Does intellectual capital matter for value creation of companies? evidence from Sri Lanka

Abstract

Value creation is the ultimate purpose of any company and it is affected by many factors including capital. In knowledge-based economy, not only the financial capital but also non-financial capital play a pivotal role for creating value for the organizational stakeholders. The non-financial capital includes specially, the intellectual capital and its components; human capital, structural capital and relational capital. Thus, this study tried to explore the impact of intellectual capital and its components on value creation of Sri Lankan companies. The study was carried on the views obtained from the top personnel of 263 Sri Lankan companies out of 814 Sri Lankan companies including both Public Listed Companies and private companies. Further, the value creation was quantified using both financial and non-financial value drivers in this study. Data were analyzed using multivariate data analysis through Partial Least Square Structural Equation Modeling. Intellectual capital and structural capital have a significant positive impact on value creation according to the study’s findings. Human capital and relational capital do not have a significant impact on value creation. Furthermore, the explanatory power of the intellectual capital on value creation was lower than the explanatory power of the components of intellectual capital on value creation. Further, the findings of the study support to the theory, specially they confirm the stakeholder theory, knowledge based theory and intellectual capital based theory. Moreover, the study adds more value to the practice by identifying intellectual capital, human capital, structural capital and relational capital as the major predecessors of value creation of Sri Lankan companies.