Business strategy, bank operation, and the role of intellectual capital development

Business strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital developmentBusiness strategy, bank operation, and the role of intellectual capital development

MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM

HO CHI MINH UNIVERSITY OF BANKING

CHI HUU LU

BUSINESS STRATEGY, BANK OPERATION, AND THE

ROLE OF INTELLECTUAL CAPITAL DEVELOPMENT

DOCTORAL DISSERTATION

Ho Chi Minh City, 4/2024

MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM

HO CHI MINH UNIVERSITY OF BANKING

Ho Chi Minh City, 4/2024

DECLARATION

I declare that the dissertation entitled “Business Strategy, Bank Operation, and the Role

of Intellectual Capital Development” is being written by myself under the orientations andnavigations of the academic supervisor – Dr Thich Van Nguyen, and is my own work,which is not being submitted to every application for a specific degree before Any citation

in the dissertation has always been stated enough in the whole work and the referencessection

Ho Chi Minh City, April 2024

Signature

ACKNOWLEDGEMENTS

First and foremost, I would like to thank the Ho Chi Minh University of Banking(HUB) in general and the Faculty of Postgraduate Education in particular due to thevaluable knowledge that I gain from participating in the doctorate program In fact, suchknowledge has played a crucial role in assisting me to complete required thesis in theeffective ways

At the same time, I would like to thank my academic supervisor - Dr Thich Van Nguyen

- who has given the insightful recommendations, considerations, and navigations thatcontribute to the significant improvement in the quality of my completed dissertation It isnot exaggeration to say that the precious chance to cooperate with him has become one ofthe most useful times to assist me in further achieving new academic skills and horizons on

my own research path

What is more, I would like to thank other colleagues who always support me even if inthe toughest circumstances It can be said that becoming a minor member of the secondfamily

- the Institute of Scientific Research and Banking Technology, Ho Chi Minh University ofBanking – provides a window of opportunity for me to not only be buried the academicenvironment but also reach more accomplishments on the career avenue

Last but not least, I would like to thank all members of my own family for theirconsiderable sacrifices In fact, it seems that without their endeavors, I do have not enoughtime to learn and pursue my dreams on the academic path Thanks to their motivations andincentives, I could confront and overcome the challenging situations in daily life and reaprich harvest of knowledge

To end up, it is hoped that all the best would come to my own lecturers, colleagues,friends, and family God will always be here to bless all of you

ABSTRACT

Leaning especially on and taking advantage of intellectual resources has beenrecognized as the effectual strategy to stay ahead of the curve in the business marketnowadays, which has witnessed a surge in increasingly fierce competitiveness.Unsurprisingly, many academicians have been enchanted to delve deep into the role ofintellectual capital in business operations of not only the firm industry, but also the bankingsector With that in mind, the current study conducted is to explore the relationship betweenintellectual capital and financial intermediation activities as well as non-interest incomes ofbanks Based on the data set of 26 commercial banks in Vietnam during the 2006-2020period, the regression results can be summarized as follows First, there is a positiveassociation between intellectual capital efficiency (measured by VAIC model) and thesebusiness activities of banks Second, when performing the VAIC-separated model, theevidence indicates that while capital employed efficiency becomes the most importantcomponent to foster financial intermediation activities, structural capital efficiency plays acrucial role in propelling non- interest incomes It should be noted that the aforementionedfindings still withstand a battery of the robustness tests applied At the same time, thecurrent analysis finds that smaller banks seemingly harness these resources in fuelingfinancial intermediation activities more effectively than their counterparts, by contrast,larger banks tend to take advantage of intellectual capital more effectually Besides, otherbank-specific characteristics and country- specific conditions such as the capital ratio, totalassets, earnings, and GDP growth also play a certain role in the main concerns of theresearch It is believed that the empirical findings may have significant contributions to shednew light on the existing theories such as the resources-based, the knowledge-led, and theIC-rooted views, and, to some extent, provide some helpful implications for not onlymanagers, decision-makers of banks, but also national authorities as well as policy-makers

in Vietnam Eventually, it is hoped that the research may become an important catalyst forstimulating more works carried out in this field in the coming years

LIST OF ABBREVIATIONSSerial

No.

TABLE OF CONTENTS

DECLARATION i

ACKNOWLEDGEMENTS ii

ABSTRACT iii

LIST OF ABBREVIATIONS iv

TABLE OF CONTENTS v

LIST OF TABLES viii

LIST OF FIGURES ix

CHAPTER 1 INTRODUCTION 1

1.1.Research motivation and context 1

1.2.Main purposes of the dissertation 3

1.2.1.General purposes 3

1.2.2.Specific purposes 4

1.3.Research objectives and scope of the dissertation 5

1.4.Methodology of the dissertation 6

1.5.Key contributions of the dissertation 8

1.6.Structure of the dissertation 9

CHAPTER 2 THEORETICAL BACKGROUND AND LITERATURE REVIEW 13

2.1.Concepts of intellectual capital 13

2.2.Determination of the role of intellectual capital in business strategy development 18

2.3.Measure methods of intellectual capital efficiency 21

2.4.Theoretical background of intellectual capital 25

2.5.Related empirical studies in the banking industry 28

2.6.Hypotheses development 57

CHAPTER 3 METHODOLOGY 64

3.1.VAIC measurement methodology 64

3.1.1.Calculation of VAIC model 64

3.1.2.Merits and demerits of VAIC model 69

3.2.Data and Variables 74

3.2.1.Sample data 74

3.2.2.Employed variables 76

3.3.Empirical Regression Models 81

3.4.Descriptive statistics and correlations analysis 85

3.4.1.Context of the Vietnamese banking system during the research period 85

3.4.2.Descriptive statistics and correlations 88

3.5.Research procedure 94

CHAPTER 4 EMPIRICAL FINDINGS AND DISCUSSIONS 98

4.1.Financial intermediation of banks and the role of intellectual capital 98

4.1.1.Main results 98

4.1.2.Robustness tests 104

4.1.3.Effect of bank size 113

4.1.4.Discussion of the findings 116

4.2.Non-interest incomes of banks and the role of intellectual capital 118

4.2.1 Main results 119

4.2.2.Robustness tests 124

4.2.3.Effect of bank size 133

4.2.4.Discussion of the findings 136

CHAPTER 5 CONCLUSIONS AND IMPLICATIONS 140

5.1.Conclusions 140

5.2.Practical implications 143

5.3.Theoretical implications 145

5.4.Limitations and directions for further research 146

REFERENCES i

APPENDIX LIST OF RELATED PUBLICATIONS xxvi

LIST OF TABLES

Table 2.1 Some definitions of IC and its components 15

Table 2.2 Some measure methods of intellectual capital efficiency 22

Table 2.3 The summary of related studies on the role of IC in the existing literature 34

