scispace - formally typeset
Search or ask a question
Journal ArticleDOI

Intellectual capital and traditional measures of corporate performance

TL;DR: In this paper, the authors investigate the association between the efficiency of value added (VA) by the major components of a firm's resource base (physical capital, human capital and structural capital) and three traditional dimensions of corporate performance: profitability, productivity, and market valuation.
Abstract: The principal purpose of this study is to investigate the association between the efficiency of value added (VA) by the major components of a firm's resource base (physical capital, human capital and structural capital) and three traditional dimensions of corporate performance: profitability, productivity, and market valuation. Data are drawn from a sample of 75 publicly traded firms from South Africa from business sectors heavily reliant on intellectual capital. Empirical analysis is conducted using correlation and linear multiple regression analysis. Findings from the empirical analysis indicate that associations between the efficiency of VA by a firm's major resource bases and profitability, productivity and market valuation are generally limited and mixed. Overall, the empirical findings suggest that physical capital remains the most significant underlying resource of corporate performance in South Africa despite efforts to increase the nation's intellectual capital base.
Citations
More filters
Journal ArticleDOI
TL;DR: In this paper, the authors investigated empirically the relation between the value creation efficiency and firms' market valuation and financial performance, and found that firms' intellectual capital has a positive impact on market value and financial performances, and may be an indicator for future financial performance.
Abstract: Purpose – The purpose of this article is to investigate empirically the relation between the value creation efficiency and firms’ market valuation and financial performance.Design/methodology/approach – Using data drawn from Taiwanese listed companies and Pulic's Value Added Intellectual Coefficient (VAIC™) as the efficiency measure of capital employed and intellectual capital, the authors construct regression models to examine the relationship between corporate value creation efficiency and firms’ market‐to‐book value ratios, and explore the relation between intellectual capital and firms’ current as well as future financial performance.Findings – The results support the hypothesis that firms’ intellectual capital has a positive impact on market value and financial performance, and may be an indicator for future financial performance. In addition, the authors found investors may place different value on the three components of value creation efficiency (physical capital, human capital, and structural cap...

1,185 citations

Journal ArticleDOI
TL;DR: In this article, the authors investigate the association between the intellectual capital (IC) of firms and their financial performance, and they find that IC and company performance are positively related; IC is correlated to future company performance; the rate of growth of a company's IC is positively related to the company's performance; and the contribution of IC to company performance differs by industry.
Abstract: Purpose – The purpose of the paper is to investigate the association between the intellectual capital (IC) of firms and their financial performance.Design/methodology/approach – The paper uses the Pulic framework, has an Asian focus, and draws on data from 150 publicly listed companies on the Singapore Exchange. It is an empirical study using partial least squares (PLS) for the data analysis. The paper tests four elements of IC and company performance.Findings – The findings show that: IC and company performance are positively related; IC is correlated to future company performance; the rate of growth of a company's IC is positively related to the company's performance; and the contribution of IC to company performance differs by industry.Research limitations/implications – The data sample is restricted to 150 companies listed on the Singapore Exchange between the years 2000 and 2002.Practical implications – IC is an area of interest to numerous parties, such as shareholders, institutional investors, scho...

671 citations


Cites background from "Intellectual capital and traditiona..."

  • ...Consequently, the ability to apply alternative IC measures consistently across large and diversified samples for comparative analysis is diminished (Firer and Williams, 2003)....

    [...]

Journal ArticleDOI
TL;DR: The field of Intellectual Capital Accounting Research (ICA) has attracted much attention over the past decade as discussed by the authors, and the literature indicates that an organisational and business revolution is in progress concerning the need to understand the value of knowledge resources and how to manage them.
Abstract: The purpose of this paper is to review and critique the field of Intellectual Capital Accounting Research (ICAR). The literature indicates that an organisational and business revolution is in progress concerning the need to understand the value of knowledge resources and how to manage them. The paper explores the field of ICAR by examining a decade of published research since Petty and Guthrie's (2000) seminal paper on ICA, “Intellectual capital literature review: Measurement, reporting and management” as published in the Journal of Intellectual Capital. The paper has four specific contributions. The first contribution is to identify the field of scholarship associated with ICAR. The second is to provide a comprehensive picture of what has happened in the field of ICAR over the past decade. Third, it provides evidence as to how and why the field of ICAR is changing. Fourth, it highlights areas for future research and policy developments. From these four contributions our definition of Intellectual Capital Accounting (ICA) emerges. That is, ICA is an accounting, reporting and management technology of relevance to organisations to understand and manage knowledge resources. It can account and report on the size and development of knowledge resources such as employee competencies, customer relations, financial relationships and communication and information technologies. Additionally, the analysis highlights several interesting patterns and worrying trends in the field of ICAR.

