If You Can Measure It, You Can Manage It: A Case of Intellectual Capital

Abstract

Despite the great importance attributed to Intellectual Capital (IC) in the past two decades or so, its measurement and management have remained elusive, mainly because of inappropriate prior models of IC measurement. The purpose of this study was, therefore, to make adjustments to an existing model, the Value Added Intellectual Coefficient (VAIC), and present an adjusted-VAIC model to measure IC. We tested our new model on data from ten emerging and developed markets of the world and obtained more consistent results than prior studies. Our results indicate a significant positive relationship between IC and its components (human, innovation and physical capitals) and firm performance. Therefore, the Adjusted-VAIC can be used with confidence to measure IC. Our study has important implications for both academia and industry concerning the measurement of IC.