Skip to main content
Frontiers of Business Research in China
Download PDF
  • Research Article
  • Published:

Measuring intellectual capital and its effect on financial performance: Evidence from the capital market in Taiwan

Frontiers of Business Research in China volume 5, pages 243–265 (2011)Cite this article

Abstract

This paper studies intellectual capital in companies in Taiwan, China. Intellectual capital is an invisible, yet important resource for companies. The first aim of this paper is to provide a systematic investigation on how to measure intellectual capital. Results show that the coefficient of value-added intellectual capital is positively related to return on assets and market capitalization in both fix and random effects. Similar results are also obtained with dynamic panel data. Furthermore, innovation variables such as research and development expenditure are more accurate than structural capital in measuring intellectual capital. The author thus suggests that companies need to keep a close track of their intellectual capital and focus on internal information delivery to gain competitive advantage.

References

  • Alwert, K., & Will, M. 2009. Does intellectual capital reporting matter to financial analysts? Journal of Intellectual Capital, 10(3):354–368.

    Article  Google Scholar 

  • Ahn, S. C., & Schmidt, P. 1995. Efficient estimations of models for dynamic panel data. Journal of Econometrics, 68: 5–28.

    Article  Google Scholar 

  • Anderson, T. W., & Hsiao, C. 1981. Estimation of dynamic models with error components. Journal of the American Statistical Association, 76: 598–606.

    Article  Google Scholar 

  • Andriessen, D. G.., & Stern, C. D. 2004. Intellectual Capital of the European Union: Measuring the Lisbon Agenda. Center for Research in Intellectual Capital, in Holland University of Professional Education, Alkmaar.

    Google Scholar 

  • Arellano, M., & Bond, S. R. 1991. Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Review of Economic Studies, 58: 277–297.

    Article  Google Scholar 

  • Arellano, M., & Bover, O. 1995. Another look at the instrumental-variable estimation of error-components models. Journal of Econometrics, 68: 29–52.

    Article  Google Scholar 

  • Bannany, M. 2008. A study of determinants of intellectual capital performance in banks: The UK case. Journal of Intellectual Capital, 9(3):487–498.

    Article  Google Scholar 

  • Barney, J. 1991. Firm resources and sustained competitive advantages. Journal of Management, 17(1): 99–120.

    Article  Google Scholar 

  • Blundell, R. W., & Bond, S. R. 2000. GMM estimation with persistent panel data: An application to production functions. Econometric Reviews, 19: 321–340.

    Article  Google Scholar 

  • Bontis, N. 1998. Intellectual capital: An exploratory study that develops measures and models. Management Decision, 36(2): 63–76.

    Article  Google Scholar 

  • Bounfour, A., & Edvinsson, L. 2004. IC for communities, nations, regions, cities, and other communities. Boston, M.A: Butterworth-Heinemann.

    Google Scholar 

  • Chan, K. H. 2009. Impact of intellectual capital on organizational performance: An empirical study of companies in the Hang Seng Index (part1). The Learning Organization, 16(1):4–21.

    Article  Google Scholar 

  • Chen, M. C., Cheng, S. J., & Hwang, Y. 2005. An empirical investigation of the relationship between intellectual capital and firms’ market value and financial performance. Journal of Intellectual Capital, 6(2): 159–176.

    Article  Google Scholar 

  • Choong, K. K. 2008. Intellectual capital: Definitions, categorization and reporting models. Journal of Intellectual Capital, 9(4): 609–638.

    Article  Google Scholar 

  • Edvinsson, L. 1997. Developing intellectual capital at Skandia. Long Rang Planning, 30(3): 266–373.

    Google Scholar 

  • Edvinsson, L. M., & Malone, S. 1997. Intellectual capital realizing your company’s true value by finding its hidden brainpower. New York: Harper Business.

    Google Scholar 

  • Firer, W. M. 2003. Intellectual capital and traditional measures of corporate performance. Journal of Intellectual Capital, 4(3): 348–360.

    Article  Google Scholar 

  • García-Meca, E., & Martínez, I. 2005. Assessing the quality of disclosure on intangibles in the Spanish capital market. European Business Review, 17(4): 305–313.

    Article  Google Scholar 

  • Ghosh, S., & Mondal, A. 2009. Indian software and pharmaceutical sector IC and financial performance. Journal of Intellectual Capital, 10(3): 369–388.

    Article  Google Scholar 

  • Itami, H. 1991. Mobilizing invisible assets. Cambridge, MA: Harvard University Press.

    Google Scholar 

  • Jacobsen, K., Hofman-Bang, P., & Nordby Jr, R. 2005. IC rating. Journal of Intellectual Capital, 6(4): 570–587.

    Article  Google Scholar 

  • Jhunjhunwala, S. 2009. Monitoring and measuring intangibles using value maps: Some examples. Journal of Intellectual Capital, 10(2): 211–223.

    Article  Google Scholar 

  • Joia, L. A., & Malheiros, R. 2009. Strategic alliances and the intellectual capital of firms. Journal of Intellectual Capital, 10(4): 539–558.

    Article  Google Scholar 

  • Kasztler, A., & Leitner, K. H. 2009. An SNA-based approach for management control of intellectual capital. Journal of Intellectual Capital, 10(5): 329–340.

    Article  Google Scholar 

  • Kamath, B. G. 2006. Understanding the intellectual capital statements: A case study of Infosys Technologies Ltd, Int. J. Learning and Intellectual Capital, 3(3): 268–292.

