intellectual capital and its effects on the performance of firms sectors and nations

Second, a new sectoral intellectual capital index is developed tomeasure the intellectual capital level across 12 sectors in Vietnam from 2011 to 2018.. CHAPTER 5 EMPIRICAL RESULTS ON TH

MINISTRY OF EDUCATION AND TRAINING

HO CHI MINH CITY OPEN UNIVERSITY

INTELLECTUAL CAPITAL AND ITS EFFECTS ON THE PERFORMANCE

OF FIRMS, SECTORS AND NATIONS

CITY – 2024

i

MINISTRY OF EDUCATION AND TRAINING

HO CHI MINH CITY OPEN UNIVERSITY

TRAN PHU NGOC TRAN PHU NGOC

INTELLECTUAL CAPITAL AND ITS EFFECTS ON THE

PERFORMANCE OF FIRMS, SECTORS AND NATIONS

Majors: BUSINESS ADMINISTRATION

Code: 9340101

DOCTORAL DISSERTATION IN BUSINESS ADMINISTRATION

Supervisors: Supervisors:

1 Dr Vo Hong Duc

2 Dr Van Thi Hong Loan

HO CHI MINH CITY – 2024

ii

DECLARATION

I, Tran Phu Ngoc, declare that the PhD thesis entitled Intellectual Capital and Its Effects on The Performance of Firms, Sectors and Nations is entirely original and has not

been submitted for any other degree or diploma at any university or institution To the best

of my knowledge, this thesis does not include any material that has been previouslysubmitted, either in full or in part, for any academic degree or diploma Unless otherwisestated, this work is solely my own, conducted under the primary supervision of Dr Vo

Hong Duc and Dr Van Thi Hong Loan

Ho Chi Minh city, July , 2024

Tran Phu Ngoc

iii

ACKNOWLEDGEMENTS

This thesis would not have been possible without the support of my principalsupervisor, Dr Vo Hong Duc I am profoundly grateful to Dr Duc for his dedication,invaluable guidance, scholarly support, and generous commitment of time throughout thisprocess Without his assistance, this thesis would not have come to fruition

I also wish to express my gratitude to Dr Van Thi Hong Loan for her insightful comments and for inspiring me to complete this work

Special thanks go to my friends at The CBER – Research Centre in Business,Economics & Resources at Ho Chi Minh City Open University, Ho Minh Chi, and TranPham Khanh Toan, whose encouragement and support were instrumental in completingthis thesis

I could not have completed this journey without the love and encouragement of myfamily and friends I am deeply appreciative of my late father, who believed in mypotential, and my mother, who is always proud of my achievements

Lastly, I extend my heartfelt thanks to my wife, Huyen Co, for her patience and support in making this dream a reality

I dedicate this thesis to my beloved daughter, Kha Han, whose inspiration and

courage helped me overcome all hardships throughout this journey

iv

ABSTRACT

In a knowledge-based economy, firms put great effort into remaining competitive.Various economic sectors have also adopted strategies to demonstrate resilience in acompetitive environment Nations are no exception In the era of economic integration,countries have to utilize all available resources to achieve sustainable nationalperformance and development While tangible assets are limited and their use is at thelimit, the role of intangible assets has become important Intellectual capital, considered acritical asset, refers to the intangible assets contributing to value creation for firms,sectors, and nations Intellectual capital includes three distinct components: human,structural, and relational The important role of intellectual capital in driving performance

is crucial Accumulating and using intellectual capital efficiently provide significanteffects and implications for the success of firms, sectors, and nations

Previous research has focused on understanding the role of intellectual capital at afirm level However, there is no well-established and generally agreed-upon approach formeasuring intellectual capital at a sector or national level As such, this dissertation aims toachieve two objectives The first objective is to measure intellectual capital at three levels:firm, sector, and nation The second objective is to examine the impact of intellectual

capital on the firm performance, sectors' performance, and the country's growth Thefindings from this dissertation are crucial for policymakers, practitioners, and executives

to consider the roles of intellectual capital to maximize the benefits of this important asset.Specific tasks from the first research objective – measuring intellectual capital – can

be summarized as follows First, data are manually collected from the annual reports of

150 firms listed in Vietnam from 2011 to 2018 These firms are classified into twocategories: financial firms and non-financial firms This dissertation subsequently uses themodified value-added intellectual coefficient (MVAIC) method to compare thedifferences regarding the intellectual capital level between financial and non-financialfirms in Vietnam Second, a new sectoral intellectual capital index is developed tomeasure the intellectual capital level across 12 sectors in Vietnam from 2011 to 2018

v Third, data from 104 nations from 2000 to 2018 are collected to construct a new index of national intellectual capital (INIC)

In addition, the following tasks are conducted to achieve the second researchobjective – examining the effects of intellectual capital on a firm's performance (at a firmlevel) and sector's performance (at the sector's level) and economic performance (at anation's level) This study employs the generalized method of moments (GMM)estimation technique to investigate how intellectual capital affects financial and non

financial firms' performance The dynamic common correlated effects (DCCE) estimationmethod is used to examine the effects of intellectual capital on the sector's performance.Finally, this dissertation examines the impacts of intellectual capital on economicperformance across nations using DCCE method

The main results from this dissertation can be summarized as follows First, a

significant difference in intellectual capital level between financial and non-financialfirms in Vietnam The empirical results indicate that intellectual capital positively affectsfirm performance in Vietnam These findings imply that non-financial firms will need to

invest in building their intellectual capital to increase their competitive advantage Second,

intellectual capital at the sector's level has been found to improve the performance ofsectors in Vietnam over the last decade, especially during the COVID-19 pandemic,which has put sectors under severe pressure These findings highlight the need forimproving intellectual capital efficiency at the sectoral level to remain competitive and

prepare for future adverse events Third, the intellectual capital level varies significantly

across countries and Vietnam, from the current standing regarding intellectual capitalranking compared with other countries, has a significant task to improve intellectualcapital for the nation Finally, the empirical results confirm that intellectual capital at thenational level supports GDP per capita – an indicator of a country's economicperformance

