Impact of Knowledge Capital on Performance of Firms: A Case of Firms in Finland
Keywords:Knowledge capital; individual capital; organisational capital; measuring knowledge capital, financial statement
Knowledge capital has become a major factor in a firm’s success. Depending on the owner knowledge capital can be divided into individual and organisational capital. The former is an individual’s knowledge which is comparable to liabilities in the balance sheet. The latter is connected to a firm’s structure and resources, and is comparable to equities in the balance sheet. Measuring knowledge capital is challenging, as it is often necessary to study private information from within a firm. This article approaches knowledge capital from a different perspective by studying public information in order to measure the financial value added by knowledge capital observed from a firm’s financial statement. This information was used to explain the financial performance of a firm.
The results of the study indicate a statistically significant effect between the change in individual capital and economic performance as well as between organisational capital and economic performance. The immediate effect of individual capital on economic performance as well as the change in organisational capital was found to be statistically insignificant. The results imply that a firm looking for short-term growth should invest in organisational capital whereas a firm looking for long-term growth should invest in individual capital.