Title: Decoding intellectual capital's association with innovation and financial performance

Authors: Sayeeduzzafar Qazi; Monu Singh; Faizi Weqar; Mohd Yasir Arafat; S.M. Imamul Haque; S.K. Zubair

Addresses: College of Business Administration, University of Business and Technology, Jeddah, Saudi Arabia ' Gitam School of Business, GITAM (Deemed to be University), Hyderabad Campus, Telangana, India ' Department of Commerce, Mohammad Ali Jauhar University, Rampur, India ' Lovely Professional University, Phagwara – 144411, Punjab, India ' Department of Commerce, Aligarh Muslim University (AMU), Aligarh, India ' Department of Business Administration, Aligarh Muslim University, Aligarh, India

Abstract: The study's main objective is to inspect the relationship between intellectual capital (IC) and the firm's innovation capability and financial performance. We employed data from 65 Indian pharmaceutical firms from 2004 to 2019. Innovation capability is measured using the proxy of the firm's research and development expenditure, while return on assets, return on investments, and asset turnover are used to measure the firm's financial performance. The result shows that only capital employed efficiency has a positive association with the firm's innovation capability, while all other independent variables are negatively related to it. Moreover, it was also found that IC, human capital efficiency, and capital employed efficiency have a positive relationship with most of the financial performance indicators. Lastly, structural capital efficiency does not have any affiliation with the firm's financial performance. This is one of the first studies examining IC's relationship with the firm's innovation capability using Pulic's (2000) VAIC model.

Keywords: intellectual capital; financial performance; profitability; productivity; innovation; VAIC.

DOI: 10.1504/IJLIC.2024.144286

International Journal of Learning and Intellectual Capital, 2024 Vol.21 No.6, pp.733 - 759

Accepted: 06 Dec 2024
Published online: 04 Feb 2025 *

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