Intellectual capital and the ‘capable firm’

Description
Intellectual capital statements are ‘new’ forms of reporting whose object is knowledge management activities. Based
on 17 firms’ work to develop intellectual capital statements, this paper analyses them as managerial technologies
making knowledge amenable to intervention. Aspects of actor-network-theory are mobilised to suggest that the
intellectual capital statement is a centre of translation, which mobilises knowledge management via three interrelated
elements: knowledge narratives, visualisations and numbers. Intellectual capital statements report on the mechanisms
put in place to make knowledge manageable. Writing intellectual capital is a local story, which often concerns
making knowledge collective and a process of allowing it to be oriented towards organisational ends. In such a story,
knowledge is about a firm’s capabilities and abilities to make a difference to a user. When writing an intellectual
capital statement, firms locate employees, customers, processes and technologies and orient them towards a user.
However, the statement as such is a means of ‘dis-locating’ knowledge resources making them amenable to intervention.
There are certain broad types of intervention that allows a classification of strategies of intervention to be
proposed.

Intellectual capital and the ‘capable ?rm’: narrating,
visualising and numbering for managing knowledge
J. Mouritsen
a,
*, H.T. Larsen
a
, P.N.D. Bukh
b
a
Copenhagen Business School, Department of Operations Management, Solbjerg Plads 3, 2000 Frederiksberg, Denmark
b
Aarhus School of Business, Denmark
Abstract
Intellectual capital statements are ‘new’ forms of reporting whose object is knowledge management activities. Based
on 17 ?rms’ work to develop intellectual capital statements, this paper analyses them as managerial technologies
making knowledge amenable to intervention. Aspects of actor-network-theory are mobilised to suggest that the
intellectual capital statement is a centre of translation, which mobilises knowledge management via three interrelated
elements: knowledge narratives, visualisations and numbers. Intellectual capital statements report on the mechanisms
put in place to make knowledge manageable. Writing intellectual capital is a local story, which often concerns
making knowledge collective and a process of allowing it to be oriented towards organisational ends. In such a story,
knowledge is about a ?rm’s capabilities and abilities to make a di?erence to a user. When writing an intellectual
capital statement, ?rms locate employees, customers, processes and technologies and orient them towards a user.
However, the statement as such is a means of ‘dis-locating’ knowledge resources making them amenable to inter-
vention. There are certain broad types of intervention that allows a classi?cation of strategies of intervention to be
proposed. These terms are portfolio management, improvement activities and productivity. Such forms of intervention
circumscribe the aspiration to transform knowledge from something internal to the person into something that is
the e?ect of a collective arrangement. They allow—through intellectual capital statements—the dark, tacit knowing
of individuals to come into the open space of calculation and action at a distance. # 2001 Published by Elsevier
Science Ltd.
The huge market-to-book ratios, which have
increased dramatically for ?rms like Microsoft,
Astra, Rentokil and Oracle during the 1990s, often
justify the current interest in intellectual capital
(Stewart, 1997). The growing di?erence between
?rms’ market value on the stock exchanges and
their book values, or more precisely their equity
values, is said to reveal intellectual capital. After
all, the argument goes, since the balance sheet
accounts for all physical capital, the di?erence
between market values and book values expresses
intellectual capital. For some, this is evidence of
the coming of information society where imma-
terial rather than material assets are the sources of
value creation (Drucker, 1993; Reich, 1991).
Intellectual capital statements are here in demand
to explain the di?erence between market values
and book values and thus show where ?rms’
intellectual capital is hidden (Edvinsson & Mal-
one, 1997; Lev & Zarowin, 1998; Stewart, 1997;
Sveiby, 1997). This di?erence is never explained,
however, but it is used to extend issues of reporting
0361-3682/01/$ - see front matter # 2001 Published by Elsevier Science Ltd.
PI I : S0361- 3682( 01) 00022- 8
Accounting, Organizations and Society 26 (2001) 735–762
www.elsevier.com/locate/aos
* Corresponding author.
E-mail address: [email protected] (J. Mouritsen).
beyond the ?nancial balance sheet. Edvinsson
(1997) divides intellectual capital three-way into
‘human capital’, ‘organisational capital’ and ‘cus-
tomer capital’, which identify the areas where the
conventional ?nancial statements do not go. Such
a breakdown of intellectual capital does not spe-
ci?cally de?ne its relevant numbers, but it illus-
trates that intellectual capital reporting is an
addition to the conventional ?nancial reporting. It
allows certain non-?nancial numbers to be part of
a ?rm’s reporting systems.
Not very many ?rms have published intellectual
capital statements yet, so practices are very scarce
and therefore there is considerable uncertainty
about what an intellectual capital statement is.
This is why we attempt to approach intellectual
capital from the perspective of practice. Through
bi-annual formal interviews, annual ques-
tionnaires, feed-back sessions and numerous talks
and visits to the ?rms, we followed 17 (of origin-
ally 23) ?rms’ work to develop and publish a
minimum of two intellectual capital statements
over a period of two years. This approach looks at
the formation of intellectual capital ‘in the mak-
ing’ (Latour, 1987) when it is not yet settled in a
set of black-boxed relations. In the course of the
study, intellectual capital was gradually formed
and ‘invented’ as a mechanism which was given
power by the relations it was able to in?uence, and
which in turn also maintained it as a particular
node of a network of relations.
We study how a particular accounting mechan-
ism or concept—such as intellectual capital—sta-
bilises as a speci?c phenomenon, which emerges in
debate, dialogue and struggle. In a sense, as intel-
lectual capital was not settled at the time of the
research, it was ‘nothing’. Its ‘something-ness’ was
fabricated in the course of its development where
being related to other phenomena, it gradually
became something and was able to transform or
shift organisational or managerial practices in
certain directions. In this sense, intellectual capital
was made productive; it was made performative
and was able to in?uence the course of a?airs into
which it was thrown. We analyse how ‘intellectual
capital’ mobilises ‘things’ such as employees, cus-
tomers, information technology, managerial work
and knowledge. ‘Intellectual capital’ is strong only
to the degree that it is able to serve as a mechan-
ism that allows it to hold together heterogeneous
elements, which together constitute a whole story
or account of how it works.
On this basis the paper suggests that intellectual
capital statements are inscription devices that
focus on making knowledge manageable. They
displace knowledge from ‘inside’ of the individual
into an ‘open’ collective or corporate domain
visualising it by means of a number of various
combinable and superimposable inscriptions
(Latour, 1990). The intellectual capital statement
reports not only in numbers but also in narratives
and visualisations about the e?orts made in the
?rm to de?ne and execute knowledge management
activities.
The paper is organised as follows. The next sec-
tion accounts for the main arguments in the intel-
lectual capital literature. A section that more
generally suggests that knowledge is a social
endeavour and it characterises more clearly the
relationships between knowledge and intellectual
capital follows it. Then follows a section on
methodology, which brings forth parts of actor-
network theory and the empirical basis for the
paper is presented, parts of which are analysed
brie?y. Then comes a section on the intellectual
capital statements themselves—in particular on
the structure of their numbers. A major section
analysing in detail three cases follows this section.
Before providing concluding remarks, the paper
discusses the ?ndings and suggests how intellectual
capital statements work as centres of translation.
1. Intellectual capital and knowledge society
Intellectual capital statements are products of
practice. Some ?rms, particularly in Scandinavia,
have published intellectual capital statements as a
mechanism to show the value of their intellectual
capital (Brooking, 1997; Edvinsson, 1997; Edvins-
son & Malone, 1997; Petty & Guthrie, 2000; Ross,
Roos, Edvinsson, & Dragonetti, 1997; Stewart,
1997; Sveiby, 1997). The context of this reporting
is typically the huge market-to-book ratios found
in some industries during the 1990s which were
argued to show the value of the ?rm beyond the
736 J. Mouritsen et al. / Accounting, Organizations and Society 26 (2001) 735–762
investments made in physical or tangible assets.
However, intellectual capital statements do not
compute this value. Published intellectual capital
statements are much more concerned to report on
‘assets’ related to employee knowledge and exper-
tise, customer con?dence in the company and its
products, company infrastructure, the e?ciency of
the business processes, and the sophistication of
information technology (Larsen, Mouritsen, &
Bukh, 1999; Mouritsen, 1998; Mouritsen, Larsen,
Bukh, & Johansen, 2001).
Even if intellectual capital refers to ‘capital’, it is
not a conventional accounting term. Some authors
use it ‘‘to refer to the knowledge and knowing
capability of a social collectivity, such as an orga-
nization, intellectual community, or professional
practice’’ (Nahapiet & Ghoshal, 1998, p. 245).
Other writers associate it more intimately with
human resource management (Boudreau & Ram-
stad, 1997) or with the management of informa-
tion technology (Davenport & Prusak, 1997).
Stewart (1997, p. x) characterises intellectual
capital as ‘‘intellectual material—knowledge,
information, intellectual property, experience—
that can be put to use to create wealth’’. It has
also been identi?ed as ‘human capital’, ‘organisa-
tional capital’ and ‘customer capital’ (e.g.
Bontis, 1998; Brooking 1997, p. 13; Edvinsson &
Malone 1997, p. 11; Petrash, 1996; Sullivan, 1998),
or as ‘competenceÂcommitment’ (Ulrich, 1998,
p. 16).
According to Stewart (1997), human capital is
that which thinks: ‘‘[m]oney talks, but it does not
think; machines perform, often better than any
human being can, but do not invent . . . [The] pri-
mary purpose of human capital is innovation—
whether of new products and services, or of
improving in business processes’’ (ibid., p. 86).
Structural capital is ‘‘knowledge that doesn’t go
home at night . . . t belongs to the organization
as a whole. It can be reproduced and shared . . .
technologies, inventions, data, publications, . . .
[and] strategy and culture, structures and systems,
organizational routines and procedures’’ (ibid.,
pp. 108–109). Like human capital, the ?rm cannot
own customer capital. Yet, it is crucial because it
is ‘‘the value of its franchise, its ongoing relation-
ships with the people or organizations to which it
sells . . . [like] market share, customer retention
and defection rates, and per customer pro?t-
ability’’ (ibid., p. 143). For Sveiby (1997, pp. 10–
11) intellectual capital has three dimensions,
namely employee competence, internal structure
and external structure: ‘‘Employee competence
involves capacity to act in a wide variety of situa-
tions to create both tangible and intangible assets.
