Abstract

The purpose of this study is to investigate empirically the validity of the basic propositions of value added intellectual coefficient (VAIC) and extend VAIC models in Indian knowledge-based sector. Using panel data relating to 62 firms from two Indian knowledge-based sectors, namely, electronics and banking sectors, for a period of 10 years (from 2001–2002 to 2010–2011), the study indicates that the VAIC model cannot be rejected as a technique of measuring intellectual capital. The result shows that VAIC significantly and positively influences the corporate performance measured by return on assets (ROA) and market-to-book (M/B) ratio. All the components of VAIC except structural capital (SC) efficiency (SCE) significantly and positively influence the corporate performance. The insignificant association between SCE and firm performance, as observed in the present context and also observed earlier by many researchers, may be regarded as the inappropriateness of the model in capturing structural capital. In order to modify the SC component of the model, the components of extended VAIC model may be used as a value-creating entity.

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