Article: Intellectual capital and business performance
Upcoming SlideShare
Loading in...5
×
 

Like this? Share it with your network

Share

Article: Intellectual capital and business performance

on

  • 928 views

Summary of article including critical review.

Summary of article including critical review.

Statistics

Views

Total Views
928
Views on SlideShare
928
Embed Views
0

Actions

Likes
0
Downloads
9
Comments
0

0 Embeds 0

No embeds

Accessibility

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Article: Intellectual capital and business performance Document Transcript

  • 1. CRITICAL REVIEW OF THE ARTICLE TITLE: INTELLECTUAL CAPITAL AND BUSINESS PERFORMANCE IN THE PORTUGUESE BANKING INDUSTRY AUTHOR: Maria do Rosário Cabrita, Nick Bontis (2008). INTRODUCTION This article theme is to find the intellectual capital effect of business performance in Portuguese banking industry. The purpose of this research is to examine the interrelationships and interactions among intellectual capital components and business performance in the Portuguese banking industry. A past research shows that component of value creation have also changed. Inventory cannot help in value creation until it is utilize in an effective manner. Similarly knowledge is not important until it is used with other financial and non financial resources in a productive way. It is also mentioned that harmonization of different types of resources and interaction among them provide a higher intellectual. Intellectual capital defines as the knowledge that can be transforms into value creation. Another research shows that intellectual capital is important driver of value creation. So in this research we focus on intellectual capital effect on business performance and effect of intellectual capital component on value generation.Previous research shows a positive relationship between intellectual capital and business performance. PURPOSE OF RESEARCH The purpose of our study is: Examine interrelationships among intellectual capital components and business performance Test interaction effects among intellectual capital components and business performance.
  • 2. CONCEPTUALIZING INTELLECTUAL CAPITAL Three elements of intellectual capital drag out from the literature that are its intangibility, the fact that it creates value and the growth effect of collective practice. In this article author used the work of Bontis (1999) as a base paper and utilize the dimensions of Bontis to measure intellectual capital and its component for performance of business. In this article three dimension of intellectual capital is used which are:    Human capital Structural capital Relational capital And two drivers:   trust culture HUMAN CAPITAL Human capital is defined as a source of sustainable competitive advantage, investment in human beings improves markedly the quality of work. It is also act as a driver of national economic activity. Previous research shows that increased training of employees may lead to higher productivity and enhanced creativity, resulting in satisfied and loyal clients. Team work is believed to increase innovation, productivity and speed-to-market. Human capital is based on four elements:     Genetic inheritances Education Experience Attitudes about life and business STRUCTURAL CAPITAL Structural capital is defines as a valuable strategic asset, which is comprised of nonhuman assets such as information systems, routines, procedures and databases. The most advanced banking institutions already employ sophisticated systems to assess risk management. A research shows that information quality is more related to improvements in work environment.
  • 3. RELATIONAL CAPITAL Relational capital is the knowledge embedded in relationships with customers, suppliers, industry associations or any other stakeholder. Relational capital can be measured as a function of longevity. Relational capital also includes market orientation. Previous research shows a positive relationship between market orientation and business performance, new product performance, innovation or learning organization. The concept of relational capital was extended to include ‘stakeholder orientation’ items. Another research demonstrate that market orientation is a necessary condition to knowledge management orientation. Competitive intelligence is a market orientation dimension.Researchers generally agree that the rejuvenation of intellectual capital inside the firm, requires a sense of alignment with relational to protect the organization from market consequences. Culture is the glue that holds together the firm. It evolves over time, from the deep knowledge of the organization’s internal capabilities, vision, traditions and values. Trust is a fundamental construct to organizational life. HYPOTHESES H1. Human capital is positively associated with structural capital. H2. Human capital is positively associated with relational capital. H3. Structural capital is positively associated with relational capital. H4. Structural capital is positively associated with business performance. H5. Relational capital is positively associated with business performance. H6. Relational capital positively moderates the relationship between the human capital and business performance. H7. Structural capital positively moderates the relationship between the human capital and business performance. H8. Relational capital positively moderates the relationship between the structural capital and business performance.
  • 4. DATA COLLECTION AND ANALYSIS This research uses quantitative method of research and is an exploratory form of research. Data is collected through questionnaire. Total sample size is 53 banks of Portuguese and data is collected from atleast managers or directors within the organization. Spss statistical software is used for data analysis and regression, Kolmogorov-Smirnov test for normality; and Cronbach’s alpha test for reliability is used. First the survey instrument is tested by using PLS (Partial least square) and pilot test shows that the survey instrument is reliable and valid. The value of Cronbach’s alpha greater than 0.93 which shows that the instrument is reliable and acceptable. In this research each component of questionnaire is tested by using varimax technique which shows that all the elements of questionnaire are reliable and valid because the value is greater than 0.40. Finally the test applied on hypothesis shows that H1 to H5 are acceptable and supported and H6 to H8 are not supported. CONCLUSION The result shows that human capital is positively related with the structural capital, human capital is also positively related with relational capital. Human Capital (HC) has important effects on both structural capital (0.755) and relational capital (0.391). Human capital influences relational capital not only directly (0.391) but also indirectly through the structural capital. Structural capital is positively related with relational capital. Structural capital and relational capital is positively associated with business performance. Relational capital is not positively moderates relationship between the human capital and business performance. Structural capital is also not positively moderate relationship between the human capital and business performance. In last relational capital is not positively moderates relationship between the structural capital and business performance. The explanatory power (R2) of model 45.4%, some indication that intellectual capital components interact to influence business performance.
  • 5. STRENGTH    Another important conclusion in this study is that the results of the Portuguese study confirm similar results found by Bontis in Canada and Bontis et al. in Malaysia. Market orientation concept into the intellectual capital phenomenon may also provide a better understanding of the market orientation. Contribution of this study relates to human resource management. WEAKNESS This research is only done on one country Portuguese. This research is only focus on one industry banking industry of country. In this research only three dimension of intellectual capital is used. It is recommend ed that senior bankers utilize an intellectual capital framework when evaluating the assets of a potential target. It is argue that a thorough understandi ng of the strategic importance of intellectual capital may also encourage banks to financially support the growth of Portuguese knowledge intensive. FUTURE IMPLICATION There is an immense opportunity for interdisciplin ary and crossfunctional learning. We suggest that defining human capital as part of intellectual capital helps organization s understand how employees create value. Further research is needed to investigate whether these findings generalize to other countries and other industries. A longitudinal study should be undertaken to determine if the associations identified in this paper hold over time.