Status-Quo vs New Strategy in Intangibles
Purpose – This study explores company strategies for intangibles. We investigate whether it is reasonable for companies to intensify intangibles when the current strategy is not intangible-intensive. This paper aims to elaborate a theoretical model to describe the strategic decision-making in companies.
Design/methodology/approach – We use the Bellman equation framework to find the conditions under which a change in strategy for intangibles is reasonable.
Findings – The results determine the parameters of returns on intangibles in different strategies, the optimal intangible stock and the influence of external economic shocks. The findings of our study demonstrate that many requirements have to be met to make intangible-intensive strategy beneficial for a company. Moreover negative shocks of crises force a company to postpone a new strategy on intangibles.
Practical implications – This research provides an insight into strategic behaviour of companies under uncertainty. The theoretical findings demonstrate under which conditions companies should decide to switch to a strategy more intangible-intensive. This model can be used to empirically test parameters of different investment strategies of companies using structural estimation techniques.
Originality/value – This work contributes to the theory of managerial economics giving closed form solutions for the dynamic optimization of company behaviour. The findings also show how this behaviour might change when economic crises are faced or expected.
This paper explores the moderator effect of firm size on the relation between different intangible resources and companies' performance. By analysing small and medium enterprises (SMEs) and large companies, the authors examine the differences in the employment of six types of intangible resources: human resources, management resource capabilities, innovation and internal process capabilities, customer loyalty and networking capabilities. Dummy regression is applied to establish the differential effect in the impact of these intangibles on firm performance, measured by return on assets (ROA). This study provides econometric justification using a database of more than 1,400 European public companies. The time period for the investigated data covers ten years, from 2004 to 2013. The findings revealed that SMEs have less endowment of almost all of the analysed intangible resources. At the same time, in comparison with large companies, SMEs benefit more from developing human resources, innovation and internal process capabilities.
Purpose: This study investigates the factors that support or obstruct market value creation through intangible capital.
Design/methodology/approach: We explore the impact of intangibles and exogenous shocks on corporate attractiveness for investors measured by Market Value Added (MVA). Specifically we analyse the relationship between intangible-driven outperformance of companies, measured by Economic Value Added (EVA) and a number of intangible drivers on macro-, meso- and micro- levels. We suppose that the process of value creation is not only confined to companies’ performances. Our empirical research was conducted on more than 900 public companies from Europe and US during the period 2005-2009.
Findings: Our study establishes that investment attractiveness is affected by intangibles. We found that a company’s experience, size and innovative focus facilitate value creation. An unexpected result was revealed concerning countries’ education level, which appears to be an obstructive condition for intangible-driven value creation.
Research limitations/implications: The study reveals the significance of industry belonging for intangible-driven value creation. Nevertheless, it does not discover the particular characteristics of industry that influence corporate attractiveness for investors. These issues could be addressed in future research.
Practical implications: Our findings extend the understanding of the phenomenon of intangible capital and enable the improvement of investment decision-making.
Originality/value: The study emphasizes the holistic framework of market value creation by analysing a number of strategic crucial factors in line with Economic Value Added.
This study investigates factors of corporate success over the crisis period of 2008-2009. We advocate the idea that investments in intangibles allow a company to be better off, even if the markets go down. The hypothesis put forward in this paper was tested on a sample of more than 300 companies which operate in developed and emerging European markets, and belong to traditional and innovative industries. The application of statistical tools showed a robust significant link between the companies’ investment decisions and their performance before and during the crisis. This study contributes to empirical corporate finance as it provides evidence that investment restriction is not the best response to an economic recession.