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Using Fuzzy AHP to manage Intellectual Capital assets: An application

to the ICT service industry


Armando Calabrese, Roberta Costa

, Tamara Menichini
Department of Enterprise Engineering, University of Rome Tor Vergata, Italy
a r t i c l e i n f o
Keywords:
Benchmarking
Intellectual Capital
Fuzzy AHP
Multi-criteria decision making
Knowledge management
a b s t r a c t
In todays competitive business environment, Intellectual Capital (IC) management is ever more recog-
nized as a fundamental factor in gaining competitive advantage. Actually, most rms have only a vague
idea of how to manage investments in IC and what they should obtain from these investments. As a
result, many companies overlook to balance IC investments, overinvesting in some IC components and
neglecting other ones. Following this lead, the aim of the paper is to assess the relative importance of
IC components, with respect to their contribution to the company value creation, in order to obtain
guidelines for IC management and investments.
We propose a model for IC evaluation by integrating Fuzzy Logic and Analytic Hierarchy Process (AHP).
This Fuzzy AHP approach allows to capture and foster IC dynamics: experts and managers are greatly
supported by the use of linguistic variables in the evaluation process of the company intangible assets.
Finally, the application of the Fuzzy AHP methodology to a group of ICT service companies is presented.
2012 Elsevier Ltd. All rights reserved.
1. Introduction
In order to obtain and maintain competitiveness companies
must understand how to manage their intangibles by effectively
increasing, spreading and exploiting them in the organization
(Stewart, 1997). Indeed, business performance depends in great
measure on an efcient management of Intellectual Capital (IC)
and, consequently, IC evaluation is a critical obstacle to gain and
maintain competitiveness. For this reason, the general attention
for Knowledge Management approaches to understanding the nat-
ure of the rm and the possible basis for sustained competitive
advantage, has been nurturing the interest for developing IC
assessment methodologies (Spender & Marr, 2006).
Scientic literature on IC regards accounting rules as generally
inadequate to completely appraise the economic value of intangi-
ble assets (Hand & Lev, 2003; Lev, 2003; Lev & Zambon, 2003), even
after the adoption of IAS 38 (Morricone, Oriani, & Sobrero, 2010).
The lack of an exhaustive response to company accounting needs
regarding intangibles, caused the rise of alternative IC oriented
forms of corporate reporting and the creation of new assessment
methods. The new methods of measurement are often founded
on different or even conicting perspectives (e.g. monetary or
non-monetary), but they all take into account the essential role
that the IC plays in the knowledge-economy (Sveiby, 20012010).
Actually, most rms have only a vague idea of how to manage
investments in IC and what they should obtain from these invest-
ments. As a result, many companies overlook to balance IC invest-
ments, because they overinvest in some IC components neglecting
other ones (Zambon, 2003). Nevertheless, evaluating the impor-
tance of IC components is essential for any company that under-
stands the new rules of survival in the knowledge-economy.
More specically, for a company it is important to understand
how to manage IC creating and maintaining the right equilibrium
among IC components (Lev, 2003). For example, if a service com-
pany invest too much in Human Capital neglecting its Structural
Capital, tacit knowledge could overgrowth explicit knowledge,
exposing the company to a high risk associated with personnel
turnover.
In a real business scenario, many IC components are intangible
in nature, therefore they are difcult or impossible to measure
quantitatively. Actually, when measuring what are considered as
intangible benets, most experts provide linguistic assessments
rather than exact numerical values to express their opinions (Costa
& Evangelista, 2008). Following this lead, in this paper IC evalua-
tion is realized by means of Fuzzy AHP, assessing the contribute
of each IC component to the company value creation process.
The methodology allows the comparison among companies of
the same industry in the perspective of IC management improve-
ment through benchmarking. Indeed, the aim of the analysis is to
give guidelines to decision makers in order to create and preserve
0957-4174/$ - see front matter 2012 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.eswa.2012.12.081

