Proceedings of the 8th International Conference on Intellectual ...

1.2 Intellectual capital and innovation
Irene Y.H. Fan and Rongbin W.B. Lee
Although <strong>the</strong> term intellectual capital (IC) has been used since 1969 by Kenneth Galbraith, <strong>the</strong>re is a
lack <strong>of</strong> consensus among researchers and practitioners on its components and definitions (Martı´nde-Castro
et al. 2011). Intellectual capital is defined by Andriessen and Stam (2004, p.10) as “all
intangible resources that are available to an organization, that give a relative advantage, and which in
combination are able to produce future benefits”. The major components <strong>of</strong> intellectual capital include
an individual perspective and a collective perspective. The collective part can be fur<strong>the</strong>r separated
into internal and external perspectives. (Martı´n-de-Castro et al. 2011) In this paper, definition <strong>of</strong>
intellectual capital with three components: human capital, structural capital and relational capital
(Roos, Fernstroem & Pike 2005; Bontis 1998) is used, with relational capital includes both internal
and external facets.
Studies <strong>of</strong> intellectual capital as determinants to business performance and competitiveness are
plenty (Hayton 2005), but studies between intellectual capital and innovation performance remain
relatively meagre (Serenko, Bontis & Grant, 2009). Innovation was thought to be embedded in <strong>the</strong>
human capital, <strong>the</strong> brainpower <strong>of</strong> employees. Early intellectual capital researchers and practitioners
proposed that structural capital, knowledge that remains with <strong>the</strong> organization after <strong>the</strong> employees left
<strong>the</strong> <strong>of</strong>fice, holds <strong>the</strong> corporate innovation assets. Recent development <strong>of</strong> intellectual capital <strong>the</strong>ory
that share <strong>the</strong> views <strong>of</strong> researchers in sociology (Burt 1992; Coleman 2000) and management
(Nahapiet & Ghoshal 1998; Subramaniam & Youndt 2005) argue that <strong>the</strong> external social capital with
customers, partners and suppliers is an important part <strong>of</strong> relational capital. The relational capital a firm
owns, including both internal and external ties, are viewed as cause <strong>of</strong> employees’ ability to learn and
innovate (Reed et al. 2006).
1.3 Knowledge and innovation
Innovation relates closely to knowledge creation and dissemination (Jantunen 2005; Sa´enz et al.
2009; Frenz & Ietto-Gillies 2009). Sayer and Walker (1992, p.115) describe innovation as
“fundamentally a social process built on collective knowledge and co-operative effort”. Innovation
building process is <strong>the</strong> wellsprings <strong>of</strong> knowledge that enable companies to develop competitively
advantageous capabilities (Leonard-Barton 1995). Researchers have developed multi-dimensional
models to outline <strong>the</strong> knowledge development and process. Nonaka (2006) defines a model with
epistemological and ontological dimensions. These two dimension forms a spiral model with
socialization, externalization, combination and internalization <strong>of</strong> knowledge. Amidon (1997) illustrates
<strong>the</strong> relationship between knowledge, innovation and learning in a three dimensional model.
Two dichotomy views <strong>of</strong> learning, sharing and hoarding <strong>of</strong> knowledge, cause different styles <strong>of</strong>
knowledge flow (March 1991; Boisot 1998; Nonaka, Toyama and Hirata 2008), and <strong>the</strong>refore affecting
<strong>the</strong> generation and usage <strong>of</strong> knowledge assets and <strong>the</strong> innovation capability <strong>of</strong> <strong>the</strong> organization.
Boisot also saw that knowledge creation is more than a simple system <strong>of</strong> input and output, but a
complex social learning cycle. (Boisot 2011)
2. The complex IC characteristic and relationship with innovation performance
Researchers have studied <strong>the</strong> influential factors <strong>of</strong> innovation performance in many different
perspectives. The empirical studies usually adopts regression model with linear direct causal effect.
Two problems stand out with this research methodology. Organization is a complex adaptive system
(Maguire et al. 2009) and <strong>the</strong> assumptions <strong>of</strong> linearity and unidirectional are not immutable. However,
<strong>the</strong>re have not been sufficient studies using complex model in <strong>the</strong> area <strong>of</strong> intellectual capital and
innovation research. Secondly, such studies were conducted with particular organizations, industry
sectors or innovation systems