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Article
Publication date: 1 March 2004

Ante Pulic

Taking into account the transformation in economic reality towards a knowledge economy it seems logical that we treat IC as a resource, equal to that land, physical…

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Abstract

Taking into account the transformation in economic reality towards a knowledge economy it seems logical that we treat IC as a resource, equal to that land, physical assets, and financial capital. This means that it is not anymore treated as a cost but as an investment. In order for the new system to be consistent we have to define a new index, namely the value creation efficiency of intellectual capital. Its empirical applications shows that while revenue, profit and GDP may indicate successful performance, IC efficiency may indicate the opposite, that value is being destroyed and not created.

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Measuring Business Excellence, vol. 8 no. 1
Type: Research Article
ISSN: 1368-3047

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Article
Publication date: 21 October 2013

Gianpaolo Iazzolino and Domenico Laise

The purpose of this paper is to study, mainly from the point of view of methodological accounting principles, the value added intellectual coefficient (VAIC), introduced…

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3041

Abstract

Purpose

The purpose of this paper is to study, mainly from the point of view of methodological accounting principles, the value added intellectual coefficient (VAIC), introduced by Pulic as a measure of intellectual capital efficiency (ICE). More specifically, the aim of the analysis is to investigate the strengths and weaknesses of the VAIC, primarily from the accounting theory perspective.

Design/methodology/approach

The approach to the study of Pulic's contribution is as follows: first the authors submitted Pulic's methodology to a “conceptual” test, in order to check whether it contradicts any basic accounting principles. Then the results of this methodological test were compared to those obtained by the authors who have criticized Pulic's proposal, in order to check for any concordance or discordance with the literature.

Findings

Several authors have discussed the crucial aspects of the VAIC. In this paper the focus is primarily on Andriessen's concerns, since they relate to the theoretical accounting aspects of Pulic's proposal, which is the topic of the paper. First of all, the authors have found that the suggestion of Pulic, centered on the Value Added Income Statement, does not modify or contradict any of the fundamental accounting principles. Therefore the criticisms made by Professor Andriessen should be subject to future research. Furthermore the performance measure proposed by Pulic (VAIC) is not a genuine rival to the traditional methodologies (e.g. the Economic Value Added (EVA)), as instead emerges from Pulic's papers. VAIC and EVA measure different aspects of the performance and therefore may usefully live together in a context in which the performance is measured through multicriteria methodologies, such as the Balanced Scorecard, Skandia Navigator or Intangible Asset Monitor.

Practical implications

The practical implications of the results are: the correct placing of Pulic's contribution into the accounting principles theory; and the manner for using the VAIC methodology in a multicriteria performance evaluation. The authors believe that both aspects have relevant implications for business accounting practice.

Originality/value

The paper shows that almost all of the misunderstandings of the literature debate, regarding Pulic's proposal, arise from a “semantic shift” generated by the fact that Pulic uses the terms human capital and structural capital with a completely different meaning from that of the Skandia Navigator. Authors’ hope is that the study described in the paper will contribute to a better understanding of: the way to calculate and to interpret the efficiency of intellectual capital (IC) in a correct manner; and the role of IC on firm multicriteria performances.

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Journal of Intellectual Capital, vol. 14 no. 4
Type: Research Article
ISSN: 1469-1930

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Article
Publication date: 1 September 2001

Nick Bontis and Danny Nikitopoulos

A synopsis of key topics, issues and findings as presented at the 4th World Congress on Intellectual Capital hosted by McMaster University in Hamilton, Ontario, Canada…

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2999

Abstract

A synopsis of key topics, issues and findings as presented at the 4th World Congress on Intellectual Capital hosted by McMaster University in Hamilton, Ontario, Canada. There were 536 delegates from 32 countries discussing the growing importance of intellectual capital. This paper highlights the key messages from the keynote speakers of the conference. Includes a summary of the presentations of such luminaries as Shahla Aly, VP Communication Sector at IBM Canada; Stephen Denning, KM director of the World Bank; Don Tapscott, chairman of Digital 4Sight; Ante Pulic and Ursula Schneider, directors of the Austrian Intellectual Capital Research Centre; Tom Jenkins, CEO of OpenText; Leif Edvinsson, VP of Knexa.com Enterprises; Verna Allee, president of Integral Performance Group; and Don Morrison, COO of Research in Motion.

