Intellectual Capital and Organizations Performance in Financial Industry in Malaysia

As the economy has transformed globally into knowledge economy, many organizations have now changed their dependence on production asset to knowledge asset, which is also known as the intellectual capital.Effective utilization of these intangible resources is the driver for better performance for the organizations hence the issue of measurement is critical.Current measurement tend to focus more on the measurement of intellectual capital from the perspectives of 'traditional accounting' model which measure the past value creation rather than the utilization of the intellectual capital.This situation has inspired more empirical works in developing a more robust measurement of intellectual capital.This study measures the utilization of intellectual capital in the organizations using both the published financial data as well as the survey distributed to the senior management team.The sample size selection is the organizations within the Malaysian financial industry that comprises four major groups which are the insurance, banking and finance, capital market and development financial institutions.The objectives for the study is twofold; to examine the relationship between the components that make up intellectual capital and performance of the organizations and secondly to measure those components using the Value Added Intellectual Capital (VAIC) method and a new method of Utilized Intellectual Capital (UIC).The findings show that UIC measurement is more robust compared to VAIC.Both structural capital and transactional leadership components are significant towards the organizations' performance and culture was found to act as a mediator in the model.