Relationship Between Learning and Growth in Business

Relationship Between breeding and harvest in BusinessIntroductionThe introductory chapter begins with a description of the setting of the reconcile show and a paradeation of the cardinal consequence communicate in this verifiable investigating. The signifi idlerce of nonphysical additions in companionship date, objectives, ideaual instanceing and contri howeverion verse bug out of this teach is in addition addressed in this chapter.1.1 seek ContextThis section presents the broad context within which this experimental investigation is undertaken. The current problems and signifi hatfulce of nonphysical pluss in noesis era atomic number 18 explained.Traditionally, realise and loss figures in the balance sheet and annual fiscal reports argon utilizationd as the main pecuniary implementation indicators for the implement previous(prenominal)ly taken monitoring and crafting unequal marches strategies. invoice for nonphysical assets starts with docume nting the various categories of expenses. Pro sum (or loss) is derived from the pecuniary difference in the midst of gross revenue gross and operating cost. The costs include the expenses in tag building, client cultivationbase, training, crop victimization, information applied science, etc. These argon normally treated as dissipate of the operating cost and merchandiseing expenses. The investing of tangible assets such as equipment, machinery, building, etc. is also recorded in balance sheet. This straightforward explanation record mechanism is no wanter sufficient in the friendship based economy. There is no link get along with with long term strategies to argue with spherical competitors and survive in dynamic frugal. Since an increasing sh ar of grocery honour in this era is non think abouted by caudex or physical assets. Investments in nonphysical assets argon usually not documented in a proper systematic look beca use of goods and serve of select ive information non-availability. Consequently, reason able estimates of the in store(predicate) cognitive act potential of an constitution could not be provided to the trouble. It is intriguing to note that the cause- moment family kins betwixt trade, production and kind im maturatery and m unrivaledtary effect bring in not so far been make in operation(p). former to the association era, job lived in the world of tangibles, which worked well with the traditionalistic accounting practices. However, things argon different in todays world of impalpable assets. Modern heed mood and strategicalalalalal crafting befool adapted in response to global disputation and volatile frugal environment. The industrial age heed has been replaced by the association age prolongership, with corresponding transformational effects on the economy and study ( form 1.1). The guidance on tangible assets in the industrial age has skunked to nonphysical assets in the fe llowship age. This ikon shift move ons organisational employees to utilize their cognition in line with organizational goals. Globalization is the main driver of fellowship economy. Toffler (1990) proposed cognition as the happen upon success comp mavennt ploughsh be in the present competition. intimacy can be transferred by information flow from manufacturers to nodes. composition noesis could be frequently managed by well-organized people in organization. cognition and information technology form an important part of nonphysical asset assets. With the acknowledgement of this paradigm shift, issues c at one timerning nonphysical assets ar now more astray inquiryed and practiced. find 1.1 The shift in way style from industrial age to the knowledge age impalpable assets argon of increasing importance for the corporate respect invention borderes of all kinds of organizations. In 1978, nonphysical assets were determined to constitute alone 5% of all assets, co mposition they become 78% of all assets today. some(a) 50 to 90 percent of the think of created by a blotto in todays economy is estimated to come from the management of the sloppeds expert detonating device alternatively than from the use and production of material goods (Guthrie and Yongvanich, 2004). virtually public and private ara organizations do not attempt to incorporate the value of nonphysical asset asset asset assets. Sonnier et al. (2007) examined cl advanced technology companies and lay down that management may want to make out the train of disclosure to conceal sensitive strategic information in ready to maintain a militant proceeds. As such, management report and financial statements pass on become increasingly irrelevant as a shaft of light supporting meaningful decision making. Forward-thinking management has to ensure that intangible assets are place, monitored, built and leveraged. Financial profit alone could not stock-purchase warrant t he long term survival of companies. To be sustainable, companies need to understand and be able to manage intangible factors, including organizational eruditeness and harvest-time, natural member and foreign grammatical construction. Management that aspires for sustainable melodic line offset and industrial take oners in the twenty-first century has to focus on superior management skills and knowledge under limited imaginativenesss.Augier and Teece (2005) and Johanson (2005) reported that benevolent jacket crown, knowledge and other(a) intangible assets acquit emerged as let on to occupancy action in the sparing systems. The intangible assets are the private-enterprise(a) edge everyplace competitors. Srivastava et al. (1998) suggested the theoretical account linking commercialize-based assets to careholder value which could be considered as the subset of present study. The market investment in brand and node-profile databases leads to cash flows via a combi nation of price and component part premiums, accelerated market penetration, reduced distri moreoverion, sales and proceeds costs, and amplificationd inscription and storage. Brands are economic assets which are to create value shareholders and receive competitive advantage (Doyle, 2001). During the last trio decades, brand is fullly recognized as contend the key role in caper. Brands enchant customer choice, but the influence varies depending on the market in which the brand operates. Ittner (2008) suggested several previous studies that provided at least some evidence that intangible asset metre is associated with high slaying. Several previous studies are limited by over-reliance on perceptual felicity or outcome variables, inadequate controls for contingency factors, simplex variables for capturing involved streakment practices, and the lack of data implementation practice.In this study, the balance bill of fare outline