Intellectual Capital and Its Effects on The Performance of Firms, Sectors and Nations

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Introduction

In the context of the knowledge-based economy, firms enhance their competitive advantagebyshiftingfromtangibleassetsintointangibleassets(Stewart,1997;Sveiby, 1997). Castro et al (2019) consider that intellectual capital plays a major role in the knowledge- based economy and is the key driver of firm’s sustained competitive advantages.Intellectualcapitalisdefinedasuniqueskills,knowledge,andsolutionsthat can be converted into value in the market, leading to an increase in firm’s competitiveness, productivity, and market value (Pulic and Kolakovic,2003).

Theroleofintellectualcapitalinfirm’sperformanceisincreasing,soitisnecessary toexaminethedynamicsofthisroleandthecontributionsofintellectualcapitaltofirm’s performance. Inkinen (2015) demonstrates that firms can benefit from a variety of intellectual capital profiles This means that some businesses require high levels of overall intellectual capital to achieve impressive performance, while others can still achieve positive results with relatively low structural or relational capital In addition, the impact of intellectual capital on a firm performance primarily stems from its combinations,interactionsandmediatingeffects.Furthermore,thereissubstantialproof highlighting the important connection between intellectual capital and a firm's innovation performance (Song, 2022; Inkinen, 2015) Various studies have been conducted to examine the effects of intellectual capital on firm’s performance with a focusonfinancialfirms(Harisetal.,2019;FirerandWilliams,2003)andmanufacturing firms (Xu and Wang, 2019) Xu and Li (2019) find a difference in intellectual capital efficiency between high-tech and non-high-tech small and medium-size firms inChina.

Theimpactsofintellectualcapitalonfirm’sperformanceintheemergingmarketsinthe Asian region has been examined in previous studies (Indonesia, Soetanto and Liem,2019;Thailand,TranandVo,2018;Malaysia,Goh,2005).Inparticular,Soetantoand

Liem (2019) argue that intellectual capital affects the market-to-book value of the knowledge-based sectors, which have intensively used technology and/or human capital.InastudyonThailand’sbankingsector,TranandVo(2018)concludethatbank profitability is driven mainly by the efficiency of capital employed Goh (2005) asserts that banks have accumulated a lower level of structural capital efficiency than human capitalefficiency.

SincejoiningtheAssociationofSoutheastAsianNations(ASEAN),Vietnamhas emergedasacountrywithremarkablenationalperformanceanddevelopment.Inrecent years, leaders in the miracle of national performance among ASEAN members have been emerging markets, such as Vietnam (OECD, 2018) Figure 1.1 indicates that the pattern of real growth in the gross domestic product (GDP) in Vietnam is stable and higher than that of other emerging countries, such as Indonesia, Malaysia, the Philippines, and Thailand Since 2000, Vietnam's GDP per capita has grown by 6.4 percent annually—one of the fastest rates in the world (Trieu, 2019) In addition, Vietnam has closely integrated into the regional and world economy, with strong trade commitments, such as the European-Vietnam Free Trade Agreement, the ComprehensiveandProgressiveAgreementforTrans- PacificPartnership,theVietnam- Eurasian Economic Union Free Trade Agreement, and the ASEAN–Hong Kong,China Free Trade Agreement, to name afew.

ASEAN 5: Indonesia, Malaysia, the Philippines, Thailand, and Vietnam.

Figure1.1 Real GDP growth trends: Vietnam, ASEAN, and theWorld 1

In addition, as shown in Figure 1.2, Vietnam has increased its investment in infrastructure to bridge the gap with other ASEAN member countries Vietnam’s spending on infrastructure represents the second fastest among the ASEAN members, 11.5percent,whichisalmostdoubledtherateofGDPgrowthfortheperiod2012-2016 However, the business environment in Vietnam is still maturing The gaps in the institutional quality undermine investors’ confidence Figure 1.2 also indicates that satisfaction with the investment environment is still lower in Vietnam than in other emerging markets inAsia.

Figure 1.2 Infrastructure spending, GDP growth rate, and business environment factors 2 Moreover, based on the 2017-2018 global competitiveness index, Vietnam lagged behind that of other ASEAN members, such as Malaysia, Indonesia, and Thailand. Vietnam has a competitive advantage from its relatively low labor costs However, its low technology readiness (in the technology readiness ranking, as presented in Figure 1.3) poses a disadvantage for Vietnam in technological innovation and automation.

Country Global Competitiveness Index, institutions pillar ranking, 2017-2018

Economist Intelligence Unit technological readiness ranking, 2018-

Source: PwC (2018); Economist Intelligence Unit(2018).

Figure 1.3 Global competitiveness and technological readiness ranking

On the above observations, The Vietnamese firms are facing great opportunities and challenges For example, the ongoing Covid-19 pandemic worldwide puts firms in a new state, a new environment The Vietnamese firms have faced new challenges that have never occurred in the past Therefore, The Vietnamese firms need to be flexiblein their production plans, business strategies and images and branding The diversified knowledge-based economy plays an important role in all areas of life and society and gradually replaces the industrial economy, which only focuses on production and consumption In order to meet the important requirements of the knowledge-based economy, firms need to thoroughly utilize the value from intellectual capital – an importantintangibleasset.Thedevelopmentoftheknowledge-basedeconomyenhances theroleofintellectualcapitalinbusinessesandsocietyandpushesittoanewlevel.This practice requires firms to use and implement appropriate and flexible policies to utilize the value of resources,which are considered intangible, from firms including skills, knowledge, innovation, and relationship withcustomers.

Researchproblems

Edvinsson and Malone (1997) consider that intellectual capital includes two main categories: human capital and structural capital Pulic (1998) introduces a value-added intellectual coefficient (VAIC) model to measure intellectual capital efficiency This model separates intellectual capital into three components, including (i) human capital, (ii) structural capital and (iii) capital employed Other studies such as Nimtrakoon (2015); Vishnu and Gupta (2014); and Nazari and Herremans (2007) also propose a modified value-added intellectual coefficient (MVAIC) model The MVAIC modelhas been widely used in measuring intellectual capital efficiency at firms’ level (Bayraktaroglu et al., 2019; Xu and Wang, 2019; Chen et al.,2015).

In addition, the strategy of spreading knowledge of firms is not only for themselves, but also extends to the sector, region and country (Pedro et al., 2018). Medina et al (2007) argue that policymakers can identify solutions to enhance the intangible resources of the sector or region through the analysis of their intellectual capitalinordertoachieveasustainablegrowth.Marcin(2013)presentscountriesaround theworldareincreasinglyinterestedinmeasuringintellectualcapitalacrosssectors.As such,i t i s i m p o r t a n t a n d n e c e s s a r y t o d e v e l o p a n e w s e c t o r a l i n t e l l e c t u a l c a p i t a l i n accordance with the sectors’ development theories (Pedro et al., 2018) Doing so will promotethemanagementofintangibleresourcesinsectors.However,amethodologytomeasure and evaluate the efficiency of the sectoral intellectual capital has been largely ignored in previousstudies.

Moreover,atthenationallevel,nowidelyusedorhighlyrecognizedmethodshave been used to measure intellectual capital across nations A limited number of studies (Lin, 2018; Kapyla et al., 2012; Lin and Edvinsson, 2011; Schneider, 2007;Andriessen and Stam, 2005; and Bontis, 2004) with the focus on measuring national intellectual capitalhavebeenconducted.However,themeasurementsofnationalintellectualcapital adopted in those studies are very impractical to be widely implemented across nations due to the unavailability of required data and/or an excessive usage of judgements Lin andEdvinsson(2011)paperisapioneeringstudyinmeasuringintellectualcapitalacross countries This method is impractical to be implemented for other nations outside the intendedsamples.Assuch,differentapproachesinmeasuringintellectualcapitalacross sectors,particularlyacrossnations,areexpectedtoproperlymeasureintellectualcapital across sectors and nations for comparison purposes (Salonius and Lonnqvist,2012).

Inthepastthreedecades,thefinancialsectorhasplayedacrucialroleinVietnam's national performance and development In the context of deepening an integration of theVietnameseeconomyintotheworldeconomy,thefinancialsectorshouldeffectively utilize both tangible and intangible resources, especially intellectual capital The operations of financial firms are directly related to intellectual capital because they are knowledge-based companies (Buallay et al., 2020) In addition, Firer and Williams (2003) emphasize that financial firms have higher intellectual capital efficiency than other sectors Employees of financial firms exhibit a higher homogeneity of skills and knowledge (Kubo and Saka, 2002) Financial firms operating in a highly regulated environment tend to be more compliant in meeting regulatory expectations while non- financialfirmsarenot.Assuch,thesedifferencesresultinadifferentlevelofintellectual capital acrosssectors.

To the best of my knowledge, contributions of intellectual capital to firm’s performance with a focus on the differences between financial and non-financial firms have largely been ignored in previous studies, particularly in emerging markets such as

Vietnam As such, a study directly targeting an emerging market like Vietnam offers crucial implications for the intellectual capital community including firms’ executives, academics and policymakers This study examines the differences in intellectualcapital efficiencybetweenfinancialandnon-financialfirmsinVietnamandthecontributionof intellectual capital to firm’s performance This dissertation extends the existing literature by developing a new sectoral intellectual capital index (SICI) which can be used to measure a different level of intellectual capital across sectors This study uniquely and strikingly extends the current literature concerning intellectual capital measurementbydevelopinganewindexofnationalintellectualcapital(INIC)whichis hardly seen in previous studies In addition, the effects of intellectual capital on the performance of firms, sectors and nations areinvestigated.

Researchgap

Intellectual capital and its effects to firm’s performance: financial firmsversusnon-financial firms

Variousstudieshavealsobeenconductedtoexaminetheeffectsandcontributions of intellectual capital on the financial performance of non-financial firms Different models are used to calculate the level of intellectual capital, such as the VAIC model (Hoang et al., 2020a; Ghosh and Modal, 2009; Kamath, 2008) and the MVAIC model (Soetanto and Liem, 2019; Sardo and Serrasqueiro, 2017) Previous studies have used different econometric techniques, such as OLS techniques (Chan, 2009; Ghosh and Mondal, 2009; Firer and Williams, 2003) and GMM techniques (Soetanto and Liem, 2019;SardoandSerrasqueiro,2017).Thefindingsinpreviousstudiesconfirmapositive relationship between intellectual capital and firm performance (Soetanto and Liem, 2019; Li and Zhao, 2018; Sardo and Serrasqueiro, 2017; Ghosh and Mondal, 2009) However, other studies confirm a negative relationship between intellectual capital and firm performance (Britto et al., 2014; Morariu, 2014).

Williams(2003)alsorevealaninsignificantrelationshipbetweenintellectualcapitaland firm performance Maali et al (2021) explore the links between corporate governance andsustainabilityperformanceusingthecorporatesocialresponsibilityof300UKfirms from 2005 to

2017 They state that corporate governance has a positive impact on sustainabilityp e r f o r m a n c e I n a d d i t i o n , c o r p o r a t e s o c i a l r e s p o n s i b i l i t y p l a y s a f u l l y mediate role in the relationship between corporate governance and sustainability performance in UK firms Soetanto and Liem (2019) state that capital employed efficiencyandstructuralcapitalefficiencycontributetofirmwealth.Inthispaper,when the sample is divided into industries based on whether they are high-level knowledge- based (those with the intensive use of technology and human capital) and low-level- knowledgebased,theresultsindicatethatcapitalemployedhasapositiveeffectonfirm performance in those that are high-level-knowledgebased.

My literature review indicates that the contributions of intellectual capital to firm performance with a focus on the financial and non-financial sectors have largely overlooked in Vietnam The financial sector plays the role of providing financial services to people and businesses This segment includes banks, securities, financial, real estate and insurance firms The main players in Vietnam's financial sector being banks and financial institutions (Zhang et al., 2021) The financial firm plays an importantroleinnationalperformanceinVietnambyfacilitatingfinancialtransactions.