Corresponding author. Address: Department of Enterprise Engineering, Univer-


sity of Rome Tor Vergata, Via del Politecnico 1, 00133 Rome, Italy. Tel.: +39
0672597799; fax: +39 0672597951.
E-mail address: roberta.costa@uniroma2.it (R. Costa).
Expert Systems with Applications 40 (2013) 37473755
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a valuable balance among IC components. Finally, the presented
model is applied to the IC evaluation of a group of ICT service
companies.
2. Measuring Intellectual Capital
In this paper we refer to IC utilizing the denitions by Roos,
Roos, Dragonetti, and Edvinsson (1997), that describe the IC as
complementary to the Financial Capital in the value creation pro-
cess of a company. In their Value Description Tree, IC is deter-
mined as the combination of two main categories of intangibles:
Human Capital that embodies the intangibles that are embed-
ded in the company Human Resources. It is subdivided in three
sub-components: Competence (competencies, skills and
knowhow), Attitude (motivation and leadership) and Intel-
lectual Agility(creativity, innovativeness, mental exibility
and problem solving).
Structural Capital that denes the intangibles that are embed-
ded in the organization. It is subdivided in three sub-compo-
nents: Relationship (the company relational network with
its stakeholders), Organization (structure, culture, routines
and processes) and Renewal and Development (R&D, new
projects, product and process innovations).
Bothacademics andpractitioners regardICas the keystone to ob-
tain and maintain competitive advantage in todays ever-competi-
tive market (Cricelli & Grimaldi, 2008; Lev & Zambon, 2003),
because they believe that an effective IC management has positive
effects on company performance (Cheung, Lee, Wang, Chu, & To,
2003; Nakamura, 2003). Several studies deal with the issue of how
IC management improves business performance generating value
in the organization and there is evidence that investments in IC
(i.e. R&D and innovation capital expenditure) have positive effects
on a rmvalue and competitiveness (Huang & Liu, 2005; Tan, Plow-
man, & Hancock, 2007). Hand and Lev (2003) point out that IC has a
positive impact onmarket value andbusiness performance, beingan
indicator for future nancial performance. Some authors also ob-
serve that different stakeholders may attribute a different nancial
value to different IC components (Chen, Cheng, & Hwang, 2005;
Costa & Menichini, 2013). Generally, the greater efforts a company
devotes to IC management, the greater performance and competi-
tive advantage it receives in return (Lu, Wang, Tung, & Lin, 2010).
For these reasons, business performance nowadays depends in
greater measure on an efcient management of intangibles, mak-
ing the evaluation of IC components a critical obstacle to turning
those investments into sources of competitive advantage (Campisi
& Costa, 2012). Indeed, intangibles are the business aspect more
difcult to manage because of the difculty to correctly report
in a nancial statement their economic value and to identify the ef-
fect of each IC component on the enterprise performance (Lev &
Zambon, 2003). Nevertheless, assessing the effectiveness of IC
management is an important issue and the measures that are avail-
able are generally unsatisfactory: they do not allow the compari-
son of IC components among companies of the same industry
(Wen, 2009), preventing the use of benchmarking, as a manage-
ment tool, to create and preserve a valuable balance among IC
components. For this reason, there is a necessity for a method that
can compare companies of the same industrial sector with respect
to the value of their IC components.
In this paper, we want to highlight the importance of measuring
IC components in order to assess and to validate the effectiveness
of IC strategies and to identify the most critical knowledge assets
for achieving competitiveness. Following this lead, we propose a
Fuzzy AHP method to assess the comparative importance of IC
components, allowing a comparison between different rms of
the same industry in the perspective of IC management improve-
ment through benchmarking.
3. Using Fuzzy AHP to assess Intellectual Capital
Most IC components are intangible in nature, therefore they are
difcult or impossible to measure quantitatively (Lev 2003; Sveiby,
20012010). For this reason, practitioners and managers are
greatly supported by the use of multi-criteria method and fuzzy
linguistic variables in the IC evaluation process. Indeed, AHP is
suitable to assess the relative importance of IC components, allow-
ing to consider both quantitative and qualitative criteria. More-
over, Fuzzy AHP, as an extension of the classic AHP method,
enables to deal with the fuzziness and vagueness of linguistic judg-
ments, establishing an effective priorization of IC components.
3.1. The analytic hierarchy process
The AHP is a decision approach created to solve complex multi-
ple criteria problems involving qualitative decisions (Saaty, 1980).
Basically, decision makers have to decompose the goal of the deci-
sion process into its constituent parts, progressing, from the gen-
eral to the specic perspective. In its simplest form, this
structure must include a goal, criteria and alternative levels, or-
dered into a hierarchy. Each item (criterion, sub-criterion or alter-
native) would then be further divided into an appropriate level of
detail. Once the hierarchy has been structured, decision makers
judge the importance of each criterion in pair-wise comparisons,
structured in matrices. The judgement is performed from the per-
spective of the direct upper level criterion.
The nal scoring is on a relative basis, comparing the impor-
tance of one decision alternative to another. AHP captures both
subjective and objective evaluations, also providing an useful
mechanism for checking the consistency of the decision maker
evaluations (Saaty, 1980). It can be used to analyze intangibles, be-
cause of the possibility to evaluate quantitative and qualitative cri-
teria and alternatives on the same preference scale, namely a
verbal one. In fact, IC components are attributes that have no scale
of measurement, but can be quantied through relative measure-
ment (priorities) (Grimaldi & Rippa, 2011; Saaty, Vargas, &
Dellmann 2003; Schiuma & Carlucci, 2007). In addition, AHP is a
subjective methodology where information and priority weights
of elements can be obtained from decision makers using direct
questioning or a questionnaire method.
3.2. The fuzzy analytic hierarchy process
Saatys AHP is often used to evaluate intangibles, but it does not
completely capture the importance of qualitative aspects because
its discrete scale cannot reect the human thinking style (zdago-
glu & zdagoglu, 2007). Indeed, when expert preferences are af-
fected by uncertainty and imprecision, it is not very reasonable
to use denite and precise numbers to represent linguistic judg-
ments (Kwong & Bai, 2003). In order to deal with ambiguity, Trian-
gular Fuzzy Numbers (TFNs) and AHP are integrated in the Fuzzy
AHP approach to solve decision making problems concerning sub-
jective evaluations. Fuzzy AHP converts linguistic judgments in
TFNs organized in fuzzy pair-wise comparison matrices. These
matrices are then processed to obtain the relative weights of items
and the ranking of alternatives. A large number of methods are
introduced to handle comparison matrices (Buckley, 1985; Chang,
1996; Custora & Buckley, 2001; Wang & Chin, 2006; Lee, 2010) and,
among them, Changs method (1996) is widely used, due to its
implementation simplicity to calculate relative weights. At the
3748 A. Calabrese et al. / Expert Systems with Applications 40 (2013) 37473755
same time, this method presents some problematic aspects that
may lead to a wrong prioritization of criteria and alternatives
(Wang, Luo, & Hua, 2008). In order to overcome these problems,
we propose an approach to calculate effectively the relative
weights of decision criteria and alternatives. In this paper, the con-
version scale used to convert linguistic judgments in TFNs is shown
in Table 1.
4. The conceptual framework
Among methods introduced to obtain relative weights from fuz-
zy comparison matrices, the Changs method (1996) is widely ap-
plied. Nevertheless, Wang et al. (2008) demonstrate that it could
lead to a wrong decision, because it may assign zero weights to
some items (criteria, sub-criteria or alternatives), excluding them
from the decision analysis. In the following paragraphs, we pro-
pose an approach to overcome Changs method limitations.
4.1. Review of Changs extent analysis method
According to Changs method, for each level of the constructed
hierarchy, the pair-wise linguistic judgments are converted in TFNs
and organized in fuzzy comparison matrices as follows:

