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FEDERAL STATE EDUCATIONAL INSTITUTION

OF HIGHER EDUCATION

NATIONAL RESEARCH UNIVERSITY

HIGHER SCHOOL OF ECONOMICS

Saint Petersburg School of Economics and Management

Department of Management

Educational programme `Management'

Bachelor's thesis

The Impact of Intellectual Capital on Organizational Performance

Metsoyan Margarita Tigranovna, Ragulina Maria Yurevna

Saint Petersburg 2020

Table of contents

Abstract

Introduction

1. Intellectual capital

2. Structure of intellectual capital

3. The relationship between intellectual capital and organizational performance

4. Human Capital

5. Relational capital

6. Structural capital

7. Research question statement

8. Data collection

9. Methods of analysis

Results

Conclusion

References

Appendix



Abstract

In the modern world intellectual capital brings the competitive advantage and success to the companies. In fact, intellectual capital is the focus of many researchers. The research paper is based on the studying of intellectual capital influence on organizational performance. The goal of the research is to define what indicators of intellectual capital influence the organizational performance among Russian companies and what is the extent of this influence. The analysis of the research is conducted on the basis of 70 Russian companies from 5 industries: oil and gas, telecommunication, transport and logistics, information technologies and retail. Multiple regression models and Pearson correlation were constructed with several dependent and independent variables. Five hypotheses containing three main components of intellectual capital are confirmed. The findings will be useful for managers to evaluate intellectual capital in the company.

Keywords: intellectual capital, human capital, relational capital, structural capital, organizational performance, Tobin's Q Ratio, components of intellectual capital.



Introduction

For two decades, intellectual capital has been the focus of researchers around the world. In the modern world, the traditional understanding of investment has changed: now companies are increasingly focusing not creating up tangible assets, but on investing and developing in intangible assets and creating a base for the company's intellectual capital. In other words, effective use of intellectual capital has become a key factor that determines business success (Survilait et al, 2015). The global value of intangible assets continues to increase rapidly from $ 19.8 trillion in 2001 to $ 47.6 trillion in 2017, according to the the Global Intangible Finance Tracker 2017 study.

In the modern economy, assets based on knowledge, information technologies and developments become the most important factor for becoming competitive on the modern market. Success and competitiveness in the long term, companies that are constantly innovating achieve this goal using new knowledge and technologies, experience and skills of their employees, provided with the necessary organizational infrastructure. Intangible assets increasingly generate the value created by companies. (Edwinsson, Malone, 1997), which are understood as knowledge, have innovation potential, licensing agreements, organizational culture, and others company development resources. The ability of an enterprise to control these types of assets is crucial to its future perspectives in the knowledge economy.

In the beginning of XXI century, world economic system entered to the new development stage. The most important feature of this new phase is modification of factors' roles which are involved in the production process, especially domination of intellectual and technological factors (El-Bannany, 2008).

Speed, intension and depth of products, services and information flows lead to increasing correlation between economic systems. As the result, there is a growth of competition between inside producers and foreign ones. Therefore, quantitative development is changed by qualitative growth. The transition to this new phase of economic development determines the crucial destination for investments flows (Boujelbene & Affes, 2013). Nowadays, in developed countries the fundamental area of financial investments is intellectual capital. The progression of each type of capital creates the specific structure of intellectual capital. According to this reason, the definition of intellectual capital is formed differently in Russia and in foreign countries. However, there are several general components of intellectual capital, which should be mentioned: intangible assets; intellectual property, which basically include patents, licenses, trademarks, know how, copyright; human resources, which can be determined as the base of knowledge and skills of employees, their creative and innovative abilities, leadership; structural resources, such as technologies and innovations, research and development processes (Huang & Hshueh, 2007)..

To evaluate this historical progress of intangible assets development, Aon and the Ponemon Institute analyzed the comparative value of intangible and tangible assets since 1975 till 2018 on the S&P 500. S&P 500 consists of the 500 largest traded corporations in USA., which have the highest capitalization. It can be seen from the graph that intangible assets have grown rapidly for 43 years and have transformed from supporting assets to major influencing factor for stakeholders, especially for investors. Overall, intangible assets create approximately 84 % of company's value in 2018 in comparison with 16% in 1975. In addition, the grow of intangible assets intensifies and accelerates over the time. (Figure 1)



Figure 1

Figure 1. Tangible Assets vs. Intangible Assets for S&P 500 companies, 1975 - 2018*

*Based on source: Jenna Ross (2020). Intangible Assets: A Hidden but Crucial Driver of Company Value. Visual Capitalist, February

Taking a deeper look on S&P 500, it is important to discuss what are the companies which are located in the top of this rating. The top five companies in 2019 are: Microsoft (share of intangible assets - 90%), Amazon (share of intangible assets - 93%), Apple (share of intangible assets - 77%), Alphabet (share of intangible assets - 65%), Facebook (share of intangible assets - 79%).

