respectively. They find human capital valuation to be an important mediating variable. Within the conceptual model human capital effectiveness is the dependent component. This construct comprises of four measures: revenue factor, expense factor, income factor, and human capital ROI (Bontis and Fit-enz 2002).

Bontis and Fit-enz’s (2002) applied this model in an empirical study of 25 companies in the financial services industry. Quantitative data, such as revenue, profit and number of employees, were collated alongside qualitative, perceptual items such as employee satisfaction or motivation. Data were then analysed using partial least squares a branch of structural equation modelling. From this analysis they assert that effective leadership is an important antecedent for human capital development. Managers must strategically manage their workforce and ensure they have the capabilities and capacities to respond to changing conditions (Eisenhardt and Martin 2000; Wang and Ahmed 2007). Employee sentiment is also identified as an important antecedent to human capital development (Bontis and Serenko, 2007). Bontis and Fit- enz (2002) define employee sentiment as the “interrelationship between employee satisfaction, commitment and motivation” (p. 226). Thus, human capital development is related to an organisation’s overall culture. If the employees of an organisation are relatively stable, it is proposed that culture can be managed effectively. However, when there is mobility in the employee base this task becomes much more difficult (Lin and Haung 2005; Wezel 2006.). Crucial to this model is the notion that non-financial measures provide a means of complementing financial measures and should be present at the strategic level of the firm. Yet, Petty and Guthrie (2000) remind us that there are inherent difficulties in measuring qualitative elements and propose that models must demonstrate a meaningful interplay between hard quantitative measures of performance and softer qualitative performance indicators (ibid).

4.4 Synopsis This review has assessed the context in which human capital is being discussed, identified the key elements of the concept, and considered its relationship to other complementary forms of capital, notably intellectual, social, and organisational capital. The present mechanisms for measuring intangibles were explored and it was noted that while most frameworks incorporate non-financial measures they are generally antecedents rather than outcomes. Return on investment is measured in terms of financial costs and returns for shareholders. In the public sector there is no comparable financial outcome; thus, the literature relating to public value and performance measurement is now explored.

16 5: Public Value

5.1: Defining Public Value In the introduction we proffered that the creation of public value is a key element of modern public policy. However, we have a problem in defining exactly what public value is. In a simple sense, it can be defined as what the public values (Kelly et al. 2002), but that does not take us very far. More recently, the literature on public value has been developed by Mark Moore at the Kennedy School of Government in the US, who stated in his seminal text Creating Public Value that public managers should seek to “produce public value” (Moore 1995, p.21). Since its initial development various authors have examined the concept often comparing it with its predecessors of traditional public administration and new public management (see for example, Bozeman 2002 or Stoker 2006). As it has evolved public value has been interpreted in a multitude of ways and has become a broader and more diverse field of research (Keaney 2006). Studies generally fall into one of two groups: those that explore public value a means of managing the public sector (see, for example, Stoker 2006) and those that consider the relationship between public value and performance measurement (see, for example, Moore 2003).

Public value theorists propose that the public sector is fundamentally different from the commercial sector so many of the initiatives of new public management may not be appropriate for implementation within the public sector (Stoker 2006). Nonetheless, they do not recommend a return to the previous models of public administration. Instead, it is proposed that through innovation and communication public managers can overcome both the inefficiencies of traditional public administration and the legitimacy and trust issues inherent within New Public Management (Chapman 2005; Stoker 2006). Moreover, in their evaluation of the theory Kelly et al. (2002) advise that public value cannot be achieved by any one organisation as it encompasses all aspects of government performance. Thus, achieving public value is a multi-disciplinary and collaborative process: public managers must work across boundaries in collaboration with civil servants, politicians, and citizens (Keaney 2006; Kelly et al. 2002; Rhodes 1997; Stoker 2006).

5.2: Public Value Management Public value is a collective and dynamic concept, defined and redefined through social and political interaction (O’Flynn 2007; Smith 2004). Sponsors of the concept propose that deliberations between the public sector and its various stakeholders will ultimately assist its organisations to allocate their resources and run their operations in a way that will create the most value (Moore 1995). Public sector organisations operate within a complex and ever changing environment. Moore (1995) conceptualises this environment as a strategic triangle encompassing: the policy environment, the authorising environment and the operating environment (see figure 3). He proposes that to achieve public value public managers must strategically manage all three aspects; ensuring that the solutions to one problem in the triangle correspond with the solutions to the other parts of the triangle. Thus, public managers must nurture dynamic capabilities (see section 4.6) and ensure that their objectives are relevant and legitimate, and can be achieved effectively and efficiently.

17

Figure 3: The Strategic Triangle

Operating Operational Environment capabilities

Authoring

Environment Public value

Legitimacy and support Adapted from Moore (2003)

Public Policy Environment

One major difference between different interpretations of public value is the emphasis placed on the role of the public. Within Moore’s (1995) model, stakeholders who legitimise and support public organisations include representatives of the public such as elected politicians but generally do not include members of the public directly (ibid) . However, others have debated the validity of this method of authorisation and have recommended that public preferences be actively sought through continuous dialogue and deliberation with consumers and citizens (see for example, Horner 2005). It is argued that failure to do so may result in services not providing public value, but a value determined and recognised solely by politicians, public managers or even private organisations delivering services on behalf of government (Blaug et al. 2006).

