Rima Tamošiūnienėa and Simona Survilaitėb
aFaculty of Economics and Finance Management, Mykolas Romeris University, Vilnius, LT-08303, Lithuania, [email protected] and bFaculty of Economics and Finance Management, Mykolas Romeris University, Vilnius, LT-08303, Lithuania, [email protected].
Abstract
The majority of publicly listed companies are trying to adapt to investors requirements and to provide as much information about company as possible. Company‘s potential of generating value added and ability to increase potential percentage of dividends attracts investors. Nevertheless, it appears that financial reports of publicly listed companies do not reflect all information, which is disposed by a respective company. Intellectual capital, being the most important factor of value added creation, is not being reflected in the financial reports and not even being managed by directors or managers. This paper provides the model of intellectual capital evaluation in publicly listed companies, which could potentially be a tool for evaluation, control and management.
Keywords: intellectual capital, publicly listed companies, value added.
Introduction
The importance of intellectual capital in publicly listed companies is being observed and accentuated by many scientists and economists (Berg, 2006; Bontis, Richards, and Serenko, 2011; Bourdieu, 2005;
Codinhoto et al., 2009; Galindo and Mendez-Picazo, 2013; Grimaldi, Cricelli, and Rogo, 2013; Heskett et al., 1994; Jensen et al., 2012; Kaplan and Norton, 2000; Kotler, 2000; Kumar and Grisaffe, 2004; Luthans et al., 2004; Mačerinskienė and Survilaitė, 2011, 2012; Malmelin, 2007; McGrath, 2007; Menon et al., 2005; Møllebjerg, 2009; Proctor, 2013; Pulic, 2000; Ulaga and Eggert, 2005; Zeithaml, 1988). Although it is agreed that intellectual capital increases value added of a respective publicly listed company, there is no accepted and widely used tool created and implemented. This paper suggests the model of intellectual capital evaluation in publicly listed companies, which could help to evaluate, measure, control and manage intellectual capital with value added generation purpose.
The creation and aspects of the model of intellectual capital evaluation in publicly listed companies
Intellectual capital is the factor of value added creation, fostering and generation in publicly listed companies. The basic issue with intellectual capital theory is description, structure and evaluation methods. Many authors indicate different, although similar, intellectual capital features. In order to investigate intellectual capital further, structural parts must be indicated and described. Nevertheless, the variety of different interpretations leads to mismatches in intellectual capital theory.
Investigation of intellectual capital theory provides different structural part approaches. The majority of authors (Bourdieu, 1986; Putnam, 1993; Saint – Onge, 1996; Sveiby, 1996; Stewart, 1997; Edvinsson and Malone, 1997; Draper, 1997; Bontis, 1998; Van Buren, 1999; O‘Donnell and O‘Regan, 2000; Bounfour, 2003; Swart, 2006; Ramirez, Lorduy, and Rojas, 2007; Malmelin, 2007; Namvar et al., 2009) indicate that human capital is the main intellectual capital part. Nevertheless, according to scientific literature, multiple intellectual capital structural parts are distinguished as well:
The model of intellectual capital evaluation in publicly listed companies
• Structural capital (Bourdieu, 1986; Edvinsson and Malone, 1997; Putnam, 1993; Saint – Onge, 1996; Stewart, 1997; Draper, 1997; Bontis, 1998; Roos et al., 1998; Bounfour, 2003; Swart, 2006;
Ramirez, Lorduy, and Rojas, 2007; Namvar et al., 2009)
• Customer capital (Saint – Onge, 1996; Stewart, 1997; Draper, 1997; Roos et al., 1998; Bontis, 1998; Van Buren, 1999)
• Relational capital (Ramirez, Lorduy, and Rojas, 2007; Malmelin, 2007; Namvar et al., 2009)
• Social capital (Bourdieu, 1986; Coleman, 1988; Putnam, 1993; Grootaert, 1997; Rose, 2000;
Uzzi and Gillespie, 2002; Parts, 2003; Mačerinskienė and Vasiliauskaitė, 2004; Swart, 2006; Danchev, 2006)
• Innovational capital (Draper, 1997; Van Buren, 1999; Bounfour, 2003; Namvar et al., 2009)
• Organizational capital (Draper, 1997; Malmelin, 2007; Namvar et al., 2009)
• Process capital (Draper, 1997; Van Buren, 1999; Namvar et al., 2009)
• Communicational capital (Hartman and Lenk, 2001; Hartman and Wang, 2004; Malmelin, 2007)
• Reputation capital (Fombrun and Rindova, 1996; Fombrun and van Riel, 2004)
• Juridical capital (Malmelin, 2007)
• Psychological capital (Bandura, 1997; Masten and Reed, 2002; Snyder et al., 2002; Luthans and Avolio, 2004; Carver et al., 2010)