(Trieu,2019).ThebankingsysteminVietnamplaysaleadingroleinVietnam'snational performance, so the focus on banking becomes important in this study Buallay et al (2020) consider banks knowledge-intensive firms The most important financial firm assets are in the form of intellectual capital A financial firm’s activities are mainly related to intellectual capital, such as brand building and human resources Financial firmemployeesexhibitgreaterhomogeneitythanemployeesinothersectors(Kuboand Saka, 2002) Moreover, it has been argued that banking has accumulated higher levels of intellectual capital than other sectors (Firer and Williams, 2003) The current literature considers that staff identity is important because intellectual capital is one of thekeymeasuresforassessingthecompetenceofemployees.Inaddition,financialfirms operating in a heavily regulated environment, whereas non-financial firms are not,resultinga different levels of intellectual capital efficiency However, to the best of my knowledge,theimpactofintellectualcapitalontheperformanceoffirmwithafocuson the differences between financial and non-financial firms has been overlooked in intellectual capital literature, particularly in emerging markets such asVietnam.

Ali et al (2022) argue that intellectual capital consists of three main components:humancapital,structuralcapitalandrelationalcapital.Humancapitalcontributestofirm performance through the competence and creativity of employees, allowing them to identify,createnewknowledgeandsolveproblems(XuandLi,2019).Structuralcapital includes procedures and processes, human resource policies and guidelines for labor management practices such as recruitment, task management, patents, intellectual property (Sardo and Serrasqueiro, 2017) Human capital utilizes structural capital to increase firm performance (Soetanto and Liem, 2019) Relational capital encompasses the relationships with stakeholders that allow for certain behaviors and sustainable relationships (Tran and Vo, 2018) Relational capital facilitates accessing, processing,synthesizing,andexchangingknowledgewithinandacrosscorporateinfluencesonfirm performance(Maali et al., 2021).

Sectoral intellectual capital and its effects to performance acrosssectors

Liuetal.(2021)statethatintellectualcapitalplaystheimportantroleofintangible assets, it helps to exploit important knowledge that affects the innovation ability of firms, sectors and regions Marcin (2013) emphasizes that intellectual capitalisa fundamental resource for value creation at the sectoral, regional and nationallevels.

10 years (Baum, 2020) These achievements of Vietnam are based on broad- based economic reforms and national development strategies, focusing on five main sectors: education, health, roads, water and electricity infrastructure (Baum, 2020).

NguyenandGregar(2018)emphasizetheroleofknowledgemanagementininnovation of Vietnamese firms Besides, Nguyen et al (2021) also affirm that intellectual capital has a positive influence on firm’s performance in Vietnam Dutt (1990) asserts that imbalance between sectors can slow down economic development In particular, the coronavirus pandemic affects the economies of countries around the world in a"K-shaped recovery". The characteristic of this type of recovery is that some sectors will improve, while others will continue to decline (Nikkei, 2021) Hence, it is necessary to measureandevaluatetheefficiencyofintellectualcapitalacrosssectorsinVietnamand other emergingmarkets.

Previous studies have measured intellectual capital in the firm level (Phusavat et al., 2011; Hoang et al., 2020b) and national level (Lin and Edvinsson, 2011; Bontis,

2004) In addition, measuring intellectual capital at the regional level has also been considered in previous studies, such as regional level in France (Edvinsson and Bounfour, 2004); 29 provinces and cities of China (Xia and Niu, 2010); 8 Russian federal districts (Markhaichuk and Zhuckovskaya, 2019) Besides, various regional intellectual capital measurements have been introduced, such as intellectual capital dynamic value (Edvinsson and Bounfour, 2004), principal components analysis and cluster analysis (Xia and Niu, 2010); data envelopment analysis (Nitkiewicz et al., 2014); multiple-criteria decision-making (Liu et al., 2021).

However, the issue of measuring intellectual capital at the sector level has been largely ignored in previous studies Based on the modified value-added coefficient(MVAIC) model, this study proposes a sectoral intellectual capital index (SICI) by examining the intellectual capital efficiency of each firm in the sector In addition, the author uses total assets as a weight to construct the intellectual capital index of the sector Moreover, this dissertation examines the impact of intellectual capital on sector performance in Vietnam.

National intellectual capital and its effects tonationalperformance

The Asia-Pacific region is considered the fastest-growing region globally, contributing two-thirds of the global growth The region includes China and Japan,two of the world's three largest economies (Business Insider, 2020) In addition, the region is also home to some of the fastest- growing countries in the world, such as Vietnam

(WorldBank,2020a).TheS&P(2020)reportstressesthattheCovid-19"shadowed"the economicprospectsoftheAsiaPacificregion,leadingtoshocksindomesticsupplyand demand in Japan and South Korea, as well as weakening the demand from external markets such as the

US and Europe Based on the report, economies in the region are suffering the double effect of weakening demand and a supply reduction Countries in the Asia Pacific region are gradually changing new production methods and new customer approaches The role of intangible assets, such as automated manufacturing technologiesandonlinesalesservices,hasgraduallyassertedtheimportanceofcreating and maintaining a competitive advantage In particular, Stahle et al (2015) state that conductingmoredetailedanalyzesoftheroleofnationalintellectualcapitalindifferent economies would also add value to intellectual capitalliterature.

Classifying intellectual capital into three distinct levels — firm, sector, and nation

— ensures a comprehensive and multidimensional approach to research (Svarc et al., 2021) Rather than solely focusing on intellectual capital at the enterprise level, this dissertation delves deeper into measuring intellectual capital across all three levels to gain a nuanced understanding of its significance and impact on performance This classification and measurement framework offers flexibility and applicability across various contexts, allowing for tailored research and theoretical methods at each level, ranging from the specific context of individual firm to the broader scope of sector and nation.

Byexaminingintellectualcapitalmanagementstrategiesandmeasuresatthefirm, sector, and nation levels, this dissertation aims to provide specific and practical recommendations for businesses and policymakers This approach enables the identification of trends and challenges in intellectual capital management and development at each level, facilitating a deeper understanding of potential issues and opportunities for businesses and the economy as a whole Ultimately, this dissertation contributes to informed decision-making and policy formulation by shedding light on the dynamics of intellectual capital across different levels ofanalysis.

Understanding the impact of national intellectual capital on national performance is essential for businesses to navigate the complexities of the global business environment effectively (Lin, 2018) Research into national intellectual capital yields valuable insights that can inform strategic management decisions and guide business actions in an increasingly competitive landscape The findings of this dissertation can directly inform business management and development practices, providing actionable intelligence for administrators and governments to formulate policies aimed at optimizing the utilization of intangible assets, particularly intellectual capital.

As the knowledge economy continues to evolve, research on national intellectual capital occupies a crucial position within the realm of modern business administration and economics (Svarc et al., 2021) This dissertation not only informs current business practices but also shapes future trends and forecasts in firm strategy development and corporate governance By shedding light on the dynamics of intellectual capital, this dissertation field contributes to a deeper understanding of the factors driving national performance and innovation, thereby facilitating informed decision-making at both organizational and governmentallevels.

Researchobjectives

Themainobjective

This study has the overarching objective of measuring intellectual capital at the firm,sectorandnationlevels.Inaddition,thisdissertationalsoexaminestheimpactsofintellectu al capital on the performance of firms and sectors; and on national performance, which is effectively the economic performance of thecountries.

Specificobjectives

The objectives of this study are summarized as follows:

1) Tomeasureintellectualcapitalforfirms,sectorsandnations.Specifically, I use the modified value-added intellectual coefficient (MVAIC) model to measure intellectual capital of financial and non-financial firms in Vietnam I alsoexaminethedifferenceinintellectualcapitalofthesetwogroupsoffirms: financial versus non-financial firms Furthermore, I develop a new sectoral intellectualcapitalindex(SICI)tomeasuretheintellectualcapitalof12sectors in Vietnam In addition, I extend the existing literature by developing a new index of national intellectual capital (INIC) to measure intellectual capitalatthe nation’s level I then use this newly developed INIC index to measure a degree of intellectual capital for 104 countries globally.

2) To examine the effects of intellectual capital on the performance offirms, and sectors, and nations.This dissertation employs a measured level of intellectual capital at firms, sectors, and nations’ levels to investigate the effectsofintellectualcapitalontheperformanceoffirms,sectorsandnations.

Variouseconometricmethodsareutilizedtoensurethevalidityandrobustness of the findings when examining these effects Drawing on a comprehensive review of previous research, performance at the firm and sector levels is assessed using return on total assets and return on equity metrics In addition, national performance is measured using GDP per capita By employing these metrics and methodologies, this dissertation aims to provide at h o r o u g h analysis of the relationship between intellectual capital and performance across multiple levels of analysis.

Researchquestions

In achieving the research objectives, this dissertation attempts to answer the following research questions:

1) Whatarethedifferencesinintellectualcapitallevelbetweenfinancialandnon-financial firms in Vietnam? And what are potential advancements in measuring intellectual capital at the sectors and nations’levels?

2) What are the effects of intellectual capital on the performance of firms and sectors in Vietnam; and on performance ofnations?

Research subjectandscope

Measuring intellectual capital and the effects of intellectual capital on the performance of firms, sectors and nations are the subjects of the dissertation.

For a research scope for firms and sectors, the research scope covers 150 listed firmsontheVietnam’sstockmarketintheperiod2011-2018.Forthenations,thescope of the study covers 104 countries in the 2000-2018period.

Contributions ofthestudy

This study contributes to the existing literature on intellectual capital in the following respects.

- First, this dissertation investigates the differences in intellectual capital efficiency between the financial and non-financial sectors in Vietnam The effects of intellectual capital on firm’s performance in Vietnam are then examined Vietnam is an emerging market in the Southeast Asia, one of the most dynamic economies in the region and the world Managerial implications are important for the intellectual capital community, including academics, policymakers, and practitioners This dissertation provides the bridge to fill the currentgap.

Conclusions and implications Analyze and interpret data

Collect data Review of the theoretical foundation and previous studies

Research problems index (SICI) The SICI can now be used to investigate various aspects of the sectors with intellectual capital efficiency in Vietnam.

- Third, a new index of the national intellectual capital (INIC), one of the first of its kind, is developed to measure the different levels of intellectual capital across nations globally This new index includes the following fundamental attributes: (i) simplicity - a new index should be simple to calculate; (ii) quantification – a new index should be easily quantifiable without using judgments; (iii) market relevance – a new index should be able to reflect the prevailingmarketandeconomyconditions;and(iv)internationalcomparison

– a new index should be practically implemented for comparison purposes across countries regardless of the level of national performance and development.

Research frameworkandsteps

Based on the theoretical foundations and empirical research conducted in relation to the field of study, the analytical framework is proposed Research data will be collected and analysis will be performed The research process is describedspecifically asfollows:

 First,researchneedstoconductarigoroustheoreticaloverviewtofind(i)the theory of intellectual capital and its measurements; factors affecttheperformance of firms, sectors and nations (ii) variables commonly used in research models in the world, and (iii) research gapsacademic.

 After identifying the above factors, the second step of the study is to determine the data set to be used to ensure the feasibility of the project. Research to collect annual data on intellectual capital at firm, sectorandnation These figures are publicly announced in the annual reports of the firms In addition, the data on the new national intellectual capital index is extracted from the source of the World Bank DevelopmentIndicators.

 Third,thisstudyusespaneldatatoconductthestudy.Withthedatacollected and through the theoretical review, this study intends to use econometric methods suitable for the data set in order to solve potential problems (unit root, autocorrelation…), to obtain the best estimateresults.