550 citations

Journal ArticleDOI
TL;DR: In this article, the authors examined the impact of intellectual capital on firms' market value and financial performance and concluded that there is a statistically significant relationship between human capital efficiency and financial performances.
Abstract: Purpose – Intellectual capital (IC) shows a significant growing acceptance as a worthy topic of academic investigation and practical implication. The purpose of this study is to examine the impact of IC on firms' market value and financial performance.Design/methodology/approach – The empirical data were drawn from a panel consisting of 96 Greek companies listed in the Athens Stock Exchange (ASE), from four different economic sectors, observed over the three‐year period of 2006 to 2008. Various regression models were examined in order to test the hypotheses included in the proposed conceptual framework.Findings – Results failed to support most of the hypotheses; only concluding that there is a statistically significant relationship between human capital efficiency and financial performance. Despite the fact that IC is increasingly recognised as an important strategic asset for sustainable corporate competitive advantage, the results of the present study give rise to various arguments, criticism and furthe...

499 citations


Cites background or methods or result from "Intellectual capital and traditiona..."

  • ...The use of the above measurement methodology is argued to provide certain advantages (Bontis, 1999; Chen et al. 2005; Firer and Williams, 2003; Pulic and Bornemann, 1999; Roos et al., 1997; Sullivan, 2000):...

    [...]

  • ...Since results of the present study and results found in similar studies that were conducted in other countries and/or time periods (Chen et al., 2005; Firer and Williams, 2003; Mavridis and Kyrmizoglou, 2005) are quite contradictory, it appears that the effect of IC on business success is not yet fully explained....

    [...]

  • ...…results of the present study and results found in similar studies that were conducted in other countries and/or time periods (Chen et al., 2005; Firer and Williams, 2003; Mavridis and Kyrmizoglou, 2005) are quite contradictory, it appears that the effect of IC on business success is not yet…...

    [...]

  • ...Firer and Williams (2003), in a study conducted on South Africa, also failed to identify such an argument, while Chen et al. (2005), succeeded in identifying a relationship between IC, market value and financial performance in the Taiwanese economy....

    [...]

  • ...Firer and Williams (2003) used the VAIC approach to measure the relationship between IC and traditional measures of corporate MIBES Transactions, Vol 5, Issue 1, Spring 2011 61 companies, but the empirical results failed to support any relationship between the three value added efficiency…...

    [...]

Journal ArticleDOI
TL;DR: In this article, the role of value added (VA) as an indicator of intellectual capital (IC) and its impact on the firm's economic, financial and stock market performance is analyzed.
Abstract: Purpose – The purpose of this paper is to analyse the role of value added (VA) as an indicator of intellectual capital (IC), and its impact on the firm's economic, financial and stock market performance.Design/methodology/approach – The value added intellectual coefficient (VAIC™) method is used on 300 UK companies divided into three groups of industries: high‐tech, traditional and services. Data require to calculate VAIC™ method are obtained from the “Value Added Scoreboard” provided by the UK Department of Trade and Industry (DTI). Empirical analysis is conducted using correlation and linear multiple regression analysis.Findings – The results show that companies' IC has a positive impact on economic and financial performance. However, the association between IC and stock market performance is only significant for high‐tech industries. The results also indicate that capital employed remains a major determinant of financial and stock market performance although it has a negative impact on economic perform...

483 citations


Cites background or methods or result from "Intellectual capital and traditiona..."

  • ...However, in order to constitute a sustained competitive advantage, and therefore a determinant of financial performance, Riahi-Belkaoui (2003) and Firer and Williams (2003) assumed that IC, as well as the physical and financial capital employed, is used in an effective and efficient way....

    [...]

  • ...Ratio of the total market capitalization (share price times number of outstanding common shares) to book value of net assets, used as a proxy for stock market performance (Sougiannis, 1994; Firer and Williams, 2003; Cazavan-Jeny, 2004)....

    [...]

  • ...Ratio of the earnings before interest and taxes divided by book value of total assets, used as a proxy for financial performance (Firer and Williams, 2003; Chen et al., 2005; Shiu, 2006)....

    [...]

  • ...In contrast with previous studies which examined only a single sector (Firer and Williams, 2003; Pulic, 2004; Shiu, 2006), the originality of our study consists in the examination of all sectors....

    [...]

  • ...However, the studies of Firer and Williams (2003) and Shiu (2006) provided generally limited and mixed results....

    [...]