The contributions of this dissertation to the existing literature on intellectual capital, its

measurement and its effects on performance are threefold First, the study examines the

differences in intellectual capital level between the financial and non financial in Vietnamand the impact of intellectual capital on firm performance The findings provide valuable

managerial implications for practitioners and firm executives

vi

Second, this dissertation pioneers the development of indices for measuring intellectual

capital for sectors and nations These indices can be used to examine the effects of

intellectual capital on different managerial and economic issues Third, to the best of the

author's knowledge, this dissertation is the first to measure intellectual capital for firms,sectors, and nations in Vietnam and consider its effects on performance in the Vietnamesecontext in the same place

vii

TABLES OF CONTENTS

DECLARATION iii

ACKNOWLEDGEMENTS iv

ABSTRACT .v

TABLES OF CONTENTS viii

LIST OF ACRONYMS xii

LIST OF FIGURES xiii

LIST OF TABLES xv

LIST OF PUBLISHED PAPERS xvi

CHAPTER 1 INTRODUCTION 1

1.1 Introduction .1 1.2 Research problems 4 1.3 Research gap 6

1.3.1 Intellectual capital and its effects to firm’s performance: financial firms versus non-financial firms 6 1.3.2 Sectoral intellectual capital and its effects to performance across sectors 8 1.3.3 National intellectual capital and its effects to national performance 9 1.4 Research objectives 11 1.4.1 The main objective 11 1.4.2 Specific objectives 11 1.5 Research questions 12 1.6 Research subject and scope 12 1.7 Contributions of the study 12 1.8 Research framework and steps 13 1.9 The outline of the dissertation 17 1.10 Summary 18 CHAPTER 2 LITERATURE REVIEW 19 2.1 Definitions and classifications 19 2.1.1 Saint-Onge’s model 20 2.1.2 Sveiby’s model 22 2.1.3 Skandia intellectual capital value scheme 23 viii

2.1.4 Sullivan’s model 24 2.2 Relevant theories 25 2.2.1 Resource-based theory 25 2.2.2 The knowledge-based

theory 26 2.2.3 Performance-based theory 27 2.3 Measuring intellectual capital:

traditional methods 28 2.3.1 Balanced scorecard 30 2.3.2 Technology

Broker 31 2.3.3 Intangible assets

monitor 32 2.3.4 Skandianavigator 33 2.3.5 Value AddedIntellectual Coefficient™ (VAIC™) 34 2.4 Measuring intellectual

capital: extended analysis for sectors andnations 36 2.4.1Sectoral intellectual capital measurements 37 2.4.2 Nationalintellectual capital measurements 40 2.5 Measuring performance

of firm, sector and nation 46 2.5.1 Firmperformance 47 2.5.2 Financialperformance for sector 47 2.5.3 Performance of thenation 48 2.6 The effects of intellectual capital

on performance of firms, sectors andnations 50 2.6.1 Intellectualcapital and firm’s performance 50 2.6.2 Intellectual capital andsector performance 55 2.6.3 Intellectual capital and national

performance 57 2.7Summary 60 CHAPTER 3

METHODOLOGY 61 3.1Data 61 3.2 Researchmethods 63 3.2.1 Assess the impact ofintellectual capital on firm performance 63 3.2.2 Assess the impact of intellectual

capital on the performance of sector andnation 66 3.3 Variables:

definitions and measurements 72

ix 3.3.1 Measuring intellectual capital at firm level 72 3.3.2Sectoral intellectual capital index 74 3.3.3 Newindex of national intellectual capital 74 3.3.4 Othervariables 79

3.4 Summary 80 CHAPTER 4

MEASURING INTELLECTUAL CAPITAL: THE ANALYTICALANALYSIS 81 4.1 An intellectualcapital level for Vietnamese listed firms 81 4.2 An intellectual capital acrosssectors in Vietnam 83 4.3 Measuring national intellectual capital: a tale

of two indices 86 4.4 A national intellectual capital acrossnations 88 4.4.1 National intellectual capital byregion 88 4.4.2 National intellectual capital by

income 90 4.5Summary 96

CHAPTER 5 EMPIRICAL RESULTS ON THE EFFECTS OF INTELLECTUAL

CAPITAL ON PERFORMANCE OF FIRM, SECTOR ANDNATION 99 5.1Intellectual capital and firm performance 99 5.1.1 Correlationanalysis 99 5.1.2 Autocorrelation and

heteroskedasticity tests 102 5.1.3 The effects of intellectual capital on firm’s performance using panel dataestimation: generalized method of moments (GMM) 102 5.2Intellectual capital and financial performance across sectors 105 5.2.1 Thedescriptive statistics 105 5.2.2 The cross-sectional dependence test 107 5.2.3 The slopehomogeneity test 107 5.2.4 The panel unit

root test 107 5.2.5 The panel

cointegration test 108 5.2.6 The effects of intellectual capital on financial performance across sectorsusing Dynamic common correlated effects technique 108 5.2.7 The causalityrelationship flows between sectoral intellectual capital, sector performance and

other variables 109

x 5.3 Intellectual capital and national performance 111 5.3.1 Thecross-sectional dependence test 113 5.3.2 The slopehomogeneity test 113 5.3.3 The panel unitroot test .113 5.3.4 The panelcointegration test 113 5.3.5 The effects ofnational intellectual capital on national performance using

the dynamic common correlated effects 114 5.3.6 The causalityrelationship flows between national intellectual capital, national performance and other

macroeconomic variables 115 5.4Summary 118 CHAPTER 6CONCLUSIONS AND IMPLICATIONS 120 6.1 Researchfindings 120 6.1.1 Measuring intellectual