Nonetheless, it is acknowledged that actively responding to public opinion is not always a straightforward process as the public consists of more than one voice and it is unlikely that there will be consensus on what creates value (Kelly et al . 2002). In addition, some decisions (for example: decisions relating to national security) will have to be made before the public can recognise their true value (Keaney 2006). It is proposed that, within the public value paradigm, public managers’ act as decisions makers who use their own expertise to act as an arbiter between competing views of what constitutes public value (Blaug et al. 2006; O’Flynn 2007). Managers must not only drive performance at an organisational level, but also work collaboratively with a network of service providers to create overall value (Smith 2004; Stoker 2006).

Although the public defines and authorises public value it is public organisations that create and increase it through their decisions and actions (O’Flynn 2007). They employ traditional resources (such as: financial and human capital) alongside the “ unique resources” of the government (such as the ability to coerce

18 people to comply to laws) to create efficient and effective services (Chapman 2005, p 32). Public managers must manage risk and ensure that the results obtained are worth the cost incurred by the public (Chapman 2005; Kelly et al. 2002; Steele and Hampton 2005). The notion of public value implies that organisations must also act innovatively and be adaptable to new purposes (Scottish Executive 2006). If these objectives are to be made, then a measurement system that enables public managers to recognise when and to what extent value is being created is required (Hills and Sullivan 2006). Hence, practitioners and academics have begun to consider ways in which public value can be appraised. The following section discusses and evaluates a number of the key measurement frameworks.

5.3: Measuring Public Value In the private sector, value is often thought to be easy to measure, in terms of financial costs and returns for shareholders. However, in the public sector there is no comparable outcome for returns to shareholders and no device, such as the price mechanism, that can inform wider stakeholders (Kelly et al . 2002). Moreover, public value includes both measurable outcomes, such as improved educational attainment or an overall reduction in crime levels and outcomes that are more difficult to quantify, including accessibility of services, social cohesion, social capital, trust in public institutions, and participation in public governance (Steele and Hampton 2005). Nonetheless, it is important for public sector organisations to measure performance. In their justification for public sector measurement Osborne and Gaebler (1992) present a number of pithy but nonetheless useful reasons for measurement including:

• If you do not measure results, you cannot tell success from failure. • If you cannot see success, you cannot reward it. • If you cannot reward success, you are probably rewarding failure. • If you cannot see success, you cannot learn from it. • If you cannot recognise failure, you cannot correct it. • If you can demonstrate results you can win public support. • What gets measured gets done.

Even so, good reasoning does not help to clarify what is to be measured or how to measure it. It is often difficult to quantify both the costs and returns of public service delivery (Blaug et al . 2006).

A small number of authors have attempted to develop frameworks that assess not only the financial measures of public value but also the relationship and process measures. For instance, Kelly et al . (2002) identify three important sources of public value: high quality services, outcomes and trust. They argue that methods of accounting for public value and reporting on success should aim to reflect all three elements Perceptions of high quality services are considered to be generated by five interrelated factors, including: service availability and take up; satisfaction with services; importance of services offered; fairness of service provision; and cost incurred to deliver services. In addition, the public expects the government to deliver a range of socially desirable and important outcomes, from ensuring peace and security to improving levels of public health. However, determining value through outcomes is difficult as they are often the result of a joint effort between citizens and government organisations. Citizens must support and work with the government if wider social outcomes, such as: better public health or lower crime levels, are to be

19 achieved. Finally, trust is an important source of public value as even where outcomes and service targets are met a decline or collapse in trust levels may destroy the capacity to add public value ( ibid ).

Kelly et al (2002) point to some techniques already in use in the private and voluntary sector that might help public managers measure such complex systems, including: social and environmental accounts and accounting techniques for intangibles. Moreover, the framework has been applied in a number of contexts (Keaney 2006). For instance, the BBC (2004) evaluated each of the three elements in relation to its key stakeholders and developed a public value test encompassing two steps. The first step examines the needs, costs and benefits of the new service. The second step attempts to estimate more quantitatively the public value of the service, and has three parts: individual value, citizen value, and net economic value ( ibid ). It is suggested that this framework provides a comprehensive basis for analysis of the BBC’s success.

Moore (2003) provides an alternative approach in what he terms as the public value scorecard. Referring to his strategic triangle (see figure 1) and building on the Balanced Scorecard approach, developed by Kaplan and Norton (1992) to measure the total value of commercial organisations, he proposes that to assess public value managers must measure a number of tangible and intangible factors at each point of the triangle (see figure 4).

Figure 4: Public Value: Accountability and Performance Measurement

Expanding support and authorisation • Funder relations and diversification • Volunteer roles and relations • Visibility, legitimacy with general public Creating public value • Relations with government regulators • Organisational vision/mission • Reputation with media • Strategic goals • Credibility with civil society actors • Links among goals, activities, outputs and outcomes • Range of outcomes • Activities and outputs that create outcomes Building operational capacity • Organisational outputs • Productivity and efficiency

• Financial integrity • Staff morale, capacity, development (Source: Moore, 2003, p. 23) • Partner morale, capacity, development • Organisational learning and innovation

Another way of presenting this is as a chain, with each point in the chain requiring performance measures to ensure it is working effectively. To illustrate this idea Moore and Williams Moore (2005) introduce what they call the ‘value chain’ (see figure 5).

