Intellectual capital for exploratory and exploitative innovation. Exploring linear and quadratic effects in construction contractor firms
| DOI | https://doi.org/10.1108/JIC-08-2018-0144 |
| Pages | 382-405 |
| Date | 29 April 2019 |
| Published date | 29 April 2019 |
| Author | Bismark Duodu,Steve Rowlinson |
| Subject Matter | Information & knowledge management |
Intellectual capital for exploratory
and exploitative innovation
Exploring linear and quadratic effects in
construction contractor firms
Bismark Duodu and Steve Rowlinson
Department of Real Estate and Construction,
The University of Hong Kong, Hong Kong
Abstract
Purpose –Intellectual capital (IC) has been suggested to be a means by which firms develop capabilities that
enhance competitive advantage. There is, however, a paucity of empirical research linking IC with innovation
in construction firms, leaving the IC–innovation link in such environments unclear. The purpose of this paper
is to advance understanding of the relationships between IC components and strategic exploratory and
exploitative innovation in construction contractor firms.
Design/methodology/approach –The sample comprised 135 management personnel from construction
contractor firms in Hong Kong. Data were collected through a questionnaire survey using validated scales in
the literature which were subjected to confirmatory factor analysis. Hierarchical linear regressionwas used to
test the hypotheses while partial least squares structural equation modelling was used for post hoc analysis.
Findings –Social capital (SC) and organisational capital (OC) each have significant positive linear effects on
exploratory and exploitative innovation, while human capital (HC) has no direct linear effect on either
innovation type. HC, however, affects both exploratory and exploitative innovation through SC or OC. None of
the three IC dimensions has a significant quadratic effect on exploratory or exploitative innovation. The
findings suggest that in construction contractor firms increases in the accumulation of SC and OC are
associated with proportional increases in exploratory and exploitative innovation.
Originality/value –Despite the growth of studies connecting IC to innovation, the link between IC and
exploratory and exploitative innovation has focussed on linear effects in units or on radical innovation
outcomes. This study makes a novel contextual contribution by exploring both linear and quadratic effects of
IC dimensions on strategic exploratory and exploitative innovation processes in construction contractor
firms. The insights contribute to advance knowledge on the relationship between IC and innovation
categories in different industrial settings.
Keywords Intellectual capital, Construction firms, Exploitative innovation, Exploratory innovation
Paper type Research paper
1. Introduction
Organisations adapt to their environment by exploiting existing capabilities through the
continuous improvement of processes, technologies and methods or by exploring new
possibilities through experimentation with new designs, products and methods. O’Reilly and
Tushman (2007) suggest that the ability of organisations to pursue exploratory innovation
enhances long-term development while exploitative innovation provides short-term gains. To
avoid stagnation and inertia construction firms must experiment with new alternatives
regarding materials, methods and technologies. At the same time, newly explored solutions
need to be routinised to realise the full benefits of the exploration (Bygballe and Ingemansson,
2014). The ability to balance exploration and exploitation is down to the organisational practices
andprioritiesaswellasfirms’operational environment (Bygballe and Ingemansson, 2014;
Lavie et al., 2010; March, 1991). The extant literature emphasises the significance of firms’
engagement in both innovation processes, pointing to the tensions that organisations might
encounter when pursuing both types of innovations simultaneously (Raisch and Birkinshaw,
2008). However, some have questioned the need for a trade-off between exploration and
exploitation (Gupta et al., 2006) arguing that firms can pursue both innovation processes
Journal of Intellectual Capital
Vol. 20 No. 3, 2019
pp. 382-405
© Emerald PublishingLimited
1469-1930
DOI 10.1108/JIC-08-2018-0144
Received 27 August 2018
Revised 26 January 2019
Accepted 4 March 2019
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1469-1930.htm
382
JIC
20,3
simultaneously (Gibson and Birkinshaw, 2004; Raisch et al., 2009). Thus, construction contractor
firms can pursue contextual solutions (cf. Raisch and Birkinshaw, 2008) that allow for
exploration and exploitation as and when necessary across their portfolio of projects. Slaughter
(2000) pointed out that new project objectives are often the triggers for the search for new
solutions (exploration) if they cannot be met with existing means. Construction projects also
present firms with opportunities to adapt their repertoire of techniques, methods and
technologies to meet specific needs (Winch, 1998). Exploratory innovation is within the
immediate new domains of projects and involves search, experimentation and activities aimed
at solving problems that are often specific to individual or portfolio of projects. Exploitative
innovation, on the other hand, is the re-use of existing technology, fine-tuning and continuous
development with the aim of improving the efficiency of an organisation’s operations and to
nurture its capability for the future (Lu and Sexton, 2006).
