By: Dr. Tamanna Dalwai and Dr. Menila James OQNHE Conference 2017, Muscat, 21-22 March Quality Management & Enhancement in Higher Education The Relevance of Intellectual Capital Reporting for Higher Education Institution By: Dr. Tamanna Dalwai and Dr. Menila James

Introduction Definition of Intellectual capital (IC) European Commission (2006) defines intellectual capital as the set of intangibles that support the organisations in creating value for its stakeholders by transforming their systems through effective use of materials, financials and human resources.

Introduction – (contd..) Importance of Intellectual capital reporting prominence of intellectual capital drivers over tangible resources competitive advantage attributed to resources such as skilled employees, strong customer relationships, patents or unique business models (Nielsen et. al. 2017) reduction in information asymmetries (Lev 2001)

Importance of Intellectual capital reporting for universities or colleges Human capital theory : Universities and colleges are considered as instruments that develop scientific and technological capabilities for maintaining standard of living Facilitate the production and dissemination of knowledge by investing in research and human resources (Sa´nchez et. al. 2006) Intellectual capital and knowledge management assist the HEIs in managing their input and outputs that are predominantly intangibles and there are limited instruments to measure and manage them (Canibano and Sanchez 2004)

Oman – Education and Challenges Tremendous growth in the education sector over the last few decades Three primary schools with no colleges or universities in 1970 (Al Shmeli 2009) Falling oil prices - education budget allocation slashed : 3 billion in 2015, 2.5 billion in 2016 to 1,586 million in 2017 (ONA 2017)

Objective of the research To argue in support of the relevance of intellectual capital reporting in the higher education sector of Oman. - By reviewing the various developments and initiatives taken in the higher education sector around the world for measuring and reporting intellectual capital reporting.

Literature Review Five major drivers of change for HEI (Ernst & Young, 2012) Democratisation of knowledge and access Contestability of markets and funding Advancement of digital technologies Global mobility Deeper linkages with the industry In light of socio-economical perspective and the need for information transparency, intellectual capital reporting plays an important role for the higher education sector (Córcoles and Ponce 2013)

Literature Review (contd…) Intellectual Capital classification Human Capital Structural Capital Relational Capital Limited recognition of intangibles in the accounting framework

Literature Review (contd…) Why should HEIs introduce intellectual capital reporting (Elena-Perez et. al. 2014): Knowledge and human resources (intangibles from university perspective) are not recognised in the traditional accounting framework Transparency from the HEIs Transformation through new management or reporting systems Evaluation of HEIs and industry collaborations HEIs need to benefit working in a non-profit environment which can be supported by intellectual capital management Strong linkages between HEIs and companies can be strengthened Researchers are brought closer to the needs of the public and private sector requirements thereby having a transparent assessment of performance Interplay of human resource management and structural capital that leads to enhancement of structure and employee creativity

Intellectual capital reporting initiatives Austrian Universities Compulsory requirement for the universities to submit the intellectual capital report Report should contain a minimum of i) university activities, social goals, its objectives and strategies, ii) intellectual capital discussion in the tripartite classification of human, social and relational capital and, iii) the processes as per the performance agreement that includes the university output and inputs.

Intellectual capital reporting initiatives (contd ….) Spanish Universities For effective allocation of funds, developed a model for HEIs reporting Model had a set of indicators (around 40) Examples - people teaching and researching in different fields, with associated results of PhD theses, scholarships and external funds amassed, measurement of graduates success in labour market, increase in researcher qualifications, importance of lifelong learning courses etc.

Intellectual capital reporting initiatives (contd ….) HERO (Intellectual capital in HEIs and Research Organisations) Initiative led by European Association of Research Managers and Administrators (EARMA) in collaboration with the European Center for the Strategic Management of Universities (ESMU). Aim: Disseminate intellectual capital experiences from the private sector to the universities and research organisations (Leitner 2003). Facilitates benchmarking, and also establish a common set of indicators

Intellectual capital reporting initiatives (contd ….) Observatory of European Universities (OEU) Formed in 2004 involving fifteen universities and research institutes and supported by the Network of Excellence PRIME Aim: Adequate governance of research activities and, to understand and improve the management of intangibles for enhancing the universities level of quality and competitiveness Outcome: Preparation of intellectual capital report which includes: vision of the institution intangible resources and activities system of indicators

Intellectual capital reporting initiatives (contd ….) Guidelines for intellectual capital management and reporting for European Universities Aim : To provide a framework that encompasses managing and reporting of intangible assets in universities Universities to identify performance measurements and evaluate the strategic impact of IC measurement and reporting at three different levels that include: i) department and course level, ii) university level and iii) society and region development level

OMAN’s HEIs AND INTELLECTUAL CAPITAL REPORTING No compulsion to prepare intellectual capital reports HEIs required to undergo OAAA – quality audit and institutional accreditation Standards cover a range of HEI activities – which also cover intellectual capital indicators Example: Staff Profile (criterion 8.2) - Number of academic staff Example: Research performance (criterion 4.2) - Number of staff publication per academic staff

Conclusion Agree with the Observatory of European Universities (2006) that HEIs around the world should be required to comply with IC reporting Lacks of uniform approach by the HEIs in managing, measuring and reporting IC components. IC reporting can be made part of quality assurance process in a more defined approach HEIs in Oman would benefit to use IC tool for strategic decision making – enhance transparency and be measurable for its impact on the society

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