Awareness of intellectual capital among bank executives in India: a survey

• DOI: https://doi.org/10.1108/IJAIM-07-2016-0073
• Date: 08 May 2018
• Published date: 08 May 2018
• Pages: 291-310
• Author: Mahesh Joshi,Monika Kansal,Sharad Sharma
• Subject Matter: Accounting & Finance,Accounting/accountancy,Accounting methods/systems

Awareness of intellectual

capital among bank executives

in India: a survey

Mahesh Joshi

School of Accounting, RMIT University, Melbourne, Australia

Monika Kansal

School of Business and Law, CQ University, Melbourne, Australia, and

Sharad Sharma

School of Accounting, RMIT University, Melbourne, Australia

Abstract

Purpose –This paper aims to explore the awareness of terminology related to intellectual capital (IC)

among executives of Indian banks and the sources in which they mostly find IC-related terminology. The

paper also explores relative and specific contributionsof each selected source of information in creating IC

awareness among bank executivesin India and determines difference amongthe executives from the public

and privatesector.

Design/methodology/approach –This research paper follows a survey-basedapproach to capture the

perceptions of Indian bank managers working middle and top management across different banks.

Regressionanalysis and ANOVA were applied to data from 166responses.

Findings –The study finds that IC awarenessamong Indian banking executives is reasonably highand is

equally spreadacross the three sub-categories of capital (externalcapital, human capital and internal capital),

though the relative awarenessof external capital is on the higher side. However, the sources of awarenessof

IC terminologydiffer among executives from the public-and private-sector banks.

Research limitations/implications –The sample was limited to middle and top managers in the

Indian bankingindustry and suffers from the usual limitationsof survey-based research such as the design of

the survey instrument and the personal biases of the respondents. Some limitations may also have arisen

because of the definitionsof IC elements adopted by this study.

Originality/value –This research adds a new dimension to the IC research by exploring the practical

application and awareness of IC thatdeviates from traditional annual report-based disclosure and valuation

studies. No existing literature has examinedthe survey-based awareness study, particularly on the banking

industry. This paper provides a foundation for future studies that examine the operational awareness and

applicationof IC in the service industries.

Keywords Intellectual Capital, Annual reports, Banking sector, Private-sector banks,

Public-sector banks

Paper type Research paper

1. Introduction

The continuous shift of the world’s economyfrom an industrial production model driven by

tangible assets to a knowledge economy driven by the use of knowledge resources and

business innovations, identifies the need for discussions and clarity on the subject of

intellectual capital (IC) (Kianto et al.,2014;Tzortzaki and Mihiotis, 2014). An

acknowledgement of intangible assets such as research and development, patents,

copyrights, licences, trademarks, product portfolios and technology has prepared the

Awareness of

intellectual

capital

291

Received16 July 2016

Revised9 January 2017

6 May2017

5July2017

Accepted6 July 2017

InternationalJournal of

Accounting& Information

Management

Vol.26 No. 2, 2018

pp. 291-310

© Emerald Publishing Limited

1834-7649

DOI 10.1108/IJAIM-07-2016-0073

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/1834-7649.htm

ground for the emergence of IC in the overall domain of financial reportingand disclosures.

Nearly three decades of work in the field ofIC research has enabled such a consensus on the

importance and definition of IC (Guthrie and Petty, 2000;Piperopoulos, 2010;F-Jard

on and

Susana Martos, 2009;Daou et al.,2014). Whether it is the issue of innovation as a tool of

competitiveness, the emergence of new business models, development of technology-

embedded products and processes or survival and growth in the era of disruption, the

disclosures practice has embraced the non-quantitative factors. These have emerged as

distinctive offshoots of this trend, as highlighted by Guthrie et al. (2012) who describe IC

accounting as “an accounting, reporting and management technology of relevance to

organisations to understandand manage knowledge resources”(p. 68).

Petty and Guthrie (2000) have made a complete distinction between knowledge

management (KM) and IC; they define KM as a function or an act that manages the object,

which is IC. Despite agreement on a broad understanding of the concept, there has been

difficulty explaining the term, IC, as it cannot be accounted for in a single transaction and

nor can a linkage be established in efforts to attain and recognise such an asset (Serena

Chiucchi, 2013;Youndt et al., 2004). In addition, the need for an accounting standard has

been observed in regard to measuring, reporting and disclosing the IC of the banks in

financial statements(Sharma and Mani, 2012).

The initial challenge for researchers in the IC domainwas to establish the existence and

importance of the IC in the successof business among stakeholders (Muhammad and Ismail,

2009). In the process, efforts were made to define the term, IC, and its various constituents

(Roslender et al., 2015).Three common elements in attempts to identify IC were identifiedby

do Rosário Cabrita and Vaz (2005): intangibility,knowledge that creates value and the effect

of collective practices. The commonly understood classification for IC is in the form of

human capital (HC), internal capital(InC) and external capital (EC) (Edvinsson and Malone,

1997;Bontis and Fitz-Enz, 2002;doRosário Cabrita and Vaz, 2005;Curado et al.,2014). Same

classification is used for this paper, which is aimed at understanding the perception of

managers in Indianbanking on various components under the above broadclassifications.

HC: This is tacit knowledge that an individual employee accumulates on account of

his/her education, experience, attitude and other personal traits, and brings to the

organisation, if used individually or in combination with knowledge of others, value.

Such elements of the capital are generally identified in the form of employee attitude/

commitment/satisfaction, educational qualifications, experience, management team,

skills and capabilities (Curad o et al.,2014;Muhamm ad and Ismail, 2009). As HC is

mobile, it is vulnerable to high turnover (Curado, 2008;Sanchezet al.,2000); hence, to

retain and maximise its gain is thechallenge for any organisation.

InC: Internal knowledge is accrued because of processes and procedures that the

organisation adopts. These processes and procedures include habits, practices,

processes, routines, information systems, working culture and databases (Curado

et al., 2014;Abhayawansa and Guthrie, 2014).

EC: This is the knowledge and competitive advantage that a business accrues from

its external relationships. External or relational capital for a business is the

combination of relationships with outside parties, including with customers,

suppliers, competitors, governments, communities and the reputation the business

commands on account of its transactions, products and services among these

participants (F-Jard

on and Susana Martos, 2009;Curado et al., 2014;Daou et al.,

2014).

IJAIM

26,2

292