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How do investments in intellectual capital create profits?

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  • Paula Kujansivu
  • Antti Lonnqvist

Abstract

This paper aims to determine how investments in Intellectual Capital (IC) are transformed into profits. It is assumed that IC investments first increase the value of IC and the efficiency of using IC, which are then expected to lead to higher productivity and finally to profitability improvements. These relationships are studied by analysing correlations between the results of performance measures representing the above-mentioned factors. The data used comprises information from the financial statements of Finnish companies during the period 2001 and 2003. Overall 60,304 cases are included representing the 11 largest industries in Finland. The analysis is carried out on the level of the whole data set, in different industries and in both SMEs and large companies. The results provide empirical evidence to support some of the assumptions concerning the relationships between IC investments and profitability. However, contrary to expectations, the results showed no linear relationship between investments in IC and profitability.

Suggested Citation

  • Paula Kujansivu & Antti Lonnqvist, 2007. "How do investments in intellectual capital create profits?," International Journal of Learning and Intellectual Capital, Inderscience Enterprises Ltd, vol. 4(3), pages 256-275.
    • Handle: RePEc:ids:ijlica:v:4:y:2007:i:3:p:256-275
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    Citations

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    Cited by:

    1. H.S.M. Deghles & N.R. Kelchevskaya, 2021. "The Impact of Intellectual Capital on Performance and Investment Attractiveness of Russian Companies," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 20(1), pages 110-132.
    2. Jianxiong Chen & Chung-Cheng Yang, 2021. "Competitive Revenue Strategies in the Medical Consumables Industry: Evidence from Human Resources, Research and Development Expenses and Industry Life Cycle," IJERPH, MDPI, vol. 18(6), pages 1-20, March.
    3. Edyta Bombiak, 2023. "Effect of Green Intellectual Capital Practices on the Competitive Advantage of Companies: Evidence from Polish Companies," Sustainability, MDPI, vol. 15(5), pages 1-22, February.
    4. Lönnqvist, Antti, 2007. "Intellectual Capital and Productivity: Identification and the Measurement of the Relationship at Company-level," Discussion Papers 1108, The Research Institute of the Finnish Economy.

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