Value creation through intellectual capital in developed European markets
Abstract
Purpose
This paper aims to investigate the production function of firms based on the use of intellectual capital. The authors come up with this problem since believe that the new economy conditions require an adjustment and a development of classical firm theory.
Design/methodology/approach
The research question addressed in this study is mainly related to the empirical validation of the function based on companies' intangibles in the Cobb-Douglas framework. This model enables the authors to advocate the idea of the complementarity of intellectual resources as well as simplifies the analysis of intellectual capital features. To accomplish the purpose of the research, the authors design a log-linear model and estimate it on a sample of more than 400 European and American companies.
Findings
Application of Cobb-Douglas framework allowed designing a production function based on intellectual capital. The complementarity of intellectual capital components is justified on the empirical results obtained in this research. The increasing return to scale for intellectual capital was established for the sample examined in this study.
Research limitations/implications
The main shortcoming of the approach implemented in this study is related to the proxy indicators of intellectual capital. Nevertheless, the authors statistically validate the chosen indicators applying hedonic approach.
Practical implications
Practical accomplishment of this research is mainly associated with the conclusion about an increasing return to scale of intellectual capital. This phenomenon appears to be of a particular importance for investment decisions.
Originality/value
The findings of this paper provide a new insight into intellectual resources interrelation that enhances companies' value creation. The authors also hope to assist future research attempts in application of the theory of company's growth driven by its intangible capital.
Keywords
Acknowledgements
The authors thank the referees for their anonymous work to improve the quality of this paper. The authors also thank the researchers and assistants of the Empirical Corporate Finance Laboratory (NRU Higher School of Economics – Perm Campus) for their work creating the database and their support. This study comprises research findings from the The Changing Role of Companies' Intangibles over the Crisis carried out within The National Research University Higher School of Economics' Academic Fund Program in 2013, Grant No. 13-05-0021.
Citation
Shakina, E. and Barajas, A. (2014), "Value creation through intellectual capital in developed European markets", Journal of Economic Studies, Vol. 41 No. 2, pp. 272-291. https://doi.org/10.1108/JES-08-2012-0122
Publisher
:Emerald Group Publishing Limited
Copyright © 2014, Emerald Group Publishing Limited