Does investing in intellectual capital improve financial performance? Panel evidence from firms listed in Tanzania DSE

Abstract

Despite that reviews have been done in intellectual capital and the performance of firms, their status has remained uncertain in the emerging economy. Previous studies have generally focused on single industries and have overlooked the input of the service and manufacturing sectors as a whole. This study offers new insight into the area of intellectual capital and its relationship with firms' performance in Tanzania and evaluates intellectual capital within the service and manufacturing sectors in totality. Using panel regression analysis for the periods of 2010 to 2019, the performance was measured in terms of SG, ROA, ATO, and Tobin's. Heteroscedasticity and endogeneity were controlled using clustered robust standard errors. The empirical findings demonstrate a significant positive influence between structural capital efficiency and SG, ROA, ATO, and Tobin's. However, the effect of human capital efficiency and capital employed efficiency were negative which suggests poor investment in human skills and capital of the firms. Further, VAIC was significantly positively associated with SG, ATO, ROA, and Tobin's Q. It is recommended that to have a competitive advantage, managers and policymakers should focus on the three parts of intellectual capital which are the key drivers of value creation in the organization.

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

“…China's textile and apparel industry. e findings of Kasoga [52] revealed a significant and positive relationship between SCE and financial performance. In the context of Russia, Andreeva and Garanina [60] pointed out that SC contributes to the performance of manufacturing companies.…”

“…Also, a study in an emerging economy (Ghana) by Oppong et al [6] showed that HCE positively affects firm productivity. Conversely, Kasoga [52] documented this negative relationship using ROA, ATO, sales growth, and Tobin's Q as performance indicators.…”

Exploring the Nonlinear Effect of Intellectual Capital on Financial Performance: Evidence from Listed Shipping Companies in China

“…In the case of India, Weqar et al [47] documented that bank profitability is positively related to physical capital, HC, and SC. In addition, for Tanzanian firms in the service and manufacturing sectors, Kasoga [48] observed a positive relation between SC and ROA and a negative relation between physical and human capitals and ROA.…”

Does Intellectual Capital Investment Improve Financial Competitiveness and Green Innovation Performance? Evidence from Renewable Energy Companies in China

“…Xu and Wang [47], using the VAIC model, concluded that the aggregate IC improves the financial performance of publicly traded agribusinesses in China with a lagged effect. Taking manufacturing and service firms listed in Tanzania as the sample, Kasoga [48] discovered that IC is significantly positively related to financial performance measured by return on assets (ROA), asset turnover ratio (ATO), sales growth, and market value.…”