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Journal of Intellectual Capital, vol. 2 no. 3
Type: Research Article
ISSN: 1469-1930

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Article
Publication date: 1 September 2005

Pek Chen Goh

This paper measured the intellectual capital performance of commercial banks in Malaysia for the period 2001 to 2003, using efficiency coefficient called VAIC™ developed…

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12451

Abstract

Purpose

This paper measured the intellectual capital performance of commercial banks in Malaysia for the period 2001 to 2003, using efficiency coefficient called VAIC™ developed by Ante Pulic.

Design/methodology/approach

Data required to calculate human capital, structural capital and capital employed efficiencies were obtained from annual reports.

Findings

As a whole, all banks have relatively higher human capital efficiency than structural and capital efficiencies. Domestic banks were generally less efficient compared to foreign banks. Hong Leong Bank, Public Bank and Southern Bank were the top three efficient domestic banks based on VAICTM assessment, while Scotia Bank is the most efficient foreign bank. Public Bank and EON Bank have consistently showed improvement in efficiency in the three years. There were significant differences between rankings of bank according to efficiency and traditional accounting measures. In view of the findings that seven out of ten domestic banks did not show improvement in efficiency following the consolidation exercise requires an urgent attention and remedial actions.

Research limitations/implications

This study failed to study all foreign banks operating in Malaysia. Future study should therefore further improve on the aspect of coverage.

Practical implications

The findings allowed banks to benchmark themselves based on the level of efficiency rankings, to establish priorities and develop strategic plans, which will in turn enhance their future performance. The findings also could help stakeholders and investors assess the value creating potential of banks; and policy makers to formulate and implement policies for establishment of a resilient banking sector.

Originality/value

This study is the first study on Malaysian banks' intellectual capital performance.

Details

Journal of Intellectual Capital, vol. 6 no. 3
Type: Research Article
ISSN: 1469-1930

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Article
Publication date: 7 January 2014

Sriranga Vishnu and Vijay Kumar Gupta

The purpose of this paper is to study the relationship between intellectual capital (IC) and performance of pharmaceutical firms in India. The secondary objective is to…

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2716

Abstract

Purpose

The purpose of this paper is to study the relationship between intellectual capital (IC) and performance of pharmaceutical firms in India. The secondary objective is to propose and test modified models of Value Added Intellectual Coefficient (VAIC™) method.

Design/methodology/approach

Data on 22 large pharmaceutical firms collected for empirical investigation. Return on assets and return on sales are performance variables. IC and its components – human capital, structural capital and relational capital (RC), are predictor variables. Three extended and modified VAIC™ models (e-VAIC™) are proposed. Multiple regression technique is applied on pooled data to draw inferences.

Findings

Results show instances of positive relationship between IC and performance variables. RC, the new variable, does not demonstrate statistically significant relationship with performance variables.

Research limitations/implications

Due to inadequate reporting of IC and its components, availability of data on various proxies is difficult. The new models proposed in this paper can be a template for future research and model development.

Practical implications

VAIC™ model, the proposed models (e-VAIC™) and the result analysis can be useful for evaluation and value creation purposes.

Originality/value

Previous researchers use original VAIC™ model. This paper modifies and extends the model in accordance with contemporary description and typology of IC. Inclusion of RC as a variable in VAIC™ model and use of new proxies for components of IC are the novelties of this paper.

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Journal of Intellectual Capital, vol. 15 no. 1
Type: Research Article
ISSN: 1469-1930

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Article
Publication date: 25 October 2011

Pirjo Ståhle, Sten Ståhle and Samuli Aho

The purpose of this study is to analyse the validity of the value added intellectual coefficient (VAIC) method as an indicator of intellectual capital.

