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Volume 5 Issue 4
Barcelona 2007
Intellectual Capital and Organizational Performance: an Empirical Study of the Pharmaceutical Industry
Alka Bramhandkar, Scott Erickson and Ian Applebee
Ithaca College, USA
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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 (tacit/explicit and/or 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. The paper then investigates the question of whether these firms actually see market results better than those of competitors.
This approach requires a focus on a single 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. The firms were sorted and divided according to market capitalization and book value and then compared in terms of returns and betas. 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.
Based on this initial success, this approach should be repeated for other industries, although improvements in methodology are possible. Industry-specific studies will be most useful, but cross-industry comparisons may also be possible. The authors 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:
Knowledge management, social capital, communities of practice, structuration theory
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