20 Figure 5: Performance Measurement in the Value Chain

Organisation’s Client Outcomes Authorising environment activities & satisfaction processes

Inputs Outputs Programme Financial audits Workload measures Customer evaluations Personnel audits Performance measures surveys Cost/benefit analysis Compliance audits (Source:

(Adapted from Moore and Williams Moore 2005; cited in Keaney 2006, p. 23)

Starting on the left hand side of the chain, measures are needed that record the degree of support the organisation has from its authorising environment. Moore (2003) suggests that the most effective way of doing this is to imagine that each of the sources of revenue or support or political legitimacy constitutes an account that the organisation is trying to maintain or further develop. Accounts should be organised according to their size and strategic importance to the organisation. Performance objectives could be set for each account and the entire set of accounts could be monitored to determine changes in size, concentration and political focus.

Next it is important to have measures that describe the activities and performance of the organisation itself – its ability to stay within budget limits, to operate in accordance with its established policies and procedures, to attract and retain high-quality people, to maintain high staff morale, to act innovatively to provide better service at lower costs in the future, or to reliably achieve the operational objectives set out in its strategic and operational plans. Keaney (2006) advises that many of these dimensions can be evaluated by existing measurement techniques including: cost-benefit analysis, financial audits and staff satisfaction surveys. Public managers can then go further along the value chain to measure the quantity, quality and character of the transactions the organisation has had with its users and to capture feedback on whether those encounters were mutually beneficial.

Despite the establishment of these and other public value measurement systems, the literature in the field is relatively new and is still focused at the level of the abstract rather than the practical (Hills and Sullivan 2006). Measurement within the social world involves the study of subjective qualities (such as pain or satisfaction) and broad abstract notions such as intelligence or democracy. Hence, although the standardisation of provision provides some protection to consumers and helps safeguard quality it can also distort what is being measured (Hills and Sullivan 2006; Moore 2003). For example, in people orientated services such as health and education where measurement is very difficult, performance has been reduced to proxy measures such as waiting lists and exam results. These often fail to capture the distinctiveness of local needs and capabilities, hence creating distorted and unrealistic objectives and dysfunctional consequences (Blaug et al . 2006).

21 Consequently, the Work Foundation’s (2006) has developed a framework for evaluating measures of public value (see figure 6). They suggest that a number of core values underpin the public value concept and these values can be grouped according to the process and outcomes of public sector delivery. Clusters relating to the process include the new public management values of efficiency, effectiveness and cost effectiveness as well as broader values such as: democracy; transparency; equity; and authorisation and trust. Values relating to outcomes include wider objectives such as: quality of life, social cohesion and social inclusion; safety and security; and promoting democracy and civic engagement. Assessing whether a measure is appropriate involves ensuring that measures are appropriate, fit-for- purpose and meet relevant methodological standards – ultimately measures must reflect the phenomenon being studied.

Figure 6: The Public Value Measurement Framework (Work Foundation) Type of Measurement Stages in the Policy Cycle Agenda Task Implement Outcomes Impac Setting definitio ation and t n delivery Appropriate? * Are they fit for purpose? * Do they meet relevant methodological standards, including method-specific quality standards

Holistic? Do they take into account: : * the complexity of the situation? * NPM values such as effectiveness and efficiency? * Relevant public value Are the the methods Are type values, such as wellbeing, social capital and quality of life? Democratic? Do they allow for: * public involvement * negotiation between different stakeholders? Are they transparent and accessible? Have they been ‘authorised’?

22 Trustworthy? Are the measures and their findings being used appropriately and with integrity? Generating Public Value Does the process of measuring create value in and of itself? (Source: Hills and Sulivan 2006, p.32)

Moreover, the Work Foundation framework (see figure 6) illustrates that different measures are needed at different stages of the process. Organisations and agencies are diverse and this diversity must be reflected in the measurement of their performance (Rustin 2004). Systems should reflect how an organisation is meeting basic national standards, but organisations should also be given the freedom to set their own targets that reflect their unique circumstances. Furthermore, both of these sets of measures should be agreed and pursued in conjunction with the public. Public managers must assess the quality of this engagement process and determine objectives through the interactive process (Blaug et al. 2006; Moore 2003).

6: Conclusions and Future Research

6.1 Conclusions This literature review has been conducted in two main parts. The first part considered the key literature surrounding human capital. It evaluated the contribution of four main paradigms: economic human capital theory, the resource based view, dynamic capabilities and intellectual capital. It was noted that recruiting and retaining the best employees is only part of the equation, an organisation must also leverage the skills and capabilities of its employees by encouraging individual and organisational learning and creating a supportive environment, in which knowledge can be created, shared and applied (Wright et al 2001; Youndt, Subramaniam and Snell 2004). Moreover, it was indicated that what might hold good for one organisation or sector in a particular country is not necessarily the right strategy for others (Andersson et al 2005). Drawing attention to Bontis and Fit-enz’s (2002) casual model it discussed the possibility of adopting a similar model within the public sector. The second part then reviewed the public value literature, examined performance measurement in the public sector and noted that within the public sector quantifying performance is not always straightforward. Finally, this review has focused on theory development and has aimed to link the contributions of two areas of literature: human capital and public value; however, the literature review is not exhaustive. The field of human capital is vast and diverse and another review could have focused on entirely different areas. Furthermore, a rigorous systematic review would have contained a separate section evaluating the literature in terms of key themes, method, and approach (see appendix for a preliminary database).

