Impact of intellectual capital on organisational performance : An empirical study of companies in the Hang Seng Index (Part 1)

Purpose – The purpose of this paper, which is written in two parts, is to investigate empirically if intellectual capital (IC) has an impact on the financial aspects of organisational performance as well as attempting to identify the IC components that may be the drivers for the leading financial indicators of listed companies. The study sought evidence from the companies of the Hong Kong Stock Exchange. Design/methodology/approach – Using data of all the constituent companies of the Hang Seng Index of the Hong Kong Stock Exchange from 2001 to 2005 and the VAIC™ methodology used in the measurement of IC by Pulic, regression models were constructed to examine the relationships between IC and the selected financial performance measures of these companies. Part 1 of the paper first explores a working definition of IC as well as appraising some of the methods in IC measurement. After advocating the use of VAIC™ and reviewing the relevant prior studies, research hypotheses are developed for this study. Part 1 of the paper concludes with a discussion of the research method and regression models used in investigating the hypotheses. Findings – The results of the analysis is presented in Part 2 of the paper, which examines the association between IC, as measured by VAIC™, and the four measures of financial performance in the sample companies surveyed in Hong Kong. Part 1 of the paper develops the hypotheses for the study and establishes the research method used to investigate these hypotheses. Originality/value – It is believed that this is the first study conducted in Hong Kong involving the use of VAIC™ for the measurement of IC. It not only contributes to the knowledge of IC research, but adds to the existing literature of the progress of IC development in relation to financial performance in companies internationally.