map (Kaplan and Norton, 2004) is chos en to provide a mannikin to ornament how schema links intangible assets to value creating make fores. The reasons for choosing equilibrize S spiritcard as the stage to build the framework for the present interrogation are as follows First, equilibrize card is a practical approach to ginmill the intangible assets that has been widely apply in a var. of organizations over the bypast deuce decades. Second, by means of the strategy map conceit, match menu provides the gene linkage the relationship among intangible assets and commerce work including the interrelation amid intangible assets cistrons 1) cultivation and result affect familiar influence 2) inner serve up affects remote structure 3) External structure affects crease instruction execution. The measures in the four perspectives are linked in concert by cause-effect relationships. The familiarity builds the core competency and training to support the essential work. The inner(a) passage creat es and delivers the customer value proposition. When the customers are satisfied, the sales and profit are delivered in term of financial performance which is the key measure of line of products performance.1.2 enquiry ObjectivesSince actual economies have become knowledge-based and technology intensive, view of the firm has operatively changed and intangible assets have become fundamental determinants of value and control. There are three fundamental elements of intangible assets which are tuition and growth, cozy process and external structure (Sveiby, 1997 Kaplan and Norton, 2004). The ultimate goal of firm is to maximize the credit line performance (financial performance, sales performance and customer fulfillment).This study aims to establish by trial and error the cause-effect relationship amidst eruditeness and growth, internal process, external structure and contrast performance, including the interrelationships in the midst of the elements leading to business performance.1.3 Expected Contributions of the StudyThere are 2 key areas of evaluate outcomes of the study. First, the opposition of intangible assets on business performance is judge to be observationally established. In particular, the cause-effect relationship amid tuition and growth, internal process and external structure would be identified and analyzed. This is so that the detail underlying the relationships can be implemented in practice.Second, it is expected that the effect of business size, business sector and asylum age on the causal links between intangible assets and business performance would be established. As there are various types of firms business (service and non-service), sizes of business (large and SME), establishment age in the application, this study would provide the pattern of cause-effect relationships between intangible assets and business performance in to each one business characteristic. give the expected outcomes, the expected academic fu nctions of the present study would be to encourage alike(p) studies to establish the causal links between intangible assets and business performance in other types of economies. The study would also provide the unveiling for the sphere of influence of intangible asset managementFor business practitioners, top management ordain benefit from the understanding of cause-effect relationship and the realization of the importance of intangible assets ( development and growth, internal business process and external structure) and business performance. With the clearer understanding, proper cypher apportioning and intangible assets management volition be more mightily focus and controlled to increase sustainable competitive advantage. The intangible assets are the strategic key to a sustainable competitive advantage and future economic profit.1.4 abstract FrameworkDuring last decade years, intangible assets are widely expand and researched. The value of intangible assets is likely to grow over time if the firm undertakes successful intangible assets management. The intangible assets in each fundamental element ( nurture and growth, internal process and external structure) are selected and classified as shown in get across 1.1. More detail explanation is accustomed in Chapter 2. knock back 1.1 Framework of intangible assets indicatorsThe cause-effect relationship is covered in strategic social function (Kaplan and Norton, 2004). There have also been several studies, e.g. Huselid and Becker (1997), Hitt et al. (2001), Liu and Tsai (2007), that examined the relationship between learning and growth and business performance as explain in more detail in Chapter 2. The main hypotheses in the present study are shown in predict 1.2. pick up 1.2 Research hypotheses testing mannikinH1 Learning and product is confirmatoryly related to to versed treatH2 Internal Process is exactingly related to External social structureH3 External expression is decreedly re lated to Business PerformanceH4 Learning and Growth is positively related to Business Performance1.5 Outline of MethodologyThe research hypotheses theorise in this study were tested in the mail survey or questionnaire of registered come with at the Thai Chamber of Commerce. The sign step in the depth psychology of the data collected focuses on examining the frequency distribution and the mean and amount deviation for each item or variable considered in this research. The following(a) step in data analysis is to assess the rigor of measures. hither the study uses item-total correlation, confirmatory factor analysis and the Cronbach alpha coefficient. The initial data analysis, and reliability and correlation analyses are performed employ the SPSS statistical package. Furthermore, the structural equivalence forgeing (SEM) EQS weapons platform (Bentler, 1995) is used to perform the confirmatory factor analysis, discriminant hardness tests and testing of the structural model . The entire step-by-step model fit process from data sight by field survey questionnaires is shown in Figure 1.3. More details of research methodology are provided in Chapter 3.1.6 body structure of the ThesisThe thesis is structured on the basis of fivesome chapters, which represent the different stages that are involved in the overall research process. Chapter 1 has covered the research context, current problems, intent and expected contribution of the studies.Chapter 2 provides an extensive critique of definition of intangible assets, intangible assets value and the Balanced notice strategic mapping. This detail provide support to fancyual model of the study and the set of research hypotheses of the study which links learning and growth, internal process and external structure to business performance through cause-effect relationship.Chapter 3 