Managing Intellectual Capital In

Managing intellectual capital inNigerian telecommunications

companiesOlunifesi Adekunle Suraj

Department of Broadcasting & Communication Technology,School of Communication, Lagos State University, Lagos,

Nigeria, and

Nick BontisDeGroote School of Business, McMaster University, Hamilton, Canada

AbstractPurpose – The purpose of this study is to assess how telecommunications companies in Nigerialeverage intellectual capital as a strategic resource for creating competitive advantage.

Design/methodology/approach – A previously published research instrument was administeredand survey data were collected from 320 managers in 29 telecommunications companies.

Findings – Hypotheses related to the relationship of human, structural and customer capital and itsinfluence on business performance were tested. Results show that Nigerian telecommunicationscompanies have mostly emphasized the use of customer capital, exemplified by market research andcustomer relationship management to boost their business performance.

Practical implications – The over-emphasis on customer capital to the detriment of otherintellectual capital components is found to be undermining the productivity of Nigeriantelecommunications companies.

Originality/value – This is the first published study of intellectual capital development in Nigeria.

Keywords Intellectual capital, Competitive advantage, Business performance,Nigerian telecommunications companies, Partial least squares, Nigeria

Paper type Research paper

IntroductionMost business leaders acknowledge that an organization’s chief asset is not itsproducts, factories or capital equipment but, the collective knowledge, creativity,experience and enthusiasm of its people (Itami, 1987). Encouraging this human capitalto increase in value means investing in the skills set of employees at all levels of theorganization as well as empowering them with the information they need to makedecisions on the organization’s behalf. As a result, making decisions where theknowledge exists will result in smarter decisions and more actively engagedemployees. Engaged employees, in turn, are likely going to be more effective, moresatisfied and likely to stay with the organization to give better customer service.Consequently, organizations now face the challenge of identifying various ways tobetter “appreciate” this critical asset. Managing human capital more effectively,increasing customer loyalty, and accelerating organizational responsiveness, have nowbecome crucial success-determining factors for all organizations (Bontis, 1999).

The telecommunications industry can be described as an engine for the economicand social development of a nation (Wright et al., 1994). As rightly noted by Dickenson(1977), if trade is the lifeblood of the economy, then telecommunications systems can

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Journal of Intellectual CapitalVol. 13 No. 2, 2012pp. 262-282q Emerald Group Publishing Limited1469-1930DOI 10.1108/14691931211225724

truly be regarded as the nervous system. Telecommunications facilities in Nigeria werefirst established in 1886 by the Colonial administration. These facilities were gearedtowards discharging administrative functions rather than the provision ofsocio-economic development of the country. Accordingly, the introduction of publictelegraph service linking Lagos by submarine cable along the west coast of Africa toGhana, Sierra-Leone, Gambia and to England was a greater priority than a robusttelecommunication network.

A new Telecommunications Act was signed into law in October 2003 by theNational Assembly. The Nigerian Communications Commission (NCC) under this actwas charged to issue communications licenses for the operation and provision ofcommercial services, and to determine the eligibility criteria and other general termsand conditions of licenses. The fact remains that most of the telecommunicationscompanies in Nigeria are yet to be listed on the floor of Nigeria Stock Exchange eventhough other knowledge-intensive and service-oriented companies (e.g. banks,insurance companies) are publicly traded.

The aim of this study is to assess how telecommunications companies in Nigerialeverage intellectual capital (IC) as a strategic resource for creating competitiveadvantage. In view of the previous aim, this research study is designed specifically to:

. understand how telecommunications companies leverage their intellectualcapital in achieving efficient business processes and effective value addedservices; and

. examine interactions between elements of intellectual capital (human, structuraland relational capital) and improve business performance in Nigeriantelecommunication companies.

Literature reviewThere are several literature reviews that have done an extensive overview of the fieldof intellectual capital (Serenko et al., 2009, 2010). Key definitions and concepts ofintellectual capital have equally been extensively discussed by many scholars(Edvinsson and Malone, 1997; Stewart, 1997; Nahapiet and Ghoshal, 1998; Ross et al.,1997). Despite different terms and definitions related to the theme, intellectual capital isnow generally accepted as comprising three major constructs: human capital,structural capital and relational capital (Sveiby, 1997; Bontis, 2001). The importanceand description of these major constructs are well established in the literature (seeChatzkel, 1998; Bontis, 2001, Teece, 2000; Pennings and Harianto, 1992). For instance,the importance of measuring human capital is well established in the statementcredited to Fitz-enz (2000, p. 249):

The accounting function does a free job of telling the state of our past and present financialhealth. But it says nothing about the future. Additionally, it does not speak to human capitalissues. To see the future, we need leading indicators. These indicators tell us the state of ourhuman capital, as we prepare for the future.