    Article  Google Scholar 

  • Kamath, B. G. 2008. Intellectual capital and corporate performance in Indian pharmaceutical industry. Journal of Intellectual Capital, 9(4): 684–704.

    Article  Google Scholar 

  • Kim, D. Y., & Kumar, V. 2008. A framework for prioritization of intellectual capital indicators in R & D. Journal of Intellectual Capital, 10(2): 277–293.

    Article  Google Scholar 

  • Kong, E. 2010. Innovation processes in social enterprises: An IC perspective. Journal of Intellectual Capital, 11(2): 158–178.

    Article  Google Scholar 

  • Kujansivu, P., & Lonnqvist, A. 2007. How do investments in intellectual capital create profits. International Journal of Learning and Intellectual Capital, 4(3): 256–275.

    Article  Google Scholar 

  • Mavridis, D. 2005. Intellectual capital performance drivers in the Greek banking sector. Management Research News, 28(5): 43–62.

    Article  Google Scholar 

  • Moeller, K. 2009. Intangible and financial performance: Causes and effects. Journal of Intellectual Capital, 10(2): 224–245.

    Article  Google Scholar 

  • Mouritsen, J., Larsen, H. T., & Balch, P. N. P. 2001. Intellectual capital and the ‘capable firm’: Narrating, visualizing, and numbering for managing knowledge, accounting. Organization and Society, 26(6/7): 738–762.

    Google Scholar 

  • Ordonez de Pablos, P. 2002. Evidence of intellectual capital measurement from Asia, Europe and Middle East. Journal of Intellectual Capital, 3(3): 287–302.

    Article  Google Scholar 

  • Ortiz, M. A. A. 2009. Analysis and valuation of intellectual capital according to its context. Journal of Intellectual Capital, 10(3): 451–482.

    Article  Google Scholar 

  • Public, A. 1998. Measuring the performance of intellectual potential in a knowledge economy. Paper presented at 2nd McMaster World Congress, available at www.Vaic-on.net

  • Public, A. 2000. VAIC—An accounting tool for IC management. International Journal of Technology Management, 20(5–8): 702–714.

    Article  Google Scholar 

  • Public, A. 2004. Intellectual capital-does it creates or destroys value? Measuring Business Excellence, 8(1): 62–68.

    Article  Google Scholar 

  • Royal, C., & O’Donnell, L. 2008. Differentiation in financial markets: The human capital approach. Journal of Intellectual Capital, 9(4): 668–683.

    Article  Google Scholar 

  • Secundo, G., Elia, M. A., & Passiante, G. 2010. Intangible assets in higher education and research: Mission, performance or both? Journal of Intellectual Capital, 11(2): 140–157.

    Article  Google Scholar 

  • Shiu, H. J. 2006. Application of the value added intellectual coefficient to measure corporate performance: Evidence from technological firms. International Journal of Management, 23(2): 356–364.

    Google Scholar 

  • Smith, G. V. 1994. The new role of intellectual property in commercial transactions. New York, NY: Wiley.

    Google Scholar 

  • Solitander, M., & Tidström, A. 2010. Competitive flows of intellectual capital in value creating networks. Journal of Intellectual Capital, 11(1): 23–38.

    Article  Google Scholar 

  • Stewart, T. A. 1997. Intellectual capital: The new wealth of organizations. New York: Doubleday.

    Google Scholar 

  • Sveiby, K. E. 1997. The new organizational wealth: Managing and measuring knowledge-based assets. San Francisco, CA: Barrette-Kohler.

    Google Scholar 

  • Sveiby, K. E. 2002. Methods for measuring intangible assets. Available at www.sveiby.com/articles/IntangibleMethods.htm

  • Tan, H. P., Plowman, D., & Hancock, P. 2007. Intellectual capital and financial returns of companies. Journal of Intellectual Capital, 8(1): 76–95.

    Article  Google Scholar 

  • Tan, H. P., Plowman, D., & Hancock, P. 2008. The evolving research on intellectual capital. Journal of Intellectual Capital, 9(4): 585–608.

    Article  Google Scholar 

  • Ting, W. K., & Lean, H. H. 2009. Intellectual capital performance of financial institutions in Malaysia. Journal of Intellectual Capital, 10(4): 588–599.

    Article  Google Scholar 

  • Wang, J. C. 2008. Investigating market value and intellectual capital for S&P 500. Journal of Intellectual Capital, 9(4): 546–563.

    Article  Google Scholar 

  • Wernerfelt, B. 1984. A resource-based view of the firm. Strategic Management Journal, 5(2): 171–180.

    Article  Google Scholar 

  • Wiig, K. 2004. People focused knowledge management: How effective decision making leads to corporate success. Butterworth-Heinemann, Oxford.

    Google Scholar 

  • Yalama, A., & Coskun, M. 2007. Intellectual capital performance of quoted banks on the Istanbul stock exchange market. Journal of Intellectual capital, 8(2): 256–271.

    Article  Google Scholar 

  • Zeghal, D., & Maaloul, A. 2010. Analyzing value added as an indicator of intellectual capital and its consequences on company performance. Journal of Intellectual Capital, 11(1): 39–60.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Money and Banking, Kainan University, Taoyuan, 33857, Taiwan, China

    Mushun Wang

Authors
  1. Mushun Wang
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Mushun Wang.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Wang, M. Measuring intellectual capital and its effect on financial performance: Evidence from the capital market in Taiwan. Front. Bus. Res. China 5, 243–265 (2011). https://doi.org/10.1007/s11782-011-0130-7

Download citation

  • Received:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11782-011-0130-7

Keywords