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

Date08 May 2018
Published date08 May 2018
AuthorMahesh Joshi,Monika Kansal,Sharad Sharma
Subject MatterAccounting & 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
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 nd IC-related terminology. The
paper also explores relative and specic 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 nds 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 denitionsof 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 worlds economyfrom an industrial production model driven by
tangible assets to a knowledge economy driven by the use of knowledge resources and
business innovations, identies 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
Received16 July 2016
Revised9 January 2017
6 May2017
Accepted6 July 2017
InternationalJournal of
Accounting& Information
Vol.26 No. 2, 2018
pp. 291-310
© Emerald Publishing Limited
DOI 10.1108/IJAIM-07-2016-0073
The current issue and full text archive of this journal is available on Emerald Insight at:
ground for the emergence of IC in the overall domain of nancial reportingand disclosures.
Nearly three decades of work in the eld ofIC research has enabled such a consensus on the
importance and denition 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 dene 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
difculty 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
nancial 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 dene the term, IC, and its various constituents
(Roslender et al., 2015).Three common elements in attempts to identify IC were identiedby
do Rosário Cabrita and Vaz (2005): intangibility,knowledge that creates value and the effect
of collective practices. The commonly understood classication 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
classication is used for this paper, which is aimed at understanding the perception of
managers in Indianbanking on various components under the above broadclassications.
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 identied in the form of employee attitude/
commitment/satisfaction, educational qualications, 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.,

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