Abstract:
This thesis investigates the impact of aggregate intellectual capital (IC), and its elements, human capital, structural capital and tangible capital, on firm performance. In addition, the study also examines the impact of past research and development (R&D) activity on the relationship between IC and firm performance. The study employs the original and modified Value Added Intellectual Coefficient (VAICTM) models to measure IC. Firm performance is measured from two different perspectives: market and financial. The study uses a sample of 1,328 firm-year observations drawn from multinational firms which engaged in R&D activity over the period 2006-2013 and were listed on the U.S. stock exchanges.
Using ordinary least squares regression, the study confirms that aggregate IC has a significant positive impact on both the market and financial performance of firms. Human capital has no significant impact on market performance, but it has a significant positive impact on financial performance. Structural capital and tangible capital each have a significant positive influence on both the market and financial performance of firms. In addition, the study finds that past R&D activity has a significant positive impact on the relationship between aggregate IC and both market and financial performance. However, the study finds mixed results for the role of past R&D activity on the relationship between the IC elements and firm performance.
The study contributes to the existing literature by providing empirical evidence on the impact of IC on firm performance among multinational R&D engaging firms. The study also adds to the literature by providing empirical evidence on the role of R&D activity in influencing the relationship between IC and firm performance and thus enhances the current understanding of the role of IC and R&D. In addition, the study contributes to the methodology by proposing a modification to the original VAIC model and empirically tests the resulting modified VAIC model.
The study thus provides empirical evidence of the impact of IC on the market performance and financial performance of firms. This evidence should be useful to firms in developing their IC and R&D policies, to users of financial statements in evaluating the benefits from IC among R&D engaging firms, and also to accounting standard setters in identifying the information on IC that should be included in financial reports.
