Main Article Content
This study examines the impact of innovation on firm performance and how intellectual capital (IC) moderates the association between innovation and firm performance. We apply an innovation index that measures the frequency of innovative related words, which appear in firm financial reports to proxy for innovation. IC is estimated through the value-added IC (VAICTM) model. This study analyses Chinese firm-year observations of financial profitability (firm value) datasets, which total 19,152 (18,276) over the years from 2007 to 2019. Results indicate that the innovation index is positively related to financial profitability and firm market value. Moreover, the moderating outcomes suggest that IC boosts the positive relationship between innovation index and firm performance. Overall, this study highlights the importance of having innovation and IC together for gaining firm competitive advantages and progressing profitably. That is, firms should be innovative and must manage their IC well.
This work is licensed under a Creative Commons Attribution 4.0 International License.
Agostini, L., Nosella, A., & Filippini, R. (2017). Does intellectual capital allow improving innovation performance? A quantitative analysis in the SME context. Journal of Intellectual Capital, 18(2), 400–418. https://doi.org/10.1108/JIC-05-2016-0056
Alvino, F., Di Vaio, A., Hassan, R., & Palladino, R. (2021). Intellectual capital and sustainable development: A systematic literature review. Journal of Intellectual Capital, 22(1), 76–94. https://doi.org/10.1108/JIC-11-2019-0259
Amin, S., & Aslam, S. (2017). Intellectual capital, innovation and firm performance of pharmaceuticals: A study of the London Stock Exchange. Journal of Information and Knowledge Management, 16(02), 1750017. https://doi.org/10.1142/S0219649217500174
Anderson, R. C., Mansi, S. A., & Reeb, D. M. (2003). Founding family ownership and the agency cost of debt. Journal of Financial economics, 68(2), 263–285. https://doi.org/10.1016/S0304-405X(03)00067-9
Androsch, F. M., & Redl, U. (2017). We aim to win–How innovation is managed at voestalpine. BHM Berg-und Hüttenmännische Monatshefte, 162(9), 389–396. https://doi.org/10.1007/s00501-017-0641-4
Ar, I. M. (2012). The impact of green product innovation on firm performance and competitive capability: The moderating role of managerial environmental concern. Procedia-Social and Behavioral Sciences, 62, 854–864. https://doi.org/10.1016/j.sbspro.2012.09.144
Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120. https://doi.org/10.1177/014920639101700108
Barney, J., Wright, M., & Ketchen Jr, D. J. (2001). The resource-based view of the firm: Ten years after 1991. Journal of Management, 27(6), 625–641. https://doi.org/10.1177/014920630102700601
Bhattacharjee, S., & Akter, R. (2022). Intellectual capital efficiency and firm performance: Evidence from an emerging knowledge-economy. International Journal of Learning Intellectual Capital, 19(1), 30–52. https://doi.org/10.1504/IJLIC.2021.10038760
Boeker, W., & Goodstein, J. (1993). Performance and successor choice: The moderating effects of governance and ownership. Academy of Management Journal, 36(1), 172–186.
Buccieri, D., Javalgi, R. G., & Gross, A. (2021). Innovation and differentiation of emerging market international new ventures the role of entrepreneurial marketing. Journal of Strategic Marketing, 1–29. https://doi.org/10.1080/0965254X.2021.1952293
Burton-Jones, A. (2001). Knowledge capitalism: Business, work, and learning in the new economy. OUP Catalogue. Oxford University Press.
