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UNIVERSITY OF ECONOMICS, HO CHI MINH CITY ---TRINH HIEP THIEN Mediating effect of strategic management accounting practices in the relationship between intellectual capital and corporate

UNIVERSITY OF ECONOMICS, HO CHI MINH CITY

-TRINH HIEP THIEN

Mediating effect of strategic

management accounting practices in the relationship between intellectual capital and corporate performance

Evidence from Vietnam

A dissertation submitted for the Degree of Doctor of Philosophy in Accounting

October 2018

INTELLECTUAL CAPITAL AND CORPORATE PERFORMANCE

EVIDENCE FROM VIETNAM

Trinh Hiep Thien

MPAcc (University of Sydney), MBA (UEH), BBus (UEH)

A dissertation submitted for the Degree ofDoctor of Philosophy in Accounting

UNIVERSITY OF ECONOMICS, HO CHI MINH CITY

Submitted to School of UEH Graduate

Title of dissertation: Mediating effect of strategic management accounting practices

in the relationship between intellectual capital and corporate performance – Evidence from Vietnam

Academic Supervisor: Dr Doan Ngoc Que

Dr Le Danh Truc Date of Final Defense:

Final Defense Committee:

Defense Committee Chairperson

Accepted by the School of Accounting and School of UEH Graduate in partially

fulfillment of the requirements for the degree of Doctor of Philosophy in Accounting

The work described in this dissertation is original based on raw data collected by

me, except where due acknowledgement is made in the text

I hereby declare this material has not previously submitted, either in full or in part, for a degree at this or any other institution

Ho Chi Minh City, Octocber 15th, 2018

TRINH HIEP THIEN

LIST OF TABLES I LIST OF FIGURES II LIST OF ABBREVIATIONS III ABSTRACT IV

INTRODUCTION 1

1 Background 1

2 Research questions and research objectives 3

3 Research object and research scope 4

4 Methodology 5

5 Outline of the dissertation 5

CHAPTER 1: LITERATURE REVIEW 7

1.1 Review of international studies of intellectual capital 7

1.1.1 Stages in developing intellectual capital as a research field 8

1.1.2 Research trends on intellectual capital in the accounting discipline 10

1.1.3 Research methods used to study intellectual capital 14

1.1.4 Review of studies investigating the relationship between intellectual capital and corporate performance 16

1.2 Review of international studies of strategic management accounting 17

1.2.1 Research on conceptualizing strategic management accounting 18

1.2.2 Research on strategic management accounting techniques 19

1.2.3 Research on the relationship between environment, strategy choice and strategic management accounting practices 21

1.2.4 Research on strategic management accounting process 22

1.2.5 Review of studies investigating the relationship between strategic management accounting practices and corporate performance 23

1.3 Review of studies of intellectual capital and strategic management accounting in Vietnam 25

1.3.3 Research on strategic management accounting in Vietnam 27

1.4 Research gaps 29

1.4.1 Lack of studies concerning performance implication of intellectual capital in association with the mediating role of SMA practices 30

1.4.2 Lack of empirical research concerning the relationship between intellectual capital and each group of SMA practices 30

1.4.3 Lack of Vietnamese empirical studies on intellectual capital and SMA practices 31

SUMMARY OF CHAPTER 1 32

CHAPTER 2: THE CONCEPTS AND INTELLECTUAL CAPITAL MEASUREMENT MODELS 33

2.1 Definition of intellectual capital 33

2.2 Components of intellectual capital 36

2.2.1 Human capital 36

2.2.2 Structural capital 37

2.2.3 Relational capital 38

2.3 Definition of corporate performance 40

2.4 Determinants of strategic management accounting practices 42

2.5 Intellectual capital measurement models 45

SUMMARY OF CHAPTER 2 48

CHAPTER 3: THEORETICAL FRAMEWORK AND HYPOTHESES DEVELOPMENT 49

3.1 Mediating effect of strategic management accounting practices in the relationship between intellectual capital and corporate performance 49

3.1.1 Human capital, structural capital and relational capital reciprocally affect each other (H1) 50

3.1.2 Intellectual capital impacts on SMA practices (H2) 51

3.1.2.1 Underlying theoretical framework 51

3.1.3 Intellectual capital impacts on corporate performance (H3) 55

3.1.3.1 Underlying theoretical framework 55

3.1.3.2 Hypotheses development (H3) 56

3.1.4 SMA practices impact on corporate performance (H4) 58

3.1.4.1 Underlying theoretical framework 58

3.1.4.2 Hypothesis development (H4) 59

3.1.5 The mediating role of strategic management accounting practices in the relationship between intellectual capital and corporate performance (H5) .61

