Management control systems in the knowledge economy: Assessing the role of intellectual capital in value creation

Author/s Federica Ricci, Vincenzo Scafarto, Salvatore Ferri, Teresa Riso
Publishing Year 2020 Issue 2020/3
Language English Pages 18 P. 17-34 File size 272 KB
DOI 10.3280/MACO2020-003002
DOI is like a bar code for intellectual property: to have more infomation click here

Below, you can see the article first page

If you want to buy this article in PDF format, you can do it, following the instructions to buy download credits

Article preview

FrancoAngeli is member of Publishers International Linking Association, Inc (PILA), a not-for-profit association which run the CrossRef service enabling links to and from online scholarly content.

The purpose of this paper is to show that intellectual capital (IC) efficiency as measured by the value added intellectual coefficient (VAIC) and its individual components may function as key performance indicators for use in management control and external reporting to capital market participants. We incorporate the VAIC within the Ohlson model (OM), a widely used model for equity valuation, which relates a firm’s market value to the book value of equity and net earnings, and allows to include any other information that may affect the market assess-ment of firm value. We then estimate the modified OM on a panel sample of firms continuously listed on the Italian Stock exchange from 2011 to 2017 using a fixed effect (FE) specification. Empirical results indicate that IC efficiency contributes along with the traditional accounting metrics included in the OM to explain the stock market performance of sample firms. This paper suggests that the VAIC and the individual measures of IC efficiency may usefully complement traditional accounting measures of performance.

Keywords: Management control, intellectual capital efficiency, value relevance, Ohlson equity valuation model.

