Measuring Return on Investment of Intellectual Capital – ROIC

S. Wesley Changchien and Pi-Yu Tsai

International Journal of Learning and Intellectual Capital, 2005, vol. 2, issue 3, 219-245

Abstract: In spite of the significance of research on measurement of Intellectual Capital (IC) for contemporary business management, a predicament prevents the advance of research on IC measurement and management, mainly stemming from the expectation of traditional accounting practices and financial reports. Instead of pursuing methods for direct valuation of IC, this research develops an IC measurement method, Return on investment of IC (ROIC) which views IC measurement as a mechanism to bring disclosure of value and provides IC measurement statement as a managerial technology. By combining the advantages of ROA (Return on Assets) and SC (Scorecard) methods, the method measures the return on investment of IC from product/service, process and IC perspectives. In the empirical case study at an ERP software company, a survey was first conducted to identify the important IC indicators for software industry, and the ROIC method along with the found important IC indicators were applied to investigate the ROIC of three projects. The managerial implications in the context of executive management were then drawn from the measurements and discussed.

Keywords: intellectual capital measurement; return on investment; ROI; knowledge value added; scorecard methods; return on assets; software industry; intellectual capital indicators; executive management; value creation; enterprise resource planning; ERP; Taiwan. (search for similar items in EconPapers)
Date: 2005
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