Human capital en the creation of new practice areas in professional service firms

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Human capital en the creation of new practice areas in

professional service firms.

Dennis van der Voorn

10001692

30-09-2014

Abstract

Human capital is an important aspect for the performance of professional service firms. This paper investigates what aspects of human capital, in the form of SKAOs, are positively related to innovative activities in the form of a new practice area process. Explorative qualitative interviews are conducted which follow into seven propositions that will have to be proven in future research.

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Introduction

We are living in a world where service industries are rapidly expanding and where they are becoming increasingly profitable. Only in the year 1995, the service sector was seen as 35% of the low income countries, 52% of the middle income countries and 66% of the high income countries. The relation this provides towards the sources of wealth in countries stresses the importance of the service sector. The employment within several sectors also relates to the income per capita over time. As the income increases, the employment in the service sector increase and the employment in the agriculture and industry sectors decreases (Worldbank, 1995).

In the meantime, the research that has been conducted within the service industry is

significantly less than the research that has been conducted on product industries. Especially the concept of innovation has only recently been researched in a proper manner. It has taken scientists until 1997 to start with the description of a systematic process of innovation in service industries (Sundbo, 1997). Research on service innovation in itself is an interesting topic to assess, and the use of professional service firms certainly provides an addition to this. When thinking of Professional service firms (PSF) one must mainly consider management consultancy firms, legal and accounting firms. Other examples of firms that can be seen as PSFs are advertisement, architecture and investment banking firms, but the main focus is on consultancy, legal and accounting firms (Von Nordenflycht 2010). As these firms are known for their high integration of knowledge and their capabilities of quick learning, their

innovativeness is something to be investigated for both managerial and scientific reasons (Hitt et al, 2001). The importance of human capital for firm performance in PSFs is widely

accepted. Authors like Hitt (2001) and Teece (2003) have stressed the important part that human capital plays in these firms and even suggested that the key employees should be

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treated differently to maximize their potential within the firm. Because these PSFs are mostly dependent on their human capital to create and sustain competitive advantages, this human capital can be interesting to investigate and in particular the role that it may play in the process of innovation.

Research gap

To explore the theory on Professional Service Firms (PSFs), we must first create a clear image on what they actually are. Løwendahl et al (2001) state that PSFs are service firms where creation of value is knowledge intensive and is delivered by highly educated and specialized employees, who keep a close link to current scientific research on their area of expertise. The services provided are highly customized and provided by experts in the knowledge field, who have a high autonomy and responsibility in diagnosing and solving problems. The services are provided with high interaction with customers, and are usually constrained with by professional norms of conduct. Von Nordenflycht (2010) has identified three distinctive characteristics of professional service firms. These characteristics are knowledge intensity, low capital intensity, and a professionalized workforce. The aspect of low capital intensity provides an extra dimension to the PSFs.

As Professional Service Firms keep a close link to current scientific research and have high knowledge intensity, their innovation processes are one of the key focuses of researchers today. Still, while innovation in products has created a large number of articles about the concept, service innovation has only recently been researched properly. Service innovation was not yet a systematic process and the service firms rarely had R&D departments. Some firms had an innovation department, which was mostly based on collecting and sorting ideas that are generated in the company. Service innovation was mostly an unsystematic process of searching and learning, and the process and antecedents had to be investigated more properly

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(Sundbo, 1997). This process is later clarified by among others Løwendahl et al (2001), who state that the creation of value in professional service firms is a function of 3 factors. The first factor that is spoken of is the resource-endowment of the firm. While tangible resources are also spoken of, the focus lies on intangible resources like collective and individual

knowledge, as well as human resources. These resources create possibilities for the firm, and help the firm to decide what it actually wants to accomplish. This last aspect influences the second factor in the model, the strategy and domain choice. This part of the process decides what the firm’s activities should be, to whom these activities should be delivered and who and where these activities should be delivered. These strategy and domain choices in turn

influence the resource-endowment of a company, as it provides constraints what is needed to implement a strategy. Both these mentioned factors influence the final aspect of the

framework: service delivery. This involves the degree of customization a company offers, the definition of tasks and interdependencies between these. The service delivery also creates a learning curve towards the resource endowment, basically creating new knowledge to use in strategic decision and implementation decisions. Another view on the innovation process in PSFs comes from Anand et al (2007). According to this research, there are four elements that constitute the development of a new practice area, which in this study will be seen as the process of innovation in PSFs. The first element is socialized agency, which is described as a professionalized socialization process in which the employee learns when and how to show initiative. The second element is called differentiated expertise, which is the sum of the extension of existing frameworks, the development and application of new knowledge and the differentiation from existent practice areas. Creating defensible turf for a new practice area is seen as the third element. To create this turf, the new practice area must be accepted by internal power holders. To be able to hold and expand the boundaries of the turf, clients must be used to legitimize and defend them. The final aspect is the support an organization should

