The Impact of Intellectual Capital on Service Firm Financial Performance in Emerging Countries: The Case of Vietnam

Abstract

This paper evaluates the effect of intellectual capital (IC) on firm financial performance in the service sector in an emerging country, Vietnam. This research is dissimilar from earlier ones for the following reasons: (i) this is the first study of IC’s impact on service firms at different knowledge intensity levels, sizes, and ownerships in an emerging country, Vietnam; (ii) it expresses empirical evidence in details of service activities, particularly the research and development, financial, and technology services that play significant roles for the development of emerging countries; (iii) it examines the effects of the gender issue, firms’ responsiveness to the government and employees, and market concentration. Applying the two-step system GMM model for the period 2005–2014, the results express that IC components generally had significant impacts on firm performance. Human capital efficiency had the strongest positive impact while capital employed efficiency had the second strongest impact. The impact of structural capital efficiency was inconsistent, depending on the knowledge intensity levels and the types of service activities. IC is more efficient for knowledge-intensive sub-sectors than the less knowledge-intensive ones. IC efficiencies differ among knowledge intensity levels, sizes, and ownerships, suggesting that policy makers and firm leaders should implement corresponding solutions.

The Impact of Intangible Capital on Firm Profitability in the Technology and Healthcare Sectors

“…The dynamic panel model (Nguyen 2023), using the one-year-lagged dependent variable as the regressor, was estimated using system GMM (generalized method of moments), as implemented by the pdynmc package in the R statistical environment (Fritsch et al 2019). The estimation uses the two-step model with time dummy variables.…”

“…Structural capital is a conglomerate of infrastructure elements such as intellectual property, internal processes and procedures, information systems, research and development investments, and, more generally, knowledge-related assets (Moon and Kym 2006;Nguyen 2023). A readily available approximation is the size of intangible assets, excluding goodwill.…”

“…Therefore, a higher proportion and increased utilization of such resources are expected to provide a competitive advantage to the firm and lead to superior financial performance (Rahman and Liu 2023). By applying the calculation model proposed by Pulic (2004), previous authors found a positive effect of structural capital efficiency on financial performance in different industries: banking and insurance (Chen et al 2014;Nawaz and Ohlrogge 2023), tourism (Sardo et al 2018), healthcare (Scafarto et al 2023;Tiwari 2022), transportation (Rahman and Liu 2023) and listed firms in general (Kasoga 2020;Katona 2018;Nguyen 2023). The research setting in previous studies was often limited to one country: China (Rahman and Liu 2023), Germany (Nawaz and Ohlrogge 2023), India (Gupta et al 2023;Tiwari 2022), Hungary (Katona 2018), Malaysia (Chen et al 2014), Portugal (Sardo et al 2018) and Tanzania (Kasoga 2020).…”

The Effect of Intellectual Capital Efficiency on Malaysian Firm Performance: A Dynamic Panel Estimation

“…Costa et al (2020) determined the impact of ICs on Portuguese tourism firm performance (ROA). Recently, Nguyen (2023) recently reported that there exists a substantial correlation between IC efficiency and the performance of Vietnamese firms, with human capital efficiency exhibiting the most pronounced positive influence on performance. Sohel Rana and Hossain (2023) discovered a significant and positive correlation between IC efficacy and the performance of listed non-financial companies in Bangladesh.…”

The Components of Intellectual Capital That Affect Firm Performance in State-Owned Companies

“…A company can create added value and improve its performance when a firm can use its intellectual capital and physical capital simultaneously. Capital employed can also assist companies in developing good internal and external relationships with employees, consumers, suppliers, creditors, and governments (Nguyen, 2023).…”