Intellectual Capital Categories Research Articles

Voluntary Intellectual Capital Disclosure and Information Asymmetry: Study of Indian Firms

This article develops a disclosure index to examine the extent and quality of intellectual capital disclosure in Indian firms. Furthermore, it assesses the gap between stakeholder expectations and industry disclosure procedures by conducting five years database analysis. To analyze the extent and quality of intellectual capital disclosure, a content analysis technique was applied to a sample of 30 non-financial firms listed on the Bombay Stock Exchange for five years, 2018–2022. A disclosure index of 42 items was constructed based on previous studies under three intellectual capital categories: Structural Capital, Relational Capital, and Human Capital. It was found that Indian companies had a low level of intellectual capital disclosure, although it increased by 28% from 2018 to 2022. Also, there was an upward movement in the disclosure of all intellectual capital components. Structural capital is disclosed by the number of organizations, whereas human capital is being disclosed the lowest. This study developed a new disclosure index consisting of 42 intellectual capital items based on extant research conferred by experts. In addition, the study considered a Sensex non-financial company for the analysis. Third, this study uses graphs to represent disclosure quality.

Intellectual capital and sustainability practices of manufacturing firms in Uganda

PurposeThe primary objective of this study is to investigate the association between the dimensions of intellectual capital (IC) and sustainability practices (SP) within the context of manufacturing medium and large (ML) firms in Uganda. The study aims to shed light on whether and how different dimensions of IC contribute to the adoption and implementation of SP by these firms.Design/methodology/approachThis study utilized a cross-sectional and quantitative approach, collecting data through a questionnaire survey from a sample of manufacturing ML firms. The collected data underwent analysis to identify patterns and relationships using the SmartPLS structural equation modeling (SEM) technique.FindingsThe findings demonstrated that the three categories of IC (human, structural and relational capital) influence the SP of ML manufacturing enterprises in Uganda. This suggests that IC is a critical component of SP.Practical implicationsManufacturing enterprises should use their IC to create strategies for sustainable solutions, such as creating new, ecologically and socially responsible products and services and improving current ones to lessen their environmental effect.Originality/valueThis research advances knowledge of SP by revealing if all aspects of IC are significant for the SP of manufacturing enterprises in Uganda.

Disclosure of Intellectual Capital : Evidence from Indian Annual Reports

The shifting of the economy from manufacturing-based to knowledge-based has raised the importance of Intellectual Capital (IC) in the business value creation process. Although IC has been recognized in integrated reports, limited information about it is still reported in traditional financial disclosures. The present study examines the extent of intellectual capital disclosure (ICD) in Indian firms and assesses the gap between stakeholder expectations and industry disclosure procedures. For this purpose, content analysis has been performed on a sample of 30 non-financial firms listed on the Bombay Stock Exchange (BSE) for the year 2019–2020 by constructing a disclosure index of 42 items based on previous studies, under the three categories of IC, namely, structural capital, relational capital, and human capital. The results reveal that the overall disclosure of intellectual capital by Indian firms is low. The companies disclose only 42% of the Intellectual Capital items. Further, it is found that maximum number of companies are disclosing structural capital, while human capital disclosure obtains the minimum score. The results imply the need to develop a proper framework for reporting intangibles in the annual statements of organizations in India.

Intellectual capital disclosure practices of financial institutions in an emerging economy

Purpose The purpose of this study is to investigate the intellectual capital disclosure (ICD) practices of financial institutions in an emerging economy of Bangladesh. Design/methodology/approach Based on 93 items of intellectual capital categorized into internal capital, external capital and human capital, ICD index is developed for 53 financial institutions listed in Dhaka Stock Exchange. This study uses descriptive statistics to analyze ICD practices, and parametric and non-parametric tests to analyze the variation of ICD practices in terms of different categories as well as in terms of different sectors. Findings Results indicate that more than 70% of ICD items are generally not disclosed by financial institutions in Bangladesh. The highest of 36% of external capital disclosure items are disclosed, whereas the lowest of 18% of human resource capital elements are disclosed. Furthermore, results find the significant variability of ICD practices in terms of different intellectual capital categories and in between banking companies and non-banking financial institutions. Practical implications Findings have critical implications for managers, policymakers and regulators for setting appropriate strategies and regulations for improving the level of ICD, which, in turn, may reduce the information asymmetry problems of financial institutions as well. Originality/value In-depth analysis about variability of ICD practices creates value in the ICD literature by highlighting strategic priority of financial institutions to disclose information about the strategic resources in unique emerging economic settings such as Bangladesh.