Table 3.1 Variables definitions 79

Table 3.2 Variables descriptive statistics 88

Table 3.3 Correlation matrix 91

Table 4.1 Baseline multivariate analysis 102

Table 4.2 Robustness tests 107

Table 4.3 GMM approach 111

Table 4.4 The role of bank size .115

Table 4.5 Baseline multivariate analysis 121

Table 4.6 Robustness tests 127

Table 4.7 GMM approach 131

Table 4.8 The role of bank size .134

LIST OF FIGURES

ingredients of IC .14

Figure 2.2 The role of IC in business strategy map 20

Figure 2.3 The illustration of the ways IC fuels financial intermediation activities and

non-interest incomes of banks 28

Figure 3.1 The major resources in promoting value-added creation 65

Figure 3.2 The ways to construct the VAIC calculation 69

Figure 3.3 The economic backdrop of Vietnam 85

CHAPTER 1 INTRODUCTION 1.1 Research motivation and context

It could be said that today’s world has faced increasing threats of the poly-crisis such asthe disruption of the global supply chain, soaring energy prices and inflation rates, andgeopolitical risk (Lu & Luong, 2022; Phan et al., 2022b; Yusoff et al., 2019) This prospectunderscores that most organizations have to find effective ways to sustain their buoyantmarkets In this case, tapping into knowledge-based resources can be seen as an essentialpreparedness to open new roads for modern companies because it assists an organization inachieving competitive advantage and stable development (Alvino et al., 2020; Suciu &Năsulea, 2019) This assertion is also true in the banking industry, which usually dependsmuch on intellectual resources rather than physical capital to provide suitable products andservices to fulfill the changing needs of their customers and succeed in competitiveness(Adesina, 2019) To some extent, intellectual capital (IC) may be an effective signal toevaluate the degree of banks’ performance compared with their rivals (Meles et al., 2016;Stewert, 1999)

Unsurprisingly, scholars and regulators have recently paid much attention toimplementing IC in banking operations While the number of studies in this field hasfocused mainly on the correlation between IC and banks' productivity (e.g., Alhassan &Asare, 2016; Yalama, 2013; and among others), IC and one’s profitability (e.g., Le &Nguyen, 2020; Poh et al., 2018; and among others), IC and ones’ risks (e.g., Dalwai et al.,2021; Nguyen et al., 2021; and among others), or technical, allocative and cost efficiencies(e.g., Adesina, 2019; Le et al., 2022), the aspect of financial intermediation in the bankingsystem as well as the link between IC and one of the most critical aspects in bankingoperations, namely total non- interest incomes, seem to remain an undiscovered area

With that in mind, this research is to tackle the key issue of whether the implementation

of IC has fostered the financial intermediation and total non-interest incomes in the bankingsystem or not In this sense, Vietnam may provide one of the ideal countries for finding aclear answer and filling this vital gap in the literature for the following reasons

Vietnam's economic growth has witnessed a fast pace in the ASEAN region, and it ishoped that this country will be the next tiger in Asia (Le, 2021; Le & Nguyen, 2020)

According to the statistics from World Bank Data, from 2006 to 2019, the GDP growth ofVietnam nearly stood at an average of around 6.5% before dropping to about 2.9% in 2020due to the adverse consequences of COVID-19 Notwithstanding, since the financial marketseems to remain undeveloped, sustainable economic growth and development have reliedmainly on the effective operations of the banking system, which is also deemed as thebackbone of the Vietnamese economy (e.g., Le et al., 2022; Le & Nguyen, 2020; Phan et al.,2022b)

The statistics revealed by World Bank Data illustrate that the economic indicators ofdomestic credit over the private sphere supported by banks jumped from about 65% to over116% during the 2006-2020 period This remarkable escalation means that the development

of the banking sector plays an imperative role in ensuring and fostering the growth of theVietnamese economy Therefore, growing financial intermediation activities have becomeone of the significant factors in ensuring sufficient economic resources and sustaining thedeveloping economy Additionally, the Vietnamese banking market may become fiercelycompetitive, resulting from the appearance of foreign banks, followed by participating in theWorld Trade Organization in 2007 (Huynh & Dang, 2021; Le & Nguyen, 2020; Phan et al.,2022a)

Consequently, domestic banks have to find new ways to adapt to changing conditions

In this regard, digging more into intellectual resources may be an underlying businessstrategy to thrive in their business activities Indeed, it is witnessing an increasing evolutionfrom the traditional paradigm of strategy to the knowledge-based paradigm, which deems IC

as the driving force of sustainable value creation and sustainable competitive advantage(Alvino et al., 2020; Khan et al., 2019; Marr & Roos, 2012) In this case, the businessstrategy construction of Vietnamese banks is not the exception, and hence, managers anddecision- makers in domestic banks cannot ignore IC perspective in both building theirbusiness strategy and managing business operations

On the other hand, as Greenbaum et al (2019) implied, banks traditionally act asfinancial producers and servicers; they are regularly forced to provide up-to-date products tosatisfy their customers' demands, by which they can flourish in today's economic climate.Such this scenario underlines the primary driver of IC in generating effective remedies forthese requirements In short, discovering the link between IC and financial intermediation

in the

banking industry would be a requisite study for not only the Vietnamese banking sector butalso other emerging countries where the sound operations of banks are seen as theprerequisite for economic development

In addition, the dissertation opts for non-interest incomes as the key objective toexplore the effect of IC on the business operations of banks for some main reasons First andforemost, the transformation from traditional incomes into non-interest incomes, includingcommissions, fees, and trading incomes, is seen as one of the essential strategies driving theoperations of banks in the modern economy these days (Bian et al., 2015) Indeed, the shifttowards non-traditional sources of income could bring certain benefits for banks, fromreducing risk and funding costs (Tran, 2020) to enhancing profitability (Mostak Ahamed,2017)