Consistent with the knowledge-based view (KBV) (Grant, 1996) and rooted in the
resource-basedview (RBV ) (Barney, 1991)firms need to create or accumulate knowledgeand
leverage such knowledge for exploratory and exploitative activities. Knowledge in firms is
considered to be inherent in individuals (human capital (HC)), networks and relationships
(social capital (SC)) and in structures, systems, routines, databases (organisational capital
(OC)). Researchers have referred to these forms of knowledge as the components of a firm’s
intellectual capital (IC) (Martín-de-Castroet al., 2011; Youndt et al., 2004). While some studies
have linked IC or its aspects with exploration and exploitation or their interaction (e.g. Kang
et al., 2012; Kostopoulos et al., 2015), more remains to be known regarding how firms
accumulate and lever age all the three components of their IC to pursu e exploratory and
exploitative innovation. For instance, Kostopoulos et al. (2015) examined ambidextrous
learning as a mediator in the IC-performance relationship in units while Kang et al. (2012)
earlier explored IC sub-dimensions as mediators in an HRM-learning framework in teams.
While theseoffer some insights into the IC-exploration/exploitation relationship, their focuson
the IC-exploration/exploitationrelationship mainly in units/teams suggest that they fall short
in offering a holistic understanding of how firms develop IC stocks to pursue strategic
exploratory and exploitative innovation. In effect, it is unclear whether strategic level IC
accumulation has similar effects on strategic exploratory and exploitative innovation
comparedto teams/units which have beenthe focus unit of analysis.A focus on the interaction
of exploration and exploitation (e.g. Kostopoulos et al., 2015) also fails to explain how IC
dimensions affect the two kinds of innovation processes individually when firms pursue
contextualsolutions. Also, with a few exceptions(e.g. Subramaniam and Youndt,2005), others
that have linked IC with innovation outcomes (e.g. Delgado-Verde et al., 2016; Agostini and
Nosella, 2017)mainly focus on radical innovation,thereby underestimating the need forfirms
to refine and reuseexisting technologies and approaches. Again, tothe best of our knowledge
researchers areyet to examine both linear and quadratic effects of the threedimensions of IC
(HC, SC, OC) on exploratory and exploitative innovation in firms.
In addition to the above, the relationship between IC and innovation in the construction
context is generally unexplored, and particularly for strategic exploratory and exploitative
innovation. Thus, there is a lack of empirical evidence of how construction firms develop or
accumulate IC and leverage such knowledge stocks for exploratory and exploitative
innovative activities. Evidence of the IC–innovation link in suchcontexts has been anecdotal,
often from single case studies (e.g. Lu and Sexton, 2006). There is, therefore, the need to
explore such relationships in such work environments to help managers focus attention on
which intellectual assets are relevant for specific innovation objectives. Cabrita and Bontis
(2008) suggest that firm outcomes from IC components can vary due to specific industry
characteristics and call for the exploration of the influence of IC on organisational processes
and outcomes in different industry and national contexts. Agostini and Nosella (2017) also
describe the link between IC and innovation as complex and unsolved, thus requiring
383
Exploratory
and
exploitative
innovation
To continue reading
Request your trial