The Role of Intellectual Capital in Creating Value in Indian Companies

Abstract

Intellectual capital is becoming the prominent resource for creating value and competitive advantage. The aim of this study is to investigate whether the performance of a Company’s intellectual capital can explain productivity and corporate financial performance or not. This study is conducted on 75 listed companies operating in India for the period 2004 to 2009. Annual reports, especially the Profit & Loss account and Balance Sheet of the company have been used to obtain the data. Necessary data also collected from Capitaline Database. Value Added Intellectual Coefficient (VAICTM) method is applied for measuring the Intellectual Capital performance of the company. Corporate performance measures used in this analysis are (1) Profitability and (2) productivity. The intellectual capital and physical capital of selected companies have been analyzed and their impact on corporate performance has been measured using multiple regression technique. Findings from the empirical analysis indicate that the relationships between the performance of a company’s intellectual capital and corporate performance are informative. The empirical findings suggest that the efficient management of company’s intellectual capital can explain corporate value creation. In this paper a new performance indicators is used which the Indian managers can use in order to evaluate the corporate performance and benchmark it with the global standards. Keywords: Intellectual Capital, human Capital, Structural Capital, VAICTM, Profitability and Produc-tivity.

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