An evidence‐based taxonomy of intellectual capital

Date31 July 2007
Publication Date31 July 2007
AuthorChing Choo Huang,Robert Luther,Michael Tayles
SubjectAccounting & finance,HR & organizational behaviour,Information & knowledge management
An evidence-based taxonomy of
intellectual capital
Ching Choo Huang
Faculty of Accounting, UiTM, Selangor, Malaysia
Robert Luther
Bristol Business School, University of the West of England, Bristol, UK, and
Michael Tayles
University of Hull, Hull, UK
Purpose – Though intellectual capital (IC) has received much attention for more than a decade, there
is a lack of consensus on its components and definition. IC is a multi-disciplinary concept and the
understanding of it varies across different business-related disciplines. This paper seeks to propose a
grouping of IC items based on empirical evidence in the form of managers’ responses to questions
about the availability of information about IC inside their companies.
Design/methodology/approach – A postal questionnaire was implemented across 520 companies
listed on the main board of Bursa Malaysia. The empirical grouping of IC derived by factor analysis is
compared with a priori groupings constructed from the IC literature.
Findings – It is found that the conventional three a priori categories namely human capital,
customer capital and structural capital – expand into eight facets. Nevertheless, there is remarkable
consistency between literature-based expectations and empirical groupings.
Research limitations/implications – The paper takes a broad scope perspective and in this
rapidly evolving field, is based on information in place in 2005. In addition, the usual limitations of
postal questionnaire surveys apply. Extension of this research approach to other cultures may reveal a
different set of groupings and such research is encouraged.
Practical implications Managers and designers of information systems may use the findings as a
benchmark against which to evaluate their own systems or proposals. More significantly, the
eight-factor model facilitates conceptualisation, measurement and management of IC and the
preparation of IC reports.
Originality/value – This evidence-based confirmation of the broad three-category model, together
with the empirical identification of more detailed facets, makes a contribution to the as yet largely
normative literature on the classification of the components of intellectual capital.
Keywords Intellectualcapital, Financial reporting, Classification, Malaysia
Paper type Research paper
Though the concept of intellectual capital (IC) has received much attention for more
than a decade, there is a lack of consensus on its components and definitions. There is
little agreement and much confusion regarding the definition of IC (Marr, 2005, p. xiv).
IC is a multi-disciplinary concept and the understanding of it varies across different
business-related disciplines. The concept was developed to deal with specific sets of
The current issue and full text archive of this journal is available at
The authors would like to thank the Malaysian Accountancy Research & Education Foundation
(MAREF) for funding this research.
Journal of Intellectual Capital
Vol. 8 No. 3, 2007
pp. 386-408
qEmerald Group Publishing Limited
DOI 10.1108/14691930710774830
issues and problems. According to Chatzkel (2002), all definitions are valid and it is up
to the user to select the definition that works best to meet any particular sets of needs.
Pioneering IC models originated mainly from Scandinavia and North America.
While the IC concept has “travelled” to Australia and some Asian countries, its
taxonomy, which was initially developed in “the West”, may not be universally
appropriate. Moreover, categorising IC helps companies to understand what it is. The
IC literature, in common with that of other immature “sub-disciplines”, such as
performance management, reveals a prevalence of often inconsistent, normativ e
models and it is instructive to explore the extent to which the numerous line items that
are referred to can be reconciled and synthesised.
This paper proposes an evidence-based grouping of IC items based on managers’
questionnaire responses and tests the validity of the a priori literature-based IC model
against that of the empirical findings. The research was conducted in Ma laysia, the
fifth most competitive country in the world according to the 2004 World
Competitiveness Yearbook. It follows earlier successful research into intellectual
capital in developing countries by Abeysekera and Guthrie (2004).
Definitions and components of intellectual capital
The task of constructing a classification of IC also implies defining it. Theoretical
research has attempted to define and classify IC (Brooking, 1996; Roos et al., 1998;
Sveiby, 1997; Edvinsson and Malone, 1997). The Organisation for Economic
Co-operation and Development (1999) describes IC as the economic value of two
categories of intangible assets of a company:
(1) organisational (structural) capital; and
(2) human capital.
However, most IC models assume three categories concerned with external
relationships, with internal infrastructure, and with people (Saint-Onge, 1996;
Stewart, 1997; Sveiby, 1997; Roos et al., 1998; O’Donnell and O’Regan, 2000). Tseng and
Goo (2005) state that most IC models comprise three interrelated categories and display
them in a table (see Table I).
To Petty and Guthrie (2000, p. 158), “[A] number of contemporary classification
schemes have refined the distinction by specifically dividing IC into the categor ies of
external (customer-related) capital, internal (structural) capital and human capital”. Of
the three categories, structural capital is sometimes subcategorised into pro cess
capital, intellectual property and innovation capital (Chatzkel, 2002). The classifica tion
schemes of IC models also differ. Knight (1999), for instance, identifies an additional
factor, financial performance in addition to the human, structural and external capital.
The Intangible Asset Monitor (Sveiby, 1997; 1998) and the Balanced Scorecard
(Kaplan and Norton, 1992) classify intangibles into three categories. Both suggest that
non-financial measures provide a means of complementing financial measures. The
Balanced Scorecard, with measures for customers, internal processes and innovation
alongside financial measures, was designed to focus managers’ attention on those
factors that help the business strategy; it was not originally developed to focus on IC
but has now been “adopted” into the IC literature.
Robinson and Kleiner (1996) recommend that when good measures of IC are not
available, indicators should be used as a means of signalling that IC is present or
Taxonomy of

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