  1. Alipour M. (2012), The effect of intellectual capital on firm performance: an investigation of Iran insurance companies, Measuring Business Excellence, 16(1), pp. 53-66.
  2. Amir E., Lev B. (1996), Value-relevance of nonfinancial information: The wireless communications industry, Journal of Accounting and Economics, 22(1-3), pp. 3-30.
  3. Arellano M. (2003), Panel data econometrics, Oxford university press.
  4. Asiaei K., Jusoh R., Bontis N. (2018), Intellectual capital and performance measurement systems in Iran, Journal of Intellectual Capital, 19(2), pp. 294-320
  5. Barth M.E., Beaver W.H., Hand J.R., Landsman W.R. (1999), Accruals, cash flows, and equity values, Review of Accounting Studies, 4(3-4), pp. 205-229.
  6. Bernard V.L. (1995), The Feltham‐Ohlson framework: implications for empiricists. Contemporary Accounting Research, 11(2), pp. 733-747.
  7. Biscotti A.M., D’Amico E. (2019), Does equity market differently perceive IC management and disclosure behaviours? Journal of the Knowledge Economy, 10(2), pp. 756-775.
  8. Bontis N. (1996), There’s a price on your head: managing intellectual capital strategically. Business quarterly, 60, pp. 40-78.
  9. Bontis N. (1998), Intellectual capital: An exploratory study that develops measures and models. Management Decision, 36(2), pp. 63-76.
  10. Bontis N. (2001), Assessing knowledge assets: A review of the models used to measure intellectual capital, International Journal of Management Reviews, 3(1), pp. 41-60.
  11. Bontis N., Dragonetti N.C., Jacobsen K., Roos G. (1999), The knowledge toolbox: A review of the tools available to measure and manage intangible resources, European management journal, 17(4), pp. 391-402.
  12. Bontis N. (2003), Intellectual capital disclosure in Canadian corporations. Journal of Human Resource Costing and Accounting, 7(1/2), pp. 9-20.
  13. Brooking A. (1996), Intellectual capital: Core asset for the third millennium enterprise. London, Thompson International Business Press.
  14. Chen M.C., Cheng S.J., Hwang Y. (2005), An empirical investigation of the relationship between intellectual capital and firms’ market value and financial performance. Journal of Intellectual Capital, 6(2), pp. 159-176.
  15. Dechow P.M., Hutton A.P., Sloan, R.G. (1999), An empirical assessment of the residual income valuation model, Journal of Accounting and Economics, 26(1-3), pp. 1-34.
  16. Edvinsson L. (1997), Developing intellectual capital at Skandia, Long range planning, 30(3), pp. 366-373.
  17. Edvinsson L., Malone M. (1997), Intellectual Capital: Realising your company’s true value by finding its hidden brainpower, New York, Harper Business.
  18. Firer S., Williams S.M. (2003), Intellectual capital and traditional measures of corporate performance, Journal of Intellectual capital, 4(3), pp. 348-360.
  19. Gebhardt W.R., Lee C.M., Swaminathan B. (2001), Toward an implied cost of capital, Journal of Accounting Research, 39(1), pp. 135-176.
  20. Gornik‐Tomaszewski S., Jermakowicz E.K. (2001), Accounting‐based valuation of Polish listed companies, Journal of International Financial Management & Accounting, 12(1), pp. 50-74.
  21. Hand J.R., Landsman W.R. (1998), Testing the Ohlson model: v or not v, that is the question. Available at SSRN 126308.
  22. Iazzolino G., Laise D. (2013), Value added intellectual coefficient (VAIC): A methodological and critical review, Journal of Intellectual Capital, 14(4), pp. 547-563.
  23. Iazzolino G., Laise D. (2016), Value creation and sustainability in knowledge-based strategies, Journal of Intellectual Capital, 17(3), pp. 457-470.
  24. Iazzolino G., Laise D. (2018), Knowledge worker productivity: is it really possible to measure it? Measuring Business Excellence, 22(4), pp. 346-361.
  25. Jordão R.V.D., Almeida V.R.d. (2017), Performance measurement, intellectual capital and financial sustainability, Journal of Intellectual Capital, 18(3), pp. 643-666.
  26. Karathanassis G.A., Spilioti S.N. (2003), An empirical investigation of the traditional and the clean surplus valuation models, Managerial Finance, 29(9), pp. 55-66.
  27. Kristandl G., Bontis N. (2007), Constructing a definition for intangibles using the resource based view of the firm, Management Decision, 45(9), pp. 1510-1524.
  28. Lev B., Sougiannis T. (1996), The capitalization, amortization, and value-relevance of R&D, Journal of Accounting and Economics, 21(1), pp. 107-138.
  29. Maditinos D., Chatzoudes D., Tsairidis C., Theriou G. (2011), The impact of intellectual capital on firms’ market value and financial performance, Journal of Intellectual Capital, 12(1), pp. 132-151.
  30. Marchi L. (2019), Governo delle aziende e creazione di valore: da una prospettiva finanziaria ad una prospettiva economico-sociale, Management Control, 1, pp. 5-16. DOI: 10.3280/MACO2019-001001
  31. Marchi L., Trucco S. (2017), La comunicazione al mercato delle performance economico-finanziarie: il ruolo del controllo di gestione, Management Control, 3, pp. 55-78. DOI: 10.3280/MACO2017-003005
  32. Marr B., Gupta O., Pike S., Roos G. (2003), Intellectual capital and knowledge management effectiveness, Management Decision, 41(8), pp. 771-781.
  33. Martín-de-Castro G., Delgado-Verde M., López-Sáez P., Navas-López J.E. (2011), Towards ‘an intellectual capital-based view of the firm’: origins and nature. Journal of business ethics, 98(4), pp. 649-662.
  34. Myers J.N. (1999), Implementing residual income valuation with linear information dynamics, The Accounting Review, 74(1), pp. 1-28.
  35. Nadeem M., Gan C., Nguyen C. (2017), Does intellectual capital efficiency improve firm performance in BRICS economies? A dynamic panel estimation, Measuring Business Excellence, 21(1), pp. 1368-3047.
  36. Nimtrakoon S. (2015), The relationship between intellectual capital, firms’ market value and financial performance empirical evidence from the ASEAN, Journal of Intellectual Capital, 16(3), pp. 587-618.
  37. Novas J.C., Alves M.d.C.G., Sousa A. (2017), The role of management accounting systems in the development of intellectual capital, Journal of Intellectual Capital, 18(2), pp. 286-315.
  38. Ohlson J.A. (1995), Earnings, book values, and dividends in equity valuation, Contemporary Accounting Research, 11(2), pp. 661-687.
