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Organisational Capital: The Power of an Economic Metaphor: Organisational Capital in German Establishments

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  • Dieter Sadowski

    ()

  • Oliver Ludewig

    (Institute for Labour Law and Industrial Relations in the EC, University of Trier)

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    Abstract

    The concept of organisational capital is multifaceted and often inadequately demarcated from related concepts like human or social capital. We define organisational capital as an agglomeration of technologies – business practices, processes and designs – that enable firms to gain a sustainable competitive advantage. Since organisational practices and their combinations are the primary components of organisational capital, it is inseparably linked to the organisation, which distinguishes it from other types of capital. Organisational capital is predominantly non-tangible, non-fungible and idiosyncratic; therefore it is hard to measure. Measuring it by using additive indices of different practices or system variables presumes a concrete functional form for the link between organisational practices and the level of organisational capital, which is in reality unknown. Following an operationalisation of Lev and Radhakrishnan (2003) we approximate the level of specific organisational capital, using the data of the IAB-establishmentpanel to control for several influencing variables. Unlike Lev and Radhakrishnan, we control for the effects of human and social capital and hence isolate the effects of organisational capital.

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    File URL: http://www.iaaeg.de/images/DiscussionPaper/2003_02.pdf
    File Function: Revised version, 2003
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    Bibliographic Info

    Paper provided by Institute of Labour Law and Industrial Relations in the European Union (IAAEU) in its series IAAEG Discussion Papers until 2011 with number 200302.

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    Length: 30 pages
    Date of creation: Feb 2003
    Date of revision:
    Handle: RePEc:iaa:wpaper:200302

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    Related research

    Keywords: organisation; organisational capital; corporate policy practices; production function; fixed effect; organisational practices;

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    1. Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers 10A, UCLA Department of Economics.
    2. Ingemar Dierickx & Karel Cool, 1989. "Asset Stock Accumulation and Sustainability of Competitive Advantage," Management Science, INFORMS, vol. 35(12), pages 1504-1511, December.
    3. Ichniowski, Casey & Shaw, Kathryn & Prennushi, Giovanna, 1997. "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines," American Economic Review, American Economic Association, vol. 87(3), pages 291-313, June.
    4. Rudi K. F. Bresser & Klemens Millonig, 2003. "Institutional Capital: Competitive Advantage In Light Of The N Ew Institutionalism In Organization Theory," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 55(3), pages 220–241, July.
    5. Erik Brynjolfsson & Loren Hitt & Shinkyu Yang, 2002. "Intangible Assets: How the Interaction of Computers and Organizational Structure Affects Stock Market Valuations," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(1), pages 137-198.
    6. Edward L. Glaeser & David Laibson & Bruce Sacerdote, 2002. "An Economic Approach to Social Capital," Economic Journal, Royal Economic Society, vol. 112(483), pages 437-458, November.
    7. Lazzarini, Sergio G., 2002. "Moving out of Committed Relationships," Insper Working Papers wpe_31, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
    8. Edward L. Glaeser & David Laibson & Bruce Sacerdote, 2001. "The Economic Approach to Social Capital," Harvard Institute of Economic Research Working Papers 1916, Harvard - Institute of Economic Research.
    9. Nicolaj Siggelkow, 2002. "Misperceiving Interactions Among Complements and Substitutes: Organizational Consequences," Management Science, INFORMS, vol. 48(7), pages 900-916, July.
    10. Prescott, Edward C & Visscher, Michael, 1980. "Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 446-61, June.
    11. John Tomer, 1981. "Organizational Change, Organization Capital and Economic Growth," Eastern Economic Journal, Eastern Economic Association, vol. 7(1), pages 1-14, Jan-Mar.
    12. Andrew Atkeson & Patrick J. Kehoe, 2002. "Measuring Organization Capital," NBER Working Papers 8722, National Bureau of Economic Research, Inc.
    13. Barbara Piazza-Georgi, 2002. "The role of human and social capital in growth: extending our understanding," Cambridge Journal of Economics, Oxford University Press, vol. 26(4), pages 461-479, July.
    14. Joel Sobel, 2002. "Can We Trust Social Capital?," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 139-154, March.
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