At the same time, such this orientation has required banks to possess necessarycapabilities of technology, expertise, and human resource (Mostak Ahamed, 2017) In thisvein, the emergence of IC would become the bridge to fill these preconditions In addition,

to deal with the aftermath of the global financial crisis, operations of the banking industry inparticular and the financial system, in general, have been constrained by tighter regulationsbecause such financial deregulation may encourage banks to join more casino-stylegambling, leading to growing instability (Tran, 2020) Hence, banks have to navigate theirbusiness strategies beyond traditional activities to achieve higher profitability This situationhighlights the vital role of both IC and non-interest incomes in banks; thus, discovering thecorrelation between these factors would provide a major insight into banking operations,especially in emerging markets where the banking system is considered the backbone of theeconomy

Taken together, it is hoped that the dissertation, namely “Business strategy, bank

operation, and the role of intellectual capital development” will may shed more light on the

role of IC in both financial intermediation and non-interest income activities and providevaluable helpfulness for not only academicians but also policy-makers in the banking sector

1.2 Main purposes of the dissertation

1.2.1 General purposes

In general, the dissertation is to conduct an empirical investigation into the role of intellectual capital in financial intermediation and non-interest income activities of

Vietnamese domestic banks In this regard, the study will point out the theoreticalbackground to advocate these main concerns before performing an empirical analysis Byleaning on the findings, the dissertation is also expected to provide useful implications formanagers and decision-makers of Vietnamese banks

on the context of the Vietnamese banking industry

Moreover, other effort of the writer is to explore the extent to which the differentcomponents of IC exert both financial intermediation activities and non-interest incomes ofthe Vietnamese commercial banks

Eventually, by leaning on the empirical findings, the present research endeavored topropound some major implications under both theoretical and practical views for not onlyacademicians but also policy-makers as well as banking leaders

In other words, as stated early, the current dissertation carried out is to answer thefollowing straightforward questions of:

(i) How does the theoretical background advocate the relationship between IC

efficiency and financial intermediation activities as well as non-interest

incomes?

(ii) Whether does intellectual capital play a crucial role in fueling non-interest

income activities of Vietnamese domestic banks or not?

(iii) Which components of intellectual capital play a crucial role in fueling the non-

interest incomes of Vietnamese domestic banks?

(iv) Whether does intellectual capital play a key role in fostering the activities of

financial intermediation of Vietnamese domestic banks or not?

(v) Which components of intellectual capital play a key role in fostering the

activities of financial intermediation of Vietnamese domestic banks?

To reach clear explanations for these major concerns, the dissertation would perform

an empirical investigation to find out the evidence In particular, the author would examinethe impact of intellectual capital on total non-interest incomes as well as on financialintermediation activities of banks Due to the importance of these business operations, thefindings in the dissertation would provide the implications for multi-stakeholders inVietnam and, perhaps, other emerging countries, especially against the backdrop ofincreasingly fierce competition resulting from the technological era

1.3 Research objectives and scope of the dissertation

For the research objectives of the dissertation, as mentioned previously, the study

would emphasize the role of intellectual capital in business operations of commercial banks,particularly the non-interest incomes and financial intermediation activities in Vietnam.These research objectives are selected as the chief purposes of the dissertation since theymay play an essential role in building business strategies of local banks as well as thegrowth of economy in Vietnam these days

First of all, as an emerging country, the economic growth in Vietnam nearly depends

on the expansion and sustainable development of the banking system Hence, the evaluation

of the impact of intellectual capital on the financial intermediation of domestic banks wouldprovide a deep insight into one of the main engines for the expansion of banking activitiesand economic growth in Vietnam

In addition, the transformation from traditional incomes such as lending interests intonon-traditional incomes may become one of crucial business strategies of banks against thebackdrop of increasingly competitive market resulting from the emergence of foreign banks,rapid changes in technological innovation, tightening regulations, and so on Therefore, theinvestigation into the role of intellectual capital in these operating aspects of banks maybring beneficial values to bank managers Taken together, these reasons have necessitatedconducting the research to point out the correlations between implementing IC and bothnon- interest incomes and financial intermediation strategies of domestic banks in Vietnam

In this regard, the research scope of this this study would focus on some main items asfollows:

For the space scope of the thesis, the author would concentrate on the business

operations of domestic banks in Vietnam The financial information of each bank would begathered from the audited financial statements and the notes to the financial statements.There are some main reasons why the research has focused mainly on commercial banks inVietnam to carry out the empirical investigation First, it allows the current analysis toachieve a relatively homogenous research sample (Adesina, 2019) At the same time, it isargued that compared with commercial banks, joint-venture and foreign-controlled onesseemingly account for a relatively small proportion (Huynh & Dang, 2021) Meanwhile, thebusiness operations of non-profit banks seemingly differ from commercial banks (Huynh &Dang, 2021) Taken together, the current research will pay special attention to commercialbanks to conduct the empirical analysis

For the time scope of the thesis, the author would select the study period spanning

from 2006 to 2020 The period is chosen because it has witnessed many changes in thebanking system in Vietnam, including regulations, structures, the emergence of foreignbanks, and technology-based orientations (e.g., Huynh & Dang, 2021; Le & Nguyen, 2020;Phan et al., 2022a; Phan et al., 2022b; Tran, 2022) At the same time, many prominentevents have emerged during the same period in the Vietnamese economy (see the detailedanalysis in Chapter 3) Thus, to some extent, the findings would draw the general picture ofthe role of IC in banking operations, specifically non-interest incomes and financialintermediation activities.

