The communication of intellectual capital: the “whys” and “whats”
| Date | 11 July 2016 |
| Pages | 414-438 |
| DOI | https://doi.org/10.1108/JIC-01-2016-0007 |
| Published date | 11 July 2016 |
| Author | Janet C.N. Wee,Alton Y.K. Chua |
| Subject Matter | Information & knowledge management,Knowledge management |
The communication of
intellectual capital: the “whys”
and “whats”
Janet C.N. Wee and Alton Y.K. Chua
Division of Information Studies,
Wee Kim Wee School of Communication and Information,
Nanyang Technological University of Singapore, Singapore
Abstract
Purpose –The purpose of this paper is twofold: first, to identify motivations that drive
communication of IC (CIC); and second, to investigate content and format used in CIC from three
perspectives, namely, human capital information, relational capital information and structural
capital information.
Design/methodology/approach –A global survey was conducted with 200 banks’senior
executives responsible for annual report (AR), followed by content analysis of each bank’s AR.
Findings –The study found four motivations of CIC, namely, management responsibility to
stakeholders, collective behavior, corporate responsibility and compliance. Content analysis of banks’
AR found structural capital information most prevalent, followed by human capital and relational
capital. Five types of formats were analyzed to show the different presentation used in the CIC.
Research limitations/implications –Current data source was limited to banking and focussed on
English language publications.
Practical implications –The study provides regulators insights to forces that either compel or
hinder CIC, and updates literature on management’s thinking and priorities in CIC.
Originality/value –This study is possibly the first paper that investigates the motivation of CIC for
reporting, where IC is an important asset to organizations. The findings on the content and format used
in CIC extend existing studies to a wider, global scale.
Keywords Motivation, Communication, Banks, Intellectual capital reporting, Content and format
Paper type Research paper
1. Introduction
The communication of IC (CIC) as a distinct field of study has gained attention only in
the recent decade (Serenko et al., 2010). It is defined as the information disclosure of
an organization’s IC assets through annual reports and supplementary corporate
disclosure (ARS), be it mandatory or voluntary. Past studies have shown that the ARS
is focussed as it is a good source to analyze the CIC as part of corporate reporting
(Dumay and Garanina, 2013; Guthrie et al., 2004). The CIC is fueled in part by changes
in regulatory reporting frameworks (Coldwell et al., 2012; PricewaterhouseCoopers,
2014), stakeholders’demand (Bismuth and Yoshiaki, 2008; Ousama et al., 2011) and the
need to manage organizational image (Herzig and Schaltegger, 2006).
However, current literature on the motivations behind the CIC (the “Whys”)is
limited. This is an important research gap for two reasons. First, understanding these
motivations allow governing bodies such as regulators and trade councils to identify
forces that either compel or hinder organizations to communicate IC (Abhayawansa
and Abeysekera, 2009; Christensen and Mohr, 2003; European Commission, 2013).
Second, addressing the research gap will update literature on management’s thinking
and priorities in the CIC (Demartini and Pailoni, 2013; Dumay, 2009).
Journal of Intellectual Capital
Vol. 17 No. 3, 2016
pp. 414-438
©Emerald Group Publishing Limited
1469-1930
DOI 10.1108/JIC-01-2016-0007
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1469-1930.htm
414
JIC
17,3
In addition, extant study of the CIC has shed little light on the “Whats,”namely,
content and formats (Duck and McMahan, 2010; Ousama et al., 2011; Peters, 2012).
In terms of content, the coverage in most research tends to lean toward the reporting of
employee-related information such as employee numbers and social benefits (Bukh,
2003; Eccles et al., 2001). There has not been much details on other aspects of IC such as
processes, strategic directions and external relationships of the organizations (Bismuth
and Yoshiaki, 2008). Much less was discussed on the formats used in the CIC although a
variety of formats including narratives, tables, graphs and visuals can commonly be
found. These formats could carry multiple messages that have rich and varied
interpretations, and they hold the emotional power to influence the reader (Davidson ,
2014). Hence, the use of formats could be a powerful impression management tool
(Anderson and Frankle, 1980; Spoehr and Lehmkuhle, 1982).
For the reasons above, this paper seeks to deepen existing knowledge on the CIC
with a twofold objective. First, the paper identifies motivations that drive the CIC.
Second, it investigates the content and format used in the CIC and provides insights to
management’s thinking. In terms of practical contribution, organizations can take
advantage of the knowledge gained from this paper to drive, share and analyze the CIC
in line with its strategic direction (Green, 2006). This paper also extends prior studies on
theCICintermsofgeographiccoverage, where few multiple jurisdictions
investigations were covered (Abeysekera and Guthrie, 2002; Petty and Guthrie, 2000).
2. Literature review
The importance of the CIC in building organizational resilience is widely recognized
(Kamath, 2007; Lengnick-Hall et al., 2011). Scholars have also previously emphasized
the need to analyze, measure and disclose IC in supporting organizational performan ce
(Andriessen, 2004; Giuliani, 2009; Mouritsen et al., 2003). However, comprehending the
underlying motivations that drive the CIC is still limited in the field of IC. Existing IC
literature, albeit scanty, suggests that organizations are pressured by government to
report IC in the ARS (Holder-Webb et al., 2009). This is part of corporate governance to
improve documentation and connections with stakeholders (Gan et al., 2013). While
corporate governance was identified as a possible motivating force, organizations also
faced the dilemma of balancing two other forces, to manage stakeholders’impression of
the organization’s image and to meet stakeholders’demand for relevant non-financial
information on decision making and operations (Bismuth and Yoshiaki, 2008; Ousama
et al., 2011). As the CIC is linked to information disclosure by organizations, the forces
of motivation could be examined from the perspectives of management and busine ss-
related disciplines.
Accounting literature has shown that high-management ownership could result in
lower information disclosure as management will have more discretion in reporting
beyond what is required by law (Craft, 1981; Leung and Horwitz, 2004). Studies from
the accounting discipline also highlight the role of leadership in the communication of
non-financial information, where market leaders influence the industry standard of
reporting (Ahmed and Courtis, 1999; Ernst & Young, 2014; Robb and Zarzeski, 2001).
Peers have also been found to influence information disclosure practices and thus, the
CIC could be influenced by the herd instinct within the community (Cooke, 1989;
Gibbins et al., 1990; Tartari et al., 2014).
Literature from business strategy advocates organized structures and management
systems given thatthese are necessary to support the capture and reporting of IC as part
of non-financial information to stakeholders (Perrini and Tencati, 2006; Yongvanich and
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capital
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