Accountability through intellectual capital disclosure in Italian Universities

This paper aims to investigate intellectual capital disclosure (ICD) provided by Italian public universities in their annual reports and to identify and examine its drivers. An empirical analysis of annual reports of Italian public universities for the year 2014 is conducted through content analysis. The information retrieved from this forms the basis for regression analysis (OLS model) to relate the disclosure index to its drivers which include governance features, financial performance and control variables. The empirical analysis shows that human and internal (organisational) capital are the most disclosed categories of intellectual capital. The results also show that board independence and university size positively affect ICD in Italian public universities. The methodology adopted in this study could be replicated for other countries to obtain a better understanding of how ICD can help meet stakeholder information needs. The results provide a useful basis for further investigation into ICD drivers and influences and may also enable regulators and standard setters to better understand and regulate IC practices in universities.

Integrated reporting and the performativity of intellectual capital

The research investigates how intellectual capital (IC) is problematised in the context of integrated reporting. Drawing on a performative approach to IC, the paper explores the role of organisational actors in defining, classifying and valuing IC within the process of preparing an integrated report (IR). The analysis relies on in-depth interviews with IR preparers of a European oil and gas company that has been issuing IRs since 2012 and considers IC to be a core element of its business model and value creation story. The case study reveals that IC definition, classification and valuation stimulate ongoing interaction among various actors. An active role is played by the staff of the department responsible for the IR preparation process, but also by organisational actors who are not directly involved in this process and by external actors, such as the company’s peers, IIRC representatives and the company’s accounting advisors. Some sketches, matrixes and maps inspired by the IIRC Framework (i.e., the business model sketch, the KPIs matrix and the connectivity map) were pivotal in defining concepts and categories of IC and its connection to value creation, although the quantification of IC’s effect on value creation remains disputed. In showing how organisational actors problematise and engage with IC inscriptions within the process of IR preparation, the paper enriches the scant research that examines the performativity of IC in the context of corporate external reporting and answers the call for more research on how IC affects the management of organisations.

Does intellectual capital allow improving innovation performance? A quantitative analysis in the SME context

PurposeThe purpose of this paper is to investigate the association between the strength of intellectual capital (IC) and small- and medium-sized enterprise (SME) innovation performance.Design/methodology/approachPrimary data of 150 SMEs belonging to manufacturing medium-high tech industries were collected through a survey. The methodology consists of a confirmatory factor analysis and a cluster analysis, complemented by a t-test, to assess whether there is a significant difference in terms of innovation performance of SMEs characterized by a different strength of IC.FindingsOverall, the findings show that SMEs of the sample can be divided into two groups characterized by a different strength of IC, and those SMEs disclosing a higher strength of IC, in terms of human capital, innovation capital and relational capital, exhibit a significantly higher radical and incremental innovation performance.Practical implicationsThe present study provides SME entrepreneurs and managers with an empirical evidence that possessing strong IC in its three dimensions seems to help SMEs reinforce their ability to generate both radical and incremental innovation. This calls that SME entrepreneurs and managers need to identify and effectively manage IC in order to strengthen and effectively leverage their investments on IC.Originality/valueThis study is particularly relevant because, instead of focusing on single categories of IC as previous studies mainly do, it adopts an overarching perspective of the dimensions of IC and their impact on both radical and incremental innovation performance. Moreover, it focuses on the SME context which has been less investigated than large firms within the domain of IC.

How much does firm-specific intellectual capital vary? Cross-industry and cross-national comparison

This study examines the level of firm-specific intellectual capital (IC) and then goes on to find out whether there are differences across national and industry contexts in this regard. The study focuses on firms in two European countries, Finland and Spain, and on low- and high-tech sectors. Utilising survey data, we analysed six different categories of intellectual capital with multiple-item scales, tested for their reliability and validity, and compared the means of IC categories between high- and low-tech firms in Finland and Spain. The findings show that the level of IC in high-tech firms is sufficiently similar in Finland and Spain, while in the low-tech sector there are major differences. Furthermore, we find that in Spain there are more major differences in IC between high- and low-tech firms than in the case of Finnish firms. Overall, this study provides new understanding of how IC varies across countries and industries.