3.2 Associations between intellectual capital components and each group of strategic management accounting practices .63

3.2.1 Underlying theoretical framework 64

3.2.2 Hypotheses development (H6) 65

3.3 Summary of the correlations in the two research models 67

SUMMARY OF CHAPTER 3 70

CHAPTER 4: RESEARCH METHODOLOGY 71

4.1 Selection of an appropriate regression approach 71

4.2 Research process 72

4.2.1 Evaluation of reflective measurement scales 74

4.2.2 Evaluation of formative measurement scales 76

4.2.3 Evaluation of the fitness of structural model 77

4.2.4 Evaluation of the significance and the stability of path coefficients 78

4.3 Unit of analysis and sample size 79

4.3.1 Unit of analysis and informants 79

4.3.2 Sample size 80

4.4 Variables measurement 82

4.4.1 Measures of each component of intellectual capital 82

4.4.1.1 Operationalization of value added (VA) 83

4.4.1.4 Operationalization of relational capital efficiency (RCE) 90

4.4.2 Measures of the variables of strategic management accounting practices 90

4.4.3 Measures of the variables of corporate performance 91

4.4.4 Measures of control variables 93

SUMMARY OF CHAPTER 4 95

CHAPTER 5: SAMPLE CHARACTERISTICS AND MEASUREMENT SCALES ASSESSMENT 9

6 5.1 Data collection to construct the variables of SMA practices 96

5.1.1 Questionnaire structure 96

5.1.2 Translating and pilot testing of the questionnaire 97

5.1.3 Main data collection procedure 98

5.2 Sample characteristics 100

5.2.1 Industry type 100

5.2.2 Organization size and SMA practices type 101

5.2.3 Respondents’ position type 102

5.3 The outcomes of reflective measurement scales assessment 103

5.4 The outcomes of formative measurement scales assessment 105

5.4.1 Calculation of measurement scale of innovation capital efficiency 105

5.4.2 Calculation of measurement scale of organizational capital efficiency 105

5.4.3 Assessment of formative measurement scales related to the structural capital efficiency variable .107

5.5 Calculation of the variable of investment efficiency 109

5.6 Descriptive statistics and collinearity assessment 110

SUMMARY OF CHAPTER 5 112

CHAPTER 6: DATA ANALYSIS AND DISCUSSION 113

6.1 Evaluation of the fitness of theoretical models 113

6.2 Empirical results – testing of reciprocal correlations between intellectual capital components (H1) 114

6.4 Empirical results – testing of the direct correlations between strategic management

accounting practices and corporate performance (H4) 119

6.5 Empirical results – testing of the direct correlations (H3) and indirect correlations between intellectual capital components and corporate performance (H5) .120

6.6 Empirical results – testing of the associations of strategic management accounting practices and intellectual capital components (H6) 126

6.7 Empirical results – testing of control variables 129

SUMMARY OF CHAPTER 6 131

CHAPTER 7: IMPLICATIONS FOR MANAGING INTELLECTUAL CAPITAL BY STRATEGIC MANAGEMENT ACCOUNTING PRACTICES 132

7.1 A discovery of three-stage value-creating process 132

7.2 Implications for the management, policy and research of intellectual capital 134

7.2.1 Recommendations for leaderships 134

7.2.2 Recommendations for policymakers 136

7.2.3 Recommendations for academic communities 138

7.3 Implications for integration of strategic management accounting practices into intellectual capital management 139

7.3.1 Orientations to manage intellectual capital by strategic cost management 139

7.3.2 Orientations to manage intellectual capital by competitor accounting 141

7.3.3 Orientations to manage intellectual capital by strategic accounting 144

7.3.4 Orientations to manage intellectual capital by customer accounting 146

SUMMARY OF CHAPTER 7 149

CONCLUSION 150

1 Summary of research findings 150

2 Theoretical contributions 151

3 Practical managerial contributions 153

4 Limitation 154

APPENDIX 1: PREVIOUS STUDIES INVESTIGATING THE RELATIONSHIP BETWEEN IC AND CORPORATE PERFORMANCE 184 APPENDIX 2: REVIEW OF PRIOR INTERNATIONAL STUDIES OF STRATEGIC MANAGEMENT ACCOUNTING 187 APPENDIX 3: PREVIOUS STUDIES INVESTIGATING THE RELATIONSHIP BETWEEN STRATEGIC MANAGEMENT ACCOUNTING AND CORPORATE PERFORMANCE .19 1

APPENDIX 4: ELEMENTS OF HUMAN CAPITAL IN INTELLECTUAL CAPITAL REPORT 194 APPENDIX 5: ELEMENTS OF STRUCTURAL CAPITAL IN INTELLECTUAL

INDICATORS OF SMA CONSTRUCTS 230

APPENDIX 17: CROSS LOADINGS OF REFLECTIVE MEASUREMENT SCALES 23 3

APPENDIX 18: CORRELATIONS, SQUARE ROOT OF AVE AND HTMT 234 APPENDIX 19: THE ESTIMATION OF SGA EXPENDITURES

AMORTIZATION RATE

235

APPENDIX 20: THE ESTIMATION OF ORGANIZATIONAL CAPITAL 239 APPENDIX 21: THE ESTIMATION OF INVESTMENT EFFICIENCY 241 APPENDIX 22: DESCRIPTIVE STATISTICS AND CORRELATION COEFFICIENTS 244 APPENDIX 23: COLLINEARITY STATISTICS – INNER VIF VALUES 246 APPENDIX 24: PLS ALGORITHM RESULT WITH THE ASSET TURNOVER VARIABLE 247 APPENDIX 25: PLS ALGORITHM RESULT WITH THE INVESTMENT EFFICIENCY VARIABLE 249 APPENDIX 26: PLS ALGORITHM RESULT WITH THE RETURN ON EQUITY VARIABLE 251 APPENDIX 27: PLS ALGORITHM RESULT WITH THE TOBIN Q VARIABLE 253 APPENDIX 28: REGRESSION RESULTS BETWEEN IC COMPONENTS AND EACH GROUP OF SMA PRACTICES

