Human Capital-Intensive Firms and Symbolic Value Creation
AbstractThe aim of this paper is to study the process of symbolic value creation of human capital-intensive firms. Human capital is a critical resource for firms’ activities. Nevertheless, this dimension is often obscured by industrial economists. In the light of critical resource theory, we analyze how taking into account the inalienable and inimitable nature of specific human capital entails a reconsideration of the role and boundaries of the firm. We show that the firm seeks to coordinate the specialization of its key partners within the frame of its economic boundaries to ensure the long-term optimization of its potential of value. Therefore, the value of the firm depends on all the resources that the firm coordinates. Then we focus on the way HCIF can create different values. We suggest that the firm builds its competitive advantage on different forms of values, in particular the symbolic value incorporated in human capital. Finally, on the basis of these considerations, we identify the wealth included in the critical resources of the firm and to bring to light the process of symbolic value creation associated with it. We suggest that the firm is the value-creating entity and the customer both recognizes and derives the value created from whatever it is that the firm provides. We propose a definition of this value and a schema of its creation process based on management works attempts. We conclude by proposing paths of research that could fruitfully be explored to further develop this new subject.
Amit, R. & Schoemaker, P. J. H. (1993). Strategic Assets and Organizational Rent. Strategic Management Journal, 14(1), 33-46.
Barney, J. B. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management, 17(1), 99-120.
Becker, G. S. (1964). Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education. 3rd ed., University of Chicago Press, New York.
Besanko, D., Dranove, D. & Shanley M. (1996). The Economics of Strategy. Wiley, New York.
Brusoni S. (2005). The Limits to Specialization: Problem Solving and Coordination in ‘Modular Networks’. Organization Studies, 26(12), 1885-1907.
Brynjolfsson, E., Hitt, L. M. & Yang, S. (2002). Intangible Assets: Computers and Organizational Capital. Brookings Papers on Economic Activity, 1, 137-198.
Cézanne C. (2008). Modern Corporate Changes: Reinstating the Link between The Nature, Boundaries and Governance of The Firm. International Review of Applied Economics, 22(4), 447-461.
Coff, R. W. (1997). Human Assets and Management Dilemmas: Coping with Hazards on the Road to Resource-Based Theory. Academy of Management Review, 22(2), 374-402.
Copeland, T., Koller, T. & Murrin, J. (1991). Valuation Measuring and Managing The Value of Companies. Wiley, New York.
Corneo, G. & Jeanne, O. (2010). Symbolic Values, Occupational Choice, and Economic Development. European Economic Review, 54(2), 237-251.
Dahlander, L., Frederiksen, L. & Rullani, F. (2008). Online Communities and Open Innovation: Governance and Symbolic Value Creation. Industry and Innovation, 15, 115-123.
Dougherty D (2001) Reimagining the differentiation and integration of work for sustained product innovation. Organisation Science 12(5): 612-631.
Foss, N. J. (2011). Human Capital and Transaction Costs Economics. in. Burton-Jones, A. & Spender, J.-C. (eds.) The Oxford Handbook of Human Capital. Oxford University Press, New York, 165-185.
Frery, F. (2004). Proposals for an Axiomatic Strategy. Paper presented at the 13th AIMS conference, Normandy, France, June 26th.
Fulghieri, P. & Sevilir, M. (2009.) Size and Scope of Human Capital Intensive Firms. Available at http://www.hec.unil.ch/documents/sem_ibf/Fulghieri.pdf (accessed 13 september 2012).
Gibbons, R. (2005). Four Formal(izable) Theories of The Firm? Journal of Economic Behavior and Organization, 58(2), 200-245.
Gottschalg, O. & Zollo, M. (2007). Interest Alignment and Competitive Advantage. Academy of Management Review, 32(2), 418-437.
Grossman, S. J. & Hart, O. D. (1986). The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration. Journal of Political Economy, 94(4), 691-719.
Halonen-Akatwijuka, M. (2010). Organizational Design, Technology and The Boundaries of The Firm. Economica, 77, 544-564.
Hamel, G. & Prahalad, C. K. (1994). Competing for The Future Breakthrough Strategies for Seizing Control of Your Industry and Creating The Markets of Tomorrow. Harvard Business School Press, Boston MA.