How much does firm-specific intellectual capital vary? Cross-industry and cross-national comparison

This study examines the level of firm-specific intellectual capital (IC) and then goes on to find out whether there are differences across national and industry contexts in this regard. The study focuses on firms in two European countries, Finland and Spain, and on low- and high-tech sectors. Utilising survey data, we analysed six different categories of intellectual capital with multiple-item scales, tested for their reliability and validity, and compared the means of IC categories between high- and low-tech firms in Finland and Spain. The findings show that the level of IC in high-tech firms is sufficiently similar in Finland and Spain, while in the low-tech sector there are major differences. Furthermore, we find that in Spain there are more major differences in IC between high- and low-tech firms than in the case of Finnish firms. Overall, this study provides new understanding of how IC varies across countries and industries.

Does intellectual capital disclosure in analysts' reports vary by firm characteristics?

In this paper, we explore how Australian sell-side financial analysts contribute to the supply of intellectual capital (IC) information in the capital market. Toward this end, we examine how types and semantic properties of IC disclosures in analyst reports vary by a number of firm-specific characteristics likely to be associated with voluntary corporate disclosure. Consistent with our expectations, we find that the uncertainty associated with forecasting firm's earnings and the IC intensity of the industry in which the firm operates are associated positively with the extent as well as several semantic properties of IC disclosure in analyst reports. Highlighting that IC disclosure in analyst reports is not always a function of the extent of IC disclosed by firm, we find a statistically significant but negative association between firm profitability and the extent and certain semantic properties of IC disclosure in analyst reports. Firm size was significantly and positively associated with only the extent of forward-looking IC disclosure. Of the three categories of IC, only relation capital disclosure varied with any of the explanatory variables. Our findings highlight the importance of analyst reports as an IC communication media that could complement corporate communications of IC not only for firms disclosing less IC information voluntarily but also for those firms known to disclose more.

Stakeholder involvement in intellectual capital system implementation for long-term competitiveness development of SMEs in Thailand

Small and medium-sized enterprises (SMEs) have been recognised on their contribution to national economic growth. A significant number of SMEs had difficulties surviving after the 2007 economic crisis and during an intensive competition in the global market. The implementation of an intellectual capital (IC) system supported with stakeholder involvement contributes to the SMEs in long-term competitiveness development. In this work, we have implemented the IC system based on the process model and the Skandia navigator model. The proposed IC system is the integration of joint application development, business plan, and customer relationship management on three selected SMEs in Thailand emphasising on enhancing stakeholder involvement. The significant achievement in IC categories in human, financial, and customer prospects has been addressed.

Proprietary costs of intellectual capital reporting: Malaysian evidence

Purpose – The purpose of this paper is to examine the relationship between intellectual capital (IC) performance (value-added intellectual coefficient (VAIC)) and company characteristics with IC disclosure (ICD) in Malaysian listed companies. Design/methodology/approach – Sample of the study is 68 biggest Malaysian companies listed in Malaysian Stock Exchange based on market capitalization in year 2006. The paper follows the classification of ICD by Huang et al. (2007), with three broad IC categories in 45 items. Content analysis was used to collect the IC information from the annual reports. Regression analysis was conducted for VAIC and its components. Log linear analysis was also conducted to cater the possible misspecification in the model. Findings – Results of the study show that VAIC is negatively related to ICD. Further classification of VAIC shows that intellectual capital efficiency and human capital efficiency are negatively related to ICD whilst structural capital efficiency is not related to ICD. Company size and leverage are found to be positively related to ICD. Research limitations/implications – Negative association between VAIC and ICD suggests that companies reduce ICD for competitive advantage reason which supports the proprietary cost theory. The findings of the study may provide some evidence to regulators to enhance the reporting practices of IC for the benefits of users of financial reporting in making relevant decisions. The focus should be given on the reporting of human capital items. Originality/value – This is the first paper to use IC framework by Huang et al. (2007). Consistency of findings with other studies using different IC framework can be compared for the choice of IC framework in future studies.

Assessment and Management of Intellectual Capital: A Single Case Study on the Construction and Implementation of an IC Index

The purpose of this paper is to present an index that assesses the contribution of the intellectual capital (IC) to the value creation process of an organization. The index combines into a single measure the contributions of the individual IC elements on the basis of their strategic importance, their performance, and their reciprocal influence.Five steps, based on the Assessment and Management of Intellectual Capital (AMIC), are considered as essential to build up the index. First, a theoretical framework is developed to underpin the process of selection of the different IC categories. Then, further steps suggest how to aggregate, weigh, and normalize the value of the IC categories in order to build the AMIC index. The index has been implemented into the ‘Software’ community of innovation of Finmeccanica, which is the leading Italian group in Aerospace, Defence, and Security. We argue that the AMIC index can be successfully used to assess and verify the performance of the value creation process and to explain the behaviour of each specific IC category and its contribution to the combined unit value. Furthermore, the analysis of each category contribution to the value creation can be carried out both in terms of stock and flow in order to highlight the quantitative and qualitative interrelations among the categories. Copyright © 2015 John Wiley & Sons, Ltd.