presents the step-by-step research methodology used to conduct the study. It illustrates a trudge of important methodological iss ues including the research design, sampling, questionnaire development process, data collection and mensuration of model variables. The Structural Equation Modeling (SEM) technique is soon explained.Chapter 4 provides results of validity testing of the constructs and hypotheses of the present study by using EQS program for SEM technique and Statistical Package for Social Science (SPSS) program. not all the results of the main research hypotheses testing model, but also other executable models are explored.Chapter 5 presents a summary of the major findings and conclusions of the study. It also suggests the semipermanent strategic implications of the study finding for top management. Finally, consideration is given to the limitations of this empirical investigation and suggestions are make for potential directions and strategies for future research. literature examineThis chapter reviews the definition of intangible assets and its value. The previous correlation empirical resea rch between intangible assets and performance are reviewed.2.1 IntroductionThere have been a large number of studies in intangible assets during the last two decades (see Figure 2.1). intangible asset assets are involved in the customers, external structure, human resources, and internal process. The intangible assets are defined as non-financial assets without physical sum that are held for use in the production or supply of goods or function or for rental to others, or for administrative purpose (Epstein and Mirza, 2005). impalpable asset is an accounting term, but knowing groovy is a noun used in the management field. They both refer to the same thing. Therefore, Edvinsson and Malone (1997) and Tseng and Goo (2005) pointed out that intangible assets and adroit capital are synonyms. intangible asset assets are placeable and controlled by the enterprise as a result of past events, and from which future economic benefits are expected to flow.Figure 2.1 Research development on intangible assets2.2 Intangible Asset Element ClassificationSeveral studies have variously attempted to categorize intangible assets as summarized in remit 2.1. Some compartmentalisations are in more common use than others. hold over 2.1 Approaches for the categorization of intangible assetsThe purpose model of the higher up intangible assets researchers is summarized by Bontis (2000) in send back 2.2.Table 2.2 Purpose of intangible modelIn Table 2.1 and Table 2.2, there are the intangible elements correspond in each study. Wingren (2004) proposed that framework the correspond to intangible assets framework presented by Sveiby (1997) and Kaplan and Norton (1992) in Figure 2.2.Wingren (2004) mentioned that the Balanced placard is generally animate being for internal development and evaluating the market value of the company for long run. Bose and doubting Thomas (2007) implemented the concept of Balanced scorecard to a company and they claimed that the formulating of Bala nced carte fits the strategic use up of the organization to achieve sustainable competitive advantage. The Balanced Scorecard encapsulates the short and long-term strategies. The motivation and evaluation of employee to achieve goal in BSC is kind of than using it just as a measuring bill.When intangible assets are addressed and defined, there are four practical approaches to measure the intangible assets (Luthy, 1998)1. Direct Intellectual Capital Method (DIC)Estimate the value of intangible assets by identifying its various components. Once these components are identified, they can be outright evaluated, either individually or as an aggregated coefficient.2. foodstuff capitalization Method (MCM)Calculate the difference between a companys market capitalization and its argumentholders equity as the value of the mind capital or intangible assets.3. Return on Asset Method (ROA)Average pre-tax mesh of a company for a period of time are divide by the reasonable tangible asse ts of the company. The result is a company ROA that is then compared with its industry fairish. The difference is multiplied by the companys average tangible assets to forecast an average annual earning from the intangibles. Dividing the above value of average earnings by the companys average cost of capital or an provoke rate once can provide an estimate of the value of its intangible assets or intellectual capital.4. Balanced Scorecard Method (BSC)The various components of intangible assets or intellectual capitals are identified and indicated. Indices are generated and reported in scorecards or graphs. Wingren (2004) has chosen to use the BSC concept because BSC contains outcome measures and the performance driver of outcomes, linked together in cause-effect relationships. There are linkages between customer, internal process and learning/growth with financial performance. The financial performance is the outcome and visible to the observers.2.3 Intangible Assets in Balanced ScorecardAmong the above four approaches, the Balanced Scorecard is by far the most well-known, although its original intent was not meant to be the measure for intangible assets, as discussed by Marr and Adams (2004) and Mouritsen et al. (2005). The Balanced Scorecard may be used to measure all the intangible assets in Table 2.1. Bose and Thomas (2007) recently applied the Balanced Scorecard in an empirical study of the Foster Brewing Group. The formulating of a scorecard that best fits the strategic interest of the organization is considered vital. In their view, the Balanced Scorecard is never genuinely fatten out because the business environment (new competitors, changing customer demand, etc.) is dynamic and endlessly evolving.As is already well-known, the Balanced Scorecard was introduced by Kaplan and Norton (1992) as a tool to link financial performance with non-financial performance dimensions learning and growth, internal process and customer perspectives. Linkages and relationships between customers, internal process and learning/growth with financial performance are shown in Figure 2.3. The Balanced Scorecard acts as a quantity system, a strategic management system, and a conversation tool. Seggie et al. (2007) made an argument for the Balanced Scorecard to be the measurement tool in marketing to measure non-financial assets and provide the organization with a long-term perspective. The Balanced Scorecard is at least partially forward-looking and partially geared toward the long-term performance of the firm. The Balanced Scorecard concept has been examined the performance measurement of bonus plan in major financial services firm. Ittner et al. (2003) recommended that the