Intellectual capital based reputation for market internationalization. The case of engineering consultancy firms
| Pages | 40-61 |
| DOI | https://doi.org/10.1108/JIC-01-2019-0010 |
| Date | 28 November 2019 |
| Published date | 28 November 2019 |
| Author | Serdar Ulubeyli,Dilek Yorulmaz |
| Subject Matter | Accounting & Finance,Accounting/accountancy,Information & knowledge management,HR & organizational behaviour,Behavioural accounting,Organizational structure/dynamics |
Intellectual capital
based reputation for
market internationalization
The case of engineering consultancy firms
Serdar Ulubeyli
Department of Civil Engineering,
Zonguldak Bülent Ecevit University, Zonguldak, Turkey, and
Dilek Yorulmaz
Zonguldak Bülent Ecevit University, Zonguldak, Turkey
Abstract
Purpose –The purpose of this paper is to report the possible impact of intellectual capital (IC) on firm
reputation (FR) and investigates if there is a relationship between FR and market internationalization (MI).
Design/methodology/approach –The data were collected from engineering consultancy firms (ECFs) in
Turkey. The study employed structural equation modeling to examine the hypothesized relationships
between IC, FR, and MI of ECFs.
Findings –ECFs with strong human and structural capital can have a good FR. However, healthy relational
capital may not lead to the same effect on FR. On the contrary, FR can create high-quality relational capital for
ECFs. Lastly, a good FR, based on robust human and structural capital, can provide the success of ECFs’
MI process.
Research limitations/implications –This model may be analyzed for other knowledge-intensive
business services. Also, subsequent researches may investigate potential variations in results about other
sectors and geographical areas. Moreover, various constructs may be included in the model. However, a
greater number of samples could lead to distinctive outcomes.
Practical implications –The research may be a general guide for related professionals and their
companies to build long-term strategies, given IC, FR and MI. In this respect, they should take into account
human and structural capital for MI.
Social implications –ECFs that can be active in the international arena may maintain their services by
financial sustainability. Thus, the advantage may result in a prosperous society.
Originality/value –The study is first to suggest a model joining IC and FR for the MI process of ECFs.
This is suitable for competition of ECFs that are willing to be sustainable firms.
Keywords Intellectual capital, Reputation, Engineering consultants, Market internationalization
Paper type Research paper
1. Introduction
The sum of all knowledge assets andknowing capabilities aredescribed as intellectualcapital
(IC) (Wang et al., 2014). IC deals with the valuation of knowledge and aims to gain sustainable
organizational competitiveness especiallyin international markets (Youndt et al.,200 4). IC also
plays a key role to comprehend the drivers behind firm reputation (FR), as it provides name
recognition gained through strategic positioning (Harrison and Sullivan, 2000). Similarly,
Petkova et al. (2008) posit that the proper management of IC represents a significant
improvement in the company’s value and reputation. Moreover, Petty and Guthrie (2000)
assert that FR may be accepted as a by-product of the judicious use of IC, rather than a
component. Based on this linkageadvocated by aforementionedstudies, there are some other
mainstream researches that claim the probableeffect of IC on FR. Rindova et al. (2005), one of
Journal of Intellectual Capital
Vol. 21 No. 1, 2020
pp. 40-61
© Emerald PublishingLimited
1469-1930
DOI 10.1108/JIC-01-2019-0010
Received 17 January 2019
Revised 21 March 2019
9 August 2019
19 September 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
The authors gratefully acknowledge chairpersons, managers and other technical/administrative staff of
the surveyedfirms for theirgenerous collaborationand contributions. The authorsalso thank the financial
support provided by the Committee on Research Grants of Zonguldak Bulent Ecevit University.
40
JIC
21,1
these researches, empirically found that the relational capital of the US business schools
contributes significantly to a favorable FR. Zabala et al. (2005) theoretically advocate that
relational capital determines FR. In another theoretical study, Cravens and Oliver (2006)
suggest that human capital can play a considerable role in the overall positioning of FR.
Highhouse et al. (2009) theoretically propose that both relational and human capital are
required for FR. Lastly, Ginesti et al. (2018) empirically support that human capital of Italian
companies is the key to FR. Looking at all these previous studies in the literature, there are
only a few empiricalresearches and littleis known concerning the impactof the elements of IC
on FR. In addition, to the best of our knowledge, the relationship between FR and the three
elements of IC has not been investigated together in an empirical way up to date.
FR has also a considerable impact on market internationalization (MI) of
knowledge-intensive services provided, for example, by engineering consultancy firms
(ECFs). This is because such organizations with good reputations have the ability to
influence and be selective of the countries they decide to enter ( Javalgi and Grossman, 2014).
With this characteristic, FR facilitates investments for knowledge-intensive international
companies with proper IC especially in developing countries where domestic corporations
may suffer from the lack of IC-based reputation (Musteen et al., 2013; Seleim and Bontis,
2013). Besides these researches that make the theoretical reasoning for linking FR and MI,
there are only a few other fundamental studies concerning the likely impact of FR on MI. As
one of these studies, Zyglidopoulos et al. (2006) theoretically argue that FR can assist small-
and medium-sized cluster firms in the MI process. Mariz-Perez and Garcia-Alvarez (2009)
found that higher FR favors the MI process. Considering all these past studies, it is seen that
only Mariz-Perez and Garcia-Alvarez (2009) empirically examined the relationship between
FR and MI. However, they focused on Spanish franchised chains and, as the chains favor the
adoption of an MI strategy, their results cannot be easily adapted and accepted by other
types of firms. Kuivalainen et al. (2012) claim that MI patterns of knowledge-intensive firms
are often different from those of companies operating in the manufacturing industry. This is
because knowledge-intensive firms are essentially based on their technical knowledge
instead of plants and machines/equipment that should typically be employed in the
manufacturing industry. This means that they do not possess any critical physical asset to
move or purchase/hire. Through this characteristic, the time lag between the founding of a
knowledge-intensive firm and the commencement, growth, and development of its
international operations abroad becomes much shorter (Zucchella et al., 2007). Based on the
same argument, these firms can begin to operate in multiple countries on international
markets almost from inception, whereas the manufacturing companies have naturally a
narrow market scope at the beginning of their international operations (Yeoh, 2004).
Therefore, to the best of our knowledge, the possible presence of the relationship between
MI and FR has not been empirically investigated in the related literature for companies
except for the franchised chains.
ECFs can serve private and public clients for a number of activities such as feasibility
reports, project management, design, bidding, contracting, construction management and
controlling (Gaskell, 2015). This broad range of services is usually more significant in
international projects when compared to domestic ones (ATCEA, 2015). This is because, in
many instances, an ECF can provide: export opportunities for material vendors and
equipment suppliers; and business opportunities for contractors from its respective home
country (TCA, 2016). However, ECFs may suffer from their relatively low level of
international works. For example, there were solely six firms from Turkey among the
largest 225 international ECFs in 2017 (ENR, 2018a). From the financial point of view, the
average annual turnover of Turkish ECFs has been $400m up to date when national and
international revenues are taken into account together (ATCEA, 2018). Despite this view in
the domain of technical consultancy, Turkish contractors have been very active in the
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Intellectual
capital based
reputation
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