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Towards a learning centred view of intellectual capital : the value of learning and knowledge in the… Best, Amanda Jayne 1999

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TOWARDS A LEARNING OF INTELLECTUAL  CENTRED  VIEW  CAPITAL  The value of learning and knowledge in the human resource strategies of innovative small and medium-sized computer servicefirmsin British Columbia  A M A N D A J A Y N E BEST B . A . (Hons), Wolverhampton Polytechnic, 1977 (The University of Wolverhampton) Post Graduate Diploma in Education, The University of Queensland, 1980  A THESIS SUBMITTED IN P A R T I A L F U L F I L M E N T OF T H E R E Q U I R E M E N T S FOR T H E D E G R E E OF M A S T E R OF ARTS in T H E F A C U L T Y OF G R A D U A T E STUDIES Department of Educational Studies Higher Education We accept this thesis as conforming to the required standard  T H E UNIVERSITY OF BRITISH C O L U M B I A June 1999 © Amanda Jayne Best, 1999  In  presenting  degree freely  at  this  the  thesis  in  partial  fulfilment  of  University  of  British  Columbia,  I agree  available for  copying  of  department publication  this or  reference  thesis by  of this  for  his  study.  I further  scholarly purposes  or  thesis  and  her  requirements that the  agree  may  be  It  is  representatives.  for financial  the  gain shall  not  that  an  by  understood allowed  the  gT>ST  The University of British Vancouver, Canada  Date  DE-6 (2/88)  ^\\<Z\  \ ° \  Columbia  ,  ^  fgflxj  r  ^—  ^  u  M  A  ,  make it extensive  head  that  of  my  copying  or  without my written  permission.  Department of  advanced  Library shall  permission for  granted  be  for  ^Tuf\>l  TOWARDS A L E A R N I N G CENTRED VIEW OF I N T E L L E C T U A L CAPITAL  ABSTRACT  This study examines the value placed on learning and knowledge by innovative small and medium-sized computer service firms, using a framework for analysis adapted from intellectual capital (IC). Knowledge is conceived as a specialized and appreciable asset capable o f being acquired, nurtured, developed, managed and commercially exploited.  Emphasis is placed on evaluating the strategies and practices that drive company learning and knowledge transfer in smaller computer service companies with respect to developing and making use o f the knowledge owned by employees, customers and the corporation. The study evaluates the extent to which short-term commercial objectives impose conceptual boundaries on particular forms o f intellectual capital - skill development, experience and recurrent learning. Data is drawn from case studies and a broader, provincial sample o f companies based in British Columbia with ten to one hundred employees.  The study concludes that small and medium-sized computer service firms narrowly conceptualize and undervalue knowledge in the area o f human resource development, where supporting learning processes and structures are often poorly developed. Companies place a premium value on new forms o f knowledge with an obvious potential  to improve the skills and experience necessary to support commercial products and services. In contrast, learning, knowledge and expertise related to professional development and more long-term organizational and/or career benefits are consistently and systematically marginalized.  The study outlines limitations o f the IC framework in terms o f the intrinsic values attributed to sources and types o f knowledge. O f particular concern is the importance attached to formalized, external relationships with customers and the undervaluing o f knowledge with less obvious or potentially more long-term commercial value.  Suggestions for using the framework in small and medium-sized computer firms include broadening the existing narrow focus o f external knowledge sources to encompass the extensive network o f business relationships companies exploit, while the undervaluing o f knowledge found in professional development is countered by linking benefits to returns from specific, rather than generic commercial goals. Emphasis is placed on potential gains i n efficiency and productivity offered by improvements to learning and organizational processes.  TABLE OF CONTENT ABSTRACT  ii  T A B L E OF CONTENT  iv  LIST OF TABLES  vii  CHAPTER I - INTRODUCTION  1  1.2  O V E R V I E W O F STUDY  5  1.3  OBJECTIVES  1.4  R E S E A R C H QUESTIONS  8  1.5  SIGNIFICANCE OF THE STUDY  9  1.6  STRUCTURE OF THE STUDY  :  7  11  CHAPTER II - REVIEW OF LITERATURE  14  2.1  INTRODUCTION  14  2.2  INNOVATION: THEORETICAL PERSPECTIVES  14  2.2.1 Serial and Simultaneous Models Product Life Cycle Theory 2.2.2 Flexible Specialization 2.2.3 Regulation Theory 2.2.4 Techno-Economic Paradigms 2.2.5 Systems of Innovation 2.2.6 Organizational Change 2.3  LEARNING, INNOVATION A N DKNOWLEDGE  2.4  KNOWLEDGE  2.3.1 Introduction 2.3.2 Theoretical Perspectives 2.3.3 Innovation and Organizational Learning - SMEs  15 16 17 19 20 21 22 -SMEs  2.4.1 Definitions - Knowledge and information 2.4.2 Categories of Knowledge Core and Peripheral Knowledge 2.4.3 Creation, Conversion and Transfer of Knowledge 2.4.4 Levels of Knowledge 2.4.5 Skills and Knowledge - Core Capabilities 2.4.6 Competency and Attributes 2.4.7 Context: Innovation and Knowledge Based SMEs 2.5  TRAINING : THE SME CONTEXT  2.5.1 Categories of Training 2.5.2 Approaches 2.5.3 Training, Innovation and SMEs 2.6  THE STRATEGIC M A N A G E M E N T OF K N O W L E D G E  2.6.1 Strategic Perspectives Knowledge Centric Information Technology Environments Intellectual Capital Perspective 2.6.2 The High Tech Context - SMEs 2.6.3 Towards a Strategic Framework for Managing Knowledge in SMEs 2.7  SUMMARY  24  24 25 27  32  32 33 34 35 37 38 39 41 42  43 44 45 46  49 50 52 56 58 59 iv  CHAPTER III - CONCEPTUAL LENS AND FRAMEWORK  62  3.1  INTRODUCTION  62  3.2  DEVELOPING A DEFINITION OF INTELLECTUAL CAPITAL  62  3.3  TAXONOMY  63  3.4  THEANALYTICAL FRAMEWORK  63  3.4.1 Business Context: Small and Medium-Sized Computer Service Firms in B.C. 3.4.2 Human Capital Perspectives Assessing Human Capital Developing Framework Parameters Summary 3.4.3 Customer Capital Perspectives Assessing Customer Capital Developing Framework Parameters Summary 3.4.4 Structural Capital Perspectives Assessing Structural Capital Developing Framework Parameters Summary 3.4  LIMITATIONS OF THE F R A M E W O R K  CHAPTER IV - METHODOLOGY  63 64 64 65 66 67 68 68 70 70 71 71 72 73 73 74 75  77  4.1  INTRODUCTION  77  4.2  STUDY DATABASE  77  4.2.1 4.2.2 4.2.3 4.2.4 4.2.5 4.3  Origin of Database Case Study Design Interview Guide Quality and Limitations of Data Access to Case Study Data  SURVEY: INTRODUCTION  4.3.1 Survey Design Company /Business Profile Innovation Skills, Learning and Training 4.3.2 Survey Database - Computer Services Sector 4.3.3 Distribution of Survey  4.4  LIMITATIONS OF THE DATABASE  CHAPTER V - FINDINGS  78 78 79 79 80 80  81 81 81 82 82 82  83  86  5.1  INTRODUCTION  86  5.2  BUSINESS CONTEXT  87  5.2.1 Case Study Profiles 5.2.2 Survey Firms 5.3  H U M A N CAPITAL  5.3.1 Hiring Practices 5.3.2 Types of Knowledge, Skills and Experience in Demand 5.3.3 Strategies and Factors Influencing the Final Hiring Decision  87 88 89  89 89 92 V  3  5.3.4 Training and professional Development Formal Policies, Statements and Procedures , Organization and Forms . . 5.3.5 Knowledge Management Formal policy, Statements and Procedures . Organization and Forums - Creation, Access and Transfer of Knowledge  93 93 94 96 96 97  5.4 C U S T O M E R C A P I T A L 5.4.1 Business Relationships Nature of Knowledge Relationship Approaches and Forms of Knowledge Relationships 5.4.2 Innovation, Learning and Knowledge Influence on Innovation, Learning and Knowledge Transfer 5.4.3 Developing Support Services ; Influence on Learning and Knowledge Types of Knowledge and Learning Situations  99 99 99 100 101 101 103 103 104  5.5  104 104 104 105 107 107 107 109 109 109  STRUCTURAL CAPITAL 5.5.1 Organizational Capital Investment in the Knowledge Infrastructure Structure and Forms of Knowledge Systems and Tools 5.5.2 Innovation Capital . Protection of Knowledge and Creative Talents Structures and Forms of Protection and Encouragement 5.5.3 Process Capital Monitoring Efficiency and Productivity Levels of Knowledge Systems Structures and Tools  5.6  SUMMARY  110  C H A P T E R VI - DISCUSSION OF FINDINGS  112  6.1  INTRODUCTION  •  6.2  H U M A N CAPITAL  112  6.3  CUSTOMER CAPITAL  117  6.4  STRUCTURAL CAPITAL  119  6.5  T H E D E V E L O P M E N T OF I N T E L L E C T U A L C A P I T A L  121  CHAPTER VII - CONCLUSIONS  112  123  T O W A R D S A N A N A L Y T I C A L F R A M E W O R K FOR SMES  126  I M P L I C A T I O N S FOR P O L I C Y  129  FURTHER RESEARCH  133  BIBLIOGRAPHY  .  137  APPENDICES  151  APPENDIX A - INTERVIEW SCHEDULE  152  APPENDIX B - SURVEY  172  APPENDIX C - CASE STUDY PROFILES  183  APPENDIX D - F R A M E W O R K FOR ANALYSIS  186  vi  LIST OF TABLES  TABLE Table 1  Training and Professional Development - characteristics  CHAPTER I - INTRODUCTION  1.1  B A C K G R O U N D TO STUDY  Addressing the workforce needs o f high tech sectors has become a significant feature o f educational policy i n British Columbia. Government, industry and business groups continue to promote the social and economic benefits o f moving the province away from a resource based economy, while economic policies focus on meeting the demand for specialized knowledge and skills in emerging fields and markets, rather than subsidizing conditions o f over supply in the declining resource sectors o f forestry, mining and fishing ( M A E T T , 1991, 1998; M S T L , 1995).  However, the majority o f firms working i n these high tech areas are also classified as small and medium-sized enterprises, which in B . C . equates to firms with less than 60 employees, or more commonly, under ten (B.C. Stats, 1997; T I A , 1997). Given the dynamic, often entrepreneurial and limited managerial resources present i n smaller high tech companies, providing policy makers with comprehensive data on how firms manage their workforce - human resources development ( H R D ) - has proven problematic, particularly with regard to the process o f learning and knowledge acquisition.  O f the three major studies looking into the relationship between learning, knowledge and human resource needs o f small and medium-sized companies, only Schuetze et al (1997) focuses exclusively on B . C , with the computer services sector comprising one o f a four sector study into innovation, skills and learning in small and medium-sized enterprises.  Work by B a l d w i n (1994) and Betcherman (1997) has focussed on developing national characteristics, trends and corporate returns on education and training.  Although firm and sector profiles o f knowledge and learning contexts remain underdeveloped, given the pivotal role o f education in gaining access to the workplace, institutions o f higher education are under increasing pressure to respond to the changing nature o f employment and specialized needs o f particular sectors and occupational areas (Fisher, et al. 1994; B C B C , 1997; M E S T , 1996).  A t the firm level, computer service companies have responded to shortages o f suitably qualified workers and high turnover rates by phasing out extensive orientation and training programmes for new and inexperienced employees. Firms now routinely screen applicants for computer literacy, while expecting a conversance with, and experience of, workplace protocols. Increase emphasis is placed on firm suitability with equal importance attributed to self-sufficiency and interpersonal skills ( B C C C , 1997; Schuetze etal, 1997).  Provincial trends indicate that continued employment w i l l involve the periodic upgrading of qualifications and skills, along with the ability to incorporate these new workplace characteristics into career planning ( M A E T T , 1991; M E S T , 1997). This has resulted i n the emergence o f a broader mandate for education, embodied in life-long learning strategies. Institutions are reaching out to business, resulting in an increase i n work-based and co-op programmes, full fee business seminars and M B A degrees, along with an  2  expanded role for continuing education i n the areas o f high tech skills and management training  Less apparent is evidence o f a well developed corporate response to high tech skill shortages by the computer services sector - in response to what many consider a global, rather than provincial shortage o f highly skilled technical, marketing and m i d management professionals. O f particular concern to both policy makers and the business community is the disproportional low incidence o f mature, successful computer service companies to emerge from an rapidly expanding small and medium-sized high tech sector, and the extent to which shortages o f skilled and experienced professionals are contributing factors (SCBC,1995; S P C , 1997). These are the companies most affected by increased competition for skills, yet the most elusive i n terms o f participating i n policy advisory groups, with a clear disaffection for public sector training initiatives (Schuetze, etal, 1997).  Computer service companies and high tech industry associations attribute the 'inconsistently predictable' responses o f managers to limited resources, rapidly developing technology and intense competition (Maloney, 1997; S P C , 1997; T I A , 1997). In contrast, professional associations offer a contrasting perspective, indicating concerns over a situation where market demand for high tech skills has effectively promoted and rewarded short-lived technical expertise, inexperience and lack o f professional development (Slofstra, 1996). Studies highlight the failure o f managers to recognize  3  economic returns, ignorance and the consequences associated with a professional culture comprised o f 'free spirits' with little or no learning culture ( M A E T T , 1998; L o o , 1991).  This suggests a lack o f consensus and cohesion in responding to skill shortages and professional certification programmes, evidenced by l o w membership rates i n organizations such as the Canadian Information Processing Society (CIPS). It also demonstrates an intrinsic difference in two contrasting yet interrelated perspectives on the role and benefits o f 'in-demand' technical skills and experience, versus long-term professional development (Best, 1997). The absence o f an apparent need or incentive to co-operate i n raising levels o f professional competence has served to inhibit the broad acceptance o f formalized learning strategies in high tech sectors such as computer services (Schuetze et al, 1997).  Business and industry associations have actively promoted the perception that companies would respond favourably to initiatives intended to assist in the development o f necessary skill and expertise ( M A E T T , 1998). However, given the often poor response rates and absence o f supporting data , more research needs to undertaken i n order to validate the 1  size o f constituencies represented, the competence and/or extent to which managers are prepared and subsequently respond and whether public sector involvement i n the learning and skill development o f knowledge based companies might act as an disincentive to developing in-house learning infrastructures. The latter is poignant with respect to both  M A E T T (1998) computer industry report - 17% survey response rate - Innovation, Skill and Learning  4  this sector and study. Previous studies into innovation, learning and training suggest incentive appears to have joined expedience, in playing a significant role i n how small and medium-sized computer service firms respond to human resource development in terms o f the value attributed to knowledge and supporting learning infrastructures (Baldwin, et al.,1995; Betcherman, 1997; Schuetze, 1997). The challenge for workforce strategists appears one o f how to merge the incentive associated with commercial gains with the expedience o f making the most efficient and effective use o f limited resources, which in small high tech firms centres on competent management o f the knowledge and learning driving products, services and organizational structures.  1.2  O V E R V I E W OF S T U D Y  This study examines the advantages to both firms and educational service providers o f marrying commercial goals, learning processes and operational necessity into a practical and sector specific human resource strategy and eventual management tool for smaller, innovative computer service firms. One with the capacity to increase individual and firm competency by complementing and enhancing, rather than containing the dynamic and entrepreneurial qualities o f this sector.  Education serves as the disciplinary perspective, centred in learning and the acquisition of knowledge and skills, while the focus is one o f leverage and the extent to which companies are making efficient and competent use o f the principal resource driving the products, services and processes o f high tech companies: the knowledge o f their  5  employees. This interest finds expression i n the field o f intellectual capital (IC), which serves as the study's conceptual lens, whereby commercial benefits are thought to accrue from an inclusive and interacting system o f returns, with the capacity to incorporate both individual and external components o f knowledge. Here the knowledge owned by employees, customers and the firm is perceived as an appreciable and exploitable commercial asset.  The conceptual strength o f IC centres on the potential to incorporate facets o f efficiency, competence and strategic management with regard to using knowledge and learning to improve the overall and long-term skill levels, expertise and professional acumen, related not only to technical and managerial functions but also sales and marketing. IC also provides sufficient disciplinary flexibility to incorporate the development o f a process and learning centred approach with the type o f categories, characteristics and operational conditions necessary for measurement.  Explored is the contention that - by recognizing, nurturing and capturing knowledge it can be managed and leveraged to improve products and procedures, and in doing so, is transforms knowledge into what U l r i c h (1998) believes is effectively the firm's only appreciable asset: collective knowledge that encompasses an organizations culture, systems and processes.  This study further extends the applied focus o f knowledge implicit to the I C perspective to include gains in efficiency and productivity. Management claims o f feeling  6  overwhelmed by financial and organizational limitation are now discussed i n relation to both the short and long term benefits associated with making better use o f existing resources, exploring the impact o f having excess capacity with respect to releasing senior employees to engage in mentoring and supervisory functions. Questions centre on the subsequent impact this might have on developing in-house solutions to the type o f skill shortages likely to inhibit the generation o f new knowledge necessary to drive products, services and processes.  1.3  OBJECTIVES  The objective o f this study is to determine whether the human resource strategies o f 2  innovative, small and medium sized computer service firms i n British Columbia realize the commercial potential implicit in organizational learning and knowledge  The intent is to employ the intellectual capital perspective as the basis for analysis, while assessing limitations o f the existing taxonomy with respect to the context o f innovative small and medium-sized computer service firms - comparing the results o f this approach to those o f previous studies. Explored is the relationship between strategies and practices supporting the acquisition, nurturing, management and exploitation o f employee and customer knowledge, and the conceptual boundaries firms impose on the value o f particular forms o f skills, experience and recurrent learning.  2  Human resource strategies and development (HRD). These terms are used in an educational context to include learning processes that facilitate the acquisition, creation, nurturing and development of knowledge.  7  Specific study objectives include:  •  •  1.4  Determining the extent to which employers acquire, nurture, develop and exploit the knowledge and experience o f existing employees and business associates to improve organizational strategies, structures, practices, and productivity levels; Evaluating the intellectual capital framework in terms o f the concepts, ease o f use, appropriateness to small and medium-sized companies and high tech sectors, and possible modifications that would be useful to companies interested in developing this concept into a formalized human resource tool.  R E S E A R C H QUESTIONS  The central question o f the study is:  Do innovative, small and medium-sized computer service firms conceptualize particular forms of knowledge and recurrent learning in terms of their value to products and services or organizational processes?  Within this broadly conceptualized focus there are three secondary or framing questions: 1.  What type o f business context do computer service firms operate within and does this impact why and how do firms respond to their human resource development;  2.  What policies, strategies and practices have established small and medium sized enterprises adopted i n order to acquire, recognize, nurture, develop, capture, and exploit the knowledge owned by employees, customers and their own organizational structures;  3.  D o smaller firms use mentoring and supervision as a means o f improving efficiency, productivity and human resource development.  8  1.5  SIGNIFICANCE OF T H E S T U D Y  The study is significant in respect to three areas: the contribution the analytical framework makes to the field o f intellectual capital; the use and application o f leverage as an approach to learning, knowledge and human resources development within areas o f public policy, institutions and professional associations; and the focus on size and sector small and medium-sized computer services firms in British Columbia  The framework for analysis provides firms, policy makers, industry associations and those involved in training and broader based educational programmes with a perspective of learning and knowledge within innovative small and medium-sized computer firms that makes a case for more effective and creative use o f the knowledge firms have at their immediate disposal. This is timely, in that smaller, established firms in this sector are showing increased interest in industry and size specific approaches to issues such as technical and mid-management skill shortages and making more efficient use o f resources - issues which significantly impact the ability to attract funding and capital.  Limitations o f the framework are discussed in the concluding chapter and may provide insights useful i n subsequent research and studies. This discussion also makes suggestions for using the framework in smaller high tech firms, which is a departure from the majority o f IC dialogue, which tends to focus on larger corporations.  9  In terms o f data, analysis and overall conclusions, the study findings have implications for firms, industry associations, professional groups, private sector trainers and public institutions. Analysis w i l l be useful to companies interested in making comparisons o f their knowledge management strategies against established companies with a demonstrated track record o f innovative approaches to business situations. Findings w i l l also serve as a checklist for case study firms as they continue their corporate 'visioning' process. The study also provides a working introduction to the type o f factors that can be employed to develop a profile o f how to use learning and knowledge strategically.  B y way o f contrast, industry associations, professional agencies and both private sector trainers and public institutions may find a role for the discussion framework in marketing the concept o f lifelong learning within a more structured and business orientated framework, which offers organizations tangible returns on investment without institutions relinquishing broader educational goals embodied in the learning and skill components o f knowledge acquisition, management and exploitation.  A n d finally, the area o f curriculum development. The IC framework makes a clear distinction between the types o f technical, professional and business knowledge found within organizations and how these components interrelate, while providing a structure for approaching, differentiating, determining and contextualizing the specialized knowledge needs o f companies against existing programme goals and objectives.  10  S T R U C T U R E OF T H E S T U D Y  1.6  The initial part o f the study reviews literature on the operational, innovative, knowledge and learning, and strategic management contexts o f small and medium-sized computer firms i n British Columbia. This chapter serves three functions. The first provides a context for the subsequent discussion o f why and how learning and knowledge are viewed, valued and managed i n smaller high tech firms, with specific reference to:  •  prevailing theories and perspectives on the business and innovative context firms operate within;  •  types and forms o f learning and knowledge found in smaller firms; and finally,  •  strategies for managing learning and knowledge.  The second function seeks to establish firm characteristics o f learning and knowledge already resent in the literature and useful for evaluating the effectiveness o f the framework, while the third centres on developing the broader, and strategic management potential o f the I C perspective, prior to introducing the formal taxonomy and analytical framework - used to structure both data and the conclusions o f the study.  Following a review o f literature the conceptual lens and framework are presented in chapter three, where intellectual capital is examined in detail, reviewing human, customer and structural capital with respect to characteristics, contrasting perspectives and assessment criteria present in the literature. The study's framework for analysis is also formalized, presented with accompanying verification o f why and how the final form  11  was arrived at. Factors cited include the need for a generic framework and suitability for use i n smaller firms.  The study's methodology is outlined i n chapter four. The origin, objectives and research protocols used to compile the secondary database are examined, coupled with an explanation o f procedures and limitations. The latter reviews issues such as size o f sample, age o f database and bias.  Findings o f the study are presented i n chapter five. Data relate to business/operational contexts and the three components o f IC - human, customer and structural capital, encompassing:  •  firm and sector characteristics, growth patterns and perceived challenges  •  hiring practices, training and professional development and the management o f knowledge;  •  forums used i n the creation, access and transfer o f knowledge, innovation, learning and knowledge transfer and support services; and  •  organizational, innovation and process capital  Outlined are the policies, strategies and practices adopted by firms with regard to the developing trust and commitment in the areas o f human, customer and structural capital. The subsequent discussion o f findings (chapter six) examines this developing profile o f why, how and in what ways learning and knowledge are perceived, structured and delivered in smaller computer service firms with regard to the influence o f short versus long-term business objectives on the value assigned to each.  12  The concluding chapter seeks to address questions i n two areas. First, the extent to which innovative, small and medium-sized computer firms narrowly conceive the value o f particular forms o f knowledge, skills experience and recurrent learning, - the influence and impact o f short-term commercial goals on the decision making process, and the implications this has for human resource development strategies. Secondly, the usefulness o f the IC conceptual and analytical framework for developing a learning and knowledge perspective o f smaller high tech or computer services firms.  Implications for policy and further research complete the study. Policy w i l l be discussed with regard to both public and private sector interests, while further research w i l l focus on further development o f the IC perspective - stressing the need for a size and sector specific models. Suggestion for through additional studies identify present limitations with regard to data collection and applied focus.  13  CHAPTER II - REVIEW OF LITERATURE 2.1  INTRODUCTION  The review o f literature encompasses areas o f research related to innovation and learning, learning and knowledge, and the management o f knowledge in dynamic, small and medium-sized business organizations. While the focuses o f the study is small and medium-sized computer service firms in British Columbia, limited research and the often sectoral focus o f literature has resulted in a broader high tech context for sections o f the review. Emphasis is placed on reviewing the influences thought to be driving the policies, structures and approaches to managing the skills, attributes, experience and overall knowledge base o f these organizations.  Developed are the often complementary relationships that exists between economic or market driven perspectives o f the role and form o f organizational learning and those suggested by cognitive and institutional theorists. The review concludes with a recognition o f the present trend towards the strategic management and leverage o f intellectual resources embodied i n the intellectual capital perspective, which forms both the conceptual and analytical framework for the study.  2.2  INNOVATION : THEORETICAL PERSPECTIVES  Innovation is defined as "the search for, and the discovery, development, improvement, adoption and commercialization o f new processes,., products and, .. .organizational 14  structures and procedures" (Jorde and Teece, 1990:76). The process can also be viewed as "creating new knowledge and drawing on the knowledge pool to generate new products and processes" (Hall, 1986:1).  There are a number o f theories offering explanations o f the process and structures o f innovation. These range from traditional economic perspectives present i n serial and simultaneous models, to the more commercial and strategic approaches o f flexible specialization and regulation theory, the life-cycle focus o f techno-economic paradigms and the more inclusive view o f the innovation process as a system. The significance to both this study and knowledge management can be found in the strategies and trajectory innovation is thought to follow, and by extension, the type o f knowledge networks one might expect to develop.  2.2.1 Serial and Simultaneous Models  The serial model views innovation as a sequential process, taking place in a "linear and predictable fashion, from research to development, design, production, and then finally to marketing, sales and service" (Jorde and Teece, 1990: 77). Feedback loops or overlaps between stages are absent. In contrast, simultaneous models " recognize the existence o f tight linkages between firms, within firms and sometimes between firms and other organizations like universities" (ibid:77). The significance o f the simultaneous model lies in the view o f innovation as incremental, cumulative and not dependent on research as a  15  starting point or initiator. Innovation is viewed as a process that builds on existing knowledge.  