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Investment in organizational capital

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  • Orlando Gomes

Abstract

Organizational capital is a specific form of capital that firms accumulate. It relates to the development of codes, technical languages, practical arrangements about how the work is done and to the creation of an organizational culture. The distinctive feature of this form of capital is the fact that it does not contribute directly to an output result. Instead, it can be thought as creating the correct environment for the human factor to maximize its capability of generating value, that is, organizational capital works as an external effect on the accumulation of the human capital input. Nevertheless, organizational capital is a form of capital and therefore it has an investment process associated with it. The paper considers the process of investment in this form of capital and recognizes that it introduces important changes over the firm's profit maximization problem. The problem gains new features relating to its dynamic nature and a condition that guarantees saddle-path stability can be derived. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • Orlando Gomes, 2007. "Investment in organizational capital," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 107-113.
    • Handle: RePEc:wly:mgtdec:v:28:y:2007:i:2:p:107-113
    DOI: 10.1002/mde.1309
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    References listed on IDEAS

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    1. Robert J. Gordon, 2000. "Does the "New Economy" Measure Up to the Great Inventions of the Past?," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 49-74, Fall.
    2. Chowdhry, Bhagwan & Garmaise, Mark J., 2003. "Organization Capital and Intrafirm Communication," University of California at Los Angeles, Anderson Graduate School of Management qt8j01z46g, Anderson Graduate School of Management, UCLA.
    3. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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