A Critical Validation of the Value Added Intellectual Coefficient: Use in Empirical Research and Comparison with Alternative Measures of Intellectual Capital

Journal of Management and Governance, Forthcoming

Posted: 11 Jul 2019 Last revised: 26 Jun 2020

See all articles by Thomas Bassetti

Thomas Bassetti

University of Padova - Department of Economics

Lorenzo Dal Maso

ESSEC Business School - Department of Accounting and Management Control

Giovanni Liberatore

affiliation not provided to SSRN

Francesco Mazzi

University of Florence - Department of Business Economics

Date Written: July 10, 2019

Abstract

The measurement of intellectual capital (IC) constitutes a major challenge in managing intangible resources. Among the various models proposed in prior literature, the Value Added Intellectual Coefficient (VAIC) is used by many studies to measure IC. Assuming a perfectly competitive market, this study decomposes the VAIC and demonstrates that it is not directly related to IC. Conversely, the main components of VAIC are the labor share, physical capital share, and interest rate. These results are extended to a non-perfectly competitive setting through a multivariate analysis of a cross-country panel of 50,310 firm-year observations for 2000-2017. The results show that the VAIC still largely depends on exogenous factors being negatively (positively) associated with the labor (physical capital) share. Nevertheless, in this non-perfectly competitive setting, the VAIC also captures a firm’s ability to generate profits, which may be attributable to multiple factors, including IC. To reduce potential measurement biases in empirical research using the VAIC, this study suggests controlling for a firm’s interest rate, labor and capital shares. Adopting this suggestion, this study investigates the association between VAIC and firm performance. The results show that this association is significantly weaker when including the interest rate, labor and capital shares. The theoretical and empirical results suggest future researchers to select the VAIC to measure IC after having conscientiously examined the alternative models proposed in recent literature.

Keywords: VAIC, intellectual capital, value added intellectual coefficient, labor share, capital share

Suggested Citation

Bassetti, Thomas and Dal Maso, Lorenzo and Liberatore, Giovanni and Mazzi, Francesco, A Critical Validation of the Value Added Intellectual Coefficient: Use in Empirical Research and Comparison with Alternative Measures of Intellectual Capital (July 10, 2019). Journal of Management and Governance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3417711 or http://dx.doi.org/10.2139/ssrn.3417711

Thomas Bassetti

University of Padova - Department of Economics ( email )

via Del Santo 33
Padova, 35123
Italy

Lorenzo Dal Maso

ESSEC Business School - Department of Accounting and Management Control ( email )

Av Bernard Hirsch
Cergy-Pontoise 95021
France

Giovanni Liberatore (Contact Author)

affiliation not provided to SSRN ( email )

Francesco Mazzi

University of Florence - Department of Business Economics ( email )

Via delle Pandette 9
Florence, Florence 50132
Italy
0039 055 4374684 (Phone)
0039 055 4374910 (Fax)

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