The impact of intellectual capital on SMEs’ performance in China. Empirical evidence from non-high-tech vs. high-tech SMEs
| Pages | 488-509 |
| DOI | https://doi.org/10.1108/JIC-04-2018-0074 |
| Date | 08 August 2019 |
| Published date | 08 August 2019 |
| Author | Jian Xu,Jingsuo Li |
| Subject Matter | Information & knowledge management |
The impact of intellectual capital
on SMEs’performance in China
Empirical evidence from
non-high-tech vs. high-tech SMEs
Jian Xu and Jingsuo Li
School of Management, Qingdao Agricultural University, Qingdao, China
Abstract
Purpose –The purpose of this paper is to explore and compare the extent of intellectual capital (IC) and its
four components in high-tech and non-high-tech small and medium-sized enterprises (SMEs) operating in
China’s manufacturing sector, and to examine the relationship between IC and the performance of high-tech
and non-high-tech SMEs.
Design/methodology/approach –The study uses the data of 116 high-tech SMEs and 380 non-high-tech
SMEs listed on the Shenzhen stock exchanges during 2012–2016. The modified value added intellectual
coefficient (MVAIC) model is used incorporating four components, namely, capital employed, human capital,
structural capital and relational capital. Finally, multiple regression analysis is utilized to test the proposed
research hypotheses.
Findings –The findings of this paper reveal that there is significant difference in MVAIC between high-tech
and non-high-tech SMEs. The results further indicate a positive relationship between IC and financial
performance of high-tech and non-high-tech SMEs. Specifically, IC is positively associated with firms’
earnings, profitability and operating efficiency. Additionally, capital employed efficiency, human capital
efficiency and structural capital efficiency are found to be the most influential value drivers for the
performance of two types of SMEs while relational capital efficiency possesses less importance.
Practical implications –This paper will provide a valuable framework for executives, managers and
policy makers in managing IC within the Chinese context.
Originality/value –To the best knowledge of the authors, this is the first empirical study that has been
conducted on high-tech and non-high-tech SMEs in the manufacturing sector in China.
Keywords Manufacturing industry, Firm performance, Intellectual capital, High-tech SMEs,
Non-high-tech SMEs
Paper type Research paper
1. Introduction
Intellectual capital (IC) has been viewed as an important factor for firms in enhancing their
competitive competence and achieving corporate success, which has attracted the attention
of both academics and practitioners (Ordóñez de Pablos, 2004; Nazari and Herremans, 2007;
Liang and Lin, 2008; Wang, 2008; Sonnier et al., 2009; Crema and Verbano, 2016; Xu and
Wang, 2018). Firms in knowledge-intensive sector, especially high-tech industry, are more
likely to invest substantially in IC. Compared with traditional enterprises, high-tech
enterprises characterized by high innovation capability largely depend on new technologies
and skilled talents, that is, IC has a greater influence on the sustainable development of high-
tech enterprises (Nimtrakoon, 2015).
Under the new normal, the Chinese economy has entered a new phase that is different
from the high-speed growth pattern exhibited in the past. It is a new trend that features
more sustainable, mid- to high-speed growth with higher efficiency and lower costs.
High-tech small and medium-sized enterprises (SMEs)[1] are considered to be the new
driving force of China’s economic growth (Petti et al., 2017). Currently, as cooperation
Journal of Intellectual Capital
Vol. 20 No. 4, 2019
pp. 488-509
© Emerald PublishingLimited
1469-1930
DOI 10.1108/JIC-04-2018-0074
Received 30 April 2018
Revised 30 July 2018
17 March 2019
24 May 2019
Accepted 11 June 2019
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1469-1930.htm
The research was financially supported by the MOE (Ministry of Education in China) Youth
Foundation Project of Humanities and Social Sciences (Grant Number 17YJCZH087). The authors
would like to thank the editor and anonymous reviewers for their valuable comments and suggestions.
488
JIC
20,4
continues to deepen between countries across the belt and road route[2], many high-tech
SMEs are keen to further develop their businesses in emerging markets, like countries in the
Middle East. In the context of the knowledge-based economy, IC has become an important
factor that can determine the success or failure of SMEs, thus affecting financial
performance. However, SMEs do not usually measure or recognize IC (Ngah and Ibrahim,
2009), because they do not have huge amounts of tangible and financial resources. Since
SMEs have different characteristics from large companies (McAdam and Reid, 2001),
empirical analysis is necessary to address this issue.
A majority of the extant IC literature has focused on studying listed companies in
developed economies, such as the USA, the UK, Canada and Australia. Little research has
been documented about IC performance of SMEs in China, an emerging market. Considering
the importance of high-tech SMEs for economic growth, studying the relationship between
IC and firm performance is especially important. High-tech and non-high-tech companies
differ substantially in the type of knowledge they utilize (Buenechea-Elberdin et al., 2017,
2018). In China’s economic transition, high-tech and non-high-tech SMEs face many
pressures from the domestic and international market (Law et al., 2019). The majority
of existing studies in the extent IC literature have examined high-tech firms (e.g. Hsu and
Fang, 2009; Xiao and Ramsden, 2016), while very few have either addressed non-high-tech
companies (e.g. Leitner, 2011) or overlooked comparisons between the two. Thus, we seek to
ascertain if the relationship between IC and financial performance is different between high-
tech and non-high-tech SMEs. Particularly, this study aims to explore and compare IC
performance of high-tech and non-high-tech SMEs operating in China’s manufacturing
sectors, and empirically examine the relationship between IC and firm performance
using the modified value added intellectual coefficient (MVAIC) model. To do so, we
consider two samples of Chinese SMEs in the manufacturing industry: 116 high-tech SMEs
and 380 non-high-tech SMEs. We hope to confirm the relationship between IC and financial
performance to help SMEs construct effective IC management system that can facilitate
performance improvements.
This study contributes to the body of knowledge on IC in four ways. First, the research
extends prior IC research by assessing and comparing IC efficiency of high-tech and non-high-
tech SMEs. Modern IC theories are oriented to descriptive purposes rather than comparative
purposes. Second, it provides empirical evidence on the relationship between IC and corporate
performance by using data from Chinese SMEs. Measuring and understanding how IC is linked
to the performance of SMEs has not been properly provided. In addition, little research is focused
ontheimpactofeachofICcomponentsonSMEs’performance. Thus, the findings of the study
are expected to expand our understanding of IC and its impact on SMEs’performance in an
emerging market. Third, this study employs the MVAIC model to comprehensively measure
firms’IC efficiency. Finally, this study provides insights for firm managers to effectively and
efficiently manage IC. Our findings also have important implications for institutional investors
when they use IC efficiency to assess firms’ability to create value.
The rest of the paper is organized as follows. In the next section, the authors provide a
detailed literature review, followed by thedevelopment of research hypotheses. Then, sample
selection,variable measurementand research model are presented. The results of the analyses
are discussedin Section 5. Finally,conclusions and commentsfor future researchare provided.
2. Literature review
2.1 Definition and measurement of IC
The term “intellectual capital”was first introduced by Galbraith in 1969 who described
it as an intellectual contribution owned by individuals. Kaplan and Norton (1996)
considered investments in suppliers, customers, employees and technology innovation as IC.
Edvinsson and Malone (1997) suggested that the gap between the balance sheet and the
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SMEs’
performance
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