Measuring the Efficiency and Value of Intellectual Capital in Indian Knowledge Companies

Abstract

Intellectual capital is becoming the most important resource for creating value and competitive advantage in todays economy. The aim of this study is to investigate the correlation between the performance of a companys intellectual capital and the value of intellectual capital at a particular time. This study is conducted on 50 software and pharmaceutical companies operating in India. Annual reports, especially the profit & loss accounts and balance sheets of the companies have been used to obtain the data. Necessary data were also collected from official website of BSE and NSE. Value Added Intellectual Coefficient (VAICTM) method is applied for measuring the Intellectual Capital performance of the company. Monetary value of IC is calculated by applying Calculated Intangible Value method. The value creation efficiency of intellectual capital and value of intellectual capital also compared on the basis of rank. Findings from the empirical analysis indicate that the relationships between the performance of a companys intellectual capital and value of IC at a particular time are significantly related. The empirical findings suggest that the efficient management of companys intellectual capital can enhance its IC value. Intellectual capital is an area of interest to numerous parties, e.g. shareholders, managers, policy makers, institutional investors. This paper provides new insights related to the management and measurement of IC, since two specific measurement methods (CIV and VAICTM) were implemented in practice.

Keywords: Intellectual Capital, Human Capital, Structural Capital, VAICTM, Calculated Intangible Value

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