1.4 Methodology of the dissertation

In order to tackle the aforementioned concerns and achieve the research objectives, thecurrent research has opted for the quantitative methodology to figure out the extent to which

IC efficiency as well as its elements exert the financial intermediation activities and totalnon- interest incomes of banks

More specifically, the study utilizes the database of 26 domestic banks in Vietnamduring the 2006-2020 period Also, many different regression approaches are performed,including OLS, Fixed-time effect, and GMM estimation, as well as controlling specificcharacteristics

of banks and macro conditions These approaches are still important because they can help

to ensure that the research findings withstand various robustness tests conducted It is truethat the empirical results of the dissertation still survive after the robustness test stages arebeing employed, meaning that the findings are quite feasible and plausible Also, theresearch sample divided into different subsamples based on the bank size will be examined

to provide an understanding of the role of IC in both large banks and small ones

At the same time, the dissertation utilizes the prior findings of previous authors in theexisting literature to calculate the main explanatory variables including IC efficiency and itsingredients as well as to build the empirical models Accordingly, to estimate the ICefficiency of domestic banks, following many extant studies (for example: Adesina, 2019;

Le et al., 2022; Nguyen et al., 2021; Ozkan et al., 2017; Poh et al., 2018, and among others),the study employs VAIC model (the value-added intellectual coefficient model) propoundedand developed by Pulic (1998, 2000, 2004) At the same time, VAIC is being separated intothree main ingredients being capital employed efficiency (CEE), human capital efficiency(HCE), and structure capital efficiency (SCE) to evaluate the impacts of these components.Additionally, the pros and cons of this approach are analyzed clearly and the reasons whythe dissertation has chosen this model in Chapter 3, besides these limitations are also stated

in the final chapter as one of the research gaps and research directions in the future

Furthermore, the dissertation also controls a variety of variables including specific characteristics and macroeconomic conditions Adding these variables into theanalysis model may give a deeper insight into the research findings and, to some extent,they can play a part role in reexamining the results These variables consist of bank size,capital ratio, loan loss reserve ratio, income ratio, GDP growth ratio, and inflation ratio,which have been used by many financial studies in the recent years (e.g., Adesina, 2019; Le

bank-& Nguyen, 2020; Nazir et al., 2021; Tran et al., 2021; and among others)

Besides, regarding the first dependent variable, financial intermediation in banks,although there are certain debates on measuring financial intermediation, the ratio of totalloans to total deposits is still popular in the banking literature (Boďa & Zimková, 2021).Some existing views scrutinize that macroprudential policies should be built around this

“descriptive indicator” (Satria et al., 2016; Van den End, 2016) In this research, this

indicator will be used as the first dependent variable in the analysis models In addition,regarding the

second dependent variable, the current study will use the (natural logarithm of) total interest incomes (NII) of banks to estimate non-interest incomes of banks, which maymirror most of the non-interest sources of income of banks, from relevant fees andcommissions to trading securities, in a direct and absolute way (Phan et al., 2022a; Phan etal., 2022b) Hence, this indicator will be applied as the second dependent variable in theanalysis models

non-1.5 Key contributions of the dissertation

The research is anticipated to contribute to the knowledge gap in this field in thefollowing ways

i) Regarding the theoretical view, first and foremost, to the best of the writers' horizon,the research can be seen as the first empirical investigation into the correlationbetween IC and banks' financial intermediation as well as the non-interest incomes, atleast in the Vietnamese context and perhaps, other developing countries Indeed, thevast majority of related papers emphasize the connection between IC and somebusiness aspects such as productivity, profitability, risk-taking, or technical,allocative, and cost efficiencies (Adesina, 2019; Le et al., 2022; Le & Nguyen, 2020;Meles et al., 2016; and among others), the research makes a difference to the extantstudies by digging more into the influence of IC on increasing financialintermediation activities and non- interest incomes in the banking sector

ii) Moreover, most studies in this area mainly take the context of the industrializedcountries to perform, notably US and China which are considered the most influentialeconomies globally (Alvino et al., 2020) Hence, by conducting an investigation inVietnam, which has been seen as a pivotal part of the Southeast Asia region and theAsia region as a whole, the study will bring more profound insight into the driver of

IC in rebuilding business strategies of domestic banks to not only economists but alsodecision-makers in developing economies

iii) In addition, as the research conducted by Poh et al (2018) indicated, different resultswhen investigating the impact of IC in the banking industry may come from variousmeasures of banking performance and periods chosen By selecting financialintermediation activities and non-interest incomes as the main research objectivesalong with the period covering from 2006 to 2020, the author would dig more intothe impact of IC on various dimensions of business operations in banks, andtherefore, the

author adds more illumination to prior findings such as Le et al (2022); Le &Nguyen (2020); Nguyen et al (2021); Poh et al (2018) and among others

iv) Besides, the findings of the dissertation also give helpful evidence to shed new light

on some important theories such as the resource-based theory, the intellectual capitaltheory and the knowledge-based theory that underscore a crucial aspect ofimplementing IC in business management of enterprises these days to stay ahead ofthe curve in the increasingly intensive competition In other words, the results in theresearch will contribute to the profound understanding about various theoreticalstudies in the IC field such as Dierickx & Cool (1989); Harris (2000); Khalique et al.(2013); Penrose & Penrose (2009) and among others

v) Under other related angle, the dissertation conducted is to respond to the previouscalls of Alvino et al (2020); Suciu & Năsulea (2019); Vătămănescu et al (2019) whoassert that the urgent need to explore more impacts of IC on different aspects inbusiness operations of modern enterprises Because the center role of IC isincreasingly recognized in both academic and practical perspectives, the empiricalexamination of the study will provide the compelling evidence in advocating thisassertation

vi) Last but not least, because the transformation from traditional incomes to traditional activities is seen as the necessary step in constructing business strategies,and implementation of IC may be the key to opening up new roads for domesticbanks in the coming future, the findings would provide certain implications forscholars and regulators in Vietnam and perhaps in other developing markets On theother hand, while the expansion of financial intermediation activities can be seen asthe key of banking operations, supporting the allocation of the economic resourcesand fueling the economic growth of Vietnam, based on the findings, the study willprovide productive implications for managers in navigating and expanding theseactivities

non-1.6 Structure of the dissertation

As mentioned before, this chapter focuses on some main points including themotivations, the research objectives, the research questions, the approached methodology,and the key contributions of the dissertation In the following chapters, the current studywill detail these contents In general, the outline of the study can be summarized as follows

Chapter 2, namely ‘Theoretical background and literature review’, will first provide the

concepts and the measure methods of intellectual capital The mentioned information isquite important because it helps to shed light on the ethos, the definition, and the valueembedded into IC that many theorists have endeavored to discover At the same time, itshows clearly the ways numerous methods developed are to offer a precise quantification of