Product Life Cycle Theory  Product life cycle theory offers a broader perspective o f the development or innovation sequence. In its simplest form the life cycles o f products are portrayed as linear, with "one development pattern for all products" (Flynn, 1987: 10). Innovation is viewed as a three stage development, comprise o f research, development - application and marketing overlap (Abernathy, Clark and Kantrow; 1983), with four corresponding sales growth characteristics - introduction, rapid, diminished and stability or decline (Flynn, 1987). The initial stages o f development are typically considered volatile. Firms face operating conditions where high rates o f innovation and market uncertainty frequently overlap and applications serve to focus market interest. The type o f knowledge needed at this stage o f the project is usually highly specialized. A common feature is the flurry o f similar products on the market as competitors also assess and work with the new technology (Abernathy, Clark and Kantrow; 1983).  Innovation is then thought to move from a development to application mode as firms attempt to recoup their R & D investment. Studies indicate the focus o f innovation then shifts to marketing, although in smaller enterprises, options may be limited due to fiscal and organizational constraints - resulting i n incremental innovation as the organizational practices 'on-the-job-training', slowly building a critical mass o f specialized skills and  16  expertise, and increasing the value o f employees working in these areas - which by extension results in forms becoming more vulnerable to employee turnover (Baldwin et al., 1995; Betcherman, 1997).  Slow rates o f change are also reminiscent o f the Kaizen management philosophy, whereby innovation is perceived in terms o f small but continuous improvements involving all facets o f the organization and extended relationships (Martin, 1995). Coombs (1988) suggests this gradual building o f skill and expertise consolidates the position o f larger high tech firms by virtue o f having both the experience and market power to support their position. However, companies in British Columbia appear more interested in using strategic partnerships to protect their autonomy and development research interests (TIA, 1997), suggesting that size can also work to consolidate sectors against larger competitors.  2.2.2 Flexible Specialization  Flexible specialization views innovation i n terms o f an incremental process born o f the proximity, reciprocity and trust between firms with similar technical interests dividing their resources into distinct areas o f specialization and cooperating networks. Learning is considered a central element in the subsequent networks o f self-interest that emerge, perceived as the exchange o f information within and among firms, which in turn leads to the expansion o f innovative capacity. Piore (1992) considers the process o f innovation in terms o f creating tension between competing interests, with new products emerging  17  because o f pressure to produce, in which firms continuously adapt to marketplace demands.  This theory is generally associated with the type o f large scale cooperation and markets found i n Europe, eastern Canada and the U S . However, government interest i n attracting the type o f large scale relocation or creation o f 'clean' high tech firms may result in a renewed interest and relevance in provinces such as British Columbia and Alberta. This strategy offers potential gains to small computer service firms i n the form o f opportunities to share R & D costs, training facilities and technical data, while providing valuable networks o f experience for the sector as a whole.  The inherent liability o f flexible specialization is one o f becoming too specialized and dependent on partnerships, to the exclusion o f other commercial opportunities and areas of technology. There have been attempts to determine the "optimal m i x o f innovation projects" (Hall, 1986:7). Nelson and Winter (1982) determined that firms are motivated by the prospect o f large gains rather than a rational response to often limited resources. A s such, unprotected technology is likely to attract others looking to take advantage o f the same opportunity. While this may result in the transfer o f knowledge between competing firms, results suggest the rewards o f being first to market are often alluring enough to result in firms overextending their resources.  Flexible specialization theory relies on learning and related benefits being closely tied to labour force mobility and a "reshuffling  o f skills, know-how and experience acquired  18  at (their) previous job(s)" (Saxenian, 1989: 37). It is assumed firms have the structures in place to capture the knowledge o f key employees before they are 're-cycled' and that workers w i l l remain in the immediate area - placing a strategic value on competence and learning with regard to the capacity o f management to respond to changing conditions.  2.2.3 Regulation Theory  In contrast, regulation theory explores the subcontracting aspect o f strategic partnerships, which tend to be narrowly conceived in terms o f sector and type o f work. This type o f business strategy is closely associated with the growing pressures on larger corporations to streamline (Coriat, 1992), whereby creative and structurally expensive R & D areas are contracted out to more cost effective and flexible small companies (Harrison and Kluver, 1989).  Studies suggest that the advantage for small computer service firms o f this type o f strategic relationship typically lies in the funding o f projects and access to related technology through the client. Liabilities include investment i n personnel and no legal right to the technology developed (Schuetze, et al. 1997). Maintaining this type o f arrangement often results i n differing patterns o f innovation and learning than one would expect to find in truly independent companies. Client needs tend to drive decision making, with greater emphasis on the process and goals o f improved efficiency and productivity. The value or incentive associated with learning and knowledge are tied directly to returns from funded work (Baldwin, 1995).  19  Regulation theory also provides a broader perspective from which to view existing public sector involvement in high tech skill shortages. There is the potential for investments in educational infrastructure to inadvertently form the basis for buy-outs, i n that while a well trained and educated workforce may result in a greater percentage o f smaller high tech companies growing into larger corporations, well run and profitable companies also make attractive acquisitions. However, perhaps more appropriate to both B . C . and the computer service firms specifically, is the school o f thought that views flexibility and specialized development more beneficial than size and proximity (Taylor, 1986). This is especially relevant in a sector where the majority o f S M E s operate within fast moving niche markets.  2.2.4 Techno-Economic Paradigms  In contrast to regional or broad innovation theories, techno-economic paradigms focus on technology life-cycles. Perspectives attempt to reconcile what technology areas produce, with why and how organizations move through a particular product cycle - highlighting the rise o f small specialized firms operating in niche markets (Freeman and Perez, 1988; Perez, 1988). Here products and the processes driving them are viewed as interrelated aspects o f innovation systems that include technical, organizational and management related functions, rather than independent and exclusive outcomes.  One o f the major advantages o f a sector specific model is the opportunity to explore what products look like i n terms o f their development pattern, while gaining a deeper  20  understanding o f what constitutes 'new' R & D versus an extension or application o f an existing technology: both may be innovative uses, yet reflect differentiated phases o f a product life cycle. This perspective also provides a useful background for this study in that it presents a strategic case for establishing knowledge management systems, relating innovative success to determining the skills and infrastructures necessary to support new products and processes. While analysts typically examine the relevance o f product lifecycle theory in relation to new technology (Taylor, 1986), placing development sequences within an innovative context also affords the opportunity to introduce the dynamic and uncertain nature o f high tech environments against which knowledge management takes place. In this instance, determining the life cycle stage o f a firm's product range provides insight into the decisions being made with regard to the strategic use o f resources.  2.2.5 Systems o f Innovation  The complex nature o f innovation has lead to interest in developing a broader and more inclusive model o f influences and networks, many o f which appear drawn from the simultaneous model and centre on the role and nature o f linkages and feedback. Lundvall (1995) suggests companies operate, whether consciously or not, within systems o f innovations, which are defined in terms o f interacting influences and relationships specifically, the creation, dissemination and exploitation o f new and commercially useful knowledge. Influences and relationships that Edquist, et al. (1997) considers part of sophisticated 'system' o f feedback mechanisms and relationships, comprised o f  21  scientific, technological, educational, manufacturing, government and market stakeholders.  Influences on firms i n these systems include: size; history/ownership; management; government support; access to markets; and capital sources (Voyer, 1994, Baldwin, et al., 1994) - with markets and finance also cited by industry and business associations as obstacles to growth ( B C C C , 1994; T I A , 1997). However, there are also institutional factors shaping firm and system responses, present in the regulations, professional standards and management practices owners and managers have to comply with (Edquist, e t a l , 1997).  Significant to this study are the often intangible factors o f learning, knowledge management and human resource development, which effectively includes knowledge acquisition, training and professional development, and the learning processes that support these activities (Lundvall, 1995).  2.2.6 Organizational Change  Broad models and theories suggest underlying influences and operational characteristics of both regions and systems o f innovation. However, the role and significance o f technology becomes most evident at the firm level, where rapid rates o f change, coupled with the decreasing shelf-life o f many products serve to create both organizational tension (Bouwen and Fry, 1988; Wolfe, 1990a) and the impetus for developing new  22  perspectives and approaches - and by extension work structures, learning processes and knowledge structures o f the firms in this study  In order to remain competitive, companies routinely re-evaluate business strategies and company structures, practices, products and services - against the capacity to innovate " the object (of which) may be diversification through product, market or t e c h n o l o g i c a l . i t may be a process o f managerial innovation, which often follows economic, technological, or cultural-political changes" (Hosking and Anderson, 1992:124). Studies indicate organizational change is often a reflection o f company history, years in operation, education levels, management style and philosophy, access to financial resources, market forces and regulatory environment (Freeman and Barley, 1990; Schuetze et al., 1997).  Forms o f organizational change reflect the actions companies take to respond to innovation. Examples o f theories and corresponding strategies include: developing an interactive and learning centred work environment - where flat or organic hierarchies, decentralized decision making and groups work characteristics are common - learning organizations; building and sustaining a core o f skilled employees, while contracting service and lower skill needs on an ' i f and when needed' basis - where more structured hierarchies and compartmentalized work units are common - core-periphery model; and environments where technical (equipment, procedures etc) and social systems (interpersonal relationships, interaction) are assigned equal and essential elements o f an effective work organization - and characterized by the development o f autonomous work  23  groups, responsible for project schedules, staffing and conditions - S T S socio-technical theory (Hosking and Anderson, 1992; Newton, 1996; Bushe and Shani, 1991).  2.3  LEARNING, INNOVATION A N D K N O W L E D G E - SMEs  2.3.1 Introduction  The relationship between innovation, learning, knowledge management and commercial success is central to this study. Within this context, economy based literature typically defines learning i n terms o f a process, whereby the capture, flow, use and dissemination of information, experience and skills are related to:  •  doing (Arrow, 1962); using (Rosenberg, 1982);  •  interacting (Lundvall, 1988); and  •  knowing (Nonaka and Takeuchi, 1995)  Learning is seldom viewed as conforming to one particular form or process. Significant is the cumulative nature o f these learning contexts, which serves to link this perspective with the previously outlined simultaneous model o f innovation.  The two primary contexts o f learning are individual and organizational (Pedler, et al., 1988). Relevant to the high tech focus o f this study is the perspective o f Attewell (1992),  Socio-technical theory (STS) or socio-technical systems theory (STST)  24  who, in a discourse on technology diffusion, contends that "implementing a complex new technology requires both individual and organizational learning". Specifically:  "individual learning involves the distillation o f an individual's experiences regarding a technology into understandings that may be viewed as personal skills and knowledge. Organizational learning is built out o f this individual learning o f members o f an organization, but is distinctive...(while)...the organization learns only insofar as individual insights and skills become embodied in organizational routines, practices and beliefs that outlast the presence o f the originating i n d i v i d u a l " (p.6)  2.3.2  Theoretical Perspectives  Theories often identified as significant to innovation and S M E s propose learning as: a structured process and investment, where skills and knowledge are dependent on situation and context - situated learning or situated cognition (Resnick, 1987a/b; Stern, 1992); a process examining, questioning, validating and revising personal experiences transformative and action learning (Mezirow, 1990; Argyris,1982; Argyris and Schon, 1974); and, a characterization o f a broader organizational learning culture, where the motivation, processes and context o f learning are stressed - learning organization (Senge, 1990; Lundvall, 1995).  Interest in situated learning reflects a shift in focus from "how knowledge gets recorded .. .how knowledge is constructed and... .the context in which learning - instruction take place.. .questioning.. .traditional positions like the one that skill and knowledge is independent o f context" (Rubenson and Schuetze, 1995). Rather than trying to alter 25  learning behaviour, there is greater emphasis on understanding the social and cultural context and adaptation in which cognitive skills develop (Sternberg, 1985) and providing a meaningful context or way o f presenting material. The ability to relate to what is being presented is considered central to promoting a sense o f trust and emancipation - a comfort zone, where learners develop a sense o f control over their learning (Resnick, 1989).  Transformative learning introduces critical and reflective components (Mezirow, 1991), to skill and knowledge acquisition, with strong links to the metacognitive school, centred in executive processing functions - planning, monitoring and evaluating intellectual task performance (Sincoff and Sternberg, 1989). These critical components are also present in the work o f Argyris (1994) and Volpert (1989) - theory in action, where taking time to analyze, reflect and learn 'before' acting is related to work conditions, with goals o f efficiency, autonomy and control. Emphasis is placed on providing working conditions conducive to personal growth, which both employee and company have the potential to benefit from.  The transformative process views learning as an extension o f an on-going "ability to make assumptions explicit" - positions which serve to provide both context and a sense of validation, and ultimately, action (Cranton, 1994:24). While situated and transformation theories centre on context and self-directed qualities o f individual and organizational learning, the development o f a broader and more inclusive and learning 'culture' lies at the centre o f learning companies (Senge, 1990; Lundvall, 1995), although there is no definitive model (Dale, 1994; Hommen, 1995). Drew and Smith (1998)  26  suggest a model where the learning organization is a "metaphor, rather than a distinct type o f structure", reflecting "a social system whose members have learned conscious communal processes for continually:  •  generating, retaining and leveraging individual and collective learning to improve performance o f organizational system in ways important to all stakeholders; and  •  monitoring and improving performance"  (p.l)  In contrast, Pedler (1988) suggests a definition whereby learning is encouraged amongst all employees and used to continuously transform itself. Individual learning and potential is harnessed by the company, which in turn expands this learning culture to include external stakeholders. Commitment is further consolidated by linking H R D to business policy and goals. Influences on innovation originate with the transformation process, centred in "the search for new ideas, ... problems and ... opportunities for learning, from which competitive advantage can be culled.." (Rowley, 1998).  2.3.3 Innovation and Organizational Learning - S M E s  Literature on organizational learning and innovation examines the 'characteristics and influences' on the learning cultures o f both employees and companies - organizational learning is comprised o f shared patterns and understandings. Interpretations o f these patterns o f learning include the contingency and institutional approaches embodied in absorptive capacity and institutional isomorphism (DiMaggio and Powell, 1983).  27  Under this perspectives organizations are believed to learn from other organizations in their field or sector (horizontal networks and relationships) or from groups or individuals within the company (vertical power relationships and organizational structures). The inclusion o f these perspectives is considered useful in that studies, looking into the policies, structures and practices surrounding learning and knowledge i n smaller high tech firms, have identified factors such as owner/management, culture/values, external influences, previous knowledge and experience as essential elements i n establishing the increased levels o f trust and commitment deemed necessary for the creation o f new knowledge and innovation (Voyer, 1994; Harris, 1996; Betcherman, 1997; Schuetze, et al., 1997; Ruggles, 1998)  The significance o f absorptive capacity is the focus on a firm's ability to exploit external sources o f knowledge, using the prior knowledge o f employees and managers as a learning context or building frame (Weick, 1991). Given the presence o f an existing knowledge base, learning is typically incremental in nature, growing slowly over time. In terms o f how knowledge is transferred, literature points to two conduits: specialized gatekeepers, whereby knowledge is filtered and disseminated according to interest and need; and a more organic and broad exposure to in-coming knowledge, whereby organizational structures are relaxed i n favour o f a broad team or project based approach to moving intellectual material in and around the company (Cohen and Levinthal, 1990).  28  This is also the nurturing environment for communities o f practice, comprised o f interest groups who effectively filter and disseminated information - on either a formal or informal basis (Lundvall, 1995; Amidon, 1997). Studies suggests firms who filter material experience fewer problems codifying information, yet may underestimate the significance o f other more generic material. In contrast, organic organizations run the risk of information overload, with few procedures or structures i n place to capture and document potentially significant material (Lyles and Schwenk, 1992).  Case studies on smaller high tech companies underscore the importance o f both structured and informal opportunities to transfer knowledge, while pointing to the increasing role o f communities o f practice as 'defacto' gatekeepers within organizations. Here employees with common interests eg., 'Java and the internet' i n the computer service sector would monitor, filter and report on aspects o f the technology considered pertinent or offering potential to the innovative capacity o f the company (Schuetze, et al., 1997; A m i d o n , 1997).  Absorptive capacity is thought to be characteristic of, and most effective in, flexible organizations with employees from a broad range o f disciplinary backgrounds, whereby there is a greater range o f skills, expertise and intellectual material to stimulate innovation. Business environment is thought to play a significant role i n how learning and knowledge are perceived, with the fast pace and contingency based high tech firms considered representative o f this type o f learning in action (Cohen and Levinthal, 1990; Hommen, 1995). 29  In contrast, institutional isomorphism views external influences on learning from a broader context. Rather than viewing firm responses to external influences as purely economic or market driven, the context is moved to an inherently political arena, seeking to clarify the form and extent o f the power relationships between employees, owner/managers and external influences with respect to how each is viewed and responded to (Dimaggio and Powell, 1983).  In regard to learning, literature indicates that external relationships or networking play a significant role i n the innovation process, while smaller companies often rely upon these relationships to supplement their in-house knowledge base. The focus is one o f determining the extent to which previous experience has shaped decision making processes and the impact these successes and failures have on the capacity to remain open to new ideas, whether product, service or process related (Hommen, 1995; Davenport and Prusak 1998; Powell, 1998).  Studies suggest that the greater the involvement with external networks and their institutions the more pressure is exerted to conform to common standards, which is often rationalized i n terms o f the need to create a common language or means o f communicating and transferring knowledge ( B C C C , 1997; Schuetze, et al., 1997; T I A . 1997) The potential impact o f these external relationships or influences on firms is explored within three contrasting modes o f change: coercive, mimetic and normative isomorphism (Dimaggio and Powell, 1983).  30  Coercive isomorphism is centred in the influence o f organizations or institutional agencies and the pressure exerted on firms to conform to certain guidelines or regulations. This is often tied to issues o f industry legitimacy and the development o f a broadening power base. Presently, this type o f regulatory conformity is often met with considerable disdain and avoidance by high tech firms, where the practice is viewed in terms o f creating extra paperwork and an distinct market advantage to competitors with little or no regulation (Dimaggio and Powell, 1983; Schuetze et al., 1997; T I A , 1997.  In contrast, mimetic isomorphism is considered to be a self-imposed restriction or conformity, closely associated with a need to find direction and structure. Companies are thought to seek out best practice models to improve both efficiency and corporate image and is the basis for structured methodologies, such as ISO, which can be problematic in that organizations may adopt an approach inappropriate to their needs (Dimaggio and Powell, 1983; Cyert and March, 1963; Brooking, 1999). Mimetic isomorphism has interest for this study given recent attempts to shape the direction o f the computer services sector i n B . C . , where companies are being encouraged and show signs o f adopting structured methodologies used extensively by U S counterparts ( M A E T T , 1998).  The final vehicle o f change is normative isomorphism, which differs from the preceding two forms o f conformity with respect to a focus on professional rather than sectoral and/or commercial goals. This is essentially people with the same occupation defining professional standards, conditions and direction o f practice (Dimaggio and Powell, 1983). The significance attached to normative isomorphism lies in the potential for one 31  professional perspective, understood procedures and practices to unduly influence the type o f skills and learning backgrounds entering and driving company policies on training and career development, over those o f other professional areas and interests (Cohn, 1985) Recent work in B . C . ' s computer service sector provides evidence o f this tension between engineering and computing areas, as two distinct professional areas increasingly encroach upon the same development areas (Schuetze et al, 1997).  2.4  KNOWLEDGE  The knowledge base o f a firm has the potential to enhance opportunities for growth and economic success. Nonaka (1994) relates the potential o f knowledge to the "interaction of environment and means" in creating and distributing knowledge and information (ibid: 14).  2.4.1 Definitions - Knowledge and information  Knowledge and information are central tenants o f studies into learning and knowledge management and often perceived as interchangeable concepts. Yet information and knowledge signify contrasting perspectives. The distinction is often related to action (Gruber, 1989), whereby "information is the flow o f messages, while knowledge is the created and organized by the very flow o f information, anchored on t he commitment and beliefs o f its holder" (Nonaka, 1994:15).  32  However, Davenport and Prusak (1998) hypothesize - knowledge and information are only two facets o f a broader knowledge context that incorporates 'data'. I f information is the flow o f messages, "data is a set o f discrete, objective facts about events" (p.2). Further differentiation's and significant to both innovation and the management o f learning and knowledge are:  •  strategic knowledge - which guides actions and serves as incentive to develop tool/means o f acquiring more (Gruber, 1989) and is strongly tied to cognitive perspectives o f 'belief and commitment' ; and.  •  information - syntactic and semantic perspectives (Bateson, 1979) whereby information is simply measured and stored (syntactic) or "contains new meaning" semantic - insight gained from perception (Nonaka, 1994: 16).  The semantic perception is considered to be the most useful when reviewing learning contexts, whereby a firm's perception, and subsequent approach to the knowledge o f 'collective memories' (Schumman and Scott, 1989) may have a direct impact on hiring, with regard to extending resources on the orientation, supervision and mentoring o f new employees i n the why, when, and how an organization functions (Huber, 1991).  2.4.2 Categories o f Knowledge  There are two categories o f knowledge useful i n discussing knowledge management: core and peripheral. Core knowledge relates to organizational mission, values, culture, operation and products, while peripheral knowledge is centred i n the performance o f specific tasks and not widely shared (Lyles and Schwenk, 1992). Each category plays a  33  distinct role i n generating and bringing form to ideas, and by extension, facilitating understanding o f the various perspectives operating within an organization.  Core and Peripheral Knowledge  The creation, use and expansion o f core and peripheral knowledge reflect the degree o f consensus, competency and dissemination organizations reach with regard to the comparative roles and functions o f a firm's operation (Hommen, 1995).  F i r m mission, business objectives and culture are considered elements o f core knowledge, and what organizational theory suggest amounts to a widely shared and agreed upon understanding o f company goals, procedures and values (Lyles and Schwenk, 1992). B y contrast, peripheral knowledge is more specific, relating to meeting the objectives, expectations and tasks associated with everyday work, typically expressed in high tech S M E s , within the dynamics o f rapidly changing individual, team or project situations. This is knowledge not easily shared unless well integrated into organizational learning structures - weekly progress meetings, presentations, email.  Given both o f these definitions are loosely based on an organizational knowledge perspective, there is a need to view these terms as enabling on one hand, yet also restrictive, i n the sense that one needs to be viewed i n relation to the other, which effectively places structural parameters on analytical frameworks looking into how core and peripheral knowledge interact.  34  2.4.3 Creation, Conversion and Transfer o f Knowledge  The creation and transfer o f knowledge is related to the process whereby "the combination o f information, context, and experiences.. ..used by a person and placed in that person's frame o f reference... is transformed into knowledge" (Harris, 1996:3).  In the area o f knowledge management, tacit and explicit knowledge are frequently cited as essential elements i n a companies' intellectual potential, i n that the interaction o f 'knowing that' (explicit) and 'knowing how' (tacit) forge a link between what someone can put expression to, and the information, skills and experience that continually and collectively act as a backdrop for cognitive processes (Nonaka and Takeuchi, 1995). Knowledge is considered "deeply rooted in action (tacit) or codified in formal, systematic language" (Nonaka, 1994: 16)  Within the context o f innovation, this process is viewed as a dialogue between tacit and explicit knowledge, incorporating four forms o f knowledge conversion (Nonaka, 1994) 1. socialization; 2. externalization; 3. internalization; and 4. combination.  In the first o f these, people expand their tacit understanding through shared experience (socialization), while i n the second instance tacit knowledge is converted into an explicit form by sharing personal or group experiences and developing a formal record (externalization). In the third form o f conversion explicit knowledge become tacit when 35  formal documents, drawings and oral stories are exchanges but the subsequent shared memories remain with the person rather than documented (internalization). While in the fourth and final category, explicit knowledge is converted or reconfigured into news forms o f itself that result in new applications (combination).  The creation or generation o f knowledge is often referred to i n terms o f "by-product o f several types o f interaction" (Brooking, 1999:93), with the most common o f which are:  •  acquisition (hiring)  •  on-the-job learning - experience gained from work - by doing  •  training and education  •  mentoring  •  brainstorming  •  social interaction  •  meetings  (Leonard, 1995; Brooking, 1999, 1997; Davenport and Prusak, 1998) The majority o f knowledge creating and transfer opportunities are also viewed as conduits or venues for the flow o f knowledge or transfer within an organization. Studies suggest the most common opportunities for knowledge creation arise from:  •  formal / informal networks - social activities/casual meetings  •  scheduled workshops  •  brown bag lunch sessions  •  project/team meetings  (Schuetze, et al., 1997; Brooking, 1999).  36  2.4.4 Levels o f Knowledge  Levels o f knowledge refers to the function knowledge performs. Using the taxonomy suggested by W i g g (1993) and subsequently developed by Brooking (1999), there are four categories deemed useful to companies and their employees:  •  goal setting or idealistic;  •  systematic;  •  pragmatic; and  •  automatic.  