Academic journal article South Asian Journal of Management

Organizational Commitment, Intellectual Capital and Organizational Competitiveness

Academic journal article South Asian Journal of Management

Organizational Commitment, Intellectual Capital and Organizational Competitiveness

Article excerpt

This paper builds a framework to understand the effects of lower organizational commitment on intellectual capital and organizational competitiveness focusing on the current labor market in India. Specifically, the effects of low organizational commitment on intellectual capital using a model of intellectual capital encompasses three tiers: human capital, social capital and organizational capital. This paper reviews literature on organizational commitment and its relationship with the development of intellectual capital within the organization. The interactive effects of social and organizational culture in India on organizational commitment and intellectual capital are given special attention. The literature suggests that a reduction of organizational commitment has the potential to strongly affect the intellectual capital of organizations, and therefore, the competitiveness of organizations. In the Indian cultural context, it is suggested that increasing organizational commitment may be the most successful with a focus on socialization practices and organizational culture.

Shifts in the global market place result in shifts in what makes organizations competitive. In the past decades, there has been a shift away from so-called "hard assets" to the so-called "soft assets", which include organizational knowledge, skills, and intellectual capital (Teece, 2000). The role of intellectual capital in enhancing ongoing organizational competitiveness is well-established in the global management literature (see for example, Bartlett, 2002; Ahn and Chang, 2004; Khandekar and Sharma, 2005; and Subramaniam and Youndt, 2005). An examination of the recent rise of India (Parbat and Mazumdar, 2006; Mukherjee, 2006) makes it clear that intellectual capital is playing an increasing role in knowledge processing industries in the southern part of India. In fact, it has been strongly argued that the intellectual capital, when combined with a superior process for harnessing organizational knowledge, is perhaps the key ingredient in continued success of organization competitiveness of global companies such as Wipro, Infosys, and Tata Consulting Services (TCS).In order for the Indian economy to become integrated into the global market place, retention and development of people who contribute their scientific and technological knowledge to the organization is of crucial importance. In a recent series of publications, however, it has been observed that there is a great deal of job hopping among qualified personnel at all levels in Indian companies, with "poaching" (companies recruiting employees from their competitors) a common practice that is increasing at an alarming rate (see for example, Scalem and Ravindranathan, 2005; and Aspden, 2006). In 2000, noted that the turnover rate at organizations such as NUT, Ltd., and Hughes Software System was 15-30% among professional staff. Since 2000, this rate has increased, with some companies reporting turnover rates as high as 8% per month for technical personnel in Bangalore (Parbat and Mazumdar, 2006). This trend is not only most prominent in cities such as Bangalore, Hyderabad, and Chennai where Business Process Outsourcing (BPO) is prevalent, but increasingly is spreading in other parts of India and to other sectors such as retail companies (Mukherjee, 2006).

This paper addresses how the decline of organizational commitment, especially among the technical personnel of Indian companies, affects the ability of these companies to maintain their ongoing competitiveness in the global market place. The Financial Express (October 14, 2006) notes that in many industrial sectors in India, the attrition rate has resulted in annual increased wages of approximately 14% across these industries. Organizational competitiveness suffers as the result of such large increases in wages while at the same time bearing the costs of hiring and training new employees. However, the issue of central concern in this paper is how declining organizational commitment affects the process of intellectual capital development, and how the willingness of employees to consider their individual contribution to the aggregate effect of job hopping on a large scale and its long-term negative impacts the ability of Indian firms to retain their market share. …

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