Figure 3.1
Conceptual Model of Impact of Intellectual Capital on Firm Performance for Firms with Different Strategic Orientation
Source: developed for the research
3.2 Samples Definition
Financial information on publicly traded hospitality firms was downloaded from the Taiwan Stock Exchange Inc. & Gre Tai Securities Market, Hong Kong Stock Exchange (SEHK) and COMPUSTAT database. Financial annual reports’ data is extremely valuable, because uniform systems of accounts are used, meaning: the data
CUSTOMER CAPITAL HUMAN CAPITAL
FIRM PROFITABILITY
DIFFERENTIATION STRATEGIC ORIENTATION
STRUCTURAL CAPITAL
LOW-‐COST LEADERSHIP STRATEGIC ORIENTATION
H2c H3c
H1 H2a H2b
H3a H3b
H4b H4a
H5a H5b
H5c H4c
is consistent and standardized, which allows the researcher to identify and measure key variables. The initial sample consisted of 36 accommodation providers, 16 of which were situated in Hong Kong, and 20 in Taiwan. However, the researcher had to give up industry players from Hong Kong, because the financial information of all of them was given only as part of a consolidated group report. We first tried to calculate the necessary information out using the percentage ratio, but later realized that this data would be untrustworthy and unreliable. Hence due to inability to obtain reliable hotel-specific information, the researches declined the data from Hong Kong. The sample size was drawn from the 20 upscale hotels in Taiwan. Our data span the years 2009-2011. Each hotel’s yearly performance was counted as a unit of observation.
However, the complete data required for our analysis were not available for all firms for all years. The final sample, consisting of 33 observations, included data on 11 hotels. Research participants are shown in Table 3.1.
Our sample includes only upscale and luxury full-service hotels, which provide on-site food and beverage and distinguish themselves through their services, facilities and amenities. Even though from consumer point of view all of the hotels belong to same category, from the managerial point of view, they might implement different strategic orientation.
According to Koontz and O’Donnell (1968), strategies denote a general program of action and deployment of emphasis and resources toward the attainment of comprehensive objectives, the deployment of resources to attain these objectives and the major policies to be followed in using these objectives. Strategies concern the direction in which tangible and intangible resources will be applied in order to maximize the chance of achieving selected objectives. Hence, the strategic orientation of each hotel weather low-cost or differentiation can be determined by its behavior towards spending and pricing, by the program of actions and their execution.
Besides, as mentioned before recent scholars and practitioners question if differentiation strategy can lead to market share leadership which, in turn, can lead to low cost; and the opposite, if under low-cost leadership it is still possible to charge a high price for product or service, depending on firm’s positioning strategy and target
market. Given these uncertainties, we define strategic orientation of each individual hotel i at time t as a simultaneous function of the operating expense ratio and hotel’s pricing strategy:
Strategic Orientation i,t = f(OERi,t PSi,t).
Operating expense ratio was used to clarify what it costs to operate each piece of property in our sample compared to its income. Operating expense ratio was calculating by the following formula:
OERi,t =(OCi,t + OEi,t) / NSi,t,
where OERi,t is an operating expense ratio for hotel property i at time t; OCi,t is operating costs associated with administering a business on a day to day basis, including directly related to producing or manufacturing a good or service costs for hotel property i at time t; OEi,t is operating expenses that a business incurs as a result of performing its normal business operations for hotel property i at time t (such as payment of employees wages and salaries, funds allocated towards research and development, etc.); and NSi,t is net sales generated by a hotel property i at time t.
Hotels’ cost advantage was compared according to and based on the results of operating expense ratio. This ratio also served as a platform to differentiate low-cost leaders from those who spend more among research participants.
To perform the pricing analysis, prices per room that lodgers charge their customers were compared among the sample hotels. In order to avoid bias connected with different channel agreements between hotels and various distributors, which could cause different pricing strategy per room, the same distribution channel was chosen;
besides, to eliminate product features’ differences the same room category was selected for comparison analysis: standard room for 2 persons without breakfast.
Eventually, using the collected data a descriptive statistical analysis was performed, and researchers could compare all the hotels on the basis of their expenditure and pricing policy, then, finally, differentiate sampled properties into two groups according to their strategic orientation (low-cost or differentiation).
To conclude, the finalized sample consisted of 11 listed hotels situated in Taiwan:
four of which pursued low-cost strategic orientation and 7 of which pursued differentiation strategic orientation, however in the current research we have made a time series analysis during three years (2009-2011), so were able to enlarge the
sample size to 33 firm/year of data, 12 of which summarized low-cost strategic orientation data and 21 of which are representatives of firms pursuing differentiation strategy. Research participants information is summarized in Table 3.1.
Table 3.1
Research participants
Low-cost leaders Differentiators
Number of observations 12 firm/year 21 firm/year
Research participants Chateau Beach Resort
The main objective of this study is to examine the impact of key types of intellectual capital investments on firm profitability for Taiwanese lodging industry participants.
To perform an analysis, intellectual capital expenditures impact on firm performance was tested over time. Quantitative analysis was used in main objective examination.
Pearson product-moment correlation coefficient was used to measure the strength and direction of dependence between investments in intellectual capital and firm performance. Multiple regression analysis was conducted in order to estimate the impact of investment on profitability.
Regression models
As long as we are estimating the impact of investment on the firm performance, productivity measurement approach has to be used. Traditionally, the production function relates output to labor and capital resources input, however according to Hall, 1993 another approach could be used for service industry, where productivity