Investigating intellectual capital: The role of intellectual property rights reform in Vietnam

Abstract

In the era of knowledge - knowledge dominates value creation and capture, firms have taken intellectual capital as the most powerful competitive weapon. Accordingly, intellectual capital has been managed in attempts of maximizing firm value through comprehensive frameworks like Balance Scorecard, Skandia Navigator, or Dow Intellectual Asset Management Model. Moreover, there has been a growing number of empirical studies investigating the contribution of intellectual capital to firm value. These studies have been conducted on a wide range of industries across nations and virtually showed a significantly positive relationship. However, the extent to which the intellectual capital is protected against piracy is expected to account for variation in strength of the relationship. As a result, this study aims at determining the association between intellectual capital and firm value as well as the importance of intellectual property rights reform to that relation. The study collects data on non-financial firms listed on the Stock Exchange of Vietnam in the period from 2011 to 2019 and uses Fixed Effect Model and Random Effect Model for estimation. Intellectual capital is expected to have positive impact on the firm value. Moreover, intellectual property rights reform significantly differentiates the impact of intellectual capital on firm value. The findings suggest that intellectual capital – the main source of sustained competitive advantage – boost the firm value in an era of hyper-competition. More importantly, the role of reform in intellectual property rights in strengthening the relation between intellectual capital and firm value should be acknowledged by firms and governments. On the one hand, firms with high proportion of intellectual capital should select destinations where enforcement of intellectual property rights is well-implemented to protect them from intellectual property piracy and sustain their competitive advantage. On the other hand, local authorities should protect and enhance the enforcement of intellectual property rights on the purpose of improving business environment.