Abstract:
Intellectual capital (IC) is recognized as a strategic asset which gives competitive
advantages by driving organizations for superior performance in the modern day
knowledge-based economies. The purpose of this study is to investigate, empirically,
the relation between IC, and firm performance and the response of investors. In this
respect, the study has been conducted using data drawn for 2002 to 2006 from listed
financial services and manufacturing sector firms in Sri Lanka. The Pulic’s Value
Added Intellectual Coefficient (VAIC) has been employed to measure the IC together
with the measurements of value creation efficiencies of capital employed, human
capital, and structural capital of selected firms. The researchers use the Pearson’s
correlation analysis and construct regression models to investigate the said
relationships. Results of the main analysis show that IC is positively associated with
firm performance, and investor response. In addition, it is found that the level of
importance placed by investors on three components of value creation efficiencies
(physical capital, human capital, and structural capital) has not been uniform.
Moreover, the results of the extended analyses further confirm some of the above
associations with few exceptions. The study is novel and original in its approach to
determine the value addition in the VAIC model. In this regard, current study brings
the assumptions of the stewardship theory in alternative to both economic value
addition and value addition according to the stakeholder theory. Moreover, the results
may extend in understanding the role of IC in creating corporate value and building
sustainable advantages for companies in developing countries as the findings in
developed economies and emerging economies cannot be generalized to developing
nations, since country-specific factors and technological advancements influence
significantly in determining the level of IC.
