CHAPTER 1 INTRODUCTION 1.1 Background of the Study

Every business requires resources in the form of physical, financial and intangible assets. Lack of, or inadequate resources of any kind may place a firm in a vulnerable position, and might undermine its success. Organizational growth is, in fact, used as one indicator of effectiveness for small and large businesses and is a fundamental concern of many practicing managers (Crosby, 1999). Ultimately, growth will be gauged by how well a firm does relative to the goals it has set for itself. Caplow (2010) points out that such growth can be particularly disorienting for employee and owner alike:  “often the people involved may not realize that anything significant has occurred until they discover by experience that their familiar procedures no longer work and that their familiar routines have been bizarrely transformed. One construct that can trigger growth in the organization today is intellectual capital management. Intellectual capital management is a key driver of organizational growth, since it must emerge as a strategic business partner helping the top management build an organization that is good not just for today, but for tomorrow and beyond.  It is now working with the top management to propel the organization forward.

In this period of national as well as global financial crisis, the study of the relevance of intangible assets has attracted much attention in the business management literature, because intellectual capital which is an aspect of intangible asset has that exerting influence of adding value to a firm and with its relational ability can facilitate the acquisition of other resources which promote the survival and profitability of a firm (Okafor, 2012). Intellectual capital refers to effort employees put into an entity in form of intangible asset which includes knowledge assets such as patents, trademarks, copy rights and other results of human innovations and thought. Collectively, it refers to all resources (human, structural and relational capital) that determine the value of competitiveness of an organization.

Intellectual Capital primarily drives wealth and growth   in   today’s   economy.   The   rise   of   new economy has highlighted the fact that the value created depends far less on their physical assets than on their   intangible   ones.   In this era, the competitiveness of a company is more important and  it  has  become  a   basic  building  block   for corporate excellence (Lim & Dallimore, 2004). The more the company values and discloses its intellectual resource/capital, the more it becomes competitive and retains confidentiality of its stakeholders (investors, & creditors). If intellectual capital is not disclosed, the book value of its share and market value will diverge (Okwy & Christopher, 2010; Holland, 2009). The study of Okwy & Christopher, (2010) reveals that millions of Naira are lost for non-disclosure of some of intellectual capital drivers/indicators. To be specific, the study further reveals that Nigerian Breweries Plc invested more than N88million in local and overseas training and development of its employees as far back as 1988; in 2006, Unilever invested over N40 million in training and development of its employees; Access Bank Plc in 2007 constructed Access Bank Campus called Access   University   of   Banking   Excellence;   and Wema  Bank Plc invested huge amount on  policy, training and development of its employees. Surprisingly, these huge amounts of investments did not reflect in the balance sheet of these companies’ annual reports. This shows glaring defects and shortcoming in the financial statement of companies in Nigeria particularly in  not  conveying  the  total value   of  asset   invested.   However, this can   be corrected if the Accounting Regulatory Board issue statement of accounting standard in support of reporting the overall intellectual capital drivers/indicators in the financial statement.

Intellectual capital management to a reasonable extent is the building block for earning revenue for companies in banking, finance, hotel, and   software   etc   businesses. Intellectual capital when combined with physical assets in manufacturing and production companies sharpens competitive edge.  Bornemann  et  al.  (1999) found that enterprises, which have managed their intellectual capital better, had achieved stronger competitive advantage than the general enterprises. In addition, they reported that companies, which had strengthened their own intellectual capital management compared to the others, had performed better. Form the foregoing therefore, the study is determined to examine the relationship between intellectual capital management and organizational growth in selected oil exploratory firms in

1.2 Statement of the Problem

Intellectual capital is one of the most popular concepts in the field of human resource management. The concept has attracted a growing interest in recent years in the management field, especially due to its association with organizational growth.

Surprisingly, many organizations still have avoided the area of intellectual capital due to lack of clear understanding of the relationship between intellectual capital management and organizational growth. However, very little study has been conducted to specifically assess the relationship of intellectual capital management and organizations performance and sustainability. According to Carla O’Dell and Jack Grayson (2011) in the article ”If Only We Knew What We Know”  explains that; why companies/employers search the world over to benchmark best practices, vast treasure troves of intellectual capital (knowledge-based) and know-how remain hidden right under their noses: in the minds of their own employees, in the often unique structure of their operations, and in the written history of their organizations. This means that research studies are necessary to examine and determine the correlations between variables we need to solve organizational problems.

In this regard, the study seeks to examine the relationship between intellectual capital management and organizational growth in selected oil exploratory firms in Port Harcourt, Rivers State.