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provide to the new practice area. Even when the first three stages of the innovation process have successfully been completed, a lack of support may still have a bad influence on the sustainability of the new practice area. In the innovation process, socialized agency is seen as the catalyst of the process, and may lead to the emergence of a new practice area in

combination with one of the other elements spoken of. When all four elements are linked in a sequence, this emerged new practice area may actually be embedded. The process of

innovation in PSF’s that is described here will be used to investigate the relevant elements in this research.

There is also research that claims that processes and antecedents of innovation may not be the same in different institutional contexts (Robertson et al, 2003). In fact, the creation of

knowledge, which can create innovations, is different between science-based PSFs and legal-based PSFs. These differences are mainly spotted in the key activities of both types of firms. Science-based PSFs value experimentation and the accumulation of tacit knowledge within a period of time. They appropriate the value of knowledge through the generation of patents. Law-based PSFs focus on interpretation of information at hand. This means that law-based firms rely more on the integration of explicit knowledge, while science-based firms rely more on the integration of tacit knowledge. The antecedents of innovation in services have also been investigated and the research states that a manager can be a source of high knowledge creation and innovation, by creating the right structure and guidance (Robertson et al, 2003).

Human capital

The use of human capital seems to be an important aspect of service firm performance. The relationship between human capital and firm performance is curvilinear: a low level of human capital relates to a low level of firm performance and a high number of human capital relates to a high level of firm performance (Hitt et al, 2001). The importance of human capital for

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firm performance in PSFs is also stressed by Teece (2003), who states that since the expert talent of the human capital in PSfs is of great importance to the performance of the firm, the experts should be treated differently from the other staff members. An example of the way in which experts should be treated is the payment structure of the expert. This structure is based on a pay-for-performance model, which means that experts receive payments mostly for the value they create. But does human capital positively influence service innovations? Marvel & Lumpkin (2007) have stated that human capital positively influences innovations in

technology based industries, and is in fact vital to innovation outcomes, in both incremental and radical innovation. This relates, however, to product industries and firms. However, as human capital is an important aspect of PSF performance, it is suggested that human capital is also important for a PSF to be innovative. This suggestion is enforced by Berry et al (2006), who state that fostering human capital will result in incremental improvements. There is only spoken of incremental innovation in this article, but the importance of human capital for innovations is made clear.

If human capital does in fact have a positive influence on the innovativeness of a PSF, what characteristics of an employee would then have a positive relationship with the different stages of the innovation process? There are several examples of employee characteristics given by past research that enhance innovativeness in producing firms. A first aspect is the loyalty an employee shows towards the firm that he or she is working for (Akgün et al, 2007). When an employee has great loyalty towards its firm, and keeps its attachments towards the firm through emotional bonds, he may be able to increase innovativeness. This is because the loyalty of the employee increases the market awareness of the firm, and creates an

environment which is open to experimentation and suggestions from lower level staff (Akgün et al, 2007). Huhtala & Parzefall (2007) also state that work engagement is an antecedent of innovativeness. But as they state in their research, for an employee to be innovative, he or she

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has to be both able and willing to be innovative. The ability to be innovative can be seen as an above average intellect, and generally having more resources for a job than the job demands.

Going back to professional service firms there are clues into antecedents of innovativeness of employees. A first is that the use of multiple employees to solve problems and create

innovations can be more useful than a single employee being innovative. This group process is called collective creativity and the idea is that the past experiences of participants in a discussion may lead to new and valuable insights (Hargadon, Bechky, 2006). This might suggest that the ability of a PSF-employee to work together with its co-workers may positively influence the firm’s ability to innovate.

