Value added intellectual coefficient (VAIC). A methodological and critical review
| Published date | 21 October 2013 |
| DOI | https://doi.org/10.1108/JIC-12-2012-0107 |
| Date | 21 October 2013 |
| Pages | 547-563 |
| Author | Gianpaolo Iazzolino,Domenico Laise |
| Subject Matter | Information & knowledge management,Knowledge management |
Value added intellectual
coefficient (VAIC)
A methodological and critical review
Gianpaolo Iazzolino
Mechanical, Energy and Management Engineering (DIMEG),
University of Calabria, Rende, Cosenza, Italy, and
Domenico Laise
Computer, Control and Management Engineering,
University of Rome “La Sapienza”, Rome, Italy
Abstract
Purpose – The purpose of this paper is to study, mainly from the point of view of methodological
accountingprinciples, the value addedintellectual coefficient(VAIC),introduced by Pulic as a measureof
intellectual capital efficiency (ICE). More specifically, the aim of the analysis is to investigate the
strengths and weaknesses of the VAIC, primarily from the accounting theory perspective.
Design/methodology/approach – The approach to the study of Pulic’s contribution is as follows:
first the authors submitted Pulic’s methodology to a “conceptual” test, in order to check whether it
contradicts any basic accounting principles. Then the results of this methodological test were
compared to those obtained by the authors who have criticized Pulic’s proposal, in order to check for
any concordance or discordance with the literature.
Findings – Several authors have discussed the crucial aspects of the VAIC. In this paper the focus is
primarily on Andriessen’s concerns, since they relate to the theoretical accounting aspects of Pulic’s
proposal, which is the topic of the paper. First of all, the authors have found that the suggestion of Pulic ,
centered on the Value Added Income Statement, does not modify or contradict any of the fundamental
accounting principles. Therefore thecriticismsmadebyProfessorAndriessen should be subject to future
research. Furthermore the performance measure proposed by Pulic (VAIC) is not a genuine rival to the
traditional methodologies (e.g. the Economic Value Added ( EVA)), as instead emerges from Pulic’s papers.
VAIC and EVA measure differentaspects of the performance and therefore may usefully live together in a
context in which the performance is measured through multicriteria methodologies, such as the Balanced
Scorecard, Skandia Navigator or Intangible Asset Monitor.
Practical implications – The practical implications of the results are: the cor rect placing of
Pulic’s contribution into the accounting principles theory; and the manner for using the VAIC
methodology in a multicriteria performance evaluation. The autho rs believe that both aspects have
relevant implications for business accounting practice.
Originality/value – The paper shows that almost all of the misunderstandings of the literature
debate, regarding Pulic’s proposal, arise from a “semantic shift” generated by the fact that Pulic uses
the terms human capital and structural capital with a completely different meaning from that of the
Skandia Navigator. Authors’ hope is that the study described in the paper will contribute to a better
understanding of: the way to calculate and to interpret the efficiency of intellectual capital (IC) in a
correct manner; and the role of IC on firm multicriteria performances.
Keywords Financial performance measurement, IC efficiency, Multicriteria, VAIC,
Value added income statement
Paper type Conce ptual paper
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1469-1930.htm
Received 6 December 2012
Revised 14 March 2013
20 March 2013
Accepted 21 March 2013
Journal of Intellectual Capital
Vol.14 No.4, 2013
pp. 547-563
rEmeraldGroup Publishing Limited
1469-1930
DOI 10.1108/JIC-12-2012-0107
The authors would like to thank two anonymous referees for their precious suggestions
that contributed to significantly enhancing the paper. The authors would like to thank Professor
Ante Pulic for reading and valuating an earlier version of the paper that was presented in the
IFKAD 2012.
547
Value added
intellectual
coefficient
1. Introduction
Over the last three decades, there have been some relevant innovations in the methods
to measure the firm’s performance. One is ass ociated with the Shareholder Value
Analysis (SVA):in this field the traditional methods based on ROI, or similar, have been
improved from indicators such as Economic Value Added ( EVA) (Stewart, 1991).
Another important innovation regards the knowledge economy.
Ante Pulic believes that the traditional performance measurement methods ( EVA
included) are not suitable to measure performance in a knowledge economy context.
He claims that “the basic indicators of industrial economy do not really show whether
and how much value has been created” ( Pulic, 2000). Therefore he proposes to use the
value added as an indicator for measuring performances in a knowledge economy context.
The analysis of this innovation is the specific object of this work, in which strengths
and weaknesses of Pulic’s proposal are analyzed.
The purpose of the paper is to investigate the concept of VAIC from a theoretical
and a methodological point of view (accounting r ules and principles). Therefore
empirical and econometric analyses, despite being significant, are not explicitly
considered; they will be addressed in another further work.
The first thing the authors would underline is that most of the misunderstandings
that have occurred in the literature debate arise from a radically different meaning that
Pulic gives to the terms human capital ( HC) and structural capital (SC) from that of the
Skandia Navigator and in general from the meaning commonly assigned to those
words by the entire IC research community. As it will be explained in Section 3.3, Pulic
starts from the Skandia Navigator ( Pulic, 2000), but after he makes a “semantic shift”
that radically modifies the meaning of the terms used in the Skandia Navigator. Much
of the debate that took place in the literature on Pulic’s works derives from this
polyvalence of meaning.
As regards the methodology, the bridge that Pulic created between the notion of
value added and that of value creation in a knowledge economy context constitutes the
principal strength point of his proposal. The authors retain that he argues successfully
that in the knowledge organizations there is no need to modify accounting principles to
consider the existence of knowledge workers. The “Value Added” Income Statement,
correctly interpreted, allows the productivity of knowledge workers and the creation of
new value generated from them to be measured.
On the other hand the attempt to qualify VAIC as a performance measurement
criterion alter native (rival) to those existing ( EVA for example) is the main weakness
of the proposal. In effect, as described below, rivalry does not exist, because VAIC
measures only a dimension of performance that is not considered from other measures.
Thus VAIC is a method that complements those existing and for this reason it can be
usefully included, as innovative indicator of intellectual capital efficiency ( ICE), in one
of the most important multidimensional directional dashboards ( Balanced Scorecard,
Skandia Navigator or Intangible Asset Monitor).
Pulic, in the last years, seems to move toward this perspective: “The new concept
[y]. has a number of advantages that, while not replacing existing measures,
complements them in a significant way” ( Pulic, 2008, p. 7).
In Section 2 the literature review concerning the impact of intellectual capital ( IC) on
financial performance and the use of VAIC is presented. Section 3 is devoted to explain
the proposal of Pulic and to correctly frame his proposal in the literature. In Section 4
the calculus of VAIC is detailed. In Section 5 the main critics to Pulic’s model are
discussed. In Section 6 a comparison between Human Capital Efficiency ( HCE) and the
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