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Intellectual capital and market performance: The case of multinational R&D firms in the U.S

Author

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  • Arifatul Husna Mohd Ariff
  • Ainul Islam
  • Tony van Zijl

    (Victoria University of Wellington, New Zealand)

Abstract

Intellectual capital (IC) is considered as a key resource in business. However, it is difficult to measure and compare across firms due to its intangible nature. The Value Added Intellectual Coefficient (VAIC) model proposed by Pulic (1998; 2000) might be used to overcome these issues. The purpose of this study is to apply the VAIC model to investigate the impact of IC on market performance among R&D engaging firms. The sample for this study comprises multinational firms listed on the United States (U.S.) stock exchanges which engaged in R&D activity during the period 2006-2013. The sample employed consists of 1,328 firm-year observations and the data were obtained from the Compustat database. Market performance is measured using the market-to-book ratio and Tobin’s q ratio. The study employs the VAIC model to measure aggregate IC efficiency and its elements: human capital efficiency, structural capital efficiency and tangible capital efficiency. The study also controls for the effects of size, leverage, year and industry on market performance. The data were analyzed using descriptive, correlation and multiple linear regression analyses. From the regression analysis, the results indicate that aggregate IC efficiency has a positive and significant association with market performance among R&D firms. However, among the components of aggregate IC efficiency, human capital efficiency has no significant association with R&D firms’ market performance while structural capital efficiency and tangible capital efficiency have a positive and significant association with market performance. The findings suggest that the synergy derived from the combination of IC and tangible resources has a significant influence on the market valuation of R&D firms. The finding also suggests the importance of structural and tangible capital over human capital in R&D engaging firms. The findings provide not only empirical evidence on the relationship between IC and market performance among R&D engaging firms, but also provides important further evidence on the VAIC model as an IC measurement method. Empirical studies to date have found mixed evidence on the adequacy of the VAIC model. In respect of structural and tangible capital the results of this study provide support for the VAIC model; but not in respect of human capital.

Suggested Citation

  • Arifatul Husna Mohd Ariff & Ainul Islam & Tony van Zijl, 2016. "Intellectual capital and market performance: The case of multinational R&D firms in the U.S," Journal of Developing Areas, Tennessee State University, College of Business, vol. 50(5), pages 487-495, Special I.
    • Handle: RePEc:jda:journl:vol.50:year:2016:issue5:pp:487-495
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    Cited by:

    1. Snezhana Hristova & Dusica Stevceska-Srbinovska, 2019. "MANAGING TECHNOLOGY IN MACEDONIAN SMEs CONTEXT: PERCEPTIONS, PRACTICES AND CHALLENGES," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.
    2. Cheng-Hung Tsai & Eugene Burgos Mutuc, 2020. "Evidence in Asian Food Industry: Intellectual Capital, Corporate Financial Performance, and Corporate Social Responsibility," IJERPH, MDPI, vol. 17(2), pages 1-21, January.
    3. Yusuf Iskandar & Joeliaty & Umi Kaltum & Hilmiana, 2021. "The Relationship Between Intellectual Capital and Performance of Social Enterprises: A Literature Review," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 10, September.
    4. Lassaad Ghachem & Costinel Dobre & Reza Etemad-Sajadi & Anca Milovan-Ciuta, 2019. "The Impact Of Cultural Dimensions On The Perceived Risk Of Online Shopping," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.
    5. Rizwan Raheem Ahmed & Munwar Hussain Pahi & Shahid Nadeem & Riaz Hussain Soomro & Vishnu Parmar & Fouzia Nasir & Faiz Ahmed, 2023. "How and When Ethics Lead to Organizational Performance: Evidence from South Asian Firms," Sustainability, MDPI, vol. 15(10), pages 1-29, May.
    6. Philip Omondi Peters & Timothy Chrispinus Okech, 2020. "Managerial intellectual capital on the internationalization of commercial banks in Kenya," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 9(3), pages 59-68, April.
    7. Xin Long Xu & Jianping Li & Dengsheng Wu & Xi Zhang, 2021. "The intellectual capital efficiency and corporate sustainable growth nexus: comparison from agriculture, tourism and renewable energy sector," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(11), pages 16038-16056, November.
    8. Erika Kulcsar & Claudia-Izabela Crenganes, 2019. "The End Product Of The Imagine Dragons’ And Lady Gaga’S Music, Or The Nature Of Marketing Mix In The Music Industry," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.
    9. Tajudeen Lawal & Daniya Adeiza Abdulazeez & Mohammed Yabagi Ibrahim, 2019. "Human Capital Efficiency And Profitability Of Quoted Integrated Oil And Gas Companies In Nigeria," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.

    More about this item

    Keywords

    Intellectual capital; market performance; R&D firms;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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