Goal setting knowledge relates to 'what's possible' (ibid:54). A t the firm level this type of knowledge is associated, expected and recognized at the senior levels o f management. This is where the goals, vision and values o f a company are determined or filter down from. Brooking maintains that the ability to vision and set goals should not be confused with the ability to translate this knowledge from a tacit to explicit form and the management processes necessary to achieve success.  In contrast, systematic knowledge is centred in reasoning and analysis. Here the emphasis is on strategies for solving problems and includes knowledge o f professional methodologies to assist companies realize their commercial goals. Systematic knowledge often moves from a tacit state to an explicit form as companies codify and develop organizational procedures and strategies for business proposals, training, documentation and protocols.  37  Pragmatic knowledge is typically "explicit, well known and understood" (ibid:58). In a work context (pragmatic knowledge) would extend to represent fundamental acceptable behaviours. This is sometime referred to in terms o f common sense and related to reconciling action and context. In contrast, automatic knowledge is the most tacit o f the four levels o f knowledge and refers to familiar or job related knowledge, that the "user... just does... without necessary considering exactly why or how they are doing a particular task " (ibid:59). Given the often tacit nature o f routine jobs automatic knowledge is seldom codified.  2.4.5 Skills and Knowledge - Core Capabilities  There are three types o f skills and knowledge discussed in the literature, which consensus suggests move from general to more specific capabilities. Focus appears to dictate the final classification term used. Leonard (1995) discussing capabilities i n terms o f public (scientific), industry and firm specific skills and knowledge, while Stewart (1997) adopts an economic perspective, whereby both are reasoned to represent a commodity, leverage or proprietary role within a company.  Under the sector classification offered by Leonard (1995), public or scientific skills/knowledge are broad and deep enough in nature to preclude specific ownership, while other types are considered to have the type o f applied or industry specific characteristic attractive to specialized areas o f activity. F i r m specific skills and knowledge are considered commercially useful to a particular organization, "not so easily  38  duplicated" (ibid:22) and typically related to aspects o f product development, organizational protocols and procedures.  In contrast, Stewart's classification (1997) looks to the value o f skills and knowledge as corporate assets, asserting that " the challenge  , is to find and enhance those talents  that are truly assets - for not all skills are created equal (ibid:89). Here generic skills and knowledge are valued as commodities, "readily obtained, and more or less equally valuable to a number o f businesses" (ibid:89), while leverage skills are referred to as "knowledge that, while not specific to a particular company, is more valuable to it than to others "(ibid:89). Examples o f this would be the recognition o f a programmers potential by a software consultancy over that o f an organization looking to staff software support positions. Proprietary skills relate to the type o f expertise and experience used to develop products, services and ultimately the reputation o f a business as a leader in a given field.  2.4.6 Competency and Attributes  Literature on competency and attributes is relevant to this study i n that it addresses the ability o f individuals and management to act on knowledge. This ability is thought to closely related to learning and influences o f resources, workplace culture and organization. (Sundberg, Snowdon and Reynolds, 1978).  39  Hommen (1995) suggests it would be more appropriate to talk about an individuals potential to act i n relation to a specific task, situation or context, framing competency i n terms of:  •  theoretical knowledge (cognitive - knowing that/what)  •  intellectual ability (advanced skills - knowing how);  •  psychometric factors (perceptual and manual abilities);  •  social ability (e.g., ability to communicate, work co-operatively, leadership);  •  attitudes (e.g., loyalty, motivation, acceptance o f certain values);  •  personal characteristics (e.g., creativity, risk taking, tolerance o f uncertainty.  (Hommen. 1995:144)  In contrast, Quinn, et al., (1997) suggests a complementary perspective, which differs in respect to the motivation behind the knowing, caring and perception attributed to knowledge creation and transfer. Quinn's classification retains the cognitive and advanced skills present i n 'knowing that' and 'how to act', while the reminder adopt the form of:  •  system understanding (know why)  •  motivated creativity - discovery or invention (care why)  •  Synthesis and trained intuition (perceive how and why)  (Quinn, et al., 1997)  System understanding relates to the "interrelationship and pacing rates o f influence among variables", while motivated creativity focuses on "the capacity to interrelate two 40  or more disciplines to create totally new effects". Synthesis and trained intuition refer to the ability "to understand or predict relationships that are not measurable" (ibid:.3). A t the sector and firm level these perspectives have formed the basis for studies looking into the types o f proficiencies and attributes companies are looking for i n their employees (Debling and Behrman 1996; D e L i m a , 1998; S P C , 1997). With respect to this study and the computer services sector, is the growing significance studies indicate firms are attaching to attributes such as leadership, a sense o f work ethics, the ability to plan and meet deadlines, co-operative working, communicative skills and 'the caring' and 'perception o f w h y ' aspects o f competency (Raizen, 1991; Betcherman, 1997; Schuetze, 1997; B C B C , 1997).  2.4.7 Context: Innovation and Knowledge Based S M E s  In relation to knowledge based sectors, Harrington and Dalmia (1991), suggest that workers are the creators o f intangible, yet value-added assets, while Kiernan (1995) asserts firms need to find ways o f tapping into tacit knowledge banks. Both Johnson, (1992) and Nonaka and Takeuchi (1995) suggest these complementary objectives can be accomplished through various forms o f interaction and conversion processes, whereby employees are encouraged to observe, articulate, share and write down hitherto more implicit elements o f their knowledge.  These perspectives correspond to work on effective forms o f organizations and work structures, particularly flat and relaxed hierarchies and those who consider their corporate  41  approach to be inherently 'organic' and forming the basis o f learning organizations and communities o f practice (Brown and Duguid, 1989). However, what is surprisingly absent from the literature on knowledge transformation and accessing 'know-how' is industry sponsored research, particularly in British Columbia's high tech areas, where maturing companies are now experiencing shortages o f seasoned mid-level managers and marketing specialists, with little success in attracting candidates from outside the province (TIA, 1997; M A E T , 1998).  2.5  TRAINING : THE SME CONTEXT  Training has been defined as creating "the human skills that taken together are the repository in which the tacit knowledge o f an organization reside" (Baldwin, et al., 1995). These skills are typically comprised o f a variety o f purposes, but include  technology-related skills. These include an intimate understanding o f specific technical processes i n manufacturing or software and computer-related skills in service industries. The second is to learn how to embed knowledge on products so as to provide new services to clients (ibid:6).  There is a suggested relationship between training, the creation o f new knowledge and innovation i n "the hypothesis.. .that the adoption o f a wide variety o f innovation strategies....fosters a need for training" (Baldwin, et al., 1995:2). Supporting theories and related studies tend to fall within one o f two perspectives: either neoclassical and human capital theory based; or that o f the institutionalist and situated learning approach (Attewell, 1990; Resnick, 1987a).  42  2.5.1 Categoriesof Training  When thinking about broad categories o f training found i n firms, there are two distinct areas: skill development; and/or the broader context o f career preparation - professional development - the latter o f which is centred on the development o f management related knowledge and skills.  In the area o f skill development, literature suggests firms increasingly associate the value of training against expenditures and returns. Quinn, et al., (1997) makes the case that firms frequently focus "virtually all their attention on basic (rather than advanced skill development) and little or none on systems, motivational, creative or perceptive capabilities" (ibid:4), maintaining that the former yields the lowest return on investment, resulting i n "mediocrity and loss o f profits" (ibid:4). This is nowhere more apparent than at the S M E level, where the association between training and rates o f return on investment have been examined (Baldwin, et al.,1995). Innovative, high tech service companies are shown to be narrowly focused on specialized technical skills with the potential to realize immediate returns to products and services (Schuetze, et al., 1997), with lower than average expenditures per employee (Betcherman et al., 1997).  The position o f management training i n S M E s is equally tenuous, with Newton (1995) viewing the situation in terms o f limited corporate capabilities. Looking further into studies, it becomes evident that while smaller high tech firms are aware o f their inadequacies, and cite improvement as integral to successful innovation ( M A E T T , 1998),  43  few actually invest the resources necessary to bring about changes, or link professional development to organizational philosophy (Schuetze, et al., 1997). Skills identified as essential to professional development include:  •  everyday requirements related to operational functions o f finance, administration and liaison;  •  strategic decision making surrounding marketing, organizational innovation and process, the management o f technology (both hardware and software); and,  •  the skills and attributes central to developing a sense o f direction, leadership style and creativity  (Newton, 1995)  The contention that "management development is simply not an integral part o f doing business i n Canada" (Newton, 1994:134) is well supported in the literature (Loo, 1991; Betcherman, 1997; M A E T T , 1998). This also corresponds with a broader perspective o f linkages between professional development and the role, responsibilities and value o f adequately trained management in regard to the innovative capacity o f firms - an advocacy that would not be necessary i f a training culture existed (Leonard 1995; Amidon, 1997; Brooking, 1999)  2.5.2 Approaches  Evidence o f a firm's commitment to training is present in the strategies or approaches adopted by management. Literature and studies points to three basic approaches to 44  training in small and medium-sized enterprises: the clear presence o f a learning culture, where training is on-going (Pedler et al, 1988; Betcherman et al., 1997); those who recognize the value o f training but are primarily event driven; and situations where neither management and employees perceive a need to formally train, yet the extent o f informal or incidental learning suggests training is taking place (Betcherman, 1997; Schuetze et al., 1997).  2.5.3 Training, Innovation and S M E s  Studies on small and medium-sized companies, studies provide evidence o f an often complementary and integrated relationship between neoclassical and institutionalist interests (Betcherman, 1997; Schuetze et al., 1997). While the decision to train is typically perceived i n terms o f human capital theory and the knowledge and skills necessary for improving business performance - products and services, situated or contextual learning is inherently social in nature, and represents ' h o w ' companies choose to view and respond to their technical and broader organizational skills and knowledge needs. Within dynamic and innovative sectors, such as computer services, the motivation and drivers o f training are thought to include " R & D and technology, quality and human resource strategies" (Baldwin et al., 1995:3).  This broadening o f perspectives and approaches is reflected in other training studies, whereby the emphasis has altered from one o f developing profiles o f those being trained, to what Betcherman (1997) considers are second generation issues o f identifying and  45  categorizing the decision making processes and organizational structures that support human resource development (Baldwin et al., 1995). Similarly, the role and importance of formal training has been reassessed with regard to appropriateness outside o f large scale organizations, which may impose limitations with regard to reconciling contrasting approaches with the form and delivery o f training - and the varying degrees o f accuracy with causality (Baldwin, 1994; Newton, 1995).  This interest is i n direct response to the growing economic importance o f smaller companies and more specifically, the perceived importance o f high tech companies to both the national and provincial economies, where training is placed within broader "Strategies For Success" (Baldwin, 1994; M A E T T , 1998). Here, the repository o f knowledge, skills and acumen present in established S M E s are viewed i n terms o f leverage, useful i n the mentoring o f even smaller and more prolific industry counterparts in the management o f growth and success. The need for detailed firm profiles o f innovation, learning and knowledge processes has resulted in an increase use o f case studies, with both national (Voyer, 1994; Betcherman at al., 1997) and provincial studies of high tech companies undertaken (Schuetze et al., 1997).  2.6  T H E STRATEGIC M A N A G E M E N T OF K N O W L E D G E  The motivation for managing knowledge is summed up by Cole (1998) and the contention that "as the recognition o f the importance o f knowledge grows, so has the recognition that it needs to treated more explicitly and systematically: it needs to be made  46  more visible and tangible to be amenable to management." (ibid:2). Managing resources is a central tenant o f the study and later discussion o f intellectual capital - the study's conceptual framework, and defined earlier in the introduction. Within this context knowledge management can be viewed as "an approach to adding or creating value by more actively leveraging the know-how, experience, and judgement resident in, and i n many cases, outside o f an organization" (Ruggles,1998:3).  In accepting that knowledge can be managed, information, skills and experience are assumed to possess an intrinsic, and strategic value. A t the firm level, determining this value would centre on: the outcome o f a knowledge needs assessment; finding people with the required specialized knowledge; accessing what these employees know; determining how they know it, devising ways o f retaining and sharing what others know; and ultimately, how this knowledge might be used to improve products, services and revenues (Davenport and Prusak, 1998; Martin, 1995; Amidon, 1997; Brooking, 1997).  The trend towards "recognizing the role o f knowledge as primary driver" is discussed further by M i l e s et al., (1998) who collectively question :  whether the managerial approaches based on mindsets rooted i n past practice are appropriate for, or capable of, fully realizing the potential value o f knowledge within the firm and/or industry (ibid:7).  47  In reviewing practices and trends it is noted that the obstacles to fully utilizing knowledge include:  "conceptualizing and measurement o f knowledge capital as a primary organizational asset; the integration o f knowledge capital into strategic management processes; and the development o f organizational forms and processes that facilitate the use and development o f knowledge (ibid:7).  In the dynamic and rapidly changing fields o f knowledge found in high tech areas, firm size and limited resources significantly impact organizational decision making processes. Consequently, function, location, form, growth and the dissemination o f knowledge are viewed as major viability factors (Kiernan, 1995; Schuetze et al., 1997), although, with the exception o f the latter, much o f the research remains i n the arena o f large corporations and/or improving skill development, rather than sector specific.  However, there is contrasting perspective on managing knowledge i n smaller high tech companies and relevant to issues raised i n the introduction to the study - ' the appropriateness o f strategies' (Cole, 1998). The fast pace o f technological change, coupled with fierce competition between entrepreneurial firms may suggest approaches to managing intellectual material that make sense for larger corporations, yet have a tendency to either stifle the creative energy and/or leave the firm exposed to piracy (Voyer, 1994). Cole (1998) goes further, speculating it is sometimes i n a firm's best interest to keep knowledge tacit - linking competitive advantage to the time it would take competitors to replicate knowledge assets. A l l o f which suggests an element o f caution  48  with regard to the over management o f resources. Future research directions for knowledge management are outlined by Teece (1998) as:  •  quantification o f intangible assets  •  understand generic inputs versus idiosyncratic inputs and profitability  •  entrepreneurial versus administrative capabilities  •  competitive advantage o f replicated knowledge  Absent is the need for sector and size specific models identified by researchers working in the field o f high tech and S M E s (Newton, 1994).  2.6.1 Strategic Perspectives  There are two complementary perspectives on the organization and management o f knowledge that have relevance for the focus o f this study - knowledge centric information technology environments (Harris, 1996) and the leveraging o f knowledge or intellectual capital (Brooking, 1996; Edvinsson and Malone, 1997; Stewart, 1997; Bontis, 1998; Roos, 1997).  Harris (1996) contends that information technology companies are 'problem' rather than 'knowledge based', while the intellectual capital perspective (Edvinsson and Malone, 1997) views knowledge as the creative force behind innovation and by extension, the driving force behind commercial success for firms involved in the type o f the dynamic, fast paced and rapidly changing areas o f technology typical o f smaller computer service firms. Both perspectives outline principles, structures and practices, although the 49  knowledge centric approach can be considered a synthesis o f existing cognitive based learning approaches, while intellectual capital is an emerging area o f interdisciplinary study seeking to integrate contrasting viewpoints.  Knowledge Centric Information Technology Environments  Harris (1996) suggests that technology organizations are not utilizing the tools o f their profession - namely, application software. Proposed is the use o f intranets, or internal networks, systems and web software as prerequisites for establishing organizational infrastructure. The role o f values, context and experience are interwoven into a case o f knowledge creating knowledge, with the success o f any transferal system resting on the creation o f a common understanding o f purpose and goals. Lacking is the presence o f social caring and trust, identified by Krogh (1998) as integral to the management o f knowledge. Sharing forms the basis for success under this approach to managing knowledge, with benefits and gains viewed as incremental, which suggests a link to absorptive capacity'. The means o f sharing is centred in the support structure, which is conceived i n terms o f organizational, process and technology components. Specifically,  "the organizational component includes the implementation o f adjustments to management philosophy, group member interaction, and individual responsibilities the process component includes changes to problem solving decision making ...., and communication processes. The technology component requires the implementation o f the technology that w i l l become the knowledge base o f the repository as well as any other required support technology." (Harris, 1996: 6).  50  These components also correspond to Brooking's (1999) suggestions for a knowledge infrastructure where approach is divided into desired characteristics, management process and growth. Aspired to characteristics include: cultural sensitivity; longevity; evaluation procedures; recognition o f memory as a corporate asset; rewarding the sharing o f knowledge; and a formally stated corporate mission. In contrast, management processes relate to specific operational elements such as job reviews and salary, training, mentoring and overall H R planning. The final component advocated by Brooking relates to supporting initiatives and systems which include:  •  networking and verbal sharing;  •  know-how bases;  •  group ware knowledge sharing;  •  decision support systems;  •  expert and knowledge based systems;  •  intelligent infrastructure;  (Brooking, 1999:135)  Benefits o f the knowledge centric approach are o f interest to this study in that Harris relates improvement to: efficiency and productivity in the areas o f providing better solutions to problems; more effective decision making; improved support for outsourcers, contractors and professional development with regard to skills development and building expertise.  51  Intellectual Capital Perspective  The concept o f intellectual capital (IC) perceives knowledge as an appreciable and exploitable asset, that can be both invested in, and offers returns on. Interest in this area lies in the need to develop approaches to knowledge acquisition and related learning processes to commercial goals.  While this concept is still evolving, the taxonomy draws from traditional human capital theory (Becker, 1975; Schultz, 1963; Mincer, 1989 ) whereby, "people spend on themselves in diverse ways, not for the sake o f present enjoyments, but for the sake o f future pecuniary a non pecuniary returns" (Blaug, 1992: 829). The motivation is perceived as one o f self-interest and " carried out by individuals" (ibid: 830) although later developed to include broader based institutions present in education systems, with social as well as private rates o f returns identified.  Proponents o f L C . have expanded the notion o f individual returns to include 'the collective' represented in this instance by 'the firm'. Commercial success rests on the ability o f companies to exploit the knowledge owned by employees, customers and their own organization (Edvinsson and Malone, 1997; Dearlove, 1998). Interest i n the intellectual capital perspective comes from a diverse number o f fields, although human resource management, education, training, economics and accounting are at the forefront of development work - the latter i n response to the increasing pressure on knowledge  52  based sectors and companies to find tangible ways o f measuring the resource that drives both the potential and success o f their respective enterprises - knowledge.  O f importance are the strategic roles and interaction o f three major sources o f firm knowledge: employee knowledge - human capital; the knowledge o f customers and clients - customer capital; and, knowledge a firm has captured - structural capital (Bontis, 1998; Stewart, 1997). Both objective and subjective elements are incorporated into the analysis o f employee knowledge, while providing for separate but equally important categories relating to the capture o f knowledge, external sources and influences significant i n the area o f networking, whether associated with absorptive capacity and the ability to exploit external knowledge (Cohen and Levinthal, 1990), or learning-byinteracting (Lundvall, 1988).  There are two distinct viewpoints evident in the literature, whereby knowledge is assumed to be either a product (capital) or process (drivers). In the former, economists operate from what Slow and Honeyman (1998) perceive to be a need to "understand and value knowledge capital" (p.91), a position that hinges on intangible elements o f a company's business operations being open to measurement and valuation.  Knowledge as a product  In terms o f this study, there are three factors relating to the economic perspective that require evaluation: namely, the size and sector o f the operations being used to formulate  53  approaches; whether a distinction is being made between formal and informal training; and the assumption that a firm's market value is something that can be empirically tested.  Slow (1999) defines intellectual capital as "the difference between a firm's market value and the net value o f its physical assets" (p:91). The process is then divided further, "separating intellectual capital into the value o f training - human capital and the ability of a firm to make money from such training" - structural capital (ibid:91). However, while attempts to integrate intangible assets " i n (a) less mechanical way than just standard productivity terms" (Slow and Honeyman, 1998:91) appear conducive to a more cognitive approach to capital assessment, findings are centred i n a large European company with extensive resources, networking structures, markets and educational pool to draw from, not typically found i n British Columbia's computer services sector. It is also raises the issue o f incorporating subjective elements without an understanding o f the underlying processes at work, something U l r i c h (1998) maintains can only be addressed by broadening the parameters o f study to include, rather than sideline these components.  Knowledge as a process  B y way o f contrast, educators and human resource professionals focus primarily on the processes o f acquiring, nurturing and developing knowledge. Here, a critical awareness of the skills, learning and experience that comprise 'the intangibles' aspects o f knowledge capital are o f greater interest and relevance. W i t h such vastly divergent perspectives, there is a corresponding lack o f consensus with regard to measuring the  54  results o f knowledge management, an essential element i n gaining broad acceptance and practice. Recent work is adopting a more multidimensional and interdisciplinary perspective, whereby context drives the discussion. This effectively provides for economists and educators to inject complimentary enablers relating to either capital or process for the purposes o f accommodating their respective paradigms.  Integrating product and process capital  Thus, while conventional human capital theory appears somewhat inconsistent with a process driven perspective o f learning and knowledge (Hommen, 1995), the evolving intellectual capital framework does provide for the inclusion o f factors such as business context and trust, which provide both context and structure to discussions and analytical work, whereby innovation and human resource development are viewed i n terms o f learning situations and organizational development, yet still retain the more objective elements essential to measuring efficiency and productivity.  In relation to an organizational knowledge and skills perspective, by linking organizational strategies to culturally entrenched knowledge structures, intellectual capital endorses the former, in contending that large bodies o f knowledge respond more favourably to a hierarchically structure, comprise o f smaller cognitive units (Anderson, 1983). This effectively moves the taxonomy away from the type o f easily quantified routine approach advocated by organizational skill theorists, and more reminiscent o f the 'statistical lens' often associated with human capital theory. In high tech firms faced with  55  limited resources, inexperienced and inadequately trained managers and high turnover, the temptation to standardize functions and routines is an understandable one, although individual knowledge and skills stand to become outdated or institutionalized (Nordhaug, 1994) - an outcome inconsistent with an essentially innovative sector, dependent on adaptability.  2.6.2 The H i g h Tech Context - S M E s  One question that hasn't been dealt with by studies up to this point is the extent to which developers and providers o f software services subsequently devote in-house resources to their own "institutional devices" (Hommen, 1995) or business systems: which includes knowledge management. Cole (1998) suggests that new information technologies tend to focus on moving information between employees rather than embedding it in organizational routines. There is work on particular firms (Voyer, 1994; Schuetze et al., 1997; Davenport and Prusak, 1997), yet case study approaches remain the exception rather than the norm. The majority o f studies relate to sectors and large enterprises or international corporations. Data on the knowledge 'intrasystems' or in-house knowledge structures o f S M E s remaining sketchy and undeveloped.  In knowledge based sectors, and particularly high tech companies, research suggests firms typically lack a structured understanding o f what they do, with even less grasp o f the type o f information that needs to be captured, where and how material might be accessed, or by whom (Schuetze et al., 1997). In relating types o f organizational  56  approach to learning and knowledge, 'gatekeeping' and 'organic models', take on a new perspective when viewed against what U l r i c h (1998) views as a 'competence and commitment' to all three facets o f intellectual capital. Data from the Innovation, S k i l l and Learning Study (Schuetze et a., 1997) indicate the majority o f smaller computer service firms, show little interest in adopting a "rational model" o f set procedures and object centred, formally structured methodologies for gathering, analyzing and acting upon relevant information (Allison, 1971). This can perhaps be explained by relating organizational approaches to learning against operating structures, which, i n the majority of the smaller computer service companies, are relaxed or flat organizational structures more conducive with an organic model (Betcherman, 1997, Schuetze et al., 1997), where limited resources and rapidly changing technical conditions make every employee a "potential receptor" (Burns and Stalker, 1961) and overnight expert.  The pace o f change or what Duncan (1972) refers to as "turbulent" environments, is worth exploring i n high tech companies because o f the real danger that managers may perceive their innovative work environment as less accessible, predictable and ultimately, manageable. This lack o f empowerment has the potential to significantly impact learning and knowledge management i n terms o f the competence and commitment to developing knowledge - contextualized by Hommen, (1995) and Resnick (1989) i n terms o f perception and willingness, coupled with the ability to use strategies and knowledge to construct new knowledge. A framework that formally differentiates between employees, management related structures and external influences provides discussion points for  57  evaluating the effectiveness o f existing knowledge and learning strategies, and by extension access and the development o f approaches for external stakeholders.  2.6.3 Towards a Strategic Framework for Managing Knowledge i n S M E s  M u c h o f the research into the capture, dissemination and exploitation o f knowledge in smaller firms centres on the strategic role o f human resource development and the effectiveness o f associated organizational, skill and learning strategies, structures and practices firms have i n place (Baldwin, 1994; Newton, 1995; Debling and Behrman, 1996; Schuetze, et al., 1997).  