A ~ a
ij

nn

1; 1; 1 l
12
; m
12
; u
12
l
1n
; m
1n
; u
1n

l
21
; m
21
; u
21
1; 1; 1 l
2n
; m
2n
; u
2n

.
.
.
.
.
.
.
.
.
l
n1
; m
n1
; u
n1
l
n2
; m
n2
; u
n2
1; 1; 1
_

_
_

_
1
where:
~
a
ij
l
ij
; m
ij
; u
ij

~
a
1
ji

1
u
ji
;
1
m
ji
;
1
l
ji
_ _
i; j 1; . . . n; i j 2
represents the linguistic judgment for the items i and j; thus

A is a
square and symmetrical matrix.
For each row of

A it is possible to calculate the relative row sum
as:

RS
i

n
j1
~
a
ij

n
j1
l
ij
;

n
j1
m
ij
;

n
j1
u
ij
_ _
i 1; . . . ; n 3
By modifying the Changs normalization formula using the Wang
and Elhags (2006) correction, it is possible to obtain the normalized
row sum

S
i
as:

S
i

RS
i

n
j1

RS
j

n
j1
l
ij

n
j1
l
ij

n
k1;ki

n
j1
u
kj
;

n
j1
m
ij

n
k1;ki

n
j1
m
kj
;

n
j1
u
ij

n
j1
u
ij

n
k1;ki

n
j1
l
kj
_ _
l
i
; m
i
; u
i
i 1; . . . ; n
4
The normalized row sums

S
i
i 1; . . . ; n are then compared using
the degree of possibility (Fig. 1):
V

S
i
P

S
j

1 if m
i
Pm
j
u
i
l
j
u
i
m
i
m
j
l
j

if l
j
6 u
i
i; j 1; . . . ; n; ji
0 otherwise
_

_
5
Finally, the relative crisp weight of each item i, is calculated normal-
izing the degree of possibility values:
w
i

V

S
i
P

S
j
j 1; . . . n; ji j

n
k1
V

S
k
P

S
j
j 1; . . . n; jk j
; i 1; . . . ; n 6
where
V

S
i
P

S
j
j 1; . . . n; ji j min
j2f1;...;ng;ji
V

S
i
P

S
j
i 1; . . . ; n 7
Wang et al. (2008) criticize this approach to calculate relative
weights. First of all they state that the method may assign a zero
weight to criteria or alternatives, implying their elimination as
unnecessary items. This elimination could contrast with the hierar-
chical structure, leading to a wrong priorization of criteria and alter-
natives. Moreover, they claim that the weights calculated using (6)
cannot be considered as the relative importance of criteria and
alternatives. For this reason, they assert that (6) is only useful to
compare TFNs, because it expresses the highest intersection point
of the membership functions related to

S
i
and

S
j
(see Fig. 1). Finally,
Wang et al. (2008) state that if pair-wise comparison matrices (1)
are consistent, crisp weights belong to the intervals dened by (4).
4.2. An innovative approach to determine Fuzzy AHP weights
In order to overcome Changs method limitations we propose a
variation of his methodology that integrates Wang et al. (2008) re-
view criticisms and Kwong and Bays (2003) approach for the con-
sistency test. The employed methodology determines the relative
importance of criteria, sub-criteria and alternatives by means of
fuzzy comparison matrices (1), without incurring in the zero
weight issue. This approach is based on the following steps:
Step 1: Convert the fuzzy comparison matrices (1) into crisp
comparison matrices using the centroid defuzzication method
called center of gravity (Yager, 1981). In case of TFNs the trans-
lating formula is (Wang & Elhag, 2007):
a
ij
~ a
ij