. . . Internal structure includes patents, concepts,
models, and computer and administrative systems.
. . . The external structure includes relationships
with customers and suppliers. It also encompasses
brand names, trademarks, and the company’s
reputation or image’’.
Finally, Edvinsson—known for the insurance
company Skandia’s intellectual capital state-
ments—makes a distinction between human and
structural capital (Edvinsson, 1997; Edvinsson &
Malone, 1997, p. 11), where the former comprises
the ‘‘combined knowledge, skill, innovativeness
and ability of the company’s individual employees
. . . it also includes the company’s values, culture,
and philosophy. Human capital cannot be owned
by the company’’. This stands in contrast to
structural capital, which is ‘‘hardware, software,
databases, organizational structure, patents trade-
marks, and everything else of organizational cap-
ability that supports those employees productivity
. . . [It is] everything left at the o?ce when the
employees go home . . . Unlike human capital,
structural capital can be owned and thereby tra-
ded’’. Intellectual capital are employees and
‘‘everything else’’; this is a very broad de?nition
and it appears to leave nothing out.
The various writers on intellectual capital iden-
tify the proposed ‘content’ of intellectual capital
statements as certain ‘new’ parameters of the value
creating potential of ?rms. They allude to a
knowledge society where knowledge and informa-
tion ‘‘have become the economy’s primary raw
material and its most important outcome’’ (Stew-
art, 1997, p. x). ‘‘The basic economic resource. . . is
and will be knowledge’’ (Drucker, 1993, p. 7;
Nonaka & Takeuchi, 1995; Quinn, 1992; Reich,
1991; To?er, 1990). In addition, ‘‘the traditional
model of ‘accounting’ which so beautifully descri-
bed the operations of companies for a half mil-
lennium, is now failing to keep up with the
J. Mouritsen et al. / Accounting, Organizations and Society 26 (2001) 735–762 737
revolution taking place in business’’ (Edvinsson &
Malone, 1997, p. 1). Reich (1991, p. 105) is more
direct:
Members of the accounting profession, not
otherwise known for their public displays of
emotion, have fretted openly about how to
inform potential investors of the true worth
of enterprises whose value rests in the brains
of employees. They have used the term
‘goodwill’ to signify the ambiguous zone on
the corporate balance sheets between the
company’s tangible assets and the value of its
talented people. But as intellectual capital
continues to overtake physical capital as the
key asset of the corporation, shareholders
?nd themselves on shakier and shakier
ground.
‘‘The value of the talented people’’, of which
Reich speaks, indicates in this discourse that
knowledge is individual and therefore that the
value of knowledge is ‘located’ in people. By
implication, the powerholders of the knowledge
society are individuals. As they are more impor-
tant for value creation than physical assets, the
?rm is re-invented around the person (Bartlett &
Ghoshal, 1997, Johansen & Swigart, 1994). This is
a centring of the individual and its ‘‘tacit know-
ledge’’ (Nonaka & Takeuchi, 1995) and the crea-
tive, unique individual (Sveiby, 1997). Nonaka
(1994, p. 97) suggests ‘‘that creating new know-
ledge. . . depends on tapping the tacit and often
highly subjective insights, intuitions, and hunches
of individual employees and making those insights
available for testing and use by the company as a
whole. The key to this process is personal com-
mitment, i.e. the employees’’ sense of identity with
the enterprise and its mission’. Here, the source of
value creation is the individual employee who is to
be persuaded to render knowledge to the ?rm. So,
the ?rm is an appendix to individuals’ knowledge.
This idea that knowledge is purely individual,
however, is highly problematical.
In contrast to seeing knowledge as individuals’
property, resource-based theory suggests that
knowledge, or organisational competencies, are
rooted in organisational routines and in
complementarities between skills and technolo-
gies. ‘‘A competence is a bundle of skills and
technologies rather than a single discrete skill or
technology. . . . A core competence represents the
sum of learning across individual skill sets and
individual organizational units. Thus, a core com-
petence is very unlikely to reside in its entirety in a
single individual or small team’’, Hamel and Pra-
halad (1994, p. 223) say. They suggest that ‘‘in the
long run, competitiveness derives from an ability
to build, at lower cost and more speedily than
competitors, the core competencies that spawn
unanticipated products. The real sources of
advantage are to be found in management’s ability
to consolidate corporatewide technologies and
skills into competencies that empower individual
businesses to adapt quickly to changing opportu-
nities’’ (Prahalad & Hamel, 1990, p. 81). Here,
corporate competence is the ability—or know-
ledge—to consolidate bundles of interpersonal
technologies and skills, which are integrated in
competencies or capabilities emanating from the
combination or co-ordination of technologies and
skills, and therefore the locus of knowledge in this
perspective is collective (Mouritsen, 1998; Ross et
al., 1997). Organisation is concerned with the
mechanisms that integrate various organisational
places, skills and technologies. The mode of
knowledge management is here not person centred
but centred on collective processes and pro-
cedures. What is knowledge here—and what does
it mean to manage it?
1.1. Knowledge and the management of knowledge
Drucker’s (1993) version of knowledge society is
one where knowledge is the basic economic
resource. However, to merely see knowledge as a
resource, which exists independently of the orga-
nisational and social activities it helps organise, is
probably misguided. Foucault (1980) clearly
points out that knowledge and power are related
in complex ways. He is concerned with the
mechanisms by which ‘‘the exercise of power per-
petually creates knowledge and, conversely,
knowledge constantly induces e?ects of power’’
(1980, p. 52). Knowledge will not guarantee access
to a progressively larger stock of truths. It is not a
738 J. Mouritsen et al. / Accounting, Organizations and Society 26 (2001) 735–762
‘‘universal good’’ and therefore not necessarily a
progressive force in society. It is simply a ‘‘system
of ordered procedures for the production, regula-
tion, distribution, circulation and operation of
statements’’ (ibid., p. 132). Therefore it is part of
the institutional and social rules that make
knowledge acceptable. It is not outside society; it
is part of society and this requires a ‘‘political
economy’’ of truth centred on scienti?c discourse,
use in economic production, consumption and
circulation, and social confrontation.
Likewise, for Lyotard (1984, p. 18) ‘‘[k]now-
ledge . . . is a question of competence that goes
beyond the simple determination and application
of the criterion of truth, extending to the determi-
nation and application of e?ciency (technical
quali?cation), of justice and/or happiness (ethical
wisdom), of the beauty of a sound or color (audi-
tory and visual sensitivity), etc. . . . [K]nowledge is
what makes someone capable of forming ‘good’
denotative utterances, but also ‘good’ prescriptive
and ‘good’ evaluative utterances’’. Therefore, to
Lyotard, under the post-modern condition
knowledge is never outside a system of legitimisa-
tion, which allows it to be regarded as knowledge.
It does not have use-value per se. It is—at least in
contemporary society—under the impression of its
performativity, its ability to transform the world.
To Giddens (1990, p. 27), where knowledge and
the capacity to act are tightly connected, in the
speci?c conditions of modernity, knowledge often
shows itself as abstract systems. These are ‘‘sys-
tems of technical accomplishment or professional
expertise that organise large areas of the material
and social environments in which we live today’’.
Here, knowledge is often ‘‘disembedded’’ and
outside most people, and it is mediated by profes-
sionals who ‘‘guarantee’’ by their training and
experience, and sometimes by government accred-
itation, that they have access to certain technical
competencies that allow them to solve problems.
Knowledge is abstract, formal and technical, and
it is often disembodied as lay people have prob-
lems accessing it to change their material word.
However, this knowledge is also corporeal in the
sense that ‘professionals’ act as mediators between a
whole set of abstract capabilities and their realisation
in practice. Here, knowledge is an institution with a
set of institutionalised ‘problems’ and ‘solutions’,
which can travel across society. Knowledge travels
alongside or among the people and technologies
that can make it work. For lay people to trust
such knowledge, they have to have ‘faith’ because
they cannot explain it themselves. Here, knowl-
edge is related to faith in certain institutions, and
therefore knowledge is not out of social concerns
but indeed part of them.
Latour (1991, p. 160, 1993) does not refer to
knowledge a lot, but he does raise the issue of
correspondence and relates it to power: ‘‘whatever
is mobilized in x to act upon another setting’’.
Knowledge is concerned with the artefacts that
allow aspirations to act at a distance to ?ow. In
other words, ‘‘[t]he problem of correspondence . . .
becomes crucial only for those who want to act at
a distance. If you are not at a distance, or do not
wish to act upon other settings, the notion of cor-
respondence vanishes, and so does the problem of
the referent.’’ (ibid.). To Latour, knowledge is
therefore not concerned to uncover a set of ‘‘hid-
den’’ referents. ‘‘Referents’’ are established in the
course of mobilising strong explanations and long
networks of interrelated artefacts with a view to
acting at a distance.
Foucault, Lyotard, Giddens and Latour, in each
of their ways, help question the traditional philo-
sophical assumption that knowledge, regarded as
‘‘justi?ed true beliefs’’, is a ‘‘thing’’ applied to the
working of society. Instead, knowledge is inevi-
tably an integral part of that society in the ?rst
place. First, it is a mechanism that continuously
intervenes in social a?airs and that therefore does
not stand outside society as a ‘stock’ put into an
inventory. It is inherently involved in the produc-
tion of social problems and solutions. Second,
knowledge is built, disseminated in and probably
even sold for and around use situations. Know-
ledge is not just passed on. The providers of
knowledge—professionals and experts—are linked
to a clientele or a public and produce the ‘market’
for that knowledge (cf. also Stehr, 1994). Knowl-
edge exists in relation to certain practices, which it
actively plays a part in organising and transform-
ing. It is not a subtract of the world and thus not
separated from its use. Third, knowledge is bound
up in bundles of heterogeneous elements (cf. Law,
J. Mouritsen et al. / Accounting, Organizations and Society 26 (2001) 735–762 739
1992, 1994). It is not only a ‘?nding’. It is also part
of a wider set of processes related to its marketing,
its associated spokespeople in the form of experts,
professionals or counsellors and its relation to an
issue, which makes it ‘useful’.