255

APPENDIX 29: THE INTELLECTUAL CAPITAL BENCHMARKING SYSTEM FRAMEWORK 25 6

APPENDIX 30: LIST OF PARTICIPATING FIRMS 257

LIST OF TABLES

Table 1.1 Milestones of significant contributions to the identifications, measurement and

reporting of intellectual capital 9

Table 1.2 Topics of intellectual capital research in the accounting discipline 11

Table 1.3 Methods used in intellectual capital accounting research 14

Table 1.4 Literature review of essential techniques in strategic management accounting toolbox 20

Table 1.5 Research trends on management accounting in Vietnam 28

Table 2.1 Definitions of intellectual capital 34

Table 2.2 Some key differences between strategic and traditional management accounting 44

Table 2.3 Summary of measurement approaches that are mainly used in intellectual capital research 46

Table 3.1 Integration of corporate-level strategy and reliance on human capital 53

Table 5.1 Development of the final sample in the main study 99

Table 5.2 The number of respondents by Industry type 101

Table 5.3 The number of respondents by Organization size and SMA practices type 102

Table 5.4 Number of Respondents by Positions type and Working Years type in the current organization 103

Table 5.5 VIF, Significance and relevance of formative indicators 108

Table 5.6 The coefficient of explanatory variables in Equation 4.20 109

Table 6.1 Summary of the SRMR results of 5-testing models 113

Table 6.2 Summary of the results of the first hypothesis testing 115

Table 6.3 Summary of the results of the second hypothesis testing 118

Table 6.4 Summary of the results of the forth hypothesis testing 119

Table 6.5 Summary of the results of the third and fifth hypothesis testing 125

Table 6.6 Summary of the results of the sixth hypothesis testing 129

Table 6.7 Summary of the testing results of control variables 130

Table 7.1 Example of intellectual capital components in value chain 140

LIST OF FIGURES

Figure 2.1 Four-stage model of corporate market valuation 42

Figure 3.1 The first research model 50

Figure 3.2 Basic contingency framework 59

Figure 3.3 The second research model 63

Figure 4.1 The research process 73

Figure 4.2 Calculation of sample size of the first research model 81

Figure 4.3 Calculation of sample size of the second research model 81

Figure 4.4 The value added intellectual coefficient model 82

Figure 5.1 Assessment of convergent validity of formative indicators relative to structural capital 107

Figure 7.1 The three-stage value-creating process by IC and SMA practices 133

Figure 7.2 Five-step intellectual capital management model 136

LIST OF ABBREVIATIONS

CIMA The Chartered Institute of Management Accountants

ICBS Intellectual capital benchmarking system

PLS-SEM Partial least square structural equation modelling

SGA Selling and general administrative expenses

SRMR Standardized root mean square residual

VAIC Value Added Intellectual Coefficient

ABSTRACTTitle of dissertation: Mediating effect of strategic management accounting practices

in the relationship between intellectual capital and corporateperformance – Evidence from Vietnam

Abs tract:

Reason for writing – The organizations with strong level of intellectual capital should

have developed management accounting with strategic directions that support suchendeavors In the history of IC accounting research, the focus of empirical studies hasalways been the direct relationship between intellectual capital components and corporateperformance A little research investigates that intellectual capital has an indirectrelationship to corporate performance via the mediating role of management accounting.Furthermore, Vietnamese managers have not actually realized the critical value ofintellectual capital in their managing process; hence, this study is expected to raiseVietnamese managers’ awareness in terms of intellectual capital

Purpose – This study investigates empirically the issue of whether an organization

develops strategic management accounting (SMA) system that supports intellectualcapital (IC) which in turn to enhance its financial performance If doing so, how SMAmanages IC components to boost an organization’s financial performance

Method – Using secondary data drawn from Vietnamese listed companies and Public’s

Value-Added Intellectual Coefficient (VAICTM) as the efficiency measure of ICcomponents and primary data through questionnaire survey to investigate the level ofSMA practices, the author constructs regression model to examine the relationshipbetween IC components and corporate performance via the mediating role of SMApractices In addition, this study also analyses which group of SMA practices are related

to manage which components of IC

Findings – The results support the hypothesis that firms’ IC has a positive impact on the

level of SMA practices and corporate performance The author finds that under themediating role of SMA practices, SMA practices fully or partially mediates the positiveinfluence of IC components over corporate performance Finally, in terms of ICmanagement, the study highlights only strategic accounting approaches are used tomanage human capital The findings validate the usefulness of all groups of SMApractices

as techniques to manage structural capital Except for strategic accounting approaches,three remaining groups of SMA practices are most appropriately situated as techniques ofrelational capital management.