What is less apparent from literature is the development o f a broad discussion framework, capable o f bridging the often contrasting mandates o f stakeholder groups with regard to their role, responsibilities and strategies for coping with the educational and employment needs o f a knowledge based economy, and more specifically, firms and sectors involved in 'cutting edge technology'.  Within this context, it is quite common to have vastly contrasting perspectives, ranging from university co-op programmes with objectives rooted in a close liaison between higher education and industry ( U . V i c . , 1998), to academics convinced their role is centred in developing a more reflectively individual, with skills and abilities that transcend occupation (Maslen and Slattery, 1994). In contrast, high tech associations typically reduce the education to work paradigm to issues surrounding existing industry  58  skill shortages, with goals o f influencing curriculum and increasing the supply o f work ready technical graduates, while professional associations focus on broader and more long-term business and management outcomes (TIA, 1997).  Attempts at building a  discussion framework for innovative S M E s is a primary objective o f a subsequent study into knowledge and human resource development in S M E s (Schuetze et al., 1997), which explores linkages between operational influences and the learning processes and structures supporting the business goals o f innovative companies. The significance o f this study lies i n the attempt to link commercial goals to the potential implicit within organizational structures, educational processes and goals.  2.7  SUMMARY  The review o f literature is primarily focussed on how companies view the role o f knowledge within the context o f innovation and organizational learning. The first section looks specifically at innovation, reviewing the varying theoretical perspectives found in cognitive, institutional, techno-economic and system fields o f research, while providing insights into the operational context o f small and medium-sized high tech firms. Literature suggests the need for an interdisciplinary lens more appropriate to the dynamic and scaled down operations found in smaller high tech firms and sectors, although the cognitive school o f thought appears to dominate work on the benefits o f a systematic approach to knowledge management found later in the review.  59  In the section on learning and knowledge, differing types, forms, creation and transfer are outlined with emphasis on how and why firms respond. Here the work o f Nonaka (1994) is contrasted to others working in the field, providing a useful juxtaposition o f process and form. In the areas o f levels o f knowledge, core capabilities, competency and attributes, the literature provides for a clear distinctions between the varying facets o f knowledge, along with evidence o f the growing importance and trend towards quantifying less tangible facets, such as trust and commitment.  The area o f knowledge management completes the review. Research appears focussed on strategic management, relating knowledge to products and services and providing increasing evidence o f the consequences o f excluding professional development as a distinct commercial goal. The importance o f trust is emerging as a central factor in managing knowledge, particularly with regard to encouraging employees and customers to share their skills, expertise and understanding.  The use o f technology i n creating knowledge infrastructures is also a major topic within the literature, with the majority o f papers and texts devoting space to strategies and implementation o f methodologies. However the majority o f work is either theoretical or taken from large corporations and represent an evolution rather than a distinct methodology. F e w authors provide case studies and feedback on future research. While the literature indicates support for a structured approach to knowledge management, there is a note o f caution present with regard to the over management o f resources. Overall, the focus is on retaining product sensitive specialized knowledge  60  (Cole, 1998). This is significant i n the area o f smaller high tech companies where studies indicate an awareness o f technical vulnerability with regard to emerging technology and applications (Schuetze, et al, 1997).  The conceptual framework for the study is introduced in this chapter and concludes the review. Intellectual capital is presented as a related yet evolved and distinct juncture to conventional human capital theory ( H C T ) - an interdisciplinary field, comprised o f literature from economics, education and sociology, in addition to professional areas such as accounting and management and human resources development. While H C T is centred in individual and institutional returns on education, IC is situated within the context o f the firm and strategic management - the knowledge o f employees, customers and the organization collectively leveraged within a formally structured framework to create new and potentially exploitable knowledge (Edvinsson and Malone, 1997; Stewart, 1997).  Research is presented i n terms o f an evolving field with two dominant theoretical positions - with capital perceived in terms o f a product or process. Product capital is the most developed o f the two areas, with practitioners focussed on more tangible forms o f IC outcomes - such as returns from new software/hardware and improving services to customers. In contrast, process capital looks at ways to improve efficiency, productivity and sales. Education - i n the form o f individual learning and knowledge management is thought to generate both product and process capital, although the latter role is characterized as underdeveloped. There is concern that technology is viewed as the solution to what are generally considered management related issues.  61  CHAPTER III - CONCEPTUAL LENS AND FRAMEWORK  3.1  INTRODUCTION  This focus o f this chapter is the study's conceptual lens - intellectual capital, first introduced as a strategic approach to managing knowledge in the literature review. The concept is developed from a broad definition into a generic taxonomy, expanding on learning and sectoral perspectives raised previously. The resulting framework and assessment parameters provide structure for the presentation and discussion o f findings. The chapter concludes with a summary o f influencing factors and contention with regard to design and implementation.  3.2  D E V E L O P I N G A DEFINITION OF I N T E L L E C T U A L C A P I T A L  Building on the previously broad perception o f IC - where knowledge owned by employees, customers and the company is leveraged to create new forms o f knowledge or capital - emphasis is now placed on the interplay o f process and outcome. Specifically, employees interacting with customers, using the facilities, forums and resources provided by companies, whereby any new understanding and/or subsequent improvement to services, products and organizational processes is considered intellectual capital. This new knowledge is assumed to have potential and therefore a value for both employer and employee (Bontis, 1996; Dearlove, 1998; Edvinsson and Malone, 1997; Stewart, 1997).  62  3.3  TAXONOMY  Adopting a synthesized perspective, IC is structured into three forms or types o f capital: human, customer and structural (Brooking 1996; Edvinsson and Malone, 1997; Stewart, 1997). The success o f a knowledge management strategy and i n this instance, intellectual capital, is thought to be dependent on how efficiently human and customer knowledge is transferred to capture systems and structures - structural capital (Dearlove, 1998). Under the premise o f leverage - and central to the I C perspective, this process must, by extension be an open system, whereby the collective knowledge o f an organization is continually updated and supplemented (Kennedy, 1998).  3.4  THE ANALYTICAL FRAMEWORK  3.4.1 Business Context: Small and Medium-Sized Computer Service Firms i n B . C .  The inclusion o f a business context deviates from the taxonomy outlined previously. However, establishing an operational context is considered imperative to developing a sector specific perspective o f using learning and knowledge to leverage commercial opportunity in smaller high tech firms. In the absence o f a formalized set o f criteria to apply, the study turned to other work on learning and knowledge management i n S M E s  63  (Betcherman, 1997; Baldwin, 1994, 1995; Schuetze, 1997), where there is recurrent use of categories such as firm age, ownership, growth patterns and sources o f funding. 4  3.4.2 Human Capital  Human capital is conceived in terms o f the contribution employees make i n realizing a firm's commercial goals, considered in relation to attributes, knowledge, experience and skills employees and managers need to meet the company's commercial goals and benefit themselves'. Stewart (1997) views this process in terms o f "the capabilities o f individuals required to provide a solutions to customers" (p.76), translated by Brooking (1997) into "the goal" or reason why a company decides to measure intellectual assets. The contribution o f employees is typically assessed in relation to need, expressed through the evaluation, competency and efficiency o f performing specific tasks and meeting business objectives (Saint-Onge, 1994; Brooking, 1997; Edvinsson, 1997 and Stewart 1997).  Perspectives  Work on S M E s suggests the primary area o f contention here relates to the type o f training used i n determining overall intellectual capital, and whether the training and professional development expenditures o f large international companies leave smaller companies  Growth patterns include: nature/pace of growth; no. of employees; and the type/location of markets  64  strategically disadvantage. For example, research indicates that training levels in S M E s tend to increase with size (Betcherman, 1997), yet few firms i n British Columbia either aspire or reach the 60 employee mark, with equally low numbers reporting the existence of training budgets (Schuetze et al., 1997). In high tech sectors, informal and just-intime training are the preferred knowledge management strategy, with little o f the competence and commitment suggested by U l r i c h (1998) as an organizational prerequisite for human capital to assume a principal role in the development o f intellectual capital.  When considering the innovative contexts found in the computer service sector, Davenport and Prusak's (1998) perspective on managing knowledge " introduces an element o f caution with regard to over-management o f employee knowledge, drawing on Nonaka and Takeuchi's work on "The Knowledge-Creating Company" (1995), and the concept o f 'requisite variety', whereby different levels o f experience and skills encourage opportunity, rather than providing excuses for failure. In evaluating skills and experience, there is a danger o f overlooking the intrinsic characteristics o f innovation in an attempt to measure the effectiveness o f a process that occurs at the margins between mind-sets, rather than the jurisdiction o f one particular knowledge and skill base (Leonard-Barton, 1995).  Assessing Human Capital  The criteria used to assess human capital relate to the ability o f employees to perform tasks and meet business objectives and include "the creativity and innovativeness o f the 65  organization" (Edvinsson et al., 1997), although business context and organizational culture have also been identified as important factors, particularly i n smaller high tech firms where managers typically work within shorter product life-cycles, have less training, resources and strategic partnerships than their larger counterparts (Betcherman, 1997; Baldwin, 1995; Schuetze et al., 1997).  Edvinsson (et al.,1997) views human capital i n terms o f skill, experience and capture. The emphasis is on need, evaluation, competency and efficiency, with organization culture and leadership central elements i n the policies, strategies and structures developed to exploit their employees knowledge base. Specific areas include hiring policies, upgrading the skills o f the existing work force, dissemination o f knowledge, and measurement o f knowledge management initiatives.  Developing Framework Parameters  Within this context, the primary objective is to determine why, when and how companies evaluate, acquire, develop and manage both knowledge, and the learning that precedes its formation. Specifically, the policies, strategies and practices companies have i n place for recruiting employees with specialized knowledge (hiring practices), upgrading or developing workforce skills and expertise (training and professional development) and the dissemination o f knowledge (knowledge management).  66  Drawing on strategies for owning human capital, the discussion incorporates the strategic role o f trust and commitment in developing human capital, looking for specific linkages to the individual work culture and value systems o f both managers and employees (Edvinsson, 1997; Ulrich, 1998). Specific questions relating to hiring practices, training and professional development and knowledge management include:  1. Hiring practices •  The type o f knowledge, skills and experience in demand  •  Strategies and factors influencing the final hiring decision  2. Training and professional development •  Formal policies, statements and procedures - budgets, tracking and evaluation  •  The organization and forms  3. Knowledge management•  Formal policies, statements and procedures  •  Organization and forums - creation, access and transfer o f knowledge  Summary  Human capital is the sum o f the knowledge owned by employees - used by firms to achieve commercial goals related to products, services and organizational processes. Major influences on the creation o f human capital are business and innovative contexts, organizational culture, hiring polices, skill development and the presence, and measurement o f sector specific knowledge management initiatives. Commercial goals are related to supporting innovation, which this framework centres i n the improvement or creation o f products, services and business processes (Stewart, 1997). 67  3.4.3 Customer Capital  While human capital is centred in the value o f employee knowledge, the focus o f customer capital is the relationship between a company and its customers - "the value o f its franchise, its ongoing relationship with the people or organizations to which it sells" (Stewart, 1997:143). Customer capital is the most recent addition to the IC and there exists a certain degree o f skepticism with regard to the assessment o f a relationship, which accounting areas would prefer to view in terms o f tangible returns relating to sales and returns to investment i n training rather than needs, expectations and potential.  Perspectives  Calls for a more inclusive form o f stakeholder or relational capital have also been voiced (Kiernan, 1995; U l r i c h , 1998). Here, all forms o f external relationships and sources o f knowledge would be formally valued, thereby including strategic partners, business counterparts and research labs. The potential impact o f this change on smaller high tech companies is significant, i n that limited resources often require the exploitation o f any and all networking and inter-organizational relationships. Studies indicate that strategic partners typically start out as clients or customers, thereby justifying inclusion ( T I A , 1997; Schuetze etal., 1997).  This is an interesting development for educational institutions seeking to clarify the business - education continuum, in that contributions o f co-op students would now  68  assume a tangible and expanded role within 'the collective' o f intellectual capital, assessed for contributions to both a human and relational perspective, in that students bring skills and knowledge that can be added to the collective experience. B y extension, this also justifies further allocation o f resources to improve both the quality o f the individual, organizational experience and knowledge capital.  In terms o f the relationship to innovation, Leonard (1995) reiterates Cohen and Levinthal's (1990) stance that innovative capabilities are tied to the recognition, assimilation, application and linkage o f new external information to commercial goals. However, moving from an exclusive customer capital perspective to a more inclusive, and by extension, broader relational base or external company networks, provides greater scope for examining the linkages between the development and subsequent exploitation of intellectual capital, types o f knowledge and learning strategies, network formation approaches, and absorptive capacity.  Hommen (1995) stresses that in the case o f network formation, inter-organizational relations and competitive advantage offer contrasting perspectives on the motivation behind external liaisons. In the former case, viewing interdependent networks as a structured, systematic and reciprocal response to scarce knowledge resources founded on mutual trust, while the latter is more o f a contracted relationship, with each side responsible for specific non-transferable knowledge and key elements o f a given project.  69  Assessing Customer Capital  The value or potential o f customer capital is broadly perceived i n terms o f meeting company goals, with external (customer) networks identified according to role and the level, type, duration, extent and tangible returns o f knowledge exchange (Leonard, 1995; Stewart, 1997; Edvinsson et al., 1997). The value o f this relationship is thought to centre on the successful transfer o f knowledge between the two with regard to needs and expectations. A necessary addition to the equation is organizational management, where opportunity amounts to an expression o f perception, whereby the capacity to act rests in the ability o f management to focus and channel expertise through what i n high tech sectors amount to the "porous boundaries" (Leonard, 1995) encompassing technical, professional and R & D areas o f the operation.  Developing Framework Parameters  The customer bond is discussed in relation to: the type and extent o f corporate relationships - business relationships; the characteristics o f learning and knowledge between companies and the importance o f these relationships for innovation, learning strategies and evaluation o f knowledge - innovation, learning and knowledge; and finally, the type o f knowledge and learning needed to support these business linkages developing support services (Edvinsson and Malone, 1997) . 5  This group of factors is based on a set of customer metrics or measurements propose to measure the effectiveness of company-customer relations. Given the focus of the study on knowledge and learning modifications have been made to highlight these two areas of interest, Edvinsson and Malone, 1997: p 94-5 5  70  Specific questions relating to business relationships, innovation, learning and knowledge transfer, and providing support services include:  1. Business relationships •  Nature o f knowledge relationships  •  Approaches and forms o f knowledge relationships  2. Innovation, learning and knowledge transfer •  Influence innovation, learning and knowledge transfer  •  Encouraging customers to participate in the development and use o f new knowledge  3. Developing support services•  Influence on learning and knowledge  •  Types o f knowledge and learning situations  Summary  Customer capital is perceived in terms o f how firms find, develop and make use o f knowledge from "on-going relationships with the people or organizations to which it sells" (Stewart, 1997:143). The emphasis is on learning and knowledge transfer under conditions o f high trust and mutual interest.  3.4.4 Structural Capital  Structural capital monitors, captures and stores both human and customer capital. It is the 'embedded' knowledge a company owns, where value is perceived i n terms o f monitoring, accessing and improving services, products and processes. Literature refers 71  to these 'assets' as codified and predominantly core knowledge, ranging from patents and copyrights, to firm strategy, culture, organizational infrastructures, products, protocols and procedures (Brooking, 1996; Edvinsson et al., 1997; Stewart, 1997; Dearlove, 1998).  Perspectives  While Booking's taxonomy and subsequent methodology divided structural capital into two distinct, yet seemingly complimentary areas o f infrastructure and intellectual property assets (Brooking, 1997) , Edvinsson and Malone (1997) suggests there are 6  actually three capitals - "organizational, innovation, and process" (p35). Facets are reduced to organizational policies, strategies, structures and practices for "speeding the flow o f knowledge through the organization, as well as out to the supply and distribution channels" (p.35). This also provides the means for efficiently codifying and leveraging competence, and realizing the potential o f existing commercial and intellectual property rights, assets and talents necessary to bring new products to markets. In essence structural capital deals with core knowledge, in that it "belongs to the organization as a whole" (Stewart, 1997:109).  A distinction also needs to be made between a commitment to formalize, capture and exploit knowledge, and having the organizational structures in place to either follow through and/or provide the type and degree o f access an enterprise would need to have in place in order to function effectively. Here the innovative context, size and culture o f a  Brooking defines intellectual property assets as property of the mind which the company owns - and has legally protected. These include patents, copyright, design rights, trade secrets, trade marks.."  6  72  company has the potential to significantly impact not only whether, but what type o f knowledge capture system a firm adopts, i n conjunction with the strategic significance attached to knowledge management as a whole.  Assessing Structural Capital  Literature indicates a trend towards a process driven perspective o f structural capital, centred in the amount and quality o f human and customer knowledge generated through its structures and management. In terms o f assessment, criteria used to assess the efficiency o f this capture, transfer and storage process are typically categorized with regard to investment in the way work is undertaken, organizational factors assisting the speed with which knowledge moves through the company and customers, and the tangible assets that emerge from innovation (Brooking, 1996; Edvinsson and Malone, 1997).  Developing Framework Parameters  Structural capital is considered in relation to three groups o f assets - organizational, innovation and process capital, which effectively drive, capture, monitor and provide access to both human and customer capita for the purposes o f creating new knowledge. A l l three capitals are considered with respect to company competence and leverage (organizational capital), creativity and results (innovation capital) and work efficiency (process capital) (Saint-Onge, 1996; Edvinsson and Malone, 1997; Stewart, 1997; Bontis,  73  1998). Specific questions relating to organizational, innovation and process capital include:  1. Organizational capital •  Investment i n the knowledge infrastructure  •  Structures and forms o f knowledge systems and tools  2. Innovation capital •  Protection o f knowledge and creative talents  •  Structures and forms o f protection and encouragement - creation o f knowledge  3. Process capital •  Monitoring the efficiency and productivity levels o f knowledge systems  •  Structures and tools - systems and methodologies  Summary  Structural capital is knowledge owned by, and o f value to a company. The creation o f intellectual capital is thought to rest in the efficient transfer o f human and customer capital to capture systems and structures (Dearlove, 1998). These 'tangible' capital assets cover a wide range o f areas, ranging from proprietary rights to organizational documentation. Attempts to divide structural capital into distinct areas reflect an often practical need to differentiate between structures and products - and evident i n the differentiation o f organizational, innovation and process capital. This reflects the expectation o f efficiency attached to developing IC into a management tool (Brooking, 1996; Edvinsson and Malone, 1997).  74  3.4  LIMITATIONS OF T H E F R A M E W O R K  In deciding on the analytical framework for the study, the evolving nature o f the intellectual capital field poses a challenge with regard to both interpretation and translation o f concepts and methodologies. While the central tenet o f IC is 'leverage', a concept with inherently economic connotations, the frameworks and methodologies lean towards professional areas o f practice and scale, with emphasis on supporting these functions and operations. Within this context, the framework represents a conservative interpretation o f the literature - a synthesis o f major viewpoints, drawing heavily on work by Edvinsson and Malone (1997), Stewart (1997), and Brooking (1996), while acknowledging the market driven lens o f knowledge and learning advocated by Davenport and Prusak (1998), Leonard (1995) and Kennedy (1996) . 7  Intellectual capital is approached as a process - comprised o f human, structural and customer knowledge or assets, subject to both internal and external influences. The creation o f new knowledge is viewed within the context and definition o f an innovative state or outcome. The overall taxonomy reflects the approach o f Saint-Onge and work undertaken at the Canadian Imperial Bank o f Commerce ( C I B C ) , rather than Edvinsson's strategy for managing the knowledge base at Skandia. Literature on the business and learning contexts o f S M E s suggests the latter is too inclusive and unrepresentative o f the importance smaller high tech firms attach to customer knowledge and feedback (Schuetze etal., 1997; T I A , 1997).  For overview of framework see Appendix D.  75  The remaining area o f contention for the study and framework is the positioning o f strategic partnerships and other collaborations - normally included as facets o f both human and structural capital. The operational characteristics o f S M E s in British Columbia, outlined i n both academic and industry studies (Schuetze, et al., 1997; T I A , 1997), suggest a broader context and role for external sources o f knowledge than any one IC approach proposes, while even Edvinsson (1997) speculates on the apparent inconsistency o f considering strategic relationships any less valuable than those o f customers. However, this remains more a question than an generally accepted tenet o f intellectual capital. Given the commitment to a generic framework, strategic relationships remain a criteria o f human and organizational (structural) capital.  It is anticipated that discussion o f the study's findings w i l l provide further insights into this and other possible limitations o f the intellectual capital framework when applying its structures and processes to the knowledge and learning needs o f innovative small and medium-sized high tech companies. From an educational perspective, the approach most suited to establishing a learning perspective embraces 'intangible' processes, affording the inclusion and attachment o f learning to commercial goals.  76  CHAPTER IV - METHODOLOGY  4.1  INTRODUCTION  This chapter outlines the methodology used in the study. The form and extent o f data are discussed i n relation to the case study interview schedule and a broader based provincial survey tool . The chapter concludes with limitations o f the study with regard to use o f 8  secondary sources, age o f the data and bias.  4.2  STUDY DATABASE  This section o f the chapter outlines the creation, use and limitations o f data used i n the study. Examined are the objectives and methodology o f the study from which data are taken. Case study and survey tools are reviewed i n relation to research protocols, quality of data and access to primary data sources. The chapter concludes with limitations o f the study data, which includes factors such as the use o f secondary data, age o f the database and bias.  For the interview schedule see Appendix A - survey tool see Appendix B  77  4.2.1 Origin o f Database  This study draws on data from research into knowledge and human resource management in small and medium sized enterprises in British Columbia (Schuetze et al.,1997). The decision to use an existing database is based on three interrelated factors: a shared interest in the topic o f how small, innovative firms handle their knowledge and human resource needs; questions that solicited the type o f data useful to the present study; and the first hand involvement o f this researcher in all facets o f the project . The study in question 9  examined the relationship between innovation, skills and learning in four industrial sectors o f the province: secondary wood products, engineering consultants, telecommunications and computer services. The present study draws on data from only one o f the original four industrial sectors: computer services.  4.2.2 Case Study Design  Case studies elicit information relating to both the "strategic, operational and organizational decision making processes and arrangements o f firms" and the "learning projects undertaken by employees and work groups in relation to both general organizational strategies and specific processes o f innovation" (Schuetze et al., 1997).  This researcher was involved in project interviews, analyses and write-up of the computer service sector , survey design, final report and industry seminar.  9  78  4.2.3 Interview Guide  The interview guide is a source o f data for:  •  company history - business context and strategies;  •  economic activities - the nature, context and exploitation o f innovation;  •  learning and information gathering;  •  and the strategies, structures and practices surrounding human resource development . 10  4.2.4 Quality and Limitations o f Data  One o f the four participating companies failed to provided full documentation. Incomplete areas o f information include organizational charts, details o f firm history, formal human resource and training policies, and compensation packages. While certain aspects o f these areas are covered in interviews, with project commitments often i n excess o f eight hours per firm, few companies were prepared to answer additional questions. To ensure the credibility o f data and accuracy o f anecdotal and on-site observations, two o f the four team members were required to attend each interview.  There was also concern over the bias or objectivity o f interview data. The research team had little influence over who was to be interviewed. However, computer service firms  Actual interview schedule sections: firms profile - business environment, relationships and innovation; employment - human resource management and skills; organization structures, decision making and learning; training and human resources development. 1 0  79  appeared open to the suggestion o f interviewing employees, although deadlines and schedules often precluded more than summary contact. There were notably exceptions, in at least two instances companies spent either the entire day or a number o f afternoons with members o f the research team.  4.2.5 Access to Case Study Data  Case study data takes the form o f questionnaires, interview tapes and transcripts. Questionnaires were used primarily to develop initial business profiles o f case study companies before interviews took place.  4.3  SURVEY: INTRODUCTION  The survey is an addition to the original research design with very narrowly conceived objectives related to issues surrounding labour market trends, policies and initiatives raised by the project advisory committee after receiving the initial case study report. While the report i n question focussed on examining the underlying processes driving organizational, learning and human resource characteristics and practices, it was suggested that incorporating data on sector counterparts had the potential to significantly broaden the audience o f the project.  