Intellectual Capital and Organizational Performance: an Empirical Study of the Pharmaceutical Industry pp357-362
This paper directly measures the impact of intellectual capital management on organizational performance. Although this is an area widely studied in the literature, the nature of most of the work to date is to focus on specific aspects of intellectual capital (human, structural, or relational capital) and their individual impact on performance. This study specifically looks to identify firms that manage overall IC, whatever its nature, better than competitors. We then ask the question, do these firms actually see market results better than those of competitors? In order to do this type of analysis, we felt a need to focus on a specific industry. If wide differences do exist between industries in terms of physical capital needs and human, structural, or relational capital needs, then random firms are harder to compare. Those within a single industry, such as the pharmaceutical firms studied here, should have relatively similar structures in relation to all these needs. We collected data on 139 firms in the drugs industry. We sorted and divided the sample according to market capitalization and book value (a common measure of intellectual capital) then looked at return on assets, investment, and equity, as well as beta. By one measure, firms with the highest level of intangible assets clearly performed better than those with lower levels. The high level firms had significantly better returns and significantly less variability in stock price. According to a second measure, the results were less convincing but still lent support to further research using this methodology. So, as a first cut, this study had very promising results. We intend to repeat it for other industries, experimenting with the measures and means of cutting the data. Although industry‑specific is obviously the initial way to go, we also intend to perform some cross‑industry comparisons with the measures we develop. We believe the results of the full research program will be significant to practice and will provide substantial support to those championing better management of intangible assets within firms.
Keywords: intellectual capital, knowledge management, organizational performance, marketbook ratio, ROA, ROE, ROI, beta
The Communication of Intellectual Capital Prevalence and relationship with Organizational Performance pp38-50
Abstract: While intellectual capital (IC) as an asset is long noted, one area that has begun to attract attention is the communication of IC. The past decade of increasing global competition and economic downturns have enhanced the importance of the com munication of IC, in particular, how IC supports organizational performance (OP). Current literature on the communication of IC is limited to reporting metrics, which does not provide sufficient insights on OP. Yet, the need for the communication of IC is growing globally as investors are demanding for more non‑financial information to reflect organizations sustainability. Hence, the objectives of this study are three‑fold. First is to ascertain the prevalence of the communication of IC, where past s tudies have reported low occurrence. Secondly, the study aims to examine the communication of IC in terms of content; and finally, to investigate the correlation of the communication of IC with OP. The dataset used in this study was drawn from annual repo rts and supplementary corporate disclosure (ARS) published for FYE2011 in English by 299 banks listed on the stock exchanges globally. The communication of IC was reviewed from three angles, human capital, relational capital and structural capital; and OP encompasses business continuity, risk management and organizational productivity. Content analysis was used to evaluate the communication of IC and to highlight nuances and trends. Findings showed that the communication of IC was prevalent in more than half of the banks in the dataset, where the communication of Human Capital content was most widely reported. Smaller banks, in particular, were found to be lacking in the communication of IC. Three peculiarities were also identified, namely inclusion of information on women, importance of training to organizational productivity, and extensiveness of risk management processes in banks. The significance of this study lies in its effort to highlight relevance of the communication of IC from the perspective of IC components and its correlation to OP.
Keywords: Keywords: intellectual capital, communication of intellectual capital, organizational performance, correlation, annual report and corporate disclosures