Moreover, the researchers highlight the main differences between tangible and intangible assets. First of all, it is significant to mention that tangible assets are easy to value, while methods of evaluating intangible assets are not generally accepted. Secondly, material and financial assets are insurable, however intellectual resources are difficult to indemnify, as they have unique valuable structure and characteristics inside the company. Intangible assets also provide investors with long-term perspectives of the company, show the valuable information about future development of the particular business, determining its competitive advantages based on intellectual resources (Hosseini & Owlia, 2016).

The rational management and use of intellectual capital can directly influence the market capitalization of the company. It can be the significant factor for all participants of economic processes, as the business value is the crucial indicator of its effectiveness. Basically, the most important function intellectual capital is the ability to create and control financial, organizational and technological advantages of the company. It is important to highlight that formation of these competitive advantages inside the company allows to create additional value and, as the result, increase market capitalization. Productive implication of intellectual capital leads to increasing of business effectiveness and performs as the significant factor of maximizing the return on invested capital, therefore increases the company's value (Ordусez de Pablos, 2003).

The increase of company's value can be formed based on several financial and economic processes. First of all, the increase of intellectual capital value, as the part of the company, leads to growth of the business value. For each component of intellectual capital the factors, which increases the value of intellectual capital of the company, can be determined. Secondly, the intellectual capital can be a source of added value. In this case, intellectual capital can directly impact on the organizational performance, particularly company's value. Its impact is based on the added value creating and getting competitive advantages due to implementation intellectual capital products into business operational processes.

Reflecting the growing interest of firms in the use of intellectual capital to improve the competitiveness and efficiency of the company, the number of scientific publications on this topic is also growing, revealing all new aspects of the problem. Despite the increased scientific interest in this area, the share of serious research on Intellectual capital published by Russian authors is quite small. In addition, Russian scientists often work with data from foreign markets.

At the same time, Russian companies are actively increasing their Intangible assets, paying attention to the introduction of new employee training practices and conducting research, which is the process of investing in intellectual capital. Moreover, Russia is on the 32th place according to Global Intellectual Capital Ranking among 180 countries. Hence, the intellectual capital development is on a good world level. This means that research in this area will be potentially in demand and can be useful both for future researchers and managers who determine the investment policy of companies. It can be seen from the Figure 2 that investments in the intellectual capital in Russia is increasing from year to year. From 2012 year to 2018 year the investment in intangible assets increased by 41% in Russia according to Federal State Statistic Service. This means that Russian companies find out that investment in intellectual capital brings value.

Figure 2

Figure 2 Investments in intangible assets in Russia*

*Based on source: Investments in intangible assets in Russia Federation. Federal State Statistic Service

On today's market, in Russia car manufactures, telecommunications and trade are the sectors where intangible assets are most often valued and reported in financial statements, these sectors are developing quickly, due to innovations and technological development gains value such companies on the market. The proportion of recorded intangible assets (including goodwill) in their total volume in these industries is 56.4%, 46.9% and 44.8%, respectively. The most frequently mentioned assets in industry reports include licenses and customer relationships. The cost of brands and trademarks was also mentioned in most cases of selling telecommunications companies.

It is important to mention, that interest of scholars and researchers is also growing. According to the Scopus the number of publications on the theme of intellectual capital is nearly 700 per year. The Intellectual capital become popular among scientific researchers from the beginning of XXI century, when the number of researches regarding intellectual capital was nearly 30 per year. Hence, the interest is increased sharply in recent years. However, the share of publications of Russian authors is quite small in comparison with foreign ones. The share of publications regarding intellectual capital by Russian authors is 1.53% in the world. Intellectual capital and its influence on the company are in general analysed from the theoretical point of view in the majority of Russian studies. In addition, the models of evaluating intellectual capital, using different tools and approaches (El-Bannany, 2008).

After analysing the Russian and foreign studies it can be highlighted that there is the relatively small share of the Russian Intellectual capital works, on contrary with the growing investment interest in knowledge management and generating competitive advantages through intangible assets, make the chosen field of scientific interest promising for study. It was found that there are few works in Russia about intellectual capital components and its indicators that can influence the organizational performance.

Therefore, the research question of the study is: What is the impact of intellectual capital on the organizational performance? The goal is to define what indicators of intellectual capital influence the organizational performance among Russian companies and what is the extent of this influence.