Hart, O. D. (1989). An Economist’s Perspective on The Theory of The Firm. Columbia Law Review, 89(7), 1757-1774.
Hart, O. D. & Moore, J. (1990). Property Rights and The Nature of The Firm. Journal of Political Economy, 98(6), 1119-1158.
Heard, E. (1993-1994). Walking The Talk of Customer Value. National Productivity Review, 11, 21-27.
Holbrook, M. (1999). Consumer Value: A Framework for Analysis and Research. Routledge, London.
Holbrook, M. (2005). Customer Value and Autoethnography: Subjective Personal Introspection and The Meanings of A Photograph Collection. Journal of Business Research, 58(1), 45-61.
Howe, J. (2009). Crowdsourcing: Why The Power of The Crowd Is Driving The Future Of Business. Crown Publishing Group, New York.
Jodelet, D. (1997). Social Representation: Phenomena, Theory and Concept. in: Moscovici, S. (Ed.) Psychologie Sociale. PUF, Paris.
Kay, N. M. (2000). The Growth of Firms. in: Foss, N. J. & Mahnke, V. (Eds.) Competence, Governance and Entrepreneurship. Oxford University Press, Oxford, 187-206.
Klein, B., Crawford, R. G. & Alchian, A. A. (1978). Vertical Integration, Appropriable Rents, and The Competitive Contracting Process. Journal Of Law And Economics, 21(2), 297-326.
Kochan, T. A. & Rubinstein, S. A. (2000). Toward a Stakeholder Theory of The Firm: The Saturn Partnership. Organization Science, 11(4), 367-386.
Kotha, S., Rajgopal, S. & Rindova, V. (2001.) Reputation Building and Performance: An Empirical Analysis of The Top 50 Pure Internet Firms. European Management Journal, 19(6), 571-586.
Langlois, R. N. & Foss, N. J. (1999). Capabilities and Governance: The Rebirth of Production in The Theory of Economic Organization. Kyklos, 52(2), 201-218.
Lawrence, T. & Phillips, N. (2002). Understanding Cultural Industries. Journal Of Management Inquiry, 11(4), 430-440.
Ledgerwood, A., Liviatan, I. & Carnevale, P. J. (2007). Group-Identity Completion and The Symbolic Value of Property. Psychological Science, 18(10), 873-878.
Leminen, S. & Westerlund, M. (2009). From Innovation Networks to Open Innovation Communities: Co-Creating Value with Customers and Users. Paper Presented At The 25th IMP Conference, Marseille, France, September 3-5.
Mahoney, J. T. & Pandian, J. R. (1992). The Resource-Based View within The Conversation of Strategic Management. Strategic Management Journal, 13(5), 363-380.
March, J. G. (1991). Exploration and Exploitation in Organizational Learning. Organization Science, 2(1), 71-87.
Marshall, A. (1890). Principles of Economics. (8th Ed.) Macmillan, London.
Milgrom, P. & Roberts, J. (1986). Price and Advertising Signals of Product Quality. Journal of Political Economy, 94(4), 796-821.
Mincer, J. (1958). Investment in Human Capital and Personal Income Distribution. Journal of Political Economy, 66(4), 281-302.
Mincer, J. (1970). The Distribution of Labor Incomes: A Survey with Special Reference to The Human Capital Approach. Journal Of Economic Literature, 8(1), 1-26.
Monroe, K. & Krishnan, R. (1985). The Effects of Price on Subjective Product Evaluations. in: Jacoby, J. & Olson, J. C. (Eds.) Perceived Quality: How Consumers View Stores And Merchandise. Lexington Books, 209-232.
Moran, P. & Ghoshal, S. (1999). Markets, Firms, and The Process of Economic Development. Academy Of Management Review, 24(3), 390-412.
Ohmae, K. (1989). The Global Logic of Strategic Alliances. Harvard Business Review, 67(2), 143-152.
Pellegrin-Boucher, E. (2006). Symbolic Functions of Consultants. Journal of General Management, 32(2), 1-16.
Penrose, E. T. (1959). The Theory of The Growth of The Firm. (3rd Ed.) Oxford University Press, Oxford.