capital 120 6.1.2 The effects of intellectual capital on the performance of firm, sector andnation 122 6.2 Contributionsand implications 124 6.2.1 Measuring intellectualcapital 124 6.2.2 The effects of intellectual capital on

the performance of firm, sector andnation 128 6.3 Limitations

and suggestions for future research 131 6.3.1 Firmlevel 131 6.3.2 Sectoral

level 131 6.3.3 National

level 132 6.4

Summary 132

REFERENCES 133

ANNEXURE 1 151

ANNEXURE 2 156

ANNEXURE 3 160

ANNEXURE 4 167

xi

LIST OF ACRONYMS

AR Arellano and Bond test

ASEAN Association of Southeast Asian Nations BM Broad

money supply

CE Domestic credit to the private sector by banks CEE Capital

employed efficiency

DCCE Dynamic common correlated effects FE Fixed

effects

GDP Gross domestic product

GMM Generalized method of moments

HCE Human capital efficiency

INIC Index of national intellectual capital IVs Instrument

variables

LEV The ratio between total debt and total assets of firms MVAIC

Modified value-added intellectual coefficient OLS Ordinary least squares

PCA Principal component analysis

PGDP GDP per capita

RE Random effects

RCE Relational capital efficiency

ROA Return on assets

ROE Return on equity

SCE Structural capital efficiency

SICI Sectoral intellectual capital index

SIZE The natural logarithm of the total assets TO Trade

openness

VIF Variance inflation factor

US United States

2SLS Two-stage least squares

3SLS Three-stage least squares

xii

LIST OF FIGURES

Figure 1.1 Real GDP growth trends: Vietnam, ASEAN, and the World 2 Figure

1.2 Infrastructure spending, GDP growth rate, and business environmentfactors 3 Figure 1.3 Globalcompetitiveness and technological readiness ranking 3 Figure 1.4 Researchprocess 13 Figure 1.5 Researchframework 16 Figure 2.1 Saint-Onge’s

model 21 Figure 2.2 Sveiby’smodel 23 Figure 2.3 Skandiaintellectual capital value scheme 24 Figure 2.4 Sullivan’sapproach to visualize intellectual capital 25 Figure 2.5 The balancedscorecard 31 Figure 2.6 Brooking’sintellectual capital measurement model 32 Figure 2.7 Intangible assets

monitor example 33 Figure 2.8 Skandianavigator 34 Figure 2.9 The DuPontmodel 47 Figure 3.1 Number of listedfirms 62 Figure 4.1 Sectoral intellectualcapital index in 2011-2018 period 85 Figure 4.2 An index of nationalintellectual capital: Lin, Edvinsson, Chen and Beding (2014) index versus theINIC 87 Figure 4.3 National intellectual capital acrossyears by region 89 Figure 4.4 National intellectual capital across years

by income 91 Figure 4.5 Accumulation of national intellectual capital

across years in somecountries 92 Figure 4.6

Accumulation of national intellectual capital across years in Group ofSeven 93 Figure 4.7

Accumulation of national intellectual capital across years in Top 10 93 Figure 4.8 The accumulation of national intellectual capital for the Asia-Pacific countries

for almost two decades, from 2000 to 2018 95 Figure 4.9 National

intellectual capital around the globe 96

xiii Figure 5.1 The causality relationship flows between sectoral intellectual capital, sectorperformance and other variables 111 Figure 5.2 The causality

relationship flows between national intellectual capital, national performance and other

components, and their proxies, of the new index of national

intellectual capital (INIC) 79Table 4.1 Descriptive statistics of the full sample 82 Table4.2 Descriptive statistics for financial firms and non-financial firms 83 Table 4.3National intellectual capital by region 89 Table 4.4 Nationalintellectual capital by income .90 Table 5.1 Regressionmodels 99 Table 5.2 The pairwisecorrelation coefficients and the variance inflation factor

(VIF) among variables 101Table 5.3 Empirical results using GMM estimations 104 Table5.4 Regression models 105 Table 5.5Descriptive statistics 106 Table 5.6Correlation matrix and the variance inflation factor among variables

107 Table 5.7Empirical results - The effects of intellectual capital on financial performance acrosssectors 108 Table 5.8 The causality relationship

flows between sectoral intellectual capital, sector performance and othervariables 110 Table 5.9 Measurements of variables and datasources 112 Table 5.10 Empirical results - The effects of national

intellectual capital on nationalperformance 114 Table 5.11 Thecausality relationship flows between national intellectual capital, national performance

and other macroeconomic variables 116

xv

LIST OF PUBLISHED PAPERS

1 Vo, D H., & Tran, N P (2024) Does national intellectual capital matter for

economic growth in the Asia–Pacific economies? Journal of Intellectual Capital, 25(2/3), 253-274

2 Vo, D H., & Tran, N P (2024) Sectoral Intellectual Capital and Sector

Performance in an Emerging Market Montenegrin Journal of Economics, 20(2),

209-220

3 Vo, D.H., Van, L.T.-H., Hoang, H.T.-T., & Tran N.P (2023) The interrelationshipbetween intellectual capital, corporate governance and corporate social

responsibility Social Responsibility Journal, 19(6), 1023-1036

4 Vo, D.H., & Tran, N.P (2023) Measuring national intellectual capital and its effect

on country’s competitiveness Competitiveness Review, 33(4), 820-839

5 Tran, N.P., & Vo, D.H (2022) Do banks accumulate a higher level of intellectual

capital? Evidence from an emerging market Journal of Intellectual Capital, 23(2),

439-457

6 Tran, N.P., Dinh, C.T.H., Hoang, H.T.T., & Vo, D.H (2022) Intellectual Capitaland Firm Performance in Vietnam: The Moderating Role of Corporate Social

