Impact of intellectual capital on enterprise value: a study into an emerging economy

Today, intellectual capital is argued to be the source of competitive advantage for modern organisations, and its impact is being acknowledged and thoroughly tested in developed economies. However, such studies are scarce in the context of emerging economies, leaving a vacuum in both theory and practice and thereby tilting the perception of investors and the efforts of managers toward traditional resources as the basis of firms’ value. In this direction, the present study is an attempt to bring forth the significance of management and evaluation of intellectual capital for assessing and enhancing the value of the firm. The paper examines the relationship between intellectual capital and the value of firms with reference to India, one of the fastest-emerging economies in the world. The findings of the study provide conclusive evidence in support of the relevance of intellectual capital for the creation and enhancement of firm value. Besides calling for adopting an effective and efficient approach to managing the intellectual resources of the organisations, the results of the study also highlight the inadequacies of the present accounting framework and lament the need for developing a more robust and inclusive accounting system that can not only precisely measure and incorporate the information relating to the intellectual capital but can also, swiftly and transparently, communicate the true value of the firm to all the relevant stakeholders.