Intellectual capital and corporate

performance of MNCs in Serbia

Biserka Komnenic
Higher School of Professional Business Studies, Novi Sad, Novi Sad, Serbia, and
Dragana Pokrajcic
Faculty of Economics, University of Belgrade, Belgrade, Serbia
Abstract
Purpose The purpose of this paper is to empirically investigate if intellectual capital (IC) has an
impact on organizational performance as well as to identify the IC components that may be the drivers
of the traditional indicators of business success. The study sought evidence from the multinational
companies which conduct their business in Serbia.
Design/methodology/approach By using data from 37 multinational companies which
established their business in Serbia from 2006 to 2008 and applying the VAIC methodology for
generating independent variables which reect IC, regression models were constructed to examine the
relationships between the efcient use of MNCs human and structural capital and corporate
performance measures: return on assets, return on equity and productivity.
Findings The results of this study reveal that human capital is positively associated with all three
corporate performance measures. The hypothesis regarding a positive association between structural
capital and MNCs protability and productivity has been conrmed only partially since the results
indicate that the structural capital variable shows a statistically signicant and positive relationship
only with the performance measure - return on equity.
Originality/value This is the rst empirical study conducted in Serbia testing the relationship
between IC and organizational performance. It contributes to the existing IC literature by giving new
insights into the IC of MNCs subsidiaries established in Serbia and its relationship with their business
performance.
Keywords Intellectual capital, Corporate performance, Busines performance, Multinational companies,
Serbia
Paper type Research paper
Research issue
According to the resource-based theory, rms gain competitive advantage and attain
superior performance by holding, acquiring, and effectively using strategic assets.
These assets include tangible, physical, assets as well as intangible assets that have
been internalized, developed and used by rms in pursuing competitive and protable
strategies (Wernerfelt, 1984). The physical assets (plant, property, equipment, and
physical technologies) are easily imitable and substitutable, and can be traded with in
the market. Intangible assets are valuable, rare, non-substitutable and hard to imitate,
which is why they are treated as strategic assets capable of generating sustainable
competitive advantage and superior nancial performance (Barney, 1991).
Often regarded as the fourth factor of production, beside land, labor and nancial
capital, intellectual capital (IC) embodies intangible value drivers and for that reason it
has an increasingly important role in achieving high business performance. Therefore,
the qualication of IC as a strategic asset rests on a potential link between intellectual
capital on the one hand, and rm performance on the other. This relationship has been
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1469-1930.htm
JIC
13,1
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Journal of Intellectual Capital
Vol. 13 No. 1, 2012
pp. 106-119
qEmerald Group Publishing Limited
1469-1930
DOI 10.1108/14691931211196231
proven by the business practice of rms which have been engaged in IC management
and also through empirical research showing the effects of intellectual capital
management, measurement and reporting process on the increase of rms value and
prot. (DTID Council, 1997; Bornemann et al., 1999; Johanson, 1999; Peppard and
Rylander, 2001).
The business practice of MNCs itself is actually the most responsible for initiating
the IC concept development. At the end of 1980s some of the most famous methods of
IC measurement and management were created in cooperation with multinational
companies which were among the rst to engage in these efforts, such as Celemi,
Scandia Group, Dow Chemical and others which have become members of the
organization for the management of IC ICM Gathering (Intellectual Capital
Management -Gathering). This is perhaps not surprising, because the issue of
coordinating knowledge processes may be more critical for such large organizations
like MNCs than for rms with national orientation (Foss and Pedersen, 2004). The
practical application of the concept of IC by multinational rms conrmed that for the
rms, the management of IC has concrete economic advantages.
In the literature about MNCs it is suggested that the performance of foreign
subsidiaries is superior to that of domestic rms due to their possession of rm-specic
advantages, that is due to their ability to protably deploy abroad the intangible assets
which have been developed in their home country (Caves, 1982; Dunning, 1988; Kogut
and Zander, 1993; Gupta and Govindarajan). Accordingly, the main objective of this
study is to test the nature and the intensity of the relationship between the components
of MNCs IC (human and structural capital) and their protability and productivity, on
the sample of MNCs subsidiaries in Serbia.