Following hypothesis are proposed in order to answer the research question:

H1: There is statistically significant positive relationship between intellectual capital components and organizational performance.

H2: There is a positive and significant influence between human capital indicators and organizational performance.

H3: There is a positive and significant influence between relational capital indicators and organizational performance.

H4: There is a positive and significant influence between structural capital indicators and organizational performance.

H5: Intellectual capital indicators have a positive and significant impact on organizational performance.

The research is considered to be explanatory, quantitative with the usage of cross-sectional time frame due to the fact that data is collected once for the one period of time. Data is obtained based on secondary data analysis of 70 Russian companies from 5 industries. In fact, data regarding intellectual capital is partly published in financial statements. However, these financial indicators, which mainly includes information about intangible assets, do not indicate the full view of intellectual capital in the company. Therefore, it is necessary to collect and use the unique indicators that allow to evaluate the development of intellectual capital of the company and should be measured separately. The level of the study is national because the analysis is conducted among Russian companies. The industry, which tis covered in this research, is business and finance.

Moreover, to answer the research question, several objectives are defined:

· to analyse the previous studies about intellectual capital components and their impact on the performance of organization

· to determine relevant proxy indicators for each component of intellectual capital

· to find the optimal indicator to measure organizational performance

· to collect the actual data based on 70 Russian companies from 5 industries

· to find the relationship between indicators and the level impact of intellectual capital indicators on organizational performance, construct the optimal model

· analyse the results, confirm or reject the hypotheses

· to emphasize the managerial implication and discuss the directions for future research

Anticipated results and possible limitations.

The optimal model of intellectual capital indicators impact on Tobin's Q will be constructed. To get the relevant results, control variables - company's size and industry - will be added to the model. It is expected that all components of intellectual capital will have the significant and positive influence on organizational performance. Therefore, we expect that all hypotheses will be confirmed. Furthermore, the relationship between intellectual capital indicators and Tobin's Q is expected to be positive and significant, based on previous studies. Finally, based on the analysis results, the indicators of intellectual capital, which have statistically significant and positive influence on intellectual capital will be determined. (Hejazi, Ghanbari & Alipour, 2016). The results can be used by companies' management in order to use this model for evaluating the impact of intellectual capital indicators on organizational performance. In addition, after applying this model, companies can identify what indicators have the most significant impact on the organizational performance, especially increase the market capitalization and bring the competitive advantage on the market. As the result, it will be clear which components of intellectual capital should be invested and developed.

It is important to highlight possible limitations. The main limitation of the study is the data availability, which means that companies with open data, included financial statements and annual reports, will be analyzed. It is necessary to mention that qualitative open data with all financial reports, detailed annual reports with the information about technologies, employees' development, strategies, customer relationship, corporate culture is generally available in the biggest public corporations. Therefore, deep valuable analysis with all chosen indicators requires accessibility of such data. These criteria are the most significant factors for the sample formation. The study is based on Russian companies, taking into account all features and trends of Russian market in general. Therefore, the results will depend on the patterns of Russian companies and can be implemented mainly on Russian market.

The structure of the study is the following. Firstly, the theory on the theme of intellectual capital will be analysed. The components of intellectual capital (human, relational and structural) will be discussed with its influence on the performance of the company, then, the theories about measurement of the performance of the company will be studied. Secondly, the indicators for three components will be chosen as independent variable and Tobin's as dependent variable which represents the performance of the company. Thirdly, the dataset of 70 Russian companies will be collected from the open sources, in particular, information about independent and control variables and Tobin's Q Ratio. Then, the analysis including descriptive statistics, correlation and regression models will be done. Finally, there will be a conclusion with the discussion for the future research of the intellectual capital and the managerial implication.



1. Intellectual capital

Different approaches for determination of intellectual capital.

Intellectual translated from latin means mind, human mental ability and capital means fundamental, basic. It can be said that intellectual capital is a complex of intellectual resources, knowledge, skills, which people use for profit generating. Based on previous studies, there are different approaches for determination of intellectual capital. According to Stuart, intellectual capital is knowledge which employees have. Galbraith includes intellectual activities and processes to the definition of intellectual capital. Edwison and Malone emphasize that intellectual capital creates additional value of the company, indicates non-financial performance and generates important opportunities for company's development.

Intellectual capital is also considered as intangible assets which increase the level of competitive advantage for the company (Brooking, 2009).

In addition, intellectual capital can be described as the intellectual assets that includes intellectual property, knowledge bases, skills and abilities and relationships with the stakeholders of the company.

