Sustainable Knowledge-based Strategies for Value Creation

Purpose – The main aim of this work is to place the value creation process within the Sustainable Growth Strategies framework.The economic sustainability of a strategy at first requires value creation for all stakeholders, according to the Stakeholder Value Theory.The economic sustainability of a strategy also requires it to be legitimized in terms of Corporate Social Responsibility (CSR). In this context, Intangible Assets and Knowledge Management assume a special relevance.The authors retain that the notion of Value Added (VA) and the accounting based on the Value Added Income Statement, adapted to a context of Intellectual Capital, is the best way to measure the value creation of a strategy that considers the Corporate Social Responsibility.Design/methodology/approach – The paper uses the notion of Value Added (VA) (Pulic, 2000; 2004; 2008) to propose a methodology that is able to distinguish between industries that carry out sustainable strategies and industries that are unable to do it. The proposed methodology is based on the analysis of the Value Added and its components, starting from a reinterpretation of the concept of VAIC (Value Added Intellectual Coefficient) made up by the same authors of this paper. An empirical analysis based on the composition of the VA in ten Italian industries, by using an overall sample of 1,000 firms, has been carried out.Findings – From results it emerges that:1. in industries with not so sustainable strategies (traditional sectors) the weight of the Cost of Employees on the VA (human capital investments) is less than the other sectors (low human capital intensity). In these sectors the value creation strategy is mainly based on dead knowledge, embedded in machines (physical capital);2. in industries with more sustainable strategies (non-traditional sectors: consulting, advertising, research, etc.) the economic value creation is mainly based on live knowledge, embedded in human resources (high human capital intensity). In these sectors we have lower productivity of work (VA/Human Capital) and higher employment.Originality/value – The originality and the value of our methodological proposal can be appreciated by taking into account that in the literature there is no accounting-based methodology that is able to identify the firms with sustainable strategies within the set of all firms.Practical implications – Our approach, based on the extension of Pulic’s contribution, makes it possible to reduce the risk of myopic valuation of economic performance. Through our methodology it is possible to highlight the effects of sustainable strategies based on knowledge investments oriented towards the Stakeholder Value Theory and Corporate Social Responsibility (CSR).