Camisón, C., & Villar-López, A. (2014). Organizational innovation as an enabler of technological innovation capabilities and firm performance. Journal of Business Research, 67(1), 2891–2902. https://doi.org/10.1016/j.jbusres.2012.06.004
Chu, Z., Xu, J., Lai, F., & Collins, B. J. (2018). Institutional theory and environmental pressures: The moderating effect of market uncertainty on innovation and firm performance. IEEE Transactions on Engineering Management, 65(3), 392–403. https://doi.org/10.1109/TEM.2018.2794453
Cooke, T. E. (1992). The impact of size, stock market listing and industry type on disclosure in the annual reports of Japanese listed corporations. Accounting and Business Research, 22(87), 229–237. https://doi.org/10.1080/00014788.1992.9729440
Dalwai, T., & Salehi, M. (2021). Business strategy, intellectual capital, firm performance, and bankruptcy risk: Evidence from Oman’s non-financial sector companies. Asian Review of Accounting, 29(3), 474–504. https://doi.org/10.1108/ARA-01-2021-0008
de Zubielqui, G. C., Lindsay, N., Lindsay, W., & Jones, J. (2019). Knowledge quality, innovation and firm performance: A study of knowledge transfer in SMEs. Small Business Economics, 53(1), 145–164. https://doi.org/10.1007/s11187-018-0046-0
Delgado, M. (2011). The role of intellectual capital assets on the radicalness of innovation: Direct and moderating effects. UAM-Accenture Working Papers, 5, 1–27.
Ferreira, J., Coelho, A., & Moutinho, L. (2020). Dynamic capabilities, creativity and innovation capability and their impact on competitive advantage and firm performance: The moderating role of entrepreneurial orientation. Technovation, 92–93, 102061. https://doi.org/10.1016/j.technovation.2018.11.004
Gunday, G., Ulusoy, G., Kilic, K., & Alpkan, L. (2011). Effects of innovation types on firm performance. International Journal of Production Economics, 133(2), 662–676. https://doi.org/10.1016/j.ijpe.2011.05.014
Gupta, S., Malhotra, N. K., Czinkota, M., & Foroudi, P. (2016). Marketing innovation: A consequence of competitiveness. Journal of Business Research, 69(12), 5671– 5681. https://doi.org/10.1016/j.jbusres.2016.02.042
Hamdan, A. (2018). Intellectual capital and firm performance: Differentiating between accounting-based and market-based performance. International Journal of Islamic and Middle Eastern Finance and Management, 11(1), 139–151. https://doi.org/10.1108/IMEFM-02-2017-0053
Hanusch, H., & Pyka, A. (2007). Elgar companion to neo-Schumpeterian economics. Cheltenham, UK: Edward Elgar Publishing. https://doi.org/10.4337/9781847207012
Hizarci?Payne, A. K., ?pek, ?., & Kurt Gümü?, G. (2021). How environmental innovation influences firm performance: A meta?analytic review. Business Strategy and the Environment, 30(2), 1174–1190. https://doi.org/10.1002/bse.2678
Hsieh, C.-H., Ting, I. W. K., Asif, J., & Le, H. T. M. (2020). The role of controlling shareholders in determining investments of intellectual capital among Taiwanese semiconductor companies. Journal of Intellectual Capital, 21(1), 62–86. https://doi.org/10.1108/JIC-05-2019-0091
Hung, K.-P., & Chou, C. (2013). The impact of open innovation on firm performance: The moderating effects of internal R&D and environmental turbulence. Technovation, 33(10–11), 368–380. https://doi.org/10.1016/j.technovation.2013.06.006
Hussinki, H., Ritala, P., Vanhala, M., & Kianto, A. (2017). Intellectual capital, knowledge management practices and firm performance. Journal of Intellectual Capital, 18(4), 904–922. https://doi.org/10.1108/JIC-11-2016-0116
Iazzolino, G., & Laise, D. (2013). Value added intellectual coefficient (VAIC): A methodological and critical review. Journal of Intellectual Capital, 14(4), 547– 563. https://doi.org/10.1108/JIC-12-2012-0107
Imhanzenobe, J. O. (2020). Managers’ financial practices and financial sustainability of Nigerian manufacturing companies: Which ratios matter most? Cogent Economics & Finance, 8(1), 1724241. https://doi.org/10.1080/23322039.2020.1724241
Jin, Y., Hu, Y., Pray, C., & Hu, R. (2017). Impact of government science and technology policies with a focus on biotechnology research on commercial agricultural innovation in China. China Agricultural Economic Review, 9(3), 438–452. https://doi.org/10.1108/CAER-05-2017-0096
Kaliappen, N., & Hilman, H. (2014). Does service innovation act as a mediator in differentiation strategy and organizational performance nexus? An empirical study. Asian Social Science, 10(11), 123–131. https://doi.org/10.5539/ass.v10n11p123
Kemp, R. G., Folkeringa, M., de Jong, J. P., & Wubben, E. F. M. (2003). Innovation and firm performance: Differences between small and medium-sized firms. Zoetermeer, The Netherlands: EIM.
