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An Empirical Study of the Impact of Intellectual Capital on Business Performance

Author

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  • Samuel Kai Wah Chu

    (Faculty of Education, University of Hong Kong, HKSAR, Hong Kong)

  • Kin Hang Chan

    (Institute for China Business, School of Professional and Continuing Education, University of Hong Kong, HKSAR, Hong Kong)

  • Ka Yin Yu

    (Faculty of Education, University of Hong Kong, HKSAR, Hong Kong)

  • Hing Tai Ng

    (Faculty of Education, University of Hong Kong, HKSAR, Hong Kong)

  • Wai Kwan Wong

    (Faculty of Education, University of Hong Kong, HKSAR, Hong Kong)

Abstract

This empirical study examines the intellectual capital (IC) performance of Hong Kong companies and its association with business performance. Data were collected from constituent companies of the Hang Seng Index listed on the Hong Kong Stock Exchange (2005–2008). An IC measurement, Value Added Intellectual Coefficient (VAICTM), was utilised to evaluate the IC investment of the companies.Four accounting ratios: market-to-book value (MB), return on assets (ROA), asset turnover (ATO) and return on equity (ROE) were used as the indicators of business performance. Regression analyses were conducted to test the ability of IC and its components in order to explain the variance in business performance measures.No conclusive evidence was found to support the associations between VAICTMas an aggregate measure and the four financial indicators. However, components of VAICTMwere found to predict a substantial variance in business performance. Capital Employed Efficiency (CEE) was found to be a key factor in predicting business financial performance. Structural Capital Efficiency (SCE) was found to have a significant effect on businesses' market valuation, as measured by MB, and on profitability, as measured by ROE. Negative correlations were found between Human Capital Efficiency (HCE) and the financial indicators. The findings indicate a gap between the traditional accounting perspective and the value creation perspective, which is central to the VAICTMmethodology in measuring IC.It is believed that the findings of this research provide insights for business stakeholders of Hong Kong companies in utilising IC, particularly the noted impact of structural capital. While our findings indicate the importance of IC for corporations, as shown by the significant effect of SCE on ROE, physical and financial assets may still be considered as the key resources in delivering business success.

Suggested Citation

  • Samuel Kai Wah Chu & Kin Hang Chan & Ka Yin Yu & Hing Tai Ng & Wai Kwan Wong, 2011. "An Empirical Study of the Impact of Intellectual Capital on Business Performance," Journal of Information & Knowledge Management (JIKM), World Scientific Publishing Co. Pte. Ltd., vol. 10(01), pages 11-21.
    • Handle: RePEc:wsi:jikmxx:v:10:y:2011:i:01:n:s0219649211002791
    DOI: 10.1142/S0219649211002791
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    Citations

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    Cited by:

    1. Muturi, Moses Murimi & Beatrice Elesani Ombaka & Joseph Muchiri, 2019. "Relationship between Intellectual Capital and Performance of Small and Medium Manufacturing Enterprises in Kenya," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 12(2), pages 22-32, December.
    2. Mohamed Sherif & Mahmoud Elsayed, 2016. "The Impact Of Intellectual Capital On Corporate Performance: Evidence From The Egyptian Insurance Market," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 20(03), pages 1-47, April.
    3. Stefano Fontana & Daniela Coluccia & Silvia Solimene, 2019. "VAIC as a Tool for Measuring Intangibles Value in Voluntary Multi-Stakeholder Disclosure," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 10(4), pages 1679-1699, December.
    4. Monika Barak & Rakesh Kumar Sharma, 2024. "Does intellectual capital impact the financial performance of Indian public sector banks? An empirical analysis using GMM," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-11, December.
    5. 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.
    6. Li, Xin & Nosheen, Safia & Haq, Naveed Ul & Gao, Xue, 2021. "Value creation during fourth industrial revolution: Use of intellectual capital by most innovative companies of the world," Technological Forecasting and Social Change, Elsevier, vol. 163(C).
    7. Victoria BOGDAN & Claudia Diana SABĂU POPA & Mărioara BELENEŞI & Vasile BURJA & Dorina Nicoleta POPA, 2017. "Empirical Analysis of Intellectual Capital Disclosure and Financial Performance – Romanian Evidence," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 51(2), pages 125-143.
    8. Yolande E. Chan & James S. Denford & Joyce Y. Jin, 2016. "Competing Through Knowledge and Information Systems Strategies: A Study of Small and Medium-Sized Firms," Journal of Information & Knowledge Management (JIKM), World Scientific Publishing Co. Pte. Ltd., vol. 15(03), pages 1-37, September.

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