Originality/ value – This study contributes to bridge the research gap and adds to

existing resources management literature on the Resources (i.e intellectual capital) –Practices (i.e SMA practices) – Performance (i.e financial performance) link Itdiscoveries three-stage value creating process and thereby presents the implications forintegrations of SMA practices into IC management In addition, this study contributes to

a growing body of literature providing empirical evidence on IC and SMA practices roles

in improving investment efficiency

Conclusion: This study provides an alarming to Vietnamese managers to become more

aware of the role played by intellectual capital in generating a firm’s value, with supportfrom the techniques of SMA Therefore, new demands of Vietnamese managers are beingimposed on management accounting to capture, measure and report IC value andperformance

Keywords: Corporate performance, human capital, intellectual capital, strategic management accounting practices, structural capital, relational capital

1 Background

It is often argued that organizations in today’s knowledge-based economy do notonly initially invest in physical assets, nevertheless in intangibles, as these are but alsotoday’s value drivers (Mehralian, Rasekh, Akhavan, & Ghatari, 2013) Amongst theseintangible assets, intellectual capital plays a key role, and due to the huge investments inintellectual capital, its management becomes a critical issue given the direct and indirect

advantages Some of these advantages may consist of the added value of theknowledge that is processed, the learning process included in the measurement ofintellectual capital (Roos, Roos, Dragonetti, & Edvinsson, 1997), the enhancement of

sustainable competitive advantages arising from the strategic assets i.e intellectualcapital (Riahi-Belkaoui, 2003), the determinants and the foremost sources of companysuccess (Alum & Drucker, 1986) Like the countries with free trading, Vietnam has

adopted an open-door policy since1990’s, the level of competition in the economy has been therefore increasingsignificantly for most Vietnamese enterprises when Vietnam’s integration in AEC andTPP, thereby, managers in Vietnamese firms should be aware of the importance ofintangibles as well intellectual capital, which achieve sustainable competitive advantages

in the international competitive arena This will be a motivator to impulse scholars doingresearch on the influence of intellectual capital in the Vietnamese context

Based on the concerns of the society, the concept of intellectual capital wasintroduced in the large body of literature and has expanded in three stages The first stagestarted in the 1990s and concentrated on increasing awareness, defining concepts,reviewing case studies and developing primary definitions (Mehralian et al., 2013) Thesecond stage, which started in the year of 2000, consider measurement, modelling,

international case studies, and various level of analysis (Mehralian et al., 2013).Therefore, there are a numerous piece of research in many countries, affirming thecorrelation between intellectual capital and corporate performance, that has beenundertaken by a variety of research methods In general, these studies find a positiverelationship between intellectual capital (or some of its components) and corporateperformance The third stage of IC research, which began from 2004, focuses on themanagerial implications of managing IC Although most of the studies on intellectual

capital have been conducted in developed Western countries and some of Asian

developing countries such as Thailand, Malaysia,

Hong Kong, this specific area of intellectual capital has been neglected in the body ofVietnamese literature.

On the other hand, as being introduced by CIMA, strategic management accounting

is a form of management accounting which emphasis is placed on information whichrelates to key strategic decision (CIMA, 2014a) Simultaneously, following by resource-based theory, intellectual capital is the asset used for strategic purposes Strategicmanagement accounting would therefore appear to have a potential role to play inintellectual capital management Notwithstanding the intellectual capital literature inaccounting is varied but mainly addresses external reporting or the measurement or thevaluation of such strategic assets, there has been little discussion on the two-wayrelationship between intellectual capital and strategic management accounting Firstly, theorganizations with strong levels of intellectual capital will have the assets as the necessaryconcrete to develop strategic management accounting system to support the managerialefforts in terms of identifying, measuring, and communicating the value drivers (Tayles,Pike, & Saudah, 2007) Secondly, once strategic management system has been evolved, itwill address the issues of identifying, measuring, and communicating intellectual capital

to support the strategic objectives The challenge, therefore, is to devise a system ofstrategic management accounting practices that are in alignment with the unique attributesand the competitive strategies of the company In other words, it must be possible to

identify and value, with some precision, the component elements of the genericintellectual capital of the company Furthermore, when analysing the Vietnamesetransitional economic context, Vietnamese enterprises have gradually applied theadvanced accounting techniques, in line with market mechanisms because many wholly

foreign- owned enterprises established in Vietnam have been providing practicalknowledge of strategic management accounting, which has been introduced toVietnamese practitioners and scholars Therefore, it is undeniable that medium and largeenterprises in Vietnam do not have any understanding of how to implement strategicmanagement accounting in their business operations Not surprisingly, the issue ofstrategic management accounting thereby started to be studied in Vietnam since the2010s Based on all above arguments, the author believes the necessity of studying thecorrelation between intellectual capital, strategic management accounting practices andcorporate performance in the case study of Vietnam Vietnamese business environment

will provide enough information about intellectual capital as well as strategic

management accounting practices that support such

research endeavours More particularly, the author emphasizes “the mediating role of

strategic management accounting practices in the relationship between intellectual capital and corporate performance”.