Responsibility Sustainability, 14, 12763 https://doi.org/10.3390/su141912763

7 Van, L.T.-H., Vo, D.H., Hoang, H.T.-T., & Tran N.P (2022) Does CorporateGovernance Moderate the Relationship between Intellectual Capital and Firm’s

Performance? Knowledge and Process Management, 29(4), 333-342

8 Vo, D.H., & Tran, N.P (2021) Measuring national intellectual capital: a novel

approach Journal of Intellectual Capital, 23(4), 799-815

9 Vo, D.H., & Tran, N.P (2021) Intellectual capital and bank performance in

Vietnam Managerial Finance, 47(8), 1094-1106

10.Tran, N.P., Van, L.T.-H., & Vo, D.H (2020) The nexus between corporate

governance and intellectual capital in Vietnam Journal of Asia Business Studies, 14(5), 637-650.

xvi

CHAPTER 1 INTRODUCTION

This chapter presents and discusses the background and rationales for conductingthis study and its novelty concerning intellectual capital measurement and the effects ofintellectual capital on the performance of firms, sectors and nations

1.1 Introduction

In the context of the knowledge-based economy, firms enhance their competitiveadvantage by shifting from tangible assets into intangible assets (Stewart, 1997; Sveiby,1997) Castro et al (2019) consider that intellectual capital plays a major role in theknowledge-based economy and is the key driver of firm’s sustained competitiveadvantages Intellectual capital is defined as unique skills, knowledge, and solutions thatcan be converted into value in the market, leading to an increase in firm’s competitiveness,productivity, and market value (Pulic and Kolakovic, 2003)

The role of intellectual capital in firm’s performance is increasing, so it is necessary

to examine the dynamics of this role and the contributions of intellectual capital to firm’sperformance Inkinen (2015) demonstrates that firms can benefit from a variety ofintellectual capital profiles This means that some businesses require high levels of overall

intellectual capital to achieve impressive performance, while others can still achievepositive results with relatively low structural or relational capital In addition, the impact

of intellectual capital on a firm performance primarily stems from its combinations,interactions and mediating effects Furthermore, there is substantial proof highlighting theimportant 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 focus on financial firms (Haris et al.,2019; Firer and Williams, 2003) and manufacturing firms (Xu and Wang, 2019) Xu and

Li (2019) find a difference in intellectual capital efficiency between high-tech and high-tech small and medium-size firms in China The impacts of intellectual capital onfirm’s performance in the emerging markets in the Asian region has been examined inprevious studies (Indonesia, Soetanto and Liem, 2019; Thailand, Tran and Vo, 2018;Malaysia, Goh, 2005) In particular, Soetanto and

non-1 Liem (2019) argue that intellectual capital affects the market-to-book value of theknowledge-based sectors, which have intensively used technology and/or human capital

In a study on Thailand’s banking sector, Tran and Vo (2018) conclude that bankprofitability is driven mainly by the efficiency of capital employed Goh (2005) assertsthat banks have accumulated a lower level of structural capital efficiency than humancapital efficiency

Since joining the Association of Southeast Asian Nations (ASEAN), Vietnam hasemerged as a country with remarkable national performance and development In recentyears, leaders in the miracle of national performance among ASEAN members have beenemerging markets, such as Vietnam (OECD, 2018) Figure 1.1 indicates that the pattern ofreal 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 thefastest rates in the world (Trieu, 2019) In addition, Vietnam has closely integrated intothe regional and world economy, with strong trade commitments, such as the European-Vietnam Free Trade Agreement, the Comprehensive and Progressive Agreement forTrans-Pacific Partnership, the Vietnam Eurasian Economic Union Free Trade Agreement,and the ASEAN–Hong Kong, China Free Trade Agreement, to name a few

-2.0%

Source: IMF (2020)

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

Figure 1.1 Real GDP growth trends: Vietnam, ASEAN, and the World1 1 Singapore is not included

because of differences in population size, income, infrastructure and technology levels

2

In addition, as shown in Figure 1.2, Vietnam has increased its investment ininfrastructure to bridge the gap with other ASEAN member countries Vietnam’s spending

on infrastructure represents the second fastest among the ASEAN members, 11.5 percent,

which is almost doubled the rate of GDP growth for the period 2012-2016 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 in Asia

Source: PwC (2018)

Figure 1.2 Infrastructure spending, GDP growth rate, and business environment factors2

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- 2022

Indonesia 47 67 Malaysia 27 27 Philippines 94 55 Thailand 78 49 Vietnam 79 65

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

Figure 1.3 Global competitiveness and technological readiness ranking 2 Singapore is not included

because of differences in population size, income, infrastructure and technology levels

3

On the above observations, The Vietnamese firms are facing great opportunities andchallenges 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 flexible in 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 andgradually replaces the industrial economy, which only focuses on production andconsumption In order to meet the important requirements of the knowledge-basedeconomy, firms need to thoroughly utilize the value from intellectual capital – animportant intangible asset The development of the knowledge-based economy enhancesthe role of intellectual capital in businesses and society and pushes it to a new level Thispractice requires firms to use and implement appropriate and flexible policies to utilize thevalue of resources, which are considered intangible, from firms including skills,knowledge, innovation, and relationship with customers

1.2 Research problems

Edvinsson and Malone (1997) consider that intellectual capital includes two maincategories: human capital and structural capital Pulic (1998) introduces a value-addedintellectual coefficient (VAIC) model to measure intellectual capital efficiency Thismodel 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 modifiedvalue-added intellectual coefficient (MVAIC) model The MVAIC model has been widelyused 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 thesector or region through the analysis of their intellectual capital in order to achieve asustainable growth Marcin (2013) presents countries around the world are increasinglyinterested in measuring intellectual capital across sectors As such, it is important andnecessary to develop a new sectoral intellectual capital in