The concept of intellectual capital
The resource and knowledge based views, evolutionary theory approach and concept of
dynamic and key capabilities all stress out that rms most important strategic assets
are those based on knowledge (intangible assets). Since the identication and
management of intangibles has not been satisfactorily addressed in these theories, this is
where the intellectual capital perspective comes in. The concept of IC expands on and
elaborates the strategic and operative understanding of rms key capabilities. In the last
decade, this emerging concept has established itself among the most widely accepted
management constructs. Its holistic approach emphasizes the dimensions of knowledge
employed and activated in organizations as well as the impact of knowledge-based
resources on their performance. Its main objective is to provide rms with guidelines on
how to develop their key capabilities represented in intellectual capital, measure their
contribution and manage their growth, and most importantly, nd the best and most
productive way to create a value considering the specicity of their key capabilities and
effects which arise from their interactions. The dening of intellectual capital and its
taxonomy, the strategic and operative management of intellectual capital and
measurement of its key components constitute a homogeneous theoretical framework,
which reects the holistic approach of this concept in creating rms value.
In the theoretical sense, the concept of IC mostly relies on the resource-based theory
of rm and its variation the concept of dynamic and core capabilities. The notion
that the resource-based theory uses as a key concept - the concept of strategic
resources, resembles the traditional concept of strategic factors of production. The
IC and corporate
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concept of IC determines ve resource categories, which can be used as a framework
for facilitating the identication of all rms strategic resources (Roos and Roos, 1997).
These categories are human, organizational and relational resources on the intangible
side and physical and monetary resources on the tangible side. This is in line with the
resource-based theory of rm by which resources are dened as those tangible and
intangible assets that are permanently connected with a rm in a given period of time
(Wernerfelt, 1984).
Intellectual capital of a rm is not just knowledge. It consists of human,
organizational and relational capital. Human capital involves not only tacit and explicit
knowledge of employees. It also includes employees competencies and capabilities in
terms of structuring and applying knowledge and skills to perform certain activities.
Organizational capital is the extension and manifestation of human capital in the form
of codied knowledge, innovation, organizational structure, corporate culture,
intellectual property, business processes and physical and nancial structure of a
rm. Relational capital is the ability to build quality relationships with external
stakeholders: customers, suppliers, investors, state and society in general. Therefore,
the IC concept represents a detailed explanation of the concept of key capabilities and
strategic resources as the focus of interest of the resource and knowledge-based theory
of rm. It provides a basis for generating information necessary for making strategic
and operative decisions concerning a rms key capabilities.
The concept of IC stresses that organizations create value through a number of
linkages and interactions between all relevant resources, within and outside them.
Accordingly, external resources, in different forms of strong and intensive linkages
with organizations stakeholders, are equally important as internal resources.
Stakeholders include shareholders, employees, customers, suppliers, lenders, the
government and society, and they are treated as organizations partners in the process
of value creation. Therefore, within the context of IC, a rms performance should be
explained from stakeholders perspective, implying that rm performance is seen as
total wealth generated by the rm, before its distribution to various stakeholders,
rather than the accounting prot allocated only to shareholders. Since the accounting
prot measures return to shareholders only, value added (VA) represents a more
accurate measure of wealth created by stakeholders, and then distributed to them
(Meek and Gray, 1998; Riahi-Belkaoui, 2003).
With respect to research on IC measurement, various valuation methodologies have
been developed. Sveiby (2010) grouped the methodologies under four categories: direct
IC methods, market capitalization methods, return-on-assets methods, and scorecard
methods. Andriessen (2004) reviewed the 25 methods for IC measurement, and grouped
them under four categories: nancial valuation, value measurement, value assessment,
and measurement. None of the existing methods can either meet all the qualitative
criteria, or satisfy all the specic needs of a rm. Therefore, rms should choose a
suitable method according to the purpose of measuring their IC, the current situation
and IC information users.
MNCs
According to the resource-based perspective the main source of competitive advantage
and high prot performance of a MNC is a capability which is ingrained within the
walls of the rm and is difcult to separate from it (Forsgren, 2008, p. 68). This
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capability is linked to the managerial and organizational processes in the rm through
its routines, current practice and history. The resource-based theory emphasizes that
every MNC must sustain and develop its core capability, which is a mixture of the
multinationals organizational processes developed over time and its employees.
