A validation study on the intangibles audit
Walden University SCHOOL OF MANAGEMENT This is to certify that the doctoral dissertation by Bryan L. Forsyth has been found to be complete and satisfactory in all respects, and that any and all revisions required by the review committee have been made. Review Committee Dr. Lilburn Hoehn, Committee Chairperson, Applied Management and Decision Sciences Faculty Dr. David Metcalf, Committee Member, Applied Management and Decision Sciences Faculty Dr. Joseph Barbeau, Committee Member, Applied Management and Decision Sciences Faculty Provost Denise DeZolt, Ph.D. Walden University 2007 ABSTRACT A Validation Study on the Intangibles Audit by Bryan Forsyth A.A., LA Tech University, 1986 B.S., Southern Illinois University, 1990 M.A., Ottawa University, 1999 Dissertation Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy Applied Management and Decision Sciences Walden University August 2007 ABSTRACT A tangible asset can be recognized and listed on the balance sheet. Alternatively, intangible assets are non-physical items (e.g. patents, knowledge, competencies). The problem is managers are not able to easily recognize and articulate the value of intangible assets, including the value of knowledge management initiatives in their organizations. The purpose of this research was to highlight the importance of evaluating intangible assets. The research questions focused on the relationship between earnings and intangible assets and the validity and reliability of an asset assessment instrument. Survey research was used to gather data from a sample of 400 members of American Society for Training and Development (ASTD). Statistical analyses included factor analysis, Cronbach’s Alpha, and Pearson’s r. The results showed there is a direct correlation between company earnings and the four supporting intangibles variables: strategies, core, organizational, and leadership competencies. The asset assessment instrument was demonstrated to have a high degree of reliability, but it should be used carefully because of lower validity scores. One key recommendation is that managers should consider disciplined methods to assess intangible assets because these variables contribute to company earnings. From a positive social change perspective, an increased awareness of the importance of intangible assets may help managers make appropriate investment decisions regarding knowledge management and other organizational change initiatives that could lead to further profitable growth and success of organizations. A Validation Study on the Intangibles Audit by Bryan Forsyth A.A., LA Tech University, 1986 B.S., Southern Illinois University, 1990 M.A., Ottawa University, 1999 Dissertation Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy Applied Management and Decision Sciences Walden University August 2007 UMI Number: 3262591 3262591 2007 UMI Microform Copyright All rights reserved. This microform edition is protected against unauthorized copying under Title 17, United States Code. ProQuest Information and Learning Company 300 North Zeeb Road P.O. Box 1346 Ann Arbor, MI 48106-1346 by ProQuest Information and Learning Company. ii TABLE OF CONTENTS LIST OF TABLES……………………………………………………………………… iv LIST OF FIGURES…………………………………………………………………… v CHAPTER 1: INTRODUCTION TO THE PROBLEM 1 Introduction to the Study 1 Statement of the Problem 2 Background of the Problem 3 The Purpose of the Study 5 Theoretical Support for the Study 6 Assumptions 11 Scope and Delimitations 12 Limitations 12 Definition of Terms 12 Research Questions 13 Significance of the Study 14 Summary and Overview 15 CHAPTER 2: LITERATURE REVIEW 17 Introduction to the Literature Review 17 Defining Intangible Assets 18 Defining the Need for Valuation 22 Links between Systems Theory and Intangible Assets 25 Potential Tools or Methods for Measuring Value in Intangibles 27 Current Valuation and Implementation Methodologies 33 Summary 42 CHAPTER 3:METHODOLOGY 45 Introduction 45 Research Design and Approach 45 Population 46 Sampling Procedure 47 Sample 48 Instrumentation 48 Data Collection Procedures 51 Data Analysis 52 Measures to Protect the Participants 56 CHAPTER 4: RESULTS 58 Introduction 58 Data Generation 58 Results 59 Summary 66 CHAPTER 5: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS 68 iii Summary 68 Conclusions 70 Recommendations for Practice 74 Recommendations for Future Study 77 Social Significance 79 Concluding Statement 80 REFERENCES 82 APPENDIX A: THE INTANGIBLES AUDIT (IA) 84 APPENDIX B: AUTHOR’S PERMISSION TO USE THE INTANGIBLES AUDIT 87 APPENDIX C: ELECTRONIC MAIL INTRODUCTION AND INVITATION TO COMPLETE THE SURVEY INSTRUMENT 89 APPENDIX D: HUMAN CAPITAL SURVEY FOR THE TECH SECTOR 90 CURRICULUM VITAE 97 iv LIST OF TABLES 1 Pearson r Correlation for the Intangible Audit Survey 60 2 Cronbach Alpha Reliability Analysis for the Intangible 62 Audit Survey 3 Factor Analysis Relating to the Validity of the Audit Questions 64 4 Pearson r Correlation Indicating Implied Importance of Variables 66 v LIST OF FIGURES Figure 1 Cronbach alpha scree plot relating to the validity of the intangible audit 64 [...]