DETERMINANTS OF FIRMS’ PERFORMANCE IN THE NIGERIAN HYDROCARBON INDUSTRY: DOES INTELLECTUAL CAPITAL MATTER?

Abstract

This study adopts the Pulic (2002) VAIC^TM approach as a measure of intellectual capital, to examine the role of intellectual capital in the financial performance of the oil and gas industry in Nigeria. With the aid of panel analysis framework, it was found that aggregated composites of intellectual capital (VAIC) perform less satisfactorily in influencing the financial performance of firms in the oil and gas industry. However, when VAIC^TM was disaggregated into human, relational, and structural capital efficiency, it was discovered that the positive effect of human capital on the financial performance of these firms was cancelled out by the negative effect of structural capital. However, the relational capital efficiency that could have improved the financial performance of these firms has no significant impact on these firms’ performance and, as such, is ultimately responsible for the insignificant overall effect of intellectual capital (VAIC) on the financial performance of firms in Nigeria’s oil and gas industry. One of the implications of these findings is that these firms place much emphasis on human assets and neglect intangible assets such as processes, patents, copyright, research and development, customer care, etc. Also, the current structural capital of the firms in this industry constitutes a drag on their financial performance. Thus, serious attention should be placed on the effective management of firms’ relational and structural capital efficiency in order to ensure a better financial return.