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5222

Abstract

Purpose

The purpose of this study is to analyse the validity of the value added intellectual coefficient (VAIC) method as an indicator of intellectual capital.

Design/methodology/approach

The paper describes VAIC through its calculation formulae and aims to establish what exactly it is that the method measures. It also looks in detail at how intellectual capital is understood in the method, and discusses its conceptual confusions. Furthermore, the paper tests the hypothesis according to which VAIC correlates with a company's stock market value, and reflects the contradictory results of earlier studies.

Findings

The analyses show, first, that VAIC indicates the efficiency of the company's labour and capital investments, and has nothing to do with intellectual capital. Furthermore, the calculation method uses overlapping variables and has other serious validity problems. Second, the results do not lend support to the hypothesis that VAIC correlates with a company's stock market value. The main reasons behind the lack of consistency in earlier VAIC results lie in the confusion of capitalized and cash flow entities in the calculation of structural capital and in the misuse of intellectual capital concepts.

Practical implications

The analyses show that VAIC is an invalid measure of intellectual capital.

Originality/value

The result is important since the method has been widely used in micro and macro level analyses, but this is the first time it has been put to rigorous scientific analysis.

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Article
Publication date: 19 October 2012

Amitava Mondal and Santanu Kumar Ghosh

The purpose of this study is to investigate empirically the relationship between intellectual capital and financial performance of 65 Indian banks for a period of ten…

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4472

Abstract

Purpose

The purpose of this study is to investigate empirically the relationship between intellectual capital and financial performance of 65 Indian banks for a period of ten years from 1999 to 2008.

Design/methodology/approach

Reserve Bank of India's database and Annual reports, especially the profit and loss accounts and balance sheets of the banks for the relevant years have been used to obtain the data. Value added intellectual coefficient (VAIC™) method is applied for measuring the value based performance of banks. Return on assets (ROA) and return on equity (ROE) are used to measure the profitability and productivity of Indian banks, measured by assets turnover ratio (ATO). The intellectual capital (human capital and structural capital) and physical capital of selected banks have been analyzed and their impact on corporate performance has been measured using multiple regression technique.

Findings

The analysis indicates that the relationships between the performance of a bank's intellectual capital, and financial performance indicators, namely profitability and productivity, are varied. The study results suggest that banks’ intellectual capital is vital for their competitive advantage.

Research limitations/implications

The study uses only 65 leading Indian banks, including foreign banks operating in India. The value added intellectual coefficient (VAIC™), introduced by Pulic, is used in this study as a basic methodology to measure the IC performance of banks.

Practical implications

The VAIC™ method can be used as an important tool by the decision makers in the knowledge economy to integrate the intellectual capital in the decision making process.

Originality/value

This is one of the first empirical researches in India that examines the impact of IC on financial performance of the Indian banking sector in the long term.

Details

Journal of Intellectual Capital, vol. 13 no. 4
Type: Research Article
ISSN: 1469-1930

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Article
Publication date: 14 May 2018

Mutalib Anifowose, Hafiz Majdi Abdul Rashid, Hairul Azlan Annuar and Hassan Ibrahim

The purpose of this paper is to examine the value relevance of intellectual capital (IC) by analysing the relationship between IC efficiency (ICE) and corporate book value…

Abstract

Purpose

The purpose of this paper is to examine the value relevance of intellectual capital (IC) by analysing the relationship between IC efficiency (ICE) and corporate book value of listed firms on main board of Nigeria Stock Exchange.

Design/methodology/approach

This study applies the resource-based theory in formulating two hypotheses that guide the results analysis. By employing a two-step dynamic system generalised method of moments (GMMs), and controlling for the possible endogeneity effect on the parameters estimated, for a sample of 91 listed firms on main board of Nigeria Stock Exchange, this study investigates the association of ICE and corporate book value, namely, cash flow from operation and economic value added (EVA), using data over the 2010 to 2014 financial years.

