Intellectual Capital and Financial Performance: Evidences from Indian Business Process Outsourcing Industry



The purpose of this study is to empirically measure the impact of intellectual capital performance on the traditional financial performance measures of selected Indian Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO) companies. Data of 13 prominent Indian BPO/KPO companies listed on Bombay Stock Exchange is taken for study. The selected companies of BPO/KPO sector are heavily reliant on intellectual capital. Financial data of nine years i.e. from 2007 to 2015 is collected from financial database CMIE’s Prowess. Literature available on intellectual capital and efficiency measurement is thoroughly reviewed. Value Added Intellectual Coefficient (VAIC™) method is used to measure the value based intellectual capital performance of the selected companies. The financial performance variables used in the study are return on assets, return on equity and operating income ratio for profitability and asset turnover ratio for productivity. VAIC™ and its components are calculated i.e. efficiency of capital employed and efficiency of intellectual capital. Empirical analysis is conducted using models of panel data i.e. fixed and random to analyse the impact of VAIC™ components on financial performance measures. Findings from the analysis suggest that intellectual capital efficiency has a significant impact on profitability but not on productivity. While capital employed efficiency has a significant impact on profitability and productivity both.


Intellectual capital VAIC™ Financial performance Value added Indian IT/BPO companies 


  1. Arun, S. (2015, December 28). IT sector worried; India to take up visa fee with U.S. The Hindu.Google Scholar
  2. Bontis, N., Janošević, S., & Dženopoljac, V. (2013). Intellectual capital in Serbia’s hotel industry. International Journal of Contemporary Hospitality Management, 27(6), 1365–1384. doi: 10.1108/IJCHM-12-2013-0541.CrossRefGoogle Scholar
  3. Bontis, N., & Nikitopoulos, D. (2001). Thought leadership on intellectual capital. Journal of Intellectual Capital, 2(3), 183–191. doi: 10.1108/14691930110400182.CrossRefGoogle Scholar
  4. Bueno, E., Salmador, M. P., Rodríguez, Ó., & Martín De Castro, G. (2006). Internal logic of intellectual capital: A biological approach. Journal of Intellectual Capital, 7(3), 394–405. doi: 10.1108/14691930610681474.CrossRefGoogle Scholar
  5. Chatzkel, J. (2004). Moving through the crossroads. Journal of Intellectual Capital, 5(2), 337–339. doi: 10.1108/14691930410533740.CrossRefGoogle Scholar
  6. Cuganesan, S. (2005). Intellectual capital-in-action and value creation. Journal of Intellectual Capital, 6(3), 357–373. doi: 10.1108/14691930510611102.CrossRefGoogle Scholar
  7. Chen, M. C., Cheng S. J., & Hwang, Y. (2005). An empirical investigation of the relationship between intellectual capital and firms’ market value and financial performance. Journal of Intellectual Capital, 6(2), 159–176.Google Scholar
  8. Drucker, P. F. (1988). The coming of the new organization. Harvard Business Review, 66(1), 45–53.Google Scholar
  9. Drucker, P. F. (1993). Postcapitalist Society. Herper Collins Publishers. New YorkGoogle Scholar
  10. Dženopoljac, V., Janoševic, S., & Bontis, N. (2016). Intellectual capital and financial performance in the Serbian ICT industry. Journal of Intellectual Capital, 17(2), 373–396. doi: 10.1108/JIC-07-2015-0068.CrossRefGoogle Scholar
  11. Edvinsson, L. (1997). Developing intellectual capital at Skandia. Long Range Planning, 30(3), 320–373.CrossRefGoogle Scholar
  12. Edvinsson, L., & Malone, M. S. (1997). Intellectual capital: The proven way to establish your company’s real value by measuring its hidden brainpower. London: Piatkus Books.Google Scholar
  13. Firer, S., & Mitchell Williams, S. (2003). Intellectual capital and traditional measures of corporate performance. Journal of Intellectual Capital, 4(3), 348–360. doi: 10.1108/14691930310487806.CrossRefGoogle Scholar
  14. Firer, S., & Stainbank, L. (2003). Testing the relationship between intellectual capital and a company’s performance: Evidence from South Africa. Meditari Accountancy Research, 11(1), 25–44.CrossRefGoogle Scholar
  15. Gan, K., & Saleh, Z. (2008). Intellectual capital and corporate performance of technology-intensive companies: Malaysia evidence. Asian Journal of Business and Accounting, 1(1), 113–130. doi: 10.1108/14691930010324188.Google Scholar
  16. Ghosh, S., & Mondal, A. (2009). Indian software and pharmaceutical sector IC and financial performance. Journal of Intellectual Capital, 10(3), 369–388. doi: 10.1108/14691930910977798.CrossRefGoogle Scholar
  17. Guthrie, J. (2001). The management, measurement and the reporting of intellectual capital. Journal of Intellectual Capital, 2(1), 27–41. doi: 10.1108/14691930110380473.CrossRefGoogle Scholar
  18. Hsu, G. H. Y. (2001). Knowledge-based economies and competition policy: Developmental strategy concerning the liberalization and internationalization of Taiwan’s business. Fair Trade Quaterly, 4(9), 123–136.Google Scholar
