The Influence Of Intellectual Capital On Financial Performance Of Manufacturing Firms In Tanzania

ABSTRACT

Intellectual capital is considered as a knowledge that is of value to the business

organization. Despite vast of studies in intellectual capital (IC), the status has

remained unknown with regard to Africa, Tanzania in specifics. This research

intended to study the influence of intellectual capital on financial performance of

manufacturing firms in Tanzania. The study employed quantitative research

approach and diagnostic research design to measure the influence of intellectual

capital on financial performance of manufacturing firms in Tanzania. The the sample

of this study consisted of six listed domestic manufacturing industries. The nature of

the data used was secondary, collected from Dar es Salaam Stock Exchange (DSE)

official website. The correlation and multiple regressions was used to measure the

degree of association/effect uniquely and collectively between each of the

independent variable (human capital efficiency, structural capital efficiency and

capital employed efficiency) and the return on capital employed. On testing the

relationship between variables, the study found a weak insignificant relationship

between Human Capital Efficiency (HCE) and ROCE. This implies that, HCE did

not have significant explanatory power to the model. The study further found,

significant positive relationship between Structural Capital Efficiency (SCE) and

financial performance of manufacturing firms in Tanzania. Lastly, the study found a

strong positive correlation between the Capital Employed Efficiency (CEE) and

ROCE in Tanzania. The study recommended that, the management should identify

and evaluate the role of knowledge in the company and match the company revenues

with the knowledge assets that produce the revenue. Furthermore, they should

develop a strategy for investing in and exploiting the company’s intellectual capital

assets, especially human capital.