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Intellectual capital, management accounting practices and corporate performance

Author

Listed:
  • Mike Tayles
  • Richard H. Pike
  • Saudah Sofian

Abstract

Purpose - The purpose of the paper was to examine whether, and in what way, managers perceive that the level and shape of intellectual capital (IC) within firms influences management accounting practice, specifically, performance measurement, planning and control, capital budgeting, and risk management. It also explores whether such firms are better able to respond to unanticipated economic and market changes and achieve relatively higher performance within their sector. Design/methodology/approach - The paper is based on the results of a study conducted in Malaysia through a questionnaire survey in 119 large companies with varying levels of IC and selected interviews with both accounting and non‐accounting executives in a subset of them. Findings - The findings in the paper suggest some evolution in management accounting practices for firms investing heavily in IC. The findings are discussed and further explored through interviews in some of the firms analysed. Research limitations/implications - The limitations of survey research in this paper are acknowledged, however these are ameliorated by confirmatory insights from the interviews. Further research could be carried out using more extensive case studies in companies, perhaps longitudinally, or undertaken using sector focused surveys. Practical implications - It is important to show in the paper that management accounting systems reflect the strategic orientation of the companies concerned. Where a greater focus on intangibles and intellectual capital occurs it may require a different emphasis on management accounting practices compared to companies where they do not feature strongly. It is important that management recognise and act on this in order to improve corporate performance. Originality/value - The paper shows that it is widely recognised that (IC), whether in the form of knowledge, experience, professional skill, good relationships, or technological capacity is a major source of corporate competitive advantage. Whilst the literature places considerable attention on the valuation, measurement and reporting of IC for external reporting purposes, far less attention has so far been given to the implications of IC for managerial accounting practice. This paper addresses this omission.

Suggested Citation

  • Mike Tayles & Richard H. Pike & Saudah Sofian, 2007. "Intellectual capital, management accounting practices and corporate performance," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 20(4), pages 522-548, July.
    • Handle: RePEc:eme:aaajpp:v:20:y:2007:i:4:p:522-548
    DOI: 10.1108/09513570710762575
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    References listed on IDEAS

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    1. Cristina Chaminade & Hanno Roberts, 2003. "What it means is what it does: a comparative analysis of implementing intellectual capital in Norway and Spain," European Accounting Review, Taylor & Francis Journals, vol. 12(4), pages 733-751.
    2. Paul M. Healy & Amy P. Hutton & Krishna G. Palepu, 1999. "Stock Performance and Intermediation Changes Surrounding Sustained Increases in Disclosure," Contemporary Accounting Research, John Wiley & Sons, vol. 16(3), pages 485-520, September.
    3. Simons, Robert, 1990. "The role of management control systems in creating competitive advantage: New perspectives," Accounting, Organizations and Society, Elsevier, vol. 15(1-2), pages 127-143.
    4. Bukh, P. N. & Larsen, H. T. & Mouritsen, J., 2001. "Constructing intellectual capital statements," Scandinavian Journal of Management, Elsevier, vol. 17(1), pages 87-108, March.
    5. Meer-Kooistra, Jeltje van der & Zijlstra, Siebren M., 2001. "Reporting on intellectual capital," Research Report 01E50, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    6. Eli Amir & Baruch Lev & Theodore Sougiannis, 2003. "Do financial analysts get intangibles?," European Accounting Review, Taylor & Francis Journals, vol. 12(4), pages 635-659.
    7. Diamond, Douglas W & Verrecchia, Robert E, 1991. "Disclosure, Liquidity, and the Cost of Capital," Journal of Finance, American Finance Association, vol. 46(4), pages 1325-1359, September.
    8. Segelod, Esbjorn, 2000. "Investments and investment processes in professional service groups," International Journal of Production Economics, Elsevier, vol. 67(2), pages 135-154, September.
    9. repec:dgr:rugsom:01e50 is not listed on IDEAS
    10. Marginson, David & Ogden, Stuart, 2005. "Coping with ambiguity through the budget: the positive effects of budgetary targets on managers' budgeting behaviours," Accounting, Organizations and Society, Elsevier, vol. 30(5), pages 435-456, July.
    11. Webb, R. Alan, 2002. "The impact of reputation and variance investigations on the creation of budget slack," Accounting, Organizations and Society, Elsevier, vol. 27(4-5), pages 361-378.
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