 Fourth,afterachievingtheexperimentalresults,theresearchneedstoexplain, discuss theresults.

 Last but not least, the study concludes on intellectual capital measurements and the effects on performance of firms, sectors and nation Along with that, the study proposes solutions to promote efficiency in the use of intellectual capital, contributing to increase the efficiency of firm, sectors andcountries.

The core of this research is intellectual capital As shown in Figure 1.4, I consider intellectualcapitalfromtwoperspectives:measuringintellectualcapitalandexamining the effect of intellectual capital on performance In addition, this dissertation also considers at all 3 levels: firm, sector andnation.

 For the measure of intellectual capital: I use the structural model and theMVAICmethodtomeasureintellectualcapitalatthefirmlevel,andcompare the difference in intellectual capital between financial and non-financial firms At the sectoral and national level, I propose new intellectual capital measurement, namely sectoral intellectual capital index (SICI) and index of national intellectual capital(INIC).

 For examining the effects of intellectual capital on performance, this dissertation uses two common measures, return on assets (ROA) and return onequity(ROE),tomeasureperformanceatthefirmandsectorlevels.Asfor thecountrylevel,IuseGDPpercapitaasameasureofnationalperformance.

16 Modified value-added intellectual coefficient (MVAIC) model

- Return on equity(ROE) The effects of intellectual capital on performance

National level Sector level Firm level Intellectual capital

Economic growth Index of national intellectual capital (INIC)

- Return on equity(ROE) Sectoral intellectual capital index (SICI)

The outline ofthedissertation

This dissertation is structured into six chapters to present a comprehensive summary of relevant literature and empirical evidence in response to the above- mentioned research questions Each of the chapters is as follows.

Chapter 1 introduces the background, main issues and identify specific research gaps Specific research questions are also raised in this chapter.

In the second chapter, intellectual capital definitions, measurements and the research framework are discussed The main objective of this chapter is to identify the gap in the existing literature which will be addressed in this dissertation.

Related research methods are presented and discussed in this chapter Various econometric methods are used to address the research questions.

Chapter 4 presents the differences in intellectual capital between the financial sectorandnon-financialsectorsinVietnam.Thenewlyconstructedsectoralintellectual capital index (SICI) and the new index of national intellectual capital (INIC) are also developed in thischapter.

Empirical results relating to the effects of intellectual capital on the performance of firms, sectors and nations are presented and discussed in this chapter.

Chapter 6 presents a summary of key findings and conclusions of this study This chapter presents the main findings and the contributions of this study The potential areas for further research are also discussed.

Summary

In Chapter 1, the author primarily outlines the overarching research objectives of the study, encompassing the measurement of intellectual capital across enterprise, industry, and national strata Furthermore, this dissertation delves into the analysis of how intellectual capital influences the performance of individual firms and sectors, as well as its impact on overall national performance Chapter 1 also identifiesande x p o u n d s u p o n t h e r e s e a r c h g a p , w h i c h s e r v e s a s t h e i m p e t u s d r i v i n g t h e a u t h o r ' s e n g a g e m e n t withthisdissertation.Moreover,thischapterelucidatestheresearch'sfocal subject and its scope, research inquiries, contributions to the field, and delineates the proceduralstepsofthestudy.Subsequently,thesucceedingChapter2embarksuponan extensive literaturereview.

In this chapter, an exposition is undertaken to provide a comprehensive survey of intellectualcapitalquantificationacrossthedimensionsofindividualfirms,sectors,and national contexts Moreover, the fundamental theories underpinning the relationship intellectual capital and the performance of firm, sector and nation are comprehensively expounded upon and examined.

Definitionsandclassifications

Saint-Onge’smodel

Westberg and Sullivan (1998) point out that Saint-Onge's model explores the tangible and intangible role of knowledge in different types of intellectual capital and how these factors are valued Saint-Onge's contributions, particularly through his work in the late 1990s and early 2000s, have provided a comprehensive approach to identifying and leveraging intellectual capital to enhance organizational performance. Thismodelunderscorestheimportanceofknowledgeandrelationshipsindrivingvalue creationwithinorganizations(Pulic,1998).Saint-Onge’smodelcategorizesintellectual capital into three primary components, each highlighting different dimensions of intangible assets Human capital refers to the collective skills, expertise, and competencies of employees This component emphasizes the value that individuals bring through their knowledge, innovation, and ability to solve problems Structural capitalencompassesthesupportiveinfrastructure,processes,databases,andintellectual property that facilitate an organization’s operations It includes organizational culture, routines, and procedures that enhance efficiency and productivity Relational capital involves the relationships an organization maintains with external stakeholders, including customers, suppliers, partners, and communities (Bontis, 1998) This component focuses on the value derived from strong, trust-based relationships and the organization’sreputationandbrand.Theintegrationofthesecomponentsisakeyaspect of Saint- Onge’s model, advocating for a synergistic effect that enhances overall organizational performance By recognizing the interplay between human, structural, and relational capital, organizations can better understand how to leverage these assets for sustained competitive advantage This integrated approach ensures that investments in one area (e.g., training employees) are supported by improvements in other areas (e.g., enhancing IT systems and strengthening customer relationships) Saint-Onge’s modelisparticularlyinfluentialinthefieldofknowledgemanagement.Byemphasizing the importance of human and structural capital, the model provides a framework for capturing, sharing, and utilizing organizational knowledge effectively This approach helpsorganizationstofosteracultureofcontinuouslearningandinnovation.Instrategic management, the model aids in identifying key intellectual capital assets that can be

Customer capital leveraged to achieve strategic goals By focusing on the holistic view of intellectual capital,managerscandevelopstrategiesthatalignwiththeorganization’sstrengthsand address its weaknesses This alignment ensures that resources are allocated efficiently to support long- term growth and sustainability (Gates and Langevin, 2010).Traditional performance measurement systems often overlook the value of intangible assets Saint- Onge’s model addresses this gap by providing a structured approach to evaluate intellectual capital This includes assessing the impact of human skills, organizational processes, and external relationships on overall performance Such comprehensive measurementallowsforbetterdecision-makingandenhancestransparencyinreporting organizationalvalue.

While Saint-Onge’s model offers a robust framework for understanding intellectual capital, it has faced some criticisms Quantifying intangible assets like humanskillsandrelationalcapitalcanbesubjectiveandcomplex,makingitdifficultto implement the model effectively Integrating Saint-Onge’s model with traditional financial metrics can be challenging, potentially leading to inconsistencies inreporting. Additionally, the rapidly changing business environment means that the componentsof intellectual capital can evolve quickly, requiring continuous updates and adaptations to the model (Pulic,1998).

Sveiby’smodel

Sveiby (1997) considers that employees are important actors and their actionswill createtheassetsandstructureofthebusiness,whethertangibleorintangible.Introduced in the late 1990s, Sveiby’s model emphasizes the importance of knowledge and competence in driving organizational performance and innovation This model is instrumental in highlighting the critical role of intangible assets, often overlooked in traditional accounting and management practices As presented in Sveiby’s model categorizes intellectual capital into three main components: individual competence, internal structure, and external structure Individual competence refers to the knowledge,skills,andexperiencepossessedbyemployees.Itunderscoresthevaluethat individuals bring to the organization through their expertise and ability to solve problems and innovate. Internal structure encompasses the internal capabilities of the organization, including processes, databases, organizational culture, and intellectual property This component represents the systems and infrastructure that support and enhancetheproductivityofemployees.Externalstructureinvolvestherelationshipsand networks an organization maintains with external stakeholders, such as customers, suppliers, partners, and the broader community This aspect of the model highlightsthe importance of reputation, brand, and customer loyalty in contributing to organizational value ( Li and Zhao,2018).

OneofthekeystrengthsofSveiby’smodelisitsemphasisonthedynamicinterplay between these components By recognizing that intellectual capital is not static but constantly evolving, Sveiby’s model encourages organizations to continually invest in and develop their intangible assets For example, improving individual competence through training and development can enhance the internal structure by fostering innovation and efficiency Similarly, strong external relationships can lead to increased customer loyalty and better market positioning, which, in turn, supports overall organizational growth (Sardo and Serrasqueiro,2017).

In practical applications, Sveiby’s model is particularly valuable for strategic management and knowledge management In strategic management, the model helps organizations identify and leverage their intellectual capital to achieve competitive advantages.Byfocusingontheholisticviewofintangibleassets,managerscandevelop strategies that align with the organization’s strengths and address its weaknesses This comprehensiveapproachensuresthatresourcesareallocatedeffectivelytosupportlong- termgrowthandsustainability.Intherealmofknowledgemanagement,Sveiby’smodel provides a framework for capturing, sharing, and utilizing knowledge within the organization By emphasizing the importance of individual competence and internal structure, the model facilitates the creation of a culture of continuous learning and improvement (Soetanto and Liem, 2019).

However, despite its many strengths, Sveiby’s model also faces some criticisms and limitations One of the primary challenges is the difficulty in measuring and quantifying intangible assets Unlike tangible assets, intellectual capital is often subjectiveandcomplextoevaluate,whichcanleadtoinconsistenciesandchallengesin implementation Additionally, integrating Sveiby’s model with traditional financial metrics can be challenging, as conventional accounting systems are not designed to capturethevalueofintangibleassetseffectively(LiandZhao,2018;GhoshandMondal, 2009).

(the organization,man agement, legal structure, manual systems, R&D, software)

Skandia intellectual capitalvaluescheme

The Skandia Navigator, introduced by Edvinsson and Malone (1997), is a groundbreakingframeworkformeasuringandmanagingintellectualcapital.Thismodel markedasignificantadvancementinacknowledgingtheimportanceofintangibleassets within organizations Utilizing a five-dimensional approach, the Skandia Navigator provides a comprehensive perspective on organizational performance (Brennan, 2001).Thefinancialdimensioncoverstraditionalfinancialmetricstoevaluatethecompany's

Human capital Structural capital economic outcomes The customer dimension assesses customer satisfaction, loyalty, and market share The process dimension looks at internal processes, efficiency, and effectiveness The renewal and development dimension reflects innovation, research and development activities, and organizational learning Lastly, the human dimension focusesonmetricsrelatedtoemployeeskills,competencies,andsatisfaction(Edvinsson and Malone,1997).

Source: Roos et al (1997); Edvinsson and Malone,(1997)

Figure 2.3 Skandia intellectual capital value scheme

Sullivan’smodel

Sullivan (2000) determines that intellectual capital includes 2 main components: human capital and intellectual assets Human capital includes the organization’s employee intellect, which provide know-how and institutional memory to the firm In addition, intellectual assets are defined as firm's tangible or physical description of specific knowledge It includes the source of innovations and competitive edge, which are generated from the various processes undertaken by the organization Moreover, intellectual assets include intellectual property, namely, trademarks, patents, trade secrets, copyrights.

Intellectual property Patents, trademarks, copyrights, etc.

Figure 2.4 Sullivan’s approach to visualize intellectual capital

Relevanttheories

Resource-basedtheory

Theresource-basedviewstatesthatinordertoachieveandmaintainacompetitive advantage,firm’sresourcesplayacrucialrole.Afirmwillbesuccessfulifitequipsthe resources that are best suited to the business and its strategy Originating from Penrose (1959), resource-based theory is introduced by subsequent studies (Wernerfelt, 1984; DierickxandCool,1989;PrahaladandHamel,1990;Barney,1991).Thistheoryreveals that firms in the market operate inconsistently in terms of resources It explains why there are differences in the performance of firms operating in the same sector (Hoopes et al., 2003) Wernerfelt (1984) states that the difference in firm performance occurs when firms own and exploit competitive advantage differently A company's competitive advantage is due to a collection of firm’s internal resources, which are unique, scarce, hard-to-replace and irreplaceable values (Guthrie et al., 2004; Barney, 1991) Internal resources include company competence, culture, management philosophy (Carmeli and Tishler, 2004) Firm's internal resources such as physical resources or human resources can be used in many different ways, depending on the ideasandbusinessorientationofeachfirm.Hence,thereisacloserelationshipbetween the firm's resources and the knowledge retained by the employees in the organization In addition, the combination of internal resources and external resources can also contribute to creating firm’s competitive advantages (Barney, 1991) Resource-based theory stresses that company need to be able to connect internal resources with opportunitiesfromoutsidemarketsto e n h a nc e firmwealth(Russoan d Fouts,19 97).