Also, in emphasizing the importance of relational and structural capital, Bontis (2001)observed that frustrated managers often do not recognize that they can tap into awealth of knowledge from their own clients and suppliers. Furthermore, Bontis (1998)maintained that structural capital is the critical link that allows IC to be measured at anorganization level.

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There is general consensus on the significance of intellectual capital as a resourceunderpinning organizational performance and correspondingly, the academicdiscipline is starting to mature (Bontis and Serenko, 2009; Serenko and Bontis,2009). According to Hlupic and Qureshi (2003), intellectual capital is increasingly beingseen as strategic resource that can create value and ensure competitive advantage.From the competitive viewpoint, knowledge is emerging as one of the most strategicassets for organizations. This is due to the fact that in our present economy, more andmore businesses are evolving whose values are not based on the tangible resources buton their intangible resources (i.e. people and their expertise, business processes andmarket assets such as customer loyalty, repeat businesses and reputation).

Drucker (1993) postulates that knowledge, as an input resource would have a greaterimpact than physical capital in the future. Grant (1996) is also of the opinion that as themarket for knowledge resources experience the same dynamic competitive conditions asit is in the case within the product markets, knowledge will appeared as the moststrategically important resource for companies. In other words, as well as becoming anincreasingly important factor of production, knowledge may have become manyorganizations’ chief resource (IFAC, 1998; Lynn, 1998). Thus, it is now regularly arguedthat the ability to create, transform and capitalize on such knowledge is ultimately whatdelivers competitive advantage (Arthur, 1996; Bontis, 1998, 2001; Sveiby, 1997). TheInternational Federation of Accountants (IFAC, 1998) for instance, notes that knowledgeis the primary source of competitive advantage and therefore, there is need to harnessthis increasingly critical source of organizational value in an attempt to ensureorganizational survival and prosperity. Moreover, with the rapidly changing dynamicsof the “new economy”, it is becoming obvious that the ability of firms to achievesustainable competitive advantage derives mainly from their intangible resources (Lynn,1998). In this respect, many leading KM researchers and practitioners have now reacheda consensus that a critical source of competitive advantage in this era of knowledgeeconomy is the knowledge asset of an organization (Teece, 2000; Zack, 1999). In line withthis consensus, Raeside and Walker (2001) predicted that knowledge would become thekey differentiator between successful enterprises and those that will fail in this century.As the core competencies of firms become more knowledge-intensive, the use ofintangible assets (i.e. ideas, information and knowledge) becomes critical due to the factthat these assets are hard to replicate (Dunning, 2000). Furthermore, Bahra (2001)reiterates that the best competitive advantage a company can have is to learn faster thanits competitors. Thus, achieving an advantage in knowledge means a direct gain incompetitive advantage (Beschorner et al., 2001).

Hence, given the literature review of intellectual capital, studies so far have shownthat intellectual capital has a significant and substantive positive impact on businessperformance (Bontis, 1998, 2001). Bontis et al. (2000) using an empirical study toinvestigate the three elements of intellectual capital, i.e. human capital, structural capital,and customer capital, and their inter-relationships within two industry sectors inMalaysia, found out that: human capital is important regardless of industry type; humancapital has a greater influence on how a business should be structured in non-serviceindustries compared to service industries; customer capital has a significant influenceover structural capital irrespective of industry; and finally, the development of structuralcapital has a positive relationship with business performance regardless of industry.Jaworski and Kohli (1993) report on a study of 222 US business units, which suggests

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that market orientation (which is within the conceptualization of relational capital) is animportant determinant of performance, regardless of market turbulence, competitiveintensity, and technological turbulence. Also, Ruekert (1992) reported a positiverelationship between degree of market orientation and long-term financial performance.Biemans and Harmsen (1995) have also concluded on the basis of several other studiesthat having a market orientation in product development has proven to be a highlycritical factor for new product success. Findings from the empirical analysis of sampled65 companies that are listed on the JSE Securities Exchange (high knowledge-basesectors) in South Africa suggest that the performance of a company’s intellectual capitalcan explain profitability and productivity, but not market valuation (Firer andStainbank, 2003). Chen et al. (2005) and Tseng and James (2005) have also found out thatfirms’ intellectual capital has a positive impact on market value, corporate value andfinancial performance, and may be an indicator for future financial performance amongTaiwanese listed companies. Using the analysis of correlation and simple linear multipleregression, the empirical analysis of top 25 firms in the drug and pharmaceuticalindustry in India, for a ten-year period from 1996 to 2006 found that the human capitalhave the major impact on the profitability and productivity of the firms over the periodof study (Kamath, 2008). Wang (2008) has equally found out a positive relationshipbetween IC and market value of the US Standard & Poor’s 500 (US S&P 500) publiclytraded electronic companies from 1996 to 2005. Zeghal and Maaloul (2010) have equallyshowed that companies’ IC has a positive impact on economic and financial performanceof 300 UK companies especially among the high technology companies. Intellectualcapital performance and its relationship with financial performance of financialinstitutions in Malaysia for the period 1999 to 2007 were also found to be stronglyassociated with profitability.