• Market assets (Brooking, 1996; Bounfour, 2003)
• Human centered assets (Brooking, 1996)
• Intellectual property assets (Brooking, 1996)
• Infrastructure assets (Brooking, 1996)
• External structure (Sveiby, 1996, 1997; Petrash, 1997; O‘Donnell and O‘Regan, 2000)
• Internal structure (Sveiby, 1996, 1997; Petrash, 1997; O‘Donnell and O‘Regan, 2000)
• Employee competence (Sveiby, 1997)
• Brand equity (Kapferer, 1997; Keller, 1998)
The intellectual capital structural parts were classified according to similarities and common features accordingly: intellectual capital is the sum of human capital, structural capital (also known as an internal structure) and relational capital (also known as an external structure). Human capital structural parts are considered psychological capital, human centered assets and employee competence. Structural capital (also known as an internal structure) structural parts are as follows: innovational capital, organizational capital, process capital, reputation capital, juridical capital, market assets, intellectual property assets, infrastructure assets. In addition to this, relational capital (also known as an external structure) is comprised of social capital, communicational capital and brand equity. The proposal of such intellectual capital classification came from willingness to collect all possible structural parts, to compare them and to find any of similarities.
According to scientific literature review, the model of intellectual capital evaluation in publicly listed companies was proposed (Picture 1.1.).
The model of intellectual capital evaluation in publicly listed companies
1st International Conference on Business Management
Picture 1.1. The model of intelectual capital evaluation in publicly listed companies
This model aims to determine how much a respective director or manager needs to invest in intellectual capital in order to increase publicly listed company’s value added with a certain amount. It is supposed that management decides to invest X amount into a human capital, X amount into a structural capital, and X amount into a communicational capital, and how this will affect value added. In addition to this, manager can also set the goal, for instance: publicly listed company’s management wants to increase the value added by 5%. The model would show, how much it is needed to invest into a specific intellectual capital part. What is more, this model also aims to determine, which intellectual capital components have the greatest impact on the value added of publicly listed company.
Also an extended model is being created for the clarification purposes. In the extended model smaller elements of intellectual capital structural parts are being listed. Nevertheless, such model is just a proposal and was not tested empirically. Expert evaluation could potentially evaluate the weight of factors in order to combine a formula, which would calculate main variables.
Conclusions
The model of intellectual capital evaluation in publicly listed companies was created and proposed using scientific literature review in order to fulfil two basic needs: how to describe intellectual capital and its main structural parts; how to adapt to investor’s needs and manage intellectual capital in order to increase value added of the respective company. The significant issue appeared during the investigation of intellectual capital theory: discrepancies and mismatches of understanding intellectual capital structural parts. In this paper an updated intellectual capital structure was proposed with the intention to facilitate and make clear picture of the intellectual capital consistency. As a result of an updated intellectual capital structure, the model of intellectual capital evaluation in publicly listed companies was created and proposed. Although such model could be helpful for management, it still needs to be empirically tested, thus requiring more research on this subject.
References
Bandura, A. (1997). Self-efficacy and health behaviour. In A. Baum, S. Newman, J. Wienman, R. West, & C.
McManus (Eds.), Cambridge handbook of psychology, health and medicine, Cambridge: Cambridge University Press, 160-162.
X EUR X EUR
X EUR
HUMAN CAPITAL
STRUCTURAL CAPITAL
RELATIONAL CAPITAL
VALUE ADDED OF PUBLIC
LISTED COMPANY
INTELLECTUAL CAPITAL
Purpose:
X% increase
The model of intellectual capital evaluation in publicly listed companies
Berg, M. (2006). The Genesis of ‘Useful Knowledge’. International Economic History Congress, Helsinki, Session 38.
Bontis, N. (1998). Intellectual capital: an exploratory study that develops measures and models. Management decision, 36(2), 63-76.
