The intellectual capital performance of the Japanese banking sector
| Pages | 92-115 |
| Published date | 01 March 2004 |
| DOI | https://doi.org/10.1108/14691930410512941 |
| Date | 01 March 2004 |
| Author | Dimitrios G. Mavridis |
| Subject Matter | Accounting & finance,HR & organizational behaviour,Information & knowledge management |
The intellectual capital
performance of the Japanese
banking sector
Dimitrios G. Mavridis
Department of Financial Applications,
Technological Institute of West Macedonia, Kozani, Greece
Keywords Intellectual capital, Japan, Banks, Business performance
Abstract The performance of economic entities has been a research matter even in the ancient
world. The human “genius” has been recognized as a vehicle for certain valuable capabilities and as
the critical enabler of transforming processes. But it has not been considered as an intellectual
capitalizator or intellectual asset. This has happened recently in the promising field of intellectual
capital and its related philosophy of knowledge management, although the related research status
quo is still in its infancy. Applies the VAIC
TM
method in order to analyze the data of Japanese
banks for the financial period 1 April 2000-31 March 2001. Analyzes the intellectual or human
(HC) and physical capital (CA) of the Japanese banking sector and discusses their impact on the
banks’ value-based performance. Focuses on the actual status of HC and CA capital and its
predictive, discriminative and integrative impact on the “intellectual” added value-based
performance situation. Confirms the existence of significant performance differences among the
various groups of Japanese banks but also the differences between the Japanese and some
European banks (Greece and Austria).
1. Prolegomena
The most challenging dimension in the causa knowledge management (KM) is
its recognition as another (or most) important performance factor. It is
doubtless a hit to the mechanistic or materialistic preconception while it helps
to discover the organic or humanistic aspect of performance process. The
intellectual potential (knowledge) can be seen as a tacit and as an explicit
phenomenon (Mavridis and Kyrmizoglou, 2003). Tacit knowledge is the
non-accessible and strictly personal or invisible potential of making things
happen. It represents the “intellectual capital” (IC) with its unknown intellectual
structures and algorithms. “Moreover it is a true liability and never equity”
(Mavridis and Kyrmizoglou, 2003), so long as these patterns remain latent.
When the tacit or invisible knowledge leads to practical results then the
personal and inaccessible liability (intellectual potential) becomes an intangible
“intellectual asset” or simply IC. This manifested knowledge potential has been
already recognized as a driver for the creation of value added and, although the
IC is an intangible or invisible driver (“intangible competencies”), it creates not
only “intangible goods” (such as know-how, licenses, patents, franchises,
copyrights, trademarks, software and methods), but also invisible competences
or competitive advantages and lastly real common tangible assets.
The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at
www.emeraldinsight.com/researchregister www.emeraldinsight.com/1469-1930.htm
JIC
5,1
92
Journal of Intellectual Capital
Vol. 5 No. 1, 2004
pp. 92-115
qEmerald Group Publishing Limited
1469-1930
DOI 10.1108/14691930410512941
In recent times researchers have been trying to define a feasible and reliable
path to measure intangible assets and IC. Several models and links between IC
and business performance have been developed. All researchers conclusively
state that knowledge is a “factor” or resource with “never ending” capacities or
diminishing tendencies (Mavridis and Kyrmizoglou, 2003). It is praised as the
“material” for the “never ending story” and as an eternal guarantee for a
sustainable economy development over generations.
In this context the present survey tries to contribute to the current IC
discussion with a more practical or results providing analysis. The “paradise
trees” and “flying dolphins” of the “Skandia Navigator” and the other used
“visual ratios” or signo-mental (Swedish-path to IC) paths of thinking are less
useful for the documental (Austrian and American-path to IC)[1] world of
financial ratios. Seetharaman and Saravanan (2002) state that “doing things the
same way and expecting different results” cannot work, meaning that the
whole idea of IC is often misunderstood or practically ignored, because they
“squeeze today’s IC to fit into the present framework”. Whether financial
(quantitative) or “intellectual” (qualitative) ratios they help to express
adequately the reality we are facing so far as possible. Furthermore, when
dealing with topics for which a great amount of critical sense is needed some
portion of flexibility is required too (Seetharaman and Saravanan, 2002).
According to Seetharaman and Saravanan (2002) four schools of thought for
IC valuation presently exist (cost, share, cash flow, market orientation), but
basically only two groups exist (Mavridis and Kyrmizoglou, 2003). One group
asks for costs or expenses (process oriented) and the other for profit or
investment returns and its drivers (value oriented). Consequently the main
research approaches for IC measurement also follow these two ma in
orientations. The cost group of researchers tries to capture the intellectual
essence through the difference between market and book value (cost
accounting). The market to book value ratio is used as an effective
“yardstick” for measuring intangibles[2].
Another promising approach – related to the second value group – has been
developed by the Austrian Intellectual Capital Research Center (AICRS), named
Value Added Intellectual Capital (VAIC
TM
) and which Pulic and his team have
successfully used in the Austrian banking sector (www.measuring-ip.at). This
“practical” and easy to use research method has also been successfully used for
the Greek banking sector (Mavridis and Kyrmizoglou, 2003).
The banking sector in general offers an ideal area of IC research:
(1) because there are reliable data available in the form of published
accounts (balance sheets, P/L);
(2) because the business nature of the banking sector is “intellectually”
intensive; and
(3) because the whole staff is (intellectually) more homogeneous than in
other economy sectors (Kubo and Saka, 2002).
IC performance
of Japanese
banking
93
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