80  4.3.1 Survey Design  The survey tool consists o f a one page overview o f the project and three sections o f questions covering three areas o f case study analyses: company and business profile; innovation; and skills, learning and training.  Company /Business Profile  This section looks into business practices and characteristics providing details o f firm markets, alliances, use and extent o f professional memberships and evidence o f formal organizational tools used i n increasing efficiency. Firms were also asked to include organizational charts to compliment those either presented by firms or compiled by team members i n response to questions on organizational structures.  Innovation  The focus o f section two is why and how innovation takes place in companies, looking specifically at the characteristics o f innovation. Survey questions relate to specific elements, sequencing or characteristics o f products, strategies and clearly defined processes o f innovation.  81  Skills, Learning and Training  Questions i n this section focus on hiring practices, work organization and the learning and training strategies innovative, small and medium-sized companies adopt i n order to a achieve their business goals. Objectives included: determining hiring priorities with regard to the perceived value o f attributes and specific skills; whether management favours employees working as teams or independently; and the extent to which training and learning have been accepted as integrated and accountable aspects o f a smaller company's overall business strategy.  4.3.2 Survey Database - Computer Services Sector  The computer service base database has been compiled from government, industry and business sources: B . C . Stats.; Technology Industry Association (TIA); Software Productivity Centre (SPC); Business i n Vancouver ( B I V ) ; industry and government representatives; and the business contact database o f this researcher.  4.3.3 Distribution o f Survey  The survey was mailed to a random selection o f 66 computer service firms with 10 - 100 employees. Firms with under 9 and over 110 employees were eliminated prior to the first round o f firm selection - 25 or 37.9% o f returns were usable. Usability was determined in relation to the number o f questions completed.  82  4.4  LIMITATIONS OF THE DATABASE  Using data from an existing data base precludes the opportunity to re-visit interviewees and by extension, to exert any influence over why and how questions are drafted or presented. While not involved i n the initial conceptualization o f the project and subsequent interview guide, this researcher attended all the computer service interviews, with opportunities to both ask and follow-up on questions and assumed responsible for overseeing the design, dissemination and response to the survey.  There may also an issue o f credibility given data was initially collected during the 1996/7 period. In this instance, the focus is one o f expanding the parameters o f a conceptual and framework rather than the creation o f new data, making the quality and range o f information o f greater importance to the researcher. It should be noted that the Innovation, Skills and Learning database represents one o f the first comprehensive studies undertaken into the knowledge and management o f human resources i n innovative, small and medium-sized enterprises i n British Columbia.  The potential for personal bias is o f concern i n every study. In this instance, the researcher is employed in a small computer services company likely to benefit directly from the findings o f the study. However, bias has to be viewed i n terms o f potential, and what the researcher has access to, and control over. In this instance the potential for in-built bias exists i n the database itself, originating with the questioning o f case study participants, and concluding with the preparation and interpretation o f the questionnaire  83  results. However, the project team was comprised o f four people and at least two members were required to attend each interview. Copies o f the draft survey were also circulated to case study firms for feedback. The only aspect o f bias not under ethical control relating to the professional knowledge shared with team members during discussions and editorial meetings. The presence o f industry advisors on the project and the dissemination o f draft copies to case study companies constitute project safeguards.  From a contrasting perspective, a concern noted by both an industry advisor and company manager was the issue o f industry background, and whether team members were in a position to interpret interviews accurately. There were questions with regard to the possible impact this might have on developing the type o f 'working knowledge' perspective relevant to the intended business audience.  Finally, the age and size o f both the firms and sample involved i n the study might raise questions. The majority o f computer services firms in British Columbia have less than ten employees, and four case studies represent a very small snapshot o f a sector comprised o f thousands o f companies ( B C Stats, 1996). The response rate o f the survey firms is also modest, with only 25 or 37.9% o f companies responding providing usable responses.  To address these concerns it is necessary to return to the objectives o f the original study, where the absence o f firms in B . C . with over 100 employees prompted interest i n developing comprehensive profiles o f smaller, successful and well established organizations. The intent was to review the experiences and conditions found in well  84  established, innovative firms thereby providing 'the majority' o f smaller enterprises with insights into addressing growth issues. To this end it was decided not to include firms under five years old with less than ten employees. It was felt that the depth and quality o f data provided by firm interviews would provide invaluable insights not hitherto available to policy makers by virtue o f the time constraints and limited resources S M E s cite as obstacles to participating i n case study research.  In terms o f survey returns, difficulty in finding firms willing to act as case studies suggested managers might be reluctant to spend time on answering detained questions. It was recognized that previous to this survey, the majority o f industry survey instruments had followed provincial and federal formats, which provide for generalized and guided responses, rather than requiring managers to reference files for details o f practices, budgets and employee qualifications. Managers were clearly accustomed, comfortable and prepared to respond to commercial or conventional business questions o f firm size, revenues, markets and strategy. However, few appeared ready to tackle questions relating to processes such as innovation, professional development and training. Consequently, emphasis was placed on the quality rather than the quantity o f returns. Given the survey was intended to act i n a supporting capacity to case study data, rather than the precursor to further research, the l o w response rate was considered acceptable and somewhat characteristic o f the sector in question . 11  11  Validated by TIA survey (1998) - a sample of 174 firms resulted in 30 responses or 17% return rate.  85  CHAPTER V - FINDINGS  5.1  INTRODUCTION  The study findings are presented using categories adopted i n the framework for analysis:  •  business context  •  human capital  •  customer capital  •  structural capital.  Outlined are the policies, structures and forms o f learning - in conjunction with the acquisition, nurturing, development, management and exploitation o f knowledge i n small and medium-sized computer service firms in British Columbia. Case study companies form the core o f study findings , supported by sectoral data taken from a broader and 12  more limited provincial survey.  For detailed business profiles of case study firms see Appendix C.  86  5.2  BUSINESS CONTEXT  5.2.1 Case Study Profiles  The commercial activities o f the four case studies range from the development o f inhouse specialized systems(C-2) to contracted third party cross platform software ( C - l ) and embedded systems ( C 3 - 4 ) . 13  C - l was founded i n 1992 as a partnership by its present owners and has enjoyed dramatic and sustained growth, particularly in the U . S . The company operates within a niche market, developing software components for industry giants such as Microsoft and Corel. In contrast, C - 2 , founded in 1981, is the most established case study firm with a history of corporate buyouts o f the company and uneven development. The company is currently a single proprietor and employee managed enterprise, specializing i n geographic information systems for resource companies involved primarily in forestry and mining, and experiencing slow but sustained growth.  C-3 and 4 are distinct from C l - 2 , in that both enterprises have developed embedded applications, representing two contrasting degrees o f acceptance and success. C-3 was founded in 1988, as a spin-off from a large international concern and is owner managed. The company builds and markets dispatch systems for taxi and courier service, and  13  Contracted third party cross platform - refers to software that can be used with various operatmg systems and hardware, designed for specific clients and not owned by developers: embedded systems where software and hardware are integrated within a single product.  87  reports dramatic growth over the past four years, due in part to industry connections and research partnerships formed as a result o f a close working relationship with the former owners.  In contrast, C-4 develops credit and debit card transaction processing systems and hardware within a market primarily controlled by financial institutions developing their own competing systems i n a rapidly evolving and relatively untried commercial area o f applied technology. Founded in 1990, the company is expanding slowly as it develops new commercial applications. This is the only case study firm to have gone public.  Case study managers cite challenges to growth that include: high rates o f personal taxation; competition for a limited pool o f technically skilled workers with eastern Canada and the U . S . ; poorly developed capital sources; inexperienced management; and a lack o f corporate vision. While all four companies have developed extensive marketing literature outlining corporate vision and business mission, expressed i n terms o f growth history, values and work ethic, two o f the four firms ( C l - 4) are actively pursuing new corporate visions for their organizations i n response to growth, maturing markets for products and emerging technology.  5.2.2 Survey Firms  A t the survey level, firms are typically limited companies with 10-25 employees. The majority o f companies are experiencing rapid annual growth rates in excess o f 50% ,  88  while 80% o f firms report national and international markets for their products and services. The U . S . market is a major and expanding source o f revenues. Over 60% o f firms report membership i n a professional organization, used primarily for marketing and/or information resources. Survey firms demonstrate a broader broad use o f the tax credit programme than case studies, however, all companies report frustration with the procedures and decision making timeframes. Research grants and government funds are used by the majority o f survey and case study firms, although there is no clear preference for one particular funding source  5.3  H U M A N CAPITAL  5.3.1 Hiring Practices  Hiring practices are reviewed in relation to the types o f knowledge, skills and experience in most demand, and the strategies and criteria firms employ to determine suitability. Based on firm evaluation criteria, prospective employees are differentiated into three distinct categories: entry level applicants, those with 3-8 years o f employment i n the industry and seasoned professionals with a minimum o f 10-15 years o f experience.  5.3.2 Types o f Knowledge, Skills and Experience in Demand  Within case study firms, entry level applications are considered i n relation to specific technical knowledge, while those with 3-5 years experience in the industry are expected  89  to have a broader range o f knowledge with respect to both emerging technology and sector counterparts. In the mid-career range, a broad based knowledge o f the industry and business related areas is valued, with emphasis on organizational infrastructure, marketing and management, although managers indicate few people are hired at this level, due to cost, potential clashes in work culture and lack o f availability.  In the areas o f personal attributes and non-vocational skills, in the ability to adapt and function as a team player are highly valued at both the entry and 3-5 years o f experience levels, while a good attitude, motivation and work ethic are also considered desirable assets. Familiarity with the logistics o f project and/or team work are also imperative for those with a few years o f industry experience, particularly the ability to meet deadlines, although discussions with case study managers indicate firms have yet to develop methods for formally evaluating these prerequisites, other than placing great emphasis on the interview process. Self-sufficiency and motivation are also considered important assets. In more experienced or seasoned applicants, project management skills are the most highly prized and sought after skills, although case study managers indicate a clear preference for in-house expertise over hiring from the marketplace.  In the area o f business related skills, case study firms expect entry level applicants to be briefed in a broad range o f technology, although not necessarily conversant with the operation and use o f specific application software or hardware not i n use by the company. Interpersonal skills are considered as important as technical abilities, while only 12% o f survey firms rank it as a number one demand skill. Interest in management related  90  abilities is ambiguous. Only 8% o f survey respondents rank management skills as their number one choice, although 64% mention relevance to their operation, which corresponds closely with the perception o f case study firms. In the 3-5 year category, prospective employees are expected to be conversant with firm specific technology and to have developed a full range o f interpersonal skills, with emphasis on customer support and project management areas. Where firms hire at the senior level, applicants are typically employed for exceptional management and interpersonal skills.  A t the entry level, all employers are looking primarily for full-time employees with industry experience, although preference is shown to co-op graduates companies employed as students. Case study managers considered this practice to be an efficient use o f limited resources, significantly reducing what were perceived to be longer period of adjustment and lower productivity normally present i n graduates from programmes without work experience components.  Within the sector as a whole, 56% o f companies value job specific experience, yet industry relevance is also considered an asset, mentioned i n at least 80% o f responses. In the 3-5 year category job specific experience was important. Firms also look for a broad base o f industry related experience. Applicants for senior positions are typically hired based on industry and business expertise, although case study firms indicate a preference for either promoting from within, or hiring short-term consultants.  91  5.3.3 Strategies and Factors Influencing the Final Hiring Decision  Case study firms have two main strategies for recruitment, word o f mouth and co-op programmes. Company employees are also an important source o f information regarding available or potential employees. Firms report little success using newspaper advertisements or job fairs as a means o f recruitment.  Managers place greater emphasis on interviews rather than an applicant's technical curriculum vitae, looking for evidence o f a potential 'fit' with the prevailing culture, well developed interpersonal skills and sound work ethic. C - l describes this search in terms o f looking for "young rocket scientists - bright, driven, in love with software development, as good with people as a driven software developer can be.." and prepared to "do what's necessary to get the job done". In the 3-5 years experience group, the ability to meeting project deadlines and previous employment with customers or competitors are also highly valued by prospective employers - in the latter case, specialized knowledge o f competing products and culture is considered useful to future marketing and sales.  Other factors influencing the hiring decision include the employees expectation of:  •  an informal work environment/ flexible hours  •  a suitable remuneration package/profit sharing - share options  •  career advancement  •  challenging work.  Overall, companies cite the need to respond to product development, industry shortages, limited resources and company fit as driving forces i n the hiring process. 92  5.3.4 Training and professional Development  Formal Policies, Statements and Procedures  A t the firm level, companies lack formal training and professional development polices, although there are informal guidelines or explicit, yet generalized understandings in place, regarding when and who is trained. Training is recognized as important yet not formally integrated into organizational business plans and strategies. C - l is closest to achieving this integration, with management "support(ing) the passion and drive to learn" - maintaining that "being in the knowledge business any investment you make (has the potential for) a very high return" - yet the company has no formal policy to support the existing training budget o f $1000 per employee, per annum. A t the sector level, Table 1. indicates that while 80% o f firms report integrated training and professional development into their business plans, it is the 20% o f firms operating without a plan that have budgets, track expenditures and evaluate outcomes.  Yes  No  %  %  Integral Part o f Business Plan  80  20  Budget  48  52  Track Expenditures  44  56  Evaluate Outcomes  40  60  Training and Professional Development  Table 1. Training and Professional Development - Characteristics  93  Firms cite improved employee skill levels as the main incentive to undertake training, although increased productivity is also a significant factor. Case study firms also report factors such as efficiency and the competitive advantage offered by a well trained workforce, while survey respondents included employee satisfaction. T w o o f the case study managers ( C l - 2 ) felt they were more likely to retain employees i f the company provides the opportunity to keep skills and knowledge current. Only one o f the four firms (C-I) has a training budget ($3000 per employee, per annum and a dedicated training room) and none o f the firms formally track or evaluate training outcomes. Training is also viewed as a strategic response to industry skill shortages, whereby smaller companies nurture and develop knowledge in-house in response to what C-2 refers to as the inability to match "what government.. .and big industry pays..." , the brain drain to the U . S . , and clients " hiring (employees) out from under us".  Organization and Forms  The majority o f training undertaken by both case study and survey firms is informal, justin-time, technical in nature and in-house. Less experienced employees receive the bulk o f training, which tends to be highly specialized and in response to a specific commercial needs identified by management. Professional training is comprised o f informal mentoring or formal public sector education, the latter o f which, managers leave to their employees discretion, although firms often subsidize formal courses and graduate work, "providing it's not to build a log cabin" ( C - l ) .  94  Where formal training is undertaken, companies usually contract private sector services and offer courses on the premises. This is the preferred option when large numbers o f employees need training. Survey data also indicate, that while nearly half o f the survey firms have used professional organizations to meet their training needs, none have turned to public sector services  Two o f the four case study companies ( C l - 4 ) have experienced an increase in professional development at the senior levels. In both cases, managers and owners are using consultants to assist them with organizational visioning, intended to facilitate a change i n company direction and mission. C - l has also invested heavily in administrative training in response to operational upgrades, with management opting for formally structured courses offered by private sector trainers.  Within this context, C-4 openly question what the firm considers is an over emphasis in public policy on technical knowledge and skills, while "the everyday skills it takes to run the company" are marginalized. One senior manager asks why government "can't work with companies to move ahead. What we're suffering from.. .is the (lack of) skills.. .even (in) sales and marketing. It's those things, as opposed to high technology.. .they should be working on the incubating the management people that operate the industry.."  Case study firms show interest in virtual training, particularly in specialized and emerging technical areas ( C - l , 2 and 3), although time constraints have tended to curb  95  enthusiasm for the time being. One o f the companies ( C - l ) makes extensive use o f industry training, offering employees access to product certification programmes, technical upgrade conferences and market release events offered by clients, manufacturers and suppliers. Overall, employees make the majority o f requests for training, while project managers or senior management are responsible for deciding the merit o f claims.  5.3.5 Knowledge Management  Formal policy, Statements and Procedures  Case study firms adopt an informal approach to managing knowledge. The broad sentiment expressed by management towards knowledge is summed up by C - 2 , where management maintain, " it's not the company or the software that counts it's the brains. We want the brains and there's all sorts o f ways to do that - joint marketing, joint ventures, partner ownership, full ownership or just hire them . . . " . However, there are no formal policies and statements relating to the acquisition, nurturing, development, access and exploitation o f knowledge i n relation to commercial goals and objectives. In contrast, procedures for handling both core and peripheral knowledge are in place, with goals and objectives related to supporting corporate operations, services and products.  96  Organization and Forums - Creation, Access and Transfer o f Knowledge  In case study firms, knowledge is organized according to function - operations, products and services. Core knowledge relating to organizational history and procedures, products and services is stored i n both hard copy and disc form. Companies indicate that the principle objective o f core knowledge is supporting the following business and administrative functions:  •  accounting - audits, business plans, finance;  •  marketing - data for use i n preparation o f promotional material;  •  legal - contracts, strategic partnerships, intellectual property rights;  •  products - specifications, manuals, upgrades;  •  services - ' h o w to' guidelines and protocols - customer support;  •  training - manuals and outlines;  •  recruitment and orientation o f new employees.  The extent to which companies document knowledge varies, although supporting products and services is a cited priority. O f all the case study firms, C-3 is the most emphatic that "the thicker your documentation up front, with your customers for example, the better you're going to turn out in the end". Managers indicate they protect sensitive areas o f material relating to legal, financial and areas o f R & D . The other end o f the spectrum is present in C-4, where "our policy is to have no procedure documentation, no policy documentation" rather to have " on one hand a list o f beliefs that we have in the company and any situation that comes up, we just go back to those. Does it tie i n with  97  our long-term focus, does it meet with our delivery o f services to our customers. If we can't answer any o f those things, then we shouldn't be doing it".  Firms provide examples o f organizational (knowledge) forums that are both formal and informal i n nature. In the latter, retreats and socials, brainstorming and mentoring are the three most prominent forms o f informal learning opportunities, cited by both case study firms and survey respondents. C - l a n d 2 report utilizing these forums i n support o f a broader organizational strategy o f building trust and promoting an informal and relaxed hierarchy. Formal arenas are comprised o f structured interactions for the transfer o f knowledge, which include:  •  monthly and weekly company briefing sessions providing overviews and feedback on projects, deadlines, new work, clients and issues;  •  project management meetings;  •  technical update seminars - reports from internet sources, conferences, industry shows and training, supervision, and project or R & D brainstorming sessions.  Both case study and survey firms report external knowledge networks in which employees access or attend: Survey respondents - % •  publications  21  •  internet web pages/groups  21  •  professional/sector seminars  20  •  trade shows  20  •  university /government labs  12  •  academic conferences  11  98  Managing external sources is viewed as an essential aspect o f supporting technical development and innovation, with approaches that often rely upon what C-3 refers to as "translator(s)" , whereby technical, sales and theoretical stakeholders rely upon key employees to recognize, convey and make firm specific, otherwise narrowly focussed and specialized knowledge. The growth o f internet sources is also considered integral to managing knowledge, with employees making extensive use o f the net to download technical data from clients and suppliers, track trends and exchanging ideas with industry counterparts.  5.4  CUSTOMER CAPITAL  5.4.1 Business Relationships  Nature o f Knowledge Relationship  Case study firms have established close knowledge links with customers. In survey firms, 44% o f companies regularly exchange information with customers, while 92% cite customer feedback as integral to development work. Presently, firms recognize these relationships through strategies and structures rather than formal policies, although marketing material either alludes or specifically makes reference to the role customers play in building overall business and development strategy.  99  Three o f the four case study firms ( C - l ,2 and 3) cite financial dependence on a small number o f key customers, while clients have funded development work i n all four cases. Overall, firms seldom upgrade products without significant input from users, although at least one company (C-3) was o f the opinion that "clients don't always know what they want".  Managers are typically looking for ways to move firms towards a more independent and market driven development trajectory, while still retaining the customer revenues needed to sustain day to day operations. Within this context, C - l has developed a pilot R & D unit to explore emerging areas o f technology using revenues from existing projects, although there is a degree o f skepticism at the mid-management level regarding the financial viability o f this approach. In contrast, C-4 has a goal o f including a service component to its emerging applied focus, in an effort to produce a "re-occurring revenue stream" , although the organization concedes management lack the basic sales and/or marketing skills and knowledge necessary to build the customer base o f an unproven technology.  Approaches and Forms o f Knowledge Relationships  Employers value customer knowledge as an asset, vital to the improvement o f service and products. While the degree o f this involvement varies, C-3 exemplifies how close the relationship can be, explaining, "we have a company which is i n business with its customers and the customer becomes the central focal point (of) what we are offering the customer and it works back from there...". However, approaches to customer support  100  vary. Although firms such as C-2 and 3 devote resources to improving the performance levels o f support staff, which managers contend, strengthens the operational link between developers and clients (C-2), this type o f investment is normally incorporated under costs incurred by on-going projects rather than knowledge or learning related. In contrast, C - l restricts access to clients, with the majority o f work undertaken remotely, rather than at client sites. Customer input typically goes through one member o f senior management, a response the organization explains i n terms o f leaving developers to develop with little need o f specialist support training.  Customers provide support for their products and innovation by providing detailed data on performance and possible modifications. Firms encourage customers to 'buy into their vision', with one firm (C-4) insisting that developing trust ensures future co-operation. Customers have also been used to beta test or trial new versions and/or upgrades o f products.  5.4.2 Innovation, Learning and Knowledge  Influence on Innovation, Learning and Knowledge Transfer  Case study firms view their client relationships as a cost-effective approach to innovation, whereby customers provide often unsolicited suggestion for improvements and new products. However, despite these benefits, managers also indicate concerns over the narrow focus o f creativity and the danger this dependency poses to future R & D ,  101  whereby companies commit to an applied focus using technology and knowledge significant to existing clients rather than predicting and planning for future needs and opportunities.  The exception to this is C-4, where a predominantly R & D focus has  resulted in a need to first sell the concept, then devote resources to developing applications.  Information flows are most intensive during the beta testing or firm trials, where results are closely monitored and documented. Given the need to go through a consultative process with clients, innovation is more likely to be systematic, a characteristic also cited by over 50% o f survey firms. Serendipitous innovation is evident in at least three o f the case study firms (C-1,2 and 4), where resources for R & D and communities o f practice are flourishing independently o f formally stated commercial goals.  The predominant form o f learning is situated within groups or project teams, where members share their new, and often tacit knowledge v i a informal discussions and mentoring. A t the organizational level, more structured approaches are evident in the form o f seminars'and weekly update meetings - used to transfer information and data gathered from sales, marketing and technical support. The former also represents the predominate work organizational form in this sector, chosen by 48% o f firms surveyed. Case study managers also indicated that it is not uncommon for personnel to move between customers and service providers, which provides firms with additional specialized knowledge and skills, yet also represents a significant loss o f peripheral  102  knowledge, i n that few o f the techniques developed for 'handling' clients have been formally documented.  