EFFECT OF INTELLECTUAL CAPITAL ON THE PERFORMANCE OF LISTED MANUFACTURING FIRMS IN NIGERIA

ABSTRACT

The study examined the effect of intellectual capital on the performance of listed manufacturing firms in Nigeria. The objectives of the study are: to determine the effect of Human Capital Efficiency on the Return of Asset of listed manufacturing firms in Nigeria. Also, : to examine the effect  of Structural Capital Efficiency on the Return of Asset of listed manufacturing firms in Nigeria To achieve the objectives of the study, ex-post facto research design method was adopted. Data was generated through NSE fact book of 2018. In testing the hypotheses, panel pooled regression analysis was used. The findings revealed that there is insignificant effect of the effect of human capital structure in listed manufacturing firms in Nigeria. The researcher therefore recommends among other things that government of Nigeria should realize that for Nigeria to attain the desired vision of being one of the strongest twenty economics of the world, the must be a radical transformation and development of intellectual capital base. Strong Nations of the world such as United States of America (USA) Japan and China attained such feats because of their level of investment and development of their intellectual capital base. Also, since human capital is critical for the success of firms in all industry, there should be a review of the educational policies and standards to encourage Public Private Partnership in training of high quality human capital. Beyond having adequate high quality human capital, human capital becomes ineffective if it operates in poorly resourced environment.

TABLE OF CONTENTS

Title page                                                                               i

Declaration                                                                           ii

Certification                                                                          iii

Dedication                                                                              iv

Acknowledgement                                                            v

Table of Content                                                                vii

List of tables                                                                       viii

Abstract                                                                               ix

CHAPTER ONE

INTRODUCTION

1.1.      Background to the Study

1.2.      Statement of the Problem

1.3       Objectives of the Study

1.4       Research Questions

1.5.      Research Hypotheses

1.6.      Significance of the Study

CHAPTER TWO

REVIEW OF RELATED LITTERATURE

2.1       Conceptual Framework

2.1.1    Concept of Intellectual Capital

2.1.2    Components of Intellectual Capital

2.1.3    Phases of Intellectual Capital Development

2.1.4    Intellectual Capital Management

2.1.5    Intellectual Capital Development Steps

2.1.6.   Intellectual Capital Management: Model

2.1.7     Importance of Intellectual Capital Management

2.1.8    Intellectual Capital Management Measures

2.1.9.   Performance

2.1.10   Firms Profitability

2.1.11   Nigerian Stock Exchange

2.2.       Theoretical Framework

2.2.1    Value Added Intellectual Coefficient Theorem (VAIC)

2.2.2    Agency Theory

2.2.3    Resource-Based View Theory

2.3.     Empirical Review

2.4.      Gap in Literature

CHAPTER THREE

METHODOLOGY

3.1.       Research Design

3.2.       Area of Study

3.3.      Population of Study

3.4.      Sampling Technique and Sample size

3.5.     Sources of Data Collection

3.6.      Data Analysis Technique

3.7.      Model Specification

3.8.      Discussions of Variables

3.8.1.   Independent Variables                                                     

CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS

4.1         Data presentation

4.2         Data analysis

4.3              Test of hypotheses

4.4         Discussion of findings

CHAPTER FIVE

SUMMARY OF FINDING, CONCLUSION AND RECOMMENDATION

5.1         Summary of Finding

5.2         Conclusion

5.3         Recommendations

REFERENCES

List of Tables

2.1       Vatable Goods at 5% Tax Rate                                                                                  12

2.2       Vatable Goods at 5% Tax Rate                                                                                  13

4.1       Data Presentation Per Capita Income and Vat of Nigeria and Ghana              40

4.2       Regression Result – Nigeria                                                                                       41

4.3       Regression Result – Nigeria                                                                                       42

CHAPTER ONE

INTRODUCTION

1.1.        Background to the Study

Resources are key drivers for every business success, the need for these adequate resources (in the form of financial, physical and intangible assets) in ensuring the continuous operation of a business function as a going concern can never be overlooked (Arzizieh T.T, 2018). These resources range from physical assets, financial cum other intangible assets, all needed for the growth of a company. In the millennium, there was a growing prediction that less people will do physical work and more people will do brain work, this is “intellectual capital”, and it doesn’t appear on the company statement of financial performance, but reflects more value for organizations than that of physical assets.

Intellectual Capital is more than simply the sum of the human, structural and relational resources of the firm, it is about how to let the knowledge of a firm work for it and have it create value (Roberts,1999),

Intellectual capital drives organizational wealth more by knowledge and information rather than the process of production. While in the past most economies depended on use of land, natural resources, equipment and capital for the creation of value, currently our information economy depends largely on the application of knowledge in the creation of wealth and economic growth. In addressing the relevance of intellectual capital management, Apiti, Ugwoke and Chiekezie (2017) noted that in this period of national as well as global financial crisis, the study of the relevance of intangible assets has attracted much attention in the business management literature, because intellectual capital which is an aspect of intangible asset has that exerting influence of adding value to a firm and with its relational ability can facilitate the acquisition of other resources which promote the survival and profitability of a firm. The foundational progress of every organization in today’s world rests on these intangible assets that make up the intellectual capital. Gone are the days when firms focus only on their physical capital with little or no attention to their intellectual capitals and still post huge profits, competition in business today has become so intense that managers utilize every resource at their disposal to edge others out of business.

