0115 966 7955 Today's Opening Times 10:00 - 20:00 (BST)

Relationship Between Learning and Growth in Business

Disclaimer: This dissertation has been submitted by a student. This is not an example of the work written by our professional dissertation writers. You can view samples of our professional work here.

Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays.


The introductory chapter begins with a description of the context of the present study and a presentation of the fundamental issue addressed in this empirical investigation. The significance of intangible assets in knowledge era, objectives, conceptual framework and contribution value of this study is also addressed in this chapter.

1.1 Research Context

This section presents the broad context within which this empirical investigation is undertaken. The current problems and significance of intangible assets in knowledge era are explained.

Traditionally, profit and loss figures in the balance sheet and annual financial reports are used as the main financial performance indicators for the action previously taken monitoring and crafting short term strategies. Accounting for intangible assets starts with documenting the various categories of expenses. Profit (or loss) is derived from the financial difference between sales revenue and operating cost. The costs include the expenses in brand building, customer database, training, product development, information technology, etc. These are usually treated as part of the operating cost and marketing expenses. The investment of tangible assets such as equipment, machinery, building, etc. is also recorded in balance sheet. This simple accounting record mechanism is no longer sufficient in the knowledge based economy. There is no linkage with long term strategies to compete with global competitors and survive in dynamic economic. Since an increasing share of market value in this era is not represented by inventory or physical assets. Investments in intangible assets are usually not documented in a proper systematic manner because of data non-availability. Consequently, reasonable estimates of the future performance potential of an organization could not be provided to the management. It is intriguing to note that the cause-effect relationships between marketing, production and human resource and financial performance have not so far been made operational.

Prior to the knowledge era, business lived in the world of tangibles, which worked well with the traditional accounting practices. However, things are different in today's world of intangibles. Modern management style and strategic crafting have adapted in response to global competition and volatile economic environment. The industrial age management has been replaced by the knowledge age leadership, with corresponding transformational effects on the economy and workplace (Figure 1.1). The focus on tangible assets in the industrial age has shifted to intangible assets in the knowledge age. This paradigm shift encourages organizational employees to utilize their knowledge in line with organizational goals. Globalization is the main driver of knowledge economy. Toffler (1990) proposed knowledge as the key success factor in the present competition. Knowledge can be transferred by information flow from manufacturers to customers. Organization knowledge could be frequently managed by well-organized people in organization. Knowledge and information technology form an important part of intangible assets. With the realization of this paradigm shift, issues concerning intangible assets are now more widely researched and practiced.

Industrial Age

Knowledge Age

Production Driven

Customer Driven


Process (Integrated)

Tangible Assets

Intangible Assets

Top Down

Bottom Up



Short-term strategies

Long-Term Strategies

Figure 1.1 The shift in management style from industrial age to the knowledge age

Intangible assets are of increasing importance for the corporate value creation processes of all kinds of organizations. In 1978, intangible assets were determined to constitute only 5% of all assets, while they become 78% of all assets today. Some 50 to 90 percent of the value created by a firm in today's economy is estimated to come from the management of the firm's intellectual capital rather than from the use and production of material goods (Guthrie and Yongvanich, 2004). Some public and private sector organizations do not attempt to incorporate the value of intangible assets. Sonnier et al. (2007) examined 150 high technology companies and found that management may want to reduce the level of disclosure to conceal sensitive strategic information in order to maintain a competitive advantage. As such, management reporting and financial statements will become increasingly irrelevant as a tool supporting meaningful decision making. Forward-thinking management has to ensure that intangible assets are identified, monitored, built and leveraged. Financial profit alone could not guarantee the long term survival of companies. To be sustainable, companies need to understand and be able to manage intangible factors, including organizational learning and growth, internal process and external structure. Management that aspires for sustainable business growth and industrial leadership in the twenty-first century has to focus on superior management skills and knowledge under limited resources.

Augier and Teece (2005) and Johanson (2005) reported that human capital, knowledge and other intangible assets have emerged as key to business performance in the economic systems. The intangible assets are the competitive edge over competitors. Srivastava et al. (1998) suggested the framework linking market-based assets to shareholder value which could be considered as the subset of present study. The market investment in brand and customer-profile databases leads to cash flows via a combination of price and share premiums, faster market penetration, reduced distribution, sales and service costs, and increased loyalty and retention. Brands are economic assets which are to create value shareholders and develop competitive advantage (Doyle, 2001). During the last three decades, brand is widely recognized as playing the key role in business. Brands influence customer choice, but the influence varies depending on the market in which the brand operates. Ittner (2008) suggested several previous studies that provided at least some evidence that intangible asset measurement is associated with higher performance. Several previous studies are limited by over-reliance on perceptual satisfaction or outcome variables, inadequate controls for contingency factors, simple variables for capturing complex measurement practices, and the lack of data implementation practice.

In this study, the Balanced Scorecard strategy map (Kaplan and Norton, 2004) is chosen to provide a framework to illustrate how strategy links intangible assets to value creating processes. The reasons for choosing Balanced Scorecard as the stage to build the framework for the present research are as follows: First, Balanced Scorecard is a practical approach to measure the intangible assets that has been widely used in a variety of organizations over the past two decades. Second, through the strategy map concept, Balanced Scorecard provides the linkage the relationship between intangible assets and business performance including the interrelationship between intangible assets elements: 1) Learning and growth affect internal process 2) Internal process affects external structure 3) External structure affects business performance. The measures in the four perspectives are linked together by cause-effect relationships. The company builds the core competence and training to support the internal process. The internal process creates and delivers the customer value proposition. When the customers are satisfied, the sales and profit are delivered in terms of financial performance which is the key measure of business performance.