Where customers are also industry leaders ( C - l ) technical expertise and knowledge are continually upgraded i n order to both maintain and w i n contracts. Some o f this learning takes place off-site and is structured within formal training and 'arranged' social interactions with industry counterparts. This is followed by in-house sessions, where knowledge is transferred to the organization. C - l describes this process in terms o f " we just send down a bunch o f people down to San Francisco for the Apple World-wide Developers Conference and then we went to the Microsoft World-wide Developers Conference ... .where they divulge a lot o f information.. .and some o f the people put on a presentation on what they discovered, so in terms o f sharing information, it's kind o f an individual information gathering (session) and then we try to share it with the group". Firms report that many o f these contacts go on to become 'off-shore' technical sources members o f virtual and informal industry networks or extended communities o f practice.  5.4.3 Developing Support Services  Influence on Learning and Knowledge  Case study firms place emphasis on the skills, experience and specialized knowledge needed to staff their customer support lines or negotiate at senior levels, although in the former, managers cite high turnover rates due to stress and lack o f both personal and professional satisfaction. 103  Types o f Knowledge and Learning Situations  Support staff are required to demonstrate extensive core knowledge relating to products and protocols i n conjunction with well developed interpersonal skills. Employees are usually trained on the job v i a mentoring or close supervision and learning is typically incremental, and not formally evaluated. While both C3 and 2 have developed support units, C - l remains the only company to introduced a rotation system i n an effort to retain the specialized knowledge and expertise o f their support staff - their peripheral and company specific knowledge Presently, management estimate support staff only stay with the company 2-3 years and generally leave at a time when they have achieved a high degree o f credibility with both customers and development employees. Others firms expect developers to support clients on an on-going basis, with very little training outside of normal company meetings and seminars.  5.5  STRUCTURAL CAPITAL  5.5.1 Organizational Capital  Investment in the Knowledge Infrastructure  Case study firms indicate an awareness o f the role o f organizational infrastructure, however, knowledge is not a formally recognized as a process with a distinct organizational structure, goal or budget. One company ( C - l ) has made a substantial  104  investment i n a new administrative support system - i n response to an increased volume of work and a resistance to hire and train personnel who are neither technical or billable. Firms typically make impressive and substantial investment in knowledge infrastructure related to technical areas and customer support, with administration and business functions relegated to secondary importance. The most significant investment being made by any o f the firms is improving connection to the internet - to access on-line technical sites, although there are indications that firms prefer employees limit their ' s u r f i n g ' ( C l 3).  Structure and Forms o f Knowledge Systems and Tools  Company knowledge infrastructures fall into three categories: technical, customer support and business related. Technical knowledge is typically incorporated through: seminars, meetings, self-directed learning, email, access to manuals, strategic partnerships and the internet. Additional external sources o f knowledge for case study firms include links to: Survey respondents - % •  business partners  44  •  suppliers  16  •  public sector sources;  92  •  academic and government sources  48  •  trade shows/seminars and publications  96  In contrast, knowledge used to support services and products rests i n structures that facilitate mentoring, supervision, specialized training and access to core knowledge  105  relating to product specifications and protocols. Business knowledge is located within administrative systems, while case study managers tended to view the development o f skills, expertise and overall acumen as a by product o f mentoring and on-the-job experience. There is also knowledge from external sources and described by C-2 as a situation where "our primary sources o f information (are).. .our technical support groups with clients.. .Secondary sources.. .would be through sales and marketing, where they are telling us what people are asking for" and by extension, what competitors are offering.  Computer systems are primarily used to store core knowledge. Managers focus on supporting administrative, business and technical functions related to services and products. None o f the case study firms has a dedicated knowledge manager, although three companies ( C - l , 2 and 3) have hired administrators and it is common to have a technical specialist overseeing communications and other specialized networking functions.  Case study firms have extensive intranets operating, although at least two o f the firms (Cland 2) admitted technical documentation was incomplete, with the majority o f manuals in hard copy form rather than on database. The latter circumstance is attributed to the rapid rate o f redundancy within technical areas. Less than 20% o f survey respondents and no case study firms have used structured methodologies such as I S O . Firms cite 1 4  cost, complexity and narrowly conceived structures inappropriate to smaller firms as factors influencing their decision, although at least one company ( C - l ) showed interest in  1 4  International Standards Organization - certification programme for business  facets o f the programme with regard to establishing more efficient administrative reporting structures.  5.5.2 Innovation Capital  Protection o f Knowledge and Creative Talents  Protection o f knowledge takes two predominant forms, legal and in-house. Case study firms view the legal protection o f knowledge from contrasting perspectives. Firms involved i n embedded technology have concerns about intellectual property rights and recouping investment capital, yet only C-3 has obtained a copyright. The remaining companies either work for customers who own the legal rights to software and hardware developed or thought the process redundant (C-4).  In terms o f in-house knowledge, management appear most concerned about limiting access to contractual areas o f business transactions, personal files or technical specifications provided at the onset o f a contract. In contrast, creative talents are consciously encourage and protected by investing in strategies for retaining employees.  Structures and Forms o f Protection and Encouragement  Structures i n place to protect knowledge and encourage creative talents can be categorized as technical and cultural in nature. Managers report that employees are  107  expected to formally codify technical specifications to ensure that work can be replicated. Companies also stress the role o f interactions with mentors, colleagues, customers and industry counterparts as an efficient means o f exploring emerging ideas, sharing specialized knowledge and building expertise, with C - l going to the expense o f installing a T - 1 line down to Microsoft "so we have email that flows continually". 1 5  A l l four case study firms view innovation as a corporate activity. Managers refer to the importance o f retaining employees over trying to document what they know, which the majority feel changes too rapidly to be an effective strategy. Major obstacles to retaining knowledge are identified as boredom, burn-out and limited career opportunities. Strategies for retaining skills, expertise and knowledge centre on providing incentives to stay, some o f which are strictly financial, while others focus on working conditions, career development, challenging work and culture. Management frequently pay above average salaries, offered buy-in options and profit sharing as a means o f retaining key staff. Other strategies include developing a more informal and open style o f management, opportunities to work on personal interests, improving documentation procedures, recognition and tangible support for communities o f practice and flexible hours.  In the area o f professional development firms indicate an awareness o f limitations surrounding a flat organizational structure, demonstrated by the experiences o f both C - l and C-4. C - l ' s attempts to satisfy promotional aspirations o f mid-level managers  15  Dedicated telecommunications line.  108  resulted in junior partnerships being offered and then withdrawn when negotiations broke down over liability issues, while the latter (C-4) provided an organizational chart which indicates nearly every member o f the firm is a manager responsible for at least two or three functions - a characteristic also present i n at least two thirds o f survey returns. Both companies acknowledge management w i l l need to expand their professional expertise and overall business acumen in order to satisfy further career demands o f employees.  5.5.3 Process Capital  Monitoring Efficiency and Productivity Levels o f Knowledge Systems  None o f the case study companies are formally monitoring the efficiency o f their knowledge systems. However, written responses indicate that in at least three cases ( C - l , 2 and 3), learning is viewed as a major influence on both efficiency and productivity - identified as a priority in terms o f improving overall competitiveness. A t the sectoral level, 72% o f survey respondents view training as an effective means o f improving productivity, while 50% make a further connection to innovative capacity and organizational knowledge - this contrasts with the 40% who evaluate training outcomes.  Structures and Tools  Managers provide no indication that any formal structures or tools are i n place to monitor knowledge systems, rather a compartmentalization o f reporting, comprised o f  109  facets from the learning and knowledge processes found i n training, professional development and expenditures on systems and hardware.  5.6  SUMMARY  Small and medium-sized computer service firms in B . C operate within dynamic and rapidly expanding international markets. Companies have become adept at accessing public sector sources o f funding and marketing information, while avoiding what are perceived as more structured and long-term relationships embodied i n public sector education and training.  In the area o f human capital or employee knowledge, firms are looking for employees with the right blend o f education, skills, technical expertise and attributes, preferring coop students at the entry level. When hiring at more advanced levels, project management skills and specialized knowledge become assets, while companies prefer to promote from within to fill senior positions, where industry experience and business acumen are valued. Professional or management development is typically viewed as an individual, rather than firm responsibility, although mentoring is thought to promote the type o f skills and expertise necessary to assuming greater responsibility. Training plays a significant role in the knowledge management strategies o f smaller computer service companies, with firms under pressure to expand their technical expertise by either acquiring or developing new knowledge i n order to maintain their competitive edge. However, while the majority  110  of firms report training to be an integral part o f their business plans, few firms have budgets, evaluate outcomes or track expenditures.  Firms value the role o f customers in developing knowledge strategies and innovation, with close collaborations existing between customer support groups and users. The need to assess, collect, evaluate and document discussions has influenced the characteristics and forms o f innovation and learning, whereby innovation tends to be systematical in response to a steady, process centred input - while learning is often incremental, with employees slowly building a critical mass o f knowledge and expertise. However, employers are working to lessen the impact o f customers on innovation by developing a broader technical knowledge and client base.  In terms o f the infrastructure supporting organizational goals, innovation and learning, companies are looking for ways to improve ' h o w ' new products and services are developed. Managers perceive innovation and knowledge creation as a normal part o f 'doing business', showing little or no interest in facets o f structured methodologies intended to impose order on administrative functions - citing incompatibility with regard to cost, time, formality and company culture. Polices and strategies are typically informal and often exclude technical systems and work related processes. Firms allocate resources to protecting the technical assets o f people rather than making substantial investment i n a learning infrastructure, using financial and work related incentives to retain employees.  Ill  CHAPTER VI - DISCUSSION OF FINDINGS  6.1  INTRODUCTION  This chapter examines the findings o f the study, applying the intellectual capital perspective o f leveraging the knowledge found in human, customer and structural capital to create new forms and expressions o f understanding or capital.  6.2  H U M A N CAPITAL  From the intellectual capital perspective, human capital relates to the contributions employees make to a company's viability i n terms o f creating new knowledge and innovation from previously held skills, expertise and understanding. Within this context both case study and survey responses suggest that, while managers view the knowledge of workers as imperative to the creativity and innovation that drive commercial success, the majority also perceived this potential and dependence as an inherent quality o f high tech business and therefore an integral part o f their survival. Thus, while knowledge may indeed be a specialized asset important i n the improvement o f services, products, services and new technology, few companies formally acknowledge the link to commercial goals outside o f promotional material extolling the virtues o f doing business with a 'learning organization'.  112  It is also apparent that not all knowledge is valued equally. Technical and related cognitive areas o f ' k n o w how' are the most openly acknowledged, heavily invested in, and exploited areas o f corporate learning and knowledge. Firms indicate a preference for loosely structured learning situations, where the objective is clearly one o f making tacit knowledge explicit, although there are no formal statements to this effect. Companies are also transferring and capturing both peripheral and core knowledge pertinent to on-going development and emerging areas o f technology. In contrast, skill, expertise and acumen inherent to business and administrative functions suggest that systematic knowledge is poorly represented at the management level, narrowly conceived within a 'when and i f we have the time and resources scenario', rather than linked to commercial goals o f improving products and services.  Managers explain this emphasis or preoccupation with technical knowledge i n terms o f the vulnerability associated with decreasing shelf-life o f products, rapidly emerging technologies and the need to keep current in order to compete in expanding international markets. A contrasting perspective might portray these characteristics as symptoms o f i l l conceived goal setting, where owners not only fail to establish a realistic vision and value for knowledge but lack the expertise to formulate broad based strategies to manage human resources. Given that companies expect these operational conditions to be a continuing and essential element o f high tech sectors, the absence o f a long-term knowledge management strategy likely to facilitate a considered response rather than a abrupt reaction to what amounts to normative operational conditions, appears to be something o f a contradiction in purpose.  113  Interviews elicited responses suggesting owners and managers often lack the management skills and business acumen necessary to leverage or guide firms through growth periods. There is an awareness o f how inexperience has the potential to seriously impede the creation o f new knowledge, innovation and business related goals, yet few act to formulate even informal strategies with regard to what and how employees should aspire to learn and ' k n o w ' in order to enhance and manage what is an inherently learning and knowledge-based process.  Great emphasis is placed on the role and expectations o f mentoring i n professional development, yet case study firms show little evidence o f allocating resources to train and support the counseling roles assigned to senior staff. A l s o noticeably absent, is the presence o f an evaluation procedure to determine the type or extent o f professional development the company might benefit from. Presently, managers indicate a disaffection for business related training, citing 'just-in-time' requirements, lack o f time and cost, inconvenience, relevance and confidentiality. The trend is one o f contracting the services of experienced industry consultants to assist i n specific problem areas o f the organization. This is a knowledge transfer and leverage strategy managers appear to find more palatable for expanding their expertise - rather than participating in what are perceived to be more structured and time consuming public education programmes with broader educational goals.  The inconsistency o f purpose is also evident in responses to staffing needs, where the preferred response is to acquire knowledge, skill and expertise, rather than invest in, or  114  utilize in-house resources. However, industry skill shortages have required firms to rethink strategies for meeting their technical knowledge needs. The demand for skilled workers often precludes finding suitable applicants on demand, or the expectation that firms could afford to pay 'the going rate' even i f they were successful i n finding suitably qualified applicants. Consequently, smaller computer firms have been compelled to consider training as a means o f both nurturing and developing knowledge, although the overall absence o f policies, budgets and evaluation procedures suggests that the learning taking place w i l l likely remain an intangible, inaccessible and under-exploited corporate asset.  Further concerns centre on the extent o f leverage firms achieve from training and other forms o f situated learning such as technical seminars, project meetings and monthly or weekly information sessions. Firms appear proficient at organizing structured learning opportunities and forums for the broad transfer o f technical knowledge, yet fail to evaluate whether either employees or mentors have the skills necessary to both transfer and capture what they hear and see, or that relevant core knowledge has been codified, stored and is accessible.  Interviews suggest firms leverage the hiring process, introducing a filter for resolving issues relating to learning and potential, with expectations changing in relation to years o f experience and position. A t the entry level co-op students and graduates are given priority over less experienced or conventionally educated applicants. The decision to hire is often strategic rather than reflecting a sense o f professional commitment to train future  115  colleagues found in other professions. Firms use co-op students to fill vacant positions and leverage both present and future potential, although few explain their hiring practices within this context. Firms indicated a clear preference for former co-op employees they felt they had already trained and only participate in co-op programmes when there are full-time positions to fill. A more recent and additional filter to the hiring process is the value o f personal attributes in the employment decision. The team focus o f work within the computer industry has resulted i n little tolerance for technically brilliant but socially inept proteges with few or poorly developed interpersonal skills, whereby peripheral knowledge would likely remain elusively tacit and inaccessible to both team members and the organization.  In essence, firms are making a statement that previous experience and acclimation to their workplace, no matter how fleeting, has value and can be used. Less acknowledgement is evident with respect to the specialized knowledge both students and graduates bring to the workplace, which has a tendency to be shared with either project members or more likely, fellow entry level workers, rather than with the corporation as a whole.  The challenge for firms looking to manage the knowledge o f their employees appears to centre on reversing the existing preconception that usefulness to the organization has to be immediate, thereby avoiding the propensity to undervalue, prejudge and isolate tacit and peripheral knowledge, before the company has the opportunity to determine the nature and extent o f the assets at their disposal.  116  6.3  CUSTOMER CAPITAL  Customer capital is centred in the value o f knowledge owned by clients, which the intellectual capital perspective views in terms o f the quality and extent o f knowledge transferred between a company and their respective clients. Both case study firms and survey respondents indicate that management invest heavily i n these knowledge relationships, although policies are often more clearly defined by marketing materials than in formal statements - articulated and accessible to all employees. Companies appear to have considerable problems reconciling goal setting (knowledge) with the type of systematic reasoning and analysis necessary to move organizations from tacit forms o f understandings to explicit forms o f protocols, procedures and documentation.  The development o f customer capital is dependent on the smooth interaction o f three service functions, present i n the feedback clients provide on the performance o f existing products and services, suggestions for new development work and technical support. The level o f dependence between the two groups has resulted in the establishment o f specialized support units, where employment criteria specifically targets previous knowledge, skills, experience and attributes.  In the case o f new employees, applicants are expected to have enough industry experience and /or leverage skills to significantly reduce the amount o f time it takes to bring productivity levels i n line with the rest o f the customer support unit. However, the process o f determining the suitability o f applicants is often individualized by the rotating  117  nature o f hiring responsibilities, which results i n a predominantly subjective choice, rather than the outcome o f a predetermined set o f criteria. In contrast, existing employees are expected to have developed a sufficient competence and understanding o f firm specific and/or proprietary skills and knowledge to enable responses to both procedural and technical questions. In both instances well developed interpersonal skills, initiative and a sound work ethic are prerequisites for employment, although how these characteristics are conceptualized and subsequently evaluated is unclear, with managers unable to provide details o f existing guidelines.  Learning i n support o f these functions is predominantly situated with employees mentored by senior employees, conversant with both the technical and service roles o f customer support. Support staff also act as mentors to the organization v i a formal reporting procedures, informal discussions and structured opportunities to share ideas and expertise. Problematic is the absence o f dedicated supervisors and review procedures for assessing either the effectiveness o f learning taking place, the technical competence o f employees or the quality and impact o f information from customers. N o r is there evidence to suggest that management are monitoring the effectiveness o f either supervision or procedural links with other business functions with regard to how increased levels o f productivity might be used to improve overall learning capabilities, rather than specific product and service related processes.  118  6.4  STRUCTURAL CAPITAL  Structural capital moves the focus o f knowledge ownership away from people to the organization. Specifically, the potential o f the assets contained within organizational structures developed to support competence, innovation and learning processes. These structures act as conduits for the movement o f human and customer knowledge through the company, a process that case study findings suggest, pose the greatest challenge for smaller high tech companies looking to maximize the creative talents o f scarce human resources.  The development o f organizational structures is firmly rooted i n the previous experiences and present visions o f company owners, directors and managers. Case study findings indicate that the majority o f management come from larger corporate backgrounds with specialized units and personnel devoted to handling the intellectual assets o f the corporation, where the mission, skills and expertise underlying learning and knowledge strategies have not been shared with the organization as a whole. There is little evidence to suggest that either managers or employees are i n the habit o f reflecting on the value or appropriateness o f leveraging these experiences to address existing operational conditions.  Within this context, the position o f learning and knowledge related support structures appears closely tied to the extent and level o f management's exposure and involvement i n these earlier encounters with knowledge management. A t the case study level, findings  119  indicate that whereas organizations are actively exploring new forms o f managing the business and people who work for them, knowledge creation is considered in terms o f 'what and w h y ' they do, rather than ' h o w ' they do it.  Ostensibly, the forums for nurturing, developing and transferring knowledge and the skills, expertise and intellectual material that drive its formation, reflect an awareness o f both the leaning processes and importance o f monitoring, capturing and accessing human and customer capital. Managers also relate these learning structures to the innovation process and strategies for encouraging learning climates conducive to creating and improving products and services.  Closer examination o f motivating factors behind existing learning structures and approaches point to the overriding influence o f organizational culture. Specifically, the predominantly informal management style and reporting system that pervade the perceptions, forms and practices employed to meet the expectations, learning and knowledge needs o f management, employees and customers. Additional ambiguities are evident in data relating to improving aspects o f work, where increased levels o f training, efficiency and productivity are all considered important organizational goals, yet at the case study level, not directly equated with the need to introduce formal knowledge management strategies. Approaches for managing knowledge can therefore be viewed as attempts to reconcile what companies feel they must do in order to survive with the type o f work environment people want to work within, whereby success is evaluated in relation to 'what i s ' , rather than 'what could' be achieved.  120  6.5  THE D E V E L O P M E N T OF I N T E L L E C T U A L C A P I T A L  Findings highlight the operational dichotomy smaller computer service firms face with regard to the value attributed to learning and knowledge in terms o f meeting the needs and expectations o f the business 'they are i n ' , versus those attached to the business 'they run'.  The development o f new knowledge or intellectual capital is problematic when  companies fail to reconcile these two positions.  While at least two case study companies appear to be aware o f what they need to do to capitalize on the knowledge at their disposal to further products and services, there is little evidence to suggest that either is close to formally recognizing learning and knowledge as interrelated aspects o f both functions, with skills, expertise and intellectual material transferable to a broad range o f functions, rather than relevant to one particular area o f the firm's operation.  Similarly, although both case study and survey companies talk o f improving efficiency and productivity, the former provide no evidence o f developing the means o f identifying, planning, budgeting or evaluating either the nature, effectiveness o f long-term objectives and outcomes o f these goals with respect to creating new knowledge or innovation.  Without all three facets o f human, customer and structural capital operating in unison, it is doubtful whether smaller high tech companies w i l l be in a position to leverage assets at their disposal to achieve the level o f synergy necessary to create levels o f new knowledge  121  capable o f improving or developing new products. Present attitudes and approaches to each area o f capital, where flat corporate structures, informality, project based work situations, shared areas o f responsibility and often poorly trained management have resulted i n a situation where companies appear to accept a 'tacitly explicit' approach to learning and knowledge. Policies are codified, only in the event that it becomes a strategic necessity - most notably, when commercial goals such as marketing, new clients or searches for capital require companies to impart corporate values and operating practices, and seldom involves developing a broad consensus using the leveraged expertise and/or support o f the organization as a whole.  122  CHAPTER VII - CONCLUSIONS  The study framework affords a clear profile o f how innovative, small and medium-sized computer companies view the place o f learning and knowledge in H R D . Findings reveal a dynamic operating environment, completely engrossed i n the possibilities o f the technology driving products and services. Evident is a neoclassical perspective, whereby the increasingly short shelf life o f applications and hardware often creates pressure to rationalize support for R & D against the potential o f more immediate gains - present i n existing technology. To these companies innovation is an inherent quality o f their business, rather than a complex learning process comprised o f distinguishable facets o f learning and knowledge.  Within this context, a premium value is placed on new forms o f knowledge with an obvious potential to improve the level and quality o f information, skills and experience necessary to support commercial products and services. Broader professional development goals related to improving overall efficiency and productivity are acknowledged, yet consistently and systematically marginalized. The onus is on both management and employees to keep current and creative within their respective technical area, with training resources and rewards closely tied to improving technical proficiency. In contrast, professional rewards are more to do with expedience than the result o f a structured and evaluated career strategy.  123  Further evidence o f structural informality is evident in the lack o f codified knowledge, which corresponds to the disaffection for regulations and formality present i n many smaller high tech companies. Firms typically devote time and resources to the nurture, development and exploitation o f employee knowledge - while actively encouraging knowledge transfer between customers and other external sources. However, few take precautions to formally capture and preserve peripheral knowledge before attrition and/or memory loss take their toll. The emphasis and value is on immediate relevance rather than future needs - a sentiment that pervades high tech organizational culture.  Perhaps the most problematic areas o f knowledge highlighted by the analysis are those encompassed by customer and structural capital. These are also areas where this particular framework falls short o f providing a clear structure for reviewing the full range of external sources o f knowledge available to small and medium-sized high tech firms sources that are currently diminished by division into three categories.  