THE IMPACT OF INTELLECTUAL CAPITAL ON THE PERFORMANCE OF FIRMS IN NIGERIA

Abstract

There is a consensus across both theoretical and empirical literature on the positive contributions of intellectual capital [IC] – which is constituted by the intangible assets of the firm – to the growth and value-creation of any organisation. Nigerian firms are also not being left out in the growing wave and importance of knowledge-driven activities and investment in the competitiveness and performance of firms. This study investigates the impact of each of the components of IC on the performance of Nigerian firms. Using the Value Added Intellectual Capital (VAIC™) approach of Pulic (2002) as a measure, this study through static panel data methodology examines the relationship between IC and firms’ performance. The findings show that VAIC™ influences the performance of these firms positively. However, each of its components indicates different results. While both the structural and human capital components have positive relationship, the capital employed component has a negative relationship. Although this result reflects a positive relationship between performance and intellectual capital of firms, the non-significance of the coefficients obtained reflects that the bulk of Nigerian firms have emphasised so much on their tangible assets. The implication of this finding is that Nigerian firms have laid so much emphasis on their tangible assets with almost a total neglect of the intangibles. Ordinarily, it is expected that the corporate policy of any firm should be such that, it is directed towards the efficient management of its intellectual capital. This derives from the fact that the efficient and effective management of firms’ intellectual capital and other intangible assets components could guarantee better performance and return from the tangible.