The relationship between recognised intangible assets and voluntary intellectual capital disclosure

Purpose – The capitalisation of intangible investments is discussed controversially in the financial accounting literature. International accounting standards are concerned with this issue and generally demand more intellectual capital to be recognised on the face of the balance sheet. If investors and analysts already gather monetary information about intangible assets from the financial report and find such information useful, then the necessity to complement such information with voluntary intellectual capital disclosure will diminish. Accordingly, there should be an association between recognised intangible assets and voluntary intellectual capital disclosure. The paper aims to discuss these issues. Design/methodology/approach – The authors analyse the voluntary disclosure of 264 investor conference and roadshow presentations of German DAX 30 firms in the year 2001, 2003, 2005, and 2007. The authors apply regression models to analyse the association between recognition of intangible assets and voluntary intellectual capital disclosure and control for other determinants of voluntary disclosure. Findings – The authors find that the magnitude of recognised intangible assets is significantly and negatively associated with the quantity and quality of voluntary intellectual capital disclosure. The authors show that this association is mainly driven by goodwill accounting. In more detailed analyses we find different directions (positive, negative and insignificant) of this relationship for different categories of intellectual capital. Research limitations/implications – Future studies on voluntary intellectual capital disclosure need to consider recognised intangible assets as a determinant to avoid omitted variable problems. Practical implications – The authors provide descriptive evidence about voluntary intellectual capital disclosure practice of Germany’s largest firms. Originality/value – The paper provides primary evidence on the association between recognised intangible assets and voluntary intellectual capital disclosure.

Reporting Intellectual Capital in Annual Reports: Evidence from Indonesia

This exploratory study which replicates the content analysis methodology of Guthrie et all (1999, 2004) towards Intellectual Capital (IC) disclosures in the annual report has set several objectives. Primarily, the empirical investigation assesses the extent to which Indonesian listed companies are publicly reporting their IC both the amount and type of information being reported. Secondly, the investigation also examines the extent to which the various categories of IC are represented in the annual reports of the sample companies. Finally, the study explores the extent to which the level of IC disclosures could be related to companies' characteristics such as industry category, age, ownership structure and market capitalization. The sample was Indonesia's 23 largest companies listed in the Jakarta Stock Exchange. In light of research limitations, the preliminary and tentative indings of this study indicate that irst of all, similar to indings worldwide, Indonesian companies have substantial intellectual capital and they do aware and disclose their intellectual capital in the annual reports. Secondly, IC that tends to be most often reported is relational capital, followed by human capital and organizational capital. Thirdly, even though the trend in IC disclosure as a whole is generally increasing, there is no conclusive and predictable pattern found. Fourthly, the IC identiied and reported is inconsistent as no framework available in helping the companies discloses intellectual capital. Fifthly, most of the intellectual capital components identiied are in qualitative format. Sixthly, even though the study did not ind a conclusive evidence regarding the relationship between the level of IC disclosure and company characteristics such as industry, age, ownership structure, and market capitalization, however some indings are noteworthy. Finally, a comprehensive framework is yet to be developed, especially for collecting and reporting IC formation for consistency and comparability purposes. );} // --> activate javascript

Measuring intellectual capital in the university sector using a fuzzy logic expert system

The main aim of this study is to find a method to measure the intellectual capital (IC) of an organization which is able to combine management and measurement views, to reflect the newest concepts regarding IC, and to take into consideration the ‘vague’ interactions between IC categories. We posit the idea that a fuzzy expert system model can address these issues, since it takes account of the qualitative nature of most IC indicators and the different IC subcategories. The main advantage of an IC score developed through a FES model is to provide a reliable IC index. The model presented in this article applied to data derived from the Austrian universities’ IC reports is a pilot model, sufficiently flexible for individual adaptations and adjustments. The main limitation of the study is that further tests can be carried out only in the presence of available and comparable IC data which are currently not available.

