Applying the VAIC™ model to Australian hotels

Abstract

PurposeThis paper aims to examine the extent to which intellectual capital (IC) adds value to a service provider and presents an approach for interpreting the results.Design/methodology/approachThe value added intellectual coefficient (VAIC™) model is used to determine the relevant elements of intellectual capital because it employs existing financial data. The number of subjects was restricted to two companies operating in the Australian hotel industry over a four‐year period (2004‐2007).FindingsThe VAIC™ model provides a robust tool for assessing the efficient use of intellectual capital. The model can be used by management to assess their own organisation's performance without having to rely upon industry standards.Research limitations/implicationsThe data derived from published financial statements and the limitations associated with accounting standards may be questionable. However, the financial statements were subject to external audit verification. The restricted number of companies is a limitation to generalisability. However, the two companies are the major players in the Australian hotel industry.Practical implicationsThe application of the VAIC™ model presented in this paper provides a basis for practical application for management.Originality/valueThe study provides management with a guide to employing the VAIC™ model and, more importantly, a method for interpreting the results.