Moreover, many studies have equally focused on identifying intellectual capitalbased critical success factors (Chong and Choi, 2005; Davenport and Prusak, 1998) butaccording to Wei et al. (2006), they are too general to address the preliminary factorsneeded to implement intellectual capital development in the telecommunicationindustry in particular.

Hence, the justification for this paper became obvious when attempting to addressthese aforementioned relationships in a novel research setting such as Nigeria. The aimof this paper is to investigate the inter-relationships among the independent variableshuman capital, structural capital and relational capital and the dependent variable,business performance in order to see if the same links can explain intellectual capitalactivity within the Nigerian telecommunications industry. These variables are definedand conceptualised based on an extension of the constructs and hypotheses developedand tested by Bontis (1998) and then again by his colleagues in Malaysia (Bontis et al.,2000), Ireland (O’Regan et al., 2001), Egypt (Seleim et al., 2007), Portugal (Cabrita andBontis, 2008), and Jordan (Sharabati et al., 2010). As such a comprehensive evaluationof the survey instrument is not necessary given that it has been extensively used in avariety of settings. However, this study aims to re-validate the following hypotheses astested by Bontis (2001) albeit within the telecommunications industry in Nigeria:

H1. Human capital (HC) is positively associated with customer capital (CC).

H2. Human capital (HC) is positively associated with structural capital (SC).

H3. Customer capital (CC) is positively associated with structural capital (SC).


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H4. Structural capital (SC) is positively associated with business performance(PERF).

H5. Human capital (HC) is positively associated with business performance(PERF).

H6. Customer capital (CC) is positively associated with business performance(PERF).

MethodologyData collectionThe population for this study comprised of all of the 150 telecommunicationscompanies categorized under the 17 major license categories in Nigeria (see www.ncc.gov.ng/index2_e.htm) by NCC. In view of the heterogeneous nature of this studypopulation, stratified sampling was used. The sampling technique becomes necessaryin view of the fact that the different license categories have made possible the divisionof the study population into homogeneous groups or strata (i.e. license categories). Thestratification factor here is that telecommunications companies in each license category(i.e. homogenous group) provide the same telecommunication services or business. Thefinal sample sample size consisted of 40 telecommunications organizations whichyielded a 27 per cent industry representation rate. A proportional sampling procedure(i.e. number of telecommunications companies in each license category divided by thetotal number of telecommunications companies in the study population multiply by thestudy’s sample size) and simple random technique were used to select the number of,and actual telecommunications companies within each license category respectively. Intotal, survey responses were received from 14 senior executives (e.g. heads andassistant heads) from seven departments (e.g. customer support, project management,training, sales, marketing, information technology and human resources) at each of the40 organizations yielding a total survey sample size of 560 respondents. The use of“key informants” as adopted in this study has been justified by Cheng and Liu (2008)as an appropriate approach for empirical studies within the information sciences.

The ICRAS (Intellectual Capital Receptivity and Adoption Survey) was used tocollect data for this study. The study considered the use of questionnaire as the mostappropriate data collection instrument because studies on intellectual capital and howit can enable performance and competitive advantage in telecommunicationsorganizations is relatively new in Nigeria. As a result, primary data on growth,performance, knowledge and knowledge management are virtually in non-existentICRAS is an amended version of the ICS (Intellectual Capital Survey) initiallydeveloped by Bontis in, 1998 (see www.NickBontis.com/Research.htm for a copy of theoriginal survey instrument). The ICS is a validated survey instrument used by bothacademic and practitioner researchers in examining intellectual capital phenomena(see Table I). The survey items have been analyzed and evaluated in various previousstudies and have been shown to maintain strong reliability and construct validity(Bontis, 1998, 2001).

The items for the ICRAS instrument were designed to tap into four constructs (threeconstructs relating to intellectual capital and performance). The items included weredeveloped from concepts that were discovered during the literature review phase of thestudy and replicated from an earlier study (Bontis, 1998). There was a total of 91 items

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used in the survey based on a respondent’s agreement or disagreement on aseven-point Likert-type scale as against ICS’s 63 items. The additional items in ICRASwere to address other intellectual capital issues relating to the peculiar nature of theNigerian business environment and the telecommunications industry in particular.Hence, items such as “our workforce lack skill and knowledge to adjust to new jobs”,

Human capitalHC1 Competence ideal level HC14 ROI on R&D are evaluatedHC2R No succession training program HC15R Rarely think actions throughHC3 Job rotation among employee HC16 Do without much energyHC4 Planners on schedule HC17R No team work among employeesHC5R No internal relationships HC18 Individuals learn from othersHC6 Come up with new ideas HC19R Employees argue constantlyHC7 Upgrade employees’ skills HC20R Employees not excited about jobsHC8 Employees trained to be best 10% HC21 Do skill auditing of employeesHC9 Employees are satisfied HC22 Get the most out of employeesHC10R No career path for employees HC23R Bring down to others’ levelHC11 Recruitment program comprehensive HC24 Job’s contribution to corporate goalHC12R Information unavailable for job use HC25 Former staff are made consultantsHC13R Big trouble if individuals left HC26 Training budget increasing yearly.

