Intellectual capital measurement implications for organizational and market performance

In the knowledge era, intellectual capital has been put forward as the key driver of corporate value and economic performance. In an economy which increasingly demands greater value creation it is essential to understand the mechanisms through which intellectual capital adds value. Despite this, the emerging picture of intellectual capital from an accounting perspective is somewhat confusing. The literature reveals mixed results about the performance enhancing properties of intellectual capital and says little about how this may be brought about. This thesis aims to bring better understanding and clarity to the topic.

It begins by “taking a step back” and questioning whether the choice of measurement and its ability to adequately capture intellectual capital could be one of the reasons for the mixed results found in the literature. In then proceeds to pin down the IC-performance effect by taking a contingency approach that investigates the relationship across multiple performance aspects, a wide range of intellectual capital measures and different industry sectors. In order to frame this empirical work the thesis pulls together a highly fragmented literature from both accounting and strategic management disciplines with the goal of exploring how intellectual capital measurement and performance can be improved by taking an interdisciplinary approach.

The findings show that the accounting discipline has the ability to capture intellectual capital and explain the mechanisms through which its elements add value to a company, but it faces difficulties and must be viewed in light of what other disciplines might add to the mix. In order to advance the measurement of intellectual capital measurement and its link to performance, the accounting profession has to accept that the existing objective measures cannot grasp some of the “soft” aspects of intellectual capital.