1.2 Research Objectives

Since developed economies have become knowledge-based and technology intensive, view of the firm has significantly changed and intangible assets have become fundamental determinants of value and control. There are three fundamental elements of intangible assets which are learning and growth, internal process and external structure (Sveiby, 1997; Kaplan and Norton, 2004). The ultimate goal of firm is to maximize the business performance (financial performance, sales performance and customer fulfillment).

This study aims to establish empirically the cause-effect relationship between learning and growth, internal process, external structure and business performance, including the interrelationships between the elements leading to business performance.

1.3 Expected Contributions of the Study

There are two key areas of expected outcomes of the study. First, the impact of intangible assets on business performance is expected to be empirically established. In particular, the cause-effect relationship between learning and growth, internal process and external structure would be identified and analyzed. This is so that the detail underlying the relationships can be implemented in practice.

Second, it is expected that the effect of business size, business sector and establishment age on the causal links between intangible assets and business performance would be established. As there are various types of firm's business (service and non-service), sizes of business (large and SME), establishment age in the industry, this study would provide the pattern of cause-effect relationships between intangible assets and business performance in each business characteristic.

Given the expected outcomes, the expected academic contributions of the present study would be to encourage similar studies to establish the causal links between intangible assets and business performance in other types of economies. The study would also provide the foundation for the field of intangible asset management

For business practitioners, top management will benefit from the understanding of cause-effect relationship and the realization of the importance of intangible assets (learning and growth, internal business process and external structure) and business performance. With the clearer understanding, proper budget allocation and intangible assets management will be more properly focused and controlled to increase sustainable competitive advantage. The intangible assets are the strategic key to a sustainable competitive advantage and future economic profit.

1.4 Conceptual Framework

During last decade years, intangible assets are widely expanded and researched. The value of intangible assets is likely to grow over time if the firm undertakes successful intangible assets management. The intangible assets in each fundamental element (learning and growth, internal process and external structure) are selected and classified as shown in Table 1.1. More detail explanation is given in Chapter 2.

Table 1.1 Framework of intangible assets indicators

Intangible assets element

Intangible assets indicators

External structure

Customer satisfaction

Customer loyalty


Internal process

Process improvement


Information technology

Learning and growth



Employee competence


The cause-effect relationship is covered in strategic mapping (Kaplan and Norton, 2004). There have also been several studies, e.g. Huselid and Becker (1997), Hitt et al. (2001), Liu and Tsai (2007), that examined the relationship between learning and growth and business performance as explain in more detail in Chapter 2. The main hypotheses in the present study are shown in Figure 1.2.

Figure 1.2 Research hypotheses testing model

H1: Learning and Growth is positively related to Internal Process

H2: Internal Process is positively related to External Structure

H3: External Structure is positively related to Business Performance

H4: Learning and Growth is positively related to Business Performance

1.5 Outline of Methodology

The research hypotheses formulated in this study were tested in the mail survey or questionnaire of registered company at the Thai Chamber of Commerce. The initial step in the analysis of the data collected focuses on examining the frequency distribution and the mean and standard deviation for each item or variable considered in this research. The next step in data analysis is to assess the validity of measures. Here the study uses item-total correlation, confirmatory factor analysis and the Cronbach alpha coefficient. The initial data analysis, and reliability and correlation analyses are performed using the SPSS statistical package. Furthermore, the structural equation modeling (SEM) EQS program (Bentler, 1995) is used to perform the confirmatory factor analysis, discriminant validity tests and testing of the structural model. The entire step-by-step model fit process from data collection by field survey questionnaires is shown in Figure 1.3. More details of research methodology are provided in Chapter 3.

1.6 Structure of the Thesis

The thesis is structured on the basis of five chapters, which represent the different stages that are involved in the overall research process. Chapter 1 has covered the research context, current problems, purpose and expected contribution of the studies.

Chapter 2 provides an extensive review of definition of intangible assets, intangible assets value and the Balanced Scorecard strategic mapping. This detail provide support to conceptual model of the study and the set of research hypotheses of the study which links learning and growth, internal process and external structure to business performance through cause-effect relationship.

Chapter 3 presents the step-by-step research methodology used to conduct the study. It illustrates a range of important methodological issues including the research design, sampling, questionnaire development process, data collection and measurement of model variables. The Structural Equation Modeling (SEM) technique is briefly explained.

Chapter 4 provides results of validity testing of the constructs and hypotheses of the present study by using EQS program for SEM technique and Statistical Package for Social Science (SPSS) program. Not only the results of the main research hypotheses testing model, but also other possible models are explored.

Chapter 5 presents a summary of the major findings and conclusions of the study. It also suggests the long-term strategic implications of the study finding for top management. Finally, consideration is given to the limitations of this empirical investigation and suggestions are made for potential directions and strategies for future research.

Literature Review

This chapter reviews the definition of intangible assets and its value. The previous correlation empirical research between intangible assets and performance are reviewed.