Referring to the Scottish Government’s request for an explanation of the role of human capital in public sector reform it is apparent that we a need a rigorous and systematic evaluation of the impact of human capital investment, in comparison with

23 contribution of other forms of capital investment, on public service outcomes in Scotland.

6.2: Plan of Action We propose to conduct an evaluation of human capital investment into the Scottish healthcare and schools systems over a period of three years (longer, if appropriate data is already available) and compare it with returns on investments in social and organisational capital over a similar period. Comparison between these two sub-sectors will provide a measure of the effects of context. The overall aim of the study is to be able to predict in specific contexts what is likely to happen when particular kinds of human capital investments are made and to allocate resources more appropriately on the basis of such evidence.

A key objective is to develop causal models of intellectual capital development, innovations and improved service delivery, so that we can quantify the effectiveness of human capital development against other forms of capital and determine the influence of timing of such investments on returns. To determine the appropriate variables to measure and to explain subsequent path coefficient relationships, we also propose to conduct in-depth, longitudinal qualitative analysis of four-to-six cases, using in-depth interviewing of key informants. This work will also provide a greater understanding of the relationships between the context, content and processes of change (Lapsley and Pettigrew 1994; Hargrave and Van de Ven 2006).

The quantitative stage of the study necessitates acquiring data on relevant constructs to be collected at three points during the course of the study to develop a sophisticated set of causal models (if possible, also anchored in historical data). These data will be both ‘factual’, e.g. spending on training, recruitment, pay, turnover, operational effectiveness, etc., and attitudinal/opinion-related on items often used to measure human capital, ( skill levels, creativity, levels of expertise, innovativeness etc.), social capital (collaboration, information sharing, degree of interaction, partnership with key external stakeholders, knowledge transfer, trust, organisational identification, etc) and organisational capital (degree of tacit knowledge made explicit in databases, manuals, etc., ways of doing things, extent of formalization, centralisation, etc). Our aim is to collect valid and reliable data on human capital investment and depletion (key drivers of intellectual capital), human capital valuation (an important mediating variable), and human capital effectiveness (an important outcome measure). The last of these may be the most difficult to measure in a public sector context, since it is typically assessed by estimates of revenues over costs in a private sector context (Bontis and Fitz-enz 2002). However, we will seek sector expertise in defining this and other constructs. Following Subramaniam and Youndt (2005) we will also collect data on the extent of radical and incremental innovations to assess the relative importance of different kinds of human capital interventions and investments in social and organisational capital on different types of innovation.

The principal method for analysing the quantitative data will be structural equation modelling using partial least squares. Structural equation modelling is one of the best techniques for developing causal models with relatively small data sets and has recently been used to predict the impact and timing of human capital investment in the Canadian financial services industry (Bontis and Serenko, 2007). We are not aware, however, of a similar approach being taken to predict human capital

24 effectiveness in the British public service context. Thus, this work should fill an important gap in the academic literature and be particularly relevant in guiding public sector policy and investment decisions.

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1 The author would like to thank the Scottish Government/ESRC PhD scheme for the support and would particularly like to acknowledge the help of the Scottish Government sponsors, Dr Gill Clark and Elizabeth Kelly.

32 Appendix: Systematic Review – Article Database

Ye Countr Typ Key Authors Source Context Approach Methodology Population Analysis ar y e Concept (S) Academy of Lit Review & Adler & 20 Social Literature Managemen USA C N/A N/A Conceptual N/A Kwon 02 Capital Review - t Review Framework Thematic Intangible Andereou, J. of High-Tech Qualitative Analysis, 20 Assets Focus Groups Green & Intellectual USA E Federal & N/A Structural 07 Measuremen & Survey Stankosky Capital Contractors Quantitative Equation t Modelling J. of 339 Large Bart & 20 Canada C & Employee Intellectual Canadian & Us Model Testing Bontis 03 & USA E Commitment Capital Organizations Interviews Data With Managers 2191 Derived HC, From Establishments From The Basic Battu, Internationa Education, Establishments 20 UK & From The 1998 British Statistical & Belfield l of E Earnings, & Quantitative & 25 04 USA Hotel & Workplace Regression & Sloane Manpower Service Employee Catering & Employment Analysis Sector Questioners Retail Sector Relations From Each Survey Establishment Public Managemen 20 Benington t & Policy UK P Public Value N/A N/A N/A N/A N/A 05 Association Review

33 Ye Countr Typ Key Authors Source Context Approach Methodology Population Analysis ar y e Concept (S) HEC Theoretical Literature Montreal Discussion - 20 Dynamic Review & Bitar (Research Canada C N/A Review N/A Model 04 Capabilities Model Paper N Conceptualis Development 01-05) ation Theoretical Literature Blaug, The Work Discussion - 20 Review & Horner & Foundation UK C Public Value N/A Review N/A Model 06 Model Lekhi (Online), Conceptualis Development ation Senior Executives - 2 Major Leadership Canada ; Divisions of Boehnke & Australi Case A Global Bontis 20 Organizatio a; Organisation - Petroleum Content Distefano E Leadership Quantitative Survey 03 n Switzerl Petroleum Company & Analysis & Developme and&; Industry From Its Distefano nt Thailand Major Subsidiaries Around The World Principal Intellectual Component 19 Managemen Capital - Private Pilot Study / MBA Bontis Canada E Quantitative Analysis & 98 t Decision Intangible Organisations Questionnaire Students Partial Least Assets Squares