l
ij
m
ij
u
ij
3
8
where ~ a
ij
l
ij
; m
ij
; u
ij

Step 2: Analyze the consistency of each comparison matrix by


calculating the consistency index (CI) and the consistency ratio
(CR):
CI
k
max
n
n 1
9
CR CI RIn100% 10
where k
max
is the largest eigenvalue of the comparison matrix, n is
the dimension of the matrix and RI(n) is a random index depending
on n as shown in Table 2.
The consistency of the matrix is acceptable only if CR (10) is less
than 10%. Nevertheless, the threshold of 10% can be reduced or in-
creased depending on the tolerance of the decision makers. If a ma-
trix results inconsistent is then necessary to obtain new pair-wise
comparison judgments, determining a new pair-wise fuzzy com-
parison matrix to analyse. The matrix review must be continue un-
til the consistency is obtained.
Table 1
Triangular fuzzy conversation scale (Chang, 1996; Lee, 2010).
Linguistic scale Triangular fuzzy
conversation scale
Triangular fuzzy
reciprocal scale
JUST EQUAL (1, 1, 1) (1, 1, 1)
EQUALLY important (2/3, 1, 3/2) (2/3, 1, 3/2)
WEAKLY MORE
important
(1, 3/2, 2) (1/2, 2/3, 1)
MODERATERLY MORE
important
(3/2, 2, 5/2) (2/5, 1/2, 2/3)
STRONGLY MORE
important
(2, 5/2, 3) (1/3, 2/5, 1/2)
EXTREMELY MORE
important
(5/2, 3, 7/2) (2/7, 1/3, 2/5)
A. Calabrese et al. / Expert Systems with Applications 40 (2013) 37473755 3749
Step 3: Determine the local priority weight of each criterion,
sub-criterion and alternative by summing up each row of the
consistent fuzzy comparison matrix

A and then normalizing
the row sums to obtain

S
i
by means of (4). Finally, the crisp
weights are calculated converting fuzzy weights as follows:
w
i
S
i

S
i

l
i
m
i
u
i
3
where

S
i
l
ij
; m
ij
; u
ij
11
via normalization, the normalized crisp weight vector is:
W w
0
1
; w
0
2
; . . . ; w
0
n
12
Step 4: Aggregate local priority weights into global priorities:
the rank of each alternative is calculated by multiplying its local
weight with the corresponding local weights of sub-criteria and
criteria along the hierarchy. Nevertheless, if two or more deci-
sion makers are involved, the evaluating process results in dif-
ferent comparison matrices, one for each decision maker.
Hence, before applying the steps 14, it is necessary to synthe-
size them in a single aggregate matrix as follow (Chang, 1996;
Wang & Elhag, 2007):
if
~
a
k
ij
l
k
ij
; m
k
ij
; u
k
ij
_ _
13
is the triangular fuzzy number which expresses the linguistic judg-
ment provided by the kth decision maker (k 1; . . . ; m) and
~ a
k
ij

1

1
u
k
ij
;
1
m
k
ij
;
1
l
k
ij
_ _
14
is the reciprocal of ~ a
k
ij
. The average judgment, according to the fuz-
zy addition operation for TFNs (Kaufmann & Gupta, 1991) is:
~
a
ij