HelfatandPeteraf(2003)emphasizethattheprincipleofresourcetheoryistheexistence of heterogeneous capacities and resources in firms It therefore accounts for heterogeneouscompetitiononthepremisethatclosecompetitorsdiffersignificantlyand permanently in terms of their resources and capabilities The type, extent, capacity and nature of resources are important determinants of firm's profitability (Amit and Schoemaker, 1993; Barney, 1991; Nelson and Winter, 1982) Firm’s resources are classified into intangible and tangible assets (Grant, 1996;

Hall, 1992) In a complex businessenvironment,resourcesmanagementhasbecomethekeyfactortomaintaining a competitive advantage for firms (Sharkie, 2003; Grover and Davenport, 2001; Teece et al.,1997) Szulanski (2003) argues that firms can increase wealth by accumulating resources with lucrative potential and efficiently exploiting thoseresources.

Theknowledge-basedtheory

Previousstudies(BalogunandJenkins,2003; Hoskissonetal.,1999;Grant,1996) show that knowledge-based theory is a recent extension of resource-based theory De Carolis (2002) argues that knowledge-based theory considers knowledge the most important strategic resource of an organization Knowledge-based theory considers firms possessing heterogeneous resources of knowledge (Hoskisson et al., 1999), including knowledge-based assets (Marr, 2004; Roos et al., 1997; Stewart, 1997). WiklundandShepherd(2003)andRouseandDaellenbach(2002)statethatknowledge- basedassetsareespeciallyimportantbecausetheseresourcesaredifficulttocopy.They are the foundation to create a sustainable competitive advantage for businesses Knowledge-based theory is increasingly concerned due to the changes in the global economy in the accumulation and ownership of knowledge assets over the past two decades There have been structural changes in patterns of production and national performance, from the exploitation of tangible resources to the knowledge economy(FulkandDeSanctis,1995).Especiallyinthecontextofglobalizationandaknowledge- based economy, resources that create a competitive advantage for companies have shifted from tangible to intangible assets (Stewart, 1997; Sveiby, 1997) In particular, intellectual capital is considered as an intangible asset, which contributes to creating a competitive advantage for businesses (Bollen et al., 2005; Bontis, 2001) Castro et al (2019) consider that intellectual capital plays a major role in a knowledge-based economy and is the main driver of a company's sustainable competitiveadvantage.

Performance-basedtheory

Performance measurement has been an integral part of management since its inception However, based on modern business theory, performance measurement is tracedbacktotheplanningandcontrolmethodsoftheAmericanrailroadindustryinthe 1860s and 1870s (Chenhall, 1997; Kaplan, 1983) During the first quarter of the 20th century,theDuPontCompanyintroducedareturn-on-investmentmethodandapyramid of financial ratios By 1925, many methods and techniques of measuring the performance continued to be developed such as discounted cash flow method, residual incomemethod,economicvalueadded,orcashflowtoinvestedcapital(Chenhall,1997; Kaplan,1983).

Chenhall(1997)definesperformanceasasetofinformationabouttheachievement of varying significance to different stakeholders Performance is a concept used to measure the quality of individual and collective efforts (Corvellec, 1997) In managementresearch,MarchandSutton(1997)arguethatperformanceisoftenseenas encapsulating the unitary purpose of the organization Specifically, organizations are required to 'implement' and communicate their achievements to key stakeholders As a result, organizational functions and processes are increasingly required to demonstrate theircontributiontooperationalperformance.KamenskyandMorales(2005)proposeamore detailed definition of differentiating performance and results In addition, Gutner andThompson(2010)stressthatassessingorganizationalperformancemeansanalyzing the outcome produced and the process leading to the outcome in terms of efficiency (Gutner and Thompson, 2010) The need to establish the link between planning, decisions, actions, and results has generated considerable interest in measuring organizational performance (Micheli and Mari, 2014) Scholars from management accounting and other areas of management study have examined a wide range ofissues related to the design, implementation, use, and review of performance measurement systems (Goold and Quinn, 1990; Neely, 1999) In management practice,organizations have invested considerable resources to measure and demonstrate their performance (Micheli and Manzoni,2010).

On the basis of previous performance measurement models, Delaney and Huselid(1996) measures firm performance based on employees' perception Organizational performance is based on criteria such as product quality, new product development, ability to attract workers, customer satisfaction and the relationship between management and employees Perception-based measurement has a positive effect on organizational performance (Chenhall, 1997) If the concern is long-term profitability, then performance is often measured by various types of profit ratios, such as return on sales (although different ratios may be calculated depending on whether profitability is measured profit before or after interest and taxes are paid); value-added ratio (sales revenue minus cost of purchased materials); return on total assets or return on equity (Neely, 2002) A general rule of thumb is that each part of the ratio should be relevant to the audience being addressed, and the overall ratio should reflect the interests of the particularaudienceoftheinformationitprovides(Neelyetal.,2002).Thesevaluesvary, depending on each firm and sector (Neely,2002).

Performance is one of the important dependent variables for researchers and managers Market competition for customers, inputs, and capital makes performance essential to an organization's survival and success Indeed, firm activities such as marketing, human resource management, strategy formulation are ultimately evaluated through the results of business operations It shows that measuring performance is a necessity to evaluate the activities of firm, sector and nation.

The resource-based theory emphasizes that an organization has enough resources toachieveitsgoalsandimproveitsperformanceoverthelongterm(Wernerfelt,1984) Inheriting the resource-based theory, knowledge-based theory (Grant, 1996) is appropriate to describe the study of intellectual capital, especially on the link between intellectualcapitalandorganizationalperformance.Meanwhile,theperformance-based theory is used to define organizational performance, specifically in this dissertation,the performance of firms,sectors and nations The combination of these three fundamental theories creates a solid research framework to conduct the dissertation.Managing intangible resources can help an organization achieve goals, improve performance and increase marketvalue.

Measuring intellectual capital:traditionalmethods

Balancedscorecard

The balanced scorecard method is introduced by Kaplan and Norton (1992) This approach creates a new framework for measuring a firm's performance by focusing on intangible assets, rather than only financial metrics This method determines the firm's current position and the goals for success in the future, and the actions required to achieve the goals Besides traditional financial measurements, the balanced scorecard approach also includes organizational perspectives of operations such as internal business, innovation and learning, customers (Bose and Thomas, 2007) Financial measurementsprovideaclearviewofthecurrentfinancialsituationbymeasuringreturn on investment(ROI) or return on equity (ROE) (Kaplan and Norton, 1996) Internal business perspective defines the processes that are critical to a firm's success These processes allow a firm to maintain relationships with existing customers and acquire new customers in market segments, thereby, meeting shareholder expectations (Kaplan and Norton, 1996) Besides, the perspective of innovation and learning has three indicators: human, system and organ These indicators identify the structures and processes that are critical to building long-term success and growth, and developing firm's knowledge (Kaplan andNorton, 1996) Measures of the innovation and learning perspectivescanbeemployeesatisfaction,sickdaysoffandstaffturnover(Malmietal., 2006).Meanwhile, the customer perspective focuses on defining the market and the customer segments which firms participate in (Bose and Thomas, 2007) The customer perspective includes customer satisfaction and retention, attracting new customers, profitability, market share, and success in building strong customer relationships (Kaplan and Norton,1992).

TechnologyBroker

Brooking(1996)proposesthemethodofmeasuringintellectualcapital,determined through the Technology Broker's intellectual capital audit To measure the intellectual capital of an organization, this method starts by answering the 20 questions that make up the intellectual capital indicators The less likely a company is to answer in 20 affirmativequestions,theloweritsefficiencyofintellectualcapitalwillbe.Thismethod describes intellectual capital as a combination of four components, namely, market assets, intellectual property, human-centric assets, and infrastructure assets Each component of this model is measured with a specific number of indicators todetermine the contribution of that asset class Brooking's method includes 178 sub-indicators designed to determine the hidden value in each component of intellectualcapital.

Market assets Intellectual property Human-centered Infrastructure assets assets assets

Patent audit(includ ing 9indicators)

Name audit(includ ing7indicat ors)

Work related knowledgeaudit(incl uding 12indicators)

Occupational assessmentaudit(incl uding 8indicators)

Corporate learning audit(including10i ndicators)

Human centered assetsmanagementau dit(including

Corporate culture audit(including4i ndicators)

Management philosophyaudit(incl uding 6indicators)

Figure 2.6 Brooking’s intellectual capital measurement model

Intangibleassetsmonitor

Intangible asset monitor model is developed by Sveiby (1997) to measure intellectual capital in an organization This model measures intangible assets using indicators that are relevant to the firm’s internal and external structures and people’s competence Internal structure is measured by ideas, models, patents, concepts, approachesandcomputeradministrativesystems.Theseindicatorsarebelongedtofirms and created by employees In addition, external structure is defined as the relationships with suppliers and customer, brand names, reputations or image, trademarks Human capitalisconsideredasindividualcompetencysuchasskill,ability,expertiseorcapacity of employees.

Profit/customer Growth in marketshare Satisfied customer index

Value added margin on sales

Client satisfaction index Repeats order

Median age of all employee

Figure2.7 Intangible assets monitor example

Skandianavigator

The Skandia Navigator, developed by Edvinssion and Malone (1997), is a pioneering framework designed to measure and manage intellectual capital Thismodel represents a significant advancement in recognizing the value of intangible assets in organizations The Skandia Navigator uses a five-dimensional framework to provideabalanced view of the organization’s performance (Brennan, 2001) The financial focus encompasses traditional financial metrics that assess the company’s economic performance.Customerfocusmeasurescustomersatisfaction,loyalty,andmarketshare. Process focus evaluates internal processes, efficiency, and effectiveness Renewal and development focus indicates innovation, research and development efforts, and organizational learning Human focus involves metrics related to employee skills, competencies, and satisfaction (Edvinssion and Malone,1997).

The Skandia Navigator is instrumental in strategic management by providing a comprehensive view of both tangible and intangible assets It helps organizations identify and leverage their intellectual capital to achieve competitive advantages(Ashton, 2005) By focusing on a broad range of indicators, companies can develop

Financial focus strategies that align with their intellectual capital strengths and weaknesses.Traditional financial metrics often fail to capture the true value of a company's intangible assets The Skandia Navigator addresses this gap by including non- financial indicators, offering a more nuanced picture of organizational performance (Soetanto and Liem, 2019) This holistic approach enables better decision-making and fosters a culture of continuous improvement Knowledge management is a critical aspect of leveraging intellectual capital The Skandia Navigator facilitates this by highlighting the importance of human and structural capital Organizations can use the insights gained fromthismodeltoimplementeffectiveknowledgemanagementpractices,ensuringthat valuable knowledge is captured, shared, and utilized efficiently (Lin,2018).

Value Added IntellectualCoefficient™(VAIC™)

One of the most popular intellectual capital measurements is developed by Pulic (1998), which is namely value-added intellectual coefficient (VAIC) VAIC is an analytical process that allows firm’s managers, shareholders, and other stakeholders to monitor and evaluate the effectiveness of the value-added and each component of the firm's resources The VAIC model is defined as follows:

VAIC = ICE + CEE 𝐼𝐶𝐸 = 𝑉𝐴 Human capital focus Process focus

 VA is described as firm’s value added, which is calculated as total of operating profit, depreciation, amortization and employeecosts.