2.1 Introduction

There have been a large number of studies in intangible assets during the last two decades (see Figure 2.1). Intangible assets are involved in the customers, external structure, human resources, and internal process. The intangible assets are defined as non-financial assets without physical substance that are held for use in the production or supply of goods or services or for rental to others, or for administrative purpose (Epstein and Mirza, 2005). Intangible asset is an accounting term, but intellectual capital is a noun used in the management field. They both refer to the same thing. Therefore, Edvinsson and Malone (1997) and Tseng and Goo (2005) pointed out that intangible assets and intellectual capital are synonyms. Intangible assets are identifiable and controlled by the enterprise as a result of past events, and from which future economic benefits are expected to flow.

Figure 2.1 Research development on intangible assets

2.2 Intangible Asset Element Classification

Several studies have variously attempted to categorize intangible assets as summarized in Table 2.1. Some categorizations are in more common use than others.

Table 2.1 Approaches for the categorization of intangible assets

Kaplan & Norton




Edvinsson & Malone


Roos et al.


Bontis et al.




Balanced Scorecard


Intangible Assets Monitor


Value Scheme

Intellectual Capital


Balanced Scorecard with Intellectual Capital



Financial & expectation


External structure

Customer capital

Structural capital




Internal processes

Internal structure

Organizational capital



Internal process

Learning and growth

Competence structure



Human Capital



Learning and growth

The purpose model of the above intangible assets researchers is summarized by Bontis (2000) in Table 2.2.

Table 2.2 Purpose of intangible model



Kaplan and Norton (1992)

A multi-dimensional, intangible asset accounting system designed to guide management decisions.



An intellectual capital performance measurement reporting system that uses an human resources, and information systems rather than financial perspective.

Edvinsson and Malone (1997)

To provide management with a taxonomy for classifying an organization's knowledge assets and a series of metrics to measure them.

Roos et al.


To develop and apply a summary index of consolidated measures of intellectual capital.

In Table 2.1 and Table 2.2, there are the intangible elements correspond in each study. Wingren (2004) proposed that framework the correspond to intangible assets framework presented by Sveiby (1997) and Kaplan and Norton (1992) in Figure 2.2.

Wingren (2004) mentioned that the Balanced Scorecard is primarily tool for internal development and evaluating the market value of the company for long run. Bose and Thomas (2007) implemented the concept of Balanced Scorecard to a company and they claimed that the formulating of Balanced Scorecard fits the strategic interest of the organization to achieve sustainable competitive advantage. The Balanced Scorecard encapsulates the short and long-term strategies. The motivation and evaluation of employee to achieve goal in BSC is rather than using it just as a measuring tool.

When intangible assets are addressed and defined, there are four practical approaches to measure the intangible assets (Luthy, 1998):

1. Direct Intellectual Capital Method (DIC)

Estimate the value of intangible assets by identifying its various components. Once these components are identified, they can be directly evaluated, either individually or as an aggregated coefficient.

2. Market Capitalization Method (MCM)

Calculate the difference between a company's market capitalization and its stockholders' equity as the value of the intellectual capital or intangible assets.

3. Return on Asset Method (ROA)

Average pre-tax earnings of a company for a period of time are divided by the average tangible assets of the company. The result is a company ROA that is then compared with its industry average. The difference is multiplied by the company's average tangible assets to calculate an average annual earning from the intangibles. Dividing the above value of average earnings by the company's average cost of capital or an interest rate once can provide an estimate of the value of its intangible assets or intellectual capital.

4. Balanced Scorecard Method (BSC)

The various components of intangible assets or intellectual capitals are identified and indicated. Indices are generated and reported in scorecards or graphs. Wingren (2004) has chosen to use the BSC concept because BSC contains outcome measures and the performance driver of outcomes, linked together in cause-effect relationships. There are linkages between customer, internal process and learning/growth with financial performance. The financial performance is the outcome and visible to the observers.

2.3 Intangible Assets in Balanced Scorecard

Among the above four approaches, the Balanced Scorecard is by far the most well-known, although its original intent was not meant to be the measure for intangible assets, as discussed by Marr and Adams (2004) and Mouritsen et al. (2005). The Balanced Scorecard may be used to measure all the intangible assets in Table 2.1. Bose and Thomas (2007) recently applied the Balanced Scorecard in an empirical study of the Foster Brewing Group. The formulating of a scorecard that best fits the strategic interest of the organization is considered vital. In their view, the Balanced Scorecard is never really complete because the business environment (new competitors, changing customer demand, etc.) is dynamic and constantly evolving.

As is already well-known, the Balanced Scorecard was introduced by Kaplan and Norton (1992) as a tool to link financial performance with non-financial performance dimensions: learning and growth, internal process and customer perspectives. Linkages and relationships between customers, internal process and learning/growth with financial performance are shown in Figure 2.3. The Balanced Scorecard acts as a measurement system, a strategic management system, and a communication tool. Seggie et al. (2007) made an argument for the Balanced Scorecard to be the measurement tool in marketing to measure non-financial assets and provide the organization with a long-term perspective. The Balanced Scorecard is at least partially forward-looking and partially geared toward the long-term performance of the firm. The Balanced Scorecard concept has been examined the performance measurement of bonus plan in major financial services firm. Ittner et al. (2003) recommended that the future research on Balanced Scorecard adoption and performance consequences must move to encompass the entire implementation process.


