Abstract
Intellectual capital is becoming increasingly important in financial decisions made by managers in the information-based environment. However, only a small portion of a company’s total assets is represented by intangible assets (such as concessions, licenses, patents, and trademarks). The current research investigates the relationship between an organization’s Intellectual capital and its health. A new model — Modified Extended Value-added Intellectual Capital Coefficient — was also proposed. The findings were compared with the two existing models, namely, Value Added Intellectual Coefficient and Modified Value Added Intellectual Coefficient. Panel data regression is used to assess the performance of 25 Indian pharmaceutical and drug companies throughout the period 2010–2019. Human capital efficiency, structural capital efficiency, and relational capital efficiency have been proven to have a substantial positive correlation with return on assets (ROA). In addition, a negative yet significant link exists between organizational capital efficiency and a company’s profitability. Under the Value Added Intellectual Coefficient, human capital and structural capital efficiency do not affect the market value to book value. The market value-to-book value, on the other hand, is positively impacted by capital employed efficiency.
Highlights
Intellectual capital is becoming increasingly important in financial decisions made by managers in the information-based environment
Intangible assets are a form of intellectual capital, which are non-physical sources of value derived from novelty, structural goals, or human resources
Tsairidis et al [12] have challenged the VAIC model in terms of its reliability. They have stated that this model neglects its negative book value, resulting in reduced output value compared to input values
Summary
The economy has evolved from physical assets to an information-based environment in recent years. Intellectual Capital (IC) adds value to the product and services by actively managing the intangible assets, impacting the organization’s health. The Indian Government, under the Ministry of Skill Development and Entrepreneurship (2015) scheme, has recognized the growth of intellectual assets, human capital, and innovation. The present study examines Intellectual Capital Efficiency’s impact on 25 Drugs and Pharmaceutical Industry’s financial performance during 2010–2019. The paper has considered the pharmaceutical sector for three reasons It is a prominent sector in investing in intellectual property and Research and Development activities. This sector induces high investment in IC and can face worldwide competition because of R&D’s experts, leading to new drugs, innovation, and patents [6].
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