1
m

m
k1
~
a
k
ij

1
m

m
k1
l
k
ij
;
1
m

m
k1
m
k
ij
;
1
m

m
k1
u
k
ij
_ _
; i; j
1; . . . ; n; j i: 15
The previous aggregate matrix is then utilized as input in the steps
14.
4.3. Intellectual Capital assessing criteria and hierarchical structure
In this paper, we present a Fuzzy AHP methodology to analyse
IC components impact on a company value creation process. The
aim of the analysis is to give guidelines to decision makers in order
to create and preserve a valuable balance among IC components.
Actually, many companies overlook this aspect of IC management,
overinvesting in some IC components and neglecting other ones.
The direct consequence of this lack of awareness about IC congu-
ration is the ineffective exploitation of the company intangible
assets.
An effective balance of IC components does not necessarily im-
ply that their relative importance should be homogeneously dis-
tributed (equal weights), but it has to reect how IC components
contribute to the value creation process of intangibles (Han &
Han, 2004; Wu, Tsai, Cheng, & Lai, 2006). Since each industrial sec-
tor is characterized by a peculiar knowledge value creation pro-
cess, the corresponding IC conguration should change
depending on the analysed industry (Costa, 2012). For this reason,
we employ a Fuzzy AHP methodology in order to obtain the rela-
tive importance of IC components (Fuzzy AHP weights), as a clear
representation of the analysed IC conguration (Bozbura, Beskese,
& Kahraman, 2007; Hu, Wu, & Liu, 2012; Lee, 2010).
The proposed approach allows us to make a direct comparison
between rms of the same industry in the perspective of improve-
ment through benchmarking. In our methodology the IC congura-
tion of a Target company is compared with the IC conguration
of Best Practices belonging to the same industry. The choice of a
sample of rms within the same business sector is essential, in or-
der to presume that the intangible processes of value creation are
similar. The benchmark, obtained through the analysis of the Best
Practices, offers the Target company directions of improvement in
IC management (Campisi & Costa, 2012).
Following this lead, Fuzzy AHP allows a complex decision to be
structured into a hierarchy descending from an overall objective to
various criteria, sub-criteria and so on until the lowest level. The
objective, or the overall goal of the decision, is represented at the
top level of the hierarchy. The criteria and sub-criteria contributing
to the decision are represented at the intermediate levels. Finally,
the decision alternatives or selection choices are laid down at the
last level of the hierarchy.
The hierarchy elaborated for our analysis has the following
structure (Fig. 2):
goal (rst level): the goal of the analysis is to assess the impact
on the value creation process of the IC components. In this
paper, we choose as goal the company revenue increase, mean-
ing that the relative importance of IC components is determined
on the basis of their impact on the revenue maximization. The
proposed methodology is fully generalizable and it allows to
choose others goals (market share, market capitalization, num-
ber of patents, etc.) depending on the value creation process of
interest.
criteria (second level): according to the denition of Intellectual
Capital (Roos et al., 1997) there are two main perspectives of
analysis: Human Capital and Structural Capital;
sub-criteria (third level): according to the denition of Intellec-
tual Capital (Roos et al., 1997) Human Capital has three sub-
criteria: Competence (C1), Attitude (C2) and Intellectual
Agility (C3). Also Structural Capital has three sub-criteria:
Relationship (C4), Organization (C5) and Renewal and
Development (C6);
alternatives (fourth level): they correspond to indicators that
describe the IC components and they are chosen from the exist-
ing IC measurement methods. The choice of the indicators have
to comprehensively represent each component of the IC as
described by Roos et al. (1997). In particular, in this paper the
alternatives are represented by indicators that describe the IC
components, according to the existing methodologies classied
by Sveiby (20012010): Training (IND1), Employee Motiva-
tion and Satisfaction (IND2), Business Climate (IND3),
1
S2 S1
(x)
V(S2>S1)
l2 u2
l1 u1
m1 m2
x
Fig. 1. The intersection between S
1
and S
2
(Zhu, Jing, & Chang, 1999).
Table 2
Consistency index, RI. of random matrices (Golden, Harker, & Wasil, 1989).
n 3 4 5 6 7 8 9
RI(n) 0.58 0.9 1.12 1.24 1.32 1.41 1.45
3750 A. Calabrese et al. / Expert Systems with Applications 40 (2013) 37473755
Investments in R&D (IND4), Customer Satisfaction (IND5);
Process and Product Innovation (IND6) and Effectiveness
and Efciency of Procedures (IND7). The proposed methodol-
ogy is fully generalizable and it allows to choose others indica-
tors depending on the industrial sector analyzed and on the
value creation process of interest.
5. An application of the Fuzzy AHP methodology to the Italian
ICT service industry
We apply the proposed methodology to a Target company (T)
belonging to the Italian Information and Communication Technol-
ogy (ICT) service industry. In the perspective of improvement
through benchmarking, we compare the IC conguration of the
Target company to a sample of 10 companies that are Best Prac-
tices (BP) of the same industry, considering the revenue increase
in the last three years (20092011) as the goal of the Fuzzy AHP
methodology.
The characteristics of the companies under study are suitable
with the purpose of this application: all IC components (Sec-
tion 4.3) are signicant, because they all sustain the company com-
petitive advantage. Specically, the Human Capital is represented
by the specialized skills of ICT industry employees, while the Struc-
tural Capital is embedded in the ICT software solutions, procedures
and systems and in the company network of partners, clients and
suppliers. The Target company under study is an Italian SME,
which gained its competitive position in the Italian market thanks
to its ability to propose solutions for integrated ICT systems in the
service industry. Until today, the Target company has been devel-
oping a sector-specic expertise, nurturing the high professional-
ism of its employees. We apply the Fuzzy AHP methodology to
determine the priorization of the IC components for each company
and, then, we compare the IC conguration of the Best Practices
with the Target one.
5.1. The Fuzzy AHP implementation
The data utilized for the Fuzzy AHP implementation are ob-
tained interviewing managers of the analysed ICT companies: each
respondent compares alternatives, sub-criteria and criteria in pair-
wise comparisons, expressing relative importance with linguistic
terms (equally, weakly more, moderately more, strongly more, ex-
tremely more). We organize the pair-wise comparisons in a table
(Table 3) in order to facilitate the respondent understanding of
the questions. Then the judgments are converted in fuzzy numbers
using Table 1.
As exemplication of the Fuzzy AHP procedure, we show the
data and the elaboration process for the Target company. Compar-
ing the alternatives under the criterion Competence (Section 4.3)
by means of pair-wise linguistic judgments, we obtain the follow-
ing fuzzy comparison matrix (Table 4):
Firstly, we analyse the consistency of the matrix (Section 4.2):
the matrix is consistent with CI = 0.11 and CR = 0.8. Secondly, we
determine the row sum

RS
i
(3) and the normalized row sum

S
i
(4), for each indicator (alternative) associated with a rowof Table 2.
The value of the row sum for the alternative Training (IND1),
with respect to the criterion Competence is calculated utilizing
(3) as follow:

RS
1
1; 1; 1 1:5; 2; 2:5 1; 1:5; 2 0:4; 0:5; 0:67
0:33; 0:4; 0:5 0:4; 0:5; 0:67 Bbbk1:5; 2; 2:5
6:13; 7:9; 9:83
All the other row sum values are summarized in Table 5:
The value of the normalized row sum for Training, with re-
spect to the criterion Competence is calculated utilizing (4) as
follow:

S
1

RS
1

n
j1

RS
j

n
j1
l
ij

n
j1
l
ij

n
k1;ki

n
j1
u
kj
;

n
j1
m
ij

n
k1;ki

n
j1
m
kj
;

n
j1
u
ij

n
j1
u
ij

n
k1;ki

n
j1
l
kj
_ _

6:13
71:13
;
7:9
59:67
;
9:83
50:43
_ _
0:0862; 0:1324; 0:195
All the other row sum values are summarized in Table 6:
Then crisp weights are calculated using (11) and, via normaliza-
tion, the relative weights for each alternative under the criterion
Competences result as:
W 0:13; 0:13; 0:11; 0:17; 0:20; 0:17; 0:09
Prioritizing Intellectual Capital
components impact on value
Human Capital Structural Capital
Business
Climate
Investments
in R&D
Customer
Satisfaction
Process and
Product
Innovation
Effectiveness and
Efficiency of
Procedures and
Processes
Competence
Attitude
Intellectual
Agility
Relationship Organization
Renewal and
Development
Training
Employee
Motivation
Fig. 2. The Fuzzy AHP model: goal, criteria, sub-criteria and alternatives.
A. Calabrese et al. / Expert Systems with Applications 40 (2013) 37473755 3751
The same methodology is, then, applied for each item (criteria, sub-
criteria and alternatives) of the structured hierarchy. The overall re-
sults for each item are obtained by multiplying their relative
weights with the corresponding weights along the hierarchy
(Table 7).
The same Fuzzy AHP evaluation process is replied for each Best
Practice company. The average weight of criteria, sub-criteria and
alternatives quanties the IC conguration of the Best Practices,
which is compared to the IC conguration of the Target company,
with the purpose of improving IC management through
benchmarking.
5.2. The results
Fig. 3 shows that T and BP are aligned in the IC composition,
with respect to the two main IC assets: Human Capital and Struc-
tural Capital. The Human Capital is signicantly more important
than the Structural Capital in the value creation process, consider-
ing the revenue growth in the period 20092011 as the analysis
goal.
This result reects the nature of the analyzed companies: in the
ICT service industry Human Resources are strategically more rele-
vant than other organizational aspects. Human Resources are the
keystone to obtain and maintain competitive advantages and IC
managers often invest to enhance and emphasize human capaci-
ties within the organization (Spender & Marr, 2006). Moreover, un-
der the Human Capital criterion, T follows the trend of BP: the
sub-criterion Intellectual Agility presents the highest weight, fol-
lowed by Competence and Attitude (Fig. 4).
The sub-criterion Attitude shows essentially the same weight
both for T (22%) and BP (20%). Besides, Competence and Intel-
lectual Agility are not aligned: the T company focuses on Compe-
tence more than BP (35% against BPs 28%), while BP invests more
than T in Intellectual Agility (52% against Ts 43%). The Target
company presents an IC composition that grounds its strengths
in the capacity to innovate, problem solving skills and creativity
(Intellectual Agility 43%), without neglecting competences
(35%) and attitudes (22%). The IC conguration of the BP compa-
nies, chosen as benchmark for the Target rm, underlines the same
composition with an evident emphasis on the innovativeness and
creativity of Human Resources (Intellectual Agility 52%). This re-
sult underlines the importance of intellectual agility as a source of
competitiveness in the ICT service industry: the capacity to apply
the company embedded knowledge in different business contexts,
innovating and transforming ideas, is a key factor for the success of
the company (Capece & Costa, 2009; Senge, 1990; Senge et al.,
2000).
Under the Structural Capital criterion, the IC congurations of
T and BP are similar: the sub-criterion Relationship presents the
uppermost weight, followed by Renewal and Development and
Organization (Fig. 5). The most aligned sub-criterion between T
Table 3
Example of questionnaire form to compare importance of one criterion over another.
With respect to Human Capital Criteria Extremely more Strongly more Moderately more Weakly more Equally Criteria
1 Competence Attitude
2 Competence Intellectual agility
3 Attitude Intellectual agility
Table 4
Synthesized pair-wise judgments for alternatives with respect to the criterion Competence.
IND1 IND2 IND3 IND4 IND5 IND6 IND7
l m u l m u l m u l m u l m u l m u l m u
IND1 1 1 1 1.5 2 2.5 1 1.5 2 0.4 0.5 0.67 0.33 0.4 0.5 0.4 0.5 0.67 1.5 2 2.5
IND2 0.4 0.5 0.67 1 1 1 1.5 2 2.5 0.4 0.5 0.67 1 1.5 2 0.4 0.5 0.67 1 1.5 2
IND3 0.5 0.67 1 0.4 0.5 0.67 1 1 1 0.33 0.4 0.5 0.33 0.4 0.5 0.33 0.4 0.5 1.5 2 2.5
IND4 1.5 2 2.5 1.5 2 2.5 2 2.5 3 1 1 1 0.4 0.5 0.67 0.5 1 1.5 1.5 2 2.5
IND5 2 2.5 3 0.5 0.67 1 2 2.5 3 1.5 2 2.5 1 1 1 1.5 2 2.5 2 2.5 3
IND6 1.5 2 2.5 1.5 2 2.5 2 2.5 3 0.67 1 2 0.4 0.5 0.67 1 1 1 1 1.5 2
IND7 0.4 0.5 0.67 0.5 0.67 1 0.4 0.5 0.67 0.4 0.5 0.67 0.33 0.4 0.5 0.5 0.67 1 1 1 1
Table 5
Row sums for each indicator with respect to the criterion Competence.
l m u

