An Empirical Investigation of the Relationship between Intellectual Capital and Firms' Development Ability

The principal purpose of this article is to investigate empirically the relation between intellectual capital and firms' development ability. Using data drawn from a sample of 432 publicly traded firms in China and Pulic's Value Added Intellectual Coefficient (VAIC) as the efficiency measure of intellectual capital, the author constructs two panel data models to examine the relationship between intellectual capital and firms' development ability. Findings indicate that intellectual capital contributes to firms' development ability positively. In addition, the empirical results show that human capital and structural capital which are the components of intellectual capital both contribute to firms' development ability. Finally, the author finds the relation between physical capital and firms' development ability is not distinct. The results extend the understanding of the role of intellectual capital in promoting firms' development ability and creating sustainable advantages for firms in developing countries.