The efficiency of intellectual capital in creating value to company performance among Malaysian technology companies

In today's knowledge-based economy and innovation age, intellectual capital (IC) plays a vital role in achieving firm competitive advantage. IC can be defined as intangible assets comprising technology, brand name, corporate culture, customer information, etc. IC is divided into human capital, structural capital, relational capital, and spiritual capital. This study was conducted to investigate the IC efficiency in creating value among technology companies in Malaysia. The objectives of the study were to measure the IC efficiency among the companies, to identify the most efficient IC elements, and to examine the relationship between IC efficiency and company performance. Data from annual reports of 29 technology companies listed in the Main Board of Bursa Malaysia (Malaysian Bourse) were analyzed using VAICTM to measure IC efficiency while the company performance was measured by using return on assets ratio (ROA). Pearson's Correlation was employed to examine the relationship between the companies' IC efficiency and their performance. For the purpose of applying VAICTM, spiritual capital was not included. The findings indicate that the most efficient IC element among the Malaysian technology companies is human capital, in average the companies generate RM2.17 return on each RM1 invested, and there is a positive and significant relationship between their IC efficiency and their performance. Based on the findings, it is concluded that IC efficiency is creating value for the companies and it is recommended that the companies manage their IC effectively to increase their performance.