Do banks accumulate a higher level of intellectual capital? Evidence from an emerging market
| DOI | https://doi.org/10.1108/JIC-03-2020-0097 |
| Published date | 03 November 2020 |
| Date | 03 November 2020 |
| Pages | 439-457 |
| Subject Matter | Information & knowledge management,Knowledge management,HR & organizational behaviour,Organizational structure/dynamics,Accounting & finance,Accounting/accountancy,Behavioural accounting |
| Author | Ngoc Phu Tran,Duc Hong Vo |
Do banks accumulate a higher level
of intellectual capital? Evidence
from an emerging market
Ngoc Phu Tran and Duc Hong Vo
Business and Economics Research Group, Ho Chi Minh City Open University,
Ho Chi Minh City, Vietnam
Abstract
Purpose –In developed countries, banks are perceived to accumulate a higher level of intellectual capital than
firms in other sectors. However, this perception has not been considered or tested in the context of an emerging
market such as Vietnam, which has one of the most dynamic economies in the Asian region. This study
estimates and compares the level of accumulation of intellectual capital and its four components by financial
and nonfinancial firms in Vietnam. Furthermore, this study examines the relationship between intellectual
capital and its components and the performance of financial and nonfinancial firms.
Design/methodology/approach–This study uses data collected from the annual reports of 75 financial and
75 nonfinancial firms in Vietnam from 2011 to 2018. A modified value-added intellectual coefficientmodel is
adopted to measure the level of intellectual capital at firms. Various aspects of intellectual capital are
considered,including the efficiencyof human capital, structural capital, capital employed andrelational capital.
In addition, the generalized method of moments is used to ensure the robustness of the findings.
Findings –Findings in this study indicate that financial firms in Vietnam have accumulated a higher level of
intellectual capital than nonfinancial firms. In addition, intellectual capital contributes positively to financial
firms’performance. Three components of intellectual capital –structural capital efficiency, capital employed
efficiency and relational capital efficiency –positively affect performance by financial firms.
Research limitations/implications –This study is limited to financial and nonfinancial firms in Vietnam.
Empirical studies in the future should incorporate the efficiency aspects of these types of firms because
different industries might have different characteristics, in particular, their current efficiency level, which
might cause differences in relation to the accumulation of intellectual capital.
Practical implications –The findings of this study provide valuable evidence and implications for
executives and policymakers in creating, managing and enhancing intellectual capital within the Vietnamese
context, in particular in the financial sector.
Originality/value –To the best of our knowledge, this isthe first empirical study conducted in the context of
Vietnam, with the following two objectives: (1) to measure and comparethe level of accumulation of intellectual
capital by financial and nonfinancial firms in Vietnam; and (2) to examine the contribution of intellectual capital
and its components to the performance by financial and nonfinancial firms in Vietnam.
Keywords Financial firms, Intellectual capital, Modified value-added intellectual coefficient, Non-financial
firms, GMM, Vietnam
Paper type Research paper
1. Introduction
In the context of globalization and the knowledge-based economy, firms enhance their
competitive advantage by shifting from tangible assets to intangible assets (Stewart, 1997;
Sveiby, 1997). Knowledge-based theory considers intellectual capital an intangible asset that
contributes to creating a competitive advantage for enterprises (Bollen et al., 2005;Bontis,
2001). Castro et al. (2019) consider that intellectual capital plays a major role in the knowledge-
based economy and is the key driver of a firm’s sustained competitive advantages.
Intellectual capital is defined as unique skills, knowledge and solutions that can be converted
into value in the market, leading to an increase in firm competitiveness, productivity and
market value (Pulic and Kolakovic, 2003).
The role of intellectual capital in firm performance is increasing, so it is necessary to
examine the dynamics of this role and the contribution of intellectual capital to firm
Banks and
higher level of
intellectual
capital
439
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1469-1930.htm
Received 19 March 2020
Revised 27 May 2020
25 July 2020
Accepted 29 September 2020
Journal of Intellectual Capital
Vol. 23 No. 2, 2022
pp. 439-457
© Emerald Publishing Limited
1469-1930
DOI 10.1108/JIC-03-2020-0097
performance. Selected studies have been conducted to examine the effect of intellectual
capital on firm performance with a focus on financial firms (Haris et al., 2019;Firer and
Williams, 2003) and manufacturing enterprises (Xu and Wang, 2019). Xu and Li (2019) find a
difference in the level of intellectual capital efficiency between high-tech and nonhigh-tech
small and medium-size enterprises in China. The impact of intellectual capital on firm
performance in Asian emerging markets has been examined in previous studies (Indonesia,
Soetanto and Liem, 2019; Thailand, Tran and Vo, 2018; Malaysia, Goh, 2005). In particular,
Soetanto and Liem (2019) argue that intellectual capital affects the market-to-book value of
knowledge-based industries, which have intensive use of technology and/or human capital. In
a study on Thailand’s banking sector, Tran and Vo (2018) conclude that bank profitability is
driven mainly by the efficiency of capital employed. Goh (2005) asserts that banks have
accumulated less structural capital efficiency than human capital efficiency.
Since joining the Association of Southeast Asian Nations (ASEAN), Vietnam has emerged
as a country with remarkable economic growth and development. In recent years, leaders in
the economic growth among ASEAN members have been emerging markets, such as
Vietnam (OECD, 2018). Figure 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% annually –one of the rates in the world (Trieu, 2019).
In addition, Vietnam has become closely integrated into the regional and world economy,
with strong trade commitments, such as the European-Vietnam Free Trade Agreement, the
Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the Vietnam-
Eurasian Economic Union Free Trade Agreement and the ASEAN–Hong Kong, China Free
Trade Agreement.
In addition, as shown in Figure 2, Vietnam has increased its investment in infrastructure
to bridge the gap with other ASEAN member countries. Vietnam’s spending on
infrastructure is the second most rapid among ASEAN members, 11.5%, which is almost
double the rate of GDP growth for the period 2012–2016. However, the business environment
in Vietnam is still maturing, with institutional gaps that undermine investor confidence.
Figure 2 also indicates that satisfaction with the investment environment is still lower in
Vietnam than in other emerging markets in Asia.
Moreover, in 2017–2018, the global competitiveness index for Vietnam lagged behind that
of other ASEAN members, such as Malaysia, Indonesia and Thailand. Vietnam has a
competitive advantage from its low labor costs. However, its low technology readiness (in the
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Vietnam ASEAN 5 World
Source(s): IMF (2020). ASEAN 5: Indonesia, Malaysia, the Philippines, Thailand, and Vietnam
Figure 1.
Real GDP growth
trends: Vietnam,
ASEAN and the world
JIC
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