A t this juncture, the propensity for smaller high tech firms to overlook or simply ignore the need to develop formal policies, strategies and practices has become an overall characteristic o f organizational culture. This can, i n part be attributed to the lack o f professional training found i n this sector, where managers acknowledge a lack o f business acumen - with limited knowledge o f operational strategies. Firms also report difficulties gaining access to resources intended to assist in resolving the business problems o f rapidly growing companies. However, given case study data on levels o f educational attainment and career paths, it appear the present knowledge void and  124  operational predicament facing managers are not centred in either a lack o f formal education or basic competencies. The industry appears to be more the victim o f its own fast pace, lack o f professional standards and prestige - in a global economy increasingly dependent on the products and services it provides.  The informality o f smaller computer service firms appears to have impacted evaluation systems and the corresponding negative impact it has had on monitoring and/or evaluating outcomes. This is a limiting factor in all three areas o f human, customer and structural capital, and by extension to the development o f intellectual capital itself. The extent o f the contradiction o f purpose - between stated goals o f efficiency, increased productivity and organizational change are apparent in human capital, where firms consistently overlook the leveraging power o f senior employees. Despite efforts to promote the benefits o f co-op education with its strong emphasis on mentoring, value is typically compartmentalized within functional parameters related to operational areas, rather than supervisory and mentoring roles. The impact o f managers marginalizing their own human capital potential is a clear, i f often unintentional message to junior employees that technical knowledge and experience is valued, while industry and business acumen is a necessary but more obscure area o f professional development - unrelated to what makes money for the corporation.  Presently, smaller high tech firms display an awareness o f what they need to do i n order to 'get by', yet lack the trust, incentive and 'know how' to invest in processes and structures that w i l l enable management to ensure tacit knowledge is articulated, captured  125  and formally incorporated into organizational culture and processes rather than merely stored - used only i n the preparation o f business plans and/or promotional material  Thus, innovative small and medium-sized computer service firms can be characterized as narrowly conceiving the value and role o f learning and knowledge in human resource development i n terms o f products and service, rather than organizational - learning processes. Determining the extent o f this under-evaluation is impeded by the existing disciplinary bias and operational context o f many IC methodologies. The intellectual capital approach currently reflects conditions found in larger and more structured corporations with well developed customer databases and tangible forms o f structured capital - which i n turn effectively undervalues the potential and often accrued returns to emerge from external relationships and applied or commercial applications o f existing technology.  TOWARDS A NA N A L Y T I C A L F R A M E W O R K FOR SMES  With respect to developing a value for learning within the operating context o f S M E s , this study points to shortcomings in two areas o f the IC perspective: the extent, role and integration o f external sources o f knowledge and the attachment o f commercial goals to the creation o f intellectual capital. The former is a direct response to existing studies on high tech sectors and S M E s - which highlight both the significance and often integrated nature o f external relationships. The latter is a necessary precursor to developing an educational and process centred perspective o f commercial value, capable o f formally  126  incorporating facets o f a particular learning approach - such as contextual and situated learning.  External sources o f knowledge  External sources o f knowledge are evident in all three areas o f capital: relevant to human capital by virtue o f the influences employees are exposed to; forms the basis o f customer capital - with previous studies clearly showing external relationships are a major knowledge source for smaller high tech firms where development costs effectively inhibit extensive in-house R & D ; and in structural capital, due to linkages with strategic partners, industry counterparts and research units.  While larger organizations may have the resources to approach knowledge needs from this more compartmentalized perspective, separating and then reintegrating these facets is more problematic for smaller organizations with limited resources and management structures that typically require senior personnel to assume two or three operational roles. In these situations it would be more useful to combine all sources o f external knowledge under one area o f capital or assets - accepting that certain forms w i l l be more tangible and ostensibly valuable than others. The issue o f whether subsequent indicators can be developed to capture this value is separate to that o f recognizing the crucial role these 'knowledge' relationships play i n the creation o f intellectual capital.  127  Attachment o f commercial goals to IC  The value o f intellectual capital is comprised o f the products, services and processes improved or created. The focus o f existing work on the relevance o f intellectual capital parallels the preoccupation study firms demonstrate for tangible outcomes - which, i n a technology sector effectively marginalizes the processes that underlie the acquisition, nurturing, development, management and exploitation o f knowledge. Given human resource development is centred in potential, the goal o f understanding the learning and particular forms o f skills, experience, intellectual material that employees draw upon to realize their professional objectives would appear to be a prerequisite to an organization's commercial success - requiring equal standing with the products and services that emerge from their creative talents.  In order to facilitate change in the way learning and knowledge are valued, this study suggests establishing a commercial role for learning and knowledge that is clearly understood within the operational culture o f firms, sectors and public sector infrastructures. The goal o f an educational lens and approach would be to demonstrate the presence o f a tangible and renewable benefit housed in the knowledge o f employees - one with the potential to train, impact management practices and increase operational efficiency.  128  IMPLICATIONS FOR POLICY  The study has implications for a number o f policy areas, the most notable o f which include: public sector involvement i n training and professional development; the role o f professional and industry associations; and post secondary education - co-op and work experience programmes;  Public sector involvement in training and professional development  The computer service sector is adept at articulating the more immediate technical and professional needs o f the industry and quick to suggest public sector roles. Absent is evidence o f a corresponding sense o f accountability with respect to matching public sector commitment and investment in educational infrastructure and associated processes - necessary to achieving the level o f long-term self-sufficiency, increased productivity and improved business performance managers in both this and related studies cite as priorities.  Energies have typically centred on addressing perceived systemic educational deficiencies rather than focussing on the quality, characteristics and immediate implications o f the often atypical learning environments present i n the majority o f smaller high tech firms. Little is known o f either the extent or efficiency with which firms leverage either in-house knowledge sources or develop the structures supporting the learning process. Evidenced in this study, attempts to examine intangible aspects o f  129  corporate culture and operations are often thwarted by firm imposed time constraints, the need to develop appropriate research methodology and both industry and government pressures to focus on educational outcomes and financial returns derived from products and services - rather than less obvious and/or profitable process related business facets.  The inherent liability o f policies and initiatives intended to improve levels o f technical an professional competence is that which presupposes firms are in a position to capitalize on these opportunities. This study shows that even successful S M E s often fail to formally acknowledge training and professional development programmes as legitimate costs o f doing business - typically viewing expenditures within the context o f a operational contingency, rather than an on-going commitment to skill and professional development.  A necessary prerequisite to developing a learning partnership with industry is the development o f hitherto narrowly focussed and applied educational concepts and vocabulary into a commercial and process centred value-added perspective and methodology - suitable for monitoring and assessing the degree o f commitment evident i n firms. The goal - to place a tangible value on in-house educational infrastructure, processes and outcomes rather than the products and services they support. O f importance are the reporting systems and/or structured methodologies that routinely fail to recognize and integrate these features - thereby inadvertently encouraging underinvestment.  130  Strengthen the role o f professional and industry associations i n H R D  H i g h tech industry associations have become major stakeholders i n the policy process, playing an increasing role in articulating the training and professional development challenges faced by companies - often at the expense o f professional associations such as C I P S , with a smaller membership, comprised o f individuals rather than corporations and focused on more long-term career goals.  Creating a climate i n which associations have ready access to policy makers may have increased awareness o f skill shortages in the computer services sector - and impacted the form and extent o f institutional response, yet the question remains whether associations have a mandate or ability to impact educational practices i n the sector as a whole. This study clearly demonstrates that smaller firms view industry association memberships i n relation to strategic goals - motivated by subsidized rates, central locations and the more immediate commercial gains offered by access to marketing expertise and specialized management/business seminars with immediate relevance. There is still little sense o f a commercial centred role for the learning process present at either the firm level or integrated into industry association literature - only the obligatory rhetoric that knowledge is the key to commercial success and suggestions for improving management skills. Policies that envisage a broader educational and training role for industry associations appear unrelated to both the level o f firm involvement and how managers currently perceive this relationship - bringing into question the influence exerted by the few organizations actively involved i n developing industry positions  131  Promotion o f co-op and work experience programmes i n P S E  The present relationship between the computer service sector and post-secondary educational policy is one based on both dependence and vulnerability to public sector institutions with regard to continuing education and supplying graduates with immediate value to operations.  In the case o f continuing education, this and other studies show firms exhibit a clear preference for in-house training - only turning to the private sector to meet specialized technical needs. Preferred external providers o f technical educational services are hardware manufactures, major software developers and internet sources, with managers viewing industry association in terms o f a resource for gaining access to up-to-date information on the economy, technology sector, policy and related management issues. The few pursuing career education often turn to institutional degree and/or diploma programmes - with increasing options to engage i n out-of-province or international distant education.  Co-op education is promoted as a viable strategy for addressing what are now acknowledged to be global, rather than localized examples o f shortages i n skilled technical and mid-management professionals. However, this study raises questions with regard to the direction o f existing co-op and work placement polices and initiatives directions that would seek to increase the numbers o f placements i n smaller computer  132  service firms with limited resources and managers who acknowledge a lack o f expertise in H R D . There is little evidence to suggest smaller firms are leveraging the potential o f existing employees or that senior workers possess the skills and expertise necessary to mentor inexperienced students requiring formal supervision and assessment. In contrast, there is data to suggest a long-term under-investment in the type o f learning processes one might expect to find i n knowledge-based sector. Most notably absent is the inclusion of educators i n strategic planning and the widespread adoption o f a learning/knowledge vocabulary.  It is incongruous to have work experience initiatives without having a method o f reviewing industry rhetoric against the polices, self-help strategies and practices firms adopt to leverage in-house knowledge and learning, and by extension, the long-term viability o f work experience programmes - initiatives that depend on co-operation and a cohesive organizational presence to provide a quality programme and suitable work situations for students.  FURTHER RESEARCH  The analytical framework forms the first stage o f a process intended to produce a knowledge based and industry specific model o f human resource development where learning is perceived i n terms o f a distinct and commercial exploitable strategy and organizational tool - rather than an assumed, intangible and inherently mysterious prerequisite to the exploitation o f knowledge resources.  133  Acceptance and adoption at both the macro and micro level hinges on the ability to monitor and measure the characteristics and outcomes o f intangibles, which this study suggests w i l l require a greater distinction to be made between process and product facets of capital - something necessary to improve the understanding o f linkages between knowledge, learning and work organization. Presently there is very little structural capacity evident that would readily afford for the meaningful integration o f existing learning centred perspectives and processes present in approaches such as contextual or situated learning. Recognition o f learning as a commercial goal with an intrinsic valueadded component - supporting more tangible aspects o f knowledge and intellectual property, would also provide for the inclusion o f supporting policies and infrastructures into corporate and government reporting structures.  Within this context, further studies would benefit from the development o f education/training databases centred i n the concept o f leveraging knowledge - with emphasis on why, when, how and the extent to which learning processes and related structural relationships are either considered and/or subsequently developed in pursuit o f commercial opportunities. O f interest is tangible evidence o f a corporate learning culture, defined i n relation to: acknowledgment and presence i n strategic planning; the articulation, use and integration o f vocabulary and concepts such as core and peripheral knowledge, core capabilities, competency and attributes; and examples and methods o f exploiting knowledge transfer - both in-house and external. This would significantly improve the ability to assess both the credibility o f firm statements and the decision making processes i n place with regard to the commercial value and exploitation o f  134  learning - reviewing awareness o f potential against the subsequent implementation o f policies and monitoring structures. It would also afford the opportunity to build-in innovation indicators, size, industry specific characteristics and operating conditions necessary to the development o f sector based best practice models.  This area o f research and study also affords insights and a possible marketing approach for those involved i n the provision o f educational services - institutions and agencies increasing expected or mandated to respond to the workforce needs o f innovative, small and medium-sized high tech companies.  One o f the greatest challenges facing any industry/institutional relationship is the ability to establish a sense o f mutual respect and understanding with regard to operational mandates and constraints. Given the contrasting conceptual boundaries present i n educational and business, research into how an educational perspective o f IC might be applied at the institutional level may provide greater insights into: how each perceives their respective role i n policy formation and implementation o f initiatives; the characteristics o f knowledge leverage; the monitoring, level and extent o f faculty commitment to an applied focus; and the necessary resource prerequisites to improving the quality and response o f both firms and faculty to work-based programmes.  Further leverage would result from contrasting institutions with mandated links to business such as B C I T and Tech B C with more conventional academic settings and continuing education programmes. International comparisons, incorporating institutions  135  such as M I T ( U S A ) , QIT (Australia) and both Griffith (Australia) and Warwick ( U K ) Universities would serve a dual purpose - providing both a broader perspective and value to data and analysis, while responding to an increasingly expectation that studies be relevant to the challenges o f an increasingly global educational marketplace and economy.  136  BIBLIOGRAPHY  Abernathy, W . J., and Utterback, J. (1981). Patterns o f industrial innovation. In Corporate strategy and product innovation (2nd ed.). (Ed.) R. Rothenberg. N e w Y o r k : the Free Press. Abernathy, W . J . , Clark, K . B . , and Kantrow, A . M . (1983). Industrial renaissance: producing a competitive future for America. N e w York: Basic Books. A c s , Z.J., and Audretsch, D . B . (1990). Innovations and small firms. Cambridge, Mass.: M I T Press. Adjustment Programs Branch. (1995). Strategic framework for sectoral adjustment initiatives. 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London: Routledge  150  APPENDICES  151  APPENDIX A - INTERVIEW SCHEDULE CASE STUDY FIRMS 1996 INNOVATION, SKILLS AND LEARNING  INNOVATION AND LEARNING IN S M A L L AND MEDIUM-SIZED ENTERPRISES  Phase One:  Identification and Initial Profile of Firm Characteristics  Identification Name o f Enterprise: Address: Telephone: Contact: Telephone:  Fax: Fax:  Are non-managerial employees i n this enterprise represented by a union? Yes: _ N o If yes, please indicate: Name o f Union: Address: Contact:  Fax:  Telephone:  Economic Activities 1) Enterprise's main field o f industrial or commercial activity: (a)  Industry:  (b)  Products and/or Services:  2) Location o f markets for the enterprise's products (goods or services): (Please provide a percentage distribution of total sales for the past year.) Geographic Area British Columbia Canada (outside B . C . ) U.S.A/Mexico Europe/Japan Elsewhere  Percentage  100% Size 3) What is the total number o f employees currently employed by this enterprise? 4) What was the enterprise's total volume o f sales in the past year?  Structure 5) Is this enterprise an independent company?  Yes: _ N o _ or,  part o f a group o f enterprises? 6) If it is part o f a group, is this enterprise:  Yes: _ N o _ (Check one answer.) • "parent" company? • subsidiary company? • "partner" company?  7) If this is an independent enterprise, is the largest single block o f company shares owned by its executives or management? Yes: _ N o _ 8) Is this enterprise currently involved in any strategic partnerships, joint ventures or strategic alliances? Yes: _ N o _ If so, please describe: Innovative Activity 9) H o w many technologically changed products (goods or services) has this enterprise developed or introduced during the past five years? Briefly identify any significant product innovations: 10) H o w many technologically changed processes has this enterprise developed or introduced during the past five years? Briefly identify any significant process innovations: 11) Does this enterprise plan to develop or introduce any technologically changed products or processes during the next five years? Yes: _ N o : _ If yes, please specify Firm History 12) In what year was this enterprise established? 19  154  13) In comparison to 1990, has your enterprise experienced any change i n competition from each o f the following geographic areas? (Check one answer for each geographic area.) Geographic Area More of  N o Change  Less  N o t a Source Competition  British Columbia Canada(outside B . C . ) U.S.A/Mexico Europe/Japan Elsewhere 14) What was the total number o f employees in this enterprise five years ago? 15) What was the enterprise's total annual volume o f sales five years ago? 16) Has this enterprise been involved in any of the following activities over the past five years? (Check all that apply.) - Merger and/or acquisitions - Strategic partnerships (equity-based consortia or joint ventures) - Strategic alliances (resource, research or marketing networks)  Yes No  (Year:  Yes No  (Year:  Yes No  (Year:  17) Compared to five years ago, has this enterprise experienced significant change regarding any o f the following characteristics? (Check one answer for each characteristic.) Yes  No  Primary product or service Degree o f business competition Controlling ownership o f enterprise Most senior manager o f enterprise Production/ operating technologies Foreign market orientation Government regulatory requirements  155  18) Have there been any other changes which may have significantly affected your enterprise i n the past five years? Yes No If yes, please specify  19) Have any o f the changes described i n responses to Q. 13 - 18 had any o f the following impacts in this enterprise over the past five years? (Check all that apply.) Reorganization o f work processes  Increases i n skill requirements  Increases in (gross/unit) labour costs  Decreases i n skill requirements  Decreases in (gross/unit) labour costs-  Increased contracting out  Workforce reductions  Decreased contracting out  If so, please explain briefly: 20) Have any o f the changes described in responses to Q. 13-18 affected the level of innovative activity (including both product and process innovation) i n this enterprise over the past five years? Yes: _ No: _ If yes, please explain briefly:  Current Business Strategy 21) Which o f the following best describes the current market for this enterprise's principal product or service ? (Check one answer.) (A) Stable  (B) Expanding  (C) Contracting  22) Are any of the following objectives included in this enterprise's current business strategy? (Check all that apply.) Undertake research & development Increase employee skill levels Introduce new process technologies Develop new products/ markets  Reduce (gross/unit) labour costs Reduce other operating costs Reorganize work processes  Develop cooperative management-employee relations  156  23) In relation to the overall business strategy, what are this enterprise's present objectives with regard to the development or introduction o f innovations? (Please indicate the current importance of each of the objectives listed below, using the following scale.) Level o f Importance  none  alight  moderate  very  crucial  Objective  1  2  3  4  5  Replace obsolete products  -  -  -  -  -  EXTEND PRODUCT RANGE: - in main product field - outside main product fid. - building market share CREATE NEW MARKETS: - i n British Columbia - i n Canada (outside B . C . ) - in U . S . A . / M e x i c o - in Japan/Europe - i n other countries L O W E R PRODUCTION COSTS B Y REDUCING: - wage costs  .  - materials consumption  -  - energy consumption  -  - product design costs  -  - production lead times  .  - environmental damage  -  - product quality defects -  .  .  .  .  .  .  -  .  .  - difficult work conditions O T H E R O B J E C T I V E (please specify):  157  24) In relation to the overall business strategy, what are the main objectives o f this enterprise's current Human Resource Development ( H R D ) strategy? (Please indicate the current importance of each of the objectives listed below, using the following scale.) Level o f Importance  none  alight  moderate  very  crucial  Objectives  1  2  3  4  5  Upgrading employee skills Hiring skilled employees Hiring outside contractors Formal training programs Informal training methods Organizational innovation  -  -  -  -  -  Phase Two; Section 1: Environment, Business Relationships, and Innovation  Environment 1) What are the most important factors shaping this firm's business environment? H o w has this environment changed over the past five years? H o w is it expected to change i n the future? H o w is this enterprise placed to compete i n this environment? 2) What public bodies, industry- organizations, and professional associations have a strong influence — either positive or negative ~ on this firm's business activities? H o w have these influences changed over the past five years? H o w are they expected to change i n the future? H o w do these influences affect the competitive position o f this enterprise? 3) What production /service technologies are used i n this firm? H o w o l d is the existing equipment? H o w m u c h o f it is computerized? H o w m u c h technological change has taken place over the past five years? What have been the major effects on employees' jobs and skills?  158  4) What production management techniques are used i n this firm? What have been the main effects on firm performance? O n employees'jobs and skills? 5) H o w does the firm's use o f technology relate to its production management techniques? Is the technology /management relationship similar i n comparable firms? Has this relationship changed over time? W i l l it change i n the future? 6) What changes have occurred within the firm's organizational structure over the past five years? Have there been similar patterns o f organizational change i n comparable firms? What have been the m a i n reasons for organizational change? What were the m a i n sources o f models or ideas for organizational change? What were the m a i n effects on firm performance? O n employees' jobs and skills? 7) H o w w o u l d y o u describe this firm's business strategy and explain its development over time? H o w have the various dimensions o f the firm's environment reviewed i n Q . l -4 (that is, the business, institutional, technical, and organizational environments referred to above) - affected the development o f the firm's strategy?  Business Relationships 8) What are the m a i n resources on w h i c h this firm depends what organizations are suppliers, and what agreements or relationships does the firm have w i t h them? 9) What are the m a i n resources that this firm provides, what organizations are the recipients, and what agreements or relationships does the firm have w i t h them? 10) What are the m a i n resources for w h i c h this firm enters into reciprocal or mutual exchange relations, what organizations are its exchange partners, and what types o f agreements or relationships does the firm have with-them?  159  11) Referring to the business relationships i n v o l v i n g the supply, provision, and exchange o f resources described i n the answers to Q . 8 - 10, h o w w o u l d y o u describe the competitive position and innovation strategy o f this firm? A. B. C. D. E.  - H o w have these relations changed over time? - H o w does the firm gain access to new technology? H o w does it transfer new technology out o f the enterprise? - T o what extent (and w i t h whom) does this firm depend on developing and maintaining cooperative relationships as part o f its overall strategy? - H o w w o u l d y o u describe the innovation strategy o f the firm i n relation to the general context o f its business relationships and business strategy? - H o w does the firm protect competitive advantage i n new products processes?  Innovative Activity 12) Please identify and provide a brief description o f any technologically changed products or processes developed by this firm over the past five years. A . Product Innovations B . Process Innovations 13) What were the m a i n sources o f information that the firm used i n developing these innovations and what kinds o f information d i d these sources provide? 14) D i d the innovations described i n the answer to Q . 12 involve cooperation agreements o f any k i n d with other enterprises or institutions? 15) What barriers had to be overcome i n developing the innovations described i n the answer to Q.12, and h o w d i d the firm overcome these barriers? 16) H o w w o u l d y o u describe the various products (goods or services) produced by this enterprise for commercial purposes i n terms o f their location across the product life cycle ? W h a t is the share o f all sales for products at different stages i n the cycle? 17) W i t h reference to the classification o f products (goods and services) described i n the answer to Q . 14, what are the m a i n improvements i n either product design or production processes that are being made to, or planned for, these products?  160  18) F o r the last year o f operation, what was the percentage distribution o f total sales across the f o l l o w i n g types o f product? Type o f Product  Sales  Products that remained essentially unchanged Products subject to incremental changes Products that were n e w or significantly changed Total 100%  19) F o r the last year o f operation, what was the percentage distribution o f total sales in new markets across the following types o f product? Type o f Products  Sales i n N e w Markets  Products that remained essentially unchanged Products subject to incremental changes Products that were n e w or significantly changed Total  100%  20) H o w w o u l d y o u describe the general economic impacts o f innovation o n your firm i n terms o f costs and benefits? H o w does this compare to the industry at large? Research and Development — Government Assistance Programs Research and Development ( R & D ) includes: basic research (experimental or theoretical w o r k w i t h no immediate focus o n application), applied research (investigative w o r k directed towards a specific aim or objective), and experimental development (applying existing knowledge to the production o f new materials, products or devices, the installation o f new processes, systems and services, or the improvement o f processes, systems and services already produced or installed. . 21) C a n any o f the innovative activities carried out b y this firm be classified as R & D ? Please specify those innovative activities that can be classified as R & D . 22) I f some or a l l o f the firm's innovative activities can be classified as R & D has this firm ever claimed R & D expenditures under Revenue Canada's Scientific Research and Experimental Development ( S R & E D ) program?  161  23) What problems has this firm experienced i n obtaining government support for its R & D activities, through either the S R & E D program or any other government assistance program?  