The concept of cause-effect relationship separates the Balanced Scorecard from other performance management systems. The measures appearing on the scorecard should be linked together in a series of cause-effect relationships to tell the organization's strategic story. Increasing promotional expenses will lead to the increase in brand value. Increased brand value will lead to higher sales revenue

The investment of human capital will create the continuous learning and growth in the organization. When the employees have more experience and knowledge, they can create the internal process which serves and fulfills customer satisfaction. The profit and revenue are the final outcomes of this causal chain.

Heskett et al. (1994) explained that the linkage of the above model that investment in employee training leads to improvement in service quality. Better service quality lead to higher customer satisfaction. Higher customer satisfaction leads to increased customer loyalty. Increased customer loyalty generates increased revenues and margins.

The following are five principles of successful Balanced Scorecard users (Kaplan and Norton, 2004):

1. Mobilize change through executive leadership

2. Translate the strategy into operational term

3. Align the organization to the strategy

4. Make strategy everyone's job

5. Make strategy a continual process

Intangible assets can be considered very much part of the Balanced Scorecard. Intangible assets are linked mainly to the marketing and human resources. Following is the review of intangible assets in Balanced Scorecard by Kaplan and Norton (1992) and intangible asset monitored by Sveiby (1997) are reviewed. By using the categories developed by Hall (1993), Sveiby (1997), Shaikh (2004) and Roos et al. (1997) reviewed and classified the intangible assets into a framework of internal structure, external structure, and employee competence as shown in Table 2.3.

Table 2.3 Framework of intellectual capital/ intangible assets indicators

External structure


Customers/ Customer loyalty

Company name/ Distribution channel/ Business collaborations/ Market information used to capture and retain customers

Customer satisfaction

Internal Process


Internal Structure

Intellectual property

* Patents

* Copyrights

* Trademarks

Infrastructure assets

* Management philosophy

* Corporate culture

* Management processes

* Information systems

* Networking systems

* Financial relations

Learning and Growth


Employee Competence





From the above table, the intangible assets are reviewed as follows.

1. Learning and Growth

The learning and growth is the capacity of employee to act in a wide variety of situations. Employee is the most valuable asset of the company in the highly competitive market. It is the one asset that creates uniqueness to the company and differentiates the company from the competitors. Sveiby (1997) emphasized employee capability as a key asset for organization growth. Employee satisfaction refers primarily to job and what employees perceive as offerings. Employee satisfaction is positively related to organizational commitment. There are several studies mentioned that human resource is effect to business performance. Huselid (1999) and Hand (1998) have reported the existence of a positive and significant relationship between investments in human resources and the market value of companies. Huselid and Becker (1997) found that there is a strongly positive relationship between a high performance human resource systems and firm performance. Bontis et al. (2000) found that human capital had positive effect on customer retention and loyalty regardless of industry type. Hitt et al. (2001) and Hurwitz et al. (2002) found that human capital has a positive effect on performance. Also, human capital is shown to have moderate cause-effect relationships with strategy and firm performance. Moon and Kym (2006) confirmed that human capital, structural capital and relational capital have direct impact on intellectual capital. Liu and Tsai (2007) surveyed 560 managers from major Taiwanese hi-tech companies and found that knowledge management has a positive effect on operating performance. Lin and Kuo(2007) also investigated that human resource management influences operational performance indirectly through organizational learning and knowledge management capability.

Knowledge is one of learning and growth perspective. In knowledge era, the knowledge management has been widely studies. The knowledge is lost by the organization when the employees leave the firm (Ordonez de Pablos, 2004). McKeen et al.(2006) founded that knowledge management was positive significant to overall organization performance (product leadership, customer intimacy and operational excellence) which is part of internal and customer perspectives in Balanced Scorecard. Organization performance was significant to financial performance. There was no significant direct relationship between knowledge management and financial performance. The knowledge sharing is a key issue in order to enhance the innovation capability that is one of internal process (Saenz et al., 2009). There is also the linkage of learning and growth and internal process. Forcadell and Guadamillas (2002) studies a firm used knowledge management to develop a process of continuous innovation which is in the internal business process perspective.

2. Internal Process

The internal process includes patents, concepts, models, information technology systems, administrative systems and organizational culture (Aaker, 1991). Such leading companies as GE, Sony, IBM, or Ford used to cover a wide variety of products, but after finding that they could not sustain all product lines, they switched to selective products, while improving the intangible factors, quality and innovation. Deng et al. (1999) suggested that patent attributes are statistically associated with stock return and market to book ratio. Research and Development is one of intangible assets which is the most importance performance. Chu et al. (2008) founded that the valuation of assets and long-term focused in operation of US IC's firms are higher than the firms in Taiwan.

3. External Structure

The external structure includes relationship with customers and suppliers. The Balanced Scorecard is concerned only customer value proposition, but the external structure covers supplier. The external structure also encompasses brand-names, customer loyalty, customer satisfaction and the company's reputation or goodwill.

In the brand valuation terminology, brand is a large bundle of trademarks and associated intellectual property rights. Cravens and Guilding (1999) reported that brand valuation is one of the most effective means for business to bring accounting and marketing closer for the purpose of strategic brand management and effective means of communication between marketing and accounting. A branded business valuation is based on a discounted cash flow analysis of future earnings for that business discounted at the appropriate cost of capital. The value of the brand business is made up of a number of tangible and intangible assets. There are 2 brand evaluation models 1) research-based approaches measure consumer behavior and attitudes that have an impact on the economic performance of brands. No financial value on brands is in this model 2) purely financially driven approaches. Market-based approaches are one of the financially driven approaches. It is based on fundamental marketing and financial principles. The marketing principle is related to commercial function that brands perform within businesses. The financial principle is related to the net present value of future expected earnings.

