Intellectual Capital and Company Performance

Emil Frederik Noesgaard

Student thesis: Master thesis

Abstract

The main focus of this thesis is to examine whether or not intellectual capital has a higher impact on a company’s performance than the traditional physical and financial assets. Many practitioners and academics are arguing that economy has transformed into the knowledge economy and that knowledge has overtaken capital and labor as the new primary economic resource. However, if knowledge is the new primary economic, then it should it also be able to observe a correlation between efficient use of this knowledge and a company’s performance. The community focusing on this type of research is called intellectual capital. Research within intellectual capital primarily revolves around two focus areas: strategic or measuring. The first focus, the strategic focus, studies the creation and use of knowledge, and the relationship between knowledge and value creation. The second focus, the measuring focus, focuses on the need to develop a new information system, that can measure non-financial data alongside with traditional financial data. This thesis belongs to the measuring focus of the intellectual capital. This thesis uses Ante Pulics framework and model, value added intellectual capital coefficient (VAIC), which is an intellectual capital model that tells how efficient a company is to generate value from its intellectual capital and employed capital (physical and financial assets), as an approximation for intellectual capital. By approximating performance with different indicators, such as return on assets, the thesis uses a linear multiple regression analysis to study the impact of intellectual capital, along with the traditional physical and financial assets, on economic performance, profitability, productivity, return on equity and stock market performance. The dataset used in this thesis is constructed from 390 companies located in the United Kingdom with publicly available accounts in the period 2008-2017. All the accounts have been downloaded from OSIRIS. This thesis found that intellectual capital has a higher positive impact on a company’s economic performance, profitability and return on equity than the traditional physical and financial assets. It also found that intellectual capital has a positive impact on future economic performance, future profitability and future return on equity. The thesis even found that the traditional physical and financial assets had a negative impact on economic performance However, the thesis also found traditional physical and financial assets had a higher positive impact on both current and future productivity and stock market performance.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2019
Number of pages81