2 Research questions and research objectives

The research gaps mentioned in Section 1.4 suggest that a need to investigate theeffects of intellectual capital and strategic management accounting practices on corporateperformance in the organizations operating in the transitional economy such as Vietnambecause these issues have not been discovered in such economy This also raises the issue

of whether an organization should develop strategic management accounting system thatsupports intellectual capital which in turn to enhance its financial performance If doing

so, it is also inevitable that how strategic management accounting manages intellectualcapital to boost an organization’s financial performance Accordingly, three researchquestions have been proposed:

Research q uestion 1: What is the direct effect of intellectual capital components on

corporate performance in Vietnamese enterprises?

Research questi o n 2: What is the effect of intellectual capital components on

corporate performance in the presence of strategic management accountingpractices?

Research question 3: How do strategic management accounting practices handle

each component of intellectual capital to improve corporate performance?

Overall res earch o bjec tive :

The overall research objective of this dissertation is to empirically examine theassociation between intellectual capital, strategic management accounting practices andcorporate performance More importantly, it investigates the mediating effect of strategicmanagement accounting practices on the relationship among intellectual capitalcomponents and three financial dimensions of corporate performance It also empiricallyanalyses the role of strategic management accounting practices playing the management

of intellectual capital components

Specific res e arch o bje c tive s :

- RO1: Testing the direct impact of each of intellectual capital components on corporate performance

- RO2: Examining the direct influence of strategic management accountingpractices over corporate performance.

- RO3: Investigating an indirect path between intellectual capital componentsand corporate performance through the mediating role of strategicmanagement accounting practices

- RO4: Empirically analysing which group of strategic management accountingpractices (i.e strategic cost management, competitor accounting, strategicaccounting and customer accounting) are related to manage which components

of intellectual capital

- RO5: Providing additional evidence on the interconnection of intellectualcapital components

3 Research object and research scope

The research object of this dissertation is the relationship among intellectualcapital, strategic management accounting practices and corporate performance Therefore,the unit of analysis is a business organization To investigate SMA practices applied in abusiness organization, the data is collected through questionnaire survey which is sent toSMA practitioners; thereby, the unit of observation is the informant (i.e managers ormembers of top management) with knowledge about accounting, planning or finance and

at least two years of working experience in the current organization Moreover, theunit of observation is also financial information in annual reports or financial statementreports which draw financial data on IC and corporate performance

The scope of this study is limited in three aspects Firstly, this study selectsVietnam, a developing country in Asia with a transitional economy and a collectivistculture, as the research site for observation and empirical testing Secondly, the observedbusiness organizations are enterprises listed on Hochiminh Stock Exchange (HoSE) andHanoi Stock Exchange (HNX) in order the author to collect financial data moreconveniently Thirdly, since the survey related to SMA practices is conduct in the year of

2016, this study only uses 2016 financial information about IC and financial performance

of the public companies where respondents has been working instead of using panel datawith many successive years to analyse intellectual capital alike the previous studies.However, to calculate some variables such as organizational capital, innovation capital,

investment efficiency, the author has to collect financial data in the period of 7 years (from

2010 to 2016)

4 Methodology

This study first reviews the literature related to intellectual capital, strategicmanagement accounting practices, corporate performance before proposing two researchmodels with six hypotheses This study mainly uses quantitative research method byusing empirical survey data and financial data obtained from a sample of at least 127public enterprises in Vietnam for the year of 2016 Due to the complex of the researchmodels with mediators and a small sample size context, data analysis is conducted byapplying partial least squares structural equation modelling (PLS-SEM) with the support

of SPSS

24.0 and SmartPLS 3.1 software packages

5 Outline of the dissertation

Besides the parts of introduction and conclusion, this dissertation is organized with

7 chapters, as follows:

Introduction part This part states the background well as the research questions

and objectives Then it briefly describes the research methodology and provides theresearch scope

Chapter 1: Literature review This chapter reviews the literature in terms of

intellectual capital, strategic management accounting studied in many different countries

as well as in Vietnam so as to reveal the research gaps which are desirable researchdirections to develop the research objectives of this dissertation

Chapter 2: The concepts and intellectual capital measurement models This chapter

not only determines the definitions of intellectual capital and its components but alsodiscusses the concepts of corporate performance and strategic management accountingpractices in order to explain the relationships amongst these concepts Next, the existingtheories underpinning the measurement of intellectual capital are introduced in theliterature extant so that the measurement of the intellectual capital variables are clearlyunderstood in the next chapters

Chapter 3: Theoretical framework and hypotheses development This chapter

focuses on underlying theoretical framework to develop the testable hypotheses of thetwo

research models, that answer research questions to bridge research gaps This chapter thenpresents the arguments that led to six testable hypotheses.