1.2. Knowledge and intellectual capital statements
As knowledge is a social activity—a set of rela-
tions in motion—intellectual capital statements
cannot represent its ‘size’ or ‘worth’. It does not
consist of separable ‘assets’ that can be captured
by (conservative) accounting rules in a balance
sheet. The network of elements that together con-
stitute what knowledge is about is beyond a
structured inscription in a balance sheet. However,
even if knowledge per se is inaccessible by princi-
ples of accounting rules, managers do try to
‘identify’ or ‘manage’ knowledge. They construct
inscriptions that allow them to intervene and act
at a distance and thus make them powerful
enough to evaluate the work e.g. of a professional
or an expert. They may not be able to comprehend
the technical competencies needed to execute a
particular craft, but they may be able, in an act of
contextualisation, to de?ne ‘qualities’ that allow
them to determine whether a certain ‘job’ or ‘pro-
duct’ works or is quali?ed. Here, managers would
not be engaged in a context-reducing act of sub-
tracting knowledge from the world. They would,
on the contrary, be drawing up a series of relations
situating in a speci?c context the e?ects of a whole
set of elements, constituting the ‘piece of knowl-
edge’ concerned, thereby actively adding to the
world. The intellectual capital statement is used
here to track the knowledge management activities
that are put to work in order to organise the
knowledge resources of the ?rm. This includes a
series of ‘small things’ such as attention to
recruitment and the composition of the workforce,
investments in developing organisational pro-
cesses, improvements of technology usage, and the
e?ectiveness of products and services for
customers and users.
Therefore, even if managers may not have direct
access to persons’ inner knowledge, they may,
analogously to scientists, be able to ‘‘master the
world, but only if the world comes to them in the
form of two-dimensional, superimposable, com-
binable inscriptions’’ (Latour, 1995, p. 147). At
least, this is what managers aim at when they
attempt to construct the ‘referent’ of knowledge. It
is not knowledge in its classical philosophical
sense but more precisely the activities of transla-
tion put in motion in the name of knowledge.
Therefore, when managers debate knowledge in
view of intellectual capital they look for a
mechanism—a managerial technology—that like a
centre of translation allows them to arrest, trans-
port and evaluate knowledge and its e?ects in
?rms. They are on the lookout for a black(ened)
box they can mobilise and that is constructed to ?t
their moves in business organisations—a technol-
ogy of managing (cf. Hansen & Mouritsen, 1999).
Intellectual capital statements are not about
knowledge per se. They are about the actions and
activities that managers put in place in the name
of knowledge. Such activities are complex sets of
interventions that cannot be captured easily. This
is why managers in the ?rms to be reported on
hereafter use quite spectacular forms of reporting
which combine not only numbers but also narratives
and visualisations of organisational knowledge
management strategies.
2. Studying intellectual capital in the making
The ‘evidence’ for the existence of intellectual
capital is the huge market-to-book ratio witnessed
in some industries during the 1990s. This relation
is presented as an indirect measure of intellectual
capital, and it is not a very satisfactory one as such
because it appears to include ‘too much’. Is all,
which is not counted as accounting assets, really
intellectual capital? Is intellectual capital really the
di?erence between market value and book value?
There must be more to the story because if it were
true, book values would in?uence intellectual
value, and as book values depend on the account-
ing rules, the absurd implication presses itself for-
ward, that to a certain extent intellectual capital
depends on accounting rules. This is counter-
intuitive, and intellectual capital would be thought
to impact market value and thus be prior both to
market value and to book value. Therefore, to
740 J. Mouritsen et al. / Accounting, Organizations and Society 26 (2001) 735–762
understand intellectual capital, market-to-book
ratios may not be very informative.
A di?erent approach, used in this paper, is to
study how intellectual capital makes a di?erence
in ?rms. More precisely, as intellectual capital is
carried by a nebulous metaphor of ‘intangible
assets’, its translation into organisational practices
is open-ended. Its transformation from ‘nothing’
into ‘something’ is a process where it emerges as
an actor (Latour, 1996). It is simultaneously
de?ned and made durable in the course of its
‘application’, and it mediates the search of man-
agers for new modes of controlling their business
in a situation given weight by an appeal to
knowledge society. This is why certain aspects of
actor-network theory are appealing.
Actor-network theory is concerned to investi-
gate, how society is held together by a hetero-
geneous set of elements. Rather than assuming
that society has a certain form because this is the
essence of social relations, it suggests that society
is held together by a long list of human and non-
human objects that stand in relation to each other.
This is the distinction between an ostensive and a
performative explanation of society. Explaining
this di?erence, Latour (1986, p.272) points out
that the ostensive de?nition of society implies that
‘in principle it is possible to discover the properties
which are typical of life in society and could
explain the social link and its evolution, though in
practice they might be di?cult to detect’. Here, the
methodological principle is to uncover stable rela-
tions by more analysis and more detailed research.
A piecemeal and systematic approach to research
will eventually—even if we have to wait for con-
siderable time—lead to true insights about, e.g.
intellectual capital. In contrast, the performative
de?nition of society is concerned to say that ‘‘it is
in principle impossible to de?ne the list of proper-
ties that would be typical of life in society
although in practice it is possible to do so’’ (ibid.,
p. 272). The things that hold society together can-
not be speci?ed in detail a priori because its very
speci?cation is part of the mechanism that holds a
society together. It is held together by relations
between heterogeneous elements.
Here, a phenomenon such as e.g. intellectual
capital is produced and held together by the set of
elements that it refers to and is able to incorporate
in its story or explanation. Such a view is con-
cerned to show how ‘‘actors and organisations
mobilise, juxtapose, and hold together the bits and
pieces out of which they are composed’’ (Law,
1992). Instead of black boxing the intellectual
capital statement ‘‘and then look for social in?u-
ences and biases’’ (Latour, 1987, p. 21), it is much
more rewarding ‘‘to be there before the box closes
and becomes black’’ (ibid., p. 21). Intellectual
capital statements are thus ‘‘created and trans-
formed by chains of translators’’ (Sevon, 1996,
p.51). In translation processes it ‘‘is in the hands
of people; each of these people may act in many
di?erent ways, letting the token drop, or modify-
ing it, or de?ecting it, or betraying it, or adding to
it, or appropriating it’’ (Latour, 1986, p. 267).
Drawing on such a principle, the study of intel-
lectual capital looks at how relations are estab-
lished and made strong. It requires attention to
the formation of ‘strong relations’ and therefore to
how fragile potentialities are made strong and
durable—in e?ect, it requires attention to how the
concept ‘intellectual capital’ is used as an argu-
ment to make heterogeneous elements stable and
obvious. Over time, the strength of ‘intellectual
capital’ is variable and only discernible by the
length of the chain of elements it is able to com-
mand. Therefore, the issue to be addressed is how
intellectual capital is performed and made to per-
form. It is concerned with how intellectual capital
is stabilised, made productive and potent, and
becomes a central key to the ?rm’s construction of
itself. Rather than assuming that there is a linear
relationship between measuring, reporting and
managing intellectual capital, this relationship is
studied on the basis of 17 Danish ?rms attempting
to construct intellectual capital statements over a
period of 3 years.
The project is organised by the Danish Agency
for Development of Trade and Industry in colla-
boration with researchers (the authors of this
paper) and a consulting ?rm and 17 Danish ?rms.
The Agency—in an act of national industrial pol-
icy to promote knowledge society—wished to
develop a set of guidelines for the development
and publication of intellectual capital statements.
The 17 ?rms have agreed to develop and publish
J. Mouritsen et al. / Accounting, Organizations and Society 26 (2001) 735–762 741
at least two intellectual capital statements. The
process is as follows. Bi-monthly, the ?rms met to
talk about their experience, and certain input is
provided by consultants, and by the feedback of
researchers on what was underway in the ?rms.
This feedback is a commentary on the develop-
ment of the ?rms’ work and is thus more a
description of what they do, how it can be ratio-
nalised, where the di?erences between the ?rms
are and how the ‘next challenge’ has been de?ned
for various situations. It is not ‘consulting advice’
although it is impossible to claim that this feed-
back is unobtrusive. It forms one of the re?exive
dimensions of the project along side other re?exive
inputs, such as talks by practitioners and other
academics, examples of how other ?rms that pub-
lish intellectual statements created them, and indi-
vidual process consulting activities performed by
the associated consultants.
The research is concerned with the gradual
development of the notion and practice of intel-
lectual capital. Multiple methods are employed to
follow this 3-year process. Each ?rm was inter-
viewed at least twice per year, a questionnaire was
administrated each year, and monthly meetings
between the ?rms were observed. All these meth-
ods were oriented towards the same ?ve questions:
(1) Why do the ?rms want to measure intellectual
capital? (2) Who are involved in the project? (3)
How does the ?rm work with intellectual capital?
(4) What is intellectual capital made to be in the
speci?c ?rm? (5) What potential e?ects is the
reporting of intellectual capital expected to have?
2.1. The 17 ?rms
All but two of the ?rms participating in the
project are service companies, and half of them
operate in the IT business (www.efs.dk/icac-
counts). This is by no means a representative
sample of Danish ?rms, and they all claim that
knowledge is a prime resource for them. Such a
claim is not unambiguous, however. In the di?er-
ent ?rms, the discourse of intellectual capital
mobilised a set of di?erent, albeit overlapping,
themes of interest. One theme is external and is
concerned to present the ?rm so that potential
employees and customers can be made interested
participants in the ?rm’s activities. Here, the
interest is to illustrate the strengths of the ?rm
with a view to expanding its resource-base. The
internal theme is concerned with knowledge man-
agement in some form or another. The ability to
share knowledge, to develop knowledge and to
retain knowledge is strong here. More speci?cally,
the motives for engaging in the work of intellec-
tual capital have been addressed in the ques-
tionnaire. Fig. 1 illustrates the importance of such
motives.
Fig. 1 shows the responses to a select set of
questions.
1
It is clear that in this sample the inter-
est in intellectual capital is primarily related to the
human, organisational and customer-resources of
the ?rm. Financial resources, as in access to new
?nancial capital, are not the reason to be con-
cerned with intellectual capital for these ?rms. The
small di?erences that can be seen from the ?g.
over time (which are not statistically signi?cant)
suggest that the view of how intellectual capital is
to move the ?rm has been fairly stable over the
?rst year of the project. If these di?erences are to
be taken into account, however, they suggest that
over time the interest in the individual person as
object for intellectual capital have to a certain
extent been overtaken by a more structured inter-
est in making the ?rms as such a ‘reservoir’ of
intellectual capital. Such a more management-
oriented theme appears to replace an employee
agenda, where the rhetoric of the individual
employee as the ?rm’s most important asset, has
been contextualised by a heightened interest in
preserving the continuity of knowledge recourses.