34 Ye Countr Typ Key Authors Source Context Approach Methodology Population Analysis ar y e Concept (S) Thematic Internationa Literature Knowledge l of Review & 19 Assets; Literature Bontis Technology Canada C N/A Review N/A Recommenda 99 Intellectual Review Managemen tions For Capital t Future Research Knowledge Internationa Assets; 20 l of Measuring Literature IC Models/ Bontis Canada C N/A 01 Managemen Intangibles; Review Measurement t Reviews Intellectual Capital Annual of Human Reports of Content 20 Resource Intellectual Canadian Quantitative/ 10,000 Content Bontis Canada E Analysis - 03 Costing & Capital Corporations Qualitative Canadian Analysis Annual Reports Accounting Corporation s HC/ IC SEM/ of Antecedents Financial Bontis & 20 Causal Map Senior Quantitative Intellectual USA E & Services Quantitative Fitz-Enz 02 SEM Executives & Qualitative Capital Consequence Industry Measures s Bontis & of Leadership 20 Discussion Critical Nikitopoul Intellectual Canada C & N/A N/A N/A 01 Overview Discussion os Capital Intellectual

35 Ye Countr Typ Key Authors Source Context Approach Methodology Population Analysis ar y e Concept (S) Capital 15individual Survey s from each Instrument organisation Bontis, of Based On representing Structural 20 Organisation 32 Crossan Managemen Canada E Quantitative Strategic Senior-, Equation 02 al Learning Organizations & Hull&. t Studies Learning Middle- & Modelling Assessment Non- Map Managemen t Bontis, Intangible European Critical Dra gonetti 19 Assets Literature Managemen Canada C N/A Review N/A Literature Jacobsen 99 Measuremen Review t Review & Roos t partial least A North squares J. of employee American 14,769 (PLS) Bontis and 20 Knowledge capabilities – Canada E financial Quantitative questionnaire current structural Serenko 07 Managemen HC services employees equation t management institution. modeling technique Statistical Review of British Statistical Booth 20 Analysis of Economics UK E HC Household Quantitative Analysis of N/A & Bryan 05 Secondary & Statistics Panel Survey Secondary Data Data

36 Ye Countr Typ Key Authors Source Context Approach Methodology Population Analysis ar y e Concept (S) HC - RBV; of Embedded Thematic Bowan & 20 Review Literature Managemen UK C Capital; N/A Literature N/A Swart 07 Qualitative Review t Studies Dynamic Review Capabilities Thematic Review & Literature Public 20 Model Review & Bozeman Administrat C Public Value N/A Review N/A 02 Conceptualisati Model ion Review on Conceptualis ation 15 Projects Internationa UK (& Saudi Brown, UK & UK, 13 20 l of Project HC & Arabia Path Model Causal Path Adams Saudi E Quantitative Projects In 06 Managemen Performance Construction Variables Analysis & Amjad Arabia Saudi t Industries Arabia Scandinavia 20 n of HC/ Public Local Govt Secondary + La Regression Carmeli Israel E Quantitative 04 Managemen Sector Authorities Questionnaire Managers Analysis t Carmeli Human Hr Capital/ Private & & 20 Resource Secondary + CEO's & La Factor Israel E Public Sector Public Sector Quantitative Schaubroe 05 Managemen Questionnaire Managers Analysis Performance Orgs ck t Nursing 20 Literature Thematic Chapman Managemen UK C Public Value NHS Review N/A 05 Review Discussion t

37 Ye Countr Typ Key Authors Source Context Approach Methodology Population Analysis ar y e Concept (S) Thematic Internationa HC Literature Thematic Chen & 20 l of Measuremen Review & Taiwan C N/A Review N/A Literature Lin 03 Managemen t & Model Review t Reporting Conceptualisati on Thematic Thematic Literature Literature Review & Academy of 19 Resource Review & Discussion of Coff Managemen USA C N/A Review N/A 97 Based View Model Implications t Review Conceptualisati Fro Future on Strategy Literature 50 HRM; Questionnaires, Internationa Knowledge Case Study Targeted 25 Logbooks l of Human Management Pharmco People From Currie & 20 Compiled By Case Study Resource UK E - Shared National (Sales Qualitative All Kerrin 03 Employees & Analysis Managemen Learning/ & Marketing Functions & 30 Semi- t Organization Organization) Levels Structured al Learning Interview Entrepreneu Secondary Analysis of Basic Dakhli rship & HC, Social Data: World Secondary Statistical 20 & De Regional Canada E Capital, Development Quantitative Data: World N/A Analysis / 04 Clercq Developme Innovation Report & Development Model nt, World Values Report & Conceptualis

38 Ye Countr Typ Key Authors Source Context Approach Methodology Population Analysis ar y e Concept (S) Survey World Values ations Survey

Thematic Literature Strategic Eisenhardt 20 Dynamic Literature Review & Managemen USA C N/A Review N/A & Martin 00 Capabilities Review Model t Conceptualis ation Exploratory Human Elias & Study of Such 20 Resource AUK 20 Hr Comparative Scarbroug UK E HC Qualitative Practices In 11 04 Managemen Organisations Managers Case Study h Major Firms In t The U 297 Agents The North & 368 Correlation - Galunic France - HC - 20 Organizatio American Survey Insurers - Basic & North E Generalised Quantitative 00 n Science Insurance Questionnaire 237 Statistical Anderson America Investment Industry Completed Analysis Pairs Garavan, Review of Critical of European Morley, 20 Ireland, HC, HRD, Concepts & Discussion & Industrial C N/A Review N/A Gunnigle 01 UK IC Introduction To Implications Training & Collins Special Issue For Research