Structural capitalSC1 Knowledge made available to staff SC13R No recognition for performanceSC2 Revenue per employee increasing SC14R Managers made decisions only.SC3 Decreasing transaction time SC15 System to capture recommendationsSC4 Implement new ideas SC16 Procedures support innovationsSC5 Supports development of ideas SC17R Firm is bureaucratic nightmareSC6 Knowledge gaps are narrowed SC18 No permanent organogramSC7 Have staff skill matrix database SC19 Not too far removed from each otherSC8 Regular contact with ex-staff SC20 Atmosphere is supportiveSC9R Same problem always occurring SC21R Mistakes are not allowedSC10R Decisions not communicated SC22 Need to create and manage knowledgeSC11R Do not share knowledge enough SC23R Re-invent the wheel for new projectsSC12R Hardly hold meetings with staff SC24R Lack skills to adjust to new jobs

SC25 Expert employees most valuable.Customer capitalCC1 Customers generally satisfied CC10 Customer info disseminatedCC2 Reduce time to resolve problem CC11 Understand target marketCC3 Market share improving CC12R Do not care what customer wantsCC4R Customers always complain CC13R Launch what customers don’t wantCC5 Longevity of relationships CC14 Meet with customersCC6 Ask customers for referral letters CC15 Capitalize on customers needCC7 Don’t lose customers to competitor CC16 Confident of future with customersCC8 Prefer expertise of particular staff CC17R Rarely employ customers’ suggestionCC9 Customers increasingly select us

PerformanceP1 Industry leadership P6 After-tax return on assetsP2 Future growth P7 After-tax return on salesP3 Profit P8 Overall response to competitionP4 Profit growth P9 Success rate in new product launchP5 Sales growth P10 Overall business performance

Note: R – reverse coded items

Table I.Summary of survey items

(excerpts fromquestionnaire)


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“we often have to ‘re-invent the wheel’ every time a new project comes up”, “ouremployees do not have a detailed career path”, among others which account for thethree major components of IC and performance measurement made up for additionalitems in ICRAS

A pilot test was also conducted in order to further refine the instrument. A smallsample of departmental heads in selected telecommunications companies were askedto evaluate the survey and provide feedback on the items. Based on general commentsmade, there were a few minor edits. Another methodological adjustment was related tothe sampling of Research & Development (R&D) personnel. This group was eventuallydeleted from the sampling frame because it was discovered during the pilot study thatmost Nigerian telecommunications companies do not have R&D departments.

Data analysisAnalysis of the raw data collected was conducted using SPSS. Cronbach’s alpha scoreswere used to evaluate the reliability of the measures as suggested by Churchill (1979)and Sekaran (1992). Nunnally (1978) recommends that constructs have reliabilityscores in excess of 0.7 as a minimum threshold.

Factor analysis was carried out to ensure data reduction and summarization. APrincipal Component Analysis (PCA) with a VARIMAX rotation was executed in orderto verify that the items (questions in the questionnaire) tapped into their stipulatedconstructs (human capital, structural capital and customer capital). The variable –factor correlations are either close to 1 thus indicating a clear association between thevariable and the factor or 0 indicating a clear lack of association as suggested by Hairet al. (1987). Thus, only the item that loaded on their corresponding factors at levels of0.4 or greater was retained for the rest of analysis. Consequently, any item thatcross-loaded on two factors or loaded on the wrong factor or did not load on any factorwith a value of 0.4 or greater was not retained.

The retained items were later subjected to Partial Least Square (PLS) to test thedifferent models under consideration. PLS is an iterative combination of principalcomponent analysis relating measure to construct and path analysis permitting theconstruction of a system of constructs. This technique requires that the dependent andindependent variables be specified before carrying out any analysis. In this study, theindependent variables are Human, Customer and Structural Capitals whilePerformance is the dependent variable. Performance which is a perceived measureof business performance is taken in this study as a reasonable substitute for objectivemeasures of performance (Dess and Robinson, 1984) and not as objective measures offinancial performance. The performance variable in this study is a function ofproductivity index based on responses to items with regards to organization’sperformance relative to their key competitors in the industry. Our use of PLS in thisstudy is based on the fact that estimation of the parameter representing themeasurement and path relationship is accomplished using Partial Least Squares (PLS)techniques. Furthermore, PLS being a structural equation modeling technique has aprimary objective of minimization of error (Hulland, 1999), could work with smallersamples (Bontis, 2001) and has been used as a research tool in a variety of settings suchas business disciplines (Hulland and Kleinmuntz, 1994); global strategy ( Johanssonand Yip, 1994); and in intellectual capital research (Bontis, 1998). To establish theassociative relationships among human, customer, structural capitals and

