Exploring the relationship between management accounting and structural capital in a knowledge‐intensive sector
| Published date | 16 January 2009 |
| Pages | 37-52 |
| DOI | https://doi.org/10.1108/14691930910922888 |
| Date | 16 January 2009 |
| Author | Peter Cleary |
| Subject Matter | Accounting & finance,HR & organizational behaviour,Information & knowledge management |
Exploring the relationship
between management accounting
and structural capital in a
knowledge-intensive sector
Peter Cleary
Department of Accounting, Finance & Information Systems,
University College Cork, Cork, Ireland
Abstract
Purpose – In the context of intellectual capital (IC) research, it has been proposed that management
accounting is most appropriately situated as an element of a firm’s structural capital. This paper sets
out to explore this contention within the confines of the indigenous Irish information and
communications technology (ICT) sector.
Design/methodology/approach – A survey instrument was used to collect the necessary data and
responses from 88 firms were generated. A form of structural equation modelling (SEM) called partial
least squares (PLS) was used to test the data.
Findings – The findings suggest that management accounting systems within the indigenous Irish
ICT sector have a positive influence on the generation of management accounting information. No
statistical support was found, however, for the suggestion that management accounting systems
positively influence firms’ structural capital, whereas the results did indicate a positive relationship
between management accounting information and structural capital. The findings strongly support
previous research on the relationships between the human, structural and relational dimensions of IC
and business performance.
Research limitations/implications – The research was conducted solely within the confines of
the Irish ICT sector. Further research is needed to explore the relevant relationships.
Practical implications – It is argued strongly that firms adapt/develop management accounting
systems to furnish themselves with the appropriate information required for the management and
measurement of their increasingly valuable stock of IC.
Originality/value – The paper explicitly explores the relationship between management accounting
and structural capital.
Keywords Management accounting, Intellectualcapital, Business performance, Ireland
Paper type Research paper
1. Introduction
Until recently, the global economic landscape was dominated by the industrial and
agricultural eras, in which economic value was synonymous with tangible assets.
However, the emergence of a new economic paradigm, known as the “knowledge
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1469-1930.htm
Funding for the research underpinning this paper has been facilitated by the Chartered Institute
of Management Accountants (CIMA). The author would like to acknowledge the useful insights
provided by his research colleagues David O’Donnell, Tom Kennedy, Philip O’Regan and Nick
Bontis, and to thank participants at the 29th McMaster World Congress in January 2008 for their
helpful suggestions.
Management
accounting and
structural capital
37
Journal of Intellectual Capital
Vol. 10 No. 1, 2009
pp. 37-52
qEmerald Group Publishing Limited
1469-1930
DOI 10.1108/14691930910922888
economy”, has led to suggestions that human capital has instead become the most
valuable organisational resource (Bontis, 1998; Pilch, 2000).
It has been argued that this development has not been paralleled at the firm level by
a sustained attempt to either develop new, or adapt extant management accounting
systems. Consequently, it has been claimed (Tayles et al., 2002) that many
knowledge-intensive firms may be unable to proactively identify, measure and manage
their stock of IC or to determine the extent to which such resources contribute to their
overall business performance.
Therefore, the aim of this paper is to explore the relationship between management
accounting and the structural capital dimension of IC as previous research (Roberts,
2003) has suggested that such a relationship exists. The remainder of the paper is
organised as follows: section 2 contains a literature review of the primary areas of
interest, section 3 outlines the research methodology adopted, section 4 outlines the
findings generated, section 5 discusses the results, and section 6 offers some
concluding remarks.
2. Literature review
Despite the non-agreement from the academic community on a definition for a firm’s
collection of non-physical resources (Brennan and Connell, 2000); the term “intelle ctual
capital” (IC) has emerged as a means to describe a firm’s collection of intangible
resources. While numerous definitions for IC exist (e.g. Edvinsson and Sullivan, 1996,
p. 358), the majority include reference to both knowledge and to some form of economic
value attached to intangible assets (Kaufmann and Schneider, 2004).
Notwithstanding the definitional debate, a categorisation of intangibles has
emerged to which the majority of academic researchers broadly conform (Bontis, 1998;
Roos et al., 1997; Sveiby, 1998). This consists of classifying IC as a combination of
human capital, structural capital and relational capital, and is the classification
adopted for this paper.
Human capital has been defined as the individual stock of knowledge accumulated
by a firm’s employees (Roos et al., 1997), while structural capital refers to the
procedures, systems and routines that comprise the core of the firm. Generally
speaking, accounting as a rules-based management technology represents a natural
element of structural capital (Roberts, 2003). Indeed, Bontis (1998, p. 66) argues that if a
firm has poor (accounting) systems in place, then their IC may not reach its full
potential. Finally, relational capital encompasses knowledge that is embedded in all of
the external relationships that a firm develops (Bontis, 1999, Bontis and Fitz-enz, 2002 ).
Pioneering research conducted by Bontis (1998) in Canadian mutual fund firms
suggested that the various dimensions of IC can have a significant and substantive
impact on firm performance. These findings were supported by Jain and Rangnekar
(2002) in research conducted in a variety of sectors in India, Do Rosario Cabrita and
Landeiro Vaz (2006) in research undertaken within the Portuguese banking sector, and
by Wang and Chang (2005) in research conducted in the Taiwanese IT sector.
Alternatively, Ordonez de Pablos (2002) found that only structural capital ha d a
positive and significant relationship on organisational performance, which was
supported by Bontis et al. (2000) in research conducted within a variety of Malaysian
industries.
JIC
10,1
38
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