IC performance in the extant literature After that, this chapter also analyzes the theoreticalbackground and the relevant studies in the banking industry, which in turn will assist todevelop the related hypotheses Basically, this chapter is expected to create the importantbackbone to gain more knowledge about the research trend in the concerned field as well asindicate the research gap that the dissertation can extend and fulfill At the same time, it cangive a strong theoretical background that helps to verify the main concerns of the study andvalidate the research orientation as well as performed approaches

Chapter 3, namely ‘Methodology’, will depict the detailed approaches to address the key

issues of the dissertation Accordingly, the chapter first discusses the methodology of theVAIC model and illustrates its detailed calculation as well as the computation of itscomponents Also, the pros and cons of this approach are also analyzed Since this model isbeing applied in the study as the main explanatory variable to evaluate the role of ICefficiency or value-added creation in banking business operations, analyzing thisinformation will help to provide a deeper insight into how VAIC still stands out in theexisting literature compared with other measures proposed, why it is being opted for as theprevalent means to estimate IC efficiency by enormous academicians, although it obtains avariety of drawbacks, and how to formulate its components Afterward, this chapter willgive information in a minute way about the data collected, the variables employed, theempirical models performed, and the various stages in performing robustness tests Besides,the backdrop of the research period is also underlined to emphasize the reasons why it ischosen and so important before analyzing descriptive statistics and correlation betweenemployed variables

Chapter 4, namely ‘Empirical findings and discussions’, will illustrate the empirical

results of the dissertation based on the methodology presented in the previous chapter Bycomparing with theoretical views and other empirical studies, the chapter will not onlydelineate the main findings but also give detailed explanations about the role of IC in the

banking operations of domestic banks It can be said that the results illustrated in the chapterwill provide a clear answer to the aforementioned research questions

Chapter 5, namely ‘Conclusions and implications’, will summarize the general findings

of the dissertation based on the results analyzed in the previous chapter At the same time,

by relying on these conclusions, the chapter will propose some main implications underboth theoretical as well as practical perspectives which may be helpful for both managers,decision- makers, and researchers in Vietnam and perhaps other emerging countries.Besides, the chapter highlights some drawbacks of the dissertation and suggests a variety offuture research directions Generally, it is hoped that future scholars can fulfill theselimitations as well as pay new paths in this research area

Brief Summary of Chapter 1

In Chapter 1, the current research has drawn the whole picture of the dissertation inwhich the research orientation and navigation underlined are to provide a concretebackground for reaching a detailed explanation of the chief concerns In this light, thechapter may help readers understand the main purposes, the research objectives, the context,and the research questions that the dissertation will concentrate on It can be said that thefirst chapter will provide the first key to open the next doors throughout the current study.The next chapters will detail the following steps to achieve a clear answer about the researchobjectives

CHAPTER 2 THEORETICAL BACKGROUND AND

LITERATURE REVIEW 2.1 Concepts of intellectual capital

In today's world, economists tend to have a general consensus on the central role ofintellectual capital in supporting organizations to gain competitiveness and achievesustainable growth, especially against the backdrop of a fiercely competitive businessenvironment, rapid changes in technological innovations, and global challenges (e.g., Khan

et al., 2019; Kweh et al., 2022; Suciu & Năsulea, 2019; Vătămănescu et al., 2019) In theearly stage, the definition of IC has been paid special attention by many economistsworldwide According to Khalique et al (2013), the first interpretation is produced by JonKenneth Galbraith in 1969 However, Harris (2000) suggests that Schultz was the firsteconomist who introduced the clarification of IC and the economic values of IC in 1963.Even though there are certain debates about the definitions, classifications of IC, and themeasures of IC in the existing literature, it is widely recognized that in the knowledge-basedera, IC is deemed as the indispensable ingredient in the business strategies of anyorganization Indeed, although there are certain differences between researchers ininterpreting IC in literature, in general, IC is seen as one of the intangible assets to fuel theoperations of companies (Ghosh & Mondal, 2009; Mondal & Ghosh, 2012), as one of themain resources to enhance competitive advantage, firm value, the confidence ofstakeholders, and sustain economic growth (Caputo et al., 2016; Jardon & Martínez-Cobas,2019), as one of the reliable sources to ensure prosperity and well-being of individuals,corporations, and countries (Alvino et al., 2020; Suciu and Năsulea, 2019)

At the same time, IC has regularly included three main components: human capital,structural capital, and relational capital (Adesina, 2019; Le & Nguyen, 2020; Meles et al.,2016; Ozkan et al., 2017; Poh et al., 2018) Accordingly, the interpretation of human capitalusually involves the competence of people in an organization, such as skills, experiences,knowledge, and so on Meanwhile, the definition of structural capital is related to a firm’sfabric, business strategies, policies, and so on By contrast, the last component, relationcapital, also named capital employed, closely involves extrinsic factors, including clients,suppliers, and relevant stakeholders

Figure 2.1 below presents the heart role of value creation that is blended from threeclassifications including human capital, structural capital, and relational capital together.Besides, Table 2.1 illustrates a variety of definitions related to intellectual capital and itscomponents in the existing literature

Source: Based on the prior studies conducted by Edvinsson & Malone (1997); Harris,

(2000); Stewart & Ruckdeschel (1998)

Figure 2.1 The illustration of the value-added creation springing from the three main

ingredients of IC

As Figure 2.1 illustrates, the value creation is of the interested concern of enterprises,being the blended and integrated relationships and close connections between three majorintangible assets: human capital, relational capital, and structural capital In this light, themore interconnected between these elements, the more maximized value space (Pew Tan etal., 2008) According to Edvinsson & Malone (1997), the firm value only results from the

whole combination of all three elements, meaning that by concentrating on one or two ofthese elements and neglecting the rest of them, a firm cannot optimize the value-addedassets

Hence, it is argued that these factors or intellectual resources can be seen as theunderlying preconditions and foundations that are essential to perform business and gaincompetitive leverage (Harris, 2000)

Table 2.1 Some definitions of IC and its components

as experiences, knowledge, IP (intellectual property), andinformation A company could harness these valuablematerials to build wealth and propensity.