Furthermore, intellectual capital is determined as company's resources providing innovative opportunities for creating and production of new products. Basic elements of this type of capital are human capital and intellectual property.

The most commonly used structure of intellectual capital consists of three components: human capital, relational capital and structural capital. Human capital is considered as mental abilities that represent skills, knowledge, creative thinking, company values and corporate culture. Relational capital is created through relations with all stakeholders of the company. It indicates the marketing strategy, customer satisfaction, different communicational channels. Organizational capital can be determined as the organizational structure, types of software, expenditures on research and development, patents, licenses and trademarks, development of intangible assets (Reed & Parker, 2006).

Therefore, intellectual capital - is multidimensional definition and nowadays there is no conventional identification and measurement of intellectual capital.

2. Structure of intellectual capital

Number of intellectual capital components is fluctuated from two (Edwinson, 2005) to four (Brooking, 1997). Intellectual capital can involve four components: market assets, intellectual property, infrastructure assets and human resources. However, Stuart claims that intellectual capital includes three components: human capital, relational capital and structural capital. This three components structure is the most widespread intellectual capital model nowadays, which is used by most of the researchers and for implementation different instruments for intellectual capital measurement and management.

Edwinson argues that intellectual capital brings the ability to the organization to transform innovations, human capital, research and development processes and intangible assets into factors that can create added value for the company (Edwinson, 2005). In comparison with intellectual capital structure created by Bontis and Stuart, intellectual capital structural model has three levels. First level consists of human capital and structural capital. He considers human capital as employees' skills, mental abilities and appropriate knowledge. Structural capital includes two parts: relational capital and organizational capital. Then, organizational capital is divided into innovation capital, which consists of patents, ideas, trademarks, licenses and knowledge bases, and process capital, which indicates the organizational infrastructure, especially operational processes, information technologies, innovative production, research and development (Sharabati, Shawqi, N. & Bontis, 2010).

Khalique considers six components of intellectual capital: human capital, structural capital, customer capital, social capital, technological capital, and spiritual capital

(Khalique, Abu, Jamal & Adel, 2011). Human capital indicates the base of employees' skills and experience, training programs provided for personnel, labor productivity, personnel turnover rate. Structural capital includes the organizational structure, development of the intangible assets, corporate governance, strategies and policies. Customer capital is determined as customer relationship management systems, the level of customer satisfaction index, customer loyalty programs. It is the fact that strong relations with customer are the basic way to generate profit. Social capital in this structural model is connected with all relationships both inside and outside the company (Kianto, 2018). Social capital can be internal, which is regarded the relationships between employees in a company, and external, which considers relationships between stakeholders and organization. Technological capital represents total amount of innovative technologies that used in organizations, process of production, number of researches. It is a crucial element of intellectual capital. Spiritual capital is described as an additional component of the intellectual capital, which involves cultural features, values, religion, principles and different beliefs. Khalique, Abu, Jamal and Adel (2011) claim that spiritual capital consists of religion features and moral values.

The classification of intellectual capital structure is presented in Table 1. It can be said that there are three major structural models, which are used in most of the researchers.

Table 1. Structural models of intellectual capital

Structural Model according to Brooking	Structural Model according to Edwinson	Structural Model according to Stuart
Market assets	Human capital	Human capital
Human resources	Relational capital	Structural capital	Organizational capital
Infrastructure assets	Structural capital		Relational capital
Intellectual property



Based on previous studies, factors that can increase the development of intellectual capital are highlighted: labor effectiveness, developed innovation capital, widespread information technologies. Furthermore, factors affecting the intellectual capital efficiency can be also emphasized: scientific and economic progress, innovative market conditions, government policy related to innovations implementation and intellectual property. (Kianto, 2018).

To sum up, several significant features of intellectual capital are determined:

· development of intellectual capital as the main factor of the company growth

· creating of company's value

· implement of intellectual capital is associated with high risks, but allows to generate profit

· intellectual capital is a non-current asset

· creates future long-term benefits.

· impossible to imitate

Therefore, intellectual capital is multidimensional phenomenon, which is developed by the result of intellectual capital components relationship. The significance of intellectual capital is growing allows companies to obtain and implement new knowledge, activate innovative solutions.

