| This research applies a broad, analytical perspective for modifying Pulic's (2000) Value Added Intellectual Coefficient (VAIC(TM)) method that measuring the "value creation efficiency" of a company. It also examines the correlation between firms' intellectual capital and market value and profitability, based on 2001∼2005 annual reports from listed Taiwan IT companies. After modifying the model, the results show that the indexes of VAIC have significantly positive correlations with firms' market value (M/B and P/E) and profitability (PM, BEP, ROA, and ROE) in broad IT industry; however, the indexes of VAIC have significantly positive or negative correlations with firms' market value and profitability in different IT fields. The findings suggest that IT industry in Taiwan is capable of transforming "intangible assets" to high value added products or services, as the ideas of about value creation described by Pulic (2004). Conclusively, tests of modified VAIC and measures of corporate performance suggest that R&D expenditure and intellectual property may capture additional information that is omitted from the Pulic's VAIC(TM) approach and underline the importance of R&D expenditure and intellectual property in enhancing firms' market value and profitability. |
