Abstract
Value Added Intellectual Coefficient (VAIC) method has become the most efficient method for measuring intellectual capital (IC). However, there are inconsistencies in the mechanism of adopting the VAIC method to measure IC, thus questioning the robustness of established relationships between IC and firm performance. Therefore, this study attempts to examine the diversity in estimates of the impact of IC on firm performance as a result of adopting the VAIC method in a diverse manner. The study also proposes a modification to the basic VAIC method to eliminate its key limitation. Findings of the study indicate that there are differences in the estimates of the impact of IC on firm performance as a result of varied VAIC adoptions. The proposed modification to the basic VAIC method incorporates theoretically agreed value compositions of IC (human capital, structural capital and relational capital) replacing traditional value compositions (human capital and structural capital) in the basic VAIC method.
Highlights
In the present global economy, intellectual capital (IC) is progressively being acknowledged as a vital constituent of organisational value (Alhassan & Asare, 2016)
Considering the issues of inconsistencies in adopting the Value Added Intellectual Coefficient (VAIC) method and existence of limitations of the VAIC method highlighted in the extant IC literature, this paper develops the following research objectives: 1. To examine the diversity in estimates of the impact of IC on firm performance created by varied adoptions of VAIC method; and
This study commenced with a review of existing studies (i.e. Pulic, 1998a, 2001, 2002a, b; Firer & Williams, 2003; Yalama & Coskun, 2007; Calisir et al, 2010; Komnenic & Pokrajcic, 2012; Ting & Lean, 2009; Chen et al, 2005; Tan et al, 2007; Clarke et al, 2011) which adopted the VAIC method to compute IC of the firm
Summary
In the present global economy, intellectual capital (IC) is progressively being acknowledged as a vital constituent of organisational value (Alhassan & Asare, 2016). The impetus for this awareness is a sequence of challenges in the knowledgebased corporate setting that motivates firms to invest in IC, given that it has become a key driver of productivity (Goh & Lim, 2004). Hasan, Mohammad, & Alam, 2017; Linda, Rasyid, & Megwati, 2017; Soetanto & Liem, in press) have found that IC helps in creating competitive advantages and superior performance for modern business organisations in a sustainable manner Past studies (i.e. Hasan, Mohammad, & Alam, 2017; Linda, Rasyid, & Megwati, 2017; Soetanto & Liem, in press) have found that IC helps in creating competitive advantages and superior performance for modern business organisations in a sustainable manner
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