4 accordance with the sectors’ development theories (Pedro et al., 2018) Doing so willpromote the management of intangible resources in sectors However, a methodology tomeasure and evaluate the efficiency of the sectoral intellectual capital has been largelyignored in previous studies

Moreover, at the national level, no widely used or highly recognized methods have beenused 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 capital havebeen conducted However, the measurements of national intellectual capital adopted inthose studies are very impractical to be widely implemented across nations due to theunavailability of required data and/or an excessive usage of judgements Lin andEdvinsson (2011) paper is a pioneering study in measuring intellectual capital across

countries This method is impractical to be implemented for other nations outside theintended samples As such, different approaches in measuring intellectual capital acrosssectors, particularly across nations, are expected to properly measure intellectual capitalacross sectors and nations for comparison purposes (Salonius and Lonnqvist, 2012)

In the past three decades, the financial sector has played a crucial role in Vietnam'snational performance and development In the context of deepening an integration of theVietnamese economy into the world economy, the financial sector should effectivelyutilize both tangible and intangible resources, especially intellectual capital Theoperations of financial firms are directly related to intellectual capital because they areknowledge-based companies (Buallay et al., 2020) In addition, Firer and Williams (2003)emphasize that financial firms have higher intellectual capital efficiency than othersectors Employees of financial firms exhibit a higher homogeneity of skills andknowledge (Kubo and Saka, 2002) Financial firms operating in a highly regulatedenvironment tend to be more compliant in meeting regulatory expectations while nonfinancial firms are not As such, these differences result in a different level of intellectualcapital across sectors

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

5 Vietnam As such, a study directly targeting an emerging market like Vietnam offerscrucial implications for the intellectual capital community including firms’ executives,academics and policymakers This study examines the differences in intellectual capitalefficiency between financial and non-financial firms in Vietnam and the contribution ofintellectual capital to firm’s performance This dissertation extends the existing literature

by developing a new sectoral intellectual capital index (SICI) which can be used tomeasure a different level of intellectual capital across sectors This study uniquely andstrikingly extends the current literature concerning intellectual capital measurement bydeveloping a new index of national intellectual capital (INIC) which is hardly seen inprevious studies In addition, the effects of intellectual capital on the performance of firms,sectors and nations are investigated

Liem, 2019; Sardo and Serrasqueiro, 2017) Previous studies have used differenteconometric techniques, such as OLS techniques (Chan, 2009; Ghosh and Mondal, 2009;Firer and Williams, 2003) and GMM techniques (Soetanto and Liem, 2019; Sardo andSerrasqueiro, 2017) The findings in previous studies confirm a positive relationshipbetween intellectual capital and firm performance (Soetanto and Liem, 2019; Li and Zhao,2018; Sardo and Serrasqueiro, 2017; Ghosh and Mondal, 2009) However, other studiesconfirm a negative relationship between intellectual capital and firm performance (Britto

et al., 2014; Morariu, 2014) Chan (2009) and Firer and Williams (2003) also reveal aninsignificant relationship between intellectual capital and firm performance Maali et al.(2021) explore the links between corporate governance and sustainability performanceusing the corporate social responsibility of 300 UK firms from 2005 to 2017 They statethat corporate governance has a positive impact on sustainability performance In addition,corporate social responsibility plays a fully

6 mediate role in the relationship between corporate governance and sustainabilityperformance in UK firms Soetanto and Liem (2019) state that capital employed efficiencyand structural capital efficiency contribute to firm wealth In this paper, 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

knowledge based, the results indicate that capital employed has a positive effect on firm performance in those that are high-level-knowledge based

My literature review indicates that the contributions of intellectual capital to firmperformance with a focus on the financial and non-financial sectors have largelyoverlooked in Vietnam The financial sector plays the role of providing financial services

to people and businesses This segment includes banks, securities, financial, real estateand insurance firms The main players in Vietnam's financial sector being banks andfinancial institutions (Zhang et al., 2021) The financial firm plays an important role innational performance in Vietnam by facilitating financial transactions In addition, thevalue of the assets in the banking system is nearly twice that of its GDP (Trieu, 2019) Thebanking system in Vietnam plays a leading role in Vietnam's national performance, so thefocus on banking becomes important in this study Buallay et al (2020) consider banksknowledge-intensive firms The most important financial firm assets are in the form ofintellectual capital A financial firm’s activities are mainly related to intellectual capital,such as brand building and human resources Financial firm employees exhibit greaterhomogeneity than employees in other sectors (Kubo and Saka, 2002) Moreover, it hasbeen argued that banking has accumulated higher levels of intellectual capital than othersectors (Firer and Williams, 2003) The current literature considers that staff identity isimportant because intellectual capital is one of the key measures for assessing thecompetence of employees In addition, financial firms operating in a heavily regulatedenvironment, whereas non-financial firms are not, resulting a different levels of intellectual

capital efficiency However, to the best of my knowledge, the impact of intellectualcapital on the performance of firm with a focus on the differences between financial andnon-financial firms has been overlooked in intellectual capital literature, particularly inemerging markets such as Vietnam

Ali et al (2022) argue that intellectual capital consists of three main components: human capital, structural capital and relational capital Human capital contributes to firm

7 performance through the competence and creativity of employees, allowing them toidentify, create new knowledge and solve problems (Xu and Li, 2019) Structural capitalincludes procedures and processes, human resource policies and guidelines for labormanagement practices such as recruitment, task management, patents, intellectualproperty (Sardo and Serrasqueiro, 2017) Human capital utilizes structural capital toincrease firm performance (Soetanto and Liem, 2019) Relational capital encompasses therelationships with stakeholders that allow for certain behaviors and sustainablerelationships (Tran and Vo, 2018) Relational capital facilitates accessing, processing,synthesizing, and exchanging knowledge within and across corporate influences on firmperformance (Maali et al., 2021)