This requires a management interest in acting on
knowledge resources at a distance.
Interviews provide some interpretation of Fig. 1.
When directly asked, ?rms would come up with
one or more variations of the following explana-
tions about the expected and desired e?ects of
their work with intellectual capital. One e?ect is to
see intellectual statements as knowledge manage-
ment tools to be used internally in order to ‘man-
age knowledge and competencies’ as well to
improve knowledge sharing or as a supplement to
1
It shows the percentage of the responses given as 4s and 5s
on a ?ve-point Likert scale.
742 J. Mouritsen et al. / Accounting, Organizations and Society 26 (2001) 735–762
other knowledge management activities. A second
e?ect is to use intellectual capital statements as
media for communication to be used to identify,
support and disseminate a corporate identity in
relation, e.g. to values and ways of working. This
could be relevant both in relation to recruitment of
new employees and attraction of new customers.
Firms experience increased competition both in
the ‘factor’ market and in the ‘product’ market. A
third desired e?ect of intellectual capital is the
provision of a framework for human resource
development. From this perspective, attention is on
outlining current employees’ competencies as well
as competencies needed in order to develop a map
of competence gaps, which would provide the
links from the training and education programs to
the intellectual capital statement. For a few of the
?rms, intellectual capital statements were interest-
ing for their potential ability to illustrate the value
of the company in order to inform potential
investors of the ‘true’ value of the ?rm. Another
aspect of this is the potential role as a marketing
mechanism demonstrating the knowledge or
competencies of the ?rm.
These di?erent explanations show why ?rms are
interested in managing knowledge. These are some
of the translations made to make intellectual
capital statements ?t into an organisational system
where the objects for management control are
being re-invented. Fig. 2 help illustrate that this is
a corporate-wide agenda as the people working with
the development of intellectual capital statements
are drawn from many sectors of the ?rm.
Fig. 2 illustrates that top management’s interest
is impressive and that the accounting and the HR
departments have been heavily involved in the
projects. This suggests that the intellectual capital
statement is not easily located in an existing
Fig. 1. Motives for working with intellectual capital.
J. Mouritsen et al. / Accounting, Organizations and Society 26 (2001) 735–762 743
organisational function. Intellectual capital tends
to work across organisational boundaries and
crafts new organisational agendas. The spread of
parties involved in the project and the massive
interest of top management suggest that a new
organisational theme is being formed.
The results of the work also vary dramatically
between the ?rms. The ?rst set of published
reports was produced in the spring of 1998. The
details of the reports are impossible to capture in a
paper, but Fig. 3 indicates that great variety can
be observed.
Fig. 2. The participants of the intellectual capital projects.
Fig. 3. Number of indicators in the intellectual capital statements.
744 J. Mouritsen et al. / Accounting, Organizations and Society 26 (2001) 735–762
Fig. 3 illustrates that the number of indicators
used in the individual intellectual capital state-
ments range from 5–6 to more than 50. Explana-
tions of this di?erence must be cautious given that
the ?rms’ areas are still experimenting with the
format of their intellectual capital statement.
However, are the di?erences merely quantitative
or also qualitative? Are the di?erences in the
number of indicators a matter of substance or
merely of form? To investigate this question, three
of the ?rms’ intellectual capital statements will be
discussed below after an introductory discussion
of the 17 intellectual capital statements in toto.
3. Intellectual capital statements
Intellectual capital statements are complex
forms of reporting which combine numbers, nar-
ration and visualisation. They do not only mobil-
ise numbers and indicators, but also a story-line—
a knowledge narrative—which describes the ‘pro-
duction function’ of intellectual capital, and often
a sketch, which provides an illustration of the
work of intellectual capital. Firms’ stories about
intellectual capital di?er, however. Their visuali-
sation of the components di?ers, and the numbers
used di?er (as will be illustrated more clearly
through three case studies later in the paper).
What then, holds them together? How is it possi-
ble to say that they all are concerned with intel-
lectual capital?
Reading intellectual capital statements, the
impression is one of diversity. They do not have a
set model, but they all somehow are organised
along three dimensions. First, they have some
form of knowledge narrative—a scenario, which is
a story line of the capabilities of the ?rm, and thus
of how it is good at doing something. The know-
ledge narrative is a presentation of the ?rm’s
knowledge resources focusing on how they inter-
act and allow the ?rm to be capable of doing cer-
tain things for external users. It thus both has a
proposition of the ?rm’s ‘production function’ and
of the value proposition supplied to users. Second,
intellectual capital statements identify a set of
knowledge management challenges, which are the
e?orts management puts in place to develop and
condition the ?rm’s knowledge resources. These
management challenges are related to the know-
ledge narrative as they seek to identify and imple-
ment activities that help realise the narrative more.
Third, there is a report which combines numbers,
visualisation and the narrative in a composition
Fig. 4. The idea of the intellectual account.
J. Mouritsen et al. / Accounting, Organizations and Society 26 (2001) 735–762 745
designed to show the development of the ?rm’s
knowledge resources.
The commonalties between ?rms are illustrated
in Fig. 4. It illustrates how the numbers are de?ned
and connected with a set of management chal-
lenges, and how they in turn together connect with
a narrative—or ‘grand story’—which makes them
relevant. These three elements are tightly coupled
although in very di?erent ways in among the
?rms.
Following Fig. 4, intellectual capital statements
connect speci?c numbers, management challenges
represented by these numbers, and the knowledge
narrative that makes intellectual capital productive.
3.1. The knowledge narrative of the capable ?rm
Fig. 4 suggests that the knowledge narrative is
one which speci?es the identity story of the ‘cap-
able ?rm’—located in a version of a ‘knowledge
based’ world—that is concerned with the need for
‘innovation’, ‘?exibility’, or other statements that
represent the role of the ?rm in its world. This
general story is then translated into management
challenges, which embody the particular mechan-
isms that managers put in motion to enhance the
knowledge narrative.
Writing an intellectual capital statement along
these lines the concern is to present the ?rm’s
unique aspiration to be a capable ?rm. This is a
statement of knowledge management strategy and
it de?nes what the ?rm is to be able to accomplish.
Some times this statement has an elaborate story
about the di?erence it makes for the users, thus
making it possible to translate this into the cap-
abilities the ?rm has to develop. For example,
Coloplast (www.coloplast.com), a Danish produ-
cer of medical supplies, suggests that it not only
produces plastic bags to contain bodily ?uids for
people who have had their colon operated out
through the sides of their bodies. It suggests that it
produce ‘Quality of Life’ saying that it has to be
concerned about the particular use made of the
plastic bags. Its intellectual capital statement has a
long narrative of examples of situations, where the
product makes a di?erence to speci?c people.
These stories comprise the knowledge narrative
along side a statement about why the ?rm there-
fore has to be capable of being particularly quality
oriented so that the products will not leak and
create embarrassing situations for users. It goes on
to show that therefore the management challenges
are about quality management, about interactions
with users to enhance insight into use situations,
and enhanced attention to product development
guided by use-situations. Numbers about quality,
about number of interactions with user groups
and customer satisfaction and numbers about
investments in product development can monitor
the implementation of this set of management
challenges.
This example shows how the knowledge narra-
tive is an aspiration that connects the user and the
?rm’s capabilities. It shows how the ?rm will be
capable and why. It also illustrates the speci?c
translations from the knowledge narrative to the
management challenges, which are corporate-wide
concerns often focusing on issues that are cross-
organisational—or at least not found merely in
one function. It also shows that numbers can be
attached to the management challenges to show
how they are implemented. The numbers do not
show the ?nancial value of intellectual capital. In
contrast, they show the implementation of the
management challenges suggested to allow the
knowledge narrative to ?ourish.
3.2. Structuring the numbers of the intellectual
capital statement
The indicators are related to the knowledge
narrative and the set of management challenges.
However, it is useful to delve a bit into how the
numbers can be understood. Even if they are
always only relevant as indicators for the imple-
mentation of the management challenges, they
present certain broad statements about the devel-
opment of a ?rm’s knowledge resources.
As discussed previously, the typical models of
intellectual capital claim ability to measure the
essence hereof via human capital, organisational
capital and customer capital. This will not work,
however, because there is no essence, as the indi-
cators in an intellectual capital statement are less
expressions of functional qualities than they are
mere e?ects of certain calculations, which involves
746 J. Mouritsen et al. / Accounting, Organizations and Society 26 (2001) 735–762
a transaction (see also Mouritsen et al., 2001).
This allows possible indicators of knowledge
management to be auditable (Power, 1997),
because they can be categorised and classi?ed just
like any ?nancial transaction—whose materiality
is a receipt. The classi?cation system is the ‘refer-
ent’ of the number. The classi?cation system that
focuses on the transactions in or around an indi-
cator—rather than the essentialist human, organi-
sational and customer capitals—illuminates the
indicator in the form of the ‘transaction’ that it
inscribes—such as statements about employees,
customers, processes and technologies. In turn,
such statements about employees, customers, pro-
cesses and technologies are interesting and rele-
vant only when they are inserted into an account
of their usefulness vis-a` -vis a narrative of corpo-
rate development. Therefore, the indicators are
interesting for their relation to speci?c organisa-
tions patterns of development rather than as gen-
eric and essentialist form of intellectual capital such
ad human, organisational and customer capitals.
The classi?cation system may help create a ‘dis-
tance’ to the intellectual capital statement’s num-
bers by ‘imposing’ certain managerial issues just
like various ratio analyses help read a ?rm’s
?nancial statement. Indeed, the reading of the
model to be presented below is parallel—if di?er-
ent—to a reading of a ?nancial accounting state-
ment. A conventional ?nancial accounting
statement has four domains (transactions about
revenues, costs, assets and liabilities) and the
model proposed also has four domains (state-
ments about employees, customers, processes and
technology). Likewise, the ?nancial accounting
statement allows three general prescriptive read-
ings: one of solidity, one of liquidity and one of
pro?tability. The intellectual capital statements
may also enable three di?erent prescriptive read-
ings, namely for portfolio management activities
about the ?rm’s knowledge resources, for its qua-
lifying activities when resources are improved, and
for its monitoring of productivity when e?ects are
surveyed. These parallels obviously should not be
taken too far, but the point that broader insights
can be derived from the intellectual capital state-
ment than the individual number itself allows a
reader to form some intelligent evaluation of the
attempts to make knowledge management
activities important management issues.