... Twenty-five years ago the book value and the market value of a company were fairly well aligned However, in many companies today, there is a dramatic difference between the physical assets that a company owns and the value ascertained by the marketplace The more knowledge based a company is as in the case of a consulting firm the more intangible assets matter If the argument were to be taken further, the majority... work place The participants were members in an organization known as the American Society of Training and Development (ASTD) They are typically full-time workers who are colleagues in the field this study impacts most The average age is 30to 45 years old Using the qualifying criteria, the researcher gathered data meaningful and applicable to the research questions in this study Limitations The data would... individual Other forms of components would consist of capital, information or materials The relationships that exist among components are varied and instrumental in the actual shape and effectiveness as well as efficiency of the system Norton and Kaplan (1996) claimed that there is a series of systemic cause and effect relationships that should be considered when using their Balanced Scorecard The cause and... particular, the area of intangible assets management Chapter 4 consists of the data analysis and findings that resulted from the analysis The data revealed some results that agreed and some that disagreed with the researcher’s hypotheses In chapter 5 the summary, recommendations and conclusions are presented The researcher concluded that there is much more work to do before this concept of intangible assets... literature on systems theory and attempted to create a link between constructs such as core competencies, value constellations, and mental models in order to advance Knowledge and Organizational Learning Management (K & OLM) in organizational systems The fundamental way in which organizational systems have been required to organize and perform as of late have been changing at a phenomenal rate unlike any... responses? The hypothesis would be that there is a positive correlation between the implementation of HRD programs and the value of intangible assets The Pearson correlation was used to answer this question and support or refute the hypothesis The hypothesis was that there was a positive relationship between the company’s earnings and the company’s current strategy, core competencies, organizational capabilities,... but these companies are still the minority APQC is currently undertaking just such a study to help practitioners understand the intricacies of valuation and measurement and perhaps to create such a consistent framework Statement of the Problem The problem in this study is that managers are not able to recognize and articulate the value of intangible assets in their organizations This situation can lead... is a rigorous financial framework for analyzing the costs, benefits, and risks associated with investing in the knowledge assets of an organization (p 7) The purpose in creating an evaluation methodology was to assist decision makers at all levels in the organization in making calculated risks and educated choices around KM proposals Some of the areas that are viewed as typical KM projects or strategies... action reviews to discover what has been learned that could be reused in the future, and creating portals that would allow for one location to search for any and all information or data the organization has available Clare and Detore (2000) posited that these many differing types of KM projects and strategies do, in fact, have some similar themes They suggested that these themes “are designed to create... what has been learned that could be reused in the future, and creating 23 portals that would allow someone to search any and all information or data the organization has available Clare and Detore (2000) posited that these many differing types of KM projects and strategies do, in fact, have some similar themes It was noted that these themes “are designed to create and/or leverage the knowledge assets . value constellations, and mental models in order to advance Knowledge and Organizational Learning Management (K & OLM) in organizational systems. The fundamental way in which organizational. creating an evaluation methodology was to assist decision makers at all levels in the organization in making calculated risks and educated choices around KM proposals. Some of the areas that are. Survey research was used to gather data from a sample of 400 members of American Society for Training and Development (ASTD). Statistical analyses included factor analysis, Cronbach’s Alpha, and Pearson’s