1.3.2 Sectoral intellectual capital and its effects to performance across sectors

Liu et al (2021) state that intellectual capital plays the important role of intangibleassets, it helps to exploit important knowledge that affects the innovation ability of firms,sectors and regions Marcin (2013) emphasizes that intellectual capital is a fundamentalresource for value creation at the sectoral, regional and national levels

In addition, from being one of the poorest countries in the world in the mid-1980s,Vietnam has achieved rapid national performance and sustainable development goals inthe last 10 years (Baum, 2020) These achievements of Vietnam are based on broad basedeconomic reforms and national development strategies, focusing on five main sectors:education, health, roads, water and electricity infrastructure (Baum, 2020) Nguyen andGregar (2018) emphasize the role of knowledge management in innovation of Vietnamesefirms Besides, Nguyen et al (2021) also affirm that intellectual capital has a positiveinfluence on firm’s performance in Vietnam Dutt (1990) asserts that imbalance betweensectors can slow down economic development In particular, the coronavirus pandemicaffects the economies of countries around the world in a "K

shaped recovery" The characteristic of this type of recovery is that some sectors willimprove, while others will continue to decline (Nikkei, 2021) Hence, it is necessary tomeasure and evaluate the efficiency of intellectual capital across sectors in Vietnam andother emerging markets

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,

8

2004) In addition, measuring intellectual capital at the regional level has also beenconsidered 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 capitalmeasurements have been introduced, such as intellectual capital dynamic value(Edvinsson and Bounfour, 2004), principal components analysis and cluster analysis (Xiaand Niu, 2010); data envelopment analysis (Nitkiewicz et al., 2014); multiple-criteriadecision-making (Liu et al., 2021)

However, the issue of measuring intellectual capital at the sector level has beenlargely ignored in previous studies Based on the modified value-added coefficient(MVAIC) model, this study proposes a sectoral intellectual capital index (SICI) byexamining the intellectual capital efficiency of each firm in the sector In addition, theauthor 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 sectorperformance in Vietnam

1.3.3 National intellectual capital and its effects to national performance

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 ofthe world's three largest economies (Business Insider, 2020) In addition, the region is alsohome to some of the fastest-growing countries in the world, such as Vietnam (WorldBank, 2020a) The S&P (2020) report stresses that the Covid-19 "shadowed" theeconomic prospects of the Asia Pacific region, leading to shocks in domestic supply anddemand in Japan and South Korea, as well as weakening the demand from externalmarkets such as the US and Europe Based on the report, economies in the region aresuffering the double effect of weakening demand and a supply reduction Countries in theAsia Pacific region are gradually changing new production methods and new customerapproaches The role of intangible assets, such as automated manufacturing technologiesand online sales services, has gradually asserted the importance of creating andmaintaining a competitive advantage In particular, Stahle et al (2015) state thatconducting more detailed analyzes of the role of national intellectual capital in differenteconomies would also add value to intellectual capital literature

9 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 dissertationdelves deeper into measuring intellectual capital across all three levels to gain a nuancedunderstanding of its significance and impact on performance This classification andmeasurement 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

By examining intellectual capital management strategies and measures at the firm,sector, and nation levels, this dissertation aims to provide specific and practicalrecommendations for businesses and policymakers This approach enables theidentification of trends and challenges in intellectual capital management anddevelopment at each level, facilitating a deeper understanding of potential issues andopportunities for businesses and the economy as a whole Ultimately, this dissertationcontributes to informed decision-making and policy formulation by shedding light on thedynamics of intellectual capital across different levels of analysis

Understanding the impact of national intellectual capital on national performance isessential for businesses to navigate the complexities of the global business environmenteffectively (Lin, 2018) Research into national intellectual capital yields valuable insightsthat can inform strategic management decisions and guide business actions in anincreasingly competitive landscape The findings of this dissertation can directly informbusiness management and development practices, providing actionable intelligence foradministrators 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 intellectualcapital occupies a crucial position within the realm of modern business administration andeconomics (Svarc et al., 2021) This dissertation not only informs current businesspractices but also shapes future trends and forecasts in firm strategy development andcorporate governance By shedding light on the dynamics of intellectual capital, this dissertation field contributes to a deeper understanding of the factors driving national

10 performance and innovation, thereby facilitating informed decision-making at both

organizational and governmental levels

1.4 Research objectives

1.4.1 The main objective

This study has the overarching objective of measuring intellectual capital at the firm,sector and nation levels In addition, this dissertation also examines the impacts ofintellectual capital on the performance of firms and sectors; and on national performance,which is effectively the economic performance of the countries

1.4.2 Specific objectives

The objectives of this study are summarized as follows:

1) To measure intellectual capital for firms, sectors and nations Specifically, I

use the modified value-added intellectual coefficient (MVAIC) model tomeasure intellectual capital of financial and non-financial firms in Vietnam I

also examine the difference in intellectual capital of these two groups of firms:financial versus non-financial firms Furthermore, I develop a new sectoralintellectual capital index (SICI) to measure the intellectual capital of 12 sectors

in Vietnam In addition, I extend the existing literature by developing a newindex of national intellectual capital (INIC) to measure intellectual capital at thenation’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 of firms, and sectors, and nations This dissertation employs a measured level of

intellectual capital at firms, sectors, and nations’ levels to investigate the effects

of intellectual capital on the performance of firms, sectors and nations Variouseconometric methods are utilized to ensure the validity and robustness of thefindings when examining these effects Drawing on a comprehensive review ofprevious research, performance at the firm and sector levels is assessed usingreturn on total assets and return on equity metrics In addition, nationalperformance is measured using GDP per capita By employing these metrics andmethodologies, this dissertation aims to provide a thorough

11 analysis of the relationship between intellectual capital and performance across multiple levels of analysis

1.5 Research questions

In achieving the research objectives, this dissertation attempts to answer the

following research questions:

1) What are the differences in intellectual capital level between financial and non 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 of nations?

