Research On The Effectiveness Of Intellectual Capital On Business Performance

The coming of the knowledge-based economy has made the relationship between intellectual capital and companies'financial performance becoming the focus of researchers. In the knowledge-based economy, Intellectual capital becomes the key competitive power of an enterprise. As intellectual capital is better understood, more and more companies have been clearly aware that the intellectual capital is a determining factor of sustainable growth and competitive advantage of an enterprise, and reasonable arrangement and effective management of intellectual capital is vital to business success.Foreign researches have proved that in some developed countries, intellectual capital plays a very important role to companies'value. Is that result appropriate for Chinese companies? Do Chinese companies depend more on intellectual capital or physical capital? The answering of these questions have significant meanings to our companies and can be guidelines while making investment and intellectual capital management decisions. And they are also very important to the government while making relevant policies.This is an empirical study of the relationship between intellectual capital and corporate performance of listed companies in manufacturing and IT industries, in Shenzhen and Shanghai A-share securities market. It explores the difference in the effectiveness of intellectual capital as a driving factor in the industry. And it can be used as a source of reference for enterprises in this sector when promoting performance by allocating and managing intellectual capital. After considering the measurability and representativeness of the variables,10 intellectual and financial variables were selected to investigate the relationship between these variables and ROE by backward regression.The results of the empirical analysis suggested there was significant correlation between physical assets and companies'financial performance. But it was different between two industries and we believe it reflected the fact that as our economy developed, companies will depend less on physical capitals.The results also showed us the positive significant correlation between structural capital and financial performance as well as positive correlation between human resources assets and financial performance.At the end of the paper, we suggest companies should build up their IC Management Accounting System to manage IC effectively, since we found the importance of IC to a company's performance.