Evaluating fashion retailers' intellectual capital: key money as a part of customer capital
| DOI | https://doi.org/10.1108/JIC-12-2019-0287 |
| Published date | 24 July 2020 |
| Date | 24 July 2020 |
| Pages | 173-194 |
| Subject Matter | Information & knowledge management,Knowledge management,HR & organizational behaviour,Organizational structure/dynamics,Accounting & finance,Accounting/accountancy,Behavioural accounting |
| Author | Fabio Fiano,Jens Mueller,Niccolò Paoloni,Massimiliano Farina Briamonte,Domitilla Magni |
Evaluating fashion retailers’
intellectual capital: key money as a
part of customer capital
Fabio Fiano
Link Campus University, Roma, Italy
Jens Mueller
Massey University in New Zealand, Albany∕Auckland, New Zealand
Niccol
o Paoloni
Department of Engineering, Roma Tre University, Roma, Italy
Massimiliano Farina Briamonte
Link Campus University, Roma, Italy, and
Domitilla Magni
Department of Business Studies, Roma Tre University, Roma, Italy
Abstract
Purpose–The purpose of this paper is to enrich the scientific and managerial debate on intangibles by placing
the concept of key money within the broader concept of Intellectual Capital, and by proposing an evaluation
approach for a portion of the latter, focusing the analysis on fashion retailers.
Design/methodology/approach –This research focuses on the fashion industry, given that key money
gains particular significance and accounted for in fashion retailers’financial statements. A comparative case
study is presented with regard to the application of two evaluation methods proposed to some fashion retailers
operating in Italy.
Findings –This paper defines a suitable placement for key money within the vast structure of intellectual
capital. The research shows that the two methods give “very close”key money values, thus laying the
foundations for a theoretical articulation of interest to be further explored in future researches.
Originality/value –The document represents a first in-depth examination regarding the evaluation and
inclusion of key money in the intellectual capital. A further element of originality lies in having interpreted the
key money in a perspective closer to the world of intangibles and competitive strategies, to the detriment of the
previous (meagre) settings that placed it within the real estate branches of study.
Keywords Intellectual capital, Intangible assets, key money, Fashion industry, Valuation, Competitive
strategy
Paper type Case study
1. Introduction
Over the last years the definition of Intellectual Capital and the related measurement
parameters have been the subject of intensive research and of a number of academic and
managerial debates.
The “knowledge management”stream of literature (Armistead, 1999;Darroch, 2005;Del
Giudice and Maggioni, 2014;Del Giudice and Della Peruta, 2016;Giampaoli et al., 2017;Papa
et al., 2018) underlines the importance of intangible assets. In a knowledge society, Intellectual
Capital is a key factor (Bukh et al., 2001).
The combination of financial (i.e. tangible assets) and intellectual values (i.e. intangible
assets) is normally considered as the market value of a business (Chen et al., 2005;
Fashion
retailers’
intellectual
capital
173
Dedicated to Roberto Fiano
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 9 December 2019
Revised 23 March 2020
19 May 2020
Accepted 6 July 2020
Journal of Intellectual Capital
Vol. 23 No. 2, 2022
pp. 173-194
© Emerald Publishing Limited
1469-1930
DOI 10.1108/JIC-12-2019-0287
Abdolmohammadi, 2005). Financial statements accounting tends to fulfil needs other than
the valuation of the Intellectual Capital and of the Knowledge Resources (KR) of firms. The
firm’s transparency commitment to shareholders, potential investors and market analysts is
enhanced by the understanding of the real value of the total assets, which provides a more
accurate representation of a comp any’sworth(Ramezan, 2011). In this sce nario, the debate
on firms’resources (Bozzolan et al. ,2003;Abdolmohammadi, 2005;Ramezan , 2011;Biscotti
et al., 2018) is growing up: the challenge for KR, Intellect ual Capital, and Knowledge
Management scholars is to understand how the peculiar aspects of Intellectual Capital
integrate with the firms’resou rces –tangible or intangible –(Bontis, 2003). Furthermo re,
through this paper, we want to enrich the scienti fic and managerial debate on intangib les by
placing the concept of key mon ey within the broader framework of Intellect ual Capital. The
purpose of the paper is part of this aca demic discussion: the aim is to define the context of
assessment of Intellectual C apital in a KR perspective. Th ere is a lively open debate
concerning the evaluation an d definition of Intellectual Capital where the con ceptual
structure of representati on is agreed upon (Davey et al., 2009). The value of this intangib le
asset is considerable for most fi rms, often exceeding the book value (Edvi nsson and Malone,
1997;Yang and Lin, 2009).
A fundamental characteristic of Intellectual Capital is its natural tendency not to respect
the corporate “perimeter”(Petty and Cuganesan, 2005). Many of the intangible assets, in fact,
are not located within the firm, but outside its borders. Here is a first subdivision of the
Intangible Heritage is done by recognizing an external and an internal value. On the outside,
the so-called Relational Capital is identified, while on the inside, Human Capital and
Structural Capital (or Organizational Capital) are often distinguished (Davey et al., 2009).
Moreover, given the growing importance that Intangibles have come to assume in recent
decades, many scholars have proposed different definitions and dimensions of Intellectual
Capital.
According to Leliaert et al. (2003), four communicating vessels form Intellectual Capital:
human capital, relational capital, competitive capital, and structural capital.
Furthermore, a number of other scholars (Lev, 2001;Rezende, 2001;Rodrigues et al., 2009;
Rocha, 2012) essentially use three distinct categories to indicate the intangible assets forming
the Intellectual Capital: market assets, individual competence assets, and structure assets.
Scholars think fit that, the importance of intellectual capital having been confirmed, it is
important (1) to identify its impact on the firm’s value, and (2) to measure said value produced
by a firm’s organizational knowledge (Wernke, 2002).
In order to compete (and differentiate themselves) within the volatile and fast-changing
fashion industry, firms highly dependent on Intellectual Capital.
In fashion industry, value-creating intangible assets are marketing-related (trademarks,
brands, trade names, licences, supplier relationships, know-how, designers) as well as
customer-related –assets used to attract, retain and manage clients (King, 2007;Iyer and
Muncy, 2005;Easey, 1995).
Also, for fashion-luxury sector, intangible assets are therefore corporate resources that do
not have a physical existence, but which contribute to the generation of firm value; in fact,
they participate in the achievement of firm’s sustainable competitive advantages. In this
specific case, the location of the points of sale is alsopart of the intellectual capital of the brand
(Watson et al., 2005). Fashion retailers must also pay close attention to the choice of adequate
positions for their points of sale when formulating competitive strategies. In fact, one of the
most important factors in commercial development in the fashion-luxury sector is the
opening of new stores, or the takeover of those previously occupied by other brands, in
strategic locations. This requires expertise in the choice of the location and the time. Some
areas and streets are a privy to the most renowned fashion brands and it is thus difficult to
have the possibility to enter into a lease agreement, because customarily, the lessees of a shop
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