3. The relationship between intellectual capital and organizational performance

The theme of intellectual capital become actual due to knowledge is the more valuable benefit of the firm that helps to be competitive on the market in comparison with other sources (Stewart, 1998)In fact, intellectual capital faces problem: it is interesting from the view of the theory, but difficult to analyze in practice as others knowledge-based views (Edwinson & Malone, 1997). The majority of meanings of intellectual capital that were introduced, highlighted involving of hidden assets, that cannot be financially measured and introduced in financial statements. Despite the fact that there is no commonly used definition of intellectual capital, scholars came to general agreement that intellectual capital creates a benefit for the company in creating of a knowledge base, stable relationships with employees and all stakeholders, technological base and etc (Maria Diez, Lizet Ochoa, Begoсa Prieto & Santidrian, 2010). Intellectual capital is the ability of a company to remove future economic benefits from existing resources, skills and competencies. The productive implementation of intellectual capital, which includes unique methods and skills, is necessary for business growth. There is no common definition among researchers of the structure of the intellectual capital, but the three basic components are determined: human, relational, structural.

The role of intellectual capital is well studied in developed countries (Bontis, 2001) Many foreign researchers reveal the fundumanetal role of the human capital in the growth of financial indicators of an organization in comparison with structural and relational capital (Cabello-Medina, Loґpez-Cabrales, & Valle-Cabrera, 2011).It can be said that educated and talented workers set stronger relationships with a wide range of counterparties, capitalizing on the relationship capital, and increase the effectiveness of business progress (Serenko & Bontis, 2004). Other authors, on the contrary, attribute the maximum contribution to the company's resulting financial performance to the relational capital: close relationships with customers and suppliers can reduce costs and increase sales, improving overall business competitiveness (Hsu & Wang, 2012).

A broad view of existing empirical research on the role of intellectual capital is presented (Inkinen,2015) who has analyzed more than fifty studies on the subject under consideration. According to the conducted analysis, internal indicators, such as return on assets, return on equity, sales growth, innovation processes, and external indicators, which emphasize the company's capitalization, Tobin's Q Ratio, price per share are the most common indicators which measure the results of companies ' performance. Author concludes that intellectual capital has a positive impact primarily on the innovative activity of enterprises, and its various elements generate a cumulative effect that increases their cumulative impact on results (Inkinen, 2015).

Bontis et. al. (2000) creates an analysis om the base of 107 firms in Malasia to find the impact of components of intellectual capital on the performance of the companies. The results show that field of the company's activity has no influence. Human, customer and structural capital show a positive impact on the financial results.

Engstrom et. al. (2003) conductes a survey and analyzed financial statement of the 13 Norwegian hotels. There was statistically positive and significant relationship between intellectual capital, where the correlation is the highest between human and structural capital. Moreover, the results show that structural capital has positive influence on hotel performances. In fact, hotels with advanced capital of customers base show high percentage of the room occupation. El-Bannany (2008) analyzed 60 companies in banking sector in the period of five years from 1999 to 2005. The independent variables include investments in research and development, risks, efficiency of the banking sector and etc. Results show that intellectual capital is important in the performance of banks. Kianto (2018) conducted a survey with questionnaire among 335 manufacturing and service companies in Finland. The relationship between three components of intellectual companies and the key activities the firms show that service companies are has and focused on the development of human capital, production companies, in turn, invested in the protection of intellectual property (Sveiby, 1997).

4. Human Capital

During the last decade human capital is becoming more significant, as it is one of the components of intellectual capital that gives companies an opportunity to increase competitive advantage and provides successful development.

Human capital, which represents the set of employees' working experience, innovative skills, creative thinking, can be determined as productive assets. (Hendricks, 2002) It is widely known that term «human capital» is firstly highlighted in researches of Theodore Schultz, who was Nobel laureate. He contributes that acquired human qualities which can be increased and improved by any investments can be called human capital.

Human capital is identified by several definitions, each of them represents valuable features of human capital. Becker (1964), who created human capital theory, defines human capital as, knowledge, level of creative thinking and level of health and safety. Moreover, human capital can be determined as the level of education, working abilities and demographic features, including cultural differences. New definition of human capital proposes that human capital can be considered as a set of life patterns, knowledge, openness to innovation, and development of soft skills. (Weatherly, 2003). Characteristics of human capital can also include the value added, the generating of competitive advantage and labour productivity inside the organization. (Pasban & Nojedeh, 2016) In addition, human capital consists of the economic value of a workforce, which involves training programs, skills and knowledge, education, the level of workplace safety. The importance of development of human resources is growing, while human capital gains the competitive advantage of the organization (Garavan, Morley, Gunnigle & Collins, 2001). Human capital is called the heart of intellectual capital (Khalique, Abu, Jamal & Adel, 2011). Finally, human capital cannot be bounded to skills and knowledge of employees, it involves behavior and actions of workers, which develop performance of organization. In order to present all definitions of human capital, it useful to collect and highlight all components, which are reflected by different researchers:

· experience,

· talent,

· knowledge,

· education,

· skills

· leadership

· creative thinking

Control and evaluating human capital are difficult operational processes inside companies. Consequently, goals and strategy of companies usually concentrate on tangible assets measurement, which involves financial and physical resources. Nevertheless, these assets cannot increase the competitive advantage of companies, especially due to constantly developing modern world and technologies. It is significant for companies to develop intangible assets, especially human capital. Implementing innovations in human resource management is also increasing rapidly, therefore the importance to measure and invest in human capital is growing.

