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Differentiation in financial markets: the human capital approach

Carol Royal (School of Organisation and Management, Australian School of Business, UNSW, Sydney, Australia)
Loretta O'Donnell (Macquarie Graduate School of Management, Macquarie University, Sydney, Australia)

Journal of Intellectual Capital

ISSN: 1469-1930

Article publication date: 17 October 2008




How can organisations and their key stakeholders, including the financial markets, benefit from the increased understanding of the role of intangibles in value creation in listed firms? One response is to challenge the finance industry to create innovative investment products based on analysis of intangibles, including human capital (HC), which can act as a lead indicator of future financial performance. This may require qualitative research specialist expertise in finance houses. The purpose of this paper is to address these issues.


The paper uses qualitative data from the trading floor of Merrill Lynch in Sydney and Hong Kong, drawing on participatory action research, by the first author. It also draws on field research interview data with biotechnology executives, using a case study approach, by the second author.


The findings suggest that finance industry may need to move beyond the use of indices and ethical investment screens to more clearly understand the role of intangibles, such as HC, in value creation.


This paper described the evolution of a set of HC analysis models, and applies them to the biotechnology industry. The results indicate that more qualitative information on listed companies can be analysed and interpreted to make the investment process more transparent to all stakeholders, including securities analysts. This may influence other researchers to extend these approaches to improve the quality of intangibles analysis.



Royal, C. and O'Donnell, L. (2008), "Differentiation in financial markets: the human capital approach", Journal of Intellectual Capital, Vol. 9 No. 4, pp. 668-683.



Emerald Group Publishing Limited

Copyright © 2008, Emerald Group Publishing Limited

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