Intellectual capital and corporate performance in Iranian pharmaceutical industry

Abstract

Purpose: The purpose of this study is to empirically study the relationship between intellectual capital (IC) components (human, structural, and physical capitals) with the traditional measures of performance of the firm (profitability, productivity and market valuation) within the pharmaceutical sector of Iran.Design/methodology/approach: The empirical data were drawn from pharma companies listed in the Iranian Stock Exchange (ISE), over the six‐year period of 2004 to 2009. The analysis of correlation, simple linear multiple regression and artificial neural networks (ANNs) were applied for analyzing any existing relationship between variables in the present study.Findings: The analysis indicates that the relationships between the performance of a company's IC and conventional performance indicators are varied. The findings suggest that the performance of a company's IC can explain profitability but not productivity and market valuation in Iran. Also the empirical analysis found that physical capital (VACA) was the one which was seen to have the major impact on the profitability of the firms over the period of study, in addition the result of ANN method also confirmed findings of multiple regression.Practical implications: There is an immediate need for policy makers and corporate managers wake up to the need to start disclosure of the IC of firms. IC measurement is of primary interest for top executives of pharmaceutical firms in Iran.Originality/value: This is an initial and pioneering study to evaluate the IC and its relationship with the traditional measures of corporate performance in the Iranian pharmaceutical industry. The present study provides a new aspect of performance measurement for research‐based industries in emerging economies and would be a good topic for further research.