Intellectual capital has been knowledge that, in turn, could

be transformed into the profitability of an organization.Intellectual capital can be seen as a new resource whichassist firms in reaching new achievements on businesspath Intellectual capital has been the discrepancy between

a company's market and book values At the same time,intellectual capital is the resource that will assist acompany to sustain competitive advantages

Intellectual capital is depicted as intangible or non-physicalassets that a company can gain value and advantageouscompetition from these resources

Intellectual capital is seen as an invisible activityconsisting of the capability of individuals in learning,namely the human capital, an organizational culture known

as the structured capital, and the interactions with extrinsicfactors named the relation capital

8 Zéghal &

Maaloul (2010)

Intellectual capital is defined as the total of all knowledgethat an organization can harness effectively in performing business operations to value-added creation

competitiveness

The interpretation of human capital is related to thecapabilities of employees in solving many problems inenormous circumstances that would ultimately generatetangible as well as intangible assets of companies

(2006)

Human capital can be deemed as the most important element

of IC, supporting the performance, efficiency, and capability of companies

Structural capital is something owned by a company ingeneral Specifically, it is related to data, patents, policy,invention, strategy, and technology From this author'sperspective, structure capital is the backbone of IC thatwould ensure the smoothness of knowledge transmissionwithin a company

Relational capital is identified as the value stemming from individuals and organizations that have relations with acompany in selling and buying In other words, this factor is

usually related to multi-stakeholders such as customers,suppliers, and other relevant stakeholders.

(2003)

Relational capital, also named capital employed, can be defined as the connection between companies and theirmultiple stake-holders

Năsulea (2019)

Human capital is the factor reflecting the capabilities ofindividuals in a company It regularly consists of the skills,experiences, and knowledge of all people in anorganization

Structural capital is the factor that emphasizes intrinsicknowledge such as policy, strategy, and structure of acompany

Relational capital is the factor related to a firm's extrinsicrelationships, such as clients and stakeholders

Source: The author collects from the extant literature

In short, it is an undeniable fact that operating in the technology-led and based era, most organizations cannot neglect the role of intellectual resources inconstructing business strategies, especially when the competitiveness has been souring andthe uncertainty has become more unpredictable This argument is reflected in the scientificendeavors of scholars to codify the role of IC throughout the existing literature

knowledge-Indeed, based on the existing definitions in the literature and to the limited abilities ofthe author, it can be concluded that there are the great efforts to identify the concept of IC,however having certain differences in interpreting IC’s definition as well as its elements,depending on the different disciplines and various angles, such as finance and accounting,

economics and strategies, marketing and communication, and so on (Le et al., 2022; Le &Nguyen, 2020) Furthermore, reaching a whole consensus on IC’s interpretation tends to bethe inconclusive debate in the extant literature (Bayraktaroglu et al., 2019; Nazir et al.,2021).

Similarly, the definitions of IC’s elements, and perhaps their names, have been stilldifferent, but many existing studies have classified IC into three main categories consisting

of human capital, structural capital, and relational capital, also called physical capital orcapital employed (e.g., Andriessen & Tissen, 2000; Nielsen et al., 2006; G Roos & Roos,1997; Stewart & Ruckdeschel, 1998; Sveiby, 1997; and among others) Accordingly, humancapital is mostly involved the intellectual prowess of individuals in an organization and itcan be lost when employees leave companies In contrast to this element, structural capital ismainly engaged with policies, strategies, cultural aspects, possessed by firms Meanwhile,contrary to the first two elements, relational capital is totally related to the external factorssuch as multiple stake-holders

2.2 Determination of the role of intellectual capital in business strategy development

Historically and conventionally, both academicians and managers have endeavored tofind out a clear reason why some businesses perform better while others do not The evidentanswer to this question may provide the key to opening new paths in managing the businessstrategy of firms (G Roos, 2005) Based on the theory of business strategy in the extantliterature, the aim of this subsection is to highlight the vital role of IC in constructingbusiness strategy of firm industry in general and banking industry in particular

First of all, it is necessary to understand the meaning of “strategy” that a business leans

on Theoretically, G Roos (2005) has identified “strategy” is seen as a series of approachesthat assist businesses in accomplishing specific goals This author also underscores that theformulation of strategy will be depend specifically on the inventiveness coming from thehuman mind, while the action of strategy is to reach the strategic compromise betweenbusiness goals and environmental requirements, suggesting that selling products andservices has to meet demands of end-users Previously, Andrews (1997) considers thatstrategy of corporate can be seen as a mechanism of decision-making that helps to clarifythe purposes, policies, as well as plans by which companies can reach their business goals.From the view

of this author, strategy brings significant contributions (both economic and non-economicvalues) to multiple stakeholders.

Now, a question is that why the level of profitability tends to be different betweencompanies, regardless of whether they operate in a same area Looking carefully at the wave

of business strategy development, it is argued that there are generally two main perspectives

by which strategy may rely on (Marr & Roos, 2012) Accordingly, the first perspective is tofocus mainly on the power of market, while the second one is to emphasize the efficiency ofinternal resources

The former view of business strategy, namely “the paradigm of market power”, is seen

as the conventional strategy model leaning specifically on the power of market From thisperspective, benefits a firm achieves may spring from the interaction of five major forcesincluding the level of power that buyers have, the level of substitutes for both products andservices, the level of power that suppliers possess, the capacity of entry into market, and thelevel of existing competition (Porter, 1980) These forces are stronger meaning that theprofitability of a company will be lower (Marr & Roos, 2012; G Roos, 2005) The mainargument of this view is that the fundamental difference in benefits of companies may comefrom the ability of barriers construction, also named “mobility barriers”, which will assistsuccessful companies in protecting from imitation of their strategic models (Caves & Porter,1977; Hatten & Hatten, 1987; Marr & Roos, 2012) In this light, the issue that may occur ishow to create a set of forces to construct these barriers Rexhepi et al (2013) suggest thatthe answer may result from harnessing the intellectual capital of an enterprise when buildingbusiness strategy, especially in industries relying much on this capacity such as educationaland financial institutions

The latter view of business strategy is known as “the paradigm of resource-basedmodel” is proposed and developed by some resource-rooted theorists such as Penrose &Penrose (2009); Wernerfelt (1984) This paradigm explains that the distinction ofprofitability may originate from the valuable resources that companies possess and the waythey employ these resources Also, from this view, both resources and capacities are deemed

as “the strategic assets” of enterprises The more strategic assets applied to a huge number

of products and services, the higher benefits an organization can achieve (Prahalad &Hamel, 2009) However, it is argued that these resources and capacities cannot themselvesproduce value-added

creation (Penrose & Penrose, 2009), hence, to create value, they have to be embedded intothe both products and services that companies offer (Marr & Roos, 2012; G Roos et al.,2001) Such this sense has underscored the center role of IC in business strategy, because byleaning especially on IC view, the resources can be used effectively and companies candetermine the way to which value-added creation (G Roos, 2005; G Roos et al., 2001).