future research on Balanced Scorecard bankers acceptance and performance consequences must move to encompass the entire implementation process..The concept of cause-effect relationship separates the Balanced Scorecard from other performance management systems. The measures be on the scorecard should be linked together in a series of cause-effect relationships to tell the organizations strategic story. Increasing promotional expenses will lead to the increase in brand value. Increased brand value will lead to higher sales revenueThe investment of human capital will create the continuous learning and growth in the organization. When the employees have more experience and knowledge, they can create the internal process which serves and fulfills customer satisfaction. The profit and revenue are the final outcomes of this causal chain.Heskett et al. (1994) explained that the linkage of the above model that investment in employee training leads to improvement in service quality. conk out service quality lead to higher customer satisfaction. high customer satisfaction leads to increase customer committal. Increased customer fealty generates increased revenues and margins.The following are five principles of successful Balanced Scorecard users (Kaplan a nd Norton, 2004)1. circle change through executive leadership2. Translate the strategy into operational term3. Align the organization to the strategy4. Make strategy everyones transmission line5. Make strategy a continual processIntangible assets can be considered very much part of the Balanced Scorecard. Intangible assets are linked mainly to the marketing and human resources. Following is the review of intangible assets in Balanced Scorecard by Kaplan and Norton (1992) and intangible asset monitored by Sveiby (1997) are reviewed. By using the categories developed by third house (1993), Sveiby (1997), Shaikh (2004) and Roos et al. (1997) reviewed and classified the intangible assets into a framework of internal structure, external structure, and employee competence as shown in Table 2.3.Table 2.3 Framework of intellectual capital/ intangible assets indicatorsFrom the above table, the intangible assets are reviewed as follows.1. Learning and GrowthThe learning and growth is the c apacity of employee to act in a wide variety of situations. Employee is the most valuable asset of the company in the exceedingly competitive market. It is the one asset that creates uniqueness to the company and differentiates the company from the competitors. Sveiby (1997) forceful employee mental ability as a key asset for organization growth. Employee satisfaction refers primarily to job and what employees perceive as offerings. Employee satisfaction is positively related to organizational commitment. There are several studies mentioned that human resource is effect to business performance. Huselid (1999) and Hand (1998) have reported the existence of a positive and hearty relationship between investments in human resources and the market value of companies. Huselid and Becker (1997) appoint that there is a strongly positive relationship between a high performance human resource systems and firm performance. Bontis et al. (2000) found that human capital had positive effect on customer retention and loyalty regardless of industry type. Hitt et al. (2001) and Hurwitz et al. (2002) found that human capital has a positive effect on performance. Also, human capital is shown to have apply cause-effect relationships with strategy and firm performance. Moon and Kym (2006) confirmed that human capital, structural capital and relative capital have direct impact on intellectual capital. Liu and Tsai (2007) surveyed 560 managers from major Taiwanese hi-tech companies and found that knowledge management has a positive effect on operating performance. Lin and Kuo(2007) also investigated that human resource management influences operational performance indirectly through organizational learning and knowledge management capability.Knowledge is one of learning and growth perspective. In knowledge era, the knowledge management has been widely studies. The knowledge is lost by the organization when the employees leave the firm (Ordonez de Pablos, 2004). McKeen et al.( 2006) founded that knowledge management was positive solid to overall organization performance (product leadership, customer intimacy and operational excellence) which is part of internal and customer perspectives in Balanced Scorecard. Organization performance was significant to financial performance. There was no significant direct relationship between knowledge management and financial performance. The knowledge sharing is a key issue in order to enhance the innovation capability that is one of internal process (Saenz et al., 2009). There is also the linkage of learning and growth and internal process. Forcadell and Guadamillas (2002) studies a firm used knowledge management to develop a process of continuous innovation which is in the internal business process perspective.2. Internal ProcessThe internal process includes patents, concepts, models, information technology systems, administrative systems and organizational culture (Aaker, 1991). Such leading companies as GE, Sony, IBM, or carrefour used to cover a wide variety of products, but afterwards finding that they could not sustain all product lines, they switched to selective products, while improving the intangible factors, quality and innovation. Deng et al. (1999) suggested that patent attributes are statistically associated with stock return and market to book ratio. Research and Development is one of intangible assets which is the most importance performance. Chu et al. (2008) founded that the valuation of assets and long-term focused in operation of US ICs firms are higher than the firms in Taiwan.3. External StructureThe external structure includes relationship with customers and suppliers. The Balanced Scorecard is concerned completely customer value proposition, but the external structure covers supplier. The external structure also encompasses brand-names, customer loyalty, customer satisfaction and the companys reputation or goodwill.In the brand valuation terminology, brand is a large bundle of trademarks and associated intellectual stead rights. Cravens and Guilding (1999) reported that brand valuation is one of the most good marrow for business to bring accounting and marketing closer for the purpose of strategic brand management and effective means of communication between marketing and accounting. A branded business valuation is based on a discounted cash flow analysis of future earnings for that business discounted at the appropriate cost of capital. The value of the brand business is made up of a number of tangible