 SC is structural capital, which is calculated as VA minusHC.

 CE is capital employed, which is measured as the book value of a firm’s net assets.

Although the value-added intellectual coefficient (VAIC) method has several advantages(SoetantoandLiem,2019).Chan(2009)andFirerandWilliams(2003)state that the data being utilized in VAIC is based on audited information which makes the measurement objective and verifiable Besides, Maditinos et al., (2011) point out that VAIC is simple, reliable and comparable Moreover, Nimtrakoon, (2015); Chen et al., (2005) state that VAIC provides a standardized and integrated measure, which allows the analysis and the comparison across organizations or firms in differentcountries.

However, the VAIC model has limitations It cannot be used exclusively for intangibleassets(Brennan,2001)anddoesnotincludeintellectualpropertyandresearch and development (R&D) expenditure, which are positively related to firm performance (Chang, 2007) In addition, the level of a firm’s risk is not considered in the model (Maditinos et al., 2011) The VAIC model cannot measure the level of intellectual capitalofcompanieswithanegativebookvalueornegativeoperatingprofit(Chuetal., 2011) In addition, it is argued that the model cannot account for the combined effects of different types of tangible and intangible assets (Dzenopoljac et al.,2017).

To overcome these limitations, Phusavat et al (2011) and Nazari and Herremans(2007) propose the MVAIC, which includes other components of intellectual capital,such as innovation capital and relational capital Crema and Verbano (2016) proposea model to measure intellectual capital, including human capital, internal structural capital, and relational capital Phusavat et al (2011) view innovation capital as R&D expenses Henry (2013) and Sullivan (2000) define relational capital as the sum of the available and potential resources that emerge from individual and organizational networks Relational capital also consists of a firm’s relationships with its customers, suppliers, marketing channels, and stakeholders in sales activities (Bozbura, 2004; Bontis, 2001) I note that, since its inception, the MVAIC model has been widely used in empirical analyses for the measurement of intellectual capital at firms.

Measuringintellectualcapital:extendedanalysisforsectorsandnations

Sectoral intellectualcapitalmeasurements

Nitkiewicz et al (2014) point out that the concept of intellectual capital is mainly applied to firms and organizations However, this concept is gradually being expanded andoneofthedirectionsofdevelopmentistodefineandclassifyknowledgecapitaland its components at the sector and regional level Pedro et al (2018) shows that strategically innovative organizations spread knowledge not only to their own but also to sector, region and country Thus, through sector and regional intellectual capital analysis, public policies can find solutions to improve sector intellectual capital to achieve sustainable development(Medina et al., 2007) Countries around the worldare increasinglyinterestedinsectorapproachestointellectualcapital(Marcin,2013).Atthe same time, issues of effective sector innovation strategy have become important Poyhonen and Smedlund (2004) examine region intellectual capital by differentiating three modes of intellectual capital creation, including: production network, innovation network and development network They state that innovation network functionedbest, whereas the production network had insufficient structured information flows In addition, Edvinsson and Bounfour (2004) examine intellectual capital dynamic value (IC-dVAl) approach to measure intellectual capital performance at regional level in France Research results show that Paris area and Toulouse region are the two regions with the highest intellectual capital, while

Corsica lags behind Xia and Niu (2010) proposeasystemof27indicatorstomeasureregionalintellectualcapitalof29provinces and cities of China. They estimate regional intellectual capital level by using principal components analysis (PCA) and cluster analysis The results show that intellectual capitalefficiencyofeasternChinaishigherthanwesternChina.Nitkiewiczetal.(2014) utilize data envelopment analysis (DEA) for evaluate regional intellectual capital in across Polish regions The results show significant differences between Polish regions in terms of intellectual capital efficiency Pedro et al (2018) emphasizes the need to develop a new sector approach to intellectual capital in relation to sector development theories.Thereby,contributingtopromotingthemanagementofintangibleresourcesin sectorsandregions.Liuetal.(2021)utilizeasetofmultiple‐criteriadecision‐makingto evaluatetheregionalintellectualcapitalof31provincesinChina.Theyrevealthatthere are differences in the level of regional intellectual capital in different regions inChina.

However, previous approaches suffer from certain shortcomings These measurements are challenging to apply because the data used to build the index are not widely available, and there is a lot of qualitative data By design of the approach, the value of each sub-indicator is determined based on the largest degree of all sub- indicators within the entire population of all estimates This approach appears to be unsupported As a result, these approaches are impractically implemented for other countries (Kapyla et al., 2012).

Table2.1 Summary - Sectoral intellectual capitalmeasurements

No Authors Research focus Technique Limitation

1 Liu et al (2021) 31 provinces in

Multiple‐criteria decision‐making (MCDM) and theTechnique forOrderPreference bySimilarity to an Ideal

The analysis of detailed components of sectoral intellectual capital appears to be complicated and arbitrary.

Data is not available and fails to attract replicability for authors in different countries.

Data not available and fails to attract replicability for authors in different countries.

29 provinces and cities of China

The analysis of detailed components of sectoral intellectual capital appears to be complicated and arbitrary.

Mea-hiya Community Cultural Council, Chiang Mai,Thailand

Qualitative approach: content analysis,thematic extraction and groundtheory

There is no basis to consider that the weighting scheme remains unchanged across sectors and periods.

Wood processing industry inEastern Finland

Interview andsystem’s theoretical interpretation oforganizations

There is no basis to consider that the weighting scheme remains unchanged across sectors and periods.

The analysis of detailed components of sectoral intellectual capital appears to be complicated and arbitrary.

Intellectual Capital dynamic Value (IC- dVAl)

There is no basis to consider that the weighting scheme remains unchanged across sectors and periods.

Cities Intellectual Capital Benchmarking System

Data is not available and fails to attract replicability for authors in different countries.

National intellectualcapitalmeasurements

In term of the national level, no widely utilized methodologies or recognized methodshavebeenusedtoevaluateintellectualcapitalacrossnations.Alimitednumber of studies on the national intellectual capital have been conducted However, the proposed approaches are very impractical in applications due to unavailability of required data and/or a high degree of judgmentrequired.

Even though Edvinsson and Malone (1997) model propose a clear and structured understanding of the elements of intellectual capital, a combination of these elements into a final measure of intellectual capital has never mentioned and discussed (Stahle, 2008) In addition, this model does not mention at all the impact of intellectual capital on national performance which is crucial attention for policymakers Based on Edvinsson and Malone's (1997) model, the concept of national intellectual capital has discussedandmeasuredinlimitedstudiesoverthelast25years,includingKapylaetal (2012); Lin and Edvinsson (2011); Schneider (2007); Andriessen and Stam (2005)a n d

Evaluating and quantifying national intellectual capital, despite its recognized importance, presents significant challenges The concept remains poorly defined and is in the early stages of development (Bontis, 2004) Describing national intellectual capital is also complex (Svarc et al., 2021) and ambiguous (Salonius and Lonnqvist,2012) Few studies have attempted to measure national intellectual capital Bontis(2004) introduced the National Intellectual Capital Index (NICI) framework, which includes four main components: (1) national human capital index, (2) national process capital index, (3) national market capital index, and (4) national renewal capital index.The NICI framework represents a significant step in understanding the relationship between national intellectual capital and national financial capital However, this framework has inherent limitations The assignment of weights is arbitrary, lacking a consistent basis for uniform weight distribution across countries and time periods.Additionally, the complex and subjective analysis of the various elements of national intellectual capital adds to the difficulty As a result, the NICI framework faces challenges in cross-national analysis, requiring substantial evaluative judgments.Moreover, the direct averaging of national intellectual capital components—human capital, process capital, market capital, and renewal capital—lacks strong empirical support (Stahle, 2008) Lin and Edvinsson (2011) made further contributions by developing a method to measure the relationship between national intellectual capital and national performance Their methodology includes quantitatively rated data, such as “computers in use per capita,” and qualitatively assessed data, rated on a scale of1–

10 Quantitative variables are normalized and scaled to a 1–10 range The linear structural relations (LISREL) technique ensures validity The national intellectual capital index created by Lin and Edvinsson (2011) remains relevant Their updated analysis, based on data from 48 countries from 2005–2010, represents one of the latest studies.Lin(2018)laterusedthismodeltocomparenationalintellectualcapitalinSouth Africa, Poland, and Romania However, Lin and Edvinsson’s (2011) approach has its limitations The creation of sub-indices lacks transparency; their model combines quantitative and qualitative assessments into an unweighted composite index, ignoring specific national objectives and strategies Additionally, the sub-indicator values are determinedsolelybythehighestvaluewithintheestimatepopulation,amethodlacking empirical validation Therefore, the model’s practical application is limited beyond the initial 40-country sample (Kapyla et al., 2012) Kapyla et al (2012) introduced a new structural framework for assessing national intellectual capital, incorporating a social capital dimension They used data from the Finnish government database from 2000– 2007 The authors emphasized that the indicator selection is illustrative and evolving rather than fixed Notably, Kapyla et al (2012) highlighted that visualizing the measurement raises questions about the dynamic interactions between different aspects ofnationalintellectualcapital.Theythusadvocateforamultidimensionalmeasurement approach for national intellectual capital assessment Various foundational concerns have arisen during the formulation and execution of the three methodologies, as discussed above, for evaluating national intellectual capital.First, the dearth of data or the nonpublic availability of essential data to external stakeholders operating beyond national boundaries has been noted (Kapyla et al., 2012).Second, a substantial reliance on evaluative judgments is indispensable when gauging a nation’s intellectual capital These approaches necessitate incorporating qualitative information, predicated upon subjective assessments, which eludes translation into quantitative parameters (Tran,

2024).T h u s , t h e a s s e s s m e n t o f a n a t i o n ’ s i n t e l l e c t u a l c a p i t a l r e s t s s i g n i f i c a n t l y o n perceptual underpinnings Furthermore, Kapyla et al (2012) consider national intellectual capital’s intricate and contextual nature, acknowledging that it transcends mere self-evidence A congruity between the concepts of national intellectual capital and the corresponding statistical metrics, coupled with financial data, necessitates validation (Stahle, 2008).

The significance of national intellectual capital in driving economic performance hasbeenextensivelydebatedinacademicliterature.NahapietandGhoshal(1998)posit that national intellectual capital serves as a catalyst for economic production, while Dahlmanetal.(2006)assertitastheprimaryengineofnationalperformanceandsocial development Lin and Edvinsson (2008) further emphasize its role as a critical source of national wealth and progress Seleim and Bontis (2013) go as far as to suggestthatnational intellectual capital can explain up to 70 percent of the variance in economic performance Various methodological approaches have been employed to investigate theimpactofnationalintellectualcapitalonnationalperformance,includingcorrelation analysis (Lin, 2018; Lin and Edvinsson, 2011), partial least squares (PLS) (Seleim and Bontis, 2013; Bontis, 2004), and analysis of variance (ANOVA) (Macerinskiene and Aleknaviciute, 2017). Bontis (2004) found a relationship between National Intellectual Capital Index (NICI) scores and the GDP per capita of Arab countries Stahle et al (2015) estimate that intangible capital contributes to 45 percent of the GDP in 48 listed countries Moreover, Macerinskiene and Aleknaviciute (2017) support the notion that national intellectual capital significantly influences national performance.

