Proceedings of the 5th European Conference on Intellectual Capital
In this paper we present an application of the model of Intellectual Capital to the world of the very rich and millionaires. It Is, we believe an important research topic, because in the last decade inequality grew, and Intellectual Capital became the most important economic asset. But no empirical studies exist to link the two phenomena. We applied our model to a set of football coaches, football being an industry that produces outlying incomes. We estimated the relation between a set of intellectual capital characteristics of those coaches and their incomes. We found that indeed, IC explains almost two thirds (63%) of the evolution of the very big salaries of those very rich people. Even if those results are interesting, and give an indication of the influence of IC in the success of rich people, they are only limited to a small sample of persons. Anyway, from our research we may infer that IC (social capital, human capital, and structural capital) plays a major role in defining the wealth of the top earners in the world. From this we may conclude that a policy of inequality reduction should take into account that intangible assets are at the base of those persons wealth. The study is original, because at least for our knowledge, It is the first in which the relation between IC and the wealth of millionaires has been tested. We hope to enlarge the study in the future in order to include the phenomenon of billionaires, as well.
Intellectual capital is very heterogeneous so it’s usual practice to divide it into some groups of more similar and homogeneous intellectual assets. It’s widespread to distinguish human capital (knowledge, skills of employees etc.), structural capital (business‐processes, innovations, corporate culture etc.) and relational capital (brand, reputation, relationships with customers etc.). The literature supports the significance of intellectual capital influence on company’s value creation. Researchers find a strong dependence of corporate performance on intellectual assets in different countries and economy branches. But their findings about a character of intellectual capital transformation in corporate value are ambiguous. Importance of human, structural and relational capital and interrelationships between them vary highly across papers. It may be explained by high firm specificity of corporate value creation. It doesn’t mean impossibility of intercompany research but requires a comparability of analyzed firms. Empirical researches on the theme of intellectual capital are often limited to particular country and industry. This restriction makes investigated companies more comparable. But we suppose there is a lot of other significant aspects of firm specificity that may impact on transformation of intellectual assets into corporate value such as firm size, amount of intangible assets, total firm efficiency etc. These variables are sometimes considered as additional factors of corporate value. But we suppose these criteria may define the model of corporate value creation in principle. This study is targeted to reveal some main types of companies and investigate a specificity of corporate value creation model for each of them. We expect to discover significant differences in models mostly related to importance and significance of particular intellectual assets. This paper is empirical and quantitative. Our sample embraces about 200 large public European industrial companies from 7 countries (Denmark, Germany, Great Britain, Finland, Netherlands, Portugal and Spain) for 2005‐2009 years. The database includes: 1. Information from financial statement. The source is Amadeus database (Bureau Van Dijk). 2. A set of nonfinancial proxy indicators (quantitative and qualitative) displaying a state of human, structural and relational capital. This data has been collected from open Internet sources such as companies’ sites. Methodology of the research combines statistic methods (cluster analysis and factor analysis) and econometrics (regression analysis). Clustering distinguishes some main types of companies. Factor analysis constructs integral indices for human, structural and relational capital on the base of initial proxy set. Regression is an instrument of modeling the corporate value creation. We found significant differences between models of corporate value creation. Human, structural and relational capitals differently transform into firm value in each type of companies. Our findings have some practical implications. For example prioritizing investments in intellectual assets should take into account a firm’s specificity more deeply. This study comprises research findings from the ‘Intellectual Capital Evaluation” Project carried out within The Higher School of Economics’ 2011 Academic Fund Program.