  39. Ohlson J. (1998), Earnings, book values, and dividends in equity valuation: An empirical perspective, Working paper, New York, New York University Press.
  40. Ohlson J.A. (2001), Earnings, book values, and dividends in equity valuation: An empirical perspective, Contemporary Accounting Research, 18(1), pp. 107-120.
  41. Ota K. (2002), A test of the Ohlson (1995) model: Empirical evidence from Japan. The International Journal of Accounting, 37(2), pp. 157-182.
  42. Penman S.H., Sougiannis T. (1998), A comparison of dividend, cash flow, and earnings approaches to equity valuation, Contemporary Accounting Research, 15(3), pp. 343-383.
  43. Pew Tan H., Plowman D., Hancock P. (2007), Intellectual capital and financial returns of companies, Journal of Intellectual Capital, 8(1), pp. 76-95.
  44. Petty R., Guthrie J. (2000), Intellectual capital literature review: Measurement, reporting and management, Journal of intellectual capital, 1(2), pp. 155-176.
  45. Pulic A. (1998), Measuring the performance of intellectual potential in knowledge economy. In 2nd McMaster Word Congress on Measuring and Managing Intellectual Capital by the Austrian Team for Intellectual Potential (pp. 1-20).
  46. Pulic A. (2000), MVA and VAIC analysis of randomly selected companies from FTSE 250. Available at: www. vaic-on. net/downloads/ftse30. pdf (accessed 7 August 2004).
  47. Pulic A. (2004). Intellectual capital – does it create or destroy value? Measuring Business Excellence, 8(1), pp. 62-68.
  48. Pulic A. (2008). The Principles of Intellectual Capital Efficiency. A Brief Description, Croatian Intellectual Capital Center, Zagreb. -- Retrieved at
  49. Reitmaier C., Schultze W. (2017), Enhanced business reporting: Value relevance and determinants of valuation-related disclosures, Journal of Intellectual Capital, 18(4), pp. 832-867.
  50. Riahi-Belkaoui A., Fekrat M.A. (1994), The magic in value added: merits of derived accounting indicator numbers, Managerial Finance, 20(9), pp. 3-15.
  51. Roos J., Edvinsson L., Dragonetti N.C. (1997), Intellectual capital: Navigating the new business landscape, London, Macmillan Business.
  52. Roos G. (2017). Knowledge management, intellectual capital, structural holes, economic complexity and national prosperity, Journal of Intellectual Capital, 18(4), pp. 745-770.
  53. Sardo F., Serrasqueiro Z. (2017), Intellectual capital and firms’ financial performance: A European empirical study, Business and Economic Research, 7(2), pp. 1-18.
  54. Scafarto V., Ricci F., Scafarto F. (2016), Intellectual capital and firm performance in the global agribusiness industry: The moderating role of human capital, Journal of Intellectual Capital, 17(3), pp. 530-552.
  55. Serenko A., Bontis N. (2004), Meta‐review of knowledge management and intellectual capital literature: Citation impact and research productivity rankings, Knowledge and process management, 11(3), pp. 185-198.
  56. Silvestri A., Veltri S. (2012), A test of the Ohlson model on the Italian stock exchange. Accounting & Taxation, 4(1), pp. 83-94.
  57. Smriti N., Das N. (2018), The impact of intellectual capital on firm performance: a study of Indian firms listed in COSPI, Journal of Intellectual Capital, 19(5), pp. 935-964.
  58. Ståhle P., Ståhle S., Aho S. (2011), Value added intellectual coefficient (VAIC): a critical analysis. Journal of Intellectual Capital, 2(4), pp. 531–551.
  59. Stewart, T. A. (1997), Intellectual capital: The new wealth of organizations. New York: Doubleday/Currency.
  60. Stober T.L. (1999), Empirical applications of the Ohlson [1995] and Feltham and Ohlson [1995, 1996] valuation models, Managerial Finance, 25(12), pp. 3-16.
  61. Sveiby K. E. (1997), The new organizational wealth: Managing & measuring knowledge-based assets, San Francisco, Berrett-Koehler.
  62. Sveiby K. E. (2000), Measuring intangibles and intellectual capital (337-354), Cambridge, Massechusetts, The MIT Press.
  63. Sveiby K. E. (2001), A knowledge‐based theory of the firm to guide in strategy formulation, Journal of intellectual capital, 2(4), 344-358.
  64. Sveiby K.E. (2010), Methods for measuring intangible assets, -- Available at:
  65. Swartz G.E., Swartz N.P., Firer S. (2006), An empirical examination of the value relevance of intellectual capital using the Ohlson (1995) valuation model, Meditari Accountancy Research, 14(2), pp. 67-81.
  66. Tayles M., Pike R.H., Sofian S. (2007), Intellectual capital, management accounting practices and corporate performance: Perceptions of managers, Accounting, Auditing & Accountability Journal, 20(4), pp. 522-548.
  67. Veltri S., Silvestri A. (2011), Direct and indirect effects of human capital on firm value: evidence from Italian companies, Journal of Human Resource Costing & Accounting, 15(3), pp. 232-254.
  68. Wang M. (2011), Measuring intellectual capital and its effect on financial performance: Evidence from the capital market in Taiwan, Frontiers of Business Research in China, 5(2), pp. 243-265.
  69. Yee K.K. (2000), Opportunities knocking: residual income valuation of an adaptive firm, Journal of Accounting, Auditing & Finance, 15(3), pp. 225-266.
  70. Zéghal D., Maaloul A. (2010), Analysing value added as an indicator of intellectual capital and its consequences on company performance, Journal of Intellectual Capital, 11(1), pp. 39-60.
  71. Aboody D., Lev B. (1998), The value relevance of intangibles: The case of software capitalization, Journal of Accounting Research, 36, pp. 161-191.
  72. Agarwal V., Taffler R., Brown M. (2011), Is management quality value relevant? Journal of Business Finance & Accounting, 38(9‐10), pp. 1184-1208.

  • Cheating in the evaluation. An expedient to estimate the impact of intangibles on the enterprise value of the high-growth start-ups Giulia Cattafi, Giovanna Mariani, Francesco Pistolesi, Domenico Nicolò, in MANAGEMENT CONTROL 3/2024 pp.193
    DOI: 10.3280/MACO2023-003009

Federica Ricci, Vincenzo Scafarto, Salvatore Ferri, Teresa Riso, Management control systems in the knowledge economy: Assessing the role of intellectual capital in value creation in "MANAGEMENT CONTROL" 3/2020, pp 17-34, DOI: 10.3280/MACO2020-003002