39 Ye Countr Typ Key Authors Source Context Approach Methodology Population Analysis ar y e Concept (S) Glomm Model Basic Canadian & 20 Statistical Conceptualisati Statistical / of USA C HC N/A N/A Ravikuma 01 Analysis - on, Secondary Economic Economics r Data Analysis HC; Literature Gratton European Volunteer Review & Critical 20 & Managemen UK C Employees; N/A Review Model N/A Literature 03 Ghoshal t Career Conceptualisati Review Success on Groysberg Harvard 1,000 Star 20 Talent Financial Stock , Nanda Business USA E Stock 04 Management Analysts & Nohria Review Analysts Regression Strategic Hi-Tech Questionnaires Analysis Hatch 20 Plant Managemen USA E HC, RBV Manufacturing Quantitative / Follow Up Modelling & Dyer 04 Managers t Firms Interviews Chi Performance Secondary Us Know-How, Datasets - R&D Department Strategic Complement Us Petroleum Expenditures of Descriptive 19 of Energy Helfat Managemen USA E arities, Industry 1976- Quantitative 26 Largest & Regression 97 R&D t Dynamic 1981 Energy Analysis Expenditure Capabilities Companies Dataset (Doe) Strategic Dynamic Literature Theoretical Helfat 20 Analytical Managemen USA C Capabilities / N/A Review & N/A Discussion / & Peteraf 03 Review t RBV / Theory Analysis

40 Ye Countr Typ Key Authors Source Context Approach Methodology Population Analysis ar y e Concept (S) Capability Development Lifecycle

Thematic Literature Review & Hills & 20 The Work Review & UK P Public Value N/A Review N/A Model Sulivan 06 Foundation Framework /Measure Development Development Panel Data Hitt, Methodology HC/ Secondary Bierman, Academy of Professional - Least 20 Strategy/ Data/ Shimizu, Managemen USA E Law Firms Quantitative Service Squares' 01 Performance Longitudinal & t Firms Dummy / RBV Questionnaire Kochhar Variable Model HC, Social Holtom, Organizatio Washing Thematic 20 Capital, Job Mitchell nal ton, C N/A Review Literature N/A Thematic 06 Embedednes & Lee Dynamics USA Review s Theoretical of Huiyan HC, Framework / Theoretical 20 American & Run- China C Compliment N/A Review Thematic N/A Discussion / 06 Academy of Tian ary Capital Literature Analysis Business Review of Intellectual Literature Thematic 20 Johnson Intellectual Canada C Capital, HC N/A Review Review & N/A Literature 02 Capital Management Model Review

41 Ye Countr Typ Key Authors Source Context Approach Methodology Population Analysis ar y e Concept (S) & Development Measuremen t Arts Thematic 20 Literature Keaney Council UK C Public Value N/A Review N/A Literature 06 Review England Review Intellectual Analysis of Capital - J. of Current Policy 20 Intangible Kelly Education UK C Schools (UK) Review & Critical N/A Thematic 04 Assets / Policy Literature Government Review Policy Public Analysis of Value; Current Policy Kelly & 20 Cabinet UK C Public Public Sector Review & Critical N/A Thematic Muers 02 office Service Literature Reform Review Strategic Secondary Data Kor & 20 HC & Large Law Econometric Managemen USA E Quantitative Longitudinal N/A Leblebici 05 Performance Firms (105; ) Analysis t Study J. of Education, Country Literature Krueger 20 USA & C & Thematic & Economic Economic Investment In Quantitative Review & N/A & Lindahl 01 Sweden E Statistical Literature Growth Education Data Secondary Data J. of HC ; Large Exploratory External Norway Thematic & Kulvisaec 20 European International International Case Study - Consultants, / E Qualitative Case hana 06 Industrial Organisation Organization Focus Groups, Senior Sweden Analysis Training s Operating In Archival Data, Executives,

42 Ye Countr Typ Key Authors Source Context Approach Methodology Population Analysis ar y e Concept (S) The Nordic & Interviews Managers, Region With Key & Informants Employees From Various Departments Internationa l J. of Dynamic Case Literature Thematic & Lawson 20 Australi Innovation E Capabilities Organisation - Qualitative Review & Case N/A Case & Samson 01 a Managemen & Innovation Cisco Systems Study Analysis t Le HC 20 New Zeal& New Literature Thematic Gibson C Measuremen N/A Review N/A 05 Treasury Zeal& Review Discussion & Oxley t Senior Basic Executives, Analysis, Journal of J. HC/Hr Questionnaires Lepak 20 Commercial Senior Hr Descriptive Managemen USA E Configuratio Quantitative + Secondary & Snell 02 Firms Managers & Statistics, t ns/ SHRM Data Line Multivariate Managers Analysis Thematic Human Literature Academy of Lepak 19 Resource Literature Review & Managemen USA C N/A Review N/A & Snell 99 Management Review Model t Review & HC Conceptualis ation