RS
1
6.13 7.90 9.83

RS
2
5.70 7.50 9.50

RS
3
4.40 5.37 6.67

RS
4
8.40 11.00 13.67

RS
5
10.50 13.17 16.00

RS
6
8.07 10.50 13.67

RS
7
3.53 4.23 5.50
Table 6
Normalized row sums for each indicator with respect to the criterion Competence.
l m u

S
1
0.0862 0.1324 0.1950

S
2
0.0802 0.1514 0.1880

S
3
0.0606 0.1455 0.1361

S
4
0.1207 0.1623 0.2628

S
5
0.1514 0.1699 0.3063

S
6
0.1165 0.1607 0.2611

S
7
0.0485 0.1425 0.1129
Table 7
The overall priority weight of each criterion, sub-criterion and alternative.
Human capital 0.66 Structural capital 0.34 Weights
C1 C2 C3 C4 C5 C6
0.33 0.20 0.47 0.50 0.18 0.32
IND1 0.13 0.17 0.11 0.10 0.08 0.08 0.12
IND2 0.13 0.21 0.17 0.13 0.14 0.15 0.16
IND3 0.11 0.11 0.14 0.16 0.18 0.13 0.13
IND4 0.17 0.10 0.08 0.14 0.06 0.23 0.13
IND5 0.20 0.22 0.25 0.21 0.19 0.10 0.21
IND6 0.17 0.09 0.17 0.16 0.11 0.25 0.16
IND7 0.10 0.09 0.08 0.10 0.25 0.07 0.10
3752 A. Calabrese et al. / Expert Systems with Applications 40 (2013) 37473755
and BP, is Renewal and Development (32% for T and 30% for BP).
Further, Relationship and Organization present signicant dif-
ferences in the relative weight: the T company focuses more on
Relationship than BP (50% against BPs 46%), while the BP compa-
nies favor Organization (24% against Ts 18%).
This IC composition is characteristic of the ICT service industry.
The highest rank of the Relationship component reects the
importance to obtain and maintain customer loyalty and to gain
a durable and reliable partnership with suppliers and distributors.
The Renewal and Development component is only the second in
the ranking of the Structural Capital components. In the ICT service
industry, R&D is characterized by product and process incremental
innovations: companies usually provides small changes in stan-
dardized products, customizing them without producing really
radical innovations. Finally, the Organization component pre-
sents the lowest value, being the analyzed companies SME without
a strong hierarchical structure, characterized by simplied coordi-
nation activities, routines and processes.
The indicators (alternatives) present slightly different rankings
between T and BP (Fig. 6). Customer Satisfaction is the most sig-
nicant indicator both for the T and BP companies (33% and 18%
respectively) and it presents the larger gap (+15%) among indica-
tors (Tables 8 and 9). Customer satisfaction and, as a consequence,
customer loyalty are strategic assets, because in the ICT service
industry customers can choose among a multitude of ICT solution
providers that offer similar products and services. The other IC
indicators (Process and Product Innovation, R&D Investments,
Employee Motivation, Business Climate and Training) are
quite balanced in the sample analyzed, with the exception of
Effectiveness and Efciency of Procedures and Processes that is
the least important indicator for T, while it is the second most
important aspect of BP intangibles. The low weight of Ts Effec-
tiveness and Efciency of Procedures and Processes (8%) demon-
strates that the knowledge embedded in process and procedures
of T is scarcer than in BP. The proportion of tacit knowledge with
respect to the explicit one (contained in operative procedures) is
larger in the T company, implying that T competitive advantage
is hugely based on its Human Resources. This IC conguration ex-
poses T to the risk of losing quickly its competitiveness in case of a
signicant turnover of its Human Resources. The gap analysis of
the IC indicators underlines the main differences in the IC congu-
ration of T and BP: Customer Satisfaction and Effectiveness and
Efciency of Procedure and Processes. Although, an IC strategic
management focused on Customer Satisfaction is surely in line
with the industrial sector under analysis, it is evident that the T
company is putting too much efforts in it (see Table 9,+15% gap),
neglecting the importance of maintaining the correct proportion
between tacit and explicit knowledge (see Table 9, 7% gap).
Finally, the gap analysis of the other ve IC indicators (Table 9)
shows that the T company is aligned with BP under the other IC as-
pects (Process and Product Innovation, R&D Investments, Em-
ployee Motivation, Business Climate and Training).
Nevertheless, Employee Motivation and Business Climate pres-
ent small gaps (2% and 3% respectively) underlining that the T
company is less interested than BP in the welfare of Human Re-
sources, with respect to other IC aspects.
5.3. Managerial implications
The presented Fuzzy AHP methodology offers guidelines to
managers for improving the balance among IC components,
regarding their impact on the company value creation process.
The Fuzzy AHP approach prescribes the direct comparison between
the T company and a sample of BP belonging to the same industry,
in the perspective of improvement through benchmarking. Indeed,
an effective balance of IC components has to reect how they con-
tribute to business performance, making essential the choice of the
sample within the same business sector, in order to presume that
the IC value creation process is similar.
In our methodology the BP conguration of intangible assets
constitutes the benchmark that the Target has to follow in order
to maximize the efciency of its IC management. The results of
the analysis highlight that the relative importance of the IC compo-
nents of T and BP presents some relevant differences. The T com-
pany should develop IC strategies less focused on Relationship
