The integration between Balanced Scorecard and intellectual capital
| Published date | 01 June 2005 |
| DOI | https://doi.org/10.1108/14691930510592843 |
| Pages | 267-284 |
| Date | 01 June 2005 |
| Author | Anne Wu |
| Subject Matter | Accounting & finance,HR & organizational behaviour,Information & knowledge management |
The integration between
Balanced Scorecard and
intellectual capital
Anne Wu
Department of Accounting, National Chengchi University, Taipei, Taiwan
Abstract
Purpose – The paper aims to discuss how to integrate the Balanced Scorecard (BSC) with intellectual
capital (IC); and handle the issues of creation, formation, measurement, reporting and even
management of strategic intellectual capital (SIC).
Design/methodology/approach – The paper adopts a case study to illustrate the integration
between the BSC and IC, and to handle the significant issues related to SIC. The case company is a car
dealership in Taiwan, which is one of the largest automobile dealerships in Taiwan. In addition,
according to the firm’s management philosophy, the company treats customers as the bosses and
employees as the precious assets to the company. The company also treats quality as one of its
important competitive advantages, hence implementing ISO 9002 in 1999.
Findings – The main findings of this study are: BSC can lead the creation, formation and
measurement of SIC and strengthen the reporting for SIC; BSC’s financial, customer, internal process,
and growth and learning perspectives can strengthen the management of IC; and, all in all, how to
integrate IC and BSC together for implementing a company’s strategy effectively and maximize the
value of a company deserves further discussion.
Practical implications – Based on this study, companies need to integrate BSC to IC in order to
strengthen the creation, formation, measurement, reporting and management of SIC. While BSC
directs IC, then the value of SIC can be improved.
Originality/value – Based on the literature review, the authors note that BSC is an important tool to
measure and manage IC. However, no research illustrates how BSC directs the creation, formation and
management of IC. In this study the authors fill this gap and introduce a case to illustrate how BSC
affects the creation, formation and measurement, and even reporting of IC.
Keywords Intellectualcapital, Balanced scorecard, Human capital,Customers,
Communicationtechnologies, Taiwan
Paper type Case study
Introduction
The development of intellectual capital (IC) can be traced back to the nineteenth
century. Lawrence R. Dicksee, a leading economic theorist, made a lecture about
intangible assets in 1896. In the following years, its transcription was recorded in The
Accountant, titled “Goodwill and its treatment in accounts” (Brief, 1980). However, over
a long period of time, there was a measurement problem in IC (Can
˜ibano et al., 2000;
Caddy, 2002; Mouritsen, 2004).
In the fast-changing business environment nowadays, the only way to create a
competitive advantage is by managing IC, which is commonly known as knowledge
management (KM) (Arora 2002). Moore et al. (2001) designed the Balanced Scorecard
(BSC) in a knowledge-based firm. They pointed out that the development of BSC
incorporates both traditional and non-traditional performance measures within the
strategic context of a knowledge-based organization. Arora (2002) discussed how to
The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at
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The integration
between BSC and
IC
267
Journal of Intellectual Capital
Vol. 6 No. 2, 2005
pp. 267-284
qEmerald Group Publishing Limited
1469-1930
DOI 10.1108/14691930510592843
use the BSC approach to implement KM effectively and concluded that organizations
that use BSC for strategy deployment, can effectively implement KM. After several
years of development, many organizations use BSC to help use resources effectively
based on the implementation of a strategy. Some companies, such as AT&T, BMW,
DUPONT, MELLON, and UPS, etc.[1], have shown excellent performance based on
BSC. BSC has been regarded as a powerful strategic management tool (Bontis et al.,
1999; Johanson et al., 2001a, b), and is complementary to IC (Bukh et al., 2002). In
addition, BSC is also deemed an important tool to solve the problem of IC measurement
(Andriessen, 2004).
Although the above literature has mentioned the importance of the relationship
between IC and BSC, few studies discuss about how to integrate BSC and IC. Kaplan
and Norton (2004a) emphasized how to align intangible assets to an enterpris e’s
strategy. However, they only focused on the learning and growth perspective of BSC.
In this study, we will discuss how BSC integrates with IC, and adopt a case study to
illustrate how BSC affects the creation, formation, measurement, and even reporting of
strategic IC (SIC).
Based on the exploration of the integration between BSC and IC, this study
contributes to the field of IC in the following ways:
.Developing a framework to clarify how BSC directs the creation, formation,
measurement, and reporting of IC and even strengthens the management of IC.
.Using a case study to illustrate how BSC solves the issues of SIC.
This study is begun by reviewing the literature about IC and BSC. Next, we discuss the
relationship between BSC and IC in two aspects:
(1) BSC directs the creation, formation, and measurement of IC.
(2) BSC strengthens the management of IC.
We then introduce a case study to examine how BSC affects the creation, formation,
measurement, and reporting of SIC.
Literature review
We classify the research studies about BSC and IC into three themes as follows.
The comparison between IC and BSC
In comparing IC and BSC, Bontis et al. (1999) indicated that BSC has a clear
relationship between non-financial indicators and financial performance, but the
disadvantage is that BSC is static. IC is a flexible and dynamic model, but is still at its
early stages. Allee (1999) also had similar conclusions. All of them argued that BSC is
based on a “balance” model, while the IC model is based on the dynamic flow of capital
accumulation in customer capital, structure capital, etc. Bukh et al. (2002) used a
software company as the case to discuss the differences and complementarities
between IC and BSC. That research concluded that BSC and IC are complementary to
each other.
The relationship between BSC and IC: the measurement and management issues
It is widely suggested that the measurement and management of IC are quite important
(Bontis, 1999; Carroll and Tansey, 2000; Petty and Guthrie, 2000; Caddy, 2002; Choo
JIC
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