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This research applies a new accounting tool for measuring the 'value creation' efficiency of a company, the Value Added Intellectual Coefficient (VAIC TM) of Pulic (1998). It also examines its correlation with corporate performance, based on the 2003 annual report from 80 Taiwan listed technologies firms. After modifying the model, applications show that the index of VAIC had a significantly positive correlation with profitability (ROA) and market valuation (MB), and a negative correlation with productivity (ATO), three aspects of a firm's performance. The findings suggest that technological industry in Taiwan is capable of transforming intangible assets such as intellectual capital to high value added products or services, as claimed by Pulic (2004). Tests of VAIC and measures of corporate performance suggest that there are certain represented the time lag relationships between the two. 1. Introduction In a knowledge economy, there is a difference between the modern approach of value creation and the traditional way of monitoring operations. This difference in business activities is due mainly to; the introduction of knowledge, an entirely different position of labor and changes in structural expenditures. In this respect, labour and capital are the primary factors in determining corporate wellbeing. (Bornemann 1999; Pulic 2000; Firer & Williams 2003; Mavridis 2004). Practically, three types of capital are found in a company: financial, physical and intelligent capital (Goh & Lim 2004), whose composition determines the production of low and high value added products or services. Since the traditional underlying factors of production have changed, there is a need to develop alternative economic theories about the information necessary for intelligent capital performance and perceptions of corporate performance. Conventional accounting systems have been developed for manufacturing economies and for measuring the value of financial and physical assets, but with intangibles they have found it difficult to account for the rate of change. Except for accounting systems, there are several internal and external measures of intelligent capital. The Skandia Navigator was one of the first internal measures to calculate and visualize the value of intangible capital, which intelligent capital (IC) represents as the difference between market and book value (Leif 1997). Others are the human resource accounting method, the intangible assets monitoring method, and the balanced scorecard method. External measures include market-to-book value, Tobin's Q and Real Option theory (Shaikh 2004). Mainly because of the lack of a commonly accepted measuring system, an important empirical question remains: Do traditional measures of corporate performance effectively capture the new emerging intelligent-based measures of the same constructs? This empirical study applies a new accounting tool of VAICTM, or the Value Added Intellectual Coefficient, developed by Ante Pulic (1998) as his trade mark- and his colleagues at the Austrian IC Research Centre (Pulic 2000; Borhemann 1999) which is designed to help managers leverage their company's potential. The key contribution of VAIC is to provide a standardized and consistent measure that can be used to conduct comparative analyses across various sectors locally and internationally. This potential of VAIC is motivated by growing evidence in the literature, much of the research stemming from the work of Pulic ( 1998). Bornemann ( 1999) found a correlation between intelligent potential and economic performance. Williams (2001) discovered that a firm with a high level of VAIC it appears to reduce its 'intelligent disclosures' when performance reaches a threshold level for fear of competitive advantage being lost. Moreover, Firer and Williams (2004) found that the associations between the efficiency of value added (VA) and profitability, productivity and market valuation are generally limited and mixed. …
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