Nexus between intellectual capital and profitability with interaction effects: panel data evidence from the Indian healthcare industry

Abstract

PurposeThis study seeks to understand the nexus between intellectual capital and profitability of healthcare firms in India with interaction effects.Design/methodology/approachRelevant data were extracted from the Centre for Monitoring Indian Economy (CMIE)'s Prowess database for a period of ten years 2009–2018 for a sample of 84 selected firms from the healthcare industry. This study uses value added intellectual coefficient (VAIC) and modified value added intellectual coefficient (MVAIC) as a measure of intellectual capital. Further, the study employs panel regression techniques to explore the relationship between intellectual capital and profitability.FindingsThe empirical findings reveal that the intellectual capital coefficient of healthcare firms in India averages 2.7757. It is also observed that a majority of the healthcare firms' intellectual capital coefficient is below the industry average. From the regression analysis, it is evident that the intellectual capital coefficient is positively related to the profitability of healthcare firms in India. As far as the components of intellectual capital coefficient are concerned, the capital employed coefficient (CEC) is the only component driving the profitability of healthcare firms in India. A further introduction of interaction terms improves model explainability and moderates the impact of the predictor variable on the response variable. Furthermore, it is observed that the intellectual capital coefficient of the healthcare industry is immune to changes in political regimes in India.Practical implicationsThe findings reveal that intellectual capital is an important driver of corporate performance, thus healthcare firms in developing economies like India need to enhance their intellectual potential. Therefore, corporates and governments in developing economies should stimulate investments in developing intellectual capital for enhanced corporate performance and economic growth. Thus, this study might be used as a reference by policymakers while drafting the future policy for the development of intellectual capital in general and healthcare sector specifically.Originality/valueThis is among the first few studies to explore such an empirical relationship for healthcare firms in India and among the few studies of this kind across the globe. It also makes novel contributions in considering interaction variables and seeking the consistency of results across different political regimes. However, the study examines one nation and one industry; thus, the generalisation of findings requires caution.

The Interaction Effect of Human Capital Efficiency on the Nexus between Intellectual Capital and Profitability: Evidence from Malaysian SMEs

“…Several studies have reported the evidence of significant and positive relationship between intellectual capital and profitability (e.g. Vishnu et al, 2014;Nimtrakoon, 2015;Dzenopoljac et al, 2016;Scafarto et al, 2016;Nawaz et al, 2017;Ozkan et al, 2017;Tiwari et al, 2018;Tiwari, 2020). Thus, the first hypothesis is as follows:…”

“…Many research papers have provided evidence that human capital supports structural capital, relational capital, which in turn have a direct impact on firm performance (e.g. Huang and Hsueh, 2007;Hsu and Fang, 2009;Leitner;2011;Gonzalez-Loureiro and Dorrego, 2012;Scafarto et al, 2016;Sardo et al, 2018;Tiwari et al, 2018;Tiwari, 2020). Therefore, this study attempts to make a contribution by measuring the moderating role of human capital in the relationship between intellectual capital and firm performance.…”

“…In addition, other studies revealed that human capital may affect firm performance indirectly through its positive impact on structural capital, relational capital and capital employed (e.g. Scafarto et al, 2016;Sardo et al, 2018;Tiwari et al, 2018;Tiwari, 2020). Scafarto et al (2016) argue human capital, structural capital, relational capital on its own is not sufficient to deliver superior performance but it needs interaction with other components of intellectual capital so that the firm can leverage on its overall intangible value.…”

“…Thus, to further strengthen the nexus between intellectual capital and firm performance, this study will investigate the moderating effect of human capital efficiency on other components of intellectual capital and how these interaction affect firm performance. Further, analysis involving moderating variables in the intellectual capital literature is still in its infancy, thus making a novel contribution (Tiwari, 2020). Therefore, based on the research issues and gaps as discussed, the study intends to address the following research questions:…”

The Nexus between Intellectual Capital and Firm's Financial Performance: ACE Market Vantage Point

“…As a result, a thorough understanding of the components of intellectual capital coefficients is critical for an organization's success. It may hold the key to achieving the desired levels of intellectual Capital (Tiwari, 2020). Moreover, Laing, Dunn, and Hughes-Lucas (2010) specified that the MVAIC model that combines the three IC components of HCE, SCE, and RCE is a valid evaluation instrument and capable of imparting discrete values IC.…”