The measurement of intellectual capital (IC) constitutes a major challenge in managing intangible resources. Among the various models proposed in prior literature, the value added intellectual coefficient (VAIC) is used by many studies to measure IC. Assuming a perfectly competitive market, this study decomposes the VAIC and demonstrates that it is not directly related to IC. Conversely, the main components of VAIC are the labor share, physical capital share, and interest rate. These results are extended to a non-perfectly competitive setting through a multivariate analysis of a cross-country panel of 50,310 firm-year observations for 2000-2017. The results show that the VAIC still largely depends on exogenous factors being negatively (positively) associated with the labor (physical capital) share. Nevertheless, in this non-perfectly competitive setting, the VAIC also captures a firm's ability to generate profits, which may be attributable to multiple factors, including IC. To reduce potential measurement biases in empirical research using the VAIC, this study suggests controlling for a firm's interest rate, labor and capital shares. Adopting this suggestion, this study investigates the association between VAIC and firm performance. The results show that this association is significantly weaker when including the interest rate, labor and capital shares. The theoretical and empirical results suggest future researchers to select the VAIC to measure IC after having conscientiously examined the alternative models proposed in recent literature.
Thomas Bassetti;Francesco Mazzi
Abstract
The measurement of intellectual capital (IC) constitutes a major challenge in managing intangible resources. Among the various models proposed in prior literature, the value added intellectual coefficient (VAIC) is used by many studies to measure IC. Assuming a perfectly competitive market, this study decomposes the VAIC and demonstrates that it is not directly related to IC. Conversely, the main components of VAIC are the labor share, physical capital share, and interest rate. These results are extended to a non-perfectly competitive setting through a multivariate analysis of a cross-country panel of 50,310 firm-year observations for 2000-2017. The results show that the VAIC still largely depends on exogenous factors being negatively (positively) associated with the labor (physical capital) share. Nevertheless, in this non-perfectly competitive setting, the VAIC also captures a firm's ability to generate profits, which may be attributable to multiple factors, including IC. To reduce potential measurement biases in empirical research using the VAIC, this study suggests controlling for a firm's interest rate, labor and capital shares. Adopting this suggestion, this study investigates the association between VAIC and firm performance. The results show that this association is significantly weaker when including the interest rate, labor and capital shares. The theoretical and empirical results suggest future researchers to select the VAIC to measure IC after having conscientiously examined the alternative models proposed in recent literature.Pubblicazioni consigliate
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