Barth and Clinch (1998) and Seethamraju (2003) reported that brands have significant correlations with the firm's market values. Not only is brand the key intangible assets in external structure elements, but also are customer satisfaction and customer loyalty. Customers are the valuable and key success assets in business. Doyle (2000) offered nine steps of the growth ladder to generating sales growth. Trust and loyalty of existing target customers are key success factors. The businesses have to maximize returns to shareholders by developing and implementing strategies to build relationships of trust with high-value customers and to create a sustainable advantage. Yeung et al. (2002) and Ittner and Larcker (2000) found a positive relationship between measures of customer satisfaction and financial performance. Moreover, customer satisfaction has a significant relationship with positive stock return. Nagar and Rajan (2005) pointed out that today intangibles, such as customer relationships, account for more than half of total assets of the firms in the United States. Cheng et al. (2008) urged that customer capital means the establishment, maintenance and development of corporate external relationship with customers, suppliers and strategic partners. Edvinsson and Malone (1997) pointed out that the value of customer capital lies in the maintenance of customer relationship.

Whereas all organizations attempt to develop their people, technology, and culture, they do not always align these intangible assets with their strategies. The Balanced Scorecard strategy map enables executives to pinpoint the specific human, information, and organization capital required by the strategy (see Figure 2.4). The cause-effect relationships between intangible assets (learning and growth, internal process, customer perspective) and financial performance are shown in the Balanced Scorecard strategy map. Each intangible assets element in the strategy map contains intangible assets sub-elements. When the strategies in each sub-element are identified, they are linked to intangible assets elements and eventually to financial performance.

of Balanced Scorecard, (Kaplan & Norton, 2004)

There are interrelationship linkages among of learning and growth, internal process, customer and financial performance. Olve et al. (1999) reported that Halifax applied the Balanced Scorecard in business and found the relationship that if we have the right staff, we will get doing the right thing and customers will be delighted. When the customers are delighted, we will in turn get more business. There are many functions involved in aligning the intangible assets with strategies. Each function has to build its own intangible assets in order to deliver and convert them to financial performance. Chareonsuk and Chansa-ngavej (2006) found that most of the companies in the Stock-Exchange of Thailand have functional organization structure. The intangible assets are linked to performance. Cheng et al. (2008) verified the accounting rationality of intangible assets classification from the management perspective (customer capital, human capital, process capital, innovation capital and contract capital) using the Tobit censoring method to analyze the composition of related intangible assets. The study provides some references for the control of intangible assets so managers can realize what kind of intangible assets to manage and decide how to do so and add value to the intangible assets.

The Balanced Scorecard has been widely used in formulating business strategy. Green and Ryan (2005) proposed the framework of intangible valuation areas for facilitating the systematic and repeatable identification of intangible assets Balanced Scorecard. It is designed to align the value drivers of intangible assets with its business strategy. Understanding the value of its intangible assets helps a business to develop, sustain and enhance its mission effectiveness and competitive advantage. Canibano et al. (2000) reviewed the importance and evidence value of intangible assets on business performance. Empirical studies of R&D, advertising, patents, brand, trademark, customer satisfaction, human resources were reviewed. Moreover, Green and Ryan (2005) presented the framework of intangible valuation areas (FIVA), which is a framework for facilitating the systematic and repeatable identification of intangible assets. FIVA provides a view of intangible assets within business enterprise. FIVA links all intangible assets driver to business performance and subsequently captures measures to monitor and evaluate performance. The FIVA is constructed based on the analytic hierarchy process (AHP) model to facilitate a ranking of value components in relative order of importance based on defined strategic knowledge management objectives. Intrapairot and Srivihok (2004) studies measurement of the intellectual capital in 10 small and medium size enterprises in Thailand by using multiple criteria decision-making (MCDM).

Chareonsuk and Chansa-ngavej (2008) proposed the framework for intangible assets management in business and industrial organization. The framework refines the strategy map concept in the Balanced Scorecard approach for use in intangible assets management. Intangible assets belong to different functional departments. They must be carefully monitored and properly nurtured by the organization. Intangible assets depend not only on the type of functional departments but also the type of industries.

The comparison between major aspects of Balanced Scorecard and intellectual capital are illustrated in Table 2.4 (based on Mouritsen et al., 2005).

Table 2.4 Conceptual comparison between Balanced Scorecard and intellectual capital


Balanced Scorecard

Intellectual Capital

Idea of strategy

Positioning theory

Competency-based strategy

The strategic process

1. Management sets financial targets and market segments to be aimed at

2. Targets are reached through customers

3. Customer satisfaction is achieved through the right generic value chain model

4. To maintain the right value chain model in the future, objectives for learning and growth are set up

1. Management determines the metaphoric narrative of the firm's identity and ambition

2. Desired characteristics, capabilities, competencies and relationships are determined

3. Goal and action plans are set up to reach

Strategic aim

The story of future profitability and market position

The narrative of desired future identity

Balanced scorecard focuses on describing the firm as value chain to increase the competitive strategy which closes the gap between a customer's want and firm's products, while intellectual capital delivers a certain value to the user. Balanced scorecard can comprise all activities needed to implement the strategy.