Based on a comprehensive review of the literature, it is evident that there is currently no universally accepted or widely acknowledged method for evaluating the levelofintellectualcapitalatthenationallevel.Whileseveralstudieshaveattemptedto estimate national intellectual capital, the methodologies employed in these endeavors are often impractical for broader application due to data limitations or a subjective nature Notable works in this area include studies by Kapyla et al (2012), Lin and Edvinsson (2011), Schneider (2007), Andriessen and Stam (2005), and Bontis (2004) Among these, the research conducted by Lin and Edvinsson (2011) holds particular significance,asitprovidedestimatesofnationalintellectualcapitalfor40countriesover the period spanning

1995 to 2008 Lin and Edvinsson's (2011) approach offersa methodological framework for assessing intellectual capital levels across different nations Previous methodologies for measuring national intellectual capital have encountered significant challenges One notable issue is the arbitrary nature of weighting schemes employed in these approaches It cannot be assumed that these weights remain consistent across different countries and over time, as highlighted by Stahle (2008) Additionally, the analysis of individual components of national intellectual capital has proven to be complex and arbitrary Assigning the maximum value to each sub-indicator without a solid scientific foundation raises questions about the validity of such assessments Consequently, these methodologies are notonlytechnically challenging to implement but also impractical for application in diverse country contexts, as underscored by Kapyla et al (2012) Table 2.2 summarizes the previousmethodsofmeasuringintellectualcapitalandthelimitationsofthesemethods.

Salonius and Lonnqvist (2012) have emphasized the difficulties associated with employing the above-mentioned indicators of national intellectual capital. Consequently, this study aims to present a new index for national intellectual capital (INIC) that possesses several essential advantages:

(i) simplicity - a new index is simple to becalculated;

(ii) quantification – a new index is easily quantifiable without usingjudgments;

(iii) market relevance – a new index is able to reflect the prevailing conditions for the economy under investigation; and

(iv) international comparison – a new index is practically implemented for comparison purposes across countries regardless of their level of national performance anddevelopment.

Importantly, the estimated level of national intellectual capital derived from the INIC approach in this study can be employed for international comparison across both countries and time periods This crucial development paves the way for future research employing the concept of national intellectual capital.

My dissertation contributes to the literature by addressing the limitations of previous methodologies for measuring national intellectual capital, which have predominantly focused on localized contexts, resulting in intellectual capital assessments being conducted on a per-country basis In the current globalized business environment, characterized by interconnected economies, there is a growing need for a standardized approach to assess intellectual capital that allows for meaningful cross- country comparisons Therefore, I propose a novel framework to construct an index of national intellectual capital (INIC) that can be universally applied.

Drawing from insights from previous methodologies proposed by scholars suchas Bontis (2004), Lin and Edvinsson (2011), and Kapyla et al (2012), as well as various studies summarized in Table 2.2, INIC incorporates three fundamental components identified in the existing literature: (i) human capital, (ii) structural capital, and (iii) relationalcapital.Thesecomponentsarewidelyrecognizedaskeydriversofintellectual capital and have been extensively studied in theliterature.

The procedural steps for calculating the INIC will be detailed in Section 3.3.3,providingatransparentandreplicablemethodforassessingnationalintellectualcapital By developing this comprehensive and standardized index, my dissertation aimstoprovide governments and policymakers with valuable insights to formulate strategies aimed at enhancing intellectual capital at the nationallevel.

Table2.2 Summary - National intellectual capital (NIC)measurements

No Authors Elements of measurement Type of variables

1 Lin (2018) Human capital; Market capital;

Qualitative data is based on the opinion of the researcher, which is subjective in nature.

The data that is accessible is not sufficient to allow for replication of the results by other researchers in other countries.

There is a lack of data and it is difficult for authors in different countries to replicate theresults.

It is not possible to assume that the way in which intellectual capital is weighted is the same in different countries and times. Examining the individual parts of a country's intellectual capital appears to be complicated and unpredictable.

Government efficiency; Business efficiency; Infrastructure

The scale is complicated and difficult to calculate.

Organization capital (management and marketing) R&D

Qualitative data relies on the researcher's opinion or perspective.

The scale is complicated and difficult to calculate.

Efficiency; Labor market efficiency; Financial market development; Technological readiness; Market size; Business sophistication; Innovation

The scale is complicated and difficult to calculate.

No Authors Elements of measurement Type of variables

Human capital (investments, assets, effects)

Structural capital (investments, assets,effects)

Relational capital (investments, assets,effects)

It is not possible toassumethat the way in which something is weighted is the sameineverynationandover time Examiningtheindividual components ofanation's intellectual capital seems to be intricate and subjective.

Qualitative data relies on the researcher's opinion or perspective.

Thereisnoavailabledatathat allows for replication by researchers in various countries.

Qualitative data is based on the opinion of the researcher, which is subjective in nature.

Measuring performance of firm, sectorandnation

Firmperformance

Drawing on cost accounting theories and practices, the Du Pont Group develops a performance measurement system through accounting measures and financial ratios, includingreturnonnetassets(RONA),returnoninvestment(ROI)andreturnonequity (ROE), and various performance metrics (Bititci, 2015) RONA measures the ratio of profit (net income) to asset turnover (average total assets) ROI is utilized to calculate the effectiveness of an investment by comparing the ratio between the return on investment and the cost of the investment ROE is the ratio of net income to shareholders'equity,whichindicateshowmuchprofitisgeneratedfromthemoneythat shareholders invest (Chenhall, 1997; Kaplan,1983).

Financial performanceforsector

Several different perspectives are used to measure performance, such as employment, productivity and profitability (Siepel and Dejardin, 2020).

Siepel and Dejardin (2020) argue that the number of people employed by a companyrepresentsacoremetricforunderstandingthesizeandperformanceofthefirm orsector.Employmentgrowthisthepreferredmetricforeconomistsandpolicymakers.

Total assetsSalesSalesEarnings

Incontrast,entrepreneursarelesslikelytoconsiderjobgrowthasameasureofsuccess, as an increase in the number of employees increases the costs involved and reduces the performance of the business This illustrates the point made above about the different measures and assessments made for a part of the company, while emphasizing the relationship between the metrics Coad et al (2014) emphasizes that employment growth will drive further revenue and profit growth, or increase firm or sector performance.

Productivityisanotherimportantaspectusedtomeasuretheefficiencyofthefirm's useoffactorsofproduction.SiepelandDejardin(2020)arguethatproductivityincludes labor productivity (value added per worker), or capital productivity (value added per unit of fixed capital) In addition, Gal (2013) emphasizes that total factor productivity (TFP) is also an important productivitymeasurement.

Profitability is another important metric to evaluate a company's performance (Kaplan, 1983) Coad et al (2017) argues that determining profitability to drive future growth is important for managers There are several ways of measuring profitability, ranging from direct measures as reported on financial statements to financial ratios commonly used in financial literature (e.g return on assets, return on equity)(Chandler et al., 2009; Coad et al., 2017) Return on assets (ROA) is mainly used by analysts to measure firm performance (Haris et al., 2019; Firer and Williams, 2003) However, previous studies (Soetanto and Liem, 2019; Tran and Vo, 2018; Goh, 2005) also utilize return on equity (ROE) as a measurement of sectorperformance.

Performance ofthenation

The performance of a nation is often measured against the achievement of economic goals (Lewis, 2003; Solow, 1956) These goals can be short-term, such as stabilizing the economy in the face of economic shocks, or long-term, such as sustainable growth and sustainable development Hence, I consider economic performance as a measure of national performance Economists often use a variety of economic indicators to examine the economic performance of a country These indicators allow economists to gauge a country's performance Monitoring these indicators is especially valuable for policymakers to take appropriate actions in the market context (Lewis, 2003) A commonly utilized macro indicator to measure economicperformanceisGDPpercapita(Lin,2018;MacerinskieneandAleknaviciute, 2017). Various studies (Borensztein et al., 1998; Parui, 2021) have utilized gross domestic product as a proxy for nationalperformance.

Gross domestic product (GDP) is the total value of final production of goods and services as a result of economic activities within the territory of a country in a given period.Thus,grossdomesticproductistheresultofalleconomicactivitiestakingplace on the territory of a country Firms use labor and investment capital to produce goods and services. Existing production technology determines how much output can be produced from a given amount of capital and labor High production output of firms means that they use investment capital effectively, have abundant and highly qualified labor resources, and apply modern science and technology in production and business Thus, the GDP of an economy either high or low reflects the production and performance in that nation (Lewis,2003).

GDP is measured through three common ways, including spending, production, and income.

 C is consumption, includes purchases of durable and non-durable goods and services.

 I is investment, calculated by fixed investment plus inventoryinvestment.

 G is government spending, measured as the sum of government purchases of goods and services.

 X is net exports (exports minusimports)

In terms of production, GDP is measured by value added The value added is calculated by the difference between the revenue the firm earns by selling its products and the amount it pays for the products of other firms it uses as products of other firms it uses as intermediate goods.

The income approach to measuring the gross domestic product (GDP) is based on theaccountingrealitythatallexpendituresinaneconomyshouldequalthetotalincome generated by the production of all economic goods and services It also assumes that there are four major factors of production in an economy, including total national income, sales taxes, depreciation and net foreign factorincome.

GDP = total national income + sales taxes + depreciation + net foreign factor income.

The effects of intellectual capital on performance of firms, sectorsandnations

Intellectual capital andfirm’sperformance

Previous studies find a positive relationship between intellectual capital and financial performance (Phusavat et al., 2011; Kamath, 2008) However, other studies also find a negative relationship between intellectual capital and firm performance (Chan, 2009; Ghosh and Mondal, 2009; Firer and Williams, 2003).

In the literature, various studies have examined the relationship between intellectualcapitalefficiencyandfirmperformanceacrossdifferentcontexts.Buallayet al (2020) utilized the MVAIC model to investigate this relationship among 59 listed banks in Gulf countries from 2012 to 2016 Their findings, based on ordinary least squares (OLS) analysis, revealed that intellectual capital efficiency positively impacts both financial performance, measured by return on equity, and market performance, measured by Tobin's Q Similarly, Hoang et al (2020a) explored the effect of intellectual capital on the performance of 13,900 Vietnamese firms over the period of 2012to2016usingaVAICmodel,andfoundapositivecorrelationbetweenintellectual capitalandfirmperformance Expandingonthis,Hoangetal.

(2020b)examinedthe mediating role of dynamic capabilities in the relationship between intellectual capital and firm performance in 350 Vietnamese firms through structural equation modeling. They concluded that components of intellectual capital enhance firm performance,with dynamic capabilities serving as a mediator Further, Hoang et al (2020c) observed that intellectualcapitalcomponentsdirectlyaffectfirmperformance,withhumanandsocial capital significantly mediating the relationship between organizational capital and firm performance. Bayraktaroglu et al (2019) conducted a study on Turkish manufacturing firms from 2003 to

2013, utilizing the MVAIC model to demonstrate that structural capital efficiency is significantly related to firms' productivity, and capital employed efficiencyissignificantlyrelatedtofirms'profitability.Theyalsofoundthatinnovation capital efficiency moderates the relationship between structural capital efficiency and productivity,aswellasbetweencapitalemployedefficiencyandprofitability.Similarly, Diyanty et al. (2019) found that human capital efficiency and capital employed efficiency positively impact firm performance, while structural and relational capital efficiency do not significantly affect firms’ financial performance In the context of Malaysian financial firms, Hapsah and Bujang (2019) analyzed data from 21 firms between 2011 and 2015, concluding that intellectual capital and its components significantly influence financial performance Soetanto and Liem (2019) examined 127 firms from 12 industries in Indonesia from 2010 to 2017 and found that intellectual capital positively affects firm performance, with capital employed efficiency and structural capital efficiency contributing to firms' wealth They also noted that in high- level knowledge industries, capital employed efficiency has a positive relationshipwith firm performance Besides, Xu and Wang (2019) studied textile firms in China and South Korea from 2012 to 2017, finding that intellectual capital and its components significantlyimpactearnings,profitability,andproductivity.Yaoetal.(2019)examined 111 Pakistani financial institutions from 2007 to 2018 and discovered a U-shaped relationship between intellectual capital and profitability, indicating that increased intellectual capital enhances profitability and productivity up to a certain point, beyond which further increases reduce performance They identified human capital efficiency as having the most significant impact on firm performance Tran and Vo (2018) used fixed- effect and random-effect models, along with the GMM estimator, to investigate thei m p a c t o f i n t e l l e c t u a l c a p i t a l o n t h e f i n a n c i a l p e r f o r m a n c e o f 1 6 l i s t e d b a n k s i n

Thailand from 1997 to 2016 Their study found no significant correlation between intellectual capital and bank performance in Thailand, but noted that capital employed efficiency had the largest positive impact on bank profitability, whereas human capital efficiency had a negative impact Nimtrakoon (2015) employed the MVAIC model to assess the impact of intellectual capital on the financial performance of 213 technology firmslistedonfiveASEANstockexchanges,findingasignificantimpactofintellectual capital and its components on financial performance, with no notable differenceamong the countries Vishnu and Gupta (2014) analyzed 25 Indian hospitals and medical research centers from 2002 to 2013, finding that human capital efficiency positively impactsfirmperformance,whilerelationalcapitalefficiencydoesnothaveastatistically significant effect on performance in the healthcaresector.

