Performance measurement, intellectual capital and financial sustainability
| Published date | 10 July 2017 |
| Date | 10 July 2017 |
| Pages | 643-666 |
| DOI | https://doi.org/10.1108/JIC-11-2016-0115 |
| Author | Ricardo Vinícius Dias Jordão,Vander Ribeiro de Almeida |
| Subject Matter | Information & knowledge management,Knowledge management,HR & organizational behaviour,Organizational structure/dynamics,Accounting & Finance,Accounting/accountancy,Behavioural accounting |
Performance measurement,
intellectual capital and
financial sustainability
Ricardo Vinícius Dias Jordão
Department of Management, Fundacao Cultural Dr Pedro Leopoldo,
Pedro Leopoldo, Brazil, and
Vander Ribeiro de Almeida
Fundacao Cultural Dr Pedro Leopoldo, Pedro Leopoldo, Brazil
Abstract
Purpose –One of the main contemporary challenges in organisations is finding ways of measuring their
intellectual capital (IC), and its effects on competitiveness and financial sustainability. The purpose of this
paper is to analyse the influence of IC on the long-term financial performance of Brazilian companies.
Design/methodology/approach –Considering that previous studies have not been able to explain the role
of IC in financial sustainability (measured by long-term corporate performance), this paper attempts to fill this
gap by means of a quantitative, descriptive and applied study. Based on the theories of knowledge
management, accounting and finance, the authors have undertaken a study of the companies listed on the
BM&FBovespa, based on secondary data, using a multi-industrial cut, over the period 2005 to 2014,
using descriptive and multivariate statistics.
Findings –The analysis supports three major conclusions: IC influences positively the profitability and
corporate return of these companies; the more intangible-intensive public companies listed on the
BM&FBovespa demonstrate higher financial sustainability than the others, in terms of profitability and
corporate return, either individually, globally or by industry; and that IC helps increase financial performance,
systematically, over time.
Research limitations/implications –Contributions of the following types were sought: theoretical
(increasing an understanding of the effects of IC on business performance from a long-term perspective –an
understanding that is still only incipient in the management literature); and empirical (increasing
an understanding of the role of IC in the differentiation of companies, in organisational profitability and on the
return on applications of resources).
Practical implications –The original proposal for the measurement of financial performance presented in
this paper proved to be valid and consistent, complementing what is known about the subject under
examination, contributing to the improvement of management theory and practice and providing a
competitive benchmarking process. This can make it possible for company analysts or managers to evaluate
their company in relation to its industry or its market as a whole by means of such indicators, individually or
combined with other quantitative or qualitative metrics.
Originality/value –The results of this research reduce a gap in the management and accounting literature,
as they shed light on the performance measurement process. In addition to the range and depth of the
statistical tests carried out, attention should be drawn to the originality of the proposal presented in this
paper. This facilitates the measurement of the effects of IC on financial performance through the selection and
application of specific indicators for the assessment of the contribution of IC to organisational results.
Keywords Competitiveness, Performance measurement, Accounting and finance,
Knowledge management, Intellectual capital, Financial sustainability
Paper type Research paper
1. Introduction
In the knowledge economy, intellectual capital (IC), because of its changeable and wide-
ranging dynamic nature, has become the main mechanism in a company’s capacity to stand
out from its competitors (Brooking, 1996; Edvinsson and Malone, 1997; Sveiby, 1997;
Stewart, 1999; Bontis, 2000; Jardon and Martos, 2012; Jordão et al., 2013; Khalique and
Isa, 2014; Ferenhof et al., 2015; Novas et al., 2017; Jordão, 2015; Andreeva and Garanina,
2016; Verbano and Crema, 2016; Mendoza, 2017; González et al., 2017). This economy
Journal of Intellectual Capital
Vol. 18 No. 3, 2017
pp. 643-666
© Emerald PublishingLimited
1469-1930
DOI 10.1108/JIC-11-2016-0115
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1469-1930.htm
643
Intellectual
capital
received great stimulus from the information and communication technologies and is
characterised by the intensive use of knowledge in organisational processes and business
management. These ideas are in tune with the observations of Jardon and Martos (2012),
Cricelli et al. (2013) and Jordão et al. (2013), which show that information and knowledge are
two of the principal resources utilised by companies in the generation of future results.
These resources stimulate the development and maintenance of human capital, improve
processes, encourage learning and growth, expand customer loyalty and partnerships with
suppliers, and produce greater innovation, to mention some of the aspects that generate
sustainable competitive differentials and result in improvements in financial performance
and in the generation of value.
Nevertheless, one of the greatest challenges for contemporary management theory is the
measurement of the value of organisational knowledge. According to Jordão and Colauto
(2013), companies and the market seek models and/or techniques that permit the reliable
recognition, measurement and assessment of intangible company equity. In addition,
this challenge, in the view of Bontis (1996) and Bontis et al. (1999), increases considerably in
importance in a context where company value increasingly depends on IC and on the
intangible assets (IA) that are part of it, instead of on other conventional resources like land,
capital and labour. The challenge of measuring the effects of IC on sustainable financial
performance, especially on the corporate return and profitability, therefore, is a research
problem that needs to be examined more deeply, because, according to Roos et al. (1997),
Edvinsson and Malone (1997), Sveiby (1997), Bontis (2000), Tseng and Goo (2005),
Jordão et al. (2013) and Novas et al. (2017), what is known on the theme is still quite little.
Recognising and exploring this gap in the investigation, the objective of this paper is to
analyse the influence of IC on the long-term financial performance of Brazilian companies.
To this end the companies listed on the BM&FBovespa were taken as the base, utilising a
multi-industrial cut, over the period 2005 to 2014.
The research is justified to the extent that its results contribute to a substantial segment
of society, as defended by Jordão et al. (2014). Thus, in addition to the recommendations of
scholars like Brooking (1996), Edvinsson and Malone (1997), Stewart (1999), Sveiby (1997),
Bontis (2000), Jardon and Martos (2012), Khalique and Isa (2014), Ferenhof et al. (2015),
Novas et al. (2017) and Lopes et al. (2016), among others, who underscore the necessity of
measuring the effects of IC on financial performance, contributions of the following types
were sought: theoretical (increasing an understanding of the effects of the assets, tangible
and/or intangible, embodied in the IC on business performance (profitability and corporate
return) from a long-term perspective –an understanding that is still only incipient in the
literature of management, especially in the Brazilian sphere); and empirical (increasing an
understanding of the role of IC in the differentiation of companies, in organisational
profitability and in the return on applications of resources). According to Marr et al. (2003),
very little of the measurement theory proposed for IC has been fully tested, and this is an
avenue of research to be explored. Moreover, Andreeva and Garanina (2016) call attention to
the need for more empirical research in emerging markets, considering that the empirical
evidence on the role of IC on financial performance and organisational competitiveness is
still very limited.
The results of this research reduce a gap in the management and accounting literature,
as they shed light on the performance measurement process. In addition to the range and
depth of the statistical tests carried out, attention should be drawn to the originality of the
proposal presented in this paper. This facilitates the measurement of the effects of IC on
financial performance through the selection and application of specific indicators for the
assessment of the contribution of IC to organisational results.
This paper is divided into five more sections in addition to this introduction section.
In Section 2 the relationship between IC and the measurement of financial performance is
644
JIC
18,3
To continue reading
Request your trial