2.4 Types of Data for Analyzing and Investigating Intangible Assets

Two main types of primary data for analyzing and investigating the intangible assets issues could be obtained, as shown in Table 2.5.

Table 2.5 Type of intangible assets primary data




Financial and accounting quantitative data

(monetary values)

Ready-made financial data

Data on intangible assets are not readily available

Difficult to obtain the financial data in some countries

Subjective opinion survey questionnaire

(non-monetary values)

All kinds of subjective opinion data could be widely covered and obtained according to the research needs in all industries in any conditions, without restrictions

The results are often susceptible to the questions' design and the respondent's attitude (Cheng et al., 2008)

Table 2.6 summarized the methodology and finding results of previous empirical studies during the last decade. Most of the previous empirical studies use the subjective opinion survey questionnaire to find the cause-effect relationship while there are only two previous studies, namely Chin et al. (2005) and Cheng et al. (2008), that gather the available financial data.

Bontis et al. (2000) applied the subjective opinion survey questionnaire and used Likert-type scale. They surveyed 107 respondents in both service and non-service sectors in Malaysia for finding the cause-effect relationship between intellectual capital and business performance. They found that the intangible assets elements have positive effect on business performance. Moon and Kym (2006) confirmed the causal linkage of interrelationship of intangible assets proposed by Bontis et al. (2000). The Likert-type scale is used throughout the opinion survey questionnaire.

Table 2.6 Previous empirical studies



Empirical Finding/ Result

Bontis et al.,


Questionnaire survey with 107 respondents both service and non-service industries. Analyzed by structural equation modeling technique, Partial Least Squares (PLS).

Intellectual capital has a significant and substantive relationship with business performance regardless of industry sector.

Carmeli and Tishler,


Questionnaire survey with 99 respondents of general management of local authority in Israel. Use multivariate analysis approach, robust canonical analysis (RCA)

Intangible organization elements (managerial capabilities, human capital, perceived organizational reputation, internal auditing, labor relations and organizational culture) have a significant positive effect on the performance of the organization.

Nagar and Rajan,


Marketing and customer satisfaction survey 87 retail banks. Analyzed by linear regression.

Customer relationship activities link to business performance.

Chin et al.,


Gather financial data of 1,386 samples companies listed. Trademark value estimation by Seethamraju (2003).

Trademark/Brand is positively associated with firm's performance.

Wang and Chang, 2005

Gather data from 131 IT firm in Taiwan and analyzed the model by partial least square (PLS) method

Human capital has no direct effect on performance.

Innovation, process and customer capital have direct effect on performance.

Human capital directly affects innovation and process capital.

Innovation and process capital further influence performance.

Chen et al.,


Gather data from 4,254 registered companies and analyzed the hypotheses by statistic testing

Intellectual capital has a positive impact on financial performance.

Cabrita and Vaz,


53 banks (253 samples) in Portuguese banking were tested using PLS testing model

Intellectual capital has a significantly related to the organizational performance.

Moon and Kym,


200 questionnaires analyzed and using SEM for model testing

Human capital has a positive effect on relational capital and that both human and relational capital affect structural capital.

McKeen et al.,


Questionnaire survey with 90 respondents in US, and analyzed the hypotheses by PLS method

Knowledge management has direct relation to organizational performance.

Organizational performance has direct relation to financial performance.

No direct relation between knowledge management and financial performance.

Liu and Tsai,


Questionnaire survey with 560 managers from Hi-Tech companies in Taiwan. Student's t-test and ANOVA are used.

Knowledge management has a positive effect on business performance.

Cheng et al.,


Directly obtain financial data of 56 companies and analyzed 23 indicators by Tobit's model

Innovation, customer, human and contract capital have some impact on intangible assets.

The primary data can be gathered from not only subjective opinion survey questionnaire, but also financial data. Chin et al. (2005) gathered the data from 1,386 companies in Taiwan and analyzed the relationship between intangible assets and business performance by using Seethamraju model. Data are available and accessed from Taiwan Economic Journal Data Bank and Trademark database of Taiwan. Chen et al. (2008) collected primary data annual report with proxy statement of US S&P500 companies.

It is often difficult to obtain data of intangible assets in financial reports that exhibit positive relationship between intangible assets and business performance. Vergauwen et al. (2007) reported that there is a strong significant positive relationship between the level of structural capital possession of a firm and the firm's intellectual capital disclosure.

2.5 Measuring Intangible Assets Using Balanced Scorecard Strategy Map Model

Section 2.2 reviewed the measurement of intangible assets. Balanced Scorecard model is the practical approach to measure intangible assets. The Balanced Scorecard has no estimation of intangible assets in financial value. The Balanced Scorecard is not a useful tool for evaluating the market value of the company. However, it is useful for internal development for companies. The Balanced Scorecard is defined intangible assets indicators in three perspectives: 1) learning and growth 2) internal process and 3) customer. These three intangible perspectives are linked together in cause-effect relationship with business performance that is tangible. The primary data of intangible assets are gathered by subjective opinion survey questionnaires to find the cause-effect relationship between intangible assets elements and business performance. Previous empirical studies such as Bontis et al. (2000), Carmeli and Tishler (2005), Wang and Chang (2005), and Chen et al. (2005) intended to find not only the cause-effect relationship between intangible assets elements and business performance, but also interrelationship among of intangible assets element. Table 2.3 classified the sub-intangible assets element in each intangible assets perspective. Nagar and Rajar (2005), Chin et al. (2005), Moon and Kym (2006), Liu and Tsai (2007), Cheng et al. (2008) studies the cause-effect relationship between sub-intangible assets element i.e. brand, customer relationship, knowledge etc. and business performance.