Numerous studies have investigated the positive impact of intellectual capital on firm performance across various industries and regions For instance, Buallay et al. (2020) examined 59 listed banks in Gulf countries, while Haris et al (2019) focusedon

26 Pakistani banks Similarly, Tran and Vo (2018) studied 16 listed banks in Thailand, Joshietal. (2010)analyzed11Australian-ownedbanks,Kamath(2008)investigated98 banksinIndia,Goh(2005)examined16banksinMalaysia,andMavridis(2004)studied 141 banks in Japan These studies employed diverse econometric techniques, including ordinary least squares (OLS) in Buallay et al (2020), fixed-effects and random-effects techniques in Tran and Vo (2018), and GMM techniques in Haris et al (2019).

Furthermore,variousmodelswereutilizedtoassessthelevelofintellectualcapital,such astheVAICmodelinseveralstudies(Mohapatraetal.,2019;TranandVo,2018;Joshi etal.,2010;Kamath,2008;Goh,2005;Mavridis,2004)andtheMVAICmodelinothers (Buallay et al., 2020; Haris et al., 2019) Notably, Haris et al (2019) identified aU-shaped relationship between intellectual capital and profitability in Pakistan, while Buallay et al (2020) and Tran and Vo (2018) emphasized the significant role of human capital efficiency and capital employed efficiency in creating bankwealth.

The significance of intellectual capital in influencing firm performance is increasingly recognized, necessitating a thorough examination of its dynamics and impact on organizational outcomes Several studies have explored the relationship between intellectual capital and firm performance, predominantly focusing onfinancial institutions(Harisetal.,2019;Yaoetal.,2019;TranandVo,2018;TingandLean,

2009; Firer and Williams, 2003) and manufacturing enterprises (Xu and Wang, 2019; 2018; Vishnu and Gupta, 2014) Xu and Li (2019) identified variations in intellectual capital efficiency between high-tech and non-high-tech small and medium enterprises in China, while Soetanto and Liem (2019) emphasized the impact of intellectualcapital efficiency on the market-to-book value of knowledge-intensive industries However, despitethesecontributions,theroleofintellectualcapitalinfinancialfirms,particularly within emerging markets like Vietnam, remains largely unexplored in the existing literature.

Our review of the literature underscores the scarcity of research investigating the relationship between intellectual capital and firm performance, particularly within the financialandnon-financialsectorsinVietnam.Notably,eventheexistingstudiesinthe

In summary, intellectual capital is an intangible resource that contributes to creating competitive advantages and improving firm performance (Ali et al., 2022; Maali et al., 2021; Xu and Li, 2019) In line with previous studies, the following hypotheses is proposed:

Hypothesis 1: Intellectual capital has a positive influence on firm performance.

Table2.3 Summary - Intellectual capital and firm performance

Region Research sample Research focus Positive

(2020) Vietnam Vietnamese commercial banks Profitability Yes

(2020a) Vietnam Vietnamese firms Profitability Yes

Vietnam ICT firms Firm performance Yes

5 Xu and Li (2019) China high-tech and non- high-tech SMEs

Indonesia Listed firms Profitability and market value

Thailand Listed banks Profitability Yes

(2018) India Listed companies Productivity, profitability, market value and sales growth

(2018) Nigeria Listed firms Cash flow from operation and EVA Yes

11 Xu et al (2017) China Listed environmental protection companies Profitability Yes

Earnings, profitability, efficiency, and market value

Garanina (2016) Russian Manufacturing companies Profitability Yes

14 Morariu (2014) Roman Listed companies Market value Negative

Australia Listed companies Profitability and productivity

16 Tan et al (2007) Singapore Listed companies Profitability and market performance

USA Multinational firms Net value added and return on total asset

SouthAfric a Listed companies Profitability andmarket value

Intellectual capital andsectorperformance

Various studies have been conducted to investigate the effects of intellectual capital on performance in different sectors, such as banking (Akkas and Asutay, 2022; Soewarno and Tjahjadi, 2020) manufacturing (Xu and Wang, 2019; Vishnu and Gupta, 2014), technology (Nkambule et al., 2022; Xu and Li, 2019) Soewarno and Tjahjadi (2020) affirm the critical role of intellectual capital in the performance of the banking sector With the homogenous characteristics of human resources, the effective utilization of human capital (the most critical component of intellectual capital) brings a sustainable competitive advantage to the bank Xu and Wang (2019) emphasize that intellectual capital contributes positively to the wealth of the manufacturing industry. The processes, patents, and production technology are the critical factors for the manufacturing industry to develop a competitive advantage These factors are the constituentelementsofstructuralcapital(thesecondcomponentofintellectualcapital).

Meanwhile, Nkambule et al (2022) argue that the technology industry is highly competitive The industry takes many years to build brands and products However,the life cycle of products will rapidly decline in a few years Sales depend on customer retentionratesandcustomerloyalty.Therefore,thetechnologyindustryshouldstriveto maintain and develop relational capital (the third component of intellectual capital) to build a sustainable competitive advantage Paoloni et al (2022) state that technology and knowledge help the food sector improve its performance and global competitiveness Thus, a deep understanding of structural capital and effective utilization of the relational capital ensure the food industry's survival, especially in the Covid-19 emergency In short, intellectual capital plays a vital role in creating wealth forfirms,sectorsandcountries.Eachsectorhasitscharacteristics,correspondingtothe focus on utilizing each component of intellectual capital to achieve sustainable competitive advantage, contributing to an increase in sector performance.

However, the issue of measuring intellectual capital at the sector level has been largely ignored in previous studies Based on the modified value-added coefficient (MVAIC) model, this study proposes a sectoral intellectual capital index (SICI) by examining the intellectual capital efficiency of each firm in the sector In addition, the authoru s e s t o t a l a s s e t s a s a w e i g h t t o c o n s t r u c t t h e i n t e l l e c t u a l c a p i t a l i n d e x o f t h e sector Moreover, this dissertation examines the impact of intellectual capital onsector performance in Vietnam In line with the above arguments, the second hypothesis is postulated as follows.

Hypothesis2(H2): Sectoral intellectual capital boosts sectorperformance. Table2.4 Summary - Intellectual capital and sectorperformance

Region Research sample Research focus

China high-tech and non- high-tech SMEs profitability and operating efficiency

Profitability and sustainable growth rate

Earnings, profitability, efficiency, and market value

Earnings, profitability, efficiency, and market value

ASEAN Technology firms Profitability and market value

USA Biotech firms Profitability and stock return

Malaysia Finance sector Profitability Yes

Listed companies Profitability andmarket value

Malaysia Service and non- service industries

Intellectual capital andnationalperformance

Various studies have been conducted to explore various aspects of measuring intellectual capital at the firm's level However, measuring intellectual capital at the national level or for the entire nation appears underexamined As a pioneering author, Bontis (2004) introduce the national intellectual capital index (NICI) method, which divides national intellectual capital into four groups: human capital, process capital, market capital and renewal capital In addition, Lin and Edvinsson (2011) propose a national intellectual capital (NIC) model Kapyla et al (2012) measure national intellectual capital, including human capital, structural capital, relational capital, and socialcapital.BasedonLinandEdvinsson's(2011)study,Stahleetal.(2015)introduce a new measurement called Edvinsson, Lin, Stahle and Stahle - ELSS, to calculate national intellectual capital.

The above models have been used to measure national intellectual capital for selectedcountrieswherequalitativeandquantitativedataareavailable.However,Inote that these models exhibit fundamental weaknesses Required data are limited, particularly for qualitative data Some models apply an arbitrary weighting scheme of intellectualcapitalcomponents.Theweightingschemedoesnotappeartobeusedacross countries andtimes.

Nonetheless,thesemodelshavebeenusedtomeasurenationalintellectualcapital for international comparison The national intellectual capital is then used to examine its effect on national performance Different techniques are utilized to examine the impact of national intellectual capital on national performance, such as correlation analysis (Lin, 2018; Lin and Edvinsson, 2011); partial least squares - PLS (Seleim and Bontis, 2013; Bontis, 2004); analysis of variance - ANOVA (Macerinskiene and Aleknaviciute, 2017) For example, Bontis (2004) reveals that the NICI scores are relatedtotheGDPpercapitaofArabcountries.Inaddition,Stahleetal.(2015)consider that intangible capital accounts for 45 per cent of the GDP in 48 quoted countries Moreover, Macerinskiene and Aleknaviciute (2017) support the view that national intellectual capital substantially impacts nationalperformance.

Dal Mas (2019) affirms the link between intellectual capital and sustainable competitiveness Suciu and Nasulea (2019) also state that intellectual capital is crucial for sustainable development competitiveness Lin (2018) asserts that national intellectual capital contributes to a nation’s wealth Carayannis and Grigoroudis (2016) believe that effective management and exploitation of knowledge resources contribute to improving national competitiveness However, no widely used methodologies or recognizedmethodshavebeenemployedtoevaluateintellectualcapitalacrosscountries to the best of my knowledge The role of intangible assets, such as automated manufacturing technologies and online sales services, has gradually asserted the importanceofcreatingandmaintainingacompetitiveadvantage.Inparticular,Stahleet al. (2015)statethatconductingmoredetailedanalyzesoftheroleofnationalintellectual capital in different economies would also add value to intellectual capital literature Hence, I propose the thirdhypothesis:

Hypothesis 3 (H3):National intellectual capital contributes to nationalperformance.

Table2.5 Summary - Intellectual capital and nationalperformance

No Authors Elements of measurement Research focus

Renewable/Development capital the association of NIC with the national digital transformation in

28 member states of the EU

Effect of NIC on GDP and growth

Utilize 20 indicators to propose the strategic, dialogic and societal measurement of NIC

Structural NIC model developers with 24 indicators to calculate NIC for 48 countries

Government efficiency; Business efficiency; Infrastructure

International comparisons of national competitiveness

Organisation capital (management and marketing) R&D

To explain the impact of IC investments on national performance

Goods market Efficiency; Labour market efficiency; Financial market development; Technological readiness; Market size; Business sophistication; Innovation

International comparisons of national competitiveness

Human capital (investments, assets,effects)

Structural capital (investments, assets,effects)

Relational capital (investments, assets,effects)

Use 38 indicators to measure NIC for 19 European countries

To explain the impact of IC investments on national performance

10 Bontis (2004) Human capital; Process capital;

Use 25 indicators to measure NIC for 10 Arab countries

Summary

Chapter 2 of this dissertation presents an exposition of the definitions and conceptual underpinnings pertaining to intellectual capital Furthermore, a succinct overview of the methodologies employed for intellectual capital quantification across firm,sector/region,andnationalstrataisprovided.Withinthischapter,acomprehensive literature review is conducted, delineating how intellectual capital exerts its influence on the performance outcomes of firms, sectors, and nations Given the pronounced significance of intellectual capital in augmenting overall performance, precise measurement assumes paramount importance, particularly at the sector and national echelons However, extant scholarly investigations have not hitherto devised methodologies to effectively gauge intellectual capital at these levels, nor have they evaluated the disparities in intellectual capital efficiency between financial andnon-financial enterprises, notably in the context ofVietnam.

