Impact of intellectual capital on profitability: Evidence from software development companies in the Slovak Republic

  • Received March 4, 2022;
    Accepted May 30, 2022;
    Published June 14, 2022
  • Author(s)
  • DOI
    http://dx.doi.org/10.21511/ppm.20(2).2022.34
  • Article Info
    Volume 20 2022, Issue #2, pp. 411-425
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This work is licensed under a Creative Commons Attribution 4.0 International License

Intellectual capital is the total value of all entity’s intangible resources (organizational, human, and customer). Effective management of intellectual capital in high-tech industries needs determination of its role in ensuring profitability and clarifying the direction of managerial and investment policy in intangible resources. The aim of this study is to investigate the impact of intellectual capital on the profitability of Slovak software development companies. Panel data regression analysis was used as the main research method to analyze the data of 16 Slovak software development companies for 2015–2019. The study designed and analyzed four panel data regression models with different dependent variables (Return on Assets, Net Profit Margin, Gross Profit Margin, Earnings Before Interest and Taxes Margin) and similar independent variables (Capitalized Development Costs, Software, Acquired Intangible Fixed Assets, Personnel Costs, Social Security Costs, Social Costs, and Total Costs of Economic Activity). The analysis of these models was carried out based on the fixed effects method. It was found that intellectual capital reflected in the financial statements of software development companies does not meet the information needs of stakeholders and does not have a significant direct impact on profitability. Only Acquired Intangible Fixed Assets had a direct positive impact on the profitability of software development companies in all four analyzed models, and some independent variables had a negative impact. It is proposed to expand the structure of financial reporting items that characterize the intellectual capital and improve the method of recognizing costs of various types as intangibles.

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    • Figure 1. Conceptual framework
    • Figure 2. Dynamics of profitability indicators of Slovak software developers for the 2015–2019 period
    • Table 1. Approaches to profitability indicators influencing intellectual capital
    • Table 2. Numerical characteristics, based on observations 1:1-16:5
    • Table 3. Model 1 (ROA). FEM (robust standard errors), using the observations 1-80
    • Table 4. Model 1 (ROA). FEM (robust standard errors), using the observations 1-80
    • Table 5. Model 2 (NPM). FEM (robust standard errors), using the observations 1-80
    • Table 6. Model 2 (NPM). FEM (robust standard errors), using the observations 1-80
    • Table 7. Model 3 (GPM). FEM (robust standard errors), using the observations 1-80
    • Table 8. Model 3 (GPM). FEM (Robust standard errors), using the observations 1-80
    • Table 9. Model 4 (EBITM). FEM (robust standard errors), using the observations 1-80
    • Table 10. Model 4 (EBITM). FEM (robust standard errors), using the observations 1-80
    • Table A1. Reporting data of 16 Slovak software development companies
    • Table B1. Characteristics of dependent and independent variables for analysis of the relation between profitability and intellectual capital
    • Project administration
      Yuliia Serpeninova
    • Supervision
      Yuliia Serpeninova, Serhii Lehenchuk
    • Writing – original draft
      Yuliia Serpeninova, Serhii Lehenchuk, Martina Mateášová
    • Writing – review & editing
      Yuliia Serpeninova, Serhii Lehenchuk
    • Conceptualization
      Serhii Lehenchuk, Martina Mateášová
    • Formal Analysis
      Serhii Lehenchuk, Tetiana Ostapchuk, Iryna Polishchuk
    • Methodology
      Serhii Lehenchuk
    • Software
      Serhii Lehenchuk, Tetiana Ostapchuk, Iryna Polishchuk
    • Data curation
      Martina Mateášová
    • Funding acquisition
      Martina Mateášová, Tetiana Ostapchuk, Iryna Polishchuk
    • Resources
      Martina Mateášová, Tetiana Ostapchuk, Iryna Polishchuk
    • Validation
      Martina Mateášová, Tetiana Ostapchuk, Iryna Polishchuk
    • Visualization
      Martina Mateášová, Tetiana Ostapchuk, Iryna Polishchuk
    • Investigation
      Tetiana Ostapchuk, Iryna Polishchuk