European evidence on intellectual capital: Linking methodologies with firm disclosures

The aim of this research is to examine the degree to which different categories of intellectual capital are disclosed in the annual reports of a sample of large European companies. The sample comprises 18 companies included in the STOXX® Europe TMI Software & Computer Services Index, from six countries. Keeping with the previous literature, the present study has analysed the disclosed items of intellectual capital outside the financial reports of these entities; this methodological choice assumes that disclosure outside the requirements of accounting standards shows the true commitment of managers in the creation and development of intellectual capital. Therefore, we have collected the cross-sectional raw data from the management review section of selected annual reports for one fiscal year. We have used relevant methodologies from the earlier literature for the content analysis of intellectual capital disclosures. The elements disclosed in narrative form were coded as binary variables on an index scale, and several frequencies and charts are included in the discussion section. Frequencies found are only poorly comparable with the results of previous studies.

The impact of intellectual capital disclosure on cost of equity capital: A case of French firms

The purpose of this paper is to examine empirically the impact of intellectual capital disclosure (IC) on cost of Equity capital. The empirical research is based on companies listed in the French SBF 120 stock market index. The findings confirm our hypotheses that stipulate the existence of a significant and negative association between intellectual capital disclosure with its two components (human capital, structural) and the cost of equity. However, the negative impact of the relational capital disclosure is not validated. The results in this paper are of considerable importance to both policy makers and firms. In fact, the understanding of the impact of Intellectual capital disclosure on cost of equity capital helps policy makers in the evaluation of the costs and benefits of disclosure. Moreover, with regard to managers of firms, the results show the benefit of enhanced IC disclosure regarding the reduction in their cost of capital. This study is one of the very first to provide empirical evidence of the association between Cost of equity capital and the level of disclosure in the three individual intellectual capital categories (human; structural and relational capital).

Usefulness of intellectual capital information: preparers' and users' views

PurposeThis paper aims to investigate preparers' and users' perceptions on the usefulness of intellectual capital (IC) information disclosed in annual reports of listed companies. In addition, it aims to examine the significant differences in the perceptions of usefulness of IC information and IC categories of the preparers and users.Design/methodology/approachThe paper used a questionnaire survey method to collect the data (i.e. primary data). The questionnaires were distributed to companies (i.e. chief financial officers and accountants) as preparers, and brokers (i.e. analysts) and banks (i.e. credit officers) as users. The data were analysed using descriptive statistics, t‐test and ANOVA.FindingsThe paper found that both preparers and users perceive the IC information disclosed in the annual reports of listed companies to be useful for their decision making purposes. Furthermore, the paper found that there are significant differences in the perception of usefulness between preparers and users.Research limitations/implicationsThe paper only focused on certain preparers' and users' perceptions. Nevertheless, it provides evidence that IC information is useful for decision‐making purposes. Future research on this issue may include more users.Practical implicationsThe findings provide evidence that IC information disclosed by listed companies is perceived to be useful by preparers and users. In addition, it provides evidence that there is significant difference between the perceptions of the usefulness of IC information by preparers, users and amongst the different user groups. Thus, these findings could be useful for regulatory authorities in Malaysia (e.g. Malaysian Accounting Standards Board and Bursa Malaysia) for the improvement of the disclosure practices (e.g. voluntary basis) by the Malaysian listed companies and enhance transparency in the capital market.Originality/valueThe paper can be considered as the first empirical study to examine the usefulness of the IC information from both views; preparers and users in Malaysia. In addition it contributes to the limited literature on IC in Malaysia.

Voluntary disclosure of intellectual capital items in roadshows and investor conferences: an empirical analysis of DAX30-companies

We analyze firms’ voluntary disclosure of intellectual capital in a setting of presentations to analysts and investors. Firms use presentations to analysts and investors as an additional means of reporting. Due to lesser restrictions of this kind of reporting and also due to the private channel disclosure setting of such presentations, firms are able to highlight certain issues which they think to be important for interpretation and forecasting of firm success. In such a setting we can assess the benefit-cost relation underlying these disclosure decisions. The sample consists of German DAX30 firms, which are analyzed for the years 2001, 2003, 2005, and 2007, resulting in a total of 271 observations. We calculate quantitative and qualitative disclosure indices and also analyze whether time, industry and type of presentation influence intellectual capital disclosure. Findings show that customer capital, human capital, and process capital are reported more often than other intellectual capital categories. Industry and type of presentation are strongly related to disclosure indices. There is also a weak significant relation between time and disclosure index. Overall, firms tend to prefer qualitative voluntary disclosure of intellectual capital and only carefully disclose quantitative data. This suggests that the benefit-cost relation of quantitative reporting is negative.