Antecedents of human capital in itself can be further explained by Ployhart & Moliterno (2011), who state that the emergence of human capital starts with an employees’ Knowledge, skills, abilities and other characteristics (SKAO- characteristics). These characteristics can be build up by non-cognitive, for example personality traits and interests and values. Cognitive parts of the SKAO characteristics are general cognitive ability, generic and specific

knowledge, the skill to be able to absorb knowledge better or faster and the experience of an employee that helps to transfer generic knowledge to specific situations. While the personal SKAOs are important for the emergence of human capital, the context of the organization plays an important role in amplifying the characteristics of human capital. When task complexity is higher, certain SKAOs are forced to be amplified within the organization. Another important aspect is the social environment that facilitates the emergence of human capital. Through these factors, generic SKAOs become context-specific SKAOs, which are usually more valuable to firms.

These SKAO-characteristics may be somehow related to the innovation process in law-based PSFs, as given by Anand et al (2007). The socialized agency, where an employee should

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acquire the knowledge and expertise to be able to solve issues of other employees or clients, for example seems to relate to the SKAO general cognitive ability. Also the other stages of Anand et al (2007) seem to have a connection to the SKAO-characteristics.

Little to no research has been done to try to link this innovation process to the

SKAO-characteristics as described by Ployhart & Moliterno (2011). Still, the aspects of the first three stages in the innovation process seem to relate somehow to several SKAO-characteristics. Even though all stages of the innovation process are important to reach a new practice area according to Anand et al (2007), it is not certain which stages are and are not related to the characteristics of Human Capital. This should become clear from exploratory research, which leads to the following research question:

How do SKAO-characteristics of human capital relate to the stages of the new practice area innovation process?

The relationships that will be investigated are the ones that seem to be implied by the

literature that will be discussed in the theoretical framework, which will legitimize the chosen stage and SKAO-characteristics to be investigated during this study. Contributions that this research question has for theory are mainly the ability to fill new gaps in the service

innovation literature, in essence the antecedents of human capital that stimulate

innovativeness in terms of successfully following this new practice area process. Both the influence of human capital on innovations and the antecedents of this human capital to be innovative have not been properly researched yet, so to fill up these gaps would be a useful contribution to current research. Managerial contributions are present in the form of possible selection procedures. When a manager knows the antecedents of an innovative individual, the manager can search for these antecedents if the company wants to work with highly

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employees. Another contribution may be that firms and individuals know which characteristics are most important in which phase of the innovation process.

The research question will be investigated with the use of qualitative data analysis. As no relationship between the two models has ever been suspected or proven, the study will follow an exploratory approach. A series of semi-structured interviews will be used to gather this qualitative data and the interviews will be set up to discover possible relationships between SKAO-characteristics and parts of the Innovation process. The interviews will be conducted in a legal firm based in Amsterdam, because of the legal firm orientation of the Anand et al (2007) paper.

Theoretical Framework

When analysing human capital, one must understand that human capital is built up by human capital resources. These resources can be seen as both individual and unit-level capacities, which are based on the SKAO-characteristics that can be accessed by the individual (Ployhart et al, 2014). The very start of the emergence of human capital resources is seen as the individual differences in capacities humans have. These differences can be divided between the SKAO-characteristics. The SKAOs that are relevant for achieving economic outcomes are seen as the human capital. This human capital is built up by human capital resources and the part of these resources that can be used to achieve a unit-level competitive advantage is called the strategic human capital resource.

There are no hard boundaries between SKAOs that are relevant for economic outcomes and those that are not, this depends on the situation at hand. A distinction can also be made between individual SKAOs and unit-level SKAOs, the difference lying in the individual and collective level. Overall, human capital resources can be divided in 4 groups: the human capital resource at an individual level which will try to create best practices, the human capital

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resource at a level which will try to create best practices and both individual and unit-level strategic human capital resources which will try to create a competitive advantage (Ployhart et al, 2014).

Now, let’s look at the SKAO-characteristics that will be investigated in this study. As the experience of an employee is by multiple studies seen as a positive indicator of performance (McDaniel et al, 1988) (Stuart, 1990), the innovative correlations of the characteristic will be investigated in this study. The same correlations are found by multiple studies for the SKAO characteristic general cognitive ability (Schmidt, Hunter, and Outerbridge's, 1986) (Murphy, 1989) (Parker & Fleishman, 1960). General cognitive ability is seen as relatively stable throughout an employees’ adult life. The SKAO-characteristic is also seen as the strongest predictor of outcomes in educational and professional dimensions. Nevertheless, cognitive ability is build up by many smaller concepts and to fully describe this characteristic, the underlying concepts must be described as well. A first part of general cognitive ability is the comprehension of information. This involves the understanding of the information that is exposed to an individual and the ability to gain insight into this information. A second aspect of general cognitive ability is the retention of knowledge. This means that an individual remembers the information that he or she has been exposed to. The manipulation of

information is a third aspect of this construct, which is seen as reforming the information and trying to change it. The final aspect of general cognitive ability is the creation of information. This means that through general cognitive ability new information may be created (Jensen, 1998). As new information is usually the basis of innovation, this particular aspect may be an important link in the innovation process of Anand et al (2007).

