Exploring the impact of intellectual capital on company reputation and performance
| DOI | https://doi.org/10.1108/JIC-01-2018-0012 |
| Pages | 915-934 |
| Date | 24 August 2018 |
| Published date | 24 August 2018 |
| Author | Gianluca Ginesti,Adele Caldarelli,Annamaria Zampella |
| Subject Matter | Knowledge management,Information & knowledge management,Accounting/accountancy,Organizational structure/dynamics |
Exploring the impact of
intellectual capital on company
reputation and performance
Gianluca Ginesti, Adele Caldarelli and Annamaria Zampella
Department of Economics, Management, Institutions (DEMI),
Università degli Studi di Napoli Federico II, Napoli, Italy
Abstract
Purpose –The purpose of this paper is to analyse the impact of intellectual capital (IC) on the reputation and
performance of Italian companies.
Design/methodology/approach –The paper exploits a unique data set of 452 non-listed companies that
obtained a reputational assessment from the Italian Competition Authority (ICA). To test the hypotheses, this
study implemented several regression analyses.
Findings –Results support the argument that human capital efficiency is a key driver of corporate
reputation. Findings also reveal that companies, which obtained reputational rating under ICA scrutiny, show
a positive relationship between IC elements and various measures of financial performance.
Research limitations/implications –The study focuses on a single country; it is not free from the
imprecisions of Pulic’s VAIC model.
Practical implications –Thispaper recommendscompanies thatare interestedto achieve a robust reputation
shouldconsider thehuman capital as a strategicintangibleasset. Second,the results suggestthat companieswith
an ICA reputational rating are able to leverage their intangibles to potentiate performance and competitiveness.
Originality/value –This is the first empirical investigation on the contribution of IC in generating value for
corporate reputation. Additionally, the study contributes to the literature on the link between IC and
performance by examining a sample of firms not yet explored in prior research.
Keywords Financial performance, VAIC, Corporate reputation, Intellectual capital, Accounting ratios
Paper type Research paper
1. Introduction
The topic of intellectual capital (IC) has gained relevant consideration among academics,
practitioners and consultants because, in the current knowledge era, companies compete,
relying more on intangible resources such as technologies, innovations in process and
organization, employee abilities, creativity, relationships with external partners and
industry networks (Starovic and Marr, 2004; Cordazzo, 2005; Kujansivu and Lönnqvist,
2007; Keong Choong, 2008; Berezinets et al., 2016). The prominence of IC has also been
established in academic research in a more broad-spectrum setting –for instance, to explain
the determinants of national competitiveness and prosperity (Vale et al., 2016; Roos, 2017).
Despite the debate on the concept of IC and its consequences continuously evolving (Dumay
and Garanina, 2013), there is a common view in literature on the ability of intangible factors
to generate a company’s value and distinctive competitive advantages (Bontis, 1996; Petty
and Guthrie, 2000; Marr et al., 2003; Roos, 2017).
In the view of an increasing usefulness of intangible resources for companies and general
economy, researchers have proposed several methodological frameworks and empirical
investigations for evaluating IC elements and their economic effects (Marr et al., 2003;
Goebel, 2015).
Starting in the 2000s, a number of studies have examined the role of IC in the
value-creating process, predominantly focusing on corporate performance (Riahi-Belkaoui, 2003; Journal of Intellectual Capital
Vol. 19 No. 5, 2018
pp. 915-934
© Emerald PublishingLimited
1469-1930
DOI 10.1108/JIC-01-2018-0012
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1469-1930.htm
The authors would like to thank Professor Rory Chase, Editor in Chief, and the anonymous referees for
their valuable comments.
915
Impact of
intellectual
capital on
company
Chen et al., 2005; María Díez et al., 2010; Clarke et al., 2011; Dumay, 2014; Scafarto et al., 2016;
Roos, 2017). This study aims to extend current research by examining the impact of IC on
company reputation and performance.
First, to the best of the authors’knowledge, little is known about the impact of IC and its
elements on company reputation. This is of fundamental importance, because scholars have
shown heightened attention in understanding the firm-level factors driving reputation
(Highhouse et al., 2009) and several arguments suggest intellectual assets play a central role
(Harrison and Sullivan, 2000). For instance, a seminal work by Petty and Guthrie (2000)
advocates that reputation is intangible in nature; however, it is the result of the judicious
leverage of firms’intangible resources. In this respect, a number of authors have pointed
out that IC and its elements are critical drivers for improving company reputation (Dolphin,
2004; Rindova et al., 2005; Zabala et al., 2005; Cravens and Oliver, 2006; Petkova et al., 2008).
To support organizations in building a better reputation, business consultants and
practitioners are beginning to pay greater attention to these argumentations, as exemplified
by the following quote:
“A strong, positive reputation translates into long-term value in an organization represented
by confidence in brand equity, intellectual capital, sustained earnings and future growth”. Deloitte
(June, 2016).
Second, the paper contributes to prior research by investigating whether Italian companies
that obtained reputational rating under authority scrutiny rely on their IC to achieve better
financial performance.
To implement the empirical investigation, this study exploits a unique data set of
452 non-listed Italian companies that gained a reliable reputational assessment via the
legality rating (LR) released by the Italian Competition Authority (ICA). More precisely, this
study uses the LR as a proxy for company reputation and adopts a methodology based on
the principles of the value added intellectual coefficient (VAIC), developed by Pulic (2000) to
measure IC and its constituents (Kujansivu and Lönnqvist, 2007; Pew Tan et al., 2007;
Clarke et al., 2011; Ghosh and Maji, 2015). According to prior literature, measures of
financial performance are calculated on the basis of several accounting ratios (ROA, ROI,
ROE and ATO).
The main results of the analysis reveal that human capital efficiency (VAHU) has a
positive influence on the LR and, contrary to prediction incorporated in the hypothesis, the
structural capital efficiency (STVA) is found to have an opposite effect. The findings also
document a positive impact of VAIC, capital employed efficiency (VACA) and STVA on
most of the measures of financial performance used in the analysis.
The contribution of this study to the literature is twofold. First, by focusing on the
impact of IC on reputation, this empirical investigation extends studies that examine the
ability of intangible factors to create value for organizations. In this respect, this article is
also related to the evolving literature on the antecedents of corporate reputation (Brammer
et al., 2009). Second, this research contributes to improve general understanding of the
relationship between IC and financial performance by providing the first empirical evidence
for a sample of companies not yet explored in literature.
From a practical point of view, this research highlights the importance of promoting
new and better management initiatives to sustain the value creation dynamics of IC
(Grimaldi et al., 2013). In particular, this paper offers fresh inputs for managerial practices
in order to identify which intangible factors can be addressed to build or maintain a strong
corporate reputation.
Finally, the results of this study may also be of interest to policymakers and investors, as
they suggest that companies, which have obtained regulatory scrutiny of reputation,
demonstrate the ability to leverage IC to enhance their profitability and competitiveness.
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