It’s one of the only ways business leaders can know for sure that they’re getting what they paid for.Īlong with co-authors Hao Jiang (of Michigan State University), Christopher A. “Can firms exploit economic rents from skilled labor?” Understanding organizational capital is more than just another problem for academics to solve. “We know that talented workers create value for the firm, but they also require higher pay,” Sun says. It’s one of the only ways business leaders can know for sure that they’re getting what they paid for. Understanding organizational capital is more than just another problem for academics to solve. It includes a wide range of non-production expenses such as rent, utilities, computer equipment, marketing and advertising, management and administrative salaries, and more.” Some scholars use the accounting metric SG&A expenditures (selling, general and administrative expenses) as a proxy, but as Sun points out, “it’s very indirect. But despite its obvious significance, there is no clean, universally accepted way to measure organizational capital. There is an academic term for the portion of value creation originating from a talented workforce–organizational capital.
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