To illustrate this issue clearly, it should take the business operations of banks as atypical example G Roos (2005) describes banks serve as conduits between clientele whoneeds financial support and a group of customers can fulfill this financial gap In this vein,banks have to organize the cash flow appropriately to balance demands of both types ofthese customers To perform this task well, banks have to transform various kinds ofintellectual resources into effective remedies and solutions that will satisfy their clients G.Roos (2005) also concludes that possessing valuable resources is not yet enough, instead,banks have to put these resources to value-added creation

Source: Based on the strategy map constructed by (Kaplan & Norton, 2000, 2004)

Figure 2.2 The role of IC in business strategy map

As Figure 2.2 illustrates above, the strategy map developed by (Kaplan & Norton, 2000,2004) has depicted the causal connection between IC drivers and the performance oforganizations, indicating the fundamental role of IC in constructing business strategy Inother words, the strategy map shows clearly the way by which IC can drive organizationalobjectives and outcomes of organizations These authors believe that by understanding thereadiness of strategic assets, decision-makers can constitute strategic objectives In short, it

is clear that by using intellectual capital, the resources of organizations can be transferredinto the end products and services which, in turn, will distribute organizational values (Marr

& Roos, 2012)

In conclusion, along with the dramatic changes in business conditions, the strategyconstruction of an organization has to be adapted to suit the market needs, and the businessperception of the pivotal role of IC in driving value-added creation also grows gradually(Marr & Roos, 2012; G Roos et al., 2001) Indeed, approaching business strategy hasevolved from the conventional paradigm to strategic assets model, in which, IC has emerged

as the key engine for performance outcomes, strategic objectives, and sustainable added creations of most companies (Alvino et al., 2020) Therefore, leaders and managers inbanks cannot neglect this pivotal factor in their business strategy construction

value-2.3 Measure methods of intellectual capital efficiency

In tandem with the persistent attempt to explain the concept and the strategic vehicle of

IC as discussed above, it is also witnessed the numerous academicians have put theircontinuous energies into seeking out clearly the effective measure of IC efficiency It can besaid that due to the core role of IC in companies' business strategies and operations, itsmeasurement has attracted many researchers in the financial sector and the existingliterature as a whole

The urgent need to measure IC efficiency also originates from the realistic businessstrategies of firms that desire to manage IC in effective ways and disclosure this informationfrequently because, as the assertion of Bayraktaroglu et al (2019), managers only manageand control anything that they entirely measure In other words, “when you can measurewhat you are speaking about and express it in numbers, you know something about it”(Liebowitz & Suen, 2000) These arguments have underscored the pivotal part ofmeasuring IC in

business strategies of enterprises, leading to the fervent desires for conducting andpropounding the effective measurement of IC in numerous disciplines.

In this vein, various measures have been invented and developed in the extant literaturethroughout the recent decades In fact, over 42 methods have been developed to estimateintangible assets in the preceding literature and this figure may likely arise (Nazir et al.,2021) Some emblematic methods may include Tobin's Q ratio, the economic value-addedindicator, the intellectual capital index, the inclusive value methodology, VAIC model,adjusted/modified/extended-VAIC model and among others

Table 2.2 below states a variety of the typical measure methods of intellectual capitalefficiency in the extant literature

Table 2.2 Some measure methods of intellectual capital efficiency

No.

The author(s) The name of propounded measure

Stewart & Ruckdeschel5

María Viedma Marti (2001,

13

2004)

The intellectual capital benchmarking

system

16 Bounfour (2003) The intellectual capital dynamic value

(IC-dVAL approach)

Vishnu & Gupta (2015)

The extended (or additional) VAIC model

Source: The author collects from the extant literature

In the early stage, K.-E Sveiby & Lloyd (2010) and Luthy (1998) categorize theintangible measurement methods into the major four categories including ‘direct intellectualcapital methods’, ‘market capitalization methods’, ‘ROA methods’, and ‘scorecardmethods’ These categories can be summarized as follows

The first category is directly connected with the aspect of “dollar value” coming fromintangible resources, which is estimated by codifying its elements The second involves thecalculation of IC’s value through computing the difference between the marketcapitalization and the book value of the equity The third uses the ROA indicator tocalculate the average annual earning springing from intangible assets The final is related tomany indices developed from various components of IC to estimate IC’s value, but thisapproach does not evaluate the economic aspects like the first category

Meanwhile, according to Bayraktaroglu et al (2019) and Pew Tan et al (2008), theexisting methods of IC measurement can be classified into the two major kinds consisting ofthe non-financial calculation or “non-dollar valuation” and the financial calculation or

“dollar valuation” These both approaches have naturally embraced both merits anddemerits As the given names of these categories suggest, while the former does notestimate the dollar valuation of IC, the latter gives the estimation of the dollar valuation

Some methods in the former group may include the Skandia intellectual capitalnavigator, intellectual capital index, balanced scorecard, and among others In this line,Kaplan & Norton (1996) can be seen as the typical pioneers trying to propose the ICmeasurement The authors develop the balanced scorecard as the model to formulate IC,allowing managers to manage the cause-and-effect connections between intangible assetsand business performance through the four views: customer, internal process, finance, andlearning & growing.

