Value added intellectual coefficient and its impact on corporate financial performance: A comparative study between MAKE and Non-MAKE award companies

Abstract

1. Introduction The purpose of the study is to explore if companies which had received a MAKE award demonstrate a higher level of intellectual capital (IC) utilization than that of those did not received the award. Value Added Intellectual Coefficient (VAICTM) is employed to assess their corporate intellectual ability. Furthermore, the proxies of corporate financial performance of market-to-book value (MB), return on assets (ROA), asset turnover (ATO) and return on equity (ROE) are examined in light of their level of IC capability. The Most Admired Knowledge Enterprise (MAKE) award winners are generally considered to be proficient in knowledge management. As a result, a higher level of IC utilization and accumulation may be therefore detected when comparing with those with non-award winners in their respective fields of industries, size and categories.

2. Literature Review Intellectual Capital According to Sveiby (2001), the term of intellectual capital (IC) was firstly introduced by John Kenneth Galbraith in 1969. Later in 1987, the pioneer of this field, Itami defined IC as a combination of intangible properties within an organization, including intellectual property, reputation, a firm’s experience, and customer relationship (Goh, 2005). Other researchers such as Stewart (1997) considered IC as the brainpower of an organization to generate profit by information, practical technique, expertise, intellectual property, and tacit knowledge of employees. Although quite a few definitions of IC existed contemporarily, it was commonly accepted that IC as an intangible asset which could create value and maintain competitive advantages for organizations (Sharma et al., 2007; Stewart, 1997; Sveiby, 1997). The number of researches linking IC to organizational performance has grown significantly in the past two decades (Goh, 2005). Steward (1997) pointed out that sustainable growth and better profitability of companies might come along with the knowledge level among employees. Their knowledge base would be expanded by exchanging tacit and explicit knowledge among employees .....