Investigating the “fate” of Intellectual Capital indicators: a case study

Abstract

Purpose – Although several frameworks for measuring and reporting Intellectual Capital (IC) have been developed over the past two decades, their actual use in practice is still limited. The purpose of this paper is to answer the call to analyze IC practices from a critical and performative perspective by investigating how and why IC indicators may end up not being used, thus shedding light on the barriers to their use. Design/methodology/approach – The paper presents a single in-depth case study and focusses attention on the fragility of the IC indicators as well on the interactions that occur among subjects while transmitting IC indicators. Findings – The case analysis shows how the different perspectives and expectations that are at stake when subjects engage with IC indicators can play a central role in hindering or enabling their use in practice. Expecting IC indicators to be able to accurately represent and to objectively signal the size and the growth/decline of IC, i.e. to be complete and isomorphic measures, can act as a barrier to their use. The case also shows that scores play a role in hindering the use of the IC indicators; the subjects disputed the scores when they did not confirm their perception of reality, and the lack of completeness and isomorphism of the IC indicators, i.e. their fragility, was the reason put forward to justify the subjects’ refusal to accept the scores and thus, to use these measures. Research limitations/implications – Although the use of a single case study provides in-depth and rich data, it also limits the generalizability of the observations to other companies. Moreover, the findings obtained may be influenced by the specific IC framework and indicators adopted. Originality/value – Differently from most previous IC research, this paper focusses attention on the transmission of indicators and ultimately, on their “fate,” and it contributes to the understanding of how and why IC indicators may be produced but not used, thus hindering the diffusion of IC frameworks in practice.

Every Cloud Has a Silver Lining: A History of Barriers to Intellectual Capital Measurement

“…Despite several IC frameworks and measurement models having been proposed over the years, their actual adoption by companies is still limited (Dumay, 2009;Lönnqvist et al, 2009;Chiucchi, 2013;Chiucchi & Montemari, 2016). Therefore, one of the current aims of ICA research is to identify the levers and the barriers to the use in practice of ICMSs by companies (Guthrie et al, 2012;Dumay, 2013;Dumay, 2014) in order to shed light on how and why successful (or unsuccessful) experiences occur (Dumay, 2012, p. 12).…”

“…It is worthy of note that non-financial measures outnumber the financial ones in ICMSs (Andriessen, 2004;Sveiby, 2010) and, by nature, these indicators have some features that may be perceived as drawbacks by information users (Gatti, 2015). As a matter of fact, they may be seen as partial, i.e., not able to capture all the relevant dimensions of the phenomenon to be measured (Vaivio, 2004, p. 61), they may be rejected because of their lack of objectivity (Chiucchi & Montemari, 2016), or they may be criticized because they can cause ambiguity and subjective interpretation (Vaivio, 2004, p. 55). Third, the indicator score may also influence the information recipients' attitude toward using it or not in the decision-making process; the score may indeed highlight some aspects of the phenomenon being measured that catch managerial attention and require action, especially if the score is extremely positive or negative (Catasús & Gröjer, 2006).…”

“…Third, the indicator score may also influence the information recipients' attitude toward using it or not in the decision-making process; the score may indeed highlight some aspects of the phenomenon being measured that catch managerial attention and require action, especially if the score is extremely positive or negative (Catasús & Gröjer, 2006). However, the score may also hinder the use of IC indicators if it does not confirm the information recipients' perception of reality; moreover, the lack of objectivity and completeness can be further reasons why users reject IC indicators (Chiucchi & Montemari, 2016).…”

“…What has been presented thus far shows that literature has deeply analyzed the main barriers that can arise and the levers that can be used when an IC measurement project is carried out. Concerning barriers, most of the contributions have shown that they can lead to a complete failure of the project (Chiucchi & Montemari, 2016;Giuliani et al, 2016;Schaper, 2016;Nielsen et al, 2017). Limited attention has been paid to how these barriers can affect the project, namely to how they can contribute to (re)shaping or (re)moulding it depending on the nature and the magnitude of the barriers that emerge during the design and the implementation stage of the IC indicators.…”

“…Literature, in fact, has emphasized that their adoption can be problematic because of several factors that can affect their actual use for managerial purposes (Vaivio, 2004;Catasús & Gröjer, 2006;Demartini & Paoloni, 2013;Chiucchi et al, 2018). In many cases, the research (and case study analysis, as well) has been aimed at exploring how barriers to their adoption can lead to a failure of the IC measurement project within companies (Chiucchi & Montemari, 2016;Giuliani et al, 2016;Schaper, 2016;Nielsen et al, 2017). In contrast, scholars have paid little attention to what happens to IC measurement projects when the magnitude of the barriers is not so relevant as to lead to a complete failure of the project.…”