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performance, a correlation analysis was carried out. It was generally determined thatthe independent variables (human, structural and customer capital) correlated witheach other and were also found to correlate individually with the dependent variable(performance). Moreover, all the correlation coefficients were found to be significant atp , 0.01. However, when the sample is stratified by license category, the resultantcoefficients are not entirely expected.

The retained items from the previous tests (Cronbach’s alpha with varimax rotation)were then used in Partial Least Square (PLS) to test their loadings within a nomologicalnetwork. Seven structural combinations (based on the general model and the six licensegroups) were examined using different combinations of the intellectual capital constructsleading into performance (see Figures 1-7). The path loading (beta value) represents thedirect causal link from one construct to the other (top number is standardized beta, t-statin brackets, *p , 0.1, * *p , 0.05, * * *p , 0.01) as depicted in Table I.

ResultsOut of the 40 telecommunications companies sampled for this study, 29 (73 per cent)eventually participated. The remaining 11 organizations were either bankrupt or had yetto commence operations at the time of the study. Thus, a total of 406 surveys werereceived from the targeted companies. Of those, 329 were complete (79 per cent) and usedfor further analysis. The 29 organizations represented by their respective license (six)categories and the number of times they were each represented shows a widecross-section of business accounted for by the data: VSAT (145 respondents representingabout 45.3 per cent), GSM (52 respondents representing 16.3 per cent), Fixed Telephony(47 respondents representing about 14.7 per cent), Fixed Wireless (39 respondentsrepresenting 12.2 per cent), Local Exchange Operator (21 respondents representing 6.6per cent) and National Carrier (16 respondents representing 5.0 per cent).

Survey respondents self-identified themselves according to the followingoccupational groups: manager (47 per cent), assistant manager (45 per cent), ChiefInformation Officer/Chief Technical Officer/Chief Operating Officer (6 per cent), and

Figure 1.General model


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Managing Director, General Manager or Chief Executive Officer (2 per cent).Managerial experience was described as follows: less than three years (26 per cent),three to six years (54 per cent), and above six years (12 per cent). Gender representationwas split between 68 per cent males and 32 per cent females. Functional workinggroups were represented as follows: IT (19 per cent), marketing/sales (19 per cent),customer service (17 per cent), project management (16 per cent), HR (13 per cent) andtraining & development (7 per cent).

To establish the associative relationships among human, customer, structuralcapitals and performance, a correlation analysis was carried out. It was generallydetermined that the independent variables (human, structural and customer capital)

Figure 2.GSM model

Figure 3.Fixed wireless model

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correlated with each other and were also found to correlate individually with thedependent variable (performance). Moreover, all the correlation coefficients were foundto be significant at p , 0.01. However, when the sample is stratified by licensecategory, the resultant coefficients are not entirely expected.

The retained items from the previous tests (Cronbach’s alpha with varimax rotationand correlation analysis) were then used in Partial Least Square (PLS) to test theirloadings within a nomological network. Seven structural combinations (based on thegeneral model and the six license groups) were examined using different combinationsof the intellectual capital constructs leading into performance (see Figure 1). The pathloading (beta value) represents the direct causal link from one construct to the other

Figure 4.Fixed telephony model

Figure 5.VSAT model


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(top number is standardized beta, t-stat in brackets, *p , 01, * *p , 0.05, * * *p , 0.01)as depicted in Table II.

Result of the PLS indicated a General model (model 1) representing all the totalrespondents irrespective of their license groups that participated in the study. Abreak-down of General model revealed different license groups as depicted by model2-7 (see Figures 1-7).

The results related to H1 show clearly that the relationship between human capitaland customer capital are positive, significant and highly substantive for all the modelsexcept for GSM which were found to be negative, non-substantive and non-significant.This might implies that GSM organizations are yet to realize the full potential of their

Figure 6.National carrier model

Figure 7.Local exchange operator

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HC!

CC

(H1

)H

C!

SC

(H2

)C

C!

SC

(H3

)S

C!

Per

f(H4

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C!

Per

f(H5

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f(H6

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0.55

611

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5.40

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0.11

81.

866

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0.04

60.

987

0.26

54.

865

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*0.

490

9.35

0*

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44.3

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0.10

40.

688

0.48

24.

448

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380

3.51

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20.

071

0.54

90.

171

1.46

00.

729

6.60

8*

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55.0

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0.69

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775

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160

0.70

72

0.21

10.

