Intellectual capital and performance of pharmaceutical firms in India

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.