43 Ye Countr Typ Key Authors Source Context Approach Methodology Population Analysis ar y e Concept (S) Multi- Disciplinary Lepak, Academy of Value Critical Managemen 20 Literature Smith Managemen USA C Creation/ N/A Review Literature t/Hr Etc 07 Review - & Taylor t Review Capture Review Literature Structured Framework HC, Intellectual Intellectual Thematic Thematic Litschka, Capital J. of Capital, Review & Discussion & Markom 20 Measuring Intellectual Austria C Performance N/A Review Model Model & 06 & Analysing Capital Management Conceptualisati Conceptualis Schunder Intellectual , Job on ation Assets Satisfaction Network Social 111 J. of Financial Analysis, Lin & 20 Capital, HC, Network Employees Intellectual Taiwan E Institutions In Quantitative Basic Haung 05 Career Surveys & Capital Taiwan Statistical Mobility Supervisors Analysis Human, Social & Organizatio Thematic Managemen Critical Luthans 20 Positive nal USA E N/A Qualitative Literature t/Hr Etc Literature & Youssef 04 Psychologica Dynamics Review Literature Review l Capital Management Mailath J. of Managers’ Quantitative Model Model 20 Nocke Economics USA C HC & N/A model and Conceptualisati N/A Conceptualis 04 & & Strategy - review on and ation and

44 Ye Countr Typ Key Authors Source Context Approach Methodology Population Analysis ar y e Concept (S) Postlewait Managemen mergers and Thematic Discussion e t Strategy takeovers Literature Review Thematic Thematic RBV; Literature Literature Strategic Dynamic 20 Review & Review & Makadok Managemen USA C Capabilities - N/A Review N/A 01 Model Model t Rent Conceptualisati Conceptualis Creation on ation Intellectual Capital, Marr & Systematic Systematic 20 Managemen UK/ Intangible Moustaghf C N/A Review Literature N/A Literature 05 t Decision Italy Assets, ir Review Review Knowledge Processes Sample = 114 Longitudinal Participants Human Case Study - Thematic Martin Education, Case Study - of EFA 20 Resource Survey & In- Analysis of Pate & UK E Workplace Us Based NCR Qualitative Course In 01 Managemen Depth Interview Beaumont Learning Corporation In 1995 Vs. t Interviews Material Scotland Same Size Control Group

45 Ye Countr Typ Key Authors Source Context Approach Methodology Population Analysis ar y e Concept (S) Intellectual Capital, HC, Employee Employee Developmen Critical 20 Personnel Development Thematic t / Mayo UK C N/A Review Literature 00 Review , Intangible Review Intellectual Review Assets , Capital Measuremen Literature t Policy 1990's Public Review of Chronological Documents Chronologica 20 Sector National Mcmaster Social UK C Review Review of & Public l Review of 02 Reform Health Service Economy Reforms Managemen Reforms (UK) t Literature Public Sector Policy - Documents, Financial Institutional Public Accountabil Theory; Thematic 20 Thematic Managemen Modell ity & Sweden C Organization N/A Review Literature 00 Review t & Managemen al Learning; Review Organizatio t Performance nal Learning Measuremen Literature t Thematic Thematic Public Innovation & Literature Literature 20 Money & Public Sector Moore USA C Public Sector Review Review & N/A Review & 05 Managemen Literature Management Model Model t Conceptualisati Conceptualis

46 Ye Countr Typ Key Authors Source Context Approach Methodology Population Analysis ar y e Concept (S) on ation

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47 Ye Countr Typ Key Authors Source Context Approach Methodology Population Analysis ar y e Concept (S) Theoretical J. of Framework / Discussion& Nerdrum 20 IC - HC Intellectual Norway C N/A Review Thematic N/A Implications & Erikson 01 Theory Capital Literature For Research Review Theoretical Knowledge Literature Framework / 19 Organizatio Creation, Review & Nonaka Japan N/A Review Thematic N/A 94 n Science Dynamic Theoretical Literature Capabilities Discussion Review Department of Focus Evaluative O’Connor Public Sector Treasury & European J. Case Study - Groups of Case Study - Roos & 20 Australi Innovation / Finance, of E Qualitative Conceptual Participants Qualitative - Vickers- 07 a Intellectual Victorian State Innovation Framework From Four Thematic Willis Capital Government Divisions Analysis Australia O’Donnell Tracey Henriksen Irel&, Intellectual Nick J. of UK; Capital, Thematic Critical 20 Bontis Intellectual Denmar C Stock N/A Review Literature N/A Literature 06 Cleary Capital k; Options, Review Review Kennedy Canada Labour & O’rRegan

48 Ye Countr Typ Key Authors Source Context Approach Methodology Population Analysis ar y e Concept (S) Intellectual Model Basic O’Regan Human Capital Conceptualisati Statistical O’Donnell CEO’s & 20 Resource Irel&, (Managemen Irish on, Survey, Analysis, Kennedy E Quantitative Other Key 01 Costing & UK t & Organisations Basic Discussion& Bontis & Stakeholders Accounting Measuremen Statistical Implications Clear t) Analysis For Research Intellectual Capital, Review Plus J. of Intangible Survey, Basic 20 Private Basic Pedrini Intellectual Italy E Assets, HC Quantitative Statistical N/A 07 Organisations Statistical Capital & Corporate Analysis Analysis Responsibilit y Industrial & Practitioner - 20 Australi HC America's Pilot Study / Pickett Commercial C / E Quantitative N/A Basic 05 a Measures Leading Banks Questionnaire Training Statistics Theoretical People Evidenced Pfeffer 20 discussion – Managemen USA C Based N/A N/A N/A N/A & Sutton 06 practitioner t Management focus Ployhart Academy of Random Weekly 20 Managemen USA E HC ??? Quantitative ??? ??? Coefficient & 06 t Journal Modelling Baughman Human Three Year Case 20 11 Large Qualitative/ Case Study / Purcell CIPD UK E Resources & Longitudinal organization 03 Organisations Quantitative Comparative Performance Study s