Evaluating of human capital is a challenge for organizations due to the fact that there are a huge variety of organizational structures, approaches and tools to assess the human resources. There is a set of major indicators provided by different authors. (Table 2)

This process is crucial for the company as the ability to measure the value of human capital brings the opportunity to generate and maximize profit, to develop successfully. The summary of human capital indicators presented in Table 2.

Table 2. Summary of human capital indicators

Components	Indicators	Authors
Personnel turnover	Percentage of dismissals in a company. Assessment of this indicator can help to find possible reasons of turnover and ways to reduce costs of staff recruitment.	Garavan, Morley, Gunnigle & Collins (2001), Hejazi, Ghanbari & Alipour (2016)
Employee health and safety	Total incident and fatality rate. This measurement is significant inside the company as it can enhance employee's motivation to work, decrease level of stress. It will result in costs declining and profit increasing.	Hendricks (2002), Weatherly (2003)
Employee training	Can be calculated in several ways: total amount of money spent on trainings programs; share of employees who passed education in a company; indicator which shows hours of education per employee.	Marr, Neely & Schiuma (2004), Weatherly (2003)
Recruitment and retention	Number of dismissals and new recruitment. This indicator can be measured as costs and time spending for recruitment process.	Hendricks (2002), Marr, Neely & Schiuma (2004)
Skills and qualification	Types of training provided, total number of hours of education, needs in trainings. Trainings programs are necessary for successful management of human resources. Educational process provides employees with new skills and abilities, therefore companies have an opportunity to develop human capital, as well as intellectual capital.	Hendricks (2002), Oxley, Le & Gibson (2008)
Employee behavior and voice	Questionnaire for employees, which provides a right to express the opinion for every worker.	Marr, Neely & Schiuma (2004)
Personnel costs	Total wage costs, level of total rewards, social benefits, insurance.	(Oxley, Le & Gibson, 2008), (Khalique, Abu, Jamal & Adel , 2011)
The employee diagrams	This indicator shows the main features of the workforce, which include education, age, experience, rate of promotion, cooperation in management activities, knowledge basis.	(Weatherly, 2003), Oxley, Le & Gibson (2008)
Labour productivity	It can be measured in different ways: sales per employee, the number of products or services produced per one employee.	(Marr, Neely & Schiuma ,2004) (Phusavat, 2011)
Competencies and skills	Evaluating quality of competence, knowledge, the distance between competence and investment in training	Weatherly (2003), Hejazi, Ghanbari & Alipour (2016)



It is clear that human capital is related to intangible assets, as it cannot be seen directly in business operational processes in comparison with tangible assets. Consequently, the value of human capital is not measured directly. There are three widespread methods of evaluating human capital inside the organization: the cost-based approach, which consists of total costs spending on employees, income-based approach, which evaluates labor productivity, and education-based approach

Therefore, estimates of the human capital stock must be constructed indirectly. Common approaches to human capital measurement include the cost-based approach, the income-based approach and the education-based approach. (Oxley, Le, Gibson, 2008).

It is important to discuss the relationship between human capital and companies' performance indicators. The positive relationship between human capital and team performance, company's learning capability, turnover rate was revealed. (Harris 2012; Wei,

2015). Moreover, significant relationship between human capital and financial performance indicator, presented by return on assets, was proved. (Phusavat, 2011)

(Mahmood et al., 2014) confirmed that human capital has positive influence on organizational performance. Researchers concluded that organizational human capital has positive impact on organizational performance. It was also found that human capital measurement includes five main indicators: leadership style, personnel optimization, efficiency of knowledge implementation, employee engagement, learning ability. Each of these drivers can be measured separately, dividing into deeper indicators. Moreover, these categories of human capital measurement are used to forecast fluctuations in financial outcomes. Companies that have higher indicators of human capital measurements better perform in stock market. In addition, these indicators can also influence non-financial performance. Authors highlight that leadership, that affects performance of organization, is one of the most crucial human capital measures which drives organizational performance (Beltramino, Garcнa-Perez-de-Lema, & Valdez-Juбrez, 2020).