Employees are assumed to be holders of a large part of the knowledge on which the
capability is based. The contemporary theory of MNCs conceptualizes the MNC as a
knowledge-sharing network whose existence can be understood in terms of its ability
to transfer, create, integrate and deploy certain kinds of knowledge more efciently
than markets are capable of doing (Kogut and Zander, 1993). The common line in the
research of MNCs knowledge transfer is MNCs capability for internal transfer of
knowledge in other words, their ability to develop knowledge in one location, and to
exploit it in another.
The reason to conduct the study on the sample of multinational rms derives from
theoretical and empirical evidence suggesting that the performance of foreign
subsidiaries is superior to that of domestic rms due to their rm-specic advantages,
i.e. their ability to effectively deploy abroad intangible assets, created in their country
of origin (Caves, 1982; Dunning, 1988; Kogut and Zander, 1993; Gupta and
Govindarajan). Accordingly, this study expects to nd empirical evidence that
supports the hypothesis that there is a strong positive correlation between the
intellectual capital of MNCs subsidiaries established in Serbia and their corporate
performance.
Since the qualication of IC as a strategic asset rests on a potential link between
intellectual capital on the one hand and rm performance on the other, and since the
intangible assets (or IC) represent MNCs most important strategic resource, we
proposed the following hypothesis:
H1. Human MNC capital is positively associated with protability and
productivity.
H2. Structural MNC capital is positively associated with protability and
productivity.
Prior empirical studies about IC and business performance
There are a signicant number of research projects in literature on IC about the
relationship between IC and corporate performance. For example, using the sample of
US multinational rms, Riahi-Belkaoui (2003) tested the relationships between
intellectual capital and net value added over total assets. The results of this study
showed a positive contribution of IC to nancial performance of MNCs, based on net
value added over total assets. For the purpose of his study Riahi-Belkaoui calculated
the IC variable as the difference between the sample rms total trademarks and the
median number of trademarks for the total sample. Therefore, for the purpose of
dening the variable which represents IC, Riahi- Belkaoui used one of the elements of
structural capital the rms intellectual property assets (trademarks).
A well-documented research project has been undertaken in Taiwan by Chen et al.
(2005). This study has analyzed the relationship between IC and rms market-to-book
value ratios and nancial performance. Its results reveal that rms intellectual capital
has a positive impact on market value and nancial performance represented in
performance measures ROA and ROE. Also, evidence is presented that R&D
IC and corporate
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109
expenditure may capture additional information on structural capital (regarding its
calculation in the VAIC methodology), and has a positive effect on rm value and
protability.
Firer and Williams (2003) have studied the association between IC and productivity,
protability and market valuation. They did not nd any strong association between
the efcient use of human and structural capital and rms protability dened as
return on assets (ROA). The results showed only a moderately positive association
between the efciency of structural capital and protability. With respect to
productivity, dened as a ratio of total turnover to total assets, they found that only the
efciency of rms human resources shows a statistically signicant relationship with
productivity, but with a negative sign. The same results were arrived at in the case
regarding the relationship between IC and market value.
Kujansivu and Lonnqvist (2005) conducted a study on a large sample of Finish
companies, with the aim of examining the different relationships between IC-related
factors and rms productivity and protability. The results showed no linear
relationship between the investments in IC, value of IC and the efciency of IC and
protability (ROA). On the other hand, they found statistically signicant linear
dependency between the efciency of IC, the value of IC and productivity.
In Taiwan, Shiu(2006), conducted a cross-sectional study of 80 Taiwan listed
technology rms in 2003. The study found a signicant positive association between
IC and protability as well as market valuation, but a negative association with
productivity. The research conducted in Singapore by Tan et al. (2007), using data from
150 publicly traded Singapore rms, conrmed positive correlations between the
efciency of IC and nancial performance measures: return on equity, earnings per
share and annual stock return. This research also found that the contribution of IC to a
rms performance differs by industry.