Phase Two; Section II: Employment, Human Resources Management & Skills Employment Profile 1) F o r each o f the occupational categories listed below, enter a) the current number o f full-time permanent employees, and b) the number o f full-time permanent employees five years ago. Occupational Category  a) Current  b) 5 years ago  Management (executive and supervisors) Professional and technical Sales and marketing Clerical/office Production A l l other occupations Total 2) Referring to the occupational categories listed above, please describe and explain any major changes (expansion, shrinkage, or fluctuation) i n the overall level o f employment over the past five years. 3) Referring to the occupational categories listed above, please describe and explain the extent to w h i c h there has been any significant change i n personnel over the past five years, either through processes o f attrition (retirements, quits, or layoffs) or through processes o f accretion (recalls, internal promotion, new hiring). 4) Approximately h o w many distinct job classes - that is, groupings o f jobs associated w i t h a distinct pay scale ~ for each o f the f o l l o w i n g occupational groups a) currently exist i n this firm, and b) existed five years ago? (Answer for each occupational group in this firm and briefly explain any significant changes.)  Occupational Category Management Professional/ technical Sales/marketing Clerical/office Production Other occupation  Distinct job Classes a) Current b) Five years ago  162  5) In comparison to five years ago, has the proportion o f employment i n each o f the following non-standard employment categories increased, remained unchanged, or decreased? (Check one answer for each category. Briefly explain significant changes.)  Non-Standard Employment  Increase  N o Change  Decrease  N. A.  _  _  _  _  Part-Time Workers Temporary Workers Temp. A g e n c y Personnel Independent Contractors  6) H o w is non-standard employment currently distributed among occupational groups in this firm and h o w has this distribution changed over the past five years? (In answering, please refer to the categories of non-standard employment used in Q. 4 and the list of occupational groups used in Q. I - 3.) 7) Has the pattern o f employment i n this firm changed over the past 5 years? Has it been: - relatively stable, - characterized by high levels o f instability (fluctuation or turnover)? or, - has there been a division between stable and unstable employment ? (Please discuss with reference to the occupational  groups listed in Questions 1 3.)  8) D o y o u foresee any significant change i n this firm's pattern o f employment over the next several years? Please explain.  Human Resource Needs and Employment Practices 9) What formal educational qualifications are looked for i n hiring employees i n different occupational groups and h o w have these expectations changed over time? 10) What kinds o f previous job-experience are looked for when h i r i n g employees i n different occupational groups and h o w have these expectations changed over time? 11) What kinds o f personality traits are looked for when hiring employees i n different occupational groups and h o w have these expectations changed over time?  163  12) W i t h reference to the different occupational groups, has this firm experienced any labour shortages (difficulties i n maintaining an adequate complement o f qualified and experienced workers) over the past five years? Please describe. 13) What are the strategies most frequently used b y this firm to co!2e w i t h job vacancies, and h o w have these strategies changed over time? 14) Has the use o f the strategies re: vacancies described i n Question 13 varied i n relation to different occupational groups? 15) What are the employment practices used b y this firm to attract and retain a skilled labour force 16) Referring to the employment practices identified i n the answer to Q . 15, please provide a brief discussion o f : a) when, w h y and h o w these practices were introduced, b) h o w they have affected the operation o f the firm, c) whether they have been supported or opposed b y affected occupational groups, d) whether they have been supported or opposed b y any other groups within the firm - e.g, management, H u m a n Resources personnel, employee representatives. 17) Please indicate whether, internal promotion or movement to another firm is the usual pattern o f career advancement for employees i n different occupational groups. (Answer for each occupational group in this firm.) 18) F o r those occupational categories whose usual pattern o f career advancement is internal promotion, please indicate: A ) whether internal mobility is limited to one j o b class or also extends to other j o b classes, and B ) the criteria for promotion ~ e.g., seniority vs. merit; credentials vs. experience.  164  Skill Demands 19) What kinds o f non-vocational skills are required by employees i n this firm? Please discuss the requirements for these skills i n terms of: a) their importance to the firm and how this has changed over time. b) whether the firm has experienced any shortage o f these skills and c) how those skills w h i c h are important to the firm are developed and maintained. 20) What kinds o f firm-specific skills are required by employees i n this firm? Please discuss the requirements for these skills i n terms of: a) their importance to the firm and h o w this has changed over time. b) whether the firm has experienced any shortage o f these skills and c) h o w those skills w h i c h are important to the firm are developed and maintained. 21) What kinds o f vocational skills are required b y employees i n this  firm?  Please discuss the requirements for these skills i n terms of: a) their importance to the firm and h o w this has changed over time. b) whether the firm has experienced any shortage o f these skills and c) h o w those skills w h i c h are important to the firm are developed and maintained. 22) A r e there categories o f skill or knowledge important to the firm that have not been captured adequately by the terms used i n Q . 1 8 - 2 1 ? Please discuss. 23) What have been the key factors determining changes i n skill requirements within the firm over the past several years?  165  Phase Two; Section III: Organizational Structure, Decision-Making & Learning  Organizational Structure  1) What is the organizational structure o f this firm? Please assist the interviewer i n drawing a "map" or flow-chart o f the firm as a business organization, describing the division o f labour and distribution o f managerial responsibilities. 2) Referring to the map o f organizational structure provided i n the answer to Q . l , please discuss the distribution o f expertise within the firm. 3) Referring to the map o f organizational structure provided i n the answer to Q . l , please discuss the coordination o f activities within the firm. 4) What basic knowledge and understanding o f the firm as a business organization are all employees expected to have? H o w has this knowledge evolved? H o w detailed is it? Does it vary i n breadth or depth across different occupational groups or different parts o f the firm? I f so, how? 5) W h i c h employees i n this firm possess specialized knowledge about particular areas o f the firm's business activities and operating environment? H o w has this knowledge evolved? H o w detailed is it? Does it vary i n breadth or depth across different occupational groups or different parts o f the firm? I f so, how? Has this pattern changed over time? I f so, how? 6) T o what extent is there agreement or disagreement within the firm regarding the relationship between basic and specialized knowledge? W h o usually agrees? W h o usually disagrees? What are the reasons usually given? Does the pattern o f agreement/ disagreement vary across occupational groups or departments? Has the pattern changed over time? I f so, how?  166  Information Gathering, Analysis, and Strategy Formulation 7) H o w does the firm go about gathering information related to its m a i n business activities? 8) H o w does the firm go about analyzing information related to its m a i n business activities? 9) H o w does the firm go about expanding and organizing its knowledge-base? 10) H o w is decision-making carried out within the firm? 11. H o w are important business decisions coordinated or made together w i t h other organizations w i t h w h i c h the firm is either affiliated or engaged i n some form o f partnership or cooperation? 12) T o what extent are business decisions influenced or affected by organizations that regulate aspects o f the business environment, including public authorities, industry or trade organizations, employers' associations, and organizations representing occupational groups, such as professional associations or unions?  Innovation as learning 13) O f the various significant innovations developed by this firm w i t h i n the last several years, please identify one o f the firm's most successful innovations and provide a briei account o f h o w this innovation was carried out, from initial conceptualization to complete implementation or commercialization. 14) Referring to the innovation process described i n the answer to Question 13, please comment on the extent to w h i c h c o m m o n or shared experience was important to the success o f the project. 15) Referring to the innovation process described i n the answer to Question 13, please comment on the extent to w h i c h combining different bodies o f information was important to the success o f the project.  167  Phase Two; Section IV: Training and Human Resource Development Organization of Training and Human Resource Development  1) H o w are responsibilities for Training and H u m a n Resource Development ( H R D ) allocated w i t h i n the firm as a business organization? (Provide detailed description.) 2) Has the organization o f training and human resource development w i t h i n the firm been subject to change over the past five years? I f so, please explain h o w and w h y it has changed. 3) Does the firm have a formal p o l i c y regarding employee training and development? I f so, please describe what this p o l i c y includes. 4) Has the firm's p o l i c y regarding employee training and development been subject to change over the past five years? I f so, please explain h o w and w h y it has changed. 5) Does the firm develop any formal plans or objectives for employee training and development? I f so, please describe and explain h o w such plans are developed. 6) I f the firm has a written formal statement o f training objectives and plans, what does this statement include? 7) H o w does the firm assess or estimate the training needs o f employees? 8) Does the firm possess a training budget? I f so, what items does this budget include? 9) H o w does the firm evaluate the impacts o f training? 10) Has there been any significant change i n the firm's approach to training i n the areas o f needs assessment, planning, budgeting, and evaluation over the 12ast five years?  168  Decision Making, Funding, and Resource Allocation  11) In what parts o f this firm are the decisions primarily made regarding the different aspects o f training? 12) O n what basis are individual employees usually selected to undertake training sponsored b y the firm? 13) H o w are employees i n this firm usually involved i n training decisions? 14) O n what types o f training decisions is there usually significant employee input? 15) Does the firm participate i n any community- or sector-based based training council i n w h i c h employers and representatives o f other groups identify training needs and develop programs i n response to those needs? 16) Does this firm regularly track its expenditures on training? I f so, what items are usually included i n accounts o f training expenditures? 17) C a n the firm provide an estimate o f training expenditures over the past year? I f so, h o w does this amount compare to annual expenditures over the past five years? 18) Does this firm receive revenues for training programs, materials or services that it provides to other organizations? I f so, please describe any training programs, materials, or services provided to other organizations over the past year. 19) Has the firm relied on any special sources for the funding o f training undertaken over the past year? I f so, please describe the nature o f their contributions and their importance to the firm's overall training effort. 20) What resources and services for training activities are usually provided internal and what resources and services are usually provided externally? 21) Has there been any significant change regarding training decisions, the funding o f training or the allocation o f training resources over the past five years? I f so, please describe and provide a brief explanation o f these changes.  169  Training Provision The following questions focus primarily on the firm's provision offormal" training. Formal training is defined as "structured" training that has predefined objectives, a structured format, and a defined curriculum. Some examples include classroom instruction, scheduled and structured on-thejob- training (OJT), apprenticeship training, and courses at formal educational or training institutions that are paid for by the employer. Conversely, "informal training" refers to training that lacks predefined objectives, a structured format, or a defined curriculum. 22) What proportion o f this firm's total training effort is n o w devoted to formal training as opposed to informal training? 23) Has the balance between formal and informal training changed over the past five years? I f so, please explain h o w and w h y . 24) H o w w o u l d y o u rate this firm's total training effort compared to other firms or establishments i n this industry? 25) Has there been any significant change i n the firm's total training effort over the past five years? I f so, please describe and explain the changes that have occurred. 26) Has this firm provided or sponsored any formal or structured training for its employees over the past year? (If no please skip to Q. 35.) 27) Please provide a brief description o f the formal training course(s) or program(s) that the firm provided or sponsored for its employees over the past year. 28) H o w many employees i n different occupational groups received formal or structured training over the past year? H o w much did they receive? 29) Has this distribution o f training provision changed sigificantly over the past five years? I f so, please describe and explain the changes. 30) In what locations d i d the formal training provided or sponsored b y the firm over the past year take p l a c e ? 31) Has the location o f formal training provision changed significantly over the past five years? I f so, please describe and explain h o w the pattern o f location has changed. A  32) H o w d i d the firm evaluate the impacts o f the formal training-undertaken during the past year? 33) What were the most significant findings from the evaluations o f formal training programs provided or sponsored over the past year?  170  34) Were any o f the formal training programs or courses provided or sponsored over the past year linked to innovative activities or innovation projects being undertaken by the firm? I f so, please: a) explain the connections between training and innovation, and b) evaluate the contributions o f training to innovation.  Training Incentives and Disincentives 35) H o w successful has formal and informal training been i n i m p r o v i n g innovative capacity, productivity, quality, s k i l l levels, and organizational commitment? 36) Have there been any other benefits o f training for this firm? 37) Have training costs, conflicts w i t h production, employee turnover, lack o f suitable resources, or insufficient government assistance posed serious obstacles to training for this firm? 38) Have there been any other obstacles to training for this firm? 39) What are the main problems w i t h regard to training for most firms i n this industry? Please provide a brief explanation o f the problems identified. 40) What are the most appropriate actions that governments could take to resolve these problems? That public education and training institutions could take? That private sector organizations could take? That individual employers could take?  171  APPENDIX B - SURVEY B.C. - PROVINCIAL SURVEY 1996 INNOVATION, SKILLS AND LEARNING  UNIVERSITY OF BRITISH COLUMBIA C E N T R E  F O R P O L I C Y  S T U D I E S I N  SMALL AND MEDIUM  SIZED  E D U C A T I O N  ENTERPRISES  IN BRITISH COL UMBIA  A survey looking into innovation and the role skills, learning and training play in the success of an enterprise S E C T I O N 1: C O M P A N Y / B U S I N E S S P R O F I L E  [1] Name of Enterprise: [2] Address: Telephone:  Fax:  Telephone:  Email:  Contact:  [3] In what year was this enterprise established? 19 [4] Number of employees in 1990  1995/6  [5] Which of the following best describes your company's main commercial activity? (check one) This company is involved in: a) telecommunications equipment b) computers and related services c) secondary wood products d) offices of engineers [6] Revenues in 1990 $  1995 $  1996 (projected) $  173  [7] Which of the following describes the ownership of this company? (check one) Type of ownership:  a) limited company b) partnership c) public company d) single proprietor [8a] Is this enterprise a part of a group of companies? No  Yes If yes,  [b] Is this company: (check one) 1) a parent company 2) a subsidiary 3) other (please specify)  [9] In the past five years has this company adopted any of the following business strategies? (1991/6)  Yes  Business Strategies:  No 1) strategic partnerships (equity based consortia or joint ventures) 2) strategic alliances (resource, research or marketing networks)  a) formal agreements b) ad hoc agreements [10a] Is this company a member of a professional and/or sector organization? No Yes If yes, [b] Is this membership used to access any of the following services: (rank order, using 1 to represent the most frequently used services)  1) educational programming/training 2) accessing information and marketing sources 3) policy related activities (industry/sector trade issues,  regulatory trends and standards  174  [11a] Does thisfirmexchange information with other companies it deals with? No  Yes  If yes, [b] Are these companies typically: (rank order, using 1 to indicate the most common exchange relationship) 1) suppliers 2) customers 3) business partners 4) other (please specify)_ [c] Would you categorise this exchange of information as adhoc(occasional) or systematic(regular)? (check either/or for each of 1-4) (occasional) OR (regular) 1) suppliers 2) customers 3) business partners 4) other (please specify) [12a] Would you describe your organisational structure as: 1) hierarchical  OR b) flat?  [b] How many levels of management/supervision does this company have?  levels  [13] Please attach an organizational chart (place at the end of survey) [14] Where are your major markets located? (rank the top three markets) (rank) Geographic Areas: a) British Columbia  b) Canada (outside B.C.)  c) U.S.A.  d) Mexico  e) Europe  f) Japan  g) Australasia  h) S.E. Asia  i) Other (please specify)  175  [15a] Is your company using elements of ISO and planning to complete certification? No Yes [b] Is your enterprise ISO accredited? No Yes [c] Do you feel ISO too expensive/time consuming for average small/medium firms? No Yes [d] Do you feel pressured to conform to ISO standards by government/competition? No Yes [e] Is your enterprise using elements of ISO but has no plans to formally enrol? No [16a] Has your company taken advantage of tax credits? No  Yes  Yes  If yes  [b] How many years has this strategy been used (total years) [17a] Have you received any other research grants/funds besides tax credits? No If yes  Yes  [b] Which organizations or agencies provided these funds/grants? (check) Organizations/agencies:  1) BRAP  4) Western Diversification Fund  2) Science Co  5) Other - Government source  3) PEMDI  6) Other - Private source  SECTION 2: INNOVATION [18a] Is this firm developing new and established products/processes simultaneously? No  Yes  [b] How does your company test products or processes? (check as many as appropriate) Products/processes are tested using:  a) prototyping (in-house)  e)fieldtrials (in-house)  b) prototyping (client sites)  f)fieldtrials (client sites)  c) beta testing (client sites)  g) other (please specify)  d) simulations (in-house)  176  [19] Does product/process development take place according to a definite plan, schedule or pace? (check one) Development is often:  a) systematic - orderly/step by step b) serendipitous - happening upon fortunate discoveries / information etc by chance c) systematic and subject to regular review/upgrades d) other (please specify)  [20] Rank the following marketing strategies in order of their importance to your business (rank) Marketing Strategies  a) new markets for existing technology b) improving market share c) creating markets for new and emerging products/processes/technologies [21] Which external sources of information do you find most the most useful in development work? (rank according to importance -1 represents the most important source of information) (rank) Sources of Information  a) academic conferences  e) professional and sector seminars  b) internet  f) trade shows and related activities  c) universities/Govt. labs, g ) customer feedback d) publications  h) other (please specify)  [22] Does innovation typically originate from any one group or person within the company? (check one) An innovative idea normally comes from:  a) an individual (employees) b) from departments c) project teams d) senior management (owners/principals) e) mixture of the above 177  SECTION 3: SKILLS, LEARNING AND TRAINING [23a] Is training an integral part of your firm's business plan? No [b] Does this firm have a training budget? No  Yes  Yes  [24] Are training expenditures formally tracked? No  Yes  [25] Does the enterprise formally evaluate the outcomes of training? No  Yes  [26] Who provides the majority of training undertaken by employees? (check one) Training Providers:  a) company employees (in-house)  c) professional/private organizations  b) public institutions [27] What formal qualifications do your employees have? (check the number of employees in each category)  Qualifications  Management  R&D/ Profess.  Sales / Technical General Marketing  a) no high school graduation b) high school graduation/equivalent c) degree d) post-graduate degree e) other qualifications (please specify)  [28] What type of work experience does your company typically look for when hiring? (rank order, using 1 as the most desired experience) (rank) This enterprise looks for people with experience that is:  1) job specific  4) industry relevant  2) generic and varied  5)fieldbased  3) project based  6) other (please specify)  178  [29] Which non-vocational skills and/or personality traits have been incorporated into hiring practices? (rank order, using 1 as the most desired skill/trait) (rank) When hiring thisfirmlooks for:  a) adaptability b) a positive attitude c) a motivated person d) a self-starter (see over page for remaining categories) e) team players/people skills f) leadership qualities g) other (please specify)  [30] Has your firm experienced an increased demand for business/trade skills over the five years? (rank in order, using 1 to indicate the most significant increase) (rank) This company now has more job opportunities for individuals with:  a) generic computer skills/expertise b) trade skills c) interpersonal skills d) management skills e) industry specific computer skills/expertise d) other (please specify)  [31] Does this company have a particular way of organizing work? (check one) Employees are typically assigned to work:  a) within departments b) in teams/project groups c) independently (under the supervision of a mentor) d) on a production line e) other (please specify)  [32] Has the focus of work (activities) within your company altered over the past five years?(rank according to importance in 1990 and now - 1 represents main focus of work activities)  Activities  Focus in 1990 Focus in 1996  a) software development b) end product c) type/delivery of product d) total solutions e) R&D  [33] Who provides the training within your company? (main trainer - rank order 1) (rank) Training is normally provided by: a) in-house (employer initiated)  b) contracted services (external) c) use of self-directed studies d) other (please specify)  [34] How successful has training been in improving the following aspects of your enterprise? rank - 1 represents most successful area of improvement .Training has improved:  a) innovative capacity  d) employee Skill Levels  b) productivity  e) organizational knowledge  c) quality  f) employee satisfaction  [35] What kind of factors have posed serious obstacles to training over the pastfiveyears? (rank) Serious training obstacles have included:  a) training costs  e) shortage of trainers  b) employee turnover  f) production/work conflicts  c) short versus long-term needs  g) suitable courses  d) employee skill levels  h) other (please specify)  180  [36] Where do training requests normally originate from? (check one) Training requests tend to come directly from:  a) employees (excluding management)  c) senior management  b) dept/production team heads  d) other (please specify)_  [37] Who is responsible for approving training requests in your company? (check one) Training requests are normally approved by:  a) dept./team heads b) senior management c) joint decision between dept./team heads and senior management d) other (please specify)  :  [38] Does your enterprise make use of any particular learning strategies? (check as many as appropriate) (check) Information is shared and disseminated by:  a) sharing conference papers b) attending lunch and learn sessions c) brainstorming opportunities d) informal mentoring situations e) retreats and other social activities f) other (please specify)  • REMINDER : Time to include your organizational chart  [39] Is there anything else you would like to add?  Please feel free to ATTACH any additional information relating to either the survey questions or general topics of innovation, learning and training at this point. If you are providing additional information in support of survey responses please include the question number. In the case of general information it would be useful to specify which of the three sections your addition(s) relate to: the company/business profile, innovation, or skills, learning and training.  Many thanks Hans Schuetze Leif Hommen Rosemary Taylor Amanda Best October 31st. 1996  ADDITIONAL INFORMATION  182  APPENDIX C - CASE STUDY PROFILES 1996/7  INNOVATION, SKILLS AND LEARNING  C A S E STUDY FIRMS - BUSINESS PROFILES  C l : A software developer offering third party contracting Activity:  D e v e l o p cross platform software components f o r clients  Founded:  P u r c h a s e d f i v e y e a r s ago as a s h e l l c o m p a n y  Ownership:  P a r t n e r s h i p - three s e n i o r a n d f i v e j u n i o r partners  Organizational F o r m :  Flat or organic  Revenues:  1996-$3.62 million  Personnel:  1990 - 3  G r o w t h Pattern:  D r a m a t i c and sustained growth  Hiring/Employment Practice:  M a i n l y n e w graduates/prefers co-op s t u d e n t s / m o t i v a t e d , d i s c i p l i n e d  Qualification o f Workforce:  Clients  Innovation driven by:  M o s t l y u n d e r 3 5 , f i r s t degrees,  Clients:  M a j o r s o f t w a r e suite d e v e l o p e r s i n N o r t h A m e r i c a  Market: Types/ Locations  " N i c h e m a r k e t " - p r i m a r i l y w i t h i n the U . S .  1996 - 4 2  C-2: A software company developing in-house products Activity:  Develop Geographic Information Systems  Founded:  1981 - subject to m e r g e r s a n d b u y o u t s u n t i l 1993  Ownership:  P r i v a t e l y o w n e d - o n e o w n e r w i t h other c o m p u t e r interests  Organizational F o r m :  Flat  Revenues:  1996-$2.5 million  Personnel:  1996-26  G r o w t h Pattern:  E x p a n d i n g after d i f f i c u l t i e s i n e a r l y 1990's  Hiring/Employment Practice:  M a i n l y n e w graduates - c o m p u t e r s c i e n c e / g e o g r a p h y - t e a m p l a y e r s  Qualifications o f Workforce:  F i r s t a n d graduate degrees  Innovation driven by:  Clients and market place  Clients:  I n c l u d e s forestry/natural r e s o u r c e c o m p a n i e s  Market: Types/ Locations  " N i c h e market" - international ( 6 0 % ) and C a n a d a ( 4 0 % )  184  C A S E STUDY FIRMS - BUSINESS PROFILES  C - 3 : A software developer - embedded systems Activity:  B u i l d s a n d sells d i s p a t c h s y s t e m s to t a x i a n d c o u r i e r s e r v i c e s  Founded:  1988 - s p i n - o f f f r o m large i n t e r n a t i o n a l c o n c e r n  Ownership:  I n d e p e n d e n t - o w n e r p u r c h a s e d , s o l d a n d re-purchased i n '92 f o r 1 $  Organizational F o r m :  Flat  Revenues:  1996 - $ 4 . 6 m i l l i o n  Personnel:  1996-44  G r o w t h pattern:  Dramatic growth  Hiring/Employment Practice:  H i r e s co-op students - a l s o f r o m other c o m p a n i e s i n f i e l d  Qualifications o f Workforce:  Y o u n g , w e l l e d u c a t e d [37 f i r s t degrees, 12 M . S c , 2 P h . D . ]  Innovation driven by:  M a r k e t p l a c e /clients  Clients:  L a r g e t a x i / c o u r i e r s e r v i c e s i n u r b a n areas - little c o m p e t i t i o n  Market: Types/Locations  " N i c h e m a r k e t " - i n t e r n a t i o n a l - e m p h a s i s o n the U n i t e d States  C - 4 : A software company developing embedded systems Activity:  D e v e l o p c r e d i t /debit c a r d t r a n s a c t i o n p r o c e s s i n g s y s t e m s / h a r d w a r e  Founded:  1990  Ownership:  P u b l i c c o m p a n y - B o a r d o f 6 directors[3 internal/majority holdings]  Organizational F o r m :  Flat  Revenues:  $1.5 m i l l i o n  Personnel:  1 9 9 6 - 11  G r o w t h Pattern:  Expanding  Hiring/Employment practice:  H i r e s b o t h f u l l a n d part-time e m p l o y e e s , e m p h a s i s o n t e a m p l a y e r  Qualifications o f Workforce:  B.A., B.Sc. and P h . D - engineering, computer science, marketing  Innovation driven by:  M a r k e t place/clients  Clients:  P a r k i n g c o m p a n i e s , m e r c h a n t s , s h o p p i n g m a l l s , a i r l i n e s , resorts  Market: Types/Locations  " N i c h e market" - C a n a d a , U.S. and internationally  185  APPENDIX D - FRAMEWORK FOR ANALYSIS  INTELLECTUAL CAPITAL - FRAMEWORK FOR ANALYSIS  Activity: Founded: Ownership: Organizational Form: Revenues: Personnel: Business Context Growth Pattern: Hiring/Employment Practice: Qualification o f Workforce: Innovation driven by: Clients: Market: Types/ Location  Human Capital  1.  H i r i n g practices  •  The type o f knowledge, skills and experience in demand  •  Strategies and factors influencing the final hiring decision  2.  Training and professional development  •  Formal policies, statements/ procedures budgets, tracking/ evaluation  •  The organization and forms  3.  Knowledge management  •  Formal policies, statements and procedures  •  Organization and forums - creation, access and transfer o f knowledge  187  INTELLECTUAL CAPITAL - FRAMEWORK FOR ANALYSIS  1. Business relationships  Customer Capital  •  Nature of knowledge relationships  •  Approaches and forms of knowledge relationships  2.  Innovation, learning and knowledge transfer -  •  Influence innovation, learning and knowledge transfer  •  Encouraging customers to participate in the development/ use of new knowledge  3.  Developing support services  •  Influence on learning and knowledge  •  Types of knowledge and learning situations  1. Organizational capital  Structural Capital  •  Investment in the knowledge infrastructure  •  Structures/ forms of knowledge systems and tools  2.  Innovation capital  •  Protection of knowledge and creative talents  •  Structures/ forms of protection and encouragement creation of knowledge  3.  Process capital  •  Monitoring the efficiency/ productivity levels of knowledge systems  •  Structures and tools - systems and methodologies  188  


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