Intellectual capital and business start‐up success
| Pages | 180-198 |
| Published date | 01 June 2002 |
| DOI | https://doi.org/10.1108/14691930210424761 |
| Date | 01 June 2002 |
| Author | Iñaki Peña |
| Subject Matter | Accounting & finance,HR & organizational behaviour,Information & knowledge management |
JIC
3,2
180
Journal of Intellectual Capital,
Vol. 3 No. 2, 2002, pp. 180-198.
#MCB UP Limited, 1469-1930
DOI 10.1108/14691930210424761
Intellectual capital and
business start-up success
InÄaki PenÄa
ESTE, Deustuko, Unibertsitatea, Donostia, Spain
Keywords Intellectual capital, Start-ups, Company performance, Entrepreneurship
Abstract While start-up firms create a substantial economic impact on most economies, the
failure rate of start-up firms seems to remain high over time. Few authors have examined the
influence of intellectual capital management on business performance, and when it has been
examined, the focus has been on large, mature and public companies. The purpose of this study is
to analyze the extent to which IC assets are associated with new firm survival and growth. Results
from this study suggest that the human capital of the entrepreneur (i.e. education, business
experience and level of motivation), organizational capital (i.e. firm capacity to adapt quickly to
changes and the ability to implement successful strategies), and relational capital (i.e. development
of productive business networks and an immediate access to critical stakeholders) are important
intangible assets, which seem to be related positively to venture performance.
Introduction
There is a wide feeling of agreement about the significant impact that new and
small firms create on the whole economy. Reynolds (1987) found that 30 percent
of new firms provided between 60-80 percent of the new jobs, sales and exports
in the USA. Policy makers believe that new businesses are not only a driving
force of local economies, but also constitute a motor of change in several
industry sectors. With all these facts in mind, it is not surprising to observe the
emergence of recent public policies which aim to encourage the creation of new
firms (i.e. business incubators, scientific parks, etc.). Numerous studies suggest,
on the other hand, that young firms are fragile and the failure rate of business
start-ups remains high over time. The study by Van de Ven et al. (1984)
concludes that about 54 percent of new businesses survive a year and a
half, and only 25 percent survive six years. Certainly, failure rates are not
homogeneous across industries and the service sector shows the higher
percentage of failed ventures, followed by the retail, manufacturing and high-
tech sectors respectively. Cooper and Dunkelberg (1981) found that 71 percent
of service and retail firms failed after four to five years. After considering all
these facts the study of determinants of the success of new firms really
becomes an opportune topic.
Throughout the last decade, we have witnessed frequent and considerable
discrepancies between book and market values of companies around the world.
An increasing number of scholars and business practitioners believe that this
gap between book and market values can be partially explained by the value
accrued to intellectual capital and other intangible assets. While previous
The current issue and full text archive of this journal is available at
http://www.emeraldinsight.com/1469-1930.htm
Financial support from the Gipuzkoako Foru Aldundia and from the Ministry of Science and
Technology of Spain, grant SEC 2000-0880-CO2, is gratefully acknowledged.
Business start-
up success
181
research on intellectual capital has focused mainly on topics related to the
definition, classification and measurement of intellectual capital (IC), few
authors have examined the relationship between IC assets and business
performance.
The recent work by Bontis et al. (2000) suggests the existence of a significant
positive relationship of intellectual capital with business performance,
regardless of the industry sector. The authors found that organizations' efforts
to manage knowledge and develop their structural capital led to relatively
higher business performance. To support this line of thinking, Sa nchez et al.
(2000) state that intangible assets are important in management processes
since they are considered to be a critical source of sustainable competitive
advantage. Roos et al. (1997) examine the linkage between IC and the value
creation process of a company from a dynamic perspective. The authors
provide important insights regarding the influence of IC tools on the value of an
organization.
Despite the relevance of these recent works, still more empirical work is
needed to confirm the link between IC assets and sustainable supra-normal
profits (Bontis et al., 2000). Apart from shareholder value creation, an IC
management approach can be extremely useful for other types of companies
such as non-public companies, family businesses, and new ventures. The focus
of this study is precisely the analysis of the relationship between the
intellectual capital of a start-up firm and new venture success. The adoption of
an IC managerial perspective on business start-ups is expected to help
entrepreneurs overcome the difficult initial years of their organizations.
Business start-up success can be partially explained by human, organizational
and relational capital elements. Each of these factors deals with intangible
elements such as skills of entrepreneurs, strategic decision making, market
adaptation, networking ability with external stakeholders, and so on. We
assume that, like for stock-market companies, IC assets play also a key role in
explaining the survival and growth of new firms.
Considering both the economic relevance and fragility of business start-ups,
the purpose of this study is to examine the extent to which IC assets explain
new firm survival and growth. This work is an attempt to sort out IC assets
into three conventional blocks (i.e. human capital, organizational capital and
relational capital) and to assess the relationship of each block with new venture
performance by examining data from a sample of business start-ups. Findings
from this study are expected to shed some light on IC determinants of venture
success.
The article consists of five additional sections. The following section is a
brief review of relevant literature on distinct IC frameworks and determinants
of new firm survival and growth. A simplified conceptual model, which relates
IC elements to start-up success, is proposed in part three. Section four deals
with the data and methodology used in our empirical work. After the
discussion of results, the study concludes with a summary of main findings
and implications.
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