Is the influence of intellectual capital on firm performance homogeneous? Evidence from India

What is it about?

This paper investigates the association between intellectual capital and firm performance by employing quantile regression model in Indian context to derive robust and complete association that the classical mean regression fails to extricate. Secondary data on 253 listed Indian firms are collected from ‘Capitaline Plus’ corporate database for a period of 15 years from 1999-2000 to 2014-15. IC and its components are computed using Pulic’s value added intellectual coefficient (VAIC) model and firm performance is measured by return on asset (ROA). Both pooled ordinary least square and quantile regression models are used to test the hypotheses. The results indicate that the pooled ordinary least square regression provide an incomplete picture about the association between intellectual capital and firm performance. The results of quantile regression indicate that the positive influence of intellectual capital and human capital is more for high value firms. The positive impact of physical capital also becomes stronger at upper quantiles. The results demonstrate that for outperforming firms the relative importance of IC is more than that of physical capital in the case of knowledge based sector, while, the dominance of physical capital is more in the case of traditional sector. However, the study fails to extricate any significant influence of structural capital on firm performance at any quantiles.

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Why is it important?

The results reveal that the intellectual capital is the root for creating significant difference between out-performing and non-performing firms. Thus, firms should efficiently acquire, create and disseminate the intellectual resources for achieving sustainable competitive advantages. This study compares the estimated coefficients of mean regression with the coefficients of quantile regression that may provide valuable inputs for policy implication.