5. Relational capital

Relational capital as a term and separate component of intellectual capital appeared nearly a decade ago (Bontis, 2001). Scholars started to study intellectual capital in the end of twenty century, that were concentrated on knowledge as an important intangible asset that creates benefits and competitiveness on the market (Bontis, 2002). In early works, there were only two components of intellectual capital - human and organizational. Later, relational capital was included, in the sense of relationships with customers. In modern world, relational capital is the main component of intellectual capital that identifies all interactions with the stakeholders of the company including customers, suppliers, shareholders, employees and etc.

Relational capital reflects the relationships between all stakeholders. The majority of managerial researches highlights the concept that firms are social objects that definitely communicate with different entities (Wahla, K, Shah, S., & Hussain, 2012). Communication is significant due to companies could receive through it valuable resources (economic theories emphasis the ability to perceive missing on new unique information) much attention is paid to the possibility to absorb missing or new knowledge) able to gain benefits on the market (Lee, Hsiao, Weng & Chen, 2020). Thuy and Quang (2005) defined relational capital as a lease engendered in an interaction between several parties, that other organization cannot reproduce. Authors highlighted that the value of the relational capital is in relationships between company's representatives and all stakeholders. It is stated stated that relational capital is a warehouse that firm has with employees, suppliers, customers, government and shareholders, that are measured with the productive and efficient communication with all players (Cabello-Medina, 2011). Moreover, it could be defining as variability of all types of interaction through different channels.

Li-Chang Hsu and Chao-Hung Wang (2010) analyzed the effect of intellectual capital, including the relational capital. The authors measure the key account and percent of total costs on the main suppliers. The sample size consists of 242 information technology companies in Asian countries. Through the correlation matrix and Bayesian regression authors made a conclusion that relational capital has direct impact on company performance and consequential on dynamic capability. Companies follow the strategy to build right and competent relationships with their consumers. Consumers are the most significant indicator of the relational capital as they build the value of the company are the object for whom company creates the value (Kohtama?ki, Partanen, & Mo?ller, 2013). Authors investigated that constant relationship with partners has significant connection with knowledge and experience. Hence, there is a positive influence on company performance. Studies about relational capital highlight that consumers who had strong relationships with the company has an influence on the performance of the company (Hejazi, Ghanbari & Alipour, 2016). The great number of production companies focuses on the relationships with the suppliers and partners, due to they play an important role in fast and high quality products and develop it with minimal costs, therefore, relationships with suppliers are one of the key factors in value creation of relational capital, due to the has strong connection and influence with the financial results of the organization (Choong, 2008).

Relational capital indicators are various, due to they include the connections with all stakeholders of the company. The summary of the main components is presented in the following Table 3.

Table 3. Summary of relational capital indicators

Indicator	Definition	Authors
Customer loyalty	Companies are struggled to improve and enhance customer loyalty, due to the high level of customer loyalty retain and motivate them to buy their goods and promote company, creating a good reputation and recommend it to others. Companies create loyalty cards, discount, bonuses, use email marketing to increase the number of active customers. For example, marketers create a mail sending actual discounts to raise the retention rate and the level of customer loyalty.	(Hejazi, Ghanbari & Alipour, 2016).
NPS (Net Promoter Score)	Net Promoter Score is the measurement of customer satisfaction and experience that helps to forecast the growth in relational capital. The NPS index creates an important link between the customer's emotions and attitude and how the business works, and allows you to turn loyalty into specific, measurable indicators that can be compared between each other in dynamics, between geographical divisions and different companies. The concept is simple and easy to understand for any employee of the company. NPS has the highest correlation with the actual economic behavior of the client: 82% NPS is evaluated by scale from -100 to +100.	(Lenart-Gansiniec, 2016).
Web-site quality	Creating a website that is convenient and attractive for the client is one of the channels for building these relationships and attracting new customers, which generates an additional competent advantage for the company. There are some common adopted criteria to evaluate the website за the company: the availability of information for investors, the choice of language, the amount of information provided, and the design.	(Datta & De, 2017)
Brand reputation	The importance of the brand as a component of the firm reputation, which is part of the company's intellectual capital and takes part in the process of generating company value, as well as influencing the financial results of the firm. Fame is especially important for companies that invest in the relationship between producer and consumer. These include the consumer goods, trade, and services sectors. Despite the logical assumption that fame has a positive impact on the company's value. According to the previous research, brand reputation is a logical result of high performance of the company and its influence on the market.	(Li-Chang Hsu & Chao-Hung Wang, 2010)
Total expenses paid to main suppliers	The amount of expenses of the Supplier are direct expenses that relate directly to the production of electric energy (capacity), and indirect expenses of the organization, which are part of general economic expenses. The higher the percentage of expenses is the more developed the relationships with suppliers are with the high-quality service.	(Beltramino, Garcнa-Perez-de-Lema, & Valdez-Juбrez, 2020).
Marketing costs	Marketing costs are included costs for advertising, promotion and public relations with customers, partners, suppliers and etc. In the majority of the companies the percentage of marketing cost from operating costs range from 1% to 30%, that usually depends on the market the company operates on. Marketing is the essential indicator in the relational capital, due to it usually performs as a channel between company and social entities.	(Thi Mai Anh, Hui, Khoa & Mehmood, 2019).