The research undertaken by Kamath (2008), tested the relationship between IC and
protability, productivity and market valuation, on the sample of 25 Indian
pharmaceutical companies. The results of this study did not reveal any signicant
positive relationship between the rms performance in terms of protability,
productivity and market valuation with any of the independent variables of IC. The
recent research by Zeghal and Maaloul (2010) using data from 300 UK companies
shows a signicantly positive association between IC and the rms economic and
nancial performance.
A study conducted by Chan (2009) on a sample that consisted of all the constituent
companies of the Hang Seng Index for the period from 2001 to 2005, examines the
relationship between the efciency of the rms IC and its components (human and
structural capital) and the rms performance measures: market valuation, return on
assets, return on equity and productivity measure. The results of regression analysis
revealed that only structural capital has a statistically signicant and positive
relationship with protability measures ROA and ROE. The most recent research
about the relationship between IC and corporate performance was conducted by Chu
et al. (2011). This study repeated the analysis conducted by Chan (2009) using the same
sample for a longer period of time, i.e. from 2001 to 2009. Its results showed that IC, as
measured by the VAIC, was positively associated with the rms protability. In
particular, structural capital, as a key component of IC, has a strong inuence in
enhancing corporate protability, and showed a growing trend in its signicance.
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Research methods
The VAIC method
On the assumption that, in the context of value creation, corporate performance
depends not only on investment in strategic resources, but also on the ability of rms
to efciently use them in the process of value creation and that the IC concept demands
stakeholders view of rms performance, for the purpose of this study the authors
have used the Value Added Intellectual Capital Coefcient (VAIC) as a construct for
generating independent variables representing IC and its components: human and
structural capital.
The VAIC method is categorized as a nancial valuation method (Andriessen, 2004).
It was created by the Austrian Intellectual Capital Research Centre (AICRS) under
Professor Pulic (2000). This method measures the efciency of rms three types of
input: physical/nancial capital, human capital, and structural capital. The sum of the
three measures is the value of aggregate coefcient VAIC. Higher VAIC value suggests
better management utilization of companies strategic resources.
One of the advantages of using this method for generating variables which
represent IC and its components (human and structural capital) is that it has a history
of deployment and application in research on the relationship between IC and corporate
performance to which researchers can refer when reviewing published papers. Also,
the application of the method is quite simple and the data needed for the calculation
can be found in nancial statements.
This method also has certain limitations. First, the existence of an inverse
relationship between HC and SC is not immediately apparent from the model (Chu et al.,
2011). Second, its measure for structural capital may be incomplete. The study
conducted by Chen et al. (2005), showed that after controlling for SCE, research and
development (R&D) expenditure is positively related with rms market value and
protability, suggesting R&D and advertisement expenditure may capture additional
information on innovative and customer capital that is excluded from the measure of
structural capital efciency. Third, it has been criticized because it may not sufciently
identify the synergistic effects for value creation from interactions of different forms of
capital (Andriessen, 2004). However, as Kujansivu and Lonnqvist emphasize, at this
point in time there are no perfect solutions available for measuring the value and
efciency of IC (Kujansivu and Lonnqvist, 2007).
Independent variables
The VAIC methodology provides a construct for generating independent variables
representing the IC components human and structural capital.
HCE Human Capital Efciency.
SCE Structural Capital Efciency.
For the computation of HCE and SCE it is necessary to compute a rms value added
which is calculated as the difference between the output and input. The basic denition
is as follows:
VA OUT 2IN
IC and corporate
performance
111
where:
VA Value added.
OUT Total sales.
IN Cost of bought in materials, components and services.
Value added can be calculated from a rms accounts as follows:
VA P C D A
where:
P Operating prot.
C Employee costs.
D Depreciation.
A Amortization.
Human capital efciency (HCE) may be obtained by treating the total expenditure on
employees as an investment that captures the total human effort in a rm in value
creation. This is the key assumption of the VAIC methodology. Therefore, HCE may be
expressed as the amount of value added generated per money unit invested in
employees:
Human capital efciency is received as a result:
HCE VA=HC
where:
HCE Human Capital Efciency Coefcient.
VA Value added.
HC Total salaries and wages.
According to the methodology, structural capital (SC) may be viewed as a contribution
to the value creation process for a given period, which may be obtained by subtracting
human capital from the amount of value added.