In light of these discernible research lacunae, this dissertation endeavors to bridge thesegapsbyexaminingthenuancedvariancesinintellectualcapitalbetweenfinancial and non- financial enterprises and its consequential impact on firm performance.Furthermore,anovelindexispositedforthemeasurementofintellectualcapitalatbothsectoral and national dimensions, concurrently scrutinizing its ramifications on the performance dynamics of firms, sectors, andnations.

The primary objective of this chapter is to elucidate the research methodology employed,whereinsuitableeconometrictechniquesareappliedtoempiricallyassessthe interrelationships among the variables underinvestigation.

Data

White et al (2010) emphasize that annual reports are very important communication of businesses and their audiences Chakroun and Hussainey (2014) consider annual reports as a voluntary disclosure tool In addition, Davison (2014) reviews the annual report to evaluate certain assets, e.g graphs and images Besides, Lys et al (2015) explore corporate social responsibility disclosures in annual reports. Hence, annual report is an important resource for research in management, accounting and financial contexts The annual report is also a marketing tool, a communication channel on corporate strategy (Stanton and Stanton, 2002) In addition, Yuthas et al. (2002) pointed out that the annual report is the most important source of information to evaluatethecompany.Whiteetal.(2010)emphasizesthattheannualreportisthemain source of information on intellectual capital, corporate governance and corporatesocial responsibility. Although some information about intangible assets may be displayed on a company's website, they typically provide information about their intangible assets through an annual report In particular, most of the previous research in the field of intellectual capital (Dumay and Cai 2014; Liao et al., 2013; Phusavat et al., 2011) all relied on data from the annual report. Therefore, the data source extracted from the annual report ensures to provide sufficient information related to intellectual capital, corporate governance and corporate social responsibility.

Therefore, the data utilized in this study are hand-collected from published annual reports of firm and respective stock exchange at which the company is listed, in line with previous studies (Soetanto and Liem, 2019; Xu and Li, 2019; Tran and Vo, 2018). The author extracts data from the website https://cafef.vn The firms selected in this studyareleadersintheirrespectivebusinessesintermsofmarketcapitalizationandare listedintheVietnamstockmarket(HoChiMinhStockExchange(HOSE)andHanoi

Stock Exchange (HNX)) This dissertation utilizes data from the year 2011 to 2018. Firmsusedinthisstudyhavebeenoperatingcontinuouslyfortheentireresearchperiod, not being closed or merged with other companies Firms with missing data for 4yearsor more and negative data are not included in this sample After removing nonconforming samples (599 firms), this study uses a sample of 150 firms The sample to population ratio is 20,03%.

Figure 3.1 Number of listed firms

These firms are classified into two sectors: financial and non-financial This classificationisbasedonpreviousstudies(Alietal.,2022;Buallayetal.,2020;Soetanto andLiem,2019;XuandLi,2019).Alietal.(2022)arguethatthefinancialfirmsconsist of: financial institutions, banking, leasing, insurance, credit unions, asset management organizations, etc. Based on Global Industry Classification Standards, this dissertation divides listed firms in Vietnam into the following two groups.Thefinancial sector includes:banking,securities,insurance.Meanwhile,theremainingsectorsbelongtothe non- financialsector.

In addition, this study continues to use data collected from annual reports of firms toproposenewsectoralintellectualcapitalindexinthesameperiod.Firmswithmissing dataandnegativedataarenotincludedinthissample.Basedontheclassificationofthe StateSecurities Commission (2020), the 150 firms mentioned above are classifiedi n t o

12sectors,including:aviation,banking,education,energy,food,insurance,oilandgas, pharmaceutical, real estate, securities, services andtechnology.

Intermofnationallevel,dataarecollectedfromtheWorldDevelopmentIndicators (World Bank, 2020b) in the last twenty-year periods This data source includes macro information for more than 200 countries worldwide Countries missing data are excludedfromthesample.Finally,thisstudyusesdatafrommorethan100countriesto construct a national intellectual capitalindex.

Researchmethods

Assess the impact of intellectual capital onfirmperformance

Toexaminethefirsthypothesis(H1),modifiedvalue-addedintellectualcoefficient (MVAIC) method has been utilized to measure intellectual capital efficiency by using panel data from 150 listed firms in Vietnam The generalized method of moments (GMM) is used to ensure the robustness of thefindings.

Previous studies have used different techniques to examine the impact of intellectual capital on firm performance, such as OLS, fixed effects (FE), and random effects (RE) These regression techniques have fundamental limitations (Ullah et al., 2018) One of the most popular estimation methods in applied econometrics involves instrument variables (IVs), including two-stage least squares (2SLS), three-stage least squares(3SLS),andGMM.Ingeneral,whentheerrorisconditionalheteroskedasticity,

GMMestimationismoreefficientthan2SLSor3SLS(Hansen,2020;Leeetal.,2016) In addition, Ullah et al (2018), Roodman (2009), and Chan and Hameed (2006) argue thatGMM can be used to deal with three sources of endogeneity, namely, unobserved,simultaneous, and dynamic endogeneity In addition, previous studies also show thatGMM can address heteroskedasticity and autocorrelation issues (Haris et al., 2019; Sardo and Serrasqueiro, 2017) GMM uses the Arellano-Bond (1991) test to examine thefirst- orderandsecond-ordercorrelationthroughAR(1)andAR(2)tests.Inaddition, Hansen statistics examine the validity of myIVs.

In order to have recommendations and policy implications suitable to the actual situation in Vietnam, I have carried out an additional step of qualitative research The qualitative method is used to exploit the inner thoughts of survey subjects through information collected through observations, expert interviews or group interviews For this topic, I utilized the in-depth interview method of 05 experts in the field of intellectual capital (as shown inAnnexure 3) In-depth interviews help the author interact with respondents through face-to-face interviews, thereby collecting opinions andviewsofexpertsontheresearchissue.Inaddition,whenapplyingexpertinterviews, the author also controlled the responses systematically and clearly (Silverman, 2016) Thein- depthinterviewswereconductedfromAugust2022toSeptember2022,duration from 90 to 150 minutes, and the location was conducted at the respondent's office The procedure was conducted through face-to-face appointments at convenient times for experts, documents and interview questions were sent in advance to the subjects via email.

In this dissertation, qualitative research is carried out through 3 specific steps as follows:

- First, the author prepared an outline for an in-depth interview The purpose of this step is to get a clear direction for the content of theinterview.

- Second,I conducted in-depth interviews to serve as the basis for the author's recommendations and policy implications After introducing the objective and expectedcontentoftheinterviewaboutintellectualcapitalanditsimpactonfirm performance,theauthorstartedaskingquestionsbasedonthepreparedinterview The interview process started with asking questions to the respondents,listening to the respondents' views, discussing with the respondents the views of the research, the contents of the research, drawing conclusions and agreeing on the samepointofviewontheissue.Inthisstudy,researchdatawasobtainedthrough interviews with respondents who are experts in the intellectual capital field The data were then grouped according to the research objective and analyzed in sequence The content of the in-depth interview revolved around the following4 mainquestions:

1 What drives you to be interested in intellectualcapital?

2 In your opinion, what components does intellectual capital include?

Whichcomponent of intellectual capital is the mostimportant?

3 Accordingtoyou,isthereadifferenceinintellectualcapitalindifferenttypes of firms (financial firms versus non-financialfirms)?

4 In your opinion, what should be done to improve the intellectual capital and firm performance inVietnam?

- Third,I synthesized data and wrote reports of qualitative research The author grouped the data according to the research objective Then, I summarized the ideas that are outstanding, have many interested respondents, and are important to the research topic After that, the author compiled and edited the content that was of interest and comments by therespondents.

The results of the expert interviews are summarized as follows: All five experts stressed that the 4.0 technology revolution requires businesses to pay more attention to the exploitation of intangible assets, especially intellectual capital In fact, although firms have invested in current software and technology to serve their operations, all activities require human control and supervision Therefore, human capital is still the most important component of intellectual capital In addition, experts also stated that there is a difference in intellectual capital between financial firms and non-financial firms in Vietnam Non-financial firms, especially manufacturing firms in Vietnam, use mostly unskilled workers, the rate of professional training is still low, so human capital is lower than in other firms In addition, due to limited financial resources, or management perspective, most manufacturing firms in Vietnam have not yet paid attentiontoinvestinginmodernproductiontechnology.Moreover,mostmanufacturing firms in Vietnam have not paid much attention to improving their relationship capital (throughpromotionandproductbrandimagebuilding).Therefore,allthreecomponents of intellectual capital in non-financial firms, including human capital, structural capital and relational capital, are lower than in financial firms In order to improve the impact of intellectual capital on firm performance, experts agree that that firms should have programs to train and improve skills for employees After training courses, employees' skillsareenhanced,therebycontributingtoimprovingtheirproductivityandoperational efficiency.

The results of in-depth interviews give opinions and views on the importance of intellectual capital, components of intellectual capital and solutions to improve intellectual capital for firms in Vietnam In addition, from these results, the author has also drawn recommendations and policy implications related to intellectual capital and its influence on firm performance, as follow: Intellectual capital plays a major role in the knowledge-based economy and is the key driver of firm’s sustained competitive advantages In Vietnam, the role of intangible assets, especially intellectual capital, is receiving more and more attention As tangible resources are increasingly scarce, it is inevitable to invest in and exploit intangible assets Therefore, intellectual capital plays a particularly important role for firms in Vietnam Human capital is the most important component of intellectual capital Investing in human capital needs to be taken care of by businesses Specifically, when the knowledge and skills of employees areimproved, combined with the investment in modern processes and technology (structural capital) will contribute to improving firm performance There is a difference in intellectual capital between financial firms and non-financial firms Employees in financial firms are more well-trained and homogeneous In addition, financial firms are also pioneers in applying modern technology to business activities Therefore, financial firms are considered to have higher intellectual capital than non-financial firms Training and professional development for employees are essential for Vietnamese firms to improve human capital, a very important component of intellectual capital In addition, Vietnamese firms also need to improve production and management processes in the direction of modernization. Firms need to consider investing in modern production technology and applying information technology to production and business activities Thereby, contributing to the improvement of structural capital, one of the components of intellectualcapital.

The questions, answers and implications are detailed inAnnexure 3.

Assess the impact of intellectual capital on the performance of sectorandnation

In addition, this dissertation solves the remaining research hypotheses (H2 andH3), the author uses research methods related to panel data The sequence of implementation steps is described as follows.

First, this study uses Pearson's correlation test to examine the correlation between variables Pearson correlation coefficient is used to test the relationship between variables in the research model It provides information about the degree and direction of the relationship In addition, the phenomenon of multicollinearity between the independent variables can also be detected through the pearson correlation coefficient. Pearson correlation coefficient (r) fluctuates in the continuous range from -1 to +1:

 r =0 Two variables have no linear correlation.

 r = 1; r =-1 Two variables have an absolute linear relationship.

 r 0 Positive correlation coefficient That is, the value of variable x increases, the value of variable y increases and vice versa.

In addition, the degree of correlation is determined as follows:

 If 0.50