The university as a capital creation system
The purpose of an organization is to create capital more productively than competing organizations in its sector or geography. In a market economy, those who cannot meet this goal ultimately disappear, as we have seen with the slow decline of traditional retail or the rapid destruction of brick and mortar travel agencies. Typically, we equate capital with financial assets, but there are multiple types of capital. For us, there are six main categories of capital (Table 1), but this is not critical as the important point is not a static taxonomy but an ever evolving process of capital creation, which occurs when one or more forms of capital are converted to other forms of capital or there is an enhancement of a particular capital.
Table 1: Types of organizational capital[1]
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Economic
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Financial, physical, and manufactured resources
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Human
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Skills, knowledge, and abilities of a workforce
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Natural
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Rights to use or extract natural resources, such as farming and mining
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Organizational
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Institutionalized knowledge and codified experience (software and databases), routines, patents, manuals, and structures
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Social
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The ability of an organization to benefit from its social connections
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Symbolic
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Organizational reputation, image, brands, and ranking within an industry
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Universities concentrate on creating human (graduates) and organizational (knowledge and intellectual property) capital. Tenure and promotion supports human and symbolic capital creation process as universities strive to develop an accomplished faculty of national or international standing. Many universities pay a lot of attention to social capital creation through mechanisms such as fraternities, sororities, and social and sporting events for alumni and supporters. Quadrangles, columns, football stadiums, climbing walls, brick buildings, etc., all support symbolic capital creation because they represent the perceived ethos of an esteemed place of learning and social interaction.
Universities are complex capital creation systems. They don't have a major single focus, such as generating economic capital. They have to coordinate the development of two types of human capital (students and faculty), fund a research agenda to create organizational capital, and develop social and symbolic capital to enhance their reputation and fund-raising prowess.
Covid-19 massively perturbed most university's capital creation process. For example, revenue from tuition, student accommodation, and parking likely declined, and closed labs stalled the creation of intellectual property. Universities had to develop interventions, such as online classes, to partially restore the health of their capital creation system. More needs to be done in most cases. Indeed, some might simply fail and close their classrooms and labs, and others might innovate their way to a higher level of capital productivity.
Over the next several weeks, in series of posts, we (Blake Ives, Munir Mandviwalla, and Rick Watson) will address the impact of Covid-19 on different types of capital with the aim of identifying major issues and innovative actions.
[1] Mandviwalla, M., & Watson, R. T. (2014). Generating capital from social media. MISQ Executive, 13(2), 97-113 and
Watson, R. T. (2019). Capital, Systems and Objects: The Foundation and Future of Organizations. Athens, GA: eGreen Press.
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Blake Ives, Munir Mandviwalla, and Rick Watson
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