Data envelopment analysis as method for evaluating intellectual capital
| Published date | 01 December 2005 |
| DOI | https://doi.org/10.1108/14691930510628807 |
| Pages | 528-543 |
| Date | 01 December 2005 |
| Author | Karl‐Heinz Leitner,Michaela Schaffhauser‐Linzatti,Rainer Stowasser,Karin Wagner |
| Subject Matter | Accounting & finance,HR & organizational behaviour,Information & knowledge management |
Data envelopment analysis as
method for evaluating intellectual
capital
Karl-Heinz Leitner
Department of Technology Policy, ARC Systems Research GmbH,
Seibersdorf, Austria
Michaela Schaffhauser-Linzatti
Faculty of Business, Economics and Statistics, University of Vienna,
Vienna, Austria
Rainer Stowasser
Office Austrian Science Board, Vienna, Austria, and
Karin Wagner
Oesterreichische Nationalbank (Austrian Central Bank),
Vienna, Austria
Abstract
Purpose – The purpose of this paper is to demonstrate the usefulness of data envelopment analysis
(DEA) as a consulting and management tool that fulfils the requirements of quantitatively and
comprehensively evaluating and benchmarking the efficiency of intellectual capital (IC).
Design/methodology/approach – DEA is applied for a sample of input and output data of all
technical and natural science departments of Austrian universities. Correlation and factor analyses
are carried out to select appropriate variables of the sample. DEA estimates the production
function of the units under evaluation in relation to peer units, which are identified as fully
efficient.
Findings – Results illustrate the existence of scale efficiencies of Austrian university departments
and show a large heterogeneity within and among universities as well as between different fields of
study with respect to their efficiency.
Research limitations/implications – DEA is mainly appropriate for larger samples inside an
organisation or among different organisations. The method can be easily transferred to similar
management situations in other types of organisations or industries, where the efficiency of IC should
be assessed.
Practical implications – The results reveal detailed improvement or reduction amounts of each
input and output of the evaluated organisational units and indicate areas for managerial action at
Austrian universities.
Originality/value – For the first time DEA is applied for evaluating and benchmarking IC of
Austrian universities. DEA is proposed as consulting and management tool for evaluation IC
performance.
Keywords Data analysis, Intellectual capital, Universities, Austria
Paper type Research paper
The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at
www.emeraldinsight.com/researchregister www.emeraldinsight.com/1469-1930.htm
The authors thank Julia Prikoszovits from the Austrian Rectors’ Conference as well as our
reviewers for helpful comments and support.
JIC
6,4
528
Journal of Intellectual Capital
Vol. 6 No. 4, 2005
pp. 528-543
qEmerald Group Publishing Limited
1469-1930
DOI 10.1108/14691930510628807
1. Introduction
In the last few years, management and reporting of intellectual capital (IC) has not only
received the attention of private firms, but also of public institutions, research
organisations, regions, and countries. In spite of growing academic literature on IC
management, consultants still lack quantitative and financial methods for analysing IC
in practice. There exist numerous methodical approaches that evaluate single aspects
of IC, e.g. human resources or customer capital, yet, satisfying approaches that
integrate IC as one unitary asset are still lacking. Indicator-based IC management
systems often used by consulting firms such as the Balanced Scorecard (Kaplan and
Norton, 1992), the Intangible Asset Monitor (Sveiby, 1997) or the IC Navigator
(Steward, 1997) have shortcomings in evaluating and benchmarking a set of IC
indicators and calculate the performance and exploitation of IC of organisations or
organisational departments based on different scales of indicators.
We are the first to propose data envelopment analysis (DEA) as an IC management
and consultancy tool for evaluating and benchmarking IC for all Austrian universities.
Hereby, we measure the value of an organisation’s IC by calculating its relative
efficiency within a set of comparable units. This allows to benchmark and rank these
units with respect to their potential efficient use of IC. DEA has been successfully used
for efficiency analysis in many fields, for instance for banks (Wheelock and Wilson,
1995), start-up companies (Fuertes Callen et al., 2005) or various industrial sectors
(Lovell, 1993). DEA is an approach to estimate the production function of organisations
and organisational units and enables the assessment of their efficiency. The
advantages of this method are that it can cope with variables of different scales and
that it incorporates multiple input and multiple output ratios (the majority of the other
approaches is based on one single output per one single input ratios). Most of all, due to
its benchmarking approach, DEA represents a competitive analysis by matching
actual practice with reference targets. Hereby, it reveals the strengths and weaknesses
of an organisational unit under evaluation in relation to peer units, which are identified
as fully efficient. For all inefficient organisational units, consultants can easily find and
quantify improvement potentials (e.g. cost reductions, revenue increases) for each IC
component included in the evaluation. Furthermore it enables ranking, as this is an
evaluation relative to all units under consideration. Although in this paper the method
of DEA is applied for universities, the overall usefulness for managers, investors, and
consultants should be pointed out.
The Austrian Ministry for Education, Science and Culture[1] has recognised that the
efficient use of IC is essential for university performance. It adopted the idea of IC
reporting to enhance transparency, to foster the management of intangible resources,
and to set incentives for performance orientation. According to the current university
law (Universitaetsgesetz 2002 – UG 2002, passed in August 2002), all universities will
have to issue annual IC reports by 2006. Within this IC report, each university will have
to publish input, output, and performance indicators for industry, teaching, research,
and for other forms of outputs. The IC report should serve as a management
instrument for the university as well as a communication instrument between
universities and the Ministry. The reorganisation of Austrian universities reveals a
high demand for such a new instrument since universities are provided with greater
autonomy and thus have to take decisions on the resource allocations with respect to
their tangible and intangible assets. Moreover, the Austrian science and education
Data
envelopment
analysis
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