Measuring process capital from a system model perspective

Purpose – The purpose of this paper is to seek effective measurement methods that reflect the real value of process capital. Design/methodology/approach – From a system model perspective, the authors refined the existing knowledge of process measurement by distinguishing three kinds of indicator for the value of process capital: input, output, and the capability to manage process capital. The design of this study, therefore, incorporates a longitudinal analysis of the content of process capital and traces its evolution by attaching a monetary value to activities and assets. Findings – The tested results reveal that the input measure is a less effective measure for process capital, while the output measure is a valid one for measuring operational and managerial performance of process capital. The capability to manage process capital can predict all dimensions of process capital in both the short‐ and long‐term periods. Practical implications – A practical view of process capital enhances the current understanding of process capital by highlighting the sustainability of process value and the validity of measuring output and management capability of the process capital. Second, the study results also explain the productivity paradox because of the complexity of the hidden cost of process input and the distinctive capability of organizations in managing technology and complementary resources. Finally, the system view of process capital, from input through process to output of the process capital, with operationalized measures, provides a useful reference for examining intellectual capital. Originality/value – The findings offer a more robust definition of process capital as a firm's established capability to exploit the knowledge of business processes and organize resources in designing and managing business activities for sustained value.