931

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102

0.38

32.

103

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0.30

41.

665

39.9

Mod

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0.39

92.

730

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373

2.44

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0.19

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290

20.

355

2.21

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0.03

12

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926

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0.62

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537

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441

4.58

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80.

495

0.10

31.

463

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70.

775

0.58

77.

258

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Nat

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0.52

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886

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0.17

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560

1.83

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222

1.15

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118

0.55

50.

873

3.65

5*

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alex

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ator

0.52

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886

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145

0.56

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482

1.86

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20.

031

0.14

10.

358

1.47

90.

410

1.56

447

.1

Table II.Beta values for different

model groups


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organizations’ human capital in establishing a strong market orientation for theircustomers. The result might also be interpreted to mean that the employees in theseorganizations are yet to develop sufficient relational capital to retain their clients’loyalty. Hence, their measure of competitive responsiveness could be considered verylow.. The strong positive, substantive and significant relationship between humancapital and customer capital as exhibited by other categories of telecommunicationscompanies is confirmed by similar findings by Bontis (1998, 2001).

The results related to H2 shows that the path is positive, substantive andsignificant for General, GSM, Fixed Telephony and VSAT while it is insignificant forother telecom operators. This might imply that these telecommunicationsorganizations have a better capability for transforming individual employee’sknowledge (human capital) into organizational assets (structural capital) than othertelecommunications organizations. GSM, VSAT and Fixed Telephony operators inNigeria appear to be the sector where competition and the challenges of human capitalis more pronounced. As a result of dearth of professional, and also due to the nature oftheir project with emphasis on team work, employees are strongly encourage todocuments their experiences and job done in form of reports in a bid to develop aknowledge base system to meet re-occurring challenges whose expertise might not bereadily available.

The beta coefficient related to H3 indicates that the relationship between customercapital and structural capital is positive, substantive and highly significant for GSMwhile slightly positively significant for General model, the national carrier, and localexchange operators. The path is negative for Fixed Wireless. The result might impliesthat only GSM operators have the required capacity to create efficient organizationalroutines and processes that facilitate market driven transactions in an environment offlexible organizational structure.

The results related to H4 showed that the relationship between structural capitaland business performance is not significant for all the Nigerian telecommunicationscompanies irrespective of their license categories. This result might imply thatNigerian telecommunications organizations do not have the required competency andwherewithal to turn their organizational asset (structural capital) to organizationalproductivity. This inability might be one of the reasons why Nigeriantelecommunications organizations are not able to achieve competitive edge overtheir global counterparts when subjected to the same market condition and businessenvironment. The operators’ lack of business know-how, poor management style andinability to perceive and respond appropriately to external factors such astechnological innovations and customers changing preferences are among majorconstraints that have led to bankruptcy of many Nigerian telecommunicationscompanies especially the indigenous ones.

The result related to H5 was positively significant and substantive for the generalmodel and fixed wireless operators, while insignificantly non-substantive for otherlicense categories. While the former confirmed Bontis (1998) observation, the latterproved to be an exception. According to Bontis (1998), human capital is more or lessuseless without the supportive structure (structural capital) of an organization.However, fixed wireless operators in this study have nonetheless gone ahead tomaximize their human capital to ensure effective organizational performance withoutthe required formal organizational structure (structural capital). In this regard, fixed

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wireless operators appear to have competitive edge over others by leveraging on theirshort term contracts skilled employees (expatriate) to solve their organization’schallenging task thereby meeting their customers need in form of readily availablesolutions. This probably explains the reason behind high performing organizationswith high staff turnover rate.

The results related to H6 show that the relationship between customer capital andperformance differs depending on the telecommunications license group. The path ispositive, highly substantive and very significant for all the models except for FixedWireless and Local Exchange Operator. The result might implies thattelecommunications organizations in GSM, VSAT and National Carrier have the abilityto leverage their enormous potential knowledge embedded in their investors, suppliers,the government and related industry associations into organizational performance. It isalso worth noting that this path is the most substantive and most significant among allthe paths examined in this study. This clearly demonstrates the importance Nigeriantelecommunications organizations attached to issue on customer capital.

DiscussionThis study revealed that Nigerian telecommunications companies with the exception offixed wireless, national carrier and local exchange operators understood the importanceof “institutionalizing” their employee knowledge into organizational corporate asset (seeH2 in Figures 1-7). Hence, they appear to have put in place structures, procedures andinfrastructures for retaining their employees’ know-how in case of voluntary turnover orretirement. Considering the nature of telecommunications industry, this appears as oneof the strategy by which these telecommunications organizations cope with scarcity oftalents and high staff turnover.

Besides, some Nigerian telecommunications companies also employ the use ofexpatriates to boost their organizational performance in situations of scarceprofessionals. In such a situation, this source of human capital can directlycontributed to organizational performance without the supportive organizationalstructural capital as argued by Bontis (1998). This strategy which could also serve as ameans of achieving competitive advantage seem to be applicable to fixed wirelessoperators as revealed in this study.