The numbers developed in the 17 ?rms can be
classi?ed according to the model presented in
Fig. 5. This model has four domains: employees,
customers, processes and technology, and three
categories of information about the knowledge
management activities performed by management:
e?ects, improvement or qualifying activities and
resources. The model classi?es the numbers in the
intellectual capital statements. It therefore does
not talk explicitly about the ?rm’s knowledge
strategy or identity. These have to be formed out-
side the analytical model. The model classi?es
Fig. 5. Analysing intellectual capital indicators.
J. Mouritsen et al. / Accounting, Organizations and Society 26 (2001) 735–762 747
numbers, which can be drawn in to support the
stories and narratives in numerous constellations.
The model’s four domains are the objects that
the numbers describe. These objects tell a very
general—and very ?at—story about the ?rms’
intellectual capital. This allows auditability to be
put in place. A lot of words proposed in intellec-
tual capital statements do not qualify here. For
example, concepts such as ‘innovation’, ‘?ex-
ibility’, ‘customer-orientation’, and ‘strong cul-
ture’ are interesting signi?ers for the ?rms, but
they are elements of knowledge narratives rather
than indicators. For example, ‘innovation’ can be
indicated as revenues from new products, by
number of patents, by number of PhDs, or by
?nancial investments in training and education.
‘Innovation’ does not only have one referent, and
therefore it does not ‘classify itself’. Therefore the
story about ‘innovation’ has to be told outside the
numbers in the identity narrative, where it is part
of an explanation that can draw on these indica-
tors. However, they are not ‘innovation’; revenues
from new products are about customers, number
of patents is about processes, number of PhDs s
about employees. They can all, however, be
mobilised in a story about ‘innovation’, which
does not exist per se. It is a narrative built on
practices that can be captured by other forms of
classi?cation—or at least translated to and from
them. This is why the numbers in the analytical
model have to be about di?erent things. It shows
more generally what types of actions and objects
have been built into, or are related to, a number.
Resources are about the portfolio of the ?rm’s
resources. It is concerned with decisions about
portfolios of employees, customers, processes and
technologies. Such numbers answer questions
about management’s actions in ‘structural’
decisions about resources and portfolios. Activities
describe the qualifying acts put into work to
improve the applicability of the di?erent resour-
ces. These are activities undertaken to upgrade or
develop resources. E?ects describe the con-
sequences of the relationships between portfolio
and qualifying activities. It is about improve-
ments. These improvements are found in the col-
lective e?ects of the entire set of numbers
presented. There is no clear causality here. All
numbers can appear in combinations with each
other. Management here undertakes productivity
control.
Experiences from ?rms suggest that many types
of indicators are possible. Some ?rms focus more
on a selected set of indicators while others have a
much broader scope. For all indicators, relevance
is determined by their ability to allow the ?rm’s
identity story to be continued and the speci?c
form of management that allows the scenario to
be addressed. They are all part of the same
attempt to realise the ideals of the knowledge
narrative. As a consequence, numbers in intellec-
tual capital statements vary.
2
Using this model
analytically, Table 1 shows the number of indicators,
which can be classi?ed in it.
Table 1 counts the total number of indicators
used by the ?rms strati?ed according to the model.
It shows that generally indicators cover the whole
model. Most of the numbers are about employees,
typically in the form of resources. Accordingly,
numbers about the composition of the workforce
are frequent. There are also many numbers about
qualifying employees often in the form of training,
and there are e?ects measures, e.g. in the form of
employee satisfaction. It should be noted that this
is a presentation of the strati?cation of the num-
bers. This does not mean that their function can
always be limited to their position in the classi?-
cation. Sometimes certain indicators carry several
Table 1
Strati?ed number of indicators in intellectual capital statements
E?ects Activities Resources
Employees 36 69 93
Customers 45 15 36
Processes 33 19 17
Technology 8 16 18
2
It is noteworthy that most of these indicators are labelled
‘non-?nancial’ even if in a technical sense they are not. Market
share information is ?nancial, cost information is ?nancial, and
often what makes these indicators ‘non-?nancial’ is that they
are mediated by information outside the ?nancial database
rather than because they lack reference to ?nancial informa-
tion. Other types of information, however, are more clearly
‘non-?nancial’, e.g. indicators of satisfaction or time, quality
and training.
748 J. Mouritsen et al. / Accounting, Organizations and Society 26 (2001) 735–762
possible categories such as, e.g. employee training
in technology, or customer satisfaction with
employees’ service. For such numbers accounting
standards have to be developed. Here, training on
technology is a statement on technology and cus-
tomer satisfaction with employee service is a
statement on customers. Likewise, employee
training has to have an object; it is often about
technology, processes or customer relations.
The strati?cation of these numbers suggests that
‘on average’, there are numerous ways in which
numbers have been attached to organisational
knowledge management activities, and thus the
precise way in which this may be done requires
more detailed analysis of cases. To illustrate these
complexities, three examples will be presented
below. They illustrate three knowledge manage-
ment contexts that they help illuminate and explain.
4. Three cases of intellectual capital: Dator,
Systematic and Carl Bro
There is much more to an intellectual capital
statement than the numbers. There is also an
interpretation, which connects the knowledge
management activities to a story line, because per
se there is little connection between knowledge
and the numbers. They are made relevant not
because they are logical in a strict mathematical
sense (as is the case with ?nancial key ratio analy-
sis) but because they can be made to support and
not be in con?ict with a broad story about the
capabilities and identity of the ?rm. This story—
or knowledge narrative—is seen to thrive when the
collectivity is supported by new or strengthened
relationships between employees, customers, tech-
nologies and processes, and when people’s ‘psy-
chic energy’ or ‘motivation’ is directed to
identifying and solving the ?rm’s problems at
large. There is—in the discourse of intellectual
capital statements—a scenario of an organisa-
tional identity where some measure of ‘empower-
ment’ is in place because new markets and more
heterogeneous customers have to be served. There
is ‘talk’ about an increasingly ‘individualized ?rm’
(Bartlett & Ghoshal, 1997; Johansen & Swigart,
1994; Reich, 1991; Sveiby, 1997).
Therefore, the intellectual capital statement is
not only a set of numbers. There is more, namely
sketches/visualisations and stories/narratives.
Together numbers, sketches/visualisations and
stories/narratives form a network, which con-
stitutes the report. The numbers show that man-
agement is serious about intellectual capital and
can be held accountable to its words and espoused
aspirations. The sketches/visualisations construct
a certain ‘wholeness’ in the organisation of num-
bers, while the story/narrative suggests how the
legitimacy of the intellectual capital statement is
formed.
The general explanation of intellectual capital
provided above discusses the conditions of varia-
tion, but does little to exemplify it. Therefore, in
this section, three cases are presented which con-
nect the individual ?rm’s knowledge narrative; its
management challenges and its constellation of
numbers. In short, it connects between numbering,
narration and visualisation. This connection is
important, since ‘‘f we want to understand a
society, or some part of a society, we have to
discover its repertoire of legitimate stories and
?nd out how this evolved’’ (Czarniawska, 1997,
p. 16).
4.1. Dator
In the case of Dator (www.dator.dk), a small
Danish IT company, there is a story line of a ?rm
working to integrate employees’ ‘heart’ and the
‘mind’. Case 1 of Dator shows a three-way inter-
action between a quotation about the knowledge
management problems of the ?rm, a sketch which
shows the boundaries of what intellectual capital
is about in this particular ?rm, and the set of
numbers, which is reported in the intellectual
capital statement.
In Dator, all the indicators are constructed
around employees. Its management challenges
concern how high professional capabilities can be
combined with personal qualities, ‘psychic’ com-
petencies, so that the employee is able to act as
responsible project leader. It is here a ‘capable’
organisation performed through people. As they
suggest in Dator:
J. Mouritsen et al. / Accounting, Organizations and Society 26 (2001) 735–762 749
We normally say that this place is charac-
terised by ‘hard fun’. It has to be fun to be
here. This is what we want, and this is pre-
cisely what young people want. Work has to
be developing and fun at the same time. We
have a reputation that says that you can only
be an employee here if you have ?rst grades,
but we try hard to say that this is not the only
kind of knowledge we want. It is true that a
person has to be professionally very able, but
his or her personal competencies are just as
important. This is important since we have
lots of project leaders who alone can get the
responsibility that an airport system in China
actually works. This requires an intelligent
engineer from the IT business, but it also
requires a person who can co-operate and
manage processes etc. This is the agenda: we
say that we want the knowledge of a whole
person—even if this sounds a bit too popular.
The idea of ‘a whole’ person is a humanistic
project, but not only. It is also a resource require-
ment for a ?rm where employment is low (about
60 people) and where at the same time, jobs are
conducted all over the world. Here, there is little
room for division of labour, and the individual
has to be able to understand the business of the
?rm intuitively. This is also why Dator works
directly with corporate culture:
We have to start with mission and vision, i.e.
how we want to work. We say that we want
to make the employee a strategic partner, and
this will be the point of departure for our
intellectual capital statement. This combines
strategy and reporting, and obviously the
employees have to be part of this process.
There is a relationship between the knowledge
narrative and the intellectual capital statement
750 J. Mouritsen et al. / Accounting, Organizations and Society 26 (2001) 735–762
that points out elements in the management
model. Employees have to understand what the
business is about and how it is to solve problems.
Therefore, the mechanics of management is orga-
nised around the acquisition of people, their
training and their enrolment into the organisa-
tional machine and ways of working. The individ-
ual employee has to ‘have fun’ as it was suggested,
but he or she also has to accept responsibility to
co-produce the business and not expect to be
managed, but to sort out the problem him- or
herself:
We are very focussed on the timing of when
we can make people project leaders. We are
very concerned that they are ‘psychically’
robust for the job and we tell people that we
have to make them strong and robust, be
active ‘go-getters’. . . . Dator’s unique way to
conduct its business is the learning organisa-
tion, i.e. open o?ces, get the individual to
seize responsibility, and an open culture.
