Intellectual capital and firm performance in India: a comparative study between original and modified value added intellectual coefficient model

What is it about?

With the dawn of a knowledge economy, the role of intellectual capital in value creation and sustainable competitive advantage became evident. With increasing importance of intellectual capital the emphasis on its management and measurement increased manifolds. The Pulic’s value added intellectual coefficient (VAIC) model is one such method that has been widely used for measuring intellectual capital and examining the link between IC and firm performance. However, this model has been criticized because of its inefficiency to capture the structural capital of a firm. The present study is a modest attempt to modify Pulic’s VAIC model with the primary intention of dealing with the structural capital measurement deficiency.

Featured Image

Why is it important?

The findings of the study indicates that SCE calculated employing MVAIC model provides better results as compared to the influence of SCE on firm performance based on original VAIC model. The outcome of this paper may be useful to reduce the existing deficiency of the VAIC model to capture the SCE component. Further, the present study is also different from most of the earlier studies in terms of application of statistical technique for examining the association. In the existing IC literature, most of the researchers have employed pooled Ordinary least square (OLS) model in a panel data set up. But the pooled OLS model cannot capture the over the years correlations of the variables within a firm and is also inappropriate when the error variance is not constant. To overcome the above limitations, we have employed random effects generalized least square (GLS) model.