Bontis, N., Richards, D. & Serenko, A. (2011). Improving service delivery. Investigating the role of information sharing, job characteristics, and employee satisfaction. The learning organization, 18(3), 239-250.
Bounfour, A. (2003). The Management of Intangibles. The Organization’s Most Valuable Asset, Routledge, London, New York.
Bourdieu, P. (1986). The forms of capital. In J. G. Richardson (Ed.), Handbook of theory and research for the sociology of education, New York: Greenwood, 241-258.
Bourdieu, P. (2005). The Social Structures of the Economy, Cambridge: Polity Press.
Brooking, A. (1996). Intellectual Capital Core Asset for the Third Millennium Enterprise. London: International Thomson Business Press.
Carver, C. S., Scheier, M. F., & Segerstrom, S. C. (2010). Optimism. Clinical Psychology Review, 30, 879-889.
Codinhoto, R. et al. (2009). The impacts of the built environment on health outcomes. Facilities, 27(3/4), 138-51.
Coleman, J. S. (1988). Social Capital in the Creation of Human Capital. The American Journal of Sociology 94, 95-120.
Danchev, A. (2006). Social capital and sustainable behavior of the firm. Industrial Management & Data Systems, 106(7), 953-965.
Draper, T. (1997). Measuring Intellectual Capital: Formula for Disaster. Stanford Hoover Institute Editorial (October).
Edvinsson, L. & Malone, M. S. (1997). Intellectual Capital: Realising your Company’s True Value by Finding its Hidden Brainpower. Harper Collins Publishers Inc, NewYork, NY.
Fombrun, C.J. & van Riel. (2004). The Reputational Landscape. Corporate Reputation Review, 1( 2), 5-13.
Fombrun, C. J. & Rindova, V. (1996). Who’s Tops and Who Decides? The Social Construction of Corporate Reputations. New York University, Stern School of Business, Working Paper.
Galindo, M.A. & Mendez-Picazo, M.T. (2013). Innovation, entrepreneurship and economic growth. Management Decision, 51(3).
Grimaldi, M., Cricelli, L. & Rogo, F. A. (2013). A theoretical framework for assessing managing and indexing the intellectual capital. Journal of Intellectual Capital, 14(4), 501-521.
Grootaert, Ch. (1997). Social Capital: The Missing Link? In World Bank, Expanding the Measure of Wealth:
Indicators of Environmentally Sustainable Development. Washington, D.C.
Hartman & Lenk. (2001). Strategic communicational capital. International Journal on Media Management, 2(3), 147-153.
Hartman & Wang. (2004). Work environment: An organization‘s intangible asset. Association for Business Communication Referred Proceedings, Cambridge, MA.
Heskett, J.L. et al. (1994). Putting the service-profit chain to work. Harvard Business Review, March-April, 164-74.
Jensen, P.A. et al. (2012). In search for the added value of FM: what we know and what we need to learn. Facilities, 30(5/6), 199-217.
Kapferer, J.N. (1997). Strategic Brand Management: Creating and Sustaining Brand Equity Long Term. 2nd edition.
London: Kogan Page.
Kaplan, R.S. & Norton, D.P. (2000). Having trouble with your strategy? Then map it. Harvard Business Review, September-October.
Keller, K.L. (1998). Strategic Brand Management: Building, Measuring and Managing Brand Equity. Upper Saddle River NJ: Prentice Hall.
The model of intellectual capital evaluation in publicly listed companies
1st International Conference on Business Management
Kotler, P. (2000). Marketing Management: Analysis, Planning, Implementation, and Control, Prentice Hall, Upper Saddle River, NJ.
Kumar, A. & Grisaffe, D.B. (2004). Effects of extrinsic attributes in perceived quality, customer value and behavioral intentions in B2B settings: a comparison across goods and service industries. Journal of Business-to-business Marketing, 11 (4), 43-74.
Luthans, F. et al. (2004). Positive Psychological Capital: Going Beyond Human and Social Capital. Business Horizons, 47(1), 45-50.
Mačerinskienė, I. & Survilaitė, S. (2011). Company’s value added and its intellectual capital coherence. Verslas:
teorija ir praktika = Business: theory and practice, Vilnius: Technika, 12(2), 183-192.
