Intellectual capital and financial performance in the Serbian ICT industry

Purpose - The purpose of this paper is to examine whether intellectual capital (IC) creates value in the Serbian information communication technology (ICT) sector. More specifically, it examines the degree to which IC and its key components affect the financial performance of selected ICT companies compared to effects on physical and financial capital. Design/methodology/approach - The analysis included 13,989 Serbian ICT companies during 2009-2013. Value-added intellectual coefficient (VAIC) was used to measure the level of IC contribution to value creation. Measures of financial performance used in the study were return on equity, return on assets, return on invested capital, profitability, and asset turnover. Findings - Results indicate that, when using firm size and leverage as control variables, only capital-employed efficiency has significant effect on financial performance. Finally, the research confirms that there were no significant differences in financial performance among different ICT subsectors. Research limitations/implications - Main research limitation is related to the disadvantages of VAIC as the measure of IC's contribution to value creation. Practical implications - Owners and managers of Serbian ICT companies must recognize the importance of managing both the physical capital and the intangible resources embedded in their employees and processes. Originality/value - This is the first paper to examine comprehensively the impact of IC on financial performance in the ICT sector in a transitional economy. This study differs from prior studies in that the authors analyzed every company that operated in Serbian ICT sector.