Chapter 4: Research methodology This chapter presents in detail the development

of the research methodology It describes and explains how the constructs in thetheoretical model are operationalised and measured It also discusses the unit ofanalysis and informants as well as sample size

Chapter 5: Sample characteristics and measurement scales assessment This

chapter firstly demonstrates how to collect data to construct the variables of SMApractices and the pilot test to examine the attributes of the indicators of SMA practicesbefore collecting main data The next is to represent the refinement of the measurementscales from the data obtained in Vietnamese public enterprises Finally, it providesdescriptive statistics of the research data and an evaluation of collinearity issue in theinner structural models

Chapter 6: Data analysis and discussion Chapter 6 presents and analyses the data

used in this study It is started at the evaluation of the fitness of theoretical models Thenext sections present the empirical results of examining the hypotheses developed inChapter 3 It includes the outcomes of the direct regressions and the mediated pathregressions that are processed by the tool of SmartPLS 3.1 The empirical results arearranged in order from the first to sixth hypothesis and finally the testing results ofcontrol variables Not only is the analysis of the data described but corresponding

to each significant proposition it is also explained in the managerial context

Chapter 7: Implications for managing intellectual capital by strategic management

accounting practices The managerial implications of this study are outlined in this

chapter It is started at a discovery of three-stage value creating process, which is inferredfrom the testing results of six hypotheses This chapter also presents the suggestions forleaders, policymakers and academic community the approaches to manage intellectualcapital Particularly, the last section suggests the orientations how to manage intellectualcapital following each group of strategic management accounting techniques

Conclusion part Following the introductory part, a summary of the main findings

is presented in this part Then, the theoretical contributions and managerial contributions

of this study are also summarized, followed by a discussion on the research limitationsand suggested directions for further research

CHAPTER 1: LITERATURE REVIEW

The first chapter reviews the literature in terms of intellectual capital, strategicmanagement accounting studied in many different countries as well as in Vietnam so as toreveal the research gaps which are desirable research directions to develop the researchobjectives of this dissertation This chapter is structured into four main sections Section1.1 presents history, research trends as well as methods used to discover the empiricalrelationships between intellectual capital and corporate performance in the accountingdiscipline Section 1.2 continues to review the international studies to identify four mainresearch themes of strategic management accounting focused by scholars Next, section1.3 is developed as a distinctive part to review intellectual capital and strategicmanagement accounting studies conducted in Vietnam since this dissertation isundertaken in Vietnamese context All above sections are aimed at identifying threemajor research gaps in the Section 1.4

1.1 Review of international studies of intellectual capital

When changing from an industrial-based economy to knowledge-based economy, afirm’s value is no longer measured solely on the basis of financial results; rather thanvalue of activities that develop knowledge resources must also be considered(Stewart & Ruckdeschel, 1998) Doing so helps understanding how employees,stakeholders and activities contribute into value creation, leading to the challenge of how

to identify, measure and report on the value of intellectual capital (Dumay, Guthrie, &Ricceri, 2012) Therefore, the emergence of the intellectual capital topic in the mid-1990s has produced literature spanning a range of research disciplines In retrospect, itappears that like a research fashion (Alcaniz, Gomez-Bezares, & Roslender, 2011), the

intellectual capital’s specialist journals have been continuously developed including the

Journal of Intellectual Capital, the International Journal of Learning and Intellectual Capital, the Journal of Human Resource Costing and Accounting, as well as within the

pages of many leading business and management journals, with the Accounting, Auditing

and Accountability Journal, European Accounting Review, the Accounting Organizations and Society Journal especially important in the accounting discipline of intellectual

capital measurement and management

1.1.1 Stages in developing intellectual capital as a research field

The historical perspective is a vital component in fostering an understanding of thecontext within which intellectual capital came to be viewed as the essential businesselement that it is today Petty and Guthrie (2000) also outlined two stages in researchingintellectual capital The first-stage efforts typically focused on raising awareness as towhy recognizing and understanding the potential of IC towards creating and managingsustainable competitive advantages is extremely essential (Petty & Guthrie, 2000).Additionally, attempts were characterized by the creation of guidelines and standards.These early publications pay attention to the fact that intellectual capital is somethingsignificant and should be measured and reported, but without referring to specificempirical research (Petty & Guthrie, 2000) Most research conducted prior to the mid-1990s is considered first stage (Petty & Guthrie, 2000) The second stage of IC researchgathered further evidence, at an organizational level, focusing on the how of IC capitaland labour market reacted towards the potential for IC to create value (Petty & Guthrie,2000) In general, the first and second stages contributed to a commonly acceptedterminology of intellectual capital Several classifications of IC have been provided,resulting in the identification of three main IC components Together with theappearance of three components of IC, the researchers defined the accounting discipline

of IC as a management, measurement and accountability toward IC (Dumay et al., 2012).According to Dumay et al (2012), a third stage of IC research is emerging and ischaracterised by research critically examining IC in practice, devoted to the managerialimplications of how to use IC in managing a company, at the beginning with the 2004special edition of Journal of intellectual capital entitled “IC at the crossroads – theoryand research” by Marr and Chatzkel (2004) While second stage IC research ispredominately devoted to evaluating IC’s influence on financial outcomes, third-stage IC

research focuses on “the deeper managerial implications of managing IC in all types of

organisations and can be classified as bottom-up research as opposed to top-down”

(Dumay & Garanina, 2013) Thus, the third stage considers value from IC is not justmonetary but incorporates worth and importance of the products and services tocustomers and other stakeholders (Dumay & Garanina, 2013)

