Value Added Intellectual Coefficient (VAIC): a methodological and critical review

Purpose – The purpose of this paper is to study, mainly from the point of view of methodologicalaccounting principles, the value added intellectual coefficient (VAIC), introduced by Pulic as a measure ofintellectual capital efficiency (ICE). More specifically, the aim of the analysis is to investigate thestrengths and weaknesses of the VAIC, primarily from the accounting theory perspective.Design/methodology/approach – The approach to the study of Pulic’s contribution is as follows:first the authors submitted Pulic’s methodology to a “conceptual” test, in order to check whether itcontradicts any basic accounting principles. Then the results of this methodological test werecompared to those obtained by the authors who have criticized Pulic’s proposal, in order to check forany concordance or discordance with the literature.Findings – Several authors have discussed the crucial aspects of the VAIC. In this paper the focus isprimarily on Andriessen’s concerns, since they relate to the theoretical accounting aspects of Pulic’sproposal, which is the topic of the paper. First of all, the authors have found that the suggestion of Pulic,centered on the Value Added Income Statement, does not modify or contradict any of the fundamentalaccounting principles. Therefore the criticisms made by Professor Andriessen should be subject to futureresearch. Furthermore the performance measure proposed by Pulic (VAIC) is not a genuine rival to thetraditional methodologies (e.g. the Economic Value Added (EVA)), as instead emerges from Pulic’s papers.VAIC and EVA measure different aspects of the performance and therefore may usefully live together in acontext in which the performance is measured through multicriteria methodologies, such as the BalancedScorecard, Skandia Navigator or Intangible Asset Monitor.Practical implications – The practical implications of the results are: the correct placing ofPulic’s contribution into the accounting principles theory; and the manner for using the VAICmethodology in a multicriteria performance evaluation. The authors believe that both aspects haverelevant implications for business accounting practice.Originality/value – The paper shows that almost all of the misunderstandings of the literaturedebate, regarding Pulic’s proposal, arise from a “semantic shift” generated by the fact that Pulic usesthe terms human capital and structural capital with a completely different meaning from that of theSkandia Navigator. Authors’ hope is that the study described in the paper will contribute to a betterunderstanding of: the way to calculate and to interpret the efficiency of intellectual capital (IC) in acorrect manner; and the role of IC on firm multicriteria performances.