To build relevance and increase financial performance, firms in Nigeria recently engage mostly university graduates (who were outstanding) in their employment policies, thereby giving credence to the fact that intellectual capital significantly affects their performance. This stride has paid in promoting huge transformation within the industrial sector of Nigeria in the last few years.

The boost of educated workforce gives rise to high profitability and productivity. Companies that makes a better disclosure of its intellectual assets, stands tall among her competitors and the greater it provides confidence to her stakeholders. Intellectual capital in combination with physical assets of companies, sharpens and strengthens competitive edge. No wonder, Arzizeh T.T, 2018, recommends that management of deposit money banks in Nigeria and the financial service industry should invest in human capital in order to enjoy increase in revenue generation coupled with the need to determine optimally the level of intellectual capital management so that layoff and underutilization would be highly discouraged and for management to strengthen Intellectual capital management in order to enhance improved performance in revenue generation. For any organization that wants to take the lead in any sector, judging by performance and all round, should take the management of her Intellectual capital seriously. In the world’s economy where there is now a paradigm shift, that firms no longer centre their viability on physical assets only, but also on human assets (i.e. intellectual capital), researchers have come to realize that intellectual capacity which in times past was neglected is now a core driver in the business world due technological advancement and great innovations; hence, the need to manage the intellectual asset of every organization in other to ensure steady growth on revenue generation is of key importance, knowing that firms can’t survive without steady generation of revenue.

1.2.Statement of the Problem

The new knowledge economies have highlighted the importance of intellectual capital and the imperative need to manage their associated costs and benefits. Firms, which are rich in human capital and face great ‘human capital-walk outs’ should be concerned with management of the cost of this unique asset. It has become a common phrase included in the chairman’s report that; “Our employee are our greatest asset”, yet there have been inadequate attention given to the value and contribution of this “great asset” on the overall performance of the banks. When companies invest in physical capital; they try to select alternatives offering the highest return on their investment. They would also like to invest in human capital offering them the highest return. Firms in Nigeria, for instance have problem of having the needed intellectual capital to carry on its work efficiently and effectively. Therefore, they result in pouching from competitor since it will take them time to actualize the process of new staff recruitment and training to meet their human capital needs. Most firms are poised with a dire challenge in the future, which likely seems to be an ever more urgent quest for competitive advantage. Guest, Michie, Conway and Sheehan (2013) noted that it is increasingly argued that the organizations best able to meet this challenge will be those that can acquire and utilize valuable, scarce and inimitable resources. Intellectual capital can fall into this category, which is argued in times past, particularly if they are effectively deployed through appropriate human resource practices and the management of organizational culture (Barney & Wright, 2018).

Odama, Onodi and Arzizeh, (2018) evaluated on the effect of Intellectual Capital Management on revenue generation of listed deposit money banks in Nigeria, adopting descriptive research design, considering the total population of all the twenty-one listed deposit money banks in Nigeria. Data were gathered via secondary source from Six (6) public annual reports of the listed deposit money banks and analyzed using percentages and ratios. Their study did not take into consideration non-financial institutions quoted in Nigeria.

The need for effective management of intellectual capital (human resources) stands as one of the central tasks of management and this presents a challenge for organizations where firms seek to compete in the world markets and search for increased productivity by encouraging the spread of high-performance workplaces. In view of this development, this research sets out to look at the effect of intellectual capital on the performance of selected listed companies in Nigeria.

1.3  Objectives of the Study

The major objective of this study is to examine the effect of intellectual capital on the performance of selected listed companies in Nigeria.

The specific objectives are as follows:

1.    To ascertain the effect of human capital efficiency on return on assets.

2.    To examine the effect of structural capital efficiency on return on asset

1.4   Research Questions

1.    To what extent does human capital efficiency affect return on asset?

2.    To what extent does structural capital efficiency affect return on asset?

1.5.   Research Hypotheses

1.    H₀: Human capital efficiency has no significant effect on return on asset

2.    H₀: Structural capital efficiency has not significant effect on return on asset

1.6.     Significance of the Study

This study is relevant to some group of stakeholders and they include:

Academicians: This study will help other academicians, researchers and scholars in formulating research questions and hypotheses that would guide their study. Literature generated in the study will also help them develop appropriate literature framework and theoretical framework for their study.

Management of firms: This study will also be beneficial to the managers of firms by encouraging them to recruit more competitive and competent employees, also outlining the measures to follow, to ensure the welfare of their workers, knowing that they are part of wealth generating teams.

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