Ko, H. T., & Lu, H.-P. (2010). Measuring innovation competencies for integrated services in the communications industry. Journal of Service Management, 21(2), 162– 190. https://doi.org/10.1108/09564231011039277
Kweh, Q. L., Chan, Y. C., & Ting, I. W. K. (2013). Measuring intellectual capital efficiency in the Malaysian software sector. Journal of Intellectual Capital, 14(2), 310–324. https://doi.org/10.1108/14691931311323904
Kweh, Q. L., Ting, I. W. K., Le, H. T. M., & Nourani, M. (2021). Nonlinear impacts of board independence on debt financing: Contingent on the shareholdings of the largest shareholder. International Journal of Finance & Economics, 26(2), 2289–2306. https://doi.org/10.1002/ijfe.1907
Lakhal, N., & Dedaj, B. (2020). R&D disclosures and earnings management: The moderating effects of IFRS and the global financial crisis. Journal of Financial Reporting and Accounting, 18(1), 111–130. https://doi.org/10.1108/JFRA-10-2019-0129
Leal-Rodríguez, A. L., Eldridge, S., Roldán, J. L., Leal-Millán, A. G., & Ortega-Gutiérrez, J. (2015). Organizational unlearning, innovation outcomes, and performance: The moderating effect of firm size. Journal of Business Research, 68(4), 803– 809. https://doi.org/10.1016/j.jbusres.2014.11.032
Lee, R., Lee, J.-H., & Garrett, T. C. (2019). Synergy effects of innovation on firm performance. Journal of Business Research, 99, 507–515. https://doi.org/10.1016/j.jbusres.2017.08.032
Leitner, K.-H. (2017). Intellectual capital, innovation, and performance: Empirical evidence from SMEs. In J. Tidd (Ed.), Exploiting intellectual property to promote innovation and create value (pp. 255–282). Singapore: World Scientific. https://doi.org/10.1142/9781786343512_0012
Li, C. (2020). Enhancing or inhibiting: The impact of investment in political ties on the link between firm innovation and productivity. International Business Review, 29(2), 101636. https://doi.org/10.1016/j.ibusrev.2019.101636
Li, G., Luo, Z., Anwar, M., Lu, Y., Wang, X., & Liu, X. (2020). Intellectual capital and the efficiency of SMEs in the transition economy China; Do financial resources strengthen the routes? PLOS ONE, 15(7), e0235462. https://doi.org/10.1371/journal.pone.0235462
Lichtenthaler, U. (2009). Outbound open innovation and its effect on firm performance: Examining environmental influences. R&D Management, 39(4), 317–330. https://doi.org/10.1111/j.1467-9310.2009.00561.x
Lim, J.-S., Darley, W. K., & Marion, D. (2017). Market orientation, innovation commercialization capability and firm performance relationships: The moderating role of supply chain influence. Journal of Business & Industrial Marketing, 32(7), 913–924. https://doi.org/10.1108/JBIM-10-2016-0238
Lu, W.-M., Wang, W.-K., & Kweh, Q. L. (2014). Intellectual capital and performance in the Chinese life insurance industry. Omega, 42(1), 65–74. https://doi.org/10.1016/j.omega.2013.03.002
Maji, S. G., & Goswami, M. (2016). Intellectual capital and firm performance in emerging economies: The case of India. Review of International Business Strategy, 26(3), 410–430. https://doi.org/10.1108/RIBS-03-2015-0019
McDowell, W. C., Peake, W. O., Coder, L., & Harris, M. L. (2018). Building small firm performance through intellectual capital development: Exploring innovation as the “black box”. Journal of Business Research, 88, 321–327. https://doi.org/10.1016/j.jbusres.2018.01.025
Mention, A.-L. (2012). Intellectual capital, innovation and performance: A systematic review of the literature. Business and Economic Research, 2(1), 1–37. https://doi.org/10.5296/ber.v2i1.1937
Mubarik, M. S., Naghavi, N., & Mahmood, R. T. (2019). Intellectual capital, competitive advantage and the ambidexterity liaison. Human Systems Management, 38(3), 267–277. https://doi.org/10.3233/HSM-180409
Nadeem, M., Gan, C., & Nguyen, C. (2018). The importance of intellectual capital for firm performance: Evidence from Australia. Australian Accounting Review, 28(3), 334–344. https://doi.org/10.1111/auar.12184
Nekhili, M., Boubaker, S., & Lakhal, F. (2012). Ownership structure, voluntary R&D disclosure and market value of firms: The French case. International Journal of Business, 17(2), 126–140.
