Intellectual Capital and Firm Performance: Evidence from Technology Sector in Malaysia

Abstract

The aim of the paper is to examine the impact of intellectual capital on firm performance of technology firms listed on the main market of Bursa Malaysia. The study covers a period of seven years from 2013 to 2019 and usable data was drawn from 32 firms, providing 224 observations for the analysis. Intellectual capital is proxy by Modified Value Added Intellectual Coefficient (MVAIC), human capital efficiency (HCE), structural capital efficiency (SCE), relational capital efficiency (RCE) and capital employed efficiency (CEE), while performance is proxy by return on asset (ROA). The empirical findings reveal a positive and significant association between MVAIC and ROA but a mixed relationships between the efficiency of MVAIC components and ROA. Two components, HCE and CEE, are positive and significantly associated with ROA. SCE is significant but negatively associated with ROA. While, RCE is insignificantly associated with ROA. There are some limitations associated with the study. The research outcome is specific to technology sector; therefore, the findings cannot be generalised to other industries. Further, the analysis uses MVAIC model and the model does not cover innovation capital and process capital, thus it may omit other aspects of intellectual capital. Some practical implications from the findings are to achieve higher future profitability, technology firms should not only manage physical capital effectively but also improve employee, internal processes and networking efficiently.