and intangible assets. There are 2 brand evaluation models 1) research-based approaches measure consumer behavior and attitudes that have an impact on the economic performance of brands. No financial value on brands is in this model 2) purely financially driven approaches.Relationship Between Learning and Growth in BusinessRelationship Between Learning and Growth in BusinessIntroductionThe introductory chapter begins with a description of the context of the present study and a presentation of the fundamental issue addressed in this empirical investigation. The significance of intangible assets in knowledge era, objectives, conceptual framework and contribution value of this study is also addressed in this chapter.1.1 Research ContextThis section presents the broad context within which this empirical investigation is undertaken. The current problems and significance of intangible assets in knowledge era are explained.Traditionally, profit and loss figures in the balance sheet and annual financial reports are used as the main financial performance indicators for the action previously taken monitoring and crafting short term strategies. Accounting for intangible assets starts with documenting the various categories of expenses. Profit (or loss) is derived from the financial difference between sales revenue and operating cost. The costs include the expenses in brand building, customer database, training, product development, information technology, etc. These are usually treated as part of the operating cost and marketing expenses. The investment of tangible assets such as equipment, machinery, building, etc. is also recorded in balance sheet. This simple accounting record mechanism is no longer sufficient in the knowledge based economy. There is no linkage with long term strategies to compete with global competitors and survive in dynamic economic. Since an increasing share of market value in this era is not represented by inventory or physical assets. Investments in intangible assets are usually not documented in a proper systematic manner because of data non-availability. Consequently, reasonable estimates of the future performance potential of an organization could not be provided to the management. It is intriguing to note that the cause-effect relationships between marketing, production and human resource and financial performance have not so far been made operational.Prior to the knowledge era, business lived in the world of tangibles, which worked well with the traditional accounting practices. However, things are different in todays world of intangibles. Modern management style and strategic crafting have adapted in response to global competition and volatile economic environment. The industrial age management has been replaced by the knowledge age leadership, with corresponding transformational effects on the economy and workplace (Figure 1.1). The focus on tangible assets in the industrial age has shifted to intangible assets in the knowledge age. This paradigm shift encourages organizational employees to utilize their knowledge in line with organizational goals. Globalization is the main driver of knowledge economy. Toffler (1990) proposed knowledge as the key success factor in the present competition. Knowledge can be transferred by information flow from manufacturers to customers. Organization knowledge could be frequently managed by well-organized people in organiz ation. Knowledge and information technology form an important part of intangible assets. With the realization of this paradigm shift, issues concerning intangible assets are now more widely researched and practiced.Figure 1.1 The shift in management style from industrial age to the knowledge ageIntangible assets are of increasing importance for the corporate value creationprocesses of all kinds of organizations. In 1978, intangible assets were determined to constitute only 5% of all assets, while they become 78% of all assets today. Some 50 to 90 percent of the value created by a firm in todays economy is estimated to come from the management of the firms intellectual capital rather than from the use and production of material goods (Guthrie and Yongvanich, 2004). Some public and private sector organizations do not attempt to incorporate the value of intangible assets. Sonnier et al. (2007) examined 150 high technology companies and found that management may want to reduce the level of disclosure to conceal sensitive strategic information in order to maintain a competitive advantage. As such, management reporting and financial statements will become increasingly irrelevant as a tool supporting meaningful decision making. Forward-thinking management has to ensure that intangible assets are identified, monitored, built and leveraged. Financial profit alone could not guarantee the long term survival of companies. To be sustainable, companies need to understand and be able to manage intangible factors, including organizational learning and growth, internal process and external structure. Management that aspires for sustainable business growth and industrial leadership in the twenty-first century has to focus on superior management skills and knowledge under limited resources.Augier and Teece (2005) and Johanson (2005) reported that human capital, knowledge and other intangible assets have emerged as key to business performance in the economic systems. The intangib le assets are the competitive edge over competitors. Srivastava et al. (1998) suggested the framework linking market-based assets to shareholder value which could be considered as the subset of present study. The market investment in brand and customer-profile databases leads to cash flows via a combination of price and share premiums, faster market penetration, reduced distribution, sales and service costs, and increased loyalty and retention. Brands are economic assets which are to create value shareholders and develop competitive advantage (Doyle, 2001). During the last three decades, brand is widely recognized as playing the key role in business. Brands influence customer choice, but the influence varies depending on the market in which the brand operates. Ittner (2008) suggested several previous studies that provided at least some evidence that intangible asset measurement is associated with higher performance. Several previous studies are limited by over-reliance on perceptual satisfaction or outcome variables, inadequate controls for contingency factors, simple variables for capturing complex measurement practices, and the lack of data implementation practice.In this study, the Balanced Scorecard strategy map (Kaplan and Norton, 2004) is chosen to provide a framework to illustrate how strategy links intangible assets to value