Despite looking at three developing stages of IC, Guthrie (2001) provides a timeline

of major IC research milestones, as summarized in Table 1.1

Table 1.1 Milestones of significant contributions to the identifications,

measurement and reporting of intellectual capital

Period Progress

Kaplan and Norton (1992) introduce the concept of a BalancedScorecard The Scorecard evolved around the premise that

“what you measure is what you get”

Mid

1990s

Nonaka and Takeuchi (1995) present their highly influentialwork on “the knowledge creating company” Although the bookconcentrates on “knowledge”, the distinction betweenknowledge and Intellectual Capital is sufficiently fine as tomake it relevant to those with a pure focus on IntellectualCapital

Also in 1994, a supplement to Skandia’s annual report isproduced which focuses on presenting an evaluation of thecompany’s stock of Intellectual Capital “VisualizingIntellectual Capital” generates a great deal of interest from othercompanies seeking to follow Skandia’s lead (Edvinsson &Sullivan, 1996)

Pioneers of the Intellectual Capital movement publish bestsellingbooks on the topic (Kaplan and Norton (1996); Edvinsson andSullivan (1996); Sveiby (1997)) Edvinsson and Malone’s work,

measuring intellectual capital.

publications find an audience.

An increasing number of large scale projects (e.g theMERITUM project; Danish; Stockholm) commence which aim,

in part, to introduce some academic rigour into research onIntellectual Capital

In 1999, the OECD convenes an international symposium inAmsterdam on intellectual capital (Organization for EconomicCo-operation and Development (OECD), 2000)

2000

-2016

Through the 2000s and onwards, IC research is continuouslydisseminated to the wider accounting research community Thegeneralist accounting journals and generalist accountingconferences have opened the doors to special editions to accept

IC accounting papers (Dumay et al., 2012)

There is an increasing trend on knowledge management researchbesides intellectual capital research (Dumay et al., 2012)

Sourc e: Summarized by the author on the sources of Guthrie (2001) and Dumay et al (2012)

1.1.2 Research trends on intellectual capital in the accounting discipline

Although it is generally accepted that intellectual capital is a knowledge resourcethat needs to be well managed, it can be analysed not just from a microeconomicviewpoint, but also from a macroeconomic aspect The issue of intellectual capital isstudied in four perspectives, such as economic, strategic, managerial and accountingperspective (Alcaniz et al., 2011) For example, on the economic perspective, intellectualcapital is related to the wealth of countries which possess it such as high technology,well-educated labour forces, etc (Stewart & Ruckdeschel, 1998) On the strategicperspective, the success of a company’s strategy is critically dependent no longer onits tangible assets, but on its intangibles, and the accumulation of intellectual capital is

also determined by strategy as a

Table 1.2 Topics of intellectual capital research in the accounting discipline

%31.21%

Sourc e: Dumay et al (2012)

Table 1.2 presents the focus of research trends on intellectual capital in the accounting discipline, as follows:

External reporting: The disclosure on IC can be voluntary and non-quantitativeand if IC is linked to firm performance, firms as well investors would benefitfrom this disclosure Therefore, a great deal research has been undertaken onintellectual capital disclosure practices in developed countries, a substantiallyless amount of research can be found on IC disclosure practices in emergingcountries (Wagiciengo & Belal, 2012) Amongst few studies available fromthe emerging economies’ context, most of them concentrated on the Asiancountries The studies have provided an empirical understanding of IC

and others The findings of studies include variations in IC disclosure withcompany size and industrial sectors (Striukova, Unerman, & Guthrie, 2008),disclosure in Europe on relational capital around 49%, 30% related tostructural capital and 21% concerning human capital (Bozzolan, O'Regan,

& Ricceri,

2006) The review suggests that most of the previous studies focused on singleyear’s data by content analysis while only a handful of studies usedlongitudinal data Several researchers such as Bozzolan, Favotto, andRicceri (2003), Bharathi Kamath (2008) used for longitudinal studies fordetailed examination of intellectual capital disclosure practices

Accountability and governance: Some papers (Keenan and Aggestam (2001); J

Li, Pike, and Haniffa (2008)) examine the influence of corporate governancefactors on intellectual capital disclosure, using various disclosure measures.These papers hypothesise that significant relationships exist betweenintellectual capital disclosure in annual reports and board structure, roleduality, ownership concentration, audit committee size and frequency of auditcommittee meetings, controlling for listing age, firm size and profitability.Management control: The extent of publications in management control andstrategy, as the most researched area of interest, is highlighted in Table 1.2,demonstrating 160 articles covering a wide range of management-relatedsubjects For examples, there were articles on the Balanced scorecards(Flamholtz, 2003) and its uses for managing IC (O'Connor & Feng, 2005),managing IC in different organization settings such as service organizations(Namasivayam & Denizci, 2006), banking industry (Puntillo, 2009) and forthe not-for-profit sector (Kong, 2009), and for mapping IC insideorganizations (Hellström & Husted, 2004) Some studies (Tayles, Bramley,Adshead, and Farr (2002), Tayles et al (2007)) suggest the application ofmanagement accounting approach to support the control of IC, that draws onthe authors’ experience in the service company environment Thesepublications also indicate the appropriateness of management accounting

budgeting, preferring the

beyond budgeting concept to control IC (Tayles et al., 2007), real optionsvaluation better than capital budgeting approach to assess strategic ICinvestment opportunities (Neil & Hickey, 2001).

