Ownership Structure and Voluntary Disclosure of Intellectual Capital

Abstract

The objective of this study is to investigate the relationship between ownership structure and voluntary disclosure of intellectual capital (IC). Ownership structure examined is family-owned (FAMC), government-linked companies (GLC) and diffused ownership (OWNDIFF). Using content analysis, a longitudinal study was carried out from years 2006 to 2008 on 162 top companies listed in Bursa Malaysia. Results show that GLCs and OWNDIFFs voluntarily disclose information on IC. In contrast, FAMCs strictly adheres to their secrecy of not disclosing more details than those stipulated by law. This study differs from prior IC disclosure studies in that it discusses voluntary disclosure from agency as well as institutional theory in explaining the relationship between ownership structure and voluntary disclosure of IC. This study may be of interest to various stakeholders such as governmental and regulatory bodies, owners and institutional investors, analysts, as well as policymakers in meeting the growing demand for intangible information to be incorporated in annual reports. It will also facilitate further calls for them to speed up their efforts in producing guidelines for a more consistent IC reporting framework.

Should we patent it or keep it a secret? The moderating role of proactive orientation in family versus non-family SMEs

“…While a few studies in the innovation literature have looked at when SMEs choose secrecy over patenting or vice versa (Gan et al, 2013;Leiponen and Byma, 2009), there have been contradictory findings regarding the relationship between family firms and the propensity to patent (Bannò, 2016;Tognazzo et al, 2013). Patenting requires the "disclosure of the knowledge associated with the innovation and prevents imitation through the threat of punishment in court" (Sofka et al, 2018: 559), but family firms may be unwilling to disclose information associated with their innovations.…”

“…Relatedly, innovation research has paid substantial attention to patenting (Holgersson, 2013) in the context of SMEs, suggesting that formal IP rights in the form of patenting may signal the quality of the firm and their conformity with high-level industry (technical) standards (Gick, 2008), and has also argued that SMEs find secrecy more useful for protecting their IP than patenting (Leiponen and Byma, 2009). While a few studies in the innovation literature have looked at when SMEs choose secrecy over patenting or vice versa (Gan et al, 2013;Leiponen and Byma, 2009), there have been contradictory findings regarding the relationship between family firms and the propensity to patent (Bannò, 2016;Tognazzo et al, 2013). Patenting requires the 'disclosure of the knowledge associated with the innovation and prevents imitation through the threat of punishment in court' (Sofka et al, 2018: 559), but family firms may be unwilling to disclose information associated with their innovations.…”

“…For example, James et al (2013) argued that protecting and capturing value using secrecy involves the 'use of internal policies and procedures that restrict the flow of information both within and outside the organisation ' (p. 1132). In their study of the relationship between ownership structure and voluntary disclosure of intellectual capital, Gan et al (2013) found that family-owned firms strictly adhere to secrecy whenever possible by disclosing no more details than stipulated by law. Still, it is notable how little SME research has considered the use of secrecy by family firms and when patenting is used instead of secrecy, given it is considered an important mechanism that firms use to maximise the portion of the value they capture from their IP.…”

“…However, although a number of contingency factors have been considered in the patenting literature such as country differences (Cohen et al, 2002;Crowley, 2004), industry differences (Alcácer et al, 2017) or innovation types (Arundel, 2001), a major focus has been placed on large firms. Relatively few studies have sought to understand when small-andmedium size enterprises (SMEs) would prefer to use secrecy as a means of IP value protection over patenting (Gan et al, 2013;Leiponen and Byma, 2009). Thus, our understanding of the factors that motivate SMEs to select patents rather than secrecy or vice versa is limited.…”