Intellectual capital of industrial sectors in South Africa

The intellectual capital of South African firms and industries are estimated and compared in this study. As the world is moving from an industrial age to a knowledge era, the measure of intellectual capital embedded in the factors of production and the factors determining competitiveness are becoming increasingly important. Firms and industries can raise profits, financial performance, and international competitiveness when the benefits from knowledge and technological spillovers are utilized; but not all firms do. Firms often realize various results with profits, turnover and growth, which differ, and their market and book values often differ as well, even though they utilize similar inputs and experience similar external circumstances and environments. One possible reason is that they follow different strategies and managerial styles because their intellectual capital differs. It is therefore important to determine the level of intellectual capital of South Africa’s industries and try to determine why the outcomes of some firms are better. This paper utilizes data from the Johannesburg Securities Exchange and determines the value added intellectual capital coefficient (VAIC) of the various firms, listed mathematically. Intellectual capital is not only labour or the human capital of the labour component. Intellectual capital is imbedded in intangible resources, such as knowledge, skills, expertise, customer relationship, information, database organizational structures, specialized machinery, capital goods, and innovations, which firms use to gain a competitive advantage and maximize profits. The VAIC is the sum of the human capital efficiency, physical capital efficiency, and structural capital efficiency of firms. These factors should be taken into account when estimating more realistic production functions and strategies that are designed to enhance the competitiveness of firms and industries in an economy. The average intellectual capital of the various firms and industries are compared, and conclusions are made with regard to the outcomes of the best performing firms in the various sub-sectors. Firms and sectors that experience economic degradation, such as the South African steel industry, are also investigated.