This study aims to examine the effect intellectual capital (IC) has on firm performance of Australian companies.
Quantitative data are collected for Australian companies listed between 2004 and 2008. IC is measured using Pulic's value added intellectual coefficient (VAIC) and its components (human, structural and capital employed efficiencies (HCE, SCE, CEE)). Direct and moderating relationships between VAIC, HCE, SCE, and CEE and four measures of performance are statistically analysed.
The results suggest that there is a direct relationship between VAIC and performance of Australian publicly listed firms, particularly with CEE and to a lesser extent with HCE. A positive relationship between HCE and SCE in the prior year and performance in the current year is also found. However evidence also suggests the possibility of an alternative moderating relationship between the IC components of HCE and SCE with physical and financial capital (CEE) which impacts on firm performance.
There are some missing data and some transgression of the assumptions of OLS regression.
This paper presents the first study of the IC relationship with firm performance in Australia. Inconclusive results from prior studies in developing countries suggested the need for a study from a developed country such as Australia. The paper is also the first to investigate whether IC moderates the relationship between CEE and firm performance.
The purpose of this study is to analyse the validity of the value added intellectual coefficient (VAIC) method as an indicator of intellectual capital.
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.
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.
The analyses show that VAIC is an invalid measure of intellectual capital.
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.