Looking at intellectual capital

Dr Indra Abeysekera

Australian and Sri Lankan companies are set to benefit from research being conducted by Macquarie University Lecturer Dr Indra Abeysekera.

Abeysekera has been examining intellectual capital practices of firms listed on the Colombo Stock Exchange since 2001 and says there is much to be learnt by comparing and contrasting the practices of both nations.

Intellectual capital

Intellectual capital includes the intangibles that are not captured by financial reporting but have a substantial influence in the performance of a firm. Examples include brands; customer satisfaction; knowledge of employees; patents; systems; and the way people work.

Why Sri Lanka?

To date, studies on intellectual capital have been conducted in developed nations such as Australia, the United States and Canada. Nothing had been done in relation to developing countries.

“Sri Lanka is a developing country with some uniqueness in it,” says Abeysekera. “It has an extremely high literacy rate of 92 percent, far beyond that of any other developing country. Intellectual capital looks at how employees’ knowledge is used for profit generation. I wanted to know whether companies were utilising this asset base.”

Data collection

Abeysekera’s data collection comprised reviewing annual reports from a sample of the top 30 firms listed on the Colombo Stock Exchange and carrying out case study interviews with selected companies.

After conducting 11 interviews in 2001, Abeysekera returned in September to update information on how these companies manage their intellectual capital.

Sri Lanka’s two decade old civil war ended with a permanent peace deal in February 2002. “This change is set to provide important lessons on how intellectual capital practices have changed to achieve business performance, from times of war to times of peace,” Abeysekera says.

Australian vs Sri Lankan practices

Australia and Sri Lanka could benefit from looking at the way in which each nation manages its intellectual capital.

“Something that Australia could learn from Sri Lanka is the level of trust they have with employees,” says Abeysekera. “They engage in various relationship building activities such as picnics and workshops. They also try to build relationships with employees’ families.”

For example, if an employee receives a commendation letter, their husband or wife receives one as well. The thought behind this is that if you are working hard at a company there is a family unit who is supportive who also deserves congratulations. This fosters a good feeling about the work that is being done by their partner.

Sri Lanka could learn many things from Australia in terms of branching out internationally and nurturing the entrepreneurial skills of staff.

“Intellectual capital is important in today’s business environment because if a company comes up with a successful product or service, competitors will copy it,” explains Abeysekera. “Intellectual capital items such as customer satisfaction, a smile, good service and the knowledge of an employee, are hard to copy. It gives the competitive advantage to a company in today’s business environment.”

For further information contact Abeysekera via email: iabeysek@efs.mq.edu.au

December 2004

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