Structural capital is calculated as follows:
SC VA 2HC
where:
SC Structural capital.
VA Value added.
HC Total salary and wages.
Structural capital efciency (SCE) is reected by the share of SC in the total value
created and it is calculated in the following manner:
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SCE SC=VA
where:
SCE Structural Capital Efciency Coefcient.
SC Structural capital.
VA Value added.
Pulic (2000) argues that there is a proportionate inverse relationship between HC and
SC, in the value creation process attributable to the entire IC base. Therefore, the
measure of SCE is slightly different from other ratios.
Dependent variables
For testing the relationship between IC and corporate performance, corporate
performance was measured by three traditional accounting performance measures:
protability of investments in the rms assets (ROA), protability of shareholders
capital ROE, and productivity measure of the rms total assets (ATO).
ROA represents the ratio of operating income to book value of total assets:
ROA Operating income/total assets.
ROE represents the ratio of net income to total shareholder equity:
ROE Net income/shareholders equity.
ATO represents the ratio of total revenue to book value of total assets:
ATO Total revenue/total assets.
Control variables
The inuence of rms tangible assets and their signicance for corporate performance
is well known in economic science and practice. On the assumption that the efciency
of using tangible assets can have signicant inuence on chosen corporate
performance measures, it is introduced into the analysis as a control variable and
treated as an independent one. Tangible assets are dened through the CEE (capital
employed efciency) indicator, also adopted from the VAIC method.
Capital Employed Efciency is calculated in the following manner:
CEE VA=CE
where:
CEE Capital Employed Efciency Coefcient
VA Value added.
CE Book value of the net asset.
The size of a rm determined as a book value of total assets may have an impact on the
dependent variables, and it is used as a control variable. The size of a rm is
represented through natural logarithm of the rms book value of total assets.
IC and corporate
performance
113
Regression models
Multiple linear regression (MLR) for predictive analysis of multiple independent
variables is used to test the hypotheses developed earlier. The regression analysis
consists of 3 regression equations (models). They examine the relationship between
human and structural capital of MNCs and three measures of corporate performance
after controlling for efciency of capital employed and rm size.
ROA b
0
b
1*
HCE b
2*
SCE b
3*
CEE b
4*
ln F Size
ROE b
0
b
1*
HCE b
2*
SCE b
3*
CEE b
4*
ln F Size
ATO b
0
b
1*
HCE b
2*
SCE b
3*
CEE b
4*
ln F Size
Data source
The analysis data were obtained partly from the National Bank of Serbia and partly
from the rms annual nancial reports balance sheets and income statements found
on their web sites. The original data sample consisted of 37 multinational companies
that were among top 300 companies whose list could be found in the annual edition of
the Serbian Journal Business & Finance, titled Business Top for 2008. From the
original sample of 37 companies, six companies were excluded from regression
analysis because they did not have consistency in producing positive value added
amount throughout the observed three-year period. The nal sample is composed of 31
companies, based on which 93 company-year observations were collected for the
period from 2006 to 2008. The reason for choosing this period is that the data required
for the study were available for these years only.
Finance industry is the largest sector representing over half of the chosen sample
(see Table I). These are multinational nancial conglomerates with diverse portfolios of
products and services ranging from classical commercial banking services to
investment banking, leasing and insurance.
Results
In presenting the results of regression analysis, the explanatory power (R adjusted) of
the regression models and the standardized regression coefcients (b) are presented.
By inspecting the values of the standardized regression coefcient, the predictive
strength or power of the independent variables can be compared and assessed. The
statistical signicance for the regression models is determined at the level: p , 0.05.
The descriptive statistics of the independent, dependent and control variables are
shown in Table II.
The results of regression analysis for models 1, 2, and 3 are shown in Tables III-V.
These models are employed in the testing the hypotheses relating to each of the
Sector Number of companies Share in percentage in total sample
Finance 17 56%
Commerce and industry 14 45%
Total 31 100
Table I.
Sample prole by sector
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components of MNCs IC: human and structural capital and the rms corporate
performance.