Even though this model seems to be in line with the firm-specific view, it may not beapplied in general because it may not evaluate the financial value of the intellectualresources (Pew Tan et al., 2008) Hence, many methods have attempted to address thislimitation, and among different measures are being proposed Among of them, mostscholars readily consent that Skandia intellectual capital navigator is deemed as themeasurement that provide a wide range of aspects to formulate IC, especially the role ofcustomer relationships in the value- added creation (Bontis, 2001) Accordingly, thisapproach embraces around 112 indices reflected in five angles: customer, finance, human,process, renewal and development However, this method does not evaluate dollar values ofIC

To sum up, the non-financial perspective allows researchers and managers to determinethe what type of IC components and their impacts on business operations of firms, but itdoes not help to formulate the economic values of intangible assets (Bayraktaroglu et al.,2019)

On the other hand, the financial perspective such as the economic value added, Tobin’s

Q, VAIC model, and extended-VAIC model, has focused mainly on the economic value ofintangible assets that an organization owns, hence it enables both scholars and businessleaders to evaluate IC’s performance and compare it to rivals (Bayraktaroglu et al., 2019).For instance, the economic value added capturing many variables including financialplan, performance, budget, shareholder communication, and incentive compensationemphasizes the maximation of earnings over costs However, one of this method’sdrawbacks is that it leans much on historical expenses that does not capture immediately thecurrent market value (Bontis, 2001; Pew Tan et al., 2008)

Another compelling method is the value-added intellectual coefficient (VAIC) model ofPulic (1998, 2000), which is seen as a relatively simple to calculate and is widely used in thepreceding literature (Adesina, 2019; Nazir et al., 2021) As a claim by Poh et al (2018), the

value-added intellectual coefficient model (VAIC) is suitable for the banking and financialsector and other industries.

This method was created and developed by Pulic (1998, 2000, 2004), and utilized in awide range of studies on the role of intellectual capital in the banking industry and otherdisciplines (e.g., Adesina, 2019; Le & Nguyen, 2020; Meles et al., 2016; Nazir et al., 2021;Ozkan et al., 2017; Poh et al., 2018; Yalama, 2013; and among others) This model wouldconsist of three main components: capital employed efficiency (CEE), human capitalefficiency (HCE), and structure capital efficiency (SCE) This approach reflects the creation

of value in each money a company spends and the efficiency of intellectual capital utilized.Therefore, a higher value of VAIC means that using a firm's resources becomes bettereffective

In this study, the author would utilize VAIC model to measure IC efficiency in banksand acting as the main explanatory variable in the analysis models For calculation, thedetailed explanation would be stated in the methodology chapter Along with that, thischapter also acknowledges the drawbacks of VAIC model and gives detailed explanationsabout some main reasons why this research has chosen this model as measure of ICefficiency In addition, the study will state these limitations as the research gap that futureacademicians can fulfill in the years coming ahead

In the next subsections, the study will provide theoretical background of intellectualcapital before some empirical studies related to IC’s role in the extant literature arereviewed

2.4 Theoretical background of intellectual capital

There are some potential theories which could interpret the connection between IC andfinancial intermediation and non-interest incomes in banks

Based on the assumption that knowledge embedded in individuals is considered an asset

of organizations, the human capital theory developed by Edvinsson & Malone (1997);Stewert (1999) suggests that any company should explore this intangible resource to createand acquire competitive leverage in the market The underlying assumption of this theory isthat by tapping into the knowledge embedded into each individual and team, organizationscan harness these assets and transform them into advantageous competition in the today’seconomy (Stewart & Ruckdeschel, 1998)

According to Harris (2000), the knowledge can be divided into two major typesincluding tacit term and explicit term In terms of the tacit knowledge which is consideredthe most significant type, Harris states that it may consist of experiences, beliefs,perceptions, learning and similar items that are being embedded into employees and are notspoken.

By contrast, the explicit knowledge is appeared clearly and accessible to anyone infirms, which includes procedures, guides, policies written down Allee (1997) asserts thatnearly 90% of knowledge owned by firms may spring from the tacit knowledge, therefore toharness intellectual resources effectively, firms need to transform this type of knowledgeinto the explicit one In other worlds, an increase in the rate of the explicit knowledge isquite the important issue when exploring intellectual capital

On the other hand, the systems theory considers that each individual has to interact withgeneral processes and businesses to meet the consistent goals of an organization (Heylighen

& Joslyn, 1992) In this vein, IC would become an appropriate environment to ensureconstant information flows within the organization and customer communication (Harris,2000) Relying on this knowledge-sharing mechanism, managers could enhance and evenadjust the orientation as well as navigation of business plans to satisfy the demands of theirclientele (Harris, 2000)

In other words, each knowledge of each member in a company will emerge as the heart

of knowledge for relevant others because individuals become a pivotal part of strategic role

in value-added creation (Senge, 1991) More clearly, Harris depicts that the systemsapproach deems the human capital and systems as two interconnected and integrated entitieswhich serve as the foundation for the performance enhancement of a company

Taken together, implementing IC may assist banks to achieve higher competitivenessand, therefore, achieve an increase in financial intermediation

To identify clearly the intended correlation between IC and financial intermediation aswell as non-interest incomes, relying on the models constructed by Edvinsson & Malone(1997) and Suciu & Năsulea (2019), the study would reconstruct these models to draw thepossible illustration of these relations in Figure 2.2

As this picture illustrates, through three main ingredients: human capital, structuralcapital, and relational capital, IC would have certain influences on financial intermediationactivities in several channels as follows.

First, it is clear that as the human theory has indicated, by tapping into the tacitknowledge of employees, any organization may transfer these implicit resources into theinnovative capital that is eventually harnessed to accomplish competitive advantages inmarkets Second, the structural capital would fuel competitiveness through the channel ofsocial capital Indeed, Suciu & Năsulea (2019) argue that in the digital, innovative, andknowledge-based era, structural capital would assist enterprises to build evolutionaryadaptations to meet current challenges Such new adjustments could enhance and strengthenthe process capital of companies, and therefore, they could achieve substantial improvement

in competitive abilities

To explain the last channel, these authors assert that increasingly interacting with stakeholders and facing differences in culture, each organization nowadays has to possess adeeper understanding of the fundamentals of the culture of excellence By relying much onthe intangible resource, namely IC, enterprises could construct or re-construct the solidfoundation, which would help them explore multi-dimensions of cultures, societies, andenvironments This improved backbone would bring sustainable development andcompetitiveness to modern firms

multi-In short, based on these channels, it is indisputable that IC and its components areexpected to provide competitive advantages for companies Thus, the activities of financialintermediation and non-interest income would be fueled by these precious resources in thetoday’s modern world