Performance measurement: In the early 1990s, various performancemeasurement frameworks were developed, to overcome the weaknesses offinancial-only measures (Tayles et al., 2007) Such models place greater focus

on intangible resources (Amir & Lev, 1996) such as key customers, internalprocesses and learning Commonly used models include Intangible AssetsMonitor (Roos, Edvinsson, & Dragonetti, 1997), and Skandia Navigator(Sveiby, 1997) which were particularly developed with intellectual capital inmind and the Balanced Scorecard (Kaplan & Norton, 1996) which had a moregeneral strategic focus The Balanced Scorecard (BSC), for example, considersrelational capital (customer perspective), structural and human capital(innovation, learning, and internal perspectives) and the impact of these onshareholder goals (financial perspective) Lev (2001) advocates the ValueChain Scoreboard, to be used by both management and investors, which seeks

to report in a structured manner on the impact of intellectual capital oncorporate performance and valuation As many of these performancemeasurement frameworks have been developed or adapted to accommodate

IC, the greater part of the extant literature evidence the tested hypotheses thatfirms with relatively high intellectual capital are more likely to employvarious performance measurement framework approaches linked toshareholder value

Commentaries/ Policy statement: A group of articles did not have empiricalresearch and tended to be either commentaries or policy statements referred toPetty and Guthrie (2000), Brennan and Connell (2000), Roslender andFincham (2001), García-Meca (2005) as first-stage contributions This trend isconducted at the beginning of the decade and there were fewer at the end ofthe decade of the 2000s The initial focus was on understanding and explainingthe various facets of IC phenomenon, little interest in testing hypotheses.These studies have given a rise with accounting literature to theoreticalcontributions on how to take IC components into account

Survey/ questionnaire/ other empirical 103

Theoretical review (literature review) 40

1.1.3 Research methods used to study intellectual capital

As at journal paper of Dumay et al (2012) paper, the authors reviewed 423 journalpapers in terms of IC to conclude that there are five groups of research methods found.Table 1.3 indicates that commentary/ normative/ policy is the most commonly used,followed by survey/ questionnaire and next to case study/ interviews Dumay et al (2012)highlight that the trend over the last 10 years is a steady increase in empirical work, whilenormative work has declined Dumay et al (2012) are also alarming that there is a danger

of over-dependence on empirical studies unsupported by theoretical underpinning.Additionally, they also highlight a failure to convert IC theory into practice resulted from

a focus of top-down research instead of bottom-up performative research (Dumay et al.,2012)

Table 1.3 Methods used in intellectual capital accounting research

%19.4%

Sourc e: Dumay et al (2012)

Case/ field study/ interviews: The works use case studies to explore andunderstand IC phenomena in a particular context For example, Dumay (2009)found a case study into the attempt to understand IC reporting in a division of

a large Australia financial services company, named AusFinCo with over25,000 employees

Content analysis: It has been conducted on annual reports by a number of ICresearchers who want to measure the level of IC disclosure This “involvescodifying qualitative and quantified information into predefined categories in

order to derive patterns in the presentation and reporting of information”(Dumay et al., 2012) The researchers used an identical framework (i.e Sveiby(1997)’s framework), which categories intangibles according whether theyaccompany with an organization’s internal structure, employee competence orexternal relationships Doing so helps to find that the key components of ICare inadequately identified, ineffectively managed and inconsistentlyreported This method can be found in the studies of Brennan (2001), Olsson(2001), Guthrie, Petty, Yongvanich, and Ricceri (2004), Whiting and Miller(2008).

Survey/ questionnaire/ other empirical: To conduct empirical research on IC,two existing IC measurement systems can be broadly classified as theaccounting framework and the perceptual school of thought (Kannan &Aulbur,

2004) One quantifiable and easily measure for IC under the accountingframework is VAIC VAIC is offered as a measure of the efficiency of ICcomponents via financial data Alternatively, the perceptual school of thoughtconcentrates on employees’ perceptions and their needs for an effectiveknowledge management system (Kannan & Aulbur, 2004) Therefore, asurvey was designed that taps into the intellectual capital constructs as well asbusiness performance within the context of the conceptual model Such adesigned survey is sent to top management to evaluate IC components Theuse of survey/ questionnaire (Bollen, Vergauwen, & Schnieders, 2005; Bontis,Chua Chong Keow, & Richardson, 2000; Tovstiga & Tulugurova, 2007) orquestionnaire combined with financial data (S Cohen & Kaimenakis, 2007)can be found in a great deal of research to indicate the relationship between IC

or some of IC components and performance

Commentary/ normative/ policy: The part of the extant literature evidence astrongly normative character; here the emphasis is essentially policy orpractice oriented, focusing on discussion about various alternative ways ofidentifying, measuring and reporting the growth of stocks of intellectualcapital during an accounting period (Alcaniz et al., 2011) To compose anormative paper, the researcher applies the methodology whichanalyses the assumptions underpinning guidelines and frameworks that