Does intellectual capital investment enhance firm performance? Evidence from pharmaceutical sector in China

ABSTRACT

The study aims to systematically analyse the relationship between intellectual capital (IC) and firm performance measured through earnings, profitability, corporate return, sales growth, productivity, and market value. The modified Value Added Intellectual Coefficient (MVAIC) is used as a measure of IC. Multiple regression models are employed with data drawn from a sample of 204 Chinese pharmaceutical listed companies during 2013–2018. The findings suggest that the aggregate IC exerts a positive impact on firms’ earnings, profitability, corporate return, and productivity. Astonishingly, IC has a negative impact on market value and no impact on sales growth. Regarding IC components, physical capital and human capital (HC) are the main contributors to firm performance. In addition, structural capital (SC), relational capital (RC), and innovation capital are the least-developed elements of IC. Our results extend the understanding of IC in the context of China and provide some insights for management and shareholders to evaluate corporate intangible investments.

KEYWORDS:

• Intellectual capital
• firm performance
• pharmaceutical sector

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

The research was funded by the Scientific Research Foundation for High-level Talents of Qingdao Agricultural University [grant number 6631120701].

Notes on contributors

Fengli Ge

Fengli Ge is a lecturer in Qingdao Agricultural University, China. Her current interest includes intellectual capital management.

Jian Xu

Jian Xu is a lecturer in Qingdao Agricultural University, China. He got his PhD from the Dankook University, South Korea. His current interest includes intellectual capital management, R&D management and corporate performance evaluation. He has published in referred international journals such as Journal of Intellectual Capital, International Journal of Production Economics, Journal of Competitiveness, Sustainability, Technology Analysis & Strategic Management, Journal of Business Economics and Management, Kybernetes, Polish Journal of Environmental Studies, Applied Economics, and Custos e Agronegocio On Line, among others.