Here, there is a concern to make intellectual
capital a matter of ‘heart’ and ‘brain’, which have
to be in concert. Knowledge management activ-
ities are concerned to attract and retain the best
people from both a professional perspective and a
personal perspective. The competencies needed are
not only academic but also ‘social’. This is parti-
cularly important because most of the employees
work independently as project-leaders in collab-
oration with customers, and being a small ?rm,
employees in Dator have to be able to manage
things on their own.
There is a colourful sketch in Dator’s intellec-
tual capital statements. It dramatises the role of
the heart and the brain. It singles out two para-
meters of the management of the ?rm and makes
them the central parameters to be concerned with.
The associated management challenge suggests
that the primary levers of knowledge management
are the in-house testing of people’s ‘psychic’
robustness and ability to handle technical as well
as organisational problems on a job far away from
help from the ?rm. Knowledge management rests
in the management of academic knowledge—
which is a question of acquisition—and personal
skills which is the upbringing set in motion to
persuade the individual to be part of a team and
suggest that the ?rm is more than a platform to
mobilise the employment market. Lots of things
go on within the ?rm to align people to each other.
This can be documented by the numbers preferred
by Dator and published in its statement: they are
about people and their entry and development in
the ?rm. It is not so much about their results,
because these are said to be much too complex
and ambiguous to be part of a long-term strategy
to develop organisational competencies. Dator’s
employees own a portion of the ?rm’s shares,
and it underlines that the intellectual capital
statement has to make the ‘person-centred’
strategy realistic:
It is important that the HR management is in
charge of the intellectual capital statement.
One objective is to show that we mean it ser-
iously when we say that we centre our
employees and their knowledge, and it is a
way to signal that we are a very young ?rm.
. . . We have to show that this is more than
‘fancy words’. There is a mental hurdle to
accept that the expenses we spend [on HR
development] are not only philanthropy, and
that building good relations with each other
really improves the bottom line. We must
have a coherent group of people and a cul-
ture, which says: Well we may spend money
for social activities here, but this is not merely
waste of money. It is a mental attitude and
one has to understand the house to really
appreciate the power of this.
The intellectual capital statement is part of a
wider scheme of believing in the proposition that
resources and competencies are important. It is a
‘belief’ that employment markets cannot provide
the skills and competencies needed for the ?rm to
thrive. It is also, however, an indication that even
if the individual is centred, he or she cannot work
sensibly without the support of the culture or the
connections that make everyday life not a thing in
isolation, but indeed part of a collective community
of practice.
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4.2. Systematic
Systematic (www.systematic.dk) is a medium-
sized Danish IT ?rm. It organises its numbers
according to a variant of the business excellence
model (the EFQM model) used to assess ?rms for
quality awards around Europe, and it illustrates a
management control approach to intellectual
capital. As illustrated in Case 2, it shows in the
form of causal model how results are constructed
on the basis of inputs and transformations. Here,
the ultimate results are the ?nancial ones, but also
results related to customers, employees, innovation
and the surroundings are mentioned.
The indicators used by Systematic are con?g.
mainly around resource numbers and e?ect num-
bers thus focusing on the portfolio of resources
and the collective e?ects produced by the ?rm.
Systematic’s management challenges concern the
alignment of individuals and organisation through
project management activities. It is concerned with
how standardised routines and controls will allow
high quality to materialise in project-work with
customers. The work is characterised by high
quality standards and delivery on time. This kind
of ‘capable’ organisation performs through stan-
dardised processes and highly quali?ed employees,
the relation between which shows up in high
quality products. As Systematic says:
We solve a problem for the customer and
deliver a piece of software. In principle, we
are a consulting ?rm that o?ers knowledge
and expertise more than a product-house that
delivers a standard solution. My picture of
Systematic is that we deliver unique solutions
based on the people and processes we have.
. . . Our TQM project is closely related to our
intellectual capital project. It is about pro-
cesses and we want to include more measures
about our projects’ timeliness in the statement.
Here, Systematic suggests that organisational
processes—linking employees, customers and
technologies—be at the core of knowledge man-
agement activities. The development of project
management systems, quality, and time are
parameters of the management activities set in
motion to improve in the areas suggested by the
business excellence model (see illustration in Case
2), i.e. customers, innovation and employees. It is
a model of the ‘income statement’ of intellectual
capital as it seeks to explicate what are singled out
to be the links between e?orts and results. Sys-
tematic’s management challenges emphasise col-
lective arrangements, incorporating people,
technology and customers in one move:
When we start writing about time, then such
a measure is hard to neglect for the ?rm, and
when we publish assessments made for our
quality and project management activities,
then there is only one way ahead, and that is
upwards. Then you get the interest of
customers, suppliers and employees, and the
internal pressure to improve increases
dramatically.
People are important here, but they are always
part of an arrangement whereby the priorities
made public through intellectual capital state-
ments are part of a process of collective improve-
ment. For Systematic, the statement is more than
a description of the position of intellectual
resources. It is a co-producing value, which arises
from the combination of structured management
systems and the mobilisation of ‘psychic energy’
or ‘motivation’ vis-a` -vis both ‘external’ customers
and ‘internal’ employees. The model works such
that—in a sense and to a degree—all elements,
which are heterogeneous, consisting of people
(both ‘internal’ and ‘external’) technology, man-
agement principles and the pages of the intellec-
tual capital statement, form a collective system of
practice beyond the mere technical. Here, intellec-
tual capital statements ‘refer’ to knowledge man-
agement activities that are organised around TQM
mechanisms set in motion to create a throughput
of projects.
4.3. Carl Bro
Carl Bro (www.carlbro.dk), a Danish engineer-
ing company, in Case 3 tells a story of intelligent
solutions, which is a metaphoric statement of what
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J. Mouritsen et al. / Accounting, Organizations and Society 26 (2001) 735–762 753
intellectual capital is to produce. The model that
organises the numbers is a break-down of intel-
lectual capital into components which results in
seven di?erent forms of capital to be reported:
human capital, customer capital, image capital,
innovation capital, process capital, and IT capital.
Carl Bro’s story is backed up by a set of num-
bers, which focuses intensely on portfolio indica-
tors but also on e?ect indicators. This is a model
of a ‘balance sheet’ of intellectual capital where its
elements are treated as separable ‘assets’ that can
be grouped in the seven categories (human, custo-
mer, image, innovation, process, and IT capital)
each constituting a form of closed description. The
model does not describe the throughput process,
as in the case of Systematic, but rather it singles
out the types of resources that constitute the
resources of the ?rm.
Like Dator, Carl Bro’s intellectual capital state-
ment has a set of bold visualisations of knowledge.
One of Carl Bro’s visualisations is a drawing made
by Ernst, an 11-year-old schoolboy, who draws
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the network of elements necessary to transport the
pyramids to his TV set (see Case 3). At the bottom
of the picture, Ernst writes that ‘‘I get my know-
ledge from TV’’, and he goes on to illustrate all the
elements necessary to bring the pyramids back
across 4000 km and 4000 years to his living room.
It takes a jeep to get there, a mummie to create a
plot, a camera to record it, a ?lm to retain it, a
cassette to edit the ?lm, a cinema to stage the story
of the mummie, and a video-recorder to dis-
seminate the pyramid. This is a long set of tech-
nological resources. Also, however, it takes a book
to be written about the pyramids, a father reading
about it in a paper, and who then buys the book
and reads it aloud to the boy who then is inter-
ested in seeing the ?lm. Here is a long net of
interessment devices. Ernst’s drawing helps illus-
trate what Carl Bro’s knowledge narrative is
about, namely a complex story of interlinked
resources and capabilities that can be commu-
nicated in one movement. By implication, this
drawing also illustrates the complexities of intelli-
gent solutions which have to rely on multiple and
interdependent resources.
Carl Bro’s management challenges are con-
cerned with the organisation of competence cen-
tres, which are groups of people who debate
certain professional issues pertaining to the pro-
fessional and scienti?c basis of their practices. For
each competence centre—of which there are doz-
ens—there is a manager who is responsible to get
the group going. Here, the ‘capable organisation’
is one where employees have the ability to colla-
borate with customers and colleagues to provide
intelligent solutions. On the one hand, the individ-
ual employee by virtue of membership in one or
more competence centres has professional knowl-
edge. On the other hand, by certain employee
development programmes, the employee is
encouraged to move into relations characterised by
interdisciplinary thinking, creativity and inventive
attitudes. For example, it was stated in Carl Bro:
What do we think the intellectual capital
statement says about us? Primarily that we
are willing to think and to change, that there
is no ?nal story about the ?rm. Our story is
that we would like to be society’s advisors. A
place, a house, where you go if you have a
large and complex problem, and so we can
work with good ethics and social under-
standing. This is our story, and the intellec-
tual capital statement supports this, but does
not in itself tell it. . . . When I say intelligent
solutions, it is about giving the customer the
best solution, and it is about having an
appropriate basis for it. It is partly about
mission, values and vision, and intelligent
solutions are ethical—and then we construct
all this by having good IT infrastructures, etc.
Carl Bro here explains that there is a whole
infrastructure to an intellectual capital statement.
First of all, the statement itself does not tell all the
details of the ?rm’s story, which is nuanced, com-
plex and often metaphorical—‘‘intelligent solu-
tions’’. Yet it helps create a certain seriousness
about the story of intelligent solutions. The story
itself plays out di?erent levels of understanding
and makes an array of justi?cations of the rele-
vance of the ?rm, which is presented as a social
asset helping society to solve its problems. The
?rm also has missions, values and visions, which
help employees grow and its solutions are said to
be intelligent. The idea of intelligence is a sub-
stitute for a complex description of the engineer-
ing craft, and its justi?cation is found in appeals to
social bene?ts. The last part of the quotation
explains that in order to be able to do this, there
has to be a good supply of infrastructual assets. IT
has to be in place, organisational competence
centres have to be in place, and—to read from the
front again—employees have to be outgoing and
interested in mingling with society.
The intellectual capital statement helps this
more ‘outgoing’ type of person to be realised. For
example, it helps changing language towards one,
which is more ‘modern’:
Let us take an example, for example in the
area of innovation. We have a strategy that
our innovation activities have to be very visi-
ble internally and externally. We make inno-
vation an asset by counting it so that it is
pushed into the area of attention. However,
the particular work in innovation is much
J. Mouritsen et al. / Accounting, Organizations and Society 26 (2001) 735–762 755
more detailed than the indicators, which are
one set of tools among others here. This is
also what we have to do, just as in the ?nan-
cial area we use a lot of concepts, which are in
the ?nancial accounts, but also a lot that are
not included.