The other variable that may be of importance to achieving differential expertise is the SKAO called experience. The most important consequence of experience is that it may allow an individual to learn and transfer from generic knowledge to firm and job specific knowledge.

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The concept of experience is also built up by various underlying types, which will be

described here. In the study of Quinones et al (1995) the concept of experience is called work experience. This is by most studies seen as the time that is spent on the job an individual has. Other studies only study the amount of times an individual has performed certain tasks within the job. The types of experience emerge because of the various ways experience can be measured and the scale on which the measurement takes place. There are three measurement modes given in the study. The first is the amount of times that an individual has experienced something, the second is the time that is spent on the experience and the third is the type of what has been experienced. The three levels of specificity are organizational level, job level and task level. By using both the measurement type and the level of specificity a framework emerges with nine types of work experience. On the organizational level the three types are the number of organizations an employee has experienced, the time spent in the organization and the type of the organization. On the job level, the three types are the number of jobs an individual has experienced, the time spent on the job and the complexity of the job. Finally, on the task level, the three types are the number of times a task is performed, the time spent on the task and the task complexity and criticality (Quinones, 1995).

Skills are seen as an ability to learn information more quickly or to learn more in general. These skills generally apply to aspects learned in formal education or through experience. Examples of skills are communication skills and being able to solve problems quickly

(McCrae & Costa, 1996). Personality is a stable combination of traits which generally do not change throughout an individual’s life. The five factor model of McCrae & Costa (1996) shows five aspects of an individual’s personality. A first aspect is emotional stability, the resistance of someone to stress or anxiety. Extraversion is the degree to which an individual gains energy from the company of others and the interaction with them. Openness to

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experience is seen as the desire to learn new aspects and gain new experience and conscientiousness relates to the degree to which an individual can be depended on.

As this study continues, relationships will be sought between the SKAO’s that come forward in this research and the stages in the innovation process of Professional Service Firms. After the data is gathered, there should be a renewed understanding of the relationships that may take place between the antecedents of human capital and the innovativeness of an individual and even an entire organization.

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Method

The research question is based on how human capital has a relationship with the innovation process in PSFs, using SKAO characteristics (Ployhart et al, 2014) as the variables of human capital and the innovation process of Anand et al (2007) which produces the following question:

How do SKAO-characteristics of human capital relate to the stages of the new practice area innovation process?

This research question will be investigated with the use of a case study. Multiple cases from a single legal firm in Amsterdam will be studies to gain information about this issue. Because only employees cannot assess whether they score high or low on the SKAO characteristics, both employees from various levels and managers will be used to participate in the data-gathering process. As the innovation process of Anand et al (2007) focuses primarily on legal firms, it makes sense to investigate this research question within an actual legal firm that would show this kind of innovation process. This setup would produce the highest quality of research possible. An early agreement with a board member has already provided access into this firm, which creates the opportunity to widely investigate within the company. The

participants will be personally invited to ensure cooperation. The selected cases are on the one hand employees of this legal firm, with a preference for higher placed personnel as they have more responsibilities and autonomy and have more opportunities to act in the innovation process. The sample population will be 10 respondents, who will provide the data necessary to answer the research question.

This research will be conducted in a qualitative manner, because of the exploratory nature of the research question and the lack of research conducted on this topic. Because this study is mostly seeking to build theory, the choice for a multiple study seems like the right

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one, because when exploring a phenomenon one sided results cannot expose the true theory hiding beneath (Thomas, 2011). To lighten multiple sides, there will be interviews conducted with both employees and their managers.

