The Impact of the Components of Intellectual Capital on Firm Performance: A Panel Var Approach

The purpose of this paper is to investigate the complex linkage between the three main components of IC, namely, human capital, structural capital and capital employed, and financial performance for companies in Mauritius over the period 2007 to 2020. This study employs a rigorous dynamic panel vector autoregressive model (PVAR) to analyze the contribution of each of the different components of the VAIC index, which include human capital efficiency, structural capital efficiency and capital employed efficiency, to the overall financial performance of the top 152 companies operating in Mauritius over the same time period. To achieve the main research objective of measuring, establishing, and empirically validating the link between the components of intellectual capital on organizational performance, this paper uses data collected for 152 companies operating in Mauritius, which includes the top 100 companies as well as those listed on the Stock Exchange of Mauritius, both on the SEM and the DEM. The empirical findings confirm that a positive relationship exists between all three components and financial performance, although significant only for HCE and SCE. Our results therefore conclude that the driving force of performance lies in human and structural capital.