Measurement of Intellectual Capital in the Indian Banking Sector

Abstract

Executive Summary Intellectual capital has recently been receiving increased attention from both academic communities and practitioners, and is identified as an important strategic asset which provides sustainability and yields better performance. It also gives rise to the view that the organizations which possess skilled, creative, and distinctive knowledgeable employees along with supportive organizational structures and systems, and maintains cordial customer relations contribute in achieving superior organizational position. Hence, it is important to understand to what extent intellectual capital is efficiently utilized by specific sectors in creating value for organizations ( Kamath, 2007 ). The present study aims to develop, establish, and empirically validate the intellectual capital scale in the banking sector, in the context of emerging economies like India. Data were collected from three executives each (including one manager and two senior employees) from 144 branches of 21 public and seven private commercial banks operating in Jammu city, India. The three senior most executives were purposively selected because of being more knowledgeable and experienced. The study established the intellectual capital scale as a multidimensional scale comprising human capital, relational capital, and structural capital. All the three dimensions were found to significantly contribute to the intellectual capital, among which relational capital contributed relatively more, followed by human capital and structural capital. Relational capital consists of important items like meeting with customers, customer feedback, and knowledge and regular customer interaction. Similarly, human capital dimension consists of significant items like employee creativity, devoted staff, training and education, experience, attitude, and innovative employees. Structural capital is a composite of valuable items like structure, systems, information technology, capabilities, culture, empowerment, and service quality which helps in developing intellectual capital. The research findings can help bank managers in determining how to generate value using human, structural, and relational capital. For instance, the study findings offer valuable insight into how the managers can improve bank’s structural capital by encouraging innovation ability among employees, positive culture, and strengthening information technology in terms of continuously updating software and hardware. The study is limited to public and private commercial banks operating in Jammu city. In future, the scale validation can be undertaken to investigate whether the three-dimensional intellectual capital scale can be generalized for other industries and countries.