Interviews are the way in which the data will be gathered in this study. These

interviews will provide information where other types of data analysis will not. This is mostly because firms do not have information available about how their employees score on SKAO-characteristics or what they have been doing in the innovation process. Interviews should not be too structured, because the specific answer to the research question is still unknown. There is some idea of what the answers should look like, but new information can be lost when conducting fully structured interviews. Therefore, open ended questions will be asked so that the interviewee stays on topic but can provide new insights into the theory (Leech, 2002).

The setup of an interview will be that each interview lasts about 30 minutes. Within this time, open ended questions will be asked while leaving room for possible new questions that may arise during the interview. Both interviews, to the supervisor and the employee, will be about the characteristics and behaviours of both managers and employees within the organisation. The interviews will be built up by 3 aspects. A first aspect is the innovative activities in which the interviewee has been or is active. The second aspect are the various SKAO characteristics that the interviewee may or may not possess. The third aspect is about the occurrence of the various stages of the innovation process as described by Anand et al (2007). When innovation projects do not qualify as creating new practice areas, the possibility exists that one or more of the stages in the process will not fully occur. In this case,

comparable information will be used to retrieve usable results, with the limitation given that the process could not be fully followed. The interviews will be recorded and transcribed afterwards.

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new insights which can be used to build theory (Leech, 2002). Because this research is of a very exploratory nature, the openness to new possible insights is of high value to come to a reliable result. Another strength of the method is that because all respondents work in the same legal firm, the study gives a clear view on how the research question applies to the particular firm. A clear limitation is that the results are hard to generalize among other legal firms, because there is no data collected in other firms. Due to limits in time and access the sample size is therefore not at a level which would ensure full validity and generalizability (Marshall, 1996). Another limitation is that clear answers will be hard to provide, as theory will only be build and will not be tested. Future research could try to confirm the theories built in this study.

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Main Findings and conclusions

To be able to answer the research question, the gathered data must be analysed. The data has been transcribed into readable text, so that there is a text to work on. After the process of creating a workable text, it is time to start coding and rearrange the text so that parts of the text is categorized. Because of the exploratory nature of this study and the semi-structured nature of the interviews, a combination of an inductive and deductive way of analysing the data is in order. This means that certain codes will be set up before the analysis of the

transcribed data, but they will also be created out of the relevant data in the interviews, where the answers of the respondents are leading in creating codes (Miles & Huberman, 1984). After the coding process a number of 10 codes have been captured out of the conducted interviews. These codes include evaluations on whether or not the employee possesses a certain SKAO-characteristic and on whether or not the employee has been active in the aspects of the stages of the innovation process of Anand et al (2007). These aspects are not the only ones that have been coded, there are also parts of the descriptions of the different projects employees and managers have been active in.

As the coding process continues, it becomes clear that while the company that has been investigated in this study works in various different innovative projects, none of these projects constitute the process of developing a new practice area. Because of this, there is no real differentiated expertise found, which is why this code has been deleted from the process of analysis. While employees and managers have been able to develop many ideas and see the opportunities and threats within the organisation, there are nog signs found of the employees extending frameworks or differentiating from existing practice areas, as new practice areas have not been developed. What does come forward in the research is the development and application of new knowledge in the form of the identification of

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process of differentiated expertise, but because of the divergent forms of innovation processes this stage has been replaced by the identification of opportunities and threats.

The other stage that is not found is the defensible turf stage. As new practice areas are not developed, these areas cannot be defended or expanded. However, the aspect of this stage that does come forward is the removal of barriers to acceptance by internal powe r holders (with a frequency of 17). Even though new practice areas are not created, the ideas that employees and managers generate are still in need of defending towards boardmembers, partners and other members of the organisation. As this aspect has in fact come forward from the gathered data, this aspect is used in the analysis. Data of socialized agency (with a

frequency of 14) and organizational support have in fact been found in this research, which means that these stages can be fully used to analyse the human capital compononents related to these stages. The organizational support is in this research divided into support from the board (with a frequency of 42) and the support of partners and other employees (with a frequency of 36), as these are perceived by the interviewees as two substantially different aspects that are caused by different factors. Even though these stages have been found, the realization must still be made that they have not been found as part of the development of new practice areas, as mentioned.

