Involuntary disclosure of intellectual capital: is it relevant?
| Published date | 09 January 2017 |
| DOI | https://doi.org/10.1108/JIC-10-2016-0102 |
| Date | 09 January 2017 |
| Pages | 29-44 |
| Author | John Dumay,James Guthrie |
| Subject Matter | Information & knowledge management,Knowledge management,HR & organizational behaviour,Organizational structure/dynamics,Accounting & Finance,Accounting/accountancy,Behavioural accounting |
Involuntary disclosure of
intellectual capital: is it relevant?
John Dumay and James Guthrie
Department of Accounting and Corporate Governance,
Macquarie University, Sydney, Australia
Abstract
Purpose –The purpose of this paper is to present an exploratory essay evaluating whether involuntary
intellectual capital disclosure (ICD) is value relevant to stakeholders. The authors define involuntary
disclosure as “what external stakeholders and stakeseekers disclose about a company”. This essay is timely
because it lays the foundations for future ICD research that departs from traditional analyses of corporate
reports, especially annual reports.
Design/methodology/approach –The paper provides a critical reflection on current and future
developments in ICD research. The normative arguments rely on the experience and expertise along with
examples from the ICD literature and contemporary business media to critique existing ICD research and
practice and to offer new ways forward for future research.
Findings –In highlighting the limitations of the traditional ICD literature, the authors provide a foundation
from which researchers should contemplate a powerful new force in ICD brought about by the rapid
transformation in technologies and forces of mass communication. The authors introduce the concept of
“involuntary disclosure”, and highlight several key issues that intellectual capital (IC) researchers should
consider if they want their academic endeavours to contribute not only to practice, but to a wider
environmental and social good.
Practical implications –Involuntary disclosures produced by stakeholders and stakeseekers introduce
opportunities and threats to organisations, bringing new risks that impact share value and reputations. How well
organisation manage these risks, and the impact inside and outside organisational boundaries, to provide
economic, environmental and social value, shouldprovide ample fuel for future transformationalIC research.
Originality/value –The most value relevant disclosures are not what an organisation discloses or reports
about itself, but rather what stakeholders and stakeseekers communicate. However, how reliable are
involuntary disclosures and how can stakeholders and organisations verify IC disclosures coming from
outside the organisation? If involuntary IC disclosures are value relevant, how might organisations seek to
influence and manage them to serve their ends?
Keywords Social media, Value relevance, Annual reports, Intellectual capital disclosure research and practice,
Involuntary disclosure, Qualitative information
Paper type Conceptual paper
1. Introduction
Those involved in contemporary business and finance and the professions face one of the
most challenging times since the Great Depression. At that time, the growing scale of
financial services responded to the demands to build railroads, vast chemical plants and
infrastructure projects. Transformations in the economy today are driven by a massive shift
in the way in which investment value is created. While fixed (tangible) assets continue to
remain important in certain industries, almost all contemporary organisations also depend
on their intellectual capital (IC) to create products and services and to create and sustain a
global competitive advantage (Petty and Guthrie, 2000).
As the twenty-first century advances, what may previously have been considered the
territory of science fiction is starting to creep over the horizon. Driverless cars and trucks will
Journal of Intellectual Capital
Vol. 18 No. 1, 2017
pp. 29-44
© Emerald PublishingLimited
1469-1930
DOI 10.1108/JIC-10-2016-0102
Received 11 October 2016
Accepted 14 October 2016
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1469-1930.htm
This paper has benefited from the constructive feedback and comments of many colleagues at several
academic conferences and presentations at different universities across the world. The authors
especially want to thank Charl de Villiers, Susanne Durst and Mario Abella for their constructive
insights, which the authors include in the paper. Also, thanks to Julz Guthrie and Fiona Crawford for
their editorial assistance.
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Involuntary
disclosure of IC
just be known as “autos”, many of the things we do at work will be automated and work
colleagues may include robots. Digital technologies –the internet, mobile phones, and other
tools to collect, store, analyse, and share information digitally –have spread quickly. Many
households in developing countries own a mobile phone, while the number of internet users has
more than tripled in a decade –from one billion in 2005 to an estimated 3.2 billion at the end of
2015 (World Bank, 2016). The digital revolution has brought immediate benefits –easier
communication and information, greater convenience and transparency, and free digital
products. It has also created a profound sense of social connectedness and global community.
Social media enables people to create, share or exchange information, ideas and images
in virtual communities and networks. Moreover, the development of new communication
technologies facilitates large volumes and velocity of data about a corporation –data that
are not produced or controlled by that corporation. This is a direct result of the changing
relationships and networks in our global economy (Dumay, 2009) and it is having a
profound impact on how organisations disclose information and communicate with
stakeholders (Dumay, 2016).
There has been an explosion in corporate disclosures through traditional and new media,
along with advances in technology, which has significantly altered how accounting and IC
information is produced, audited, disseminated, reported and consumed. Changes in the use
of social media and software have led to the production of more information, quicker
dissemination of that information and new ways to audit, access, evaluate and trade on that
information. Much of the information disclosed is qualitative in nature and associated with a
wider view of performance and accountability. Previous research mainly focusses on the
corporation’s production of voluntary or regulated information (van der Laan, 2009).
However, significant amounts of information are also now produced by those outside the
reporting corporation. Each of the changes outlined above introduces opportunities and
threats to the reporting organisation, along with new risks that may impact share value and
reputations. We focus on intellectual capital disclosure (ICD) and various research traditions
associated with this concept.
This paper introduces the concept of “involuntary disclosure”to the ICD literature and
research agenda. As such we define “involuntary disclosure”as what stakeholders and
stakeseekers disclose about an organisation. The paper is motivated by the desire to
open up the IC research agenda to new ways of thinking about ICD. We adopt Dumay’s
(2016, p. 169) revised version of Stewart’s (1997, p. x) original IC definition, in which Dumay
replaces the word “wealth”with “value”, highlighting that value is more than money,
because it incorporates utility and social and environmental value:
[IC] is the sum of everything everybody in a company knows that gives it a competitive edge […]
Intellectual Capital is intellectual material, knowledge, experience, intellectual property,
information […] that can be put to use to create [value].
How IC information and its communication emanate from sources other than the traditional
media associated with a corporation’s IC disclosure and reporting is of growing interest
(Dumay, 2016). In essence, this paper continues from where Dumay (2016) left off by
breaking down the differences between reporting and disclosure. Organisational disclosure
is defined as what “was previously secret or unknown”, so that “all stakeholders understand
how an organisation takes into consideration ethical, social and environmental impacts in
keeping with an eco-systems approach to IC”(p. 168). This new way of looking at disclosure
is necessary because current ICD research concentrates too much on voluntary disclosures
in documents such as annual reports. These documents have failed to disclose much IC
(see De Silva et al., 2014), so we are not able to see the whole picture.
Since the start of interest in IC and its contribution to value creation over two decades
ago (Guthrie et al., 1999), research into ICD has been a popular avenue for research as
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