Do Intellectual Capital Elements Spur Firm Performance? Evidence from the Textile and Apparel Industry in China

Abstract

This paper examines how investment in intellectual capital (IC) elements by textile and apparel companies improves firm performance measured in terms of profitability, market value, and productivity. The modified value-added intellectual coefficient (MVAIC) model is applied to measure IC. Using a panel of 35 Chinese textile and apparel companies for a six-year period (2013–2018), the results show that physical and human capitals are the strong factors that contribute to firm performance. In addition, relational capital negatively influences profitability and market value, and structural capital and innovation capital have a negative impact on employee productivity. We also find that the MVAIC model performs better in measuring IC than the original value-added intellectual coefficient (VAIC) model. This paper can provide some insights for corporate managers to enhance firm performance and gain competitive advantage by proper utilization of IC in traditional industries.

The Balanced Scorecard as a Strategic Management Tool in the Textile Sector

“…At this point, we present a summary of empirical studies carried out by several authors on experiences of implementing the BSC in the textile sector. Zhang et al (2021) examine how investment in Intellectual Capital (IC) elements by textile and apparel companies improve firm performance measured in terms of profitability, market value, and productivity. According to the authors, the textile and apparel industry is traditionally labor-intensive.…”

Is Too Much a Good Thing? The Non-Linear Relationship Between Intellectual Capital and Financial Competitiveness in the Chinese Automotive Industry

“…First, because the VAIC method is limited to historical data from annual financial statements, it may be inappropriate to assess firms' future value-creating potential. Second, some expenditures such as research and development (R&D) and advertising costs are not included in this method because both of them are classified as expense items (Ståhle et al, 2011;Lu et al, 2021;Zhang et al, 2021). Therefore, this study applies the MVAIC method, which will be further discussed in Section 2.2.…”

“…As reported by Ovechkin et al (2021), the stock of HC and SC has the biggest influence on firms' profitability in the Russian agricultural sector. Zhang et al (2021) pointed out that physical capital and HC are strong factors spurring the performance of textile and apparel companies in the case of China.…”

“…(3) Control variables. Guided by previous literature (Nimtrakoon, 2015;Smriti & Das, 2018;Xu & Li, 2019;Xu & Wang, 2019;Yao et al, 2019;Xu & Liu, 2020Ge & Xu, 2021;Zhang et al, 2021), firm size (SIZE), firm leverage ratio (LEV), firm age (AGE), and gross domestic product growth rate (GDP) are included in regression models. More specifically, this study determines SIZE as the natural logarithm of total assets, LVE as the total liabilities to total assets, and AGE as the natural logarithm of years since setup of enterprise.…”

The Impact of Intellectual Capital on Smart Organization in AlBashir Hospital

“…The tangible assets created by individual and collective practices, for the purpose of building competencies and skills, allowing assets to create added value, and intellectual capital is considered one of the most valuable assets at the present time, because it represents a scientific intellectual ability capable of making changes, modifications and adaptations to the surrounding environmental changes, and what it is witnessing organizations are one of the challenges of globalization, intense competition, global transformation towards a knowledge economy, and global technological development, which directed organizations to the need to invest in human and knowledge resources, as it represents the real capital on which the success or failure of organizations depends (Al-Sudani & Al-Salman, 2019). There is agreement among many researchers about defining the dimensions of intellectual capital, as it has been identified in three dimensions: human capital, structural capital, and relational capital (Stewart, 1999, 11;Simina, 2021;Pap et al, 2020;Ginesti & Ossori, 2020;Zhang et al, 2021).…”