The main SKAOs found in the gathered data are personality (with a frequency of 22), skills (with a frequency of 42) and experience. The last aspect has been divided into legal experience (with a frequency of 26) and experience outside legal conduct (with a frequency of 20), as these two aspects seem to relate to different aspects of the innovation process. The aspect that the data mainly displays is the role of the support from both the board of directors, the partners and the rest of the organization. While the focus of this study has been the effect of the SKAO-characteristics on the stages of the new practice area process (among which is the support of the organization), the data mainly displays the effect of support on the

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innovation. This has created a gap in the data, as the effect of SKAOs on organizational support are not found. The other aspects that the data specifically focuses on, is the effect of the two types of experience on various stages of the new practice area process. This is where the most relevant emphasis lies in the gathered data. Stated in the tables below, the data gathered on the SKAO-characteristics is checked for an implied positive relationship with the innovation process. Each type of SKAO is displayed in a different table.

Table 1.) Personality and innovation. (stated in the table are the percentages of the interviewees which implied a positive relationship. Note that only 90% of the interviewees talked about personality in general. The

percentages in the table are based on the total number of interviewees)

Socialized agency Identification opportunities/threats Defending ideas Support board Support partners/employees Extraversion 10 20 10 Agreeableness Conscientiousness Emotional stability 10 10 Openness to experience 60 10

Table 1 shows the implied positive relationships between personality aspects of human capital and the stages of the innovation process. The most obvious outcome of the table is that 60 percent of the interviewees have mentioned openness to experience to be positively related to

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the identification of opportunities and or threats. This aspect seems to be supported by Mcrae & Costa (1997), who state that individuals who score high on the aspect of openness to experience may be better in adapting to changing environments and tend to be more able and willing to think about new and challenging ideas. Also, when an employee possesses low openness to experience, this individual might be driven to conservatism and is not active in threat or opportunity identification (George & Zhou, 2000). As this aspect, indicated by data, has already been proven by previous literature, it is not of the highest relevance to go in-depth to at this point. A less powerfull outcome of table 1 is that extraversion may be positively related to the defence of ideas and overcoming resistance. This has only been stated by 20 percent of the interviewees, but it might be supported by previous literature. Wallach et al (1968) already stated that individuals with a higher level of extraversion are better at getting their point across and convince other individuals of their ways of thinking. This also means that these outcomes do not provide new insights in the literature. The second table displayed below describes the implied relationships between experience and the stages of the innovation process. Note that only 90% of the interviewees talked about legal experience and only 80% of the interviewees talked about experience outside law. The percentages in the table are based on the total number of interviewees. As can be seen in the table, legal experience is seen as positively related to socialized agency by 70% of the interviewees. This seems to make sense because legal experience and socialized agency have a few aspects in common. A first important aspect of socialized agency is gaining knowledge or expertise on the subject. This will mostly be achieved through multiple years of experience within a legal environment. Fullfilling formal expectations towards becoming a partner is another part of socialized

agency. The path towards becoming a partner is largely determined by the years of tenure and the experience and learning an employee has gained (Anand et al, 2007).

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Table 2.) Experience and innovation. (stated in the table is the percentage of the interviews in which the relationship is implied. Note that only 90% of the interviewees talked about legal experience and only 80% of the interviewees talked about experience outside law. The percentages in the table are based on the total number of interviewees.)

Socialized agency

Identification

opportunities/ threats

Defending ideas Support board Support

partners/employees Legal Experience 70 20 50 Experience outside law 50

Because of the large percentage of the population who implied the relationship and because the implication seems to be supported by literature, the third proposition is:

Proposition 1: Legal experience of human capital in a law professional service firm is positively related to socialized agency.

According to 50 percent of the interviewees, experience outside of law is positively related to the identification of opportunities and or threats. “New ideas emerge at the boundaries of various disciplines”. This is a quote from one of the interviewees, which suggests that an individual can better see opportunities and threats when he or she has been active in another sector than the sector of the current workplace. It is proven that high levels of knowledge can be very important to innovation, especially when the environment is very dynamic (Thornhill, 2006). According to 50 percent of the interviewees in this research, experience outside the sector is the most important knowledge aspect towards innovation. This leads to the fourth proposition:

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Prosition 2: Experience outside law of human capital in a law professional service firm is positively related to the identification of opportunities and or threats.