creating processes. The reasons for choosing Balanced Scorecard as the stage to build the framework for the present research are as follows First, Balanced Scorecard is a practical approach to measure the intangible assets that has been widely used in a variety of organizations over the past two decades. Second, through the strategy map concept, Balanced Scorecard provides the linkage the relationship between intangible assets and business performance including the interrelationship between intangible assets elements 1) Learning and growth affect internal process 2) Internal process affects external structure 3) External structure affects business performance. The measures in the four perspectives are linked together by cause-effect relationships. The company builds the core competence and training to support the internal process. The internal process creates and delivers the customer value proposition. When the customers are satisfied, the sales and profit are delivered in terms of financial performance which is the key measure of business performance.1.2 Research ObjectivesSince developed economies have become knowledge-based and technology intensive, view of the firm has importantly changed and intangible assets have become fundamental determinants of value and control. There are three fundamental elements of intangible assets which are learning and growth, internal process and external structure (Sveiby, 1997 Kaplan and Norton, 2004). The ultimate goal of firm is to maximize the business performance (financial performance, sales performance and customer fulfillment).This study aims to establish empiricall y the cause-effect relationship between learning and growth, internal process, external structure and business performance, including the interrelationships between the elements leading to business performance.1.3 Expected Contributions of the StudyThere are two key areas of expected outcomes of the study. First, the impact of intangible assets on business performance is expected to be empirically established. In particular, the cause-effect relationship between learning and growth, internal process and external structure would be identified and analyzed. This is so that the detail underlying the relationships can be implemented in practice.Second, it is expected that the effect of business size, business sector and establishment age on the causal links between intangible assets and business performance would be established. As there are various types of firms business (service and non-service), sizes of business (large and SME), establishment age in the industry, this study would p rovide the pattern of cause-effect relationships between intangible assets and business performance in each business characteristic.Given the expected outcomes, the expected academic contributions of the present study would be to encourage similar studies to establish the causal links between intangible assets and business performance in other types of economies. The study would also provide the foundation for the field of intangible asset managementFor business practitioners, top management will benefit from the understanding of cause-effect relationship and the realization of the importance of intangible assets (learning and growth, internal business process and external structure) and business performance. With the clearer understanding, proper budget allocation and intangible assets management will be more properly focused and controlled to increase sustainable competitive advantage. The intangible assets are the strategic key to a sustainable competitive advantage and future ec onomic profit.1.4 Conceptual FrameworkDuring last decade years, intangible assets are widely expanded and researched. The value of intangible assets is likely to grow over time if the firm undertakes successful intangible assets management. The intangible assets in each fundamental element (learning and growth, internal process and external structure) are selected and classified as shown in Table 1.1. More detail explanation is given in Chapter 2.Table 1.1 Framework of intangible assets indicatorsThe cause-effect relationship is covered in strategic mapping (Kaplan and Norton, 2004). There have also been several studies, e.g. Huselid and Becker (1997), Hitt et al. (2001), Liu and Tsai (2007), that examined the relationship between learning and growth and business performance as explain in more detail in Chapter 2. The main hypotheses in the present study are shown in Figure 1.2.Figure 1.2 Research hypotheses testing modelH1 Learning and Growth is positively related to Internal Proce ssH2 Internal Process is positively related to External StructureH3 External Structure is positively related to Business PerformanceH4 Learning and Growth is positively related to Business Performance1.5 Outline of MethodologyThe research hypotheses formulated in this study were tested in the mail survey or questionnaire of registered company at the Thai Chamber of Commerce. The initial step in the analysis of the data collected focuses on examining the frequency distribution and the mean and standard deviation for each item or variable considered in this research. The next step in data analysis is to assess the validity of measures. Here the study uses item-total correlation, confirmatory factor analysis and the Cronbach alpha coefficient. The initial data analysis, and reliability and correlation analyses are performed using the SPSS statistical package. Furthermore, the structural equation modeling (SEM) EQS program (Bentler, 1995) is used to perform the confirmatory factor analy sis, discriminant validity tests and testing of the structural model. The entire step-by-step model fit process from data collection by field survey questionnaires is shown in Figure 1.3. More details of research methodology are provided in Chapter 3.1.6 Structure of the ThesisThe thesis is structured on the basis of five chapters, which represent the different stages that are involved in the overall research process. Chapter 1 has covered the research context, current problems, purpose and expected contribution of the studies.Chapter 2 provides an extensive review of definition of intangible assets, intangible assets value and the Balanced Scorecard strategic mapping. This detail provide support to conceptual model of the study and the set of research hypotheses of the study which links learning and growth, internal process and external structure to business performance through cause-effect relationship.Chapter 3 presents the step-by-step research methodology used to conduct the st udy. It illustrates a range of important methodological issues including the research design, sampling, questionnaire development process, data collection and