Do Intellectual Capital Elements Spur Firm Performance? Evidence from the Textile and Apparel Industry in China

This paper examines how investment in intellectual capital (IC) elements by textile and apparel companies improves firm performance measured in terms of profitability, market value, and productivity. The modified value-added intellectual coefficient (MVAIC) model is applied to measure IC. Using a panel of 35 Chinese textile and apparel companies for a six-year period (2013-2018), the results show that physical and human capitals are the strong factors that contribute to firm performance. In addition, relational capital negatively influences profitability and market value, and structural capital and innovation capital have a negative impact on employee productivity. We also find that the MVAIC model performs better in measuring IC than the original value-added intellectual coefficient (VAIC) model. This paper can provide some insights for corporate managers to enhance firm performance and gain competitive advantage by proper utilization of IC in traditional industries.