Intellectual Capital Disclosure Quality Changes in the Biotechnology Industry, 2003-10

Abstract

The purpose of this research project was to examine the voluntary disclosure quality for intellectual capital by Australian biotechnology companies between 2003 and 2010. Measurement was made in the annual reports of the same 28 biotechnology firms in 2003, 2006 and 2010. Content analysis of narrative and measurement items, based on Sveiby’s ‘Intangible Assets Monitor’ categories (Internal, External and Human Capital) were used to accurately record the quality of voluntary ICD. Although expected, there was no demonstrable increase in the quality of voluntary ICD measured by Wilcoxon Signed Rank Test. In fact, the only significant change in quality of ICD reporting in the firm’s annual reports was a significant decrease in ‘Internal Capital’ of the type most commonly recorded for intellectual property, financial relations and corporate culture. Key success factors for ‘Human Capital’ ICD, for example staff qualifications and know-how, or ‘External capital’ ICD, like those about collaborations, licensing agreements and grant funding, were certainly not absent from disclosures, but an expected increase in quality was not detected. A limitation of this study is its Australian context. Financial managers’ distraction by 2006 IFRS harmonization (intangible asset balance sheet de-recognition) and insulation of the Australian equities market to recent global events may partly explain our observation.