Measurement practices for knowledge management: An option perspective

Abstract

This article develops an option pricing model to evaluate knowledge management (KM) activities from the following perspectives: knowledge creation, knowledge conversion, knowledge circulation, and knowledge carry out. This paper makes three important contributions: (1) it provides a formal theoretical grounding for the validity of the Black-Scholes model that might be employed to KM; (2) it proposes a measurement framework to enable leveraging knowledge assets effectively and efficiently; (3) it presents the first application of the Black-Scholes model that uses a real world business situation involving KM as its test bed. The results prove the option pricing model can be act as a measurement guideline to the whole KM activities.