Mačerinskienė, I. & Survilaitė, S. (2012). The assess model of intellectual capital and a company’s value added cohesion. Creative and Knowledge Society, 2(1), 82-94.
Mačerinskienė, I. & Vasiliauskaitė, J. (2004). Organizacijos socialinio kapitalo tyrimo metodologija. Tiltai, 3(28), 101-116.
Malmelin, N. (2007). Communication capital. Modelling corporate communications as an organizational asset.
Corporate communications: an international journal, 12(3), 298-310.
Masten, A.S. & Reed, M-G.J. (2002). Resilience in development. In Handbook of Positive Psychology. C.R. Snyder
& S.J. Lopez, Eds., 74–88. Oxford University Press. London.
McGrath, P. (2007). Knowledge management in monastic communities of the medieval Irish Celtic church. Journal of Management History, 13(2), 211-223.
Menon, A. et al. (2005). Understanding customer value in business-to-business relationships. Journal of Business-to-business Marketing, 12(1), 1-38.
Mollebjerg, L. (2009). Facility management value add. Presentation at Business Conference of EFMC2009, Amsterdam, 16-18 June, 2009.
Namvar, M. et al. (2009). Exploring the impacts of intellectual property on intellectual capital and company performance: The case of Iranian computer and electronic organizations. Management decision, 48(5).
O’Donnel, D. et al. (2000). Intellectual capital: a habermasian introduction. Journal of intellectual capital, 1(2), 187 – 200.
Parts, E. (2003). Interrelationships between human capital and social capital: implications for economic development in transition economies. University of Tartu.
Proctor, T. (2006). Collaboration and networking in the process of innovation: the path to precision time keeping.
Journal of Management History, 19(2).
Pulic, A. (2000). MVA and VAIC™ analysis of randomly selected companies from FTSE 250, Austrian Intellectual Capital Research Center, Graz. Retrieved at March 23, 2015 from http://www.measuring-ip.at/Papers/ham99tx.htm
Pulic, A. (2000). VAIC™ – an accounting tool for IC management. International Journal of Technology Management, 20(5-8), 702-714.
Putnam, Robert D. (1993). Making democracy work. Civic traditions in modern Italy. Princeton: Princeton University Press.
Ramirez, Y. et al. (2007). Intellectual capital management in Spanish universities. Journal of intellectual capital, 8(4), 732-748.
Rose, R. (2000). How much does Social capital add to individual Health? A Survey Study of Russians. Social Science
& Medicine, 51(9), 1421-1435.
Saint-Onge. (1996). Tacit knowledge the key to the strategic alignment of intellectual capital. Strategy & Leadership, 24(2), 10-16.
Snyder, C.R., Shorey, H.S., Cheavens, J., Pulvers, K.M., Adams, V.H., & Wiklund, C. (2002). Hope and Academic Success in College. Journal of Educational Psychology, 94(4), 820-826.
The model of intellectual capital evaluation in publicly listed companies
Stewart, T. A. (1997). Intellectual capital: the new wealth of organizations, Doubleday Dell Publishing Group: New York.
Sveiby, K. E. (1996). The intangible asset monitor. Journal of Human Resource Costing and Accounting, 2(1), 73-97.
Sveiby, K. E. (1997). The new organisational wealth: managing and measuring knowledge-based assets. Berret-Koehler Publishers, Inc.: San Francisco.
Swart, J. (2006). Intellectual capital: disentangling an enigmatic concept. Journal of intellectual capital, 7(2), 136-159.
Ulaga, W. & Eggert, A. (2005). Relationship value in business markets: the construct and its dimensions. Journal of Business-to-business Marketing, 12(1), 73-99.
Uzzi, B. & Gillespie, J. J. (2002). Knowledge spillover in corporate financing networks: embeddedness and the firm’s debt performance. Strategic Management Journal, 23, 595-618.
Van Buren, M. E. (1999). A yardstick for knowledge management, Trainning & Development. May 1999, 71-78.
Zeithaml, V.A. (1988). Consumer perceptions of price, quality, and value: a means-end model and synthesis of evidence. Journal of Marketing, 52(3), 2-22.
1st International Conference on Business Management Universitat Politècnica de València, 2015 DOI: http://dx.doi.org/10.4995/ICBM.2015.1294
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY-NC-ND 4.0)