49 Ye Countr Typ Key Authors Source Context Approach Methodology Population Analysis ar y e Concept (S) HC; Theory Basic British J. of Robinson 20 Employee Secondary data development Statistical Industrial UK E Quantitative N/A & Zhang 05 Share – WERS 98 and Secondary Analysis, Relations Ownership Data Analysis Discussion Ro usu Genetically Theory Public Value Basic Huffman 20 Land & modified foods development USA E / conflicting Quantitative Consumers Statistical Shogren 04 Economics – US and info Analysis & Tegene marketplace experimental Critical Advances Discussion of In Russ-Eft 20 Literature Literature, Developing UK C ROI - HRD N/A Review N/A & Preskill 05 Review Examples & Human Recommenda Resources tions J. of HC - Market Spanish Basic 20 C & Application of Sáenz Intellectual Spain To Book Banking Quantitative Secondary Statistical 05 E Model Capital Ratio Industry Analysis Intellectual Correlation Seleim Capital In Egyptian 20 Egypt & HC, IC, Analysis & Ashour Egyptian E Software Quantitative Survey CEOs 04 Canada Performance Stepwise & Bontis Software Companies Regression Firms Knowledge Knowledge Serenko 20 & Process Quantitative Literature Canada C Management N/A N/A Meta-Review & Bontis 04 Managemen LR Review / IC t Smith 20 Australian Australi C Public Value Public Sector Review Literature N/A Thematic

50 Ye Countr Typ Key Authors Source Context Approach Methodology Population Analysis ar y e Concept (S) 04 of Public a Organisations Review Review & Administrat Theoretical ion Discussion Critical Office For Public Literature Literature Steele & 20 Public C & Public Sector UK Service Qualitative Review & Case N/A Review & Hampton 05 Managemen E Organisations Creativity Studies Case Study t (OPM) Analysis Judge HC, Stiles & Thematic Thematic 20 Institute of Intellectual Kulvisaec UK C N/A Review Literature N/A Literature 03 Managemen Capital, hana Review Review t Performance American Public Value Thematic Review of Management Thematic Literature 20 Stoker Public USA C / N/A Review Literature N/A Review / 06 Administrat Networked Review Theory ion Governance Development Canadian Senior / Cognition Knowledge financial High-level Stovel J. of Semi-structured versus 20 Management services human Meaghan Intellectual Canada E Qualitative interviews behaviour 02 / Voluntary industry – 19 resources & Bontis Capital investigation Turnover Firms personnel.

Stroomber Thematic HC gen 20 Statistics New Literature Thematic C Measuremen N/A Review N/A Rose & 02 New Zeal& Zeal& Review of Discussion t Nana Measures

51 Ye Countr Typ Key Authors Source Context Approach Methodology Population Analysis ar y e Concept (S) Single Executives/ Subramani Academy of IC & Business Unit Moderated 20 Longitudinal Directors of am & Managemen USA E Innovative Orgs With Quantitative Regression 05 Questionnaire Marketing Youndt t Capabilities >100 Analysis & R&D Employees Dynamic Teece Strategic Model 19 Capabilities Literature Pisano G Managemen N/A Review N/A conceptualisa 97 & Strategic Review & Shuen t Journal tion Management J. of 20 Economic Economic Statistical Teulings Political C N/A Quantitative N/A 05 HC & Wages Modelling Analysis Economy Public Public Sector Information Basic 20 Norther IC In Public Wall Managemen E Organisation In Quantitative Questionnaire Not Statistical 05 n Irel& Sector t Review Ni Provided Analysis Literature Internationa Review Wang & 20 l J. of Dynamic Literature UK C N/A Review N/A (Strong But Ahmed 07 Managemen Capabilities Review Process Not t Reviews Described 676 Wezel , Organisation Netherla Dutch Qualitative Secondary Data Cattani 20 Organizatio Interfirm s - Econometric nds / E Accounting & Longitudinal & 06 n Science Mobility Individual Analysis USA Industry Quantitative Study Pennings Professional Accountants

52 Ye Countr Typ Key Authors Source Context Approach Methodology Population Analysis ar y e Concept (S) 800 HC Randomly Accounting, Quantitative Questionnaire Structural 20 /Managemen Private Sector Chosen Widener Organisatio USA E & & Participant Equation 04 t Control Organisations Firms With n & Society Qualitative Observation Modelling Systems > 250 Employees J. of Human Wright 20 Literature Literature Managemen USA C Resource N/A Review N/A & Boswell 02 Review Review t Management Thematic Literature Wright J. of 20 RBV & Literature Review & Dunford Managemen USA C N/A Review N/A 01 SHRM Review Model & Snell t Conceptualis ation Youndt HC, SC, OC J. of Quantitative Subramani 20 & IC profiles 208 Statistical Managemen USA E & secondary Questionnaire Executives am & 04 – HRM organizations Analysis t Studies data Snell investments

Notes: C = Conceptual, E = Empirical, P = Policy, J. = Journal

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