Intellectual capital and business performance: the role of dimensions of absorptive capacity
| DOI | https://doi.org/10.1108/JIC-11-2018-0199 |
| Pages | 23-39 |
| Date | 28 November 2019 |
| Published date | 28 November 2019 |
| Author | Syed Saad Ahmed,Jia Guozhu,Shujaat Mubarik,Mumtaz Khan,Essa Khan |
| Subject Matter | Accounting/accountancy,Information & knowledge management,HR & organizational behaviour,Accounting & Finance,Knowledge management |
Intellectual capital and business
performance: the role of
dimensions of absorptive capacity
Syed Saad Ahmed and Jia Guozhu
School of Economics and Management, Beihang University, Beijing, China
Shujaat Mubarik
Department of Management Sciences,
Mohammad Ali Jinnah University, Karachi, Pakistan, and
Mumtaz Khan and Essa Khan
Department of Management Sciences,
Bahria University –Karachi Campus, Karachi, Pakistan
Abstract
Purpose –The purpose of this paper is to empirically examine the mediating role of potential and realized
absorptive capacity in intellectual capital (IC) and business performance. It also investigates the direct impact
of the components of IC on business performance.
Design/methodology/approach –Partialleast square-structuralequation modeling (PLS-SEM)was used to
assess the effect of IC dimensions on performance andto analyze the mediating role of absorptive capacityin
this relationship. Data were collectedfrom 192 managers using a surveyquestionnaire with Likertscale items.
Findings –The findings of the study show that potential absorptive capacity does not intervene in the
relationship between the components of IC and those of business performance. However, realized absorptive
capacity, measured as the transformation and exploitation of knowledge, played a positive mediating role in
the relationship between the dimensions of IC and those of business performance. Social capital was also
noted as a weak predictor of business performance, while human capital and organizational capital had a
profound positive influence.
Originality/value –This study contributes to the literature on IC by examining the role of realized and
potential absorptive capacity in the relationship between IC components and firm performance. This research
also helps practitioners recognize the importance of transformation and the exploitation of knowledge for
business performance.
Keywords Performance, Social capital, Intellectual capital, Human capital, Organizational capital,
Absorptive capacity
Paper type Research paper
1. Introduction
In the current challenging business environment, intangible assets, such as learning
capability, human capital, knowledge management and relationships with stakeholders
are now the major sources of competitive advantage (Mubarik et al., 2016; Haskel and
Westlake, 2017; Jones et al., 2018; Rupcic, 2019). The growing importance of intangible
assets has opened up many new areas of research in the last few decades. The amount of
research produced on intellectual capital (IC) has exhibited a sharp upward trend
(Ribière and Walter, 2013). Stewart (1991, p. 4) defined IC as “the intangible assets that
could be used by an organization to create value.”Numerous other definitions and
classifications of IC that use various terminologies have been put forward; however, three
main dimensions of IC have been agreed upon by most scholars, namely, human capital,
social capital and structural capital (Bontis, 1998; Sumedrea, 2013; Secundo et al., 2018).
Many scholars agree that all three dimensions of IC play an instrumental role in
leveraging firm performance (Subramaniam and Youndt, 2005; Chen et al., 2006;
Mehralian et al., 2018). Likewise, Mubarik et al. (2016) call IC a key component, which
Journal of Intellectual Capital
Vol. 21 No. 1, 2020
pp. 23-39
© Emerald PublishingLimited
1469-1930
DOI 10.1108/JIC-11-2018-0199
Received 15 November 2018
Revised 20 February 2019
5 May 2019
11 June 2019
21 July 2019
22 August 2019
Accepted 31 October 2019
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1469-1930.htm
23
Intellectual
capital and
business
performance
exerts a significant positive effect on firms’financial and non-financial performance, both
directly and indirectly.
Absorptive capacity appears to be among the possible instrumental factors in the
relationship between the three dimensions of IC and performance. Cohen and Levinthal
(1990) introduced the concept of absorptive capacity and defined it as the organization’s
capacity to acquire, assimilate, and apply knowledge. They also indicated that the
possession of prior knowledge is an important precursor for absorptive capacity.
Although manystudies have analyzed the impactof absorptive capacity onorganizational
outcomes, the focusof the majority of these was examinationof the relationship of absorptive
capability to innovation capabilities (Cepeda-Carrión et al., 2010; Tseng et al., 2011;
Leal-Rodríguez et al., 2014; Lewandowska, 2015; Engelman et al., 2017; Hussinki et al., 2017).
These studies found a significant positive impact for absorptive capacity on firm
innovation. Such studies paid less attention to the interaction of absorptive capacity with
intangible assets like IC (Mariano and Walter, 2015; Mehralian et al., 2018). Likewise, the
majority of studies examining absorptive capacity took it as a single construct, irrespective
of the differences between realized and potential absorptive capacity. Further, studies of the
relationships among the three major dimensions of IC on performance through realized and
absorptive capacity have been few.
Moreover, some researchers have claimed that absorptive capacity moderates the
relationship between IC and performance, while others argue for its role as mediator. The
inconclusive results of these studies indicate that more research is required to clarify the role
of realized and potential absorptive capacity in the relationship between the components of
IC and business performance. Recently, scholars have begun to examine the mediating role
of knowledge management in IC, but here again, innovation was under the spotlight, not
overall business performance (Han and Li, 2015; Obeidat et al., 2017). Some studies have
found that the acquisition, assimilation and exploitation of knowledge rely on knowledge
already existing in the organization (Aribi and Dupouët, 2016; Curado and Bontis, 2007).
This study examines the role of potential and realized absorptive capacity in the
relationship between IC and performance.
Further, this study also examines the direct impact of each dimension of IC on
business performance, thus contributing to the literature on IC in three different ways.
First, it demonstrates how the three important dimensions of IC affect performance
through potential and realized absorptive capacity. Although there has been much
work on the overall impact of IC (Firer and Williams, 2003; Inkinen, 2015; Dzenopoljac
et al.,2017),itsindirectimpactsthroughabsorptive capacity have seldom been
investigated separately.
Likewise, most studies that examine the role of absorptive capacity have taken it as a
single construct, irrespective of any consideration of the difference between realized and
potential absorptive capacity. Interrogating the effects of absorptive capacity without
differentiating its types can be risky and even misleading. Second, this study clarifies the
role of organizational absorptive capacity between IC and business performance (Petti and
Zhang, 2016; Shafique and Kalyar, 2018). The literature is inconclusive on the role of
absorptive capacity as a mediator or a moderator (Rafique et al., 2018). This study can help
practitioners recognize the importance of transformation and the exploitation of knowledge
for business performance.
Section 2 of this paper reviews previous scholarly contribution that formed
the theoretical base for the constructs and their relationships. Section 2.5 presents the
hypotheses and conceptual model. Section3 highlights the research design and methodology.
Section 4 exhibits data analysis whereas discussion and conclusion appear in Sections 5
and 6, respectively. Section 7 assesses limitations of the study and possibe direction for
future research.
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