The results reveal that all three regression models have the highest statistical
signicance and high explanatory power, with coefcients of determination of 41, 45,
and 44 per cent respectively. The hypothesis regarding a positive relationship between
n Mean Median Minimum Maximum SD
HCE 93 2.69797 2.26143 0.054 12.2259 2.06273
SCE 93 0.27278 0.55602 217.373 0.9182 1.87801
CEE 93 0.37517 0.29578 0.000 1.3965 0.26336
ROA 93 5.94481 2.79806 27.906 29.5924 8.34676
ROE 93 11.38684 10.52667 2101.743 95.2817 20.35020
ATO 93 68.29238 32.68751 7.245 325.5283 67.85653
Ln Fsize 93 16.88552 16.63112 15.038 19.3378 1.11653
Table II.
Descriptive statistics of
the independent and
dependent variables
Standardized regression
Coefcient b t-value p-level
Model 1 (relationship between ROA and IC components)
HCE 0.338893
*
4.10857 0.000089
SCE 0.119013 1.40067 0.164829
CEE 0.452224
*
5.12719 0.000002
Ln Fsize 20.126605 21.44156 0.152976
Notes: Adj R
2
0.414; F(4.88) 17.277;
*
Signicant at p , 0.00000
Table III.
The relationship between
human and structural
capital and corporate
performance
Standardized regression
Coefcient b t-value p-level
Model 3 (relationship between ATO and IC components)
HCE 0.237528
*
2.94732 0.004103
SCE 0.022919 0.27608 0.783136
CEE 0.406807
*
4.72060 0.000009
Ln Fsize 20.360269
*
24.19848 0.000064
Notes: Adj R
2
0.440; F(4.88) 19.143;
*
Signicant at p , 0.00000
Table V.
The relationship between
human and structural
capital and corporate
performance
Standardized regression
Coefcient b t-value p-level
Model 2 (relationship between ROE and IC components)
HCE 0.302861
*
3.80893 0.000258
SCE 0.269046
*
3.28473 0.001660
CEE 0.476436
*
5.60352 0.000000
Ln Fsize 0.080910 0.95568 0.341851
Notes: Adj R
2
0.455; F(4.88) 20.266;
*
Signicant at p , 0.00000
Table IV.
The relationship between
human and structural
capital and corporate
performance
IC and corporate
performance
115
MNCs human capital and corporate performance is strongly statistically supported.
The results show that human capital efciency has a positive correlation with all three
corporate performance measures, and in all three models the regression coefcient of
this independent variable has the highest statistical signicance. The regression
coefcient value of this independent variable is highest in the model which tests the
inuence of MNCs IC components on the performance measure ROA b of0; 338:
Structural capital was found to be a statistically signicant predictor only for return
on equity, showing a positive correlation with this dependent variable. Regression
analysis revealed that structural capital is not associated with protability measure
ROA and measure of productivity ATO. Therefore, the hypothesis regarding a positive
relationship between MNCs structural capital and protability and productivity has
only been partially conrmed.
As a control variable, physical capital efciency (CEE) was found to be the
statistically signicant and strongest predictor in all three models testing the
relationship between each IC component: human and structural capital and chosen
corporate performance measures.
Turning to the control factor rm size, results show that it has a statistically
signicant but negative correlation only with productivity measure ATO. Its relationship
with other two corporate performance measures is not of statistical signicance.
Implications for researchers and practitioners and research limitations
The research implications of this study are multiple. First, empirical evidence has been
found to support the conrmation of a relationship between MNCs IC and traditional
corporate performance measures (ROA, ROE, and ATO), since the regression analysis
results have revealed a signicant inuence of the IC components, especially human
capital, on the protability and productivity of the observed subsidiaries. Second, the
study results can serve as yet another reference for future research of IC inuence on
corporate performance. Furthermore, given that this is the rst analysis in Serbia to
use the IC VAIC measuring method for examining the relationship between IC and
corporate performance it may serve as a platform for conducting future research on the
IC problem area in Serbia.
Regarding practical implications the results of this study can inuence the awareness
raising about the signicance of IC for corporate performance, which in time may result
in recognizing the need for the implementation of some of the IC management and
measuring models and methods. This is of particular signicance in the context of
Serbias intention to carry out the transition of its economy into a knowledge-based one.