Such a language game may help the ?rm change
its reputation primarily internally but then in turn
also externally:
The intellectual capital statement helps us to
change the reputation of the ?rm. I almost
could say that when I came to this ?rm it was
extremely ‘dusty’ and ‘old’. To me, the intel-
lectual capital statement has been a tool to
change this. Similarly, our work with mission,
values and vision were ‘gibberish’ and di?cult
to communicate. Terminology and language
are very di?erent among departments in this
?rm because it is quite clear that certain
departments are very innovative without
using this word to characterise their activities.
They may have managers who do not use the
word innovation, and who therefore do not
really motivate their employees by engaging
them e.g. by saying: ‘Come on, hear this, this
is so interesting, and we will be doing all this
new stu?!’ From the perspective of recruit-
ment and retention of employees, it is harm-
ful not to say this, and this is where the
intellectual capital statement comes in
because its role is to change reality and not
only register it.
Here, the intellectual capital statement changes
language games. New concepts are invented for
processes already in place, but by assigning new
words to these processes they change. They change
‘meaning’ and suddenly it is possible to create
‘psychic energy’ and ‘motivation’, which in?uence
the ‘object’ to which they are directed. Therefore,
Carl Bro’s management challenge is about orga-
nising spaces of expertise that create the founda-
tion for innovative and independent people who
are full of initiative. It is a ‘capable organisation’,
which performs such individuals who—when they
engage in speci?c relations to customers—manu-
facture intelligent solutions based on inter-
disciplinary work, creativity and innovation.
5. Intellectual capital statements in action
These three cases illustrate that intellectual
capital statements help mobilise a network of
relations. The whole array of relations constitutes
the possibility of the intellectual capital statement
to be of some form of intelligent value. The indi-
cators help tell a story about the mechanisms by
which the ?rms attempt to construct knowledge
management activities, but they do not themselves
explain what these are. The story points this out,
but in the abstract as metaphors of the e?ects of
the ?rms’ doings, and in a more concrete list of
activities concerning knowledge management
challenges that the ?rms put in place. Dator
reports primarily employee indicators, and it has a
story about the human brain and heart necessary
to conduct good business. Systematic is concerned
with the transformation of actions into e?ects—
including ?nancial e?ects, where such things as
quality control systems and time are structural
mechanisms to hold knowledge e?ects in place.
Carl Bro separates between ‘assets’ and suggests
that the individual type of asset is signi?cant in
concert with other types of assets which is clear
from its emphasis on employee development, infra-
structure, and customer relations at the same time.
All ?rms are interested in many aspects of the
development of intellectual capital, but their prio-
rities hereof make their e?orts di?erent and tied to
the local situation. All ?rms develop their intellec-
tual capital statement both in terms of numbers
and in terms of sketches and stories. They all
explain how the intellectual capital statement is
concerned with identifying, managing, and sharing
knowledge. Firms assemble their own con?gura-
tion of management challenges to this end. This is
why it is necessary to accompany each and every
set of numbers with an interpretation, and the
stories and the sketches help accomplish this. The
three elements of the intellectual capital network
go together. They, together, constitute how intel-
lectual capital relates to the management of
knowledge in the individual ?rm.
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5.1. Mobilising intellectual capital statements
‘Knowledge’, ‘innovation’, ‘cultural sensitivity’
are key words in the narratives constructed
around the three ?rms. Dator and Systematic use
‘knowledge’, while Carl Bro uses ‘innovation’ and
‘cultural sensitivity’. These are high level images
striven for in the three ?rms. However, it is not
easy to see what they actually mean and it is not
easy to see how they distinguish themselves in
terms of preferred management actions. There-
fore, in all three ?rms, there is a more speci?c
translation process, which allows them to be
attached to certain practices. These practices are
di?erent in the three ?rms.
In Dator, the management challenges focus on
attracting people and making them part of a
community of practice with its own ways of
working and communicating. These develop pro-
ject leaders that can act in practical situations
characterised by complex technical, organisational
and social relations. Here, the management
actions tie ‘knowledge’ to persons. At least, the
moves made to underscore knowledge are about
persons. The result, however, is not only a local
personal kind of knowledge. Working through
and on persons, the management of Dator also
crafts knowledge as a collective entity. The
strength of the individual is (partly) related to the
collective ability to support him or her even over
long distances. It installs ways of creating a com-
petent person vis-a` -vis the ways of working that
are part of Dator’s social milieu. Therefore, the
‘initial’ centring of the person ‘results’ in a more
structural conception of knowledge as ingrained in
the milieu of the ?rm. The visualisation of a per-
son with ‘heart’ and ‘brain’ supports the know-
ledge narrative and the management challenges, as
it dramatises the mechanics of the management
challenge. It shows that the parameters of man-
agement are concerned with the attraction of
‘brains’ and of the development of ‘hearts’. This is
beautifully, and artfully, demonstrated by Dator’s
visualisation. There is but a small step from
Dator’s visualisation to its numbers. As shown, all
numbers are about the human resource manage-
ment issues: employee pro?les, age, number of
sta?, and investments in employee training and
development. These indicators typically concern
the list of resources enjoyed by Dator and are thus
a matter of portfolio management activities, and
also a bit about the activities management puts in
motion to develop this resource-base.
Systematic also uses ‘knowledge’ as a narrative
of the ?rm’s identity, but the ‘referents’ of know-
ledge are di?erent from Dator’s ‘referents’ of
knowledge. Systematic’s translation of the broad
narrative of ‘knowledge’ is primarily into man-
agement challenges, which emphasise the collec-
tive, or organisational, conditions for managing
throughput of a ?rm producing complex services
and products. The management challenges
emphasise e?cient and high quality processes. The
mechanics of this challenge is to install assessment
procedures, quality controls, e?ciency measures
and customer satisfaction measures. Here, the
narrative of ‘knowledge’ is not primarily executed
against the person, but rather around the skills,
technologies and procedures that work together to
de?ne ‘knowledge’ as a collective endeavour. This
is a mechanism whose elements are de?ned as
employees, customers, processes and technologies
and which are all subordinated to the ?ows of
services and products that are the collective e?ects
of Systematic’s work. This is what it is: Systema-
tic’s work, not employees’ work, not customers’
work, not technologies’ work. Systematic’s work!
This idea is supported by the visualisation that
shows the ?rm as an input/output model where
the e?orts performed by management leads to
?nancial results in the other end. This is a model
where managerial action plays an important role
in co-ordinating the various kinds of resources—
including plans, people, buildings and pro-
cedures—toward intermediate goals in the form of
employee satisfaction, customer satisfaction and
e?ects on society, and ultimately towards ?nancial
results. This is also clear form the battery of
numbers used. There is a heightened emphasis on
the e?ect measures, which identify the productivity
of the ?rm’s total activities.
In Carl Bro there is a knowledge narrative of
‘innovation’ and ‘cultural sensitivity’. This narra-
tive is translated into a set of management chal-
lenges, which emphasise the collective ability to
create solutions. Compared with Systematic,
J. Mouritsen et al. / Accounting, Organizations and Society 26 (2001) 735–762 757
where the collective ability is re?ected in e?ect
indicators, Carl Bro is more interested in the
resource base, which is indicated by numbers of
the portfolio of resources. The mechanics of man-
agement is here the development of a set of organ-
isational capabilities built up around e.g.
competence centres and in bringing a new lan-
guage of innovation to the organisation. Here, the
narrative of ‘innovation’ is concerned with trans-
forming employee through providing a new voca-
bulary of innovation and letting this motivate
them to engage in a new model of talk and com-
munication with customers. To support this, the
introduction of competence centres re?ects the
idea of being at the forefront of technology and
scienti?c knowledge. Such a management chal-
lenge is (partly) supported by the visualisation of
the network of competencies necessary to conduct
this strategy: employees, customers, image, inno-
vation, process and IT. These are managed by
setting up managers for each area. Such a
mechanic of management re?ects the orientation
towards making the whole set of interrelated
competencies collective. It may be that the individ-
ual is a link to the environment, but the individual
carries competencies that are not his or hers.
Individuals stand for competencies which are not
theirs. This is why the constellation of intellectual
capital is not ‘person-centred’ per se but more a
matter of a collectivity, which requires the individual
to be of a certain kind.
This is also why Ernst’s drawing of knowledge
networks beautifully captures the ambition of Carl
Bro’s vision with knowledge management. It
draws together heterogeneous elements in a move
towards improvement of users’ value of its service.
A grand knowledge narrative, indeed.
5.2. The intellectual capital statement as a centre
of translation
These examples illustrate how the intellectual
capital statement is a centre of translation, which—
acting on other settings—translates the world of
the ?rm, mobilises and musters (new) resources
inscribed in the name of intellectual capital (cf.
Latour, 1990, p. 26). Thereby, the intellectual
capital statement is a technology for acting at a
distance. It is a centre where the world of the ?rm
by way of a series of transformations is trans-
ported, then combined, superimposed and calcu-
lated upon, calculations thereby being only a
(small) subset of the translations being performed
in the centre (Latour, 1987, p. 238). The ‘grand
narrative’, or the plot, of the intellectual capital
statement explains how the inscribed and mobi-
lised resources are shown and related to each other
in one presentation.
In this way it translates each of the elements by
o?ering new qualities to the inscribed entities,
whilst at the same time constructing completely
new ones. That is to say, each of the elements of
the intellectual capital statement is quali?ed as
entities in themselves by being brought to the
statement, and at the same time, the whole state-
ment constructs a new power-relation. It is namely
neither about the story per se, about the sketch per
se, nor about the numbers per se. It is about the
combination of them all and the power they
mobilises to act at a distance. That is to say, the
centre of translation impacts on the ?rm. It con-
structs hiring policies, organisational competency
centres, new organisational vocabularies and lan-
guages, and mechanisms for productivity
enhancement. This is why the inscription of an
intellectual capital statement is not merely the
narration, the visualisation and the numbering of
the ‘state of a?airs’. The inscription helps the
power of the centre of translation to change
things, or ‘‘to force others to go out of their ways’’
(Latour, 1990, p.26). To be this powerful, ‘‘settings
strive to become centres by mobilising everything
at hand and tying their claims to as many resour-
ces as possible’’. (Latour, 1991, p. 161). Intellec-
tual capital statements hold employees, customers,
technologies and processes in place and claim their
resources in the name of a collectivity. The mat-
erial out of which such a statement is fabricated—
paper, colour and ink—is paradoxically weak
compared with the strength of the relations intel-
lectual capital statements organise. However, this
is what centres of translation can do if they are
able to hold all these elements in place. The
mechanics of holding together is a piece of work,
because it is not merely a juxtaposition of elements
on paper. It is more. It is the whole production of
758 J. Mouritsen et al. / Accounting, Organizations and Society 26 (2001) 735–762
the relationships between the elements, and there-
fore the intellectual capital statement adds to the
translation by demonstrating how the e?orts to
bring elements in are conducted. That is, intellec-
tual capital statements not only show numbers of
people, customers, processes and technologies.