This study applies the Balanced Scorecard strategy map because of 1) each intangible assets element contains sub-elements of intangible assets. 2) the interrelationship among intangible assets elements 3) the cause-effect relationship between intangible assets and business performance/tangibles.

2.6 Summary

Intangible assets are currently widely studies and researched in knowledge management era. Balanced scorecard is one practical method to explain the component of intangible assets in firms and cause-effect relationships between intangible assets and business performance. The intangible assets in Balanced Scorecard can be classified in three elements which are learning and growth, internal process and customer which are close to the concept of the intangible assets monitor accept the component of external structure. The external structure is covered not only customer but also external partners while only customer prospective is shown in Balanced Scorecard. There is interrelationship between the intangible assets elements in Balanced Scorecard strategy map. In this study, the intangible assets elements are learning and growth, internal process and external structure. There are some research studies listed in Table 2.6 establishing cause-effect relationships among intangible assets or intellectual capital and performance. However, they are partial studies, involving some elements of the intangible assets. The literature review points out the need for a more comprehensive study exploring the interrelationship between the intangible assets element and business performance. The review does leads naturally to the set of research hypotheses in Figure 1.2.

Research Design and Methodology of Study

This chapter explained the research design and methodology employed for testing the research model and hypotheses. The research design covers questionnaire design, data collection method, study construct and analytical procedures for assessing the reliability and validity of the measurement. Lastly, the hypotheses testing and model fit are explained.

3.1 Research Design

Selecting an adequate research design is important to strengthen the empirical research quality. There are three types of research designs referring to exploratory, descriptive and causal (Chisnall, 2001; Churchill, 1995; Zikmund, 2000). The summary is in Table 3.1.

Table 3.1 Type of research characteristic

Type of research



To investigate and identify the real nature of research problems by finding out what is happening, seeking new insights and ideas, asking questions and assessing phenomena in a new light. It is useful when a research problem is ambiguous or limited knowledge. Ability to observe, gathering information and construct explanation are required skill.


Some previous understanding about the topic under investigation whereas problem is structured and well understood. It aims to describe characteristic of a specific group. Accuracy is most important.


To examine the cause-and-effect relationships between variables by finding out, which variables are causes and which variables are effects of a phenomenon. It is concerned with learning why (how one variable produce change in another) while descriptive research attempts to find out who, what, where, when or how much.

The casual research is most appropriate for this study because the objectives of the study are highly structured, research problem is well understood, and there are sufficient previous empirical studies to support the formulation of hypotheses testing. Chapter 2 reviewed the concept of Balanced Scorecard strategy map as the practical method for finding the cause-effect relationships between intangible assets and business performance. The intangible assets primary data are gathered from a subjective opinion survey questionnaire. There are several previous empirical studies listed in Table 2.6 using the opinion survey questionnaire to find the cause-effect relationship between intangible assets elements and financial performance or business performance.

3.2 Data Collection Methods

Good planning of the data collection process leads to quality data and in turn delivers quality research. There are three traditional types of communication data sources: personal interview, telephone interviews and mail survey (questionnaire) (Churchill, 1995). The advantages and disadvantages are summarized in Table 3.2.

Table 3.2 Advantage and disadvantage of data collection method (Zikmund, 2000)


Personal Interviews




Mail Surveys (Questionnaires)

Speed of data collection


Very fast

Slow; researcher has no control over return of questionnaire

Geographic flexibility

Limited to moderate



Respondent cooperation



Moderate; poorly designed questionnaire will have low response rate

Versatility of questioning

Quite versatile


Not versatile; requires highly standardized format

Questionnaire length



Varies depending on incentive

Item non-response rate




Possibility for respondent misunderstanding



High; no interviewer present for clarification

Degree of interviewer influence on answers



None, interviewer absent

Supervision of interviewers


High, especially with central location WATS interviewing

Not applicable

Anonymity of respondent




Ease of call back

or follow-up



Easy, but takes time



Low to moderate


Special features

Visual materials may be shown or demonstrated; extended probing possible

Simplified fieldwork and supervision of data collection; quite adaptable to computer technology

Respondent may answer questions at own convenience; has time to reflect on answers

The questionnaire is most appropriate for gathering the information due to its advantages in terms of cost-effectiveness, low level of administration requirement, allowance for top management respondent to complete upon their convenience, obtaining large amount of information from a large sample and elimination of potential bias as no affluent from the interviewer. For this reasons, the questionnaire survey is widely used in academic and commercial researches.

3.3 Questionnaire Development

Questionnaire is the primary source of data for this study. An appropriate design of the questionnaire is crucial to ensure the success of the study and the achievement of the research objectives (Churchill, 1995; Malhotra, 2004). Questionnaire design has attracted noteworthy attention in general business literature. In the marketing field, Churchill (1995) provides a clear and concise step-by-step procedure to assist researchers in developing and constructing the questionnaire as illustrated in Figure 3.1.

Step 1 Specify what information will be sought

The purpose of this study is to identify the interrelationship of three elements of intangible assets which are learning and growth, internal business process and external structure that can facilitate the achievement of business performance. The required information is linked to those elements. The descriptive research is appropriate type of research selected.

