The Development of an Intellectual Capital Index for Malaysian Companies

Intellectual Capital (IC), a value creator of today's economy, is of critical importance to a company's sustainable competitive advantage. However, it is difficult to measure IC which comprises the intangible or soft assets of a company. A number of models have surfaced in the attempt to measure IC. This paper aims to review these measurement models and highlights their strenghts, weaknesses and reliabilities based on previous literature and research. In additon, this paper proposes a model to measure IC in the context of Malaysian companies. A review of literature on the components and measures of IC relevant to the value creation of a company was focused in developing a model for Malaysian companies. The proposed model which is known as the Malaysia Intellectual Capital Index (My-ICI) envisages as a way forward in an initial effort to assess IC for Malaysian companies. Attempts are made to quantify IC elements to arrive at an IC index for the companies. The development of a more structured IC index should assist companies to monitor and manage their IC more efficiently. The IC index determined in this research should also be of interest to various interest groups, supplementing them with information on IC and utilise an IC index for their decision making process. The relationship between IC index and company performance and market value can be used for prediction. In addition, IC index should aid the accounting profession in developing a more systematic and standardised external reporting for IC including disclosing an IC Index in the annual reports in the future.