They also show how those numbers are put to
work in order to, ?rstly, be an account in con-
junction with narratives and visualisations, and
then, secondly, to act back on the setting from
where the numbers came. It is not only a repre-
sentation of a state of a?airs; it is a translation
and an act of power.
Knowledge is not easily de?nable and accessible,
particularly since for it to be productive, people
have somehow to be ‘motivated’. Sharing cannot
be ‘commanded’, ingenuity cannot be ‘installed’,
creativity cannot be ‘fabricated’. They all have to
be ‘motivated’. In all these situations, ‘motivation’
is a quite particular form of productivity. It is the
mechanism, which brings white-collar productivity
in place. When ‘motivation’ is there, people will
act intelligently and creatively and thus create
sensible solutions. This is why, in the stories pre-
sented in the three ?rms, people must have a place.
They are not, however, prior to or independent of
organisational arrangements.
This is also why ‘knowledge’ is a strange
resource in ?rms. It is not independent of organi-
sational activities already in place. This can be
seen in relation to the kind of knowledge that is
presented in intellectual capital statements. Here
knowledge and power are related and the interest
in knowledge derives from managers’ interest in
controlling organisational arrangements. The
categories invented via intellectual capital state-
ments allow managers to act at a distance because
the transformative aspirations managers may have
require a mediating technology of managing
which can help determine whether organisational
activities are ‘right’, are ‘sensible’, are ‘on the cor-
rect track’, or merely ‘appropriate’. The intellec-
tual capital statement allows managers to ask such
questions about the resource base of the ?rm. The
relationship between power and knowledge, of
which Foucault talks, is one where the aspiration
to manage also shows up in aspirations to manu-
facture a technology of managing that can
function as a lever to install more visibility about
the management of the portfolio, quali?cation
activities and productivity of resources.
Why would they want to change identities and
organisational capabilities? Probably Lyotard’s
point that ‘good’ knowledge is saleable knowledge
is important here. The knowledge management
activities are interesting not because they produce
knowledge accredited by criteria of ‘Science’, but
because it has exchange value. This is where
knowledge management activities go. They have
to be crafted in such a way that they support the
pursuit of ?nancial value—not only intellectual
value.
5.3. Making knowledge manageable
Like the economy in the eighteenth century
through statistics was drawn away from the
households into the realm of the nation (Foucault,
1991), through intellectual capital statements in
the twenty-?rst century knowledge is drawn away
from the invisible inner space of individuals into a
light where government is made possible. It is
established as a managerial issue in relation to the
?rm as a collectivity, and the future as actionable
is made possible. The ?rm’s capacity to act and
the future are drawn through the process of
inscription, which intellectual capital mobilises,
into a space of accounting and made amenable to
intervention at a distance. This is parallel to
?nancial accounting’s ability to draw the plethora
of daily actions into a calculated space on which
actionability may be performed.
Like statistics in the eighteenth century could
produce ‘new’ characteristics of the economy in
shifting from the household to a political econ-
omy, the work in the twenty-?rst century to put
the ?rm’s knowledge resources and knowledge
management activities into numbers (and narra-
tives and sketches) gives them new characteristics.
Knowledge management is moved from the inner
spaces of the individual to the open space con-
structed via numbers (and narratives and sketches)
of the intellectual capital statement. Through such
a process of re-centring, the traditional con-
stantive idea of knowledge as essentially an indi-
vidual phenomenon is questioned. The process of
J. Mouritsen et al. / Accounting, Organizations and Society 26 (2001) 735–762 759
putting numbers onto knowledge management
activities constructs new bundles of organisational
relations and thus creates new conceptions of
states of a?airs and relations, which did not ‘exist’
prior to their bringing into visibility through
numbers.
Metaphorically, ?rms’ ability to activate know-
ledge is lifted from the individual’s dark, tacit inner
space into the light of the numbers where it is
made amenable to a wide set of possible manage-
ment actions. This re-focusing of the knowledge
management via a managerial technology such as
the intellectual capital statement allows managers
to make it a larger project than the individual.
Knowledge management is about aligning all the
?rm’s knowledge resources, which implies a form
of co-ordinated e?ort to bring employees, tech-
nologies, processes and customers together. The
set of relations between these elements stand out
in concert, and individuals’ tacit knowing is but
one—among many—elements hereof. Intellectual
capital statements thus help illuminate knowledge
management, established through inscriptions:
All these inscriptions can be superimposed,
reshu?ed, recombined, ad summarized, and
totally new phenomena emerge, hidden from
the other people from whom these inscrip-
tions have been extracted (Latour, 1990).
Through such a process, intellectual capital
allows a translation of knowledge management
into activities about employees, customers, pro-
cesses and technologies, and the work to relate
them to numbers makes knowledge an organisa-
tional and collective endeavour rather than merely
an individual one.
Analogously to the process by which ?nancial
accounting drew the economy out of the chaos of
daily life’s details, intellectual capital statements
draw knowledge out of the disparate daily situa-
tions, compare them in new ways and identify new
relations. Then they are ‘put back’ into daily
decision making, and new forms of co-ordination
across the ?rm are established as new forms of
visibility are acted upon. In this way, knowledge is
established as a managerial agenda and drawn
away from the ‘darkness’ of individual cognition
and tacit knowing into the light constructed
around a technology of managing organised
around numbers (and stories and sketches). Here,
knowledge resources are combined in networks of
competency relations, and knowledge manage-
ment is about constructing expressions that can
help illuminate how knowledge resources work
and result in e?ects. Knowledge management is
not about constantive knowledge but about per-
formative knowledge (cf. also Austin, 1976). It is
concerned with relations between various dis-
parate types of knowledge resources that are indi-
vidually developed to engage more tightly in
networks that make up competency-relations and
bundles of complementary resources. The intellec-
tual capital statement help assigning numbers,
stories and sketches to such relations in a way
such that knowledge is ‘lifted out’ of the darkness
of individual tacit knowing and brought on such a
form, that it can be addressed, evaluated and
acted on at the distance.
6. Conclusion
Intellectual capital is no ordinary accounting
concept. It is a new concept often carried more by
huge market-to-book ratios than by its own work.
In this paper, its own work has been analysed on
the basis of empirical evidence from 17 ?rms, and
more speci?c evidence from three of these ?rms.
The analysis indicates that intellectual capital is in
search of a ‘referent’. To merely say that it some-
how re?ects the di?erence between market values
and book values of a ?rm is inadequate. When
?rms talk about intellectual capital statements,
they are expressing their interests in controlling
and managing the ?rm. Therefore, as practice,
intellectual capital is about the activities managers
can put in motion in the name of knowledge.
These activities turn out often to be about employee
development, restructuring organisations and
developing marketing activities.
Such activities, however, do not carry a lot of
power per se. Therefore, the ?rms express in stor-
ies and narratives how ordinary daily life is actu-
ally interesting and compelling. To do this
ordinarily, daily life has to be related to grand
760 J. Mouritsen et al. / Accounting, Organizations and Society 26 (2001) 735–762
narratives of innovation, the information society
and ‘we-live-from-knowledge’ claims. For this
story to be communicable, it has to be drawn up.
There is a challenge to create a persuasive intel-
lectual capital statement, and therefore, it consists
not merely of numbers, but also of stories/narra-
tives and visualisation/sketches that allow a series
of translations to take place. The story commu-
nicates the ?rm’s functioning, the sketch creates
boundaries around the theme termed intellectual
capital, and the indicators relate to the sketch
certain numbers and create a form of seriousness
as the story can be ‘audited’. The numbers are
loosely coupled and they ‘cohere’ for their rela-
tionship to the story and the sketch. It is not a
bottom-line in itself. They are part of a narrative
where they grant some form of credibility to it so
that it helps promote the story and avoid contra-
dicting it. This reading takes intellectual capital to
the local stories and strategies, it is set in action to
explicate and defend.
The broad types of managerial actions made
possible through intellectual capital statements are
closely related to its numbers. Its numbers are
powerful because they inscribe and monitor man-
agement’s e?orts. This is why there is also a broad
set of classi?cations more directly linked to the
discourse of management than to the local assem-
bly of stories, numbers and sketches in the state-
ment. This broad classi?cation of management
actions has as domains for intervention only four
separate types: employees, customers, organisa-
tional processes and technology. These are the
objects that management can in?uence in the
name of knowledge. The classi?cation also sug-
gests how intervention can be accomplished
namely through portfolio management, quali?ca-
tion management and productivity management.
When combining the domains and the ways of
intervening in an analytical model, broad state-
ments can be made about ?rms’ management
activities across the domains that can be read out
of the indicators actually being used in the intel-
lectual capital statement. For the 17 ?rms, it is
clear that the number used to illustrate the work
to enhance knowledge management covers all
possible combinations of the domains and the
ways of intervening.
There is thus a question of what networks intel-
lectual capital statements actually mobilise. From
the perspective of writing the text—its produc-
tion—intellectual capital mediates the phenomena
it organises, such as people, technologies, strat-
egies, management issues and technologies of
presentation. From the perspective of reading—
the consumption of intellectual capital state-
ments—the network is a di?erent one as readers
attempt to retract from the particularities of the
situation and see it in a broader context involving
their interest in comparing with other situations.
Both from the perspective of writing and reading
are the three types of intervention in the form of
resources, activities and e?ects interesting and
relevant. They may be mobilised di?erently
though, as they weave in and out of the situation
depending on whether they are taken into illus-
trating the speci?cs of a knowledge narrative, or
whether they are mobilised to audit the imple-
mentation of a knowledge narrative.
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