Nourani, M., Ting, I. W. K., Lu, W.-M., & Kweh, Q. L. (2019). Capital structure and dynamic performance: Evidence from ASEAN-5 banks. The Singapore Economic Review, 64(03), 495–516. https://doi.org/10.1142/S021759081650034X
O’brien, R. M. (2007). A caution regarding rules of thumb for variance inflation factors. Quality & Quantity, 41(5), 673–690. https://doi.org/10.1007/s11135-006-9018-6
OECD. (2021). Gross domestic spending on R&D (indicator). https://doi.org/10.1787/d8b068b4-en
Piening, E. P., & Salge, T. O. (2015). Understanding the antecedents, contingencies, and performance implications of process innovation: A dynamic capabilities perspective. Journal of Product Innovation Management, 32(1), 80–97. https://doi.org/10.1111/jpim.12225
Porter, M. E., & Stern, S. (1999). The new challenge to America’s prosperity: Findings from the Innovation Index. Washington, D. C.: Council on Competitiveness.
Pulic, A. (2000). VAIC™: An accounting tool for IC management. International Journal of Technology Management, 20(5–8), 702–714. https://doi.org/10.1504/IJTM.2000.002891
Rajapathirana, R. P. J., & Hui, Y. (2018). Relationship between innovation capability, innovation type, and firm performance. Journal of Innovation & Knowledge, 3(1), 44–55. https://doi.org/10.1016/j.jik.2017.06.002
Rousseau, M. B., Mathias, B. D., Madden, L. T., & Crook, T. R. (2016). Innovation, firm performance, and appropriation: A meta-analysis. International Journal of Innovation Management, 20(03), 1650033. https://doi.org/10.1142/S136391961650033X
Saunila, M., Pekkola, S., & Ukko, J. (2014). The relationship between innovation capability and performance: The moderating effect of measurement. International Journal of Productivity and Performance Management, 63(2), 234–249. https://doi.org/10.1108/IJPPM-04-2013-0065
Schumpeter, J. A. (1934). The theory of economic development: An inquiry into profits, capital, credit, interest, and the business cycle (R. Opie, Trans.). Cambridge, MA: Harvard University Press. (Original work published 1911).
