Intellectual capital and bank branches' efficiency: an integrated study
| DOI | https://doi.org/10.1108/JIC-07-2020-0245 |
| Published date | 08 March 2021 |
| Date | 08 March 2021 |
| Pages | 840-863 |
| Subject Matter | Information & knowledge management,Knowledge management,HR & organizational behaviour,Organizational structure/dynamics,Accounting & finance,Accounting/accountancy,Behavioural accounting |
| Author | Irene Wei Kiong Ting,Fu-Chiang Chen,Qian Long Kweh,Hai Juan Sui,Hanh Thi My Le |
Intellectual capital and bank
branches’efficiency:
an integrated study
Irene Wei Kiong Ting
Faculty of Industrial Management, Universiti Malaysia Pahang,
Gambang, Malaysia
Fu-Chiang Chen
Department of Accounting Information, Chihlee Institute of Technology,
New Taipei City, Taiwan
Qian Long Kweh
Faculty of Management, Canadian University Dubai, Dubai, United Arab Emirates
Hai Juan Sui
Faculty of Industrial Management, Universiti Malaysia Pahang,
Gambang, Malaysia, and
Hanh Thi My Le
Faculty of Accounting, Ton Duc Thang University, Ho Chi Minh City, Vietnam
Abstract
Purpose –This study aims to investigate the association between intellectual capital (IC) and bank efficiency
of Taiwanese bank branches.
Design/methodology/approach –This study manually collects sample data from 107 non-public financial
reports of the bank branches of Taiwan Business Bank Company Limited. As this study concerns bank
branches, this study uses questionnaires related to IC to measure the implementation of IC at branch level. This
study employs data envelopment analysis (DEA) models (BCC, EBM and BootBCC) to identify bank branches’
efficiency. This study uses partial least square-based structural equation modeling analysis to assess the
impact of IC and bank efficiency.
Findings –Result reveals that relational capital (RC) significantly and negatively impacts bank efficiency.
Findings also imply that human capital (HC) and structural capital (SC) do not contribute to bank efficiency in
Taiwan.
Practical implications –Spending effort in building relationships with customers diverts banks’resources.
More inputs that are used may not be converted to outputs immediately. Bank branches should focus on
enhancing their service quality to attract customers to use the facilities provided by branches.
Originality/value –To the best of the authors’knowledge, this empirical study is the first to examine the
association between IC and bank branches’efficiency in Taiwan by integrating primary and secondary data.
For IC components, this study conducts a survey by designing the questionnaires related to IC to assess the
implementation of IC at bank branches in Taiwan. In terms of efficiency, this study uses bank financial data
and DEA models to identify bank branches’efficiency.
Keywords Intellectual capital, Bank branches’efficiency, Data envelopment analysis
Paper type Research paper
1. Introduction
With the rapid growth of innovation, technologies and a knowledge-based economic
environment, the contemporary business environment has transformed from emphasizing
traditional financial and physical resources to intangible ones (Poh et al., 2018). Intellectual
JIC
23,4
840
This research is funded by the Foundation for Science and Technology Development of Ton Duc Thang
University (FOSTECT), website: http://fostect.tdtu.edu.vn, under Grant FOSTECT.2019.B.14.
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 29 July 2020
Revised 11 December 2020
Accepted 18 January 2021
Journal of Intellectual Capital
Vol. 23 No. 4, 2022
pp. 840-863
© Emerald Publishing Limited
1469-1930
DOI 10.1108/JIC-07-2020-0245
capital (IC) is interpreted as intangible resources, which provides values and competitive
competence to a firm. IC is regarded as a critical element of performance in the knowledge-
based business environment. IC with its factors, such as the material of knowledge,
information, intellectual property and experience, is identified as a crucial drive in enhancing
firms’competitive competence, corporate success and shareholder wealth creation (Xu and
Li, 2019).
Bontis (1998) classified IC into three main components, namely, human capital (HC),
structural capital (SC) and relational capital (RC). The three components cover human
abilities and individual tacit knowledge (HC), namely, organizational processes, systems and
procedures (SC), including the built-up relationships with stakeholders, business partners
and customers (RC). These components increase organizational performance (Ferreira and
Franco, 2017). They constantly verify that the clear strategy of organizational processes,
management of relationships, proactive creation and innovation increase firm performance.
In recent years, the importance of IC has received great attention, particularly in the banking
context (Chowdhury et al., 2018). Banking sectors must provide high-quality services to
achieve strategic objectives and competitive success assurance, including human resource
training, brand building, systems and processes development (Ting et al., 2011). Many studies
(Buallay et al., 2019;Chen et al., 2014;Shih et al., 2010;Tiwari and Vidyarthi, 2018) confirmed
that successful banking sectors have leveraged to IC utilization, such as human resources
efficiency, brand image, organizational systems and processes (Chowdhury et al., 2018).
Thus, IC should be regarded as strategy resources, which is the platform for the banking
sectors to achieve high performance.
Ultimately, this study employs sample data from bank branches of Taiwan Business
Bank Company Limited, Taiwan. Banks in Taiwan serve as the inter-mediator in providing
financial resources (Chen and Yeh, 1998). In the early 1990s, the Taiwanese government has
imposed bank deregulation to increase bank efficiency and service quality. In July 2002, the
regulatory authority in Taiwan introduced the first financial restructuring to enhance the
competitive advantages and globalization in Asia (Hsiao and Lin, 2013). Moreover, along with
the trend of global financial liberalization and internationalization, the local banking
environment is becoming increasingly competitive in the 2000s (Chiu et al., 2013). The
banking industry has developed the capabilities for sustainable competitive advantage in
responding to external changes (Yang and Liu, 2012). With that, managing bank branches is
one of the main focuses for a bank’s survivorship. Shyu and Chiang (2012) further highlighted
that the bank’s profits mainly come from its branches, and the business operations at the
branch level decide the overall performance of the bank. This case has brought pressure to
the banking industry in ensuring the efficiency level of bank branches in Taiwan. This
circumstance compelled the banking industry to integrate their workforce, financial assets,
and the IC improvement to achieve sustainable operations (Shih et al., 2010), particularly for
bank branches in Taiwan. Fundamentally, this study attempts to further investigate the
association between IC and bank efficiency of Taiwanese bank branches.
This study contributes to the banking and IC literature. First, this study extends the
existing literature of IC in developing countries and focuses on bank branch efficiency,
particularly in Taiwan. Studies focusing on bank branches have limited coverage and
aspects. Examples include the following: (1) size efficiency relationship of UK bank branches
(Drake and Howcroft, 2002); (2) characteristics and operation efficiency of bank branches of
Greece (Giokas, 2008); (3) impact of market conditions to the efficiency of bank branches
in Greece (Pasiouras et al., 2009); (4) assessment of bank branches efficiency of Emporiki
Bank in Greece (Tsolas and Giokas, 2012); (5) efficiency level of 247 retail bank branches in
Malaysia (Saha et al., 2018). To the best of our knowledge, this study makes the first attempt
to identify the impact of IC on the efficiency of bank branches, specifically on bank branches
in Taiwan.
Intellectual
capital and
bank branches’
efficiency
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