Due to significant global market opportunities and challenges, organizations are seeking to become strategy-focused, encouraging the management researchers globally to study strategically progressive and fruitful management practices that could maximize overall organizational effectiveness. Intellectual capital is widely considered as a dynamic value concept which positively affects the organizational performance (Bontis, 1998). Since organizational effectiveness is considered as a wholesome and a comprehensive measure to gauge organizational performance (Lee and Choi, 2003), this study attempts to explore the impact of intellectual capital and its components on organizational effectiveness of public and private sectors in India. Collective sample response of 420 respondents, from both the sectors, was collected through standardized questionnaires and subjected to regression analysis through SPSS v20. The findings reveal that the impact of intellectual capital on organizational effectiveness is higher in public sector organizations than in private sector organizations. Human capital and structural capital, and not customer capital, impact the organizational effectiveness in public sector organizations, whereas all the three components of intellectual capital impact organizational effectiveness in private sector organizations.

Management of intellectual capital has been well recognized as a strategic tool globally. Organizational ability to realize the economic value from its collective knowledge assets of human skills, product distribution, affiliations and information, has become a hallmark of the new economy. Competition today focuses on competencies, relationships and new ideas, thus making the concept of intellectual capital important for maximizing the enterprise value. Intellectual capital has been conceptualized as the non-physical or non-tangible resources in an organization which create, accumulate and distribute knowledge through three major entities, namely, the employees of an organization, the markets in which the organization operates, and finally the formal and informal policies and practices which an organization follows. Knowledge management researchers term these three bodies of intellectual capital as Human Capital, Customer Capital and Structural Capital, respectively.

Human capital is scarce, of great value, and difficult to duplicate and replace, and hence considered as a strategic asset that can promote organizational values and strengthen its core competitive advantage. Customer capital is valuable because it integrates the business’s strategies, framework and vision, long-term strategies and objectives (e.g., creating customer value) of an organization into tangible actions which aim at ensuring long-term organizational sustainability. Structural capital is a scaffold and a driver for gearing up higher efficiencies in human capital and customer capital through refined situational factors. Therefore, the organizations these days, in their efforts towards becoming high performing systems, tend to optimally realize the might of their organizational intellectual capital and formulate and undertake specific policies, programs and activities and build supporting infrastructural capabilities. This gives an impetus to the need for assessing the contribution of organizational efforts on this front towards achieving organizational objectives.

Knowledge Management Journal, IFAC, 2007, Organizational Effectiveness, The Impact of Intellectual Capital, Organizational Effectiveness, Comparative Study, Public and Private Sectors, India.