Motives for Financial Valuation of Intangibles and Business Performance in SMEs

Abstract

In line with the Resource-based view, intangibles have become the key resource for generating competitive advantages in a firm. This is particularly significant in the case of small and medium enterprises (SMEs) whose competitive advantage is frequently based on intangible resources. However, there has been little attempt to assess and measure the role of intangible resources in firms' performance, and the motives driving their valuation process. Besides, most of the studies have been carried out in large firms. This article, combining theoretical contributions and empirical evidence, aims to analyze the relationship between the motives, external or internal, driving the valuation process of intangibles and the performance obtained by SMEs. Considering the recognized hypotheses and based on a survey of a representative sample of 369 Spanish SMEs' managers, in addition to the financial data collected from these firms, we explore whether the different motives driving the companies to perform a financial valuation of their intangibles are reflected in the business performance, and conditioned by financial structure and the level of intangibles. Results indicate that SMEs consider important to report intangibles value to external stakeholders as they depict a higher level of borrowing, as well as a higher level of intangibles accounted in the balance sheet. Furthermore, SMEs that consider the financial valuation of their intangibles for internal reasons achieve better performance. The implications of these results and suggestions for future research are dicussed as well.

The drivers of profitability in the top 30 major airlines worldwide

“…Thus, our H1 is partially confirmed. Human capital and structural capital proxies are significant drivers in the prediction of firm’s TUR ( p < 0.01) and ROE ( p < 0.05), confirming the assumptions of Roos et al (1997), Marr et al (2004), Schiuma et al (2008), Lopes (2010), Salchi et al (2014), Shakina and Molodchik (2014) and Vallejo-Alonso et al (2015) that intellectual capital is nowadays much more comprehensive and managed towards the value creation and achievements of sustainable standards of profitability.…”

“…This evidence could be associated with cultural, social and political issues, also confirming the association between CAP and the variable region ( r = −0.434; p = 0.017). As stated in international accounting rules about intangibles (Moeller, 2009; Zéghal and Maaloul, 2010; Kianto et al , 2013; Tsai et al , 2013b; Salchi et al , 2014; Shakina and Molodchik, 2014; Tudor et al , 2014; Vallejo-Alonso et al , 2015), these assets are associated with expected returns. This assumption is consolidated by its positive association with turnover and its positive association with passenger traffic ( r = 0.476; p = 0.008).…”

“…Commonly within the social sciences, intangibles are classified as knowledge resources (Nonaka and von Krogh, 2009; Miller and Choi, 2010; Tsai et al , 2013a); as intellectual capital (Roos et al , 1997; Marr et al , 2004; Schiuma et al , 2008; Celenza and Rossi, 2014); or as intangible assets (Hall, 1992; Lev, 2001; Lopes and Rodrigues, 2007; Ittner, 2008; Lopes, 2010; Tanfous, 2013). Dependent on accounting rules, several studies (Moeller, 2009; Zéghal and Maaloul, 2010; Kianto et al , 2013; Tsai et al , 2013b; Salchi et al , 2014; Shakina and Molodchik, 2014; Tudor et al , 2014; Vallejo-Alonso et al , 2015) have identified and measured the impact of intangibles on value-creation and performance in business. Traditionally, intellectual capital can be split into two main categories: human capital and structural capital (Roos et al , 1997).…”

“…The research of Vallejo-Alonso et al (2015) focuses on how intellectual capital drivers affect performance of Spanish SMEs. Assuming that these drivers have become a key resource for generating competitive advantage, the authors found that SMEs view reporting the value of intangibles to external stakeholders as important and tend to depict higher levels of borrowing alongside intangibles capitalized on the balance sheet.…”

Modelos de capital intelectual a nivel empresarial y su aporte en la creación de valor

“…Hoy en día, los activos intangibles tienen gran importancia estratégica para aquellas empresas constituidas principalmente por capital humano, es decir, aquellas que se basan en el conocimiento de cada empleado. Con sus aportes, estos apoyan el logro de los objetivos organizacionales y motivan a las empresas a contratar o estimular al personal que haya adquirido experiencias o habilidades y se pueda desarrollar en la misma empresa a futuro (Vallejo-Alonso et al, 2013).…”