and Customer Satisfaction, and more centered on Organization
and Effectiveness and Efciency of Procedures and Processes.
Moreover, the T company should put more efforts in enhancing
the Intellectual Agility of its Human Resources, without relying
too much on their Competence. The gap analysis of the IC
66%
34%
67%
33%
0%
10%
20%
30%
40%
50%
60%
70%
Human Capital Structural Capital
T
BP
Fig. 3. Intellectual Capital components: criteria.
35%
22%
43%
28%
20%
52%
Competence
Attitude Intellectual Agility
T
BP
Fig. 4. The overall ranking of Human Capital sub-criteria (Target sub-criteria are in
bold).
50%
18%
32%
46%
24%
30%
Relationship
Organization
Renewal and
Development
T
BP
Fig. 5. The overall ranking of Structural Capital sub-criteria (Target sub-criteria are
in bold).
A. Calabrese et al. / Expert Systems with Applications 40 (2013) 37473755 3753
component weights demonstrates that T gives too much impor-
tance to its relationship with customers, overlooking to improve
the soundness of its procedures and processes. Moreover, T also
underestimates the value of the intellectual agility as a source of
competitiveness in the ICT service industry. Actually, the capacity
to apply the company embedded knowledge in different business
contexts (intellectual agility) is strategically connected with the
reliability of the company procedures and processes (Calabrese,
2012; Calabrese & Scoglio, 2012). In this case, the tacit knowledge
in the organization is too high compared with the explicit one and
there are not adequate efforts in creating an organized explicit
knowledge repository that is continuously fed and leveraged. The
T company should favor knowledge sharing activities and the
structurization and formalization of capabilities, in order to en-
hance problemsolving, creativity and innovativeness in the organi-
zation. Moreover, a more collaborative environment should
improve business climate and employee motivation (Calabrese,
Costa, Menichini, Rosati, & Sanfelice, 2013).
The proposed methodology should be repeated regularly in or-
der to monitor possible shifts in the conguration of the IC compo-
nents, analyzing how IC investments are related to business
performance.
6. Conclusions
In this paper, we present a Fuzzy AHP methodology to analyse
the impact of IC components on a company value creation process.
The aim of the analysis is to provide guidelines to decision makers
in order to create and preserve a valuable balance among IC com-
ponents. Actually, many companies overlook this aspect of IC man-
agement, overinvesting in some IC components and neglecting
other ones. The direct consequence of this lack of awareness about
IC conguration is the ineffective exploitation of the company
intangible assets. Following this lead, the purpose of the proposed
methodology is to determine which IC investments should be re-
duce and which ones should be increased in order to improve a
company business performance. We suggest to balance IC compo-
nents by applying a benchmarking approach: a company, called
Target, is compared to Best Practices of the same industry with re-
spect to the conguration of their IC components.
We choose Fuzzy AHP to determine the ranking (or relative
importance) of the IC components, because, as an extension of
the classic AHP method, it considers the fuzziness and vagueness
of the linguistic judgments expressed by decision makers about
the impact of the IC components on business performance. None-
theless the existence of a large number of methods to handle Fuzzy
AHP, we present an innovative approach to determine the relative
importance of IC components, which starts from a review of
Changs extent analysis method (1996).
Finally, we apply the proposed Fuzzy AHP approach to a sample
of companies operating in the ICT services industry. The presented
methodology is a useful tool to support decision makers in manag-
ing IC investments, selecting which IC components should be lev-
eraged to improve performance. Actually, the outcomes of the
application offer direction for progress, that should constitute the
basis for the formulation of future IC strategies.
10%
12%
11%
12%
33%
14%
8%
11%
14%
14%
13%
18%
15%
15%
Training
Employee
Motivation
Business
Climate
R&D
Investments
Customer
Satisfaction
Process and
Product
Innovation
Effectiveness
and Efficiency
of Procedures
and Processes
T
BP
Fig. 6. Ranking of IC indicators (Target indicators are in bold).
Table 9
Gaps in the Intellectual Capital indicators.
Indicator Relative importance
Target (T)
(%)
Best practices (BP)
(%)
Gap (T-BP)
(%)
Customer satisfaction 33 18 +15
Process and product innovation 14 15 1
Employee motivation 12 14 2
R&D investments 12 13 1
Business climate 11 14 3
Training 10 11 1
Effectiveness and efciency of
procedures and processes
8 15 7
Table 8
Ranking of the Intellectual Capital Indicators.
Target company (T) Best practices (BP)
Indicator Relative
importance
(%)
Indicator Relative
importance
(%)
Customer satisfaction 33 Customer satisfaction 18
Process and product
innovation
14 Effectiveness and efciency
of procedures and
processes
15
Employee motivation 12 Process and product
innovation
15
R&D investments 12 Business climate 14
Business climate 11 Employee motivation 14
Training 10 R&D investments 13
Effectiveness and
efciency of
procedures and
processes
8 Training 11
3754 A. Calabrese et al. / Expert Systems with Applications 40 (2013) 37473755
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