Step 2 Determine type of questionnaire and method of administration

The questionnaire of intangible assets is constructed and distributed to the top management of company. It has to have clear objectives and reliable questions.

Step 3 Determine content of individual question

Kaplan and Norton (1992) illustrated the Balanced Scorecard model which has the internal linkage of learning and growth, internal process and customer to financial performance. In 2004, Kaplan and Norton proposed the strategic map for converting intangible assets to tangible outcomes which is widely used in the business strategies crafting. As mentioned in Chapter 2, there are several studies that reviewed and classified the intangible assets into a framework of learning and growth, internal process and external structure.. In this study, the intangible assets in each element have been explained in Table 1.1.

The designs of the questionnaire in the present study follows the three elements of intangible assets namely, learning and growth, internal process and external structure. The other important group of questions that must be mentioned is business performance.

The number of questions in each of the intangible assets elements is shown in Table 3.3. Simplicity and friendliness to the respondent are the design concept of this questionnaire.

Table 3.3 Number of questions in each element of the questionnaire

Questionnaire elements


Related survey questions

Learning and Growth









Internal Process

Process Improvement




Information Technology


External Structure

Customer Satisfaction


Customer Loyalty




Business Performance

Financial Performance


Sales Performance


Customer Fulfillment


Step 4 Determine the from of response to each question

The intangible assets indicators of each intangible assets element in questionnaire are adopted from the literature on the measures of intangible assets to business performance which are reviewed in Chapter 2. The questions in each intangible assets elements are mainly constructed from Bontis (2000), Roos et al. (1997), Olve et al. (1999) and Hinshaw (2005). Each question is classified and gathered in the same group of intangible assets which are learning and growth, internal process and external structure. A five-point Likert-type scale is used through out the questionnaires, ranging from (1)”low/disagree” to (5)”high/strongly agree”. The five-point Likert-type scale has been used by McKeen et al. (2006) and Moon and Kym (2006) for gathering the primary data before analyzing the cause-effect relationship of intangible assets.

Step 5 Determine the wording of each question

Clear and simple words were used to ensure that questions could be easily friendly and understood by the top management. Top management has to spend few minute to complete questions without any unclear message. Questionnaire is developed in both English and Thai, as exhibited in the Appendix C.

Step 6 Determine sequence of question

The simple, general and interesting questions were placed at the beginning to attract and stimulate participants' interests. Thus, the sequence of questionnaire is learning and growth, internal process, external structure. The business performance question is a difficulty and sensitive. They are placed at the end of the questionnaire. The business information, i.e. established year, type of business and respondent's information are placed at the last pages. Moreover, the confident level of respondent in the question is also shown at the last page.

Step 7 Determine physical characteristics of questionnaire

The total length of questionnaire is ten pages. It is organized in two-sided pages to make it compact and practical for this distribution. The front cover consisted of a clear title and objective of this research. The length of the topics covering learning and growth, internal process, external structure, business performance and general information is two pages each.

Step 8 Re-examine step 1-7 and revise if necessary

The draft version of the questionnaires was distributed to two knowledgeable researchers and two practitioners with long experience in the industry. A number of modifications were made according to their suggestions.

Step 9 Pre-test questionnaire and revise if necessary

The pre-survey questionnaire has been given to the top management of twenty companies in different type of business and size of business. There were only a few changes in wordings and sequence of questions. As a result of these valuable suggestions, the questionnaire was modified and improved to ensure that the introduction, sequence, wording in questionnaire are appropriate and ready for mass distribution to the industry.

3.4 Data Collection

The mail survey/questionnaire is appropriate and applicable for this study. The registered companies at the Ministry of Commerce in Thailand were 562,386 companies (from http://knowledgebase.dbd.go.th/dbd/bra/brasummaries.aspx as of January 31, 2009) and 873 registered companies in Thai stock market (Stock Exchange of Thailand, SET, and Market Alternative Investment, MAI). They are two widely recognizes trade associations in Thailand, the Federation of Thai Industries and Thai Chamber of Commerce. The Federation of Thai Industries covers only manufacturing industry, not service sectors. Thus, the Thai Chamber of Commerce is targeted as a channel for distributing the mail survey questionnaires. The members of the Thai Chamber of Commerce are in various business sectors and of business sizes. It has 3,084 member companies. Several of the public-listed companies in Thai stock market are also members of the Thai Chamber of Commerce. The members of the Thai Chamber of Commerce are known to have reliable financial and general information.

To gain access to members of Thai Chamber of Commerce, an introductory letter from the Thai Chamber of Commerce is considered necessary. A letter introducing the research project and signed by a director of the Thai Chamber of Commerce was therefore attached to the cover page of the questionnaire. The questionnaires were distributed to all the members of Thai Chamber of commerce regardless of business sizes, business sectors and establishment age. About a week later, a series of follow up telephone calls were made to check the status of questionnaire responses. There were 26 return-mails because of wrong address information. The correct addresses were sourced by telephone and questionnaires resent. After the repeated follow up attempts, 361 completed questionnaires were received.

It is very important to ensure the

To export a reference to this article please select a referencing stye below:

Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.

Request Removal

If you are the original writer of this dissertation and no longer wish to have the dissertation published on the UK Essays website then please click on the link below to request removal:

More from UK Essays

Get help with your dissertation
Find out more