Schumpeter, J. A. (2016). Capitalism, socialism and democracy. In R. Blaug, & J. Schwarzmantel (Eds.), Democracy: A reader (pp. 259–264). New York: Columbia University Press. https://doi.org/10.7312/blau17412-059
Secundo, G., Ndou, V., Del Vecchio, P., & De Pascale, G. (2020). Sustainable development, intellectual capital and technology policies: A structured literature review and future research agenda. Technological Forecasting and Social Change, 153, 119917. https://doi.org/10.1016/j.techfore.2020.119917
Semuel, H., Siagian, H., & Octavia, S. (2017). The effect of leadership and innovation on differentiation strategy and company performance. Procedia-Social and Behavioral Sciences, 237, 1152–1159. https://doi.org/10.1016/j.sbspro.2017.02.171
?ledzik, K. (2013). Schumpeter’s view on innovation and entrepreneurship. In S. Hittmar (Ed.), Management trends in theory and practice (pp. 89–95). Slovakia: University of Zilina. https://doi.org/10.2139/ssrn.2257783
Smriti, N., & Das, N. (2018). The impact of intellectual capital on firm performance: A study of Indian firms listed in COSPI. Journal of Intellectual Capital, 19(5), 935–964. https://doi.org/10.1108/JIC-11-2017-0156
Song, M., Im, S., van der Bij, H., & Song, L. Z. (2011). Does strategic planning enhance or impede innovation and firm performance? Journal of Product Innovation Management, 28(4), 503–520. https://doi.org/10.1111/j.1540-5885.2011.00822.x
Ståhle, P., Ståhle, S., & Aho, S. (2011). Value added intellectual coefficient (VAIC): A critical analysis. Journal of Intellectual Capital, 12(4), 531–551. https://doi.org/10.1108/14691931111181715
Thompson, S. B. (2011). Simple formulas for standard errors that cluster by both firm and time. Journal of Financial Economics, 99(1), 1–10. https://doi.org/10.1016/j.jfineco.2010.08.016
Thornhill, S. (2006). Knowledge, innovation and firm performance in high-and low-technology regimes. Journal of Business Venturing, 21(5), 687–703. https://doi.org/10.1016/j.jbusvent.2005.06.001
Ting, I. W. K., & Lean, H. H. (2009). Intellectual capital performance of financial institutions in Malaysia. Journal of Intellectual Capital, 10(4), 588–599. https://doi.org/10.1108/14691930910996661
Ting, I. W. K., Ren, C., Chen, F.-C., & Kweh, Q. L. (2020). Interpreting the dynamic performance effect of intellectual capital through a value-added-based perspective. Journal of Intellectual Capital, 21(3), 381–401. https://doi.org/10.1108/JIC-05-2019-0098
Wadho, W., & Chaudhry, A. (2018). Innovation and firm performance in developing countries: The case of Pakistani textile and apparel manufacturers. Research Policy, 47(7), 1283–1294. https://doi.org/10.1016/j.respol.2018.04.007
Walker, R. M., Chen, J., & Aravind, D. (2015). Management innovation and firm performance: An integration of research findings. European Management Journal, 33(5), 407–422. https://doi.org/10.1016/j.emj.2015.07.001
Wernerfelt, B. (1984). A resource?based view of the firm. Strategic Management Journal, 5(2), 171–180. https://doi.org/10.1002/smj.4250050207
Wernerfelt, B., & Montgomery, C. A. (1988). Tobin’s q and the importance of focus in firm performance. The American Economic Review, 78(1), 246–250.
Yousaf, M. (2022). Intellectual capital and firm performance: Evidence from certified firms from the EFQM excellence model. Total Quality Management & Business Excellence, 33(13–14), 1472–1488. https://doi.org/10.1080/14783363.2021.1972800
Zeng, D. Z. (2017). Measuring the effectiveness of the Chinese innovation system: A global value chain approach. International Journal of Innovation Studies, 1(1), 57–71. https://doi.org/10.3724/SP.J.1440.101005
Zhang, L., Yu, Q., Jin, Z., & Xu, J. (2021). Do intellectual capital elements spur firm performance? Evidence from the textile and apparel industry in China. Mathematical Problems in Engineering, 2021, 7332885. https://doi.org/10.1155/2021/7332885
Zhang, M., Qi, Y., Wang, Z., Pawar, K. S., & Zhao, X. (2018). How does intellectual capital affect product innovation performance? Evidence from China and India. International Journal of Operations & Production Management, 38(3), 895–914. https://doi.org/10.1108/IJOPM-10-2016-0612