The assessment of the intellectual capital impact on the value creation process: a decision support framework for top management (original) (raw)
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Knowledge and Process Management
The purpose of this paper is to present an index that assesses the contribution of the intellectual capital (IC) to the value creation process of an organization. The index combines into a single measure the contributions of the individual IC elements on the basis of their strategic importance, their performance, and their reciprocal influence.Five steps, based on the Assessment and Management of Intellectual Capital (AMIC), are considered as essential to build up the index. First, a theoretical framework is developed to underpin the process of selection of the different IC categories. Then, further steps suggest how to aggregate, weigh, and normalize the value of the IC categories in order to build the AMIC index. The index has been implemented into the ‘Software’ community of innovation of Finmeccanica, which is the leading Italian group in Aerospace, Defence, and Security. We argue that the AMIC index can be successfully used to assess and verify the performance of the value crea...
Interaction Effects of Intellectual Capital in Company’s Value Creation Process
2012
Intellectual capital" is a new term for key resources of a firm that enable it to compete on challenging market. Such assets as IT-systems, brand, employees' knowledge and competencies are crucial for any company. However, large stocks of these resources do not lead to success automatically. The main purpose of this paper is to find out how interconnections between intellectual capital components contribute to company value. We test empirically linear and non-linear relationship between intellectual capital components and business performance with the assumption of their mutual influence on each other. From the theoretic point of view we combine the theory of intellectual capital with Value-Based Management concept and Resource-Based View in order to investigate the way that firm's intellectual resources transform into its value. There are two main problems when dealing with intellectual capital. The first one is intellectual capital evaluation. Previous papers on this topic are usually based on either questionnaire data or information from financial reports. However, questionnaire survey has significant disadvantage as the data obtained include subjective opinion of respondents. Financial reports lack for information about amount of firm's intellectual capital. Therefore we propose another way to estimate intellectual capital components. Each of three components-human capital, structural capital and relational capital-is measured through the set of financial and non-financial proxy indicators which are collected from company's reports and its web-site. Further these data are aggregated in first principal components through factor analysis to obtain the comprehensive view of intellectual capital structure. The second problem is to measure the value that has been created by intellectual resources. We chose two measures-market capitalization and market-to-book ratio. Proposed method of analysis of intellectual capital is used on the sample of 59 firms from European countries with high level of economic and knowledge development. The sample covers five year period (from 2005 to 2009). We used the LS method to assess the direct and indirect relationships between intellectual capital and corporate value. This study contributes in different ways. Firstly, it helps researchers and management to understand what synergetic effects between intellectual capital's components take place. Secondly, it proposes an application of principal components method for investigating intellectual capital. Also it helps to recognize the level of homogeneity of intellectual capital elements that are combined in human capital, structural capital or relational capital and therefore are interpreted as describing one aspect of firm's activity.
International Journal of Economic Practice and Policy
Given that the concept of Intellectual capital (IC) came from business practice, it can be said that it is a practice in search of a theory. Studying the theoretical contribution of this concept is challenging as it demands the systematization of all relevant theories in which it finds its foundation and all aspects of its research. The crucial issues addressed in the concept of IC are: Has the economy based on knowledge influenced the emergence of a new matrix of value creation, and, if so, how is it possible to identify the essential resources which have the most influence on the process of value creation? To answer these questions, the concept of IC develops both the theoretical basis and practical guidelines and tools that contribute to a more precise definition of the strategic assets of the firm and their role in the process of value creation. For the concept of intellectual capital, the articulation of the value creation process is the essential precondition for firms' su...
Intellectual Capital Management – a Possible Approach
In recent years, the idea of managing intellectual capital in organization has gained popularity among both in academia and in business environment. The idea that current annual financial statements do not allow efficient management it appears to be widely accepted nowadays, since they do not capture a wide range of intangibles that are seen as the fundamental determinants of firms' success. Therefore it is necessary that the intellectual capital to be used more effectively for the company to achieve sustainable competitive advantage. Despite the growing importance of intellectual capital management, the lack of ability of information systems to identify, measure and control intangible assets in order to increase the efficiency of their management and to improve their financial performance, can result in the loss of company because the managers do not but identified or exploited intangible assets. To the help of managers come proposed models for managing intellectual capital developed, mainly by scientists from the Nordic countries. The purpose of this paper is to develop a new model of intellectual capital management focuses on renewing and maximising the enterprise-wide value of intellectual assets.
The strategic assessment of intellectual capital assets: An application within Terradue Srl
This article describes a framework for the strategic management of intellectual capital assets (ICAs). The framework allows synthesizing the opinions of a firm's human resources on which ICAs are comparatively more likely to have a positive effect on value creation for customers, employees, and shareholders. The framework assesses managers' opinions about the amount of investments that each ICA would require, with respect to the others, to have a positive effect on value creation. By means of a benefit/cost analysis, the researchers recommend ICAs eligible for investments. Then, managers and senior human resources validate the recommendations and identify suitable practical actions for their implementation. The article shows how the implementation of the framework within an Italian firm allows identifying several critical ICAs. Furthermore, the article describes how the validation of the recommendations encourages the implementation of actions that aim to create value for the firm.
A theoretical framework for assessing managing and indexing the intellectual capital
Journal of Intellectual Capital, 2013
Purpose: The purpose of the present paper is to propose a theoretical framework which defines, analyses and assesses the intellectual capital value drivers to increase the value creation of an organization. Design/methodology/approach: The proposed framework is composed by an arrangement of procedural steps. In the first step intellectual capital value drivers are selected by reason of their relevance and of their occurrences in recent literature. Then, an assessment of the value drivers is carried out on the basis of their strategic importance and of their inter-relationships with other value drivers. Finally, an index is constructed from the combination of the static and dynamic characteristics of the selected value drivers. Findings: This integrated framework provides managers with the possibility of monitoring the response of intellectual capital performance to their strategic decisions and helps them to adjust and improve measures to reach the prefixed objectives. Managers' perception is the fundamental input to the assessment of the contribution of the intellectual capital to the value creation process. Originality/value: The modality of building the proposed synthetic index innovates the assessment of intellectual capital from a quantitative point of view. The framework offers a high degree of flexibility both in defining and managing intellectual capital and in assessing each intellectual capital value driver in dependence of any variations in market scenery and of any external or internal input of innovation.
Intellectual Capital and the Value Creation: We Achieved One of the Main Goal or Not
The goal of this research, translated into paper, is to research whether there are relationships between intellectual capital, on the one hand, and value creation, on the other. The first should be a cause of the second. From research selected between the 2 topics, together, it appears that these relationships were little or nothing evidenced in the literature review carried out. These are mere exercises that are based on a stamp that has a high statistical, econometric content (especially in the domain of Partial Least Squares – PLS), which prove to be unsuitable for practical application. It would be expected that, given that the intellectual capital is the main basis for creating value, more practical examples would be obtained. All the more so as this relationship is often referred to. In addition to the scarcity of relevant literature that is confined to these 2 topics only, it appears that the work capable of explaining value creation appears to be very limited, and even unintelligible, whether for academic scholars, researchers specializing in the area, or above all, laypeople (for whom supposedly it should be of maximum use, from the point of view of application). The literature review in these 2 areas needs much further development focused on its real usefulness, to apply in practice. In any case, in this domain, we can see a source for future developments, guided by more consistent and useful criteria in the practice of real business life.