The findings (see H4 in Figures 1-7) of this study also revealed that Nigeriantelecommunications companies have failed to leverage on their accumulatedorganizational knowledge and their corporate brain power to achieve competitiveadvantage and organizational productivity. As a result, they are yet to overcomefundamental challenges that are facing knowledge intensive organizations in theknowledge economy as highlighted by Kuhn and Abecker (1997). The consequence ofthis has been unjustified high overhead cost, poor quality of service delivery anddiminishing organizational revenue.

Equally important for an organizational productivity is the relationship betweenemployee satisfaction and customer loyalty (Kaplan and Norton, 1996b). This isevident in this study (see H1 in Figures 1-7) except for GSM operators. This synergymight be due to telecommunications companies’ aggressive sales strategy which placepremium on relationship/account managers. This strategy allows customers’ need tobe understood and met on time which leading to customers’ loyalty that guaranteesrepetitive business. However, this type of business strategy could also result into


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productivity loss in the case of voluntary turnover of the skilled or the revenuegenerating employees (human capital) to who the customers have come to developconfidence in. It is hereby suggested that telecommunication organizations shouldensure that their customers’ loyalty is to the organization and not to the individualemployee. So, in case of voluntary turnover of employees, the organization retains itsnetwork of customers (customer capital).

The study also revealed that organizations that are able to turn their customercapital into organizational asset (structural capital) will be outstanding in theirbusiness performance despite their low affinity between their customers and theiremployee as depicted in model 2. This might imply that organizational branding(customer relationship with the organization as against customer relationship with theemployee) could be very effective in boosting organizational performance as itpromotes customer loyalty and good relationship.

While some telecommunications companies in this study have been able to turntheir human capital (H2 in Figures 1, 2, 4 and 5) and their customers’ knowledge (H3 inFigure 2) into organizational asset, it is disheartening to note that none of thetelecommunications organizations are able to leverage these intellectual assets to boosttheir organizational performance (see H4 in Figure 1-7). As a result, the sampledtelecommunications organizations in this study cannot be said to be truly “efficient”(managing internal knowledge of the organization effortlessly) nor “effective”(managing knowledge about market, suppliers, customers and competitorsproductively). Nigerian telecommunications inefficient and ineffective managementof intellectual asset seem to be undermining their productivity and businessperformance.

It was also observed that customer capital to performance path has been found to bemore substantial and highly significant than others in this study. This is confirmed insimilar studies (Sveiby, 1997; Bontis, 1998). The significance of this observation is thatNigerian telecommunications companies attached more value to customer capital thanany other intellectual capital. Though, customer capital is critical to organizationalsuccess however, over-emphasizing the customer capital to the detriment of otherintellectual capital may be counterproductive.

ConclusionsThe telecommunications operators in this study have failed to leverage on theirorganizational knowledge (structural capital) to achieve competitive advantage andboost their performance. Moreover, the level at which the telecommunicationsorganizations leverage their intellectual capital for competitive advantage andorganizational performance varies from one license group to another. Nonetheless, allthe operators except GSM operators in this study appear to have shown preference intheir ability to mobilize their human capital in establishing a market orientation. As aresult, one observed that Nigerian telecommunications companies have a preferencetowards developing competitive responsiveness along the human capital to customercapital path as identified in this study rather than the alternate structural capital toperformance path as identified by Bontis (2001).

Notwithstanding, GSM operators appear to show leading edge over others in theirability to align their customers capital with their structural capital.

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Fixed Wireless Operators also display ability to quickly transform the expertise oftheir skilled expatriates into immediate organizational performance before the contractexpiration or eventual exit of such employee. Considering the high turnover rate andscarcity of skilled talents in Nigerian telecommunications industry, this is a highlycommendable organizational skill that could (should) guarantee sustainablecompetitive advantage.

National Carrier and GSM operators show a leading edge over other Nigeriantelecommunications operators in their tendency to leverage their customers’knowledge base into business performance. We envisaged this to be due to themarket monopoly by the National Carrier over the years before the privatizationprogramme and the large subscribers’ base advantage by the GSM operators.

Generally, the sampled telecommunications organizations in this study are yet toeffectively and efficiently manage their intellectual capital in boosting theirperformance. Specifically, turning their organizational knowledge (Structural capital)into business performance remains their greatest challenge.

The study also showed that telecommunications operators in Nigeria are morecustomer-driven than service-driven in that they emphasis much on customer capitalthan other intellectual capital. Moreover, it was also observed that Nigeriantelecommunications companies encourage strong customer-employee relationshiprather than organization-customer relationship.