1.6 Research subject and scope

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 firms

on the Vietnam’s stock market in the period 2011-2018 For the nations, the scope of thestudy covers 104 countries in the 2000-2018 period

1.7 Contributions of the study

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 ofintellectual capital on firm’s performance in Vietnam are then examined.Vietnam is an emerging market in the Southeast Asia, one of the most dynamiceconomies in the region and the world Managerial implications are importantfor the intellectual capital community, including academics, policymakers, andpractitioners This dissertation provides the bridge to fill the current gap

- Second, this study extends the current literature by developing a new measure of

intellectual capital at the sector level - a new sectoral intellectual capital

12 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 acrossnations globally This new index includes the following fundamental attributes:(i) simplicity - a new index should be simple to calculate; (ii) quantification – anew index should be easily quantifiable without using judgments; (iii) marketrelevance – a new index should be able to reflect the prevailing market andeconomy conditions; and (iv) international comparison – a new index should bepractically implemented for comparison purposes across countries regardless ofthe level of national performance and development

1.8 Research framework and steps

Based on the theoretical foundations and empirical research conducted in relation tothe field of study, the analytical framework is proposed Research data will be collectedand analysis will be performed The research process is described specifically as follows:

Research problems

Review of the theoretical foundation and previous studies

Collect data

Analyze and interpret data

Conclusions and implications

Source: Author's synthetic

Figure 1.4 Research process

13

• First, research needs to conduct a rigorous theoretical overview to find (i) thetheory of intellectual capital and its measurements; factors affect theperformance of firms, sectors and nations (ii) variables commonly used inresearch models in the world, and (iii) research gaps academic

• After identifying the above factors, the second step of the study is to determinethe data set to be used to ensure the feasibility of the project Research tocollect annual data on intellectual capital at firm, sector and nation Thesefigures are publicly announced in the annual reports of the firms In addition,the data on the new national intellectual capital index is extracted from thesource of the World Bank Development Indicators

• Third, this study uses panel data to conduct the study With the data collected andthrough the theoretical review, this study intends to use econometric methodssuitable for the data set in order to solve potential problems (unit root,autocorrelation…), to obtain the best estimate results

• Fourth, after achieving the experimental results, the research needs to explain, discuss the results

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

The core of this research is intellectual capital As shown in Figure 1.4, I considerintellectual capital from two perspectives: measuring intellectual capital and examiningthe effect of intellectual capital on performance In addition, this dissertation alsoconsiders at all 3 levels: firm, sector and nation

• For the measure of intellectual capital: I use the structural model and the MVAICmethod to measure intellectual capital at the firm level, and compare thedifference in intellectual capital between financial and non-financial firms Atthe sectoral and national level, I propose new intellectual capital measurement,namely sectoral intellectual capital index (SICI) and index of nationalintellectual capital (INIC)

14

• For examining the effects of intellectual capital on performance, this dissertation

uses two common measures, return on assets (ROA) and return on equity(ROE), to measure performance at the firm and sector levels As for the countrylevel, I use GDP per capita as a measure of national performance.

15

Modified value-added intellectual coefficient (MVAIC) model

Sectoral intellectual

capital index (SICI)

Index of national

intellectual capital (INIC)

Source: Author's synthetic Figure 1.5 Research framework

Intellectual capital

Intellectual capital measurements

Firm level

Sector level

National levelThe effects of intellectual

capital on performance

- Return on assets (ROA) - Return on equity (ROE)

- Return on assets (ROA) - Return on equity (ROE)

Economic growth

16

1.9 The outline of the dissertation

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

in this chapter

1.10 Summary

In Chapter 1, the author primarily outlines the overarching research objectives of thestudy, encompassing the measurement of intellectual capital across enterprise, industry,and national strata Furthermore, this dissertation delves into the analysis of howintellectual capital influences the performance of individual firms and sectors, as well asits impact on overall national performance Chapter 1 also identifies and expounds uponthe research gap, which serves as the impetus driving the author's engagement with thisdissertation Moreover, this chapter elucidates the research's focal subject and its scope,research inquiries, contributions to the field, and delineates the procedural steps of thestudy Subsequently, the succeeding Chapter 2 embarks upon an extensive literaturereview

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CHAPTER 2 LITERATURE REVIEW

In this chapter, an exposition is undertaken to provide a comprehensive survey ofintellectual capital quantification across the dimensions of individual firms, sectors, andnational contexts Moreover, the fundamental theories underpinning the relationshipintellectual capital and the performance of firm, sector and nation are comprehensivelyexpounded upon and examined

2.1 Definitions and classifications

The concept of intellectual capital is first mentioned by Senior (1836) Intellectualcapital is described as an important resource in creating a firm wealth, but it is notrecorded on the balance sheet (Xu and Liu, 2020) Ali et al (2022) argue that intellectualcapital is a value not only in terms of monetary returns but also in terms of environmental,social and economic issues Intellectual capital is the sum total of all employeecompetencies and skills that create company wealth (Shahwan and Habib, 2020) Thedefinition of intellectual capital covers different levels, including firm, sector and nation.St-Pierre and Audet (2011) suggest that there is consensus on the significant contribution

of intellectual capital to value creation, but there is no generally accepted definition ofintellectual capital Stewart (1997) defines intellectual capital as an intangible valuecreated for people Sullivan (2000) states that intellectual capital, which is considered asknowledge of the company, could be converted into tangible profits Bontis and Fitz-enz(2002) note that intellectual capital consists of knowledge, experience, intellectualliterature, intellectual property, and information that can be used to create value and toincrease competitiveness In addition, Sardo and Serrasqueiro (2017) argue thatintellectual capital is about the hidden value of a firm However, currently availabledefinitions of intellectual capital refer to an intangible nature of capital based on implicitknowledge, and its ability to create value (Vishnu and Gupta, 2014; Roos et al., 1997;Stewart, 1997; Brooking, 1996; Edvinsson and Sullivan, 1996) The difference betweenthe market value and the book value of a firm has been considered the most obviousindicator of intellectual capital because this difference