6. Structural capital

The significance of structural capital has increased for the last years in the reason that it helps companies be efficient and brings benefits on the market. Structural capital is the processes that involves organizational procedures and technological inventions in the organization. According to Seleim, Ashour and Bontis (2004) structural capital consists of knowledge databases, that company uses or creates, unique software, patents, licenses and trademarks. Moreover, structural capital involves management systems, corporate governance and intellectual property of the company. Development of structural has positive effect on organizational performance. Stewart, T (2007). defined structural capital as the infrastructural facilities or organizational opportunities that answers on market needs. Wahla, Shah and Hussain (2012) highlight that structural capital includes intangible assets that are intellectual property objects, unique right of the patent holder to an invention, industrial design, utility model exclusive copyright for computer programs and all databases.

Shan and Mclver (2011) defined structural capital as ability and power. Many researchers examine the influence of structural capital on financial performance of the organization Thrylo and Kornukh (2011). dedicated that 50 percent of production in the U.S. manufacturing companies are dependent on structural capital and that value of structural capital 60 percent of the value of the tangible assets. Di Vincenzo, Hemphдlд, Magnusson and Mascia (2012) found that that structural capital brings the strong competitive advantage to the firms. Maria Diez, Lizet Ochoa, Begoсa Prieto, and Santidrian, (2010) in the study “Intellectual capital and value creation in Spanish firms” were examine the relationship between such investments in the R&D, in creation of new unique products or services, technological development and value creation of Spanish companies. The results show that there was relation between structural capital anв company value, the most significant variables were the quality of operating processes and development of R&D.

The relationship between three components, in particular structural capital, and knowledge management is analyzed on the example of 87 Spanish pharmaceutical firms. Authors create a research model that shows the significant relationship between structural capital and knowledge management (Otriz, B., Donate, M. & Guadamillas, F., 2016).

In fact, there is unanimity among scientific researchers that structural capital is gained by firms and stayed despite the fact that employees are finishing their working day. Cvrtila and Kuna (2006) stated: structural capital is depending on external environment, due to technological development, which is a significant component, and innovations are updated very quickly in the modern world. Hence, companies should monitor trends on the markets and invest in R&D to be the leader. Taking everything into account, structural capital is an integral part of the companies, the priorities and strategies which are development of innovations, contribution to the knowledge, the protection of intellectual property rights, the usage of advanced software and strong organizational governance.

There are various measurement models of structural capital. However, the majority consists of similar components that are connected with the organizational structure of the companies, innovation development, investments in technology. It can be divided into the innovative potential that can give the company the significant advantage, and the potential of an internal processes in which workers share their knowledge through teamwork and leadership (Edwinsson & Malone, 1997). In the following table there is a summary of different variables for measuring the structural capital. (Table 4)



Table 4. Summary of structural capital indicators

Indicator	Definition	Authors
Software	While measuring and evaluating the software scholars use different approaches, that include: the uniqueness of the software, the breadth of possible uses, the volume and structure of investments for the implementation of software, possibility and degree of legal protection, the presence and nature of risks from the use of software in different industries, the current use of the software and etc.	(Otriz, Donate & Guadamillas, 2016).
ERP, Knowledge Databases	Knowledge databases are showing how company uses modern technological resources, that optimize time and financial resources, for example, Oracle, SAP ERP, SQL, NAVISION.	(Shan & Mclver, 2011)
Intangible assets	The value of intangible assets is used as an indicator of the company's intellectual property, and its impact on the indicator of economic value added. This indicator is statistically significant in the following works in the evaluation of relationship intellectual and the performance of the company.	(Cvrtila and Kuna, 2006)
Company strategy	It is measured as binary variable, through checking the presence of strategy in the reports, that reflects the activities, perspective and directions of company development.	(Li-Chang Hsu & Chao-Hung Wang, 2010)
R&D

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