Also, the human capital to performance path in this study was found to be positiveand significant for Nigerian telecommunications companies especially, the fixedwireless companies (model 3). This is contrary to findings of Bontis (1998). Oneexplanation of this unexpected result is that the intellectual capital development is inits infancy in Nigeria compared to other developed nations around the world and thatis why there is greater (and positive) opportunity for growth and thereforeimprovement versus other nations (and industries) where this relationship may beshowing signs of maturity.

This study is an extension of similar studies carried out by Bontis (1998, 2001). Ittherefore confirmed the importance of managing intellectual capital (knowledge) inknowledge-intensive industry such as Nigerian telecommunications industry. Whileresponding to Bontis’s (1998, 2001) calls for empirical studies on the management ofintellectual capital in organizations, it has also addressed the perceived literature gapon KM studies that are primarily focused on the IT companies as observed by Chong(2006).

More importantly, this study identified two alternative paths of organizationalcompetitive responsiveness. The first path (structural capital to performance) has beenaddressed extensively in Bontis’s work (2001) which seems to address knowledgeintensive firms that are not ICT companies. The second path (human capital tocustomer capital) which emphasizes more on employee-customer relationship appearsto be germane to ICT companies (Nigerian telecommunications industry as found outin this study). According to Sveiby (1994), telecommunications organizations areexamples of knowledge organizations that are totally adapted to their customers.Hence, their “service” emerges as an ongoing process of problem solving between thecustomers and their teams of experts. Therefore, the rapport or the chemistry betweenthe client (customers) and the teams (human capital) is important.


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Implications for researchers and practitionersThe telecommunications companies’ inability to leverage their structural capital fororganizational performance might imply that Nigerian telecommunicationsorganizations may not likely survive the hyper competitive market of thisknowledge intensive industry. Therefore there is a great need for researchers andpractitioners alike to implement better strategies for accelerating collaboration (humancapital development), codification of tacit knowledge (structural capital development)and value chain integration (relational capital development).

Furthermore, the goodwill enjoyed by Nigerian telecommunications organizationsas a result of positive significant relationship path between human and customercapital could prove detrimental in the long run due to voluntary turnover of skilledemployees (human capital). To avoid this consequence, telecommunicationorganizations must safeguard both customer and employee loyalty.

Nigerian telecommunication companies need to efficiently and effectively manageall of their knowledge resources and take a more holistic approach to intellectualcapital development. As a result, they may need to de-emphasize their focus on clientacquisition (customer capital) to the detriment of other intellectual capital components.

Suggestions for future studiesThis study discusses how Nigeria telecommunications organizations leverage theirintellectual capital for competitive advantage. We suggest studies be carried out inother knowledge intensive and service based industries in Africa (e.g. software,banking, entertainment) to see if the results obtained in this study could be generalized.Also, a comparison between service (e.g. banking) and non-service companies(e.g. manufacturing) could be undertaken in order to see their relative management ofintellectual capital for business performance. Using the same methodology andresearch instrument, telecommunications organizations under minor/individual licensecategory in Nigeria could also be examined in order to have a general consensus onhow Nigerian telecommunications manage their intellectual capital for competitiveadvantage.

Moreover, we suggest more studies be conducted to substantiate the path betweenhuman capital and organizational performance which was contrary to Bontis’ findings(1998). Furthermore, the relationship between human capital and customer capitalcould be teased out in order to have a better understanding of how recruitment andtraining practices impact customer loyalty.

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Further reading

Choo, C.W. (1998), The Knowing Organization: How Organizations Use Information to ConstructMeaning, Create Knowledge, and Make Decisions, Oxford University Press, New York,NY.

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About the authorsDr Olunifesi Adekunle Suraj holds a master and doctorate degree in information science with anemphasis on knowledge management and intellectual capital from the University of Ibadan,Nigeria. After stints with various consultancy firms, he was appointed as Head of Training for


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one of the foremost information and communications technology companies in Nigeria.Presently, he is a Lecturer at Lagos State University, Nigeria, within the Department ofBroadcasting & Communication Technology with several publications to his credit. Dr Olunifesiis a knowledge management and social media consultant and serves as founder and CEO ofTreasure Intelligence.

Dr Nick Bontis is an Associate Professor of Strategy at the DeGroote School of Business atMcMaster University. He received his PhD from the Ivey Business School at the University ofWestern Ontario. His doctoral dissertation is recognized as the first thesis to integrate the fieldsof intellectual capital, organizational learning and knowledge management and is the numberone selling thesis in Canada. He was recently recognized as the first McMaster professor to winoutstanding teacher of the year and faculty researcher of the year simultaneously. He is a 3MNational Teaching Fellow, an exclusive honour only bestowed on the top university professors inCanada. Dr Bontis is recognized the world over as a leading professional speaker and consultantin the field of knowledge management and intellectual capital. Nick Bontis is the correspondingauthor and can be contacted at: [email protected]

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