References
More filters
Journal ArticleDOI
TL;DR: In this article, the authors examine three aspects of the stakeholder theory and critique and integrate important contributions to the literature related to each, concluding that the three aspects are mutually supportive and that the normative base of the theory-which includes the modern theory of property rights-is fundamental.
Abstract: ?The stakeholder theory has been advanced and justified in the management literature on the basis of its descriptive accuracy, instrumental power, and normative validity. These three aspects of the theory, although interrelated, are quite distinct; they involve different types of evidence and argument and have different implications. In this article, we examine these three aspects of the theory and critique and integrate important contributions to the literature related to each. We conclude that the three aspects of stakeholder theory are mutually supportive and that the normative base of the theory-which includes the modern theory of property rights-is fundamental. If the unity of the corporate body is real, then there is reality and not simply legal fiction in the proposition that the managers of the unit are fiduciaries for it and not merely for its individual members, that they are . . . trustees for an institution [with multiple constituents] rather than attorneys for the stockholders.

10,163 citations


"Intellectual capital and traditiona..." refers background in this paper

  • ...Developing intuitive research propositions Donaldson and Preston (1995) argue that since Adam Smith the dominant view of the firm is that it obtains its resources from investors, employees and suppliers to produce goods and services for its customers....

    [...]

Book
01 Jan 1997
TL;DR: In this article, the authors argue that knowledge has become the most important fact of economic life and that knowledge is the chief ingredient of what is bought and sold, the raw material people work with.
Abstract: This work argues that knowledge has become the most important fact of economic life. It is the chief ingredient of what is bought and sold, the raw material people work with. In the new economy, intellectual capital - not natural resources, machinery or financial capital - has become the one indispensable asset of corporations. The volume shows how the emergence of the information age has changed the nature of wealth, and it offers new ways of looking at what companies do and how to lead them. In an economy based on knowledge, intellectual capital - the untapped, unmapped knowledge of organizations - has become a company's most useful tool. It is found in: the talent of the people who work there; the loyalty of the customers it serves and learns from; the value of its brands, copyrights, patents and other intellectual capital; and the collective knowledge embodied in its systems, management techniques and history - vital assets that are rarely managed and almost never managed skilfully. Readers should learn how to discover and map the human, structural and customer assets that are the knowledge based of a corporation; how General Electric, Hewlett-Packard, McKinsey, Merck & Co manage intellectual capital to improve performance; how intellectual capital can dramatically increase profitability; why the information economy demands new principles of managing people and working with customers; and how the knowledge economy affects readers personally, in their career, and how to capitalize on the opportunities it presents.

3,142 citations

Journal ArticleDOI
TL;DR: In this paper, an empirical pilot study that explores the development of several conceptual measures and models regarding intellectual capital and its impact on business performance is presented, which can help both academics and practitioners more readily understand the components of Intellectual Capital and provide insight into developing and increasing it within an organization.
Abstract: This paper details an empirical pilot study that explores the development of several conceptual measures and models regarding intellectual capital and its impact on business performance. The objective of this pilot study is to explore the development of items and constructs through principal components analysis and partial least squares (PLS). The final retained, subjective measures and optimal structural specification show a valid, reliable, significant and substantive causal link between dimensions of intellectual capital and business performance. These results should help both academics and practitioners more readily understand the components of intellectual capital and provide insight into developing and increasing it within an organization. Suggestions are then made to advance and improve this research programme.

2,837 citations

Journal ArticleDOI
Nick Bontis1
TL;DR: A review of the literature pertaining to the assessment of knowledge assets can be found in this article, where a variety of models have surfaced in an attempt to measure IC and this paper aims to highlight their strengths, weaknesses and operationalizations.
Abstract: This paper reviews the literature pertaining to the assessment of knowledge assets. Since knowledge assets are at the crux of sustainable competitive advantage, the burgeoning field of intellectual capital is an exciting area for both researchers and practitioners. Unfortunately, the measurement of such intangible assets is difficult. A variety of models have surfaced in an attempt to measure IC and this paper aims to highlight their strengths, weaknesses and operationalizations.

1,594 citations

Book
31 Oct 1997
TL;DR: In this paper, the authors present an organizational system that helps managers maximize the flow of intellectual capital in their companies, providing insights gained by leading experts from the practice, research, and consulting side of business management.
Abstract: From the Publisher: Providing an organizational system that helps managers maximize the flow of intellectual capital in their companies, Intellectual Capital presents the insights gained by leading experts from the practice, research, and consulting side of business management. Starting with a definition of intellectual capital and its main components, the book offers a step-by-step "process model" to rooting out corporate inefficiency at all levels. Illustrated with vivid case studies, the book also covers the latest thinking and practices of the "second generation" of intellectual capital practices, from consolidating intellectual capital measures into a single "IC Index" to linking them with shareholder value creation systems.

1,452 citations