Testing the relationship between intellectual capital and a company’s performance: Evidence from South Africa

Abstract

The aim of this study was to investigate whether the performance of a company’s intellectual capital can explain organisational performance. The dimensions of a company’s performance are (1) profitability, (2) productivity and (3) market valuation. Data were obtained from a sample of 65 companies that are listed on the JSE Securities Exchange (high knowledge‐base sectors). Findings from the empirical analysis indicate that the relationships between the performance of a company’s intellectual capital and (1) profitability, (2) productivity and (3) market valuation are informative but varied. The empirical findings suggest that the performance of a company’s intellectual capital can explain profitability and productivity, but not market valuation.

The Effect of Intellectual Capital on Organizational Performance: The Mediating Role of Knowledge Sharing

“…This result supports the conclusions of [12] [66] [124] [136] [137]. Intellectual capital found to be of significance in respect of enhancing organizational performance and organizational profitability [138]. Intellectual capital can be developed and better utilized by adopting managerial practices and strategies that will create value through the organizations workforce, which will impact the organizational performance in the long run [153].…”

“…For an example, [138] found that human capital has a significant negative relationship with firm performance. Moreover, [139] pointed out that there is no relationship between intellectual capital and firm performance.…”

Intellectual Capital and Business Performance in Professional Football Clubs: Evidence From a Longitudinal Analysis

“…For instance, Firer and Stainbank (2003) have found a positive relationship between IC and profitability (ROA), a negative relationship with productivity (as measured by asset turnover (ATO)), and no significant relationship with market valuation (M/BV) in South African public traded companies; Shiu (2006) has found a positive correlation of IC with profitability (ROA) and market valuation (M/BV) but a negative correlation with firm productivity (ATO), based on the annual reports of 80 Taiwan listed technology firms; Maditinos et al (2011), using a panel of 96 Greek companies listed in the Athens Stock Exchange, have only found a significant relationship between human capital efficiency (HCE, as measured in VAIC) and financial performance while failing to prove the positive impact of other IC components; Chan (2009), using all the constituent companies of Hang Seng Index in Hong Kong Stock Exchange, has found an overall lack of association between IC (VAIC) and four financial indicators (ROA, ROE, M/BV, and ATO), although some IC components were found to explain a substantial variance in business performance.…”

“…As a result, a surge of writings and empirical studies has accumulated (e.g., Bassi & Van Buren, 1999;Bontis, Keow, & Richardson, 2000;Pulic, 2000;Riahi-Belkaoui, 2003;Firer & Stainbank, 2003;Shiu, 2006;Chan, 2009;Chen, Cheng, & Hwang, 2005;Sharabati, Jawad, & Bontis, 2010;Maditinos, Chatzoudes, Tsairidis, & Theriou, 2011;Alipour, 2012;Zeglat & Zigan, 2014), but a truly conclusive evidence has not yet been reached as to the impact of IC on firm performance.…”

Panel data techniques and accounting research

“…Heterogeneity between firms was not controlled for and the study may have suffered from omitted variable bias. Firer and Stainbank (2003), Gouws and Lucouw (2000) and Swartz and Firer (2005) made use of a cross-section of data in the empirical part of their research (one year of data by multiple firms). The use of panel data would have had benefits such as more reliable parameter estimates, more degrees of freedom, and importantly, the ability to study the dynamics of adjustment from one period to another.…”