19 represents the economic value of intangible capital (Maditinos et al., 2011) In the

following section, I will present several models of intellectual capital classification

2.1.1 Saint-Onge’s model

Westberg and Sullivan (1998) point out that Saint-Onge's model explores thetangible and intangible role of knowledge in different types of intellectual capital and howthese 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 andleveraging intellectual capital to enhance organizational performance This modelunderscores the importance of knowledge and relationships in driving value creationwithin organizations (Pulic, 1998) Saint-Onge’s model categorizes intellectual capitalinto three primary components, each highlighting different dimensions of intangibleassets Human capital refers to the collective skills, expertise, and competencies ofemployees This component emphasizes the value that individuals bring through theirknowledge, innovation, and ability to solve problems Structural capital encompasses thesupportive infrastructure, processes, databases, and intellectual property that facilitate anorganization’s operations It includes organizational culture, routines, and procedures thatenhance efficiency and productivity Relational capital involves the relationships anorganization maintains with external stakeholders, including customers, suppliers,partners, and communities (Bontis, 1998) This component focuses on the value derivedfrom strong, trust-based relationships and the organization’s reputation and brand Theintegration of these components is a key aspect of Saint-Onge’s model, advocating for asynergistic effect that enhances overall organizational performance By recognizing theinterplay between human, structural, and relational capital, organizations can betterunderstand how to leverage these assets for sustained competitive advantage Thisintegrated approach ensures that investments in one area (e.g., training employees) aresupported by improvements in other areas (e.g., enhancing IT systems and strengtheningcustomer relationships) Saint-Onge’s model is particularly influential in the field ofknowledge management By emphasizing the importance of human and structural capital,the model provides a framework for capturing, sharing, and utilizing organizationalknowledge effectively This approach helps organizations to foster a culture of continuouslearning and innovation In strategic management, the model aids in identifying keyintellectual capital assets that can be

20 leveraged to achieve strategic goals By focusing on the holistic view of intellectualcapital, managers can develop strategies that align with the organization’s strengths andaddress its weaknesses This alignment ensures that resources are allocated efficiently tosupport long-term growth and sustainability (Gates and Langevin, 2010) Traditionalperformance measurement systems often overlook the value of intangible assets Saint Onge’s model addresses this gap by providing a structured approach to evaluateintellectual capital This includes assessing the impact of human skills, organizationalprocesses, and external relationships on overall performance Such comprehensivemeasurement allows for better decision-making and enhances transparency in reportingorganizational value

While Saint-Onge’s model offers a robust framework for understanding intellectualcapital, it has faced some criticisms Quantifying intangible assets like human skills andrelational capital can be subjective and complex, making it difficult to implement the

model effectively Integrating Saint-Onge’s model with traditional financial metrics can

be challenging, potentially leading to inconsistencies in reporting Additionally, therapidly changing business environment means that the components of intellectual capitalcan evolve quickly, requiring continuous updates and adaptations to the model (Pulic,1998)

Human capital

Structural

capital

Customer capital

Source: Westberg and Sullivan

(1998) Figure 2.1 Saint-Onge’s model

One of the key strengths of Sveiby’s model is its emphasis on the dynamic interplaybetween these components By recognizing that intellectual capital is not static butconstantly evolving, Sveiby’s model encourages organizations to continually invest in and

develop their intangible assets For example, improving individual competence throughtraining and development can enhance the internal structure by fostering innovation andefficiency Similarly, strong external relationships can lead to increased customer loyaltyand better market positioning, which, in turn, supports overall organizational growth(Sardo and Serrasqueiro, 2017)

In practical applications, Sveiby’s model is particularly valuable for strategicmanagement and knowledge management In strategic management, the model helpsorganizations identify and leverage their intellectual capital to achieve competitiveadvantages By focusing on the holistic view of intangible assets, managers can develop

22 strategies that align with the organization’s strengths and address its weaknesses This comprehensive approach ensures that resources are allocated effectively to support long term growth and sustainability In the realm of knowledge management, Sveiby’s model 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 andlimitations One of the primary challenges is the difficulty in measuring and quantifyingintangible assets Unlike tangible assets, intellectual capital is often subjective andcomplex to evaluate, which can lead to inconsistencies and challenges in implementation.Additionally, integrating Sveiby’s model with traditional financial metrics can bechallenging, as conventional accounting systems are not designed to capture the value ofintangible assets effectively (Li and Zhao, 2018; Ghosh and Mondal, 2009)

Internal structure

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

Individual competence

(education, experience)

Source: Sveiby (1997)

Figure 2.2 Sveiby’s model

2.1.3 Skandia intellectual capital value scheme

The Skandia Navigator, introduced by Edvinsson and Malone (1997), is agroundbreaking framework for measuring and managing intellectual capital This model

marked a significant advancement in acknowledging the importance of intangible assetswithin organizations Utilizing a five-dimensional approach, the Skandia Navigatorprovides a comprehensive perspective on organizational performance (Brennan, 2001).The financial dimension covers traditional financial metrics to evaluate the company's

23 economic outcomes The customer dimension assesses customer satisfaction, loyalty, andmarket share The process dimension looks at internal processes, efficiency, andeffectiveness The renewal and development dimension reflects innovation, research anddevelopment activities, and organizational learning Lastly, the human dimension focuses

on metrics related to employee skills, competencies, and satisfaction (Edvinsson andMalone, 1997)

Market value Financial capital Intellectual capital

Human capital Structural capital

Innovation capital Process capital

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

Figure 2.3 Skandia intellectual capital value scheme

2.1.4 Sullivan’s model

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

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