Diversity in Estimates of the Impact of Intellectual Capital on Firm Performance Created by Varied Adoptions of VAIC Method

Sampath Kehelwalatenna      
Gamini Premaratne

Abstract

Value Added Intellectual Coefficient (VAIC) method has become the most efficient method for measuring intellectual capital (IC). However, there are inconsistencies in the mechanism of adopting the VAIC method to measure IC, thus questioning the robustness of established relationships between IC and firm performance. Therefore, this study attempts to examine the diversity in estimates of the impact of IC on firm performance as a result of adopting the VAIC method in a diverse manner. The study also proposes a modification to the basic VAIC method to eliminate its key limitation. Findings of the study indicate that there are differences in the estimates of the impact of IC on firm performance as a result of varied VAIC adoptions. The proposed modification to the basic VAIC method incorporates theoretically agreed value compositions of IC (human capital, structural capital and relational capital) replacing traditional value compositions (human capital and structural capital) in the basic VAIC method.

Keywords: Firm Performance, Intellectual Capital, Measuring Intellectual Capital, VAIC

Volume 10, Issue 1
June 30, 2019
Pages: 66-113

DOI: http://doi.org/10.4038/cbj.v10i1.43

Suggested citation:

Diversity in estimates of the impact of intellectual capital on firm performance created by varied adoptions of VAIC method. Colombo Business Journal, (10)1, 66-113. doi: 10.4038/cbj.v10i1.43

Sampath Kehelwalatenna
Department of Accounting, University of Colombo, Sri Lanka
sampathk@dac.cmb.ac.lk

Gamini Premaratne
UBD School of Business and Economics, Universiti Brunei Darussalam, Brunei