Findings

The results show a significant positive relationship between overall ICE and corporate book value (cash flow from operation and EVA). This study contributes to recent evidence concerning the value relevance of IC information to investors and other interested stakeholders.

Research limitations/implications

The generalisation of the results to smaller firms, in the alternative securities market, may be inappropriate as study sampled listed firms on the main board of Nigerian Stock Exchange.

Practical implications

Those charged with governance should be concerned with the investment and management of IC as it enhances the economic value and operating cash flow in line with the resource-based theory.

Originality/value

This study is first to consider the ICE study across all sectors in the Nigerian economy using modified Pulic value added intellectual capital. The study controls for heteroscedasticity and endogeneity issues by adoption of two-step dynamic system GMMs.

Details

Journal of Intellectual Capital, vol. 19 no. 3
Type: Research Article
ISSN: 1469-1930

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Article
Publication date: 28 December 2020

Hakan Uslu

The objective of this study is to explore and compare intellectual capital (IC) and its three components in deposit, investment and participation banks operating in…

Abstract

Purpose

The objective of this study is to explore and compare intellectual capital (IC) and its three components in deposit, investment and participation banks operating in Turkey’s banking sector, and to analyze empirically the relationship between intellectual capital and financial performances of the banks.

Design/methodology/approach

The study uses a panel data of 46 banks operating in the Turkish banking system during the period of 2005–2019. To measure intellectual capital, value-added intellectual coefficient (VAIC) is used, consisting of the efficiency of a firm’s three types of capital – that is human, structural and employed capitals. To examine the proposed research hypotheses for each bank type separately, multiple regression analysis methods are used.

Findings

The findings of this paper reveal a positive and statistically significant relationship between IC and financial performance of the banks. Specifically, two of the components of IC, namely, employed and human capital efficiencies, are the most influential value drivers for the financial profitability of the banks, whereas structural capital efficiency has less importance in the profitability of the banks. The financial performance of the banks in Turkey is affected mostly by human capital. Therefore, if banks plan to increase their profitability, they need to pay more attention to human capital than structural and employed capitals.

Originality/value

The current study can be considered as one of the most comprehensive studies on analyzing the relationship between intellectual capital and financial performances of businesses in the Turkish banking sector. The previous studies analyzed either the banks individually or all banks as one group. The paper provides a valuable framework for executives, managers and policymakers in managing IC within the Turkish context as the most comprehensive study in the relevant literature.

Details

Competitiveness Review: An International Business Journal , vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1059-5422

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Book part
Publication date: 3 June 2021

Sumit Kumar Maji and Arindam Laha

In the present knowledge economy, intellectual capital (IC) is regarded as one of the significant determinants of efficiency, profitability, and ultimately value of a…

Abstract

In the present knowledge economy, intellectual capital (IC) is regarded as one of the significant determinants of efficiency, profitability, and ultimately value of a firm. This chapter empirically investigates the ramifications of the IC on the level of efficiency of the firm. In addition, exploration of the changing dynamics in the relationship between IC and firm level efficiency in the face of global economic crisis is of special interest of this chapter. In attaining the objectives of the study, a comprehensive database of 299 manufacturing firms (chosen randomly from a stratification of six BSE manufacturing industry subsectors) were utilized during the period from 1999–2000 to 2013–2014. Firm level efficiency scores and implications of IC (as measured by employing Pulic's Value Added Intellectual Capital Model) on the level of efficiency of the firms were examined simultaneously using Stochastic Frontier Analysis. Empirical results revealed that IC significantly determines the efficiency of the manufacturing firms during the period of study. However, the impact of financial crisis was not robust in changing the synergy between efficiency and IC. Size, age, and leverage were also found to be significant determinants of efficiency during the period of study.

Details

Productivity Growth in the Manufacturing Sector
Type: Book
ISBN: 978-1-80071-094-8

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