The importance of intellectual capital within Romanian listed entities.

• Author: Ienciu, Nicoleta M.
• Position: Report

1. INTRODUCTION

   Te deeper purpose of an intellectual capital approach is to change people's behavior, not least through changing the corporate language. The concept of intellectual capital brings with it a whole set of new values about what is good and what is bad management, what is the right and the wrong things to do in organizations (Kong, 2007).

   Intellectual capital has often been described as the difference between what a firm's market value is and the cost of replacing its assets. Therefore, this (often positive) difference can be described as "those things that we normally cannot put a price tag on" such as expertise, knowledge, and a firm's organizational learning ability. There are three (3) elements that are proposed as encompassing intellectual capital: 1) Human Capital, 2) Structural Capital, and 3) Relational Capital. Human capital can be described as the firm's collective capability to extract the best solutions from the knowledge of its individuals. Structural capital can be thought of as the firm's organizational capabilities to meet market requirements and finally, relational capital refers to the end-user's satisfaction and loyalty to the organization (Bontis, 2002).

   The objective of this study is to examine the position of Romanian entities listed on the Bucharest Stock Exchange (BSE) regarding the importance given to intellectual capital components and related disclosures in order to obtain an accurate image of what intellectual capital represents for an entity.

2. LITERATURE REVIEW

   Mouritsen et al. (2005) state that IC is related to questions about identity, such as "who you are, and what you want to be" and thus IC is not merely an objective and knowledge of what an organization can do. IC encompasses three interrelated components such as human capital, structural capital and relational capital. Through the combination, interaction and balancing of the three types of IC and managing the knowledge flow between three components, IC renders the best possible value to organizations (Kong, 2007).

   Ulrich (1998) identify three reasons why intellectual capital management is important:

1. the demand for knowledge worker in a growing service economy is on the rise (organizations linked to human capital)

2. the first line become increasingly important in relation to customer value (organizations linked to relational capital)

3. learning and innovation become increasingly important in the new economy (structural capital).

   Brennan (2001) analyzed the intellectual capital disclosure for 21 organizations from Ireland showing that in Ireland, organizations disclose intellectual capital information in a hazard way because there is no conceptual framework for reporting such information. Olson (2001) examine the annual reports of 18 organizations listed on the Swedish Stock Exchange and conclude that none of the analyzed organizations has not granted more than 7% of the space of the annual report for information regarding intellectual capital. Lynn (1998) recognizes the crucial importance of managing intellectual capital and offers the view that "a...