The Relationship between Intellectual Capital and Corporate Performance

Abstract

Intellectual capital (IC) is organisational intangible asset which is frequently associated with performance. IC is commonly categorised into three core component: human capital, structural capital and relational capital. This study aims to explore the inclusion of spiritual capital as a new component alongside with the other three components, while attempting to determine the association of the IC on corporate performance of Malaysian public listed companies (PLCs). Findings revealed that generally, Malaysian PLCs do acknowledge the existence or importance of IC in their organisation. In addition, the majority of the PLCs adopt Key Performance Indicator (KPI) to measure their department's performance. Importantly, the findings confirm that all four IC components has a significant positive relationship with corporate performance of Malaysian PLCs. Surprisingly, relational capital emerged as IC component that has the strongest relationship with corporate performance, followed by spiritual capital, structural capital and human capital. This result suggests that IC is vital to business success and performance. Importantly, spiritual capital needs to be considered in IC when measuring performance. Finally, this study proposes that future research should investigate the influence of the new IC on corporate performance within diverse industry for example, to focus on high IC industries such as trading or services, finance or technology.