This study is not without its limitations. It is debatable whether the chosen method
(VAIC) is appropriate for measuring IC. However, at this point in time, there are no
perfect solutions available for measuring IC. Also, future research should consider the
introduction of other control factors, which may help in producing more precise and
accurate results. Furthermore, the future research should be conducted on a sample
that spans a longer period of time, which could not have been done in this study, since
all the necessary data were available only for the given period of three years.
Discussion and conclusion
The study results give strong empirical support for the hypothesis about a positive
correlation between MNCs human capital and their corporate performance. This is in
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line with the results of earlier empirical research about the relationship between IC and
corporate performance (Chen et al., 2005; Tan et al., 2007; Kamath, 2008; Zeghal and
Maaloul, 2010, etc.). Human capital efciency (HCE) was found to be the strongest
predictor with the highest value of regression coefcient in the model testing its
relationship with performance measure ROA. The results of our study are also, in line
with the theoretical and empirical evidence (Minbaeva et al., 2003; Delaney and
Huselid, 1996; Koch and McGrath, 1996; Huselid, 1995) that building and upgrading
skills and knowledge of employees working for MNCs subsidiaries has proved to be
essentially important for the overall performance of MNCs, especially in the context of
raising the level of subsidiaries productivity and the efciency of work routines.
The hypothesis about the relationship between MNCs structural capital and
corporate performance has only been partially conrmed, since this variables
regression coefcient has proved to be statistically signicant and having a positive
sign only in the case of testing its relationship with ROE. The lack of association
between structural capital and protability measure ROA and productivity (ATO)
appears to support an argument advanced by Chen et al. (2005), Chan (2009) upon
investigating Taiwanese companies. It was argued that structural capital in the VAIC
methodology might be incomplete because the expenditure on research and
development (R&D) and advertising is treated as expenses and thus not captured as
part of structural capital. In addition, the SCE component of ICE can only have the
value of less than one while the contribution of the HCE component is usually higher.
In general, it may be concluded that multinational companies in Serbia appear to be
putting emphasis on two strategic resources, namely human and physical capital, as a
way of enhancing return on investments, return on equity, and productivity. Therefore,
it may be concluded that MNCs subsidiaries in Serbia are focused on investing in
capacity and efciency building activities through delivering education and training to
employees in order to help them increase production levels and perform work routines
more efciently. On the other hand, there is an indication that the subsidiaries of
multinationals in Serbia put less effort on the development of structural capital as
compared with their sister companies in developed countries. However, it was not the
objective of this study to provide explanations for these differences. Also, further
research is needed to better understand the impact of MNCs individual IC components
on their corporate performance.
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About the authors
Biserka Komnenic MSc graduated from the Faculty of Economics, University of BK Belgrade in
1999. She obtained an MSc degree at Faculty of Economics, University of Belgrade in 2004. Her
PhD thesis was Holistic way of creating value of enterprises, for the Faculty of Economics,
University of Belgrade. From 2005 she has been a full-time Lecturer in Novi Sad Business School.
Her teaching commitments are in the undergraduate studies of Financial Management and
Financial Institutions and Markets. Her research interests are theory and economics of
enterprises and advanced nancial management methodologies and her other professional
activities include being president of intellectual capital community formed by Regional Chamber
of Economy Novi Sad and being a columnist for the magazine Business & Finance. Biserka
Komnenic is the corresponding author and can be contacted at: bkomnenic@gmail.com
Dragana Pokrajcic PhD, graduated from the Faculty of Economics, Belgrade, in 1978, where
she got the MSc degree in 1978, and the PhD degree in 1990. Has been working as a Full
Professor since 1998. She attended the London School of Economics and Political Science,
London (1985) for professional improvement and advanced training. She teaches undergraduate
studies in the subject Enterprise Economics and postgraduate studies in the subject
Entrepreneurship and Economics of Small Business a the Belgrade Faculty of Economics. Her
research interests are: theory and economics of enterprises, innovation and entrepreneurship,
enterprise organization and management. Her other professional activities include: participation
in consultations of national and international importance; project consulting and research
activities.
IC and corporate
performance
119
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