measurement of model variables. The Structural Equation Modeling (SEM) technique is briefly explained.Chapter 4 provides results of validity testing of the constructs and hypotheses of the present study by using EQS program for SEM technique and Statistical Package for Social Science (SPSS) program. Not only the results of the main research hypotheses testing model, but also other possible models are explored.Chapter 5 presents a summary of the major findings and conclusions of the study. It also suggests the long-term strategic implications of the study finding for top management. Finally, consideration is given to the limitations of this empirical investigation and suggestions are made for potential directions and strategies for future research.Literature ReviewThis chapter reviews the definition of intangible assets and its value. The previous correlation empirical research between intangible assets and performance are reviewed.2.1 IntroductionThere have been a large number of studies in intangible assets during the last two decades (see Figure 2.1). Intangible assets are involved in the customers, external structure, human resources, and internal process. The intangible assets are defined as non-financial assets without physical substance that are held for use in the production or supply of goods or services or for rental to others, or for administrative purpose (Epstein and Mirza, 2005). Intangible asset is an accounting term, but intellectual capital is a noun used in the management field. They both refer to the same thing. Therefore, Edvinsson and Malone (1997) and Tseng and Goo (2005) pointed out that intangible assets and intellectual capital are synonyms. Intangible assets are identifiable and controlled by the enterprise as a result of past events, and from which future economic benefits are e xpected to flow.Figure 2.1 Research development on intangible assets2.2 Intangible Asset Element ClassificationSeveral studies have variously attempted to categorize intangible assets as summarized in Table 2.1. Some categorizations are in more common use than others.Table 2.1 Approaches for the categorization of intangible assetsThe purpose model of the above intangible assets researchers is summarized by Bontis (2000) in Table 2.2.Table 2.2 Purpose of intangible modelIn Table 2.1 and Table 2.2, there are the intangible elements correspond in each study. Wingren (2004) proposed that framework the correspond to intangible assets framework presented by Sveiby (1997) and Kaplan and Norton (1992) in Figure 2.2.Wingren (2004) mentioned that the Balanced Scorecard is primarily tool for internal development and evaluating the market value of the company for long run. Bose and Thomas (2007) implemented the concept of Balanced Scorecard to a company and they claimed that the formulating of Balanced Scorecard fits the strategic interest of the organization to achieve sustainable competitive advantage. The Balanced Scorecard encapsulates the short and long-term strategies. The motivation and evaluation of employee to achieve goal in BSC is rather than using it just as a measuring tool.When intangible assets are addressed and defined, there are four practical approaches to measure the intangible assets (Luthy, 1998)1. Direct Intellectual Capital Method (DIC)Estimate the value of intangible assets by identifying its various components. Once these components are identified, they can be directly evaluated, either individually or as an aggregated coefficient.2. Market Capitalization Method (MCM)Calculate the difference between a companys market capitalization and its stockholders equity as the value of the intellectual capital or intangible assets.3. Return on Asset Method (ROA)Average pre-tax earnings of a company for a period of time are divided by the average tangible ass ets of the company. The result is a company ROA that is then compared with its industry average. The difference is multiplied by the companys average tangible assets to calculate an average annual earning from the intangibles. Dividing the above value of average earnings by the companys average cost of capital or an interest rate once can provide an estimate of the value of its intangible assets or intellectual capital.4. Balanced Scorecard Method (BSC)The various components of intangible assets or intellectual capitals are identified and indicated. Indices are generated and reported in scorecards or graphs. Wingren (2004) has chosen to use the BSC concept because BSC contains outcome measures and the performance driver of outcomes, linked together in cause-effect relationships. There are linkages between customer, internal process and learning/growth with financial performance. The financial performance is the outcome and visible to the observers.2.3 Intangible Assets in Balanced S corecardAmong the above four approaches, the Balanced Scorecard is by far the most well-known, although its original intent was not meant to be the measure for intangible assets, as discussed by Marr and Adams (2004) and Mouritsen et al. (2005). The Balanced Scorecard may be used to measure all the intangible assets in Table 2.1. Bose and Thomas (2007) recently applied the Balanced Scorecard in an empirical study of the Foster Brewing Group. The formulating of a scorecard that best fits the strategic interest of the organization is considered vital. In their view, the Balanced Scorecard is never really complete because the business environment (new competitors, changing customer demand, etc.) is dynamic and constantly evolving.As is already well-known, the Balanced Scorecard was introduced by Kaplan and Norton (1992) as a tool to link financial performance with non-financial performance dimensions learning and growth, internal process and customer perspectives. Linkages and relation ships between customers, internal process and learning/growth with financial performance are shown in Figure 2.3. The Balanced Scorecard acts as a measurement system, a strategic management system, and a communication tool. Seggie et al. (2007) made an argument for the Balanced Scorecard to be the measurement tool in marketing to measure non-financial assets and provide the organization with a long-term perspective. The Balanced Scorecard is at least partially forward-looking and partially geared toward the long-term performance of the firm. The Balanced Scorecard concept has been examined the performance measurement of bonus plan in major financial services firm. Ittner et al. (2003) recommended that the future research on Balanced Scorecard adoption and performance consequences must move to encompass the entire implementation process..The concept of cause-effect relationship separates the Balanced Scorecard from other performance management systems. The