Intellectual capital, knowledge management practices and firm performance
| Published date | 09 October 2017 |
| DOI | https://doi.org/10.1108/JIC-11-2016-0116 |
| Pages | 904-922 |
| Date | 09 October 2017 |
| Author | Henri Hussinki,Paavo Ritala,Mika Vanhala,Aino Kianto |
| Subject Matter | Information & knowledge management,Knowledge management,HR & organizational behaviour,Organizational structure/dynamics,Accounting & Finance,Accounting/accountancy,Behavioural accounting |
Intellectual capital, knowledge
management practices and
firm performance
Henri Hussinki, Paavo Ritala, Mika Vanhala and Aino Kianto
School of Business and Management,
Lappeenranta University of Technology, Lappeenranta, Finland
Abstract
Purpose –The purpose of this paper is to examine the association of different configurations of
intellectual capital (IC) and knowledge management practices (KMP) with firm performance. Do firms with
different profiles concerning their overall levels of IC and KMP differ in terms of innovation and market
performance?
Design/methodology/approach –First, the firms were distributed into four distinct profiles based on their
overall level of IC and utilization of KMP. Then, the four differentIC/KMP profiles were evaluated with regard
to their innovation and market performance.
Findings –Consistent with the extant research, this study finds that the firms characterized with high
levels of IC and high use of KMP are likely to outperform the firms with low overall levels of IC and KMP.
On more interesting note, this study also demonstrates that firms characterized with high level of IC
but only low utilization of KMP can match the innovation performance of the firms with high levels of IC
and KMP.
Practical implications –While the results indicate that the level of IC alone could predict the
innovation potential of the firm, the firms should use KMP to leverage the IC and to capitalize the
knowledge potential. This result s hows the merits of letting innovation flourish without strict
managerial control, while pinpointing the relevance of knowledge management (KM) in exploitation
of IC.
Originality/value –As one of the first attempts to merge the IC and KM approaches to find out which
configurations could influence firm performance outcomes, this study provides the research community with
valuable insights and sets the tone for further discussion.
Keywords Performance, Innovation, Knowledge management, Intellectual capital,
Knowledge management practices
Paper type Research paper
Introduction
Academics, practitioners, and policy makers broadly agree that knowledge is a crucial
driver for firm performance and value creation (e.g. OECD, 1996; Grant, 1996;
Makadok, 2001; Hamilton, 2006; Ferreira and Hamilton, 2010). The prominent academic
discussion addressing the impact of knowledge-based issues on value creation is centered
on the concepts of intellectual capital (IC) and knowledge management (KM). IC refers to
the overall intellectual assets that the company owns or possesses (Roos and Roos, 1997;
Stewart, 1997; Sullivan, 1998) while KM refers to the processes and practices that enable
firms to manage their intellectual assets and to achieve knowledge-based competitive
advantages (Alavi and Leidner, 2001; Davenport and Prusak, 1998; Heisig, 2009;
Nonaka and Takeuchi, 1995; Von Krogh, 1998).
Given that both IC and KM literatures address the effect of intangibles on value creation
and organizational success, they would be expected to be intertwined and parallel. However,
these literatures largely use different perspectives and foundations due to their varying
scholarly traditions. IC literature often adopts a static stock perspective, and KM literature a
more dynamic, processual viewpoint (Kianto, 2007; Kianto et al., 2014). While the extant
literatures have provided the basic understanding on how an organization’s knowledge
Journal of Intellectual Capital
Vol. 18 No. 4, 2017
pp. 904-922
© Emerald PublishingLimited
1469-1930
DOI 10.1108/JIC-11-2016-0116
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1469-1930.htm
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JIC
18,4
resources and its practices to manage knowledge are associated with its performance,
few studies have utilized both IC and KM approaches. This study argues that combining the
static and dynamic –or the stock and flow –perspectives of knowledge yields a more
comprehensive understanding of intangible bases of value creation than addressing only
one side of the phenomenon.
To address the above-mentioned research gap, this study empirically examines how the
firm’s knowledge base (i.e. IC) and its ability to utilize and develop this base (i.e. KM) are
associated with firm performance outcomes. The purpose is to examine firms with different
profiles based on their overall levels of IC and knowledge management practices (KMP), and
to identify any differences in innovation and market performance between firms with those
profiles. The study utilizes a survey data set collected from 259 Finnish companies with at
least 100 employees, and then statistically analyzes differences in innovation and market
performance between four different IC/KMP firm profiles.
Categorizing the data into four groups with high/low IC and KMP profiles reveals
statistically significant group differences for innovation and market perform ance.
The comparison of the four profiles shows that the firms strong both in overall
IC and KMP are likely to outperform the firms with low overall IC and low KMP on both
market and innovation performance measures. In addition, firms with a high level of IC
but low usage of KMP enjoy equally strong innovation performance as those firms high
in IC and KMP.
This paper is among the first attempts to merge the IC and KM disciplines to find out
which configurations could yield organizational benefits in terms of innovation and market
performance outcomes. The results thus respond to the recent calls for research that would
combine IC and KM perspectives (Hsu and Sabherwal, 2012; Kianto et al., 2014; Seleim and
Khalil, 2011). The results also contribute to the broader scholarly discussion of the
knowledge-based view (KBV), where knowledge-based assets are seen as both resources
and capabilities (Grant, 1996; Spender, 1996).
IC and KMP
The literatures of IC and KM address complementary aspects of the KBV of the firm.
The KBV sees knowledge both as a resource and as a capability, where utilizing and
developing it is required to achieve competitive advantages (Grant, 1996; Spender, 1996;
Spender and Grant, 1996).
IC focuses on all the intangible resources that a firm can use to achieve competitive
advantage (Roos and Roos, 1997; Stewart, 1997; Sullivan, 1998). Typically, researchers
argue that the overall IC of the firm is made up of three dimensions: human, structural/
organizational, and relational/social capital (e.g. Bontis, 1998; Edvinsson and Malone, 1997;
Roos and Roos, 1997; Stewart, 1997; Nahapiet and Ghoshal, 1998). Human capital refers to
the firm’s employees and their knowledge, capabilities, education, skills, and characteristics
(Bontis, 1998; Edvinsson and Malone, 1997; Roos and Roos, 1997; Stewart, 1997). Structural/
organizational capital refers to the IC that is owned by the firm and remains in the firm
even when people leave work (Roos and Roos, 1997). Relational/social capital is the
value embedded in and derived from relationships with customers, suppliers, partners,
institutions, and other comparable stakeholders (Edvinsson and Malone, 1997; Roos and
Roos, 1997; Nahapiet and Ghoshal, 1998). Lately, researchers have started to question the
tripartite model’s ability to recognize and measure the diverse nature of the firm’s overall IC
(Kaufmann and Schneider, 2004; Kianto, 2007; Kianto et al., 2014). Therefore, dimensions
such as renewal capital (Kianto, 2008; Inkinen et al., 2014), trust capital (Mayer et al., 1995;
Inkinen et al., 2014), and entrepreneurial capital (Erikson, 2002; Inkinen et al., 2014) have
been proposed to be included as components of IC.
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IC, KMP and
firm
performance
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