  19. Itami, H. (1991). Mobilizing invisible assets. Massachusetts: Harvard University Press.Google Scholar
  20. Janosevic, S., Dzenopoljac, V., & Bontis, N. (2013). Intellectual capital and financial performance in Serbia. Knowledge and Process Management. 20(1), 1–11.Google Scholar
  21. Joshi, M., Ubha, D. S., & Sidhu, J. (2012). Intellectual capital disclosures by Indian and Australian information technology companies. Journal of Intellectual Capital, 13(4), 582–598. doi: 10.1108/14691931211276142.
  22. Kamath, G. B. (2008). Intellectual capital and corporate performance in Indian pharmaceutical industry. Journal of Intellectual Capital, 9(4), 684–704. doi: 10.1108/14691930810913221.
  23. Kianto, A., Ritala, P., Inkinen H., & Vanhala, M. (2013). The interaction of intellectual capital stocks and knowledge management practices in organizational value creation, Paper presented at 8th International Forum on Knowledge Asset Dynamics Zagreb.Google Scholar
  24. Kaplan, R. S., & Norton, D. P. (1992). The balanced scorecard—Measures that drive performance. Harvard Business Review, 70(1), 71–79.Google Scholar
  25. Kavida, V., & Sivakumar, N. (2010). The Relevance of Intellectual Capital in the Indian Information Technology Industry. The IUP Journal of Knowledge Management, 8(4).Google Scholar
  26. Maditinos, D., Chatzoudes, D., Tsairidis, C., & Theriou, G. (2011). The impact of intellectual capital on firms’ market value and financial performance. Journal of Intellectual Capital, 12(1), 132–151. doi: 10.1108/14691931111097944.CrossRefGoogle Scholar
  27. Malik, M., & Velan, N. (2016). Trends and determinants of IT-BPM exports in India. Journal of Science and Technology Policy Management, 7(2).Google Scholar
  28. Mehri, M., Umar, M., Saeidi, P., Hekmat, R., & Naslmosavi, S. (2013). Intellectual Capital and Firm Performance of High Intangible Intensive Industries: Malaysia Evidence. Asian Social Science, 9(9).Google Scholar
  29. Marquardt, M. J. (1999). Action Learning in Action: Transforming Problems and People for World-class Organizational Learning. Palo Alto: Davies-Black Publishing.Google Scholar
  30. Mondal, A., & Ghosh, S. K. (2012). Intellectual capital and financial performance of Indian banks. Journal of Intellectual Capital, 13(4), 515–530. doi: 10.1108/14691931211276115.CrossRefGoogle Scholar
  31. NASSCOM. (2015). The IT-BPM sector in India. New Delhi: Strategic Review.Google Scholar
  32. OECD. (1999). Measuring and reporting intellectual capital: experience, issues and prospects; an international symposium. Organisation for Economic Co-operation and Development, Amsterdam.Google Scholar
  33. Pal, K., & Soriya, S. (2012). IC performance of Indian pharmaceutical and textile industry. Journal of Intellectual Capital, 13(1), 120–137. doi: 10.1108/14691931211196240.CrossRefGoogle Scholar
  34. Patibandla, M., & Petersen, B. (2002). Role of transnational corporations in the evolution of a high-tech industry: The case of India’s software industry. World Development, 30(9), 1561–1577.CrossRefGoogle Scholar
  35. Pulic, A. (2004). Intellectual capital—Does it create or destroy value? Measuring Business Excellence, 8(1), 62–68.CrossRefGoogle Scholar
  36. Pulic, A. (1998). Measuring the performance of intellectual potential in knowledge economy. Presented at the 2nd McMaster World Congress on Measuring and Managing Intellectual Capital by the Austrian Team for Intellectual Potential.Google Scholar
  37. Roos, G., & Roos, J. (1997). Measuring your company’s intellectual performance. Long Range Planning, 30(3), 413–426.CrossRefGoogle Scholar
  38. Stewart, T. (1997). Intellectual capital: The new wealth of organizations. New York, NY: Doubleday.Google Scholar
  39. Stewart, T. A. (2001) The Wealth of Knowledge: Intellectual Capital and the Twenty-first Century Organization, Currency, New York.Google Scholar
  40. Sveiby, K. (1997). The intangible assets monitor. Journal of Human Resource Costing & Accounting, 2(1), 73–97.CrossRefGoogle Scholar
  41. Sveiby, K.-E. (2008). East and West do meet—That is the real issue! Journal of Intellectual Capital, 9(2). doi: 10.1108/jic.2008.25009baf.001.
  42. Tandon, K., Purohit, H., & Tandon, D. (2016) Measuring Intellectual Capital and Its Impact on Financial Performance: Empirical Evidence from CNX Nifty Companies. Global Business Review, 17(4), 980–997.Google Scholar
  43. Vishnu, S., & Kumar Gupta, V. (2014). Intellectual capital and performance of pharmaceutical firms in India. Journal of Intellectual Capital, 15(1), 83–99. doi: 10.1108/JIC-04-2013-0049.CrossRefGoogle Scholar
  44. Young, C.-S., Su, H.-Y., Fang, S.-C., & Fang, S.-R. (2009). Cross-country comparison of intellectual capital performance of commercial banks in Asian economies. The Service Industries Journal, 29(11), 1565–1579. doi: 10.1080/02642060902793284.CrossRefGoogle Scholar

Copyright information

© Springer Nature Singapore Pte Ltd. 2017

Authors and Affiliations

  1. 1.Indian Institute of Management KashipurKashipurIndia
  2. 2.Aligarh Muslim UniversityAligarhIndia

Personalised recommendations