Transcript Document

Intellectual Capital and organizational
Performance of Firms Listed on Nairobi
Securities Exchange
Dr. Anne Kariuki
Prof. Peter K’obonyo
Prof. Martin Ogutu
Emerging Issues
• Do brilliant people make brilliant companies?
• HC is hired and not possesed-highest mobility (private)
Does the loss of an employee affect firms financial statement?
• SC- relationship=networked society- public good
• OC-capital owned by the organization
• Creating reciprocal relationship
• IC-Tripartite dimensions knowledge embedded in people,
network relationship, organizational routines
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Introduction
• Rise of knowledge economy, one driven by knowledge, information and
brainpower as primary source of competitive advantage is attributed to
increasing prominence of intellectual capital (Quinn et al. 1996; Stewart,
1997)
• Ling and Hung (2012) -intellectual capital-company’s key factor for future
success and long-term profitability in the age of knowledge based economy
where tangible assets are slowly being replaced by intangible assets.
• Emergent theme- combination or integration of intellectual capital
components leads to competitive advantage and higher performance
(Youndat, Subramanian and Snell, 2004; Cabrita and Bontis, 2008).
• Integrated approach
• NSE-inter-industry effect
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Concepts
• Intellectual Capital-sum of knowledge and knowing capabilities that can
be utilized to give a competitive advantage.
• multi-dimensional concept that resides at individual level, network and
organization.(Tripartite dimension)
• Human capital, social capital and organization capital(Cabrita and Bontis,
2008)
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• long held the position that firms with high
intellectual capital achieve a higher competitive
advantage
• Confusion on the definition and close relation to
other terms-embryonic stage, no convergence on
measurement
• Examined subcategories (uni-dimensional) ignore
integrated effect –
• RBV assertion that unique configuration of firm
resources creates a sustainable competitive
advantage that cannot be explained by isolated
factors.
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• Organizational Performance
• Financial measures-not adequate for decision making
• Kaplan and Norton (1992; 1996) balanced approach incorporating financial
and nonfinancial ,
• stakeholder’s theory- propositions that a firm has
multiple responsibilities to a wider set of groups other
than the shareholders.
• BSC complements information provided by financial
measures with three additional measures; customer
perspective which measures how well the business is
satisfying the needs of the customer, internal business
process measures how efficiently and effectively an
organization is meeting its goals and objectives
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Human Capital
• origin of human capital can be traced to the
work of Schultz and Becker in 1960’s. Earlier
studies, Schultz (1961) and Becker (1964)
focused on economic behaviour especially
how accumulation of knowledge and skills
enables individuals to increase their
productivity and their earnings.
• Economic perspective
• Psychological perspective
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Proposal presented by Anne Wangui Kariuki
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Social Capital
• Nahapiet and Ghoshal (1998) defined social
capital as the sum of actual or potential
resources embedded within and available
through network of relationship possessed or
developed by individuals or social units.
• most scholars consider social capital as a
resource that is jointly owned rather than
controlled by an individual.
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Organizational Capital
• Nahapiet and Ghoshal (1998) defined social
capital as the sum of actual or potential
resources embedded within and available
through network of relationship possessed or
developed by individuals or social units.
• most scholars consider social capital as a
resource that is jointly owned rather than
controlled by an individual.
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Kariuki
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IC-Organizational Performance
• Empirical studies presented two conflicting strands that yield
inconsistent and inconclusive research findings
• isolated effect Riahi-Belkaouli (2003)_trademark, did not
incorporate non-financial performance
•
Fire and William (2003)- did not incorporate non-financial
•
Uadiale and Uwigbe (2011)-focused on market-oriented performance
•
Shabarati et al. (2010) and Ngari et al. (2011) –Homogeneous population
• Amedieu and Vivian (2010) revealed negative relationships
• Latter strand-interconnectedness and coexistence of intellectual capital
with performance and found a positive relationship (Youndat et al. 2004;
Cabrita and Bontis, 2008
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Oral presentation by Anne Wangui Kariuki
Intellectual Capital
•Human Capital
•Social Capital
•Organizational
Capital
Organizational
Performance
Financial
Non-financial
Dependent Variable
Independent Variable
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• H1: Human capital has a significant influence
on organizational performance
• H2: Social capital has significant influence on
organizational performance
• H3: Organization capital has significant
influence on organizational performance
• H4: Intellectual Capital has a significant
influence on organizational performance
BMGMT 1201
Operation Management
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METHODOLOGY
• Research Design-Cross sectional survey-Collected data at time of study, across
the population, establish association among variables, enhance uniform data
collection
• Target Population-Firms Listed on NSE from 2009- 2012, 50 companies
• Data collection-primary and secondary (Supported by
Primary-Questionnaire-perceptual measures (Self-administered questionnaire)
Secondary-Financial measures (NSE Handbooks)
• Respondents-HR managers-best placed -organization characteristics measured were
known to selected members in upper echelons, provide more reliable information
• Reliability- pilot test with 10 organizations, Cronbach alpha Intellectual capital (0.861),
non-financial(0.877)
• Unit of Analysis-organization
•
Analysis –Inferential,
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Analysis and Results
Multi-collinearity-VIF <10(Hair et al.1998)
• Response Rate-68% saunder et al. 2009-30-50 as acceptable
response rate
• Correlation Analysis-test for multi-collinearity
• VIF is 10 and above (Hair et al. 2006). The VIF for this study
ranged from 1.112 to 2.484 indicating no problem of multicollinearity between the study variables.
Hierachical multiple regression performed -allow one to specify
the fixed order of entry of variables in order to control for the
effect of covariate
• Control Variables- we included the age of the firm, size of the
organization measured by number of employees and
ownership structure of the organization as control variable in
our statistical analysis.
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Hypothesis Testing-Non financial
•
•
Conflicting strand- Synergetic effect rather than isolated effect (RBV)
Performance measures, population, context
•
Similar studies (Youndat et al. 2004; Cabrita and Bontis, 2008)
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Oral defense by Anne wangui kariuki
Mode Model 1
l
Ownership
stt.
. -033
Yrs of
operation
-.033
Size
-.003
HC
Model 2
Model 3 Model 4
.438
SC
.243
.432*
OC
.281
244*
224*
IC-P
R2
R2 change
F
.145
.264
.368
.353
.543
.116
.220
.205
.395
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Hypothesis testing-Financial
• Linear regression- insignificant (ROE, ROA and
DY)
• Optimal scaling-group variables into similar
categories
• ROE and DY – insignificant
• Study utilized ROA
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H1: Intellectual capital has a relationship with corporate performance-ROA
H1a: Human capital has a relationship with financial performance.
H1b: Social capital has a relationship with financial performance.
H1c: organization capital has a relationship with financial performance.
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Model
R2
F
B
HC
.115
2.017
.339*
SC
.285
6.179
.534*
OC
.115
2.006
-.339*
IC
.183
3.464*
.427*
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Implications
• Theoretical-RBV(the combined effect of intellectual capital
components is greater than the individual effect of components of
intellectual capital in respect to non-financial performance.
• -Difficult for a firm to imitate the three variables
• RBV-Joint Effect-. The findings demonstrate that the explanatory power of
the three factors was greater than the predictor variables in regard to nonfinancial performance (Not tested in a developing country context)
• Signaling theory-Mediating effect of corporate reputation
Policy and Practice
-education and training-vision 2030-globally competitive and prosperous
country(linkage between the industry and the education sytem)
-combined effect of human capital, social capital and organization capital create
synergies that help companies increase their performance instead of solely
relying on performance.
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Thank You
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Proposal presented by Anne Wangui Kariuki
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