measures appearing on the s corecard should be linked together in a series of cause-effect relationships to tell the organizations strategic story. Increasing promotional expenses will lead to the increase in brand value. Increased brand value will lead to higher sales revenueThe investment of human capital will create the continuous learning and growth in the organization. When the employees have more experience and knowledge, they can create the internal process which serves and fulfills customer satisfaction. The profit and revenue are the final outcomes of this causal chain.Heskett et al. (1994) explained that the linkage of the above model that investment in employee training leads to improvement in service quality. Better service quality lead to higher customer satisfaction. Higher customer satisfaction leads to increased customer loyalty. Increased customer loyalty generates increased revenues and margins.The following are five principles of successful Balanced Scorecard users (Kaplan and Norton, 2004)1 . Mobilize change through executive leadership2. Translate the strategy into operational term3. Align the organization to the strategy4. Make strategy everyones job5. Make strategy a continual processIntangible assets can be considered very much part of the Balanced Scorecard. Intangible assets are linked mainly to the marketing and human resources. Following is the review of intangible assets in Balanced Scorecard by Kaplan and Norton (1992) and intangible asset monitored by Sveiby (1997) are reviewed. By using the categories developed by Hall (1993), Sveiby (1997), Shaikh (2004) and Roos et al. (1997) reviewed and classified the intangible assets into a framework of internal structure, external structure, and employee competence as shown in Table 2.3.Table 2.3 Framework of intellectual capital/ intangible assets indicatorsFrom the above table, the intangible assets are reviewed as follows.1. Learning and GrowthThe learning and growth is the capacity of employee to act in a wide va riety of situations. Employee is the most valuable asset of the company in the highly competitive market. It is the one asset that creates uniqueness to the company and differentiates the company from the competitors. Sveiby (1997) emphasized employee capability as a key asset for organization growth. Employee satisfaction refers primarily to job and what employees perceive as offerings. Employee satisfaction is positively related to organizational commitment. There are several studies mentioned that human resource is effect to business performance. Huselid (1999) and Hand (1998) have reported the existence of a positive and significant relationship between investments in human resources and the market value of companies. Huselid and Becker (1997) found that there is a strongly positive relationship between a high performance human resource systems and firm performance. Bontis et al. (2000) found that human capital had positive effect on customer retention and loyalty regardless of industry type. Hitt et al. (2001) and Hurwitz et al. (2002) found that human capital has a positive effect on performance. Also, human capital is shown to have moderate cause-effect relationships with strategy and firm performance. Moon and Kym (2006) confirmed that human capital, structural capital and relational capital have direct impact on intellectual capital. Liu and Tsai (2007) surveyed 560 managers from major Taiwanese hi-tech companies and found that knowledge management has a positive effect on operating performance. Lin and Kuo(2007) also investigated that human resource management influences operational performance indirectly through organizational learning and knowledge management capability.Knowledge is one of learning and growth perspective. In knowledge era, the knowledge management has been widely studies. The knowledge is lost by the organization when the employees leave the firm (Ordonez de Pablos, 2004). McKeen et al.(2006) founded that knowledge management was p ositive significant to overall organization performance (product leadership, customer intimacy and operational excellence) which is part of internal and customer perspectives in Balanced Scorecard. Organization performance was significant to financial performance. There was no significant direct relationship between knowledge management and financial performance. The knowledge sharing is a key issue in order to enhance the innovation capability that is one of internal process (Saenz et al., 2009). There is also the linkage of learning and growth and internal process. Forcadell and Guadamillas (2002) studies a firm used knowledge management to develop a process of continuous innovation which is in the internal business process perspective.2. Internal ProcessThe internal process includes patents, concepts, models, information technology systems, administrative systems and organizational culture (Aaker, 1991). Such leading companies as GE, Sony, IBM, or Ford used to cover a wide variet y of products, but after finding that they could not sustain all product lines, they switched to selective products, while improving the intangible factors, quality and innovation. Deng et al. (1999) suggested that patent attributes are statistically associated with stock return and market to book ratio. Research and Development is one of intangible assets which is the most importance performance. Chu et al. (2008) founded that the valuation of assets and long-term focused in operation of US ICs firms are higher than the firms in Taiwan.3. External StructureThe external structure includes relationship with customers and suppliers. The Balanced Scorecard is concerned only customer value proposition, but the external structure covers supplier. The external structure also encompasses brand-names, customer loyalty, customer satisfaction and the companys reputation or goodwill.In the brand valuation terminology, brand is a large bundle of trademarks and associated intellectual property r ights. Cravens and Guilding (1999) reported that brand valuation is one of the most effective means for business to bring accounting and marketing closer for the purpose of strategic brand management and effective means of communication between marketing and accounting. A branded business valuation is based on a discounted cash flow analysis of future earnings for that business discounted at the appropriate cost of capital. The value of the brand business is made up of a number of tangible and intangible assets. There are 2 brand evaluation models 1) research-based approaches measure consumer behavior and attitudes that have an impact on the economic performance of brands. No financial value on brands is in this model 2) purely financially driven approaches.