Porter, M. (1985). Competitive Advantage. Free Press, New York.
Porter-Liebeskind, J. (2000). Ownership, Incentives and Control in New Biotechnology Firms. in: Blair, M. M. & Kochan, T. A. (Eds.) The New Relationship: Human Capital In The American Corporation. Brookings Institution Press, Washington DC, 299-333.
Rajan, R. G. & Zingales, L. G. (1998). Power in A Theory of The Firm. Quarterly Journal of Economics, 113(2), 387-432.
Rajan, R. G. & Zingales, L. G. (2000). The Governance of The New Enterprise. in: Vives, X. (Ed.) Corporate Governance: Theoretical And Empirical Perspectives. Cambridge University Press, Cambridge, 201-227.
Rajan, R. G. & Zingales, L. G. (2001a) The Influence of The Financial Revolution on The Nature of Firms. American Economic Review, 91(2), 206-211.
Rajan, R. G. & Zingales, L. G. (2001b). The Firm as A Dedicated Hierarchy: A Theory of The Origins and Growth of Firms. Quarterly Journal of Economics, 116(3), 805-851.
Rajan, R. G. & Zingales, L. G. (2003). Saving Capitalism from The Capitalists: Unleashing The Power of Financial Markets to Create Wealth and Spread Opportunity. Crown Business, New York.
Ravasi, D. & Rindova, V. (2004). Creating Symbolic Value: A Cultural Perspective On Production And Exchange. Available At Http://Papers.Ssrn.Com/Sol3/Papers.Cfm?Abstract_
Id=1265021 (Accessed 13 September 2012).
Ravasi, D. & Rindova, V. (2008). Symbolic Value Creation. in: Barry, D. & Hansen, H. (Eds.), The Sage Handbook Of New Approaches In Management And Organization. SAGE Publications Ltd, 270-284.
Rindova, V. & Fombrun, C. J. (1999). Constructing Competitive Advantage: The Role of Firm-Constituent Interactions. Strategic Management Journal, 20(8), 691-710.
Rindova, V. & Petkova, A. P. (2007). When Is A New Thing A Good Thing? Technological Change, Product Form Design, and Perceptions of Value fFor Product Innovation. Organization Science, 18(2), 217-232.
Schultz, T. W. (1961). Investment In Human Capital. American Economic Review, 51(1), 1-17.
Slywotzky, A. (1996). Value Migration. Harvard Business School Press, Boston MA.
Sheth, B, Newman, B. & Gross, B. (1991). Consumption Values and Market Choices: Theory and Applications. South-Western Pub, Cincinnati.
Smith, J. B. & Colgate, M. (2007). Customer Value Creation: A Practical Framework. Journal of Marketing Theory And Practice, 15(1), 7-23.
Ulaga, W. (2003). Capturing Value Creation in Business Relationships: A Customer Perspective. Industrial Marketing Management, 32(8), 677-693.
Vargo, S. L. & Lusch, R. (2004). Evolving to A New Dominant Logic for Marketing. Journal of Marketing, 68, 1-17.
Vargo, S. L. & Lusch, R. (2008). Service-Dominant Logic: Continuing The Evolution. Journal of The Academy of Marketing Science, 36,1-10.
Walker, P. (2010). The (Non)Theory of The Knowledge Firm. Scottish Journal of Political Economy, 57(1), 1-32.
Wang, H. C., He, J. & Mahoney, J. T. (2009). Firm-Specific Knowledge Resources and Competitive Advantage: The Roles of Economic and Relationship-Based Employee Governance Mechanisms. Strategic Management Journal, 30(12), 1265-1285.
Wernerfelt, B. (1984). A Resource-Based View of The Firm. Strategic Management Journal, 5(2), 171-180.
Woodall, T. (2003). Conceptualization ‘Value For The Customer’: An Attributional, Structural and Dispositional Analysis. Academy Of Marketing Science Review, 12, 1-41.
Woodruff, R. B. (1997). Customer Value: The Next Source for Competitive Advantage. Journal of The Academy of Marketing Science, 25(2), 139-153.
Zingales, L. G. (2000). In Search of New Foundations. Journal of Finance, 55(4), 1623-1653
(CC BY-NC-ND 3.0) (Since 2014)