1.3 Objectives of the Study

The main objective of the study is to examine the relationship between intellectual capital management and organizational growth in selected oil exploratory firms in Port Harcourt, Rivers State. The specific objective are follows:

1. To examine the relationship between human capital and organizational growth in selected oil exploratory firms in Port Harcourt, Rivers State.
2. To examine the relationship between structural capital and organizational growth in selected oil exploratory firms in Port Harcourt, Rivers State.
3. To examine the relationship between customer capital and organizational growth in selected oil exploratory firms in Port Harcourt, Rivers State.

1.4 Significance of the Study

Today, the intangible assets have moved into the driver’s seat in successful corporations. Forward looking organizations are recognizing the need to harnessing intangible organizational resources and manage these assets as carefully as they do their tangible ones.

It is crucial for organizations to identify their intellectual capital in order to raise productivity levels, sustain competitive advantages and generate added future value (Davenport & Prusak, 1998; Dierickx & Cool, 1989; Youndt, Snell, Dean, & Lepak, 1996).

Considering the importance of intellectual capital management and organizational growth, it is worthwhile this study is carried out because it will be beneficial to many, the significance of the study will be the exploration of different types of intellectual capital and their relationship to organizational performance.

Furthermore, the following significant are itemized according to the categories of benefactors, thus:

To the students: This study will contribution to knowledge for aspiring scholar in the field of Business Management.

To the industry: Forms of intellectual capital management practices that

are reflective of corporate competitiveness

To the managers/practitioners: recommendations to those organizations who mismanage the intellectual capital at their disposal.

To the academicians: increase in the already existing literature on Intellectual Capital Management.

1.5     Research Questions

The following research questions are posed to guide the study:

1. To what extent does human capital associate with organizational growth in selected oil exploratory firms in Port Harcourt, Rivers State.
2. To what extent does structural capital associate with organizational growth in selected oil exploratory firms in Port Harcourt, Rivers State.
3. To what extent does customer relational capital associate with organizational growth in selected oil exploratory firms in Port Harcourt, Rivers State.

1.6 Statement of Hypothesis

The following research questions are postulated to guide the study:

H0: There is no significance relationship between intellectual capital management and organizational growth in selected oil exploratory firms in Port Harcourt, Rivers State.

H1: There is a significance relationship between intellectual capital management and organizational growth in selected oil exploratory firms in Port Harcourt, Rivers State.

1.7 Scope of the Study

The study is delimited under the following heading: content scope, geographical scope and unit of analysis.

Content Scope: The content scope of this study involves an investigation to ascertain the relationship between intellectual capital management and organizational growth. The independent variable is intellectual capital management measured by human capital, structural capital and customer relational capital. While dependent variable is organizational growth measured by innovation, market share and profitability.

Geographical Scope: This study is delimited in Port Harcourt Metropolis with special reference to some selected oil exploratory firms in Port Harcourt, Rivers State.

Unit of Analysis: The unit of analysis in this research involves the individuals at the time of carrying out the study.

This study involves an investigation of intellectual capital management in relation to organizational productivity. Hence it is a micro level study.

1.8 Limitations of the Study

The major limitation of the study is the short time frame the research lasted, coupled with the tight academic time table, which prevented a very comprehensive study. The fund available to the researcher was also limited and therefore the study was limited to a small portion of the survey population.

Another limitation is the difficulties, encountered by the researcher in obtaining all needed information and materials from the right source and compilation of data for the project.

1.9 Definitions of Terms

The following terms are operationally defined as follows:

Intellectual Capital

This is refers as the possession of knowledge, applied experience, organizational technology, customer relationships and professional skills that provide Skandia with a competitive edge in the market.

Human Capital

This is refers to as the stock of competencies, knowledge, social and personality attributes, including creativity, embodied in the ability to perform labor so as to produce economic value.

Customer Capital

This is refers to as the most important components of intellectual capital.  It is pointed out based on knowledge embedded in the marketing channels and customer relations with organizations that develops in conducting business

Structural Capital

This is refers to as the knowledge created by an organization and it cannot be separated from the entity. However, structural capital provides the environment that support individuals to

Organizational Growth

This is refers to as the different things to different organizations

Innovation

This is refers to as implementing new ideas to create value for an organization. This may mean creating a new service, system, or process, or enhancing existing ones.

Profitability

This is refers to as the capacity to generate profit from all the aspects of an organization; it illustrating how proficient the management is in yielding revenue for the organization.

Market share

This is refers to as representing the percentage of an industry or market’s total sales that is earned by a particular organization over a specified time period.