Defending ideas, the particle of the innovation process stage defensible turf, is the stage where an employee has to defend the generated ideas to partners, other employees and finally the board of the organization. According to 50 percent of the interviewees in this research, legal experience and the defence of ideas are positively related to each other. As the interviews indicate, the factor that plays a large role in this is the hierarchy within the organization. This means that even though a new employee has a high expertise of what is going on and interesting ideas, the chance is low that the employee is able to defend the ideas to resisting parties within the organization. Ahmed (1998) has already indicated that

hierarchical cultures within organizations are able to hinder innovation. This might indicate that the hierarchy within a professional service firm can indeed limit the defence of ideas for younger employees within the organization. Another aspect of the implied relationship is that employees gain more confidence with years of experience, which also helps them to defend their ideas. This seems to be supported by Merel et al (2000), who state that confidence grows with years of experience within a certain field. Since literature seems to support the reasoning of the interviewees in this research behind the implied relationship, this leads to the following proposition:

Proposition 3: Legal experience of human capital in a law professional service firm is positively related to the defence of ideas.

The indication of the interviewees that legal experience might be positively related to the identification of opportunities and or threats is at a relatively low level compared to the other three implications. Since a relatively low number of interviewees has mentioned this

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Table 3.) Skills and innovation. (stated in the table is the percentage of the interviews in which the relationship is implied)

Socialized agency

Identification opportunities/threats

Defending ideas Support board Support

partners/employees Thinking commercial

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₃₀

₃₀

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The three main skills that have been mentioned and linked to the theory are the ability to think commercially and in the interest of the client, the ability to persuade other individuals and the ability to shift quickly from low levels of abstractions to high levels of abstraction. The implied relationships between the skills and the stages of the innovation process are all

implied by a relatively low number of interviewees. Therefore, only the two implications with the highest number of mentioning by interviewees will be investigated further. The first implication that will be investigated is the possibility of advocates to shift quickly from levels of abstraction and the relationship with the stage of socialized agency. 30 percent of the interviewees has mentioned a connection between these aspects. The main reason for the implication is that, as stated by the interviewees, shifting from low to high levels of

abstraction are important for any lawyer to be successful in his or her task. This means that if a lawyer would not possess this skill, the lawyer would not be able to follow the steps of socialized agency, as the individual lacks an important skill to be a successful lawyer. Since

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the indications is not that strong, future research will have to indicate this relationship. The second implication in table 3 is that the ability to persuade other individuals is positively related to the defence of ideas. The ability to persuade other individuals is already defined as a way to get ones point across, convince others of this point and also convincing other

individuals to see the value of the ideas and insights of the individual who is able to persuade others. This means that this indication does not create the necessary insight into the theory. Also, as the relationship is only indicated by a small percentage of the data, the indication is not strong enough to display.

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Limitations and future research

As this study has been exploratory, limitations and directions for future research are naturally involved. A first aspect is that, due to a small sample size and an exploratory research

dimension, the validity and generalizability of this study are not very high. This is why this study builds towards propositions instead of clear results. The gathered data indicates that a relationship may be occurring, but this is not proven yet (Marshall, 1996). This also suggests that future quantitative research may investigate these implied relationships further. Another possible limitation may be the fact that the data used in this study is solely gathered from individuals that have had something to do with innovation processes. This excludes the less innovative employees from the data, which may decrease reliability. On the other hand, this study has sought the different aspects of human capital that have helped them in the process of innovation. If employees had been included that have never participated in innovative projects, they would not have been helpful for this study. Future research may investigate the employees that do not participate in innovative projects and see which SKAOs they lack in comparison to the ones that do participate in innovation.

Due to a lack of gathered data in these areas, the SKAOs general cognitive ability and interests and values have not been investigated. This means that there is a high probability that not all possible relationships between the SKAOs and the stages of the innovation process have been implied. This might be investigated further by future research, in which more emphasis can be laid on the cognitive ability and the interests and values of human capital.

A clear limitation of this study is the fact that the new practice area process of Anand et al (2007) does not appear in the gathered data, as new practice areas have not been created within the organization. A first consequence of this is that of the stages differentiated expertise and creating defensible turf, only particles have been found in the gathered data,

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which makes it harder to investigate the effect of human capital on these stages. The second consequence is that even though certain stages or parts of stages have been mentioned in the gathered data, the goal has never been to create a new practice area. This means that even though the steps of the process have been found and measured, the goal of these steps was never to create a new practice area. This could mean that the analysed data would be different if the goal was in fact to create a new practice area and therefore the data is not as reliable as it should be. Still, as solely the steps in the process have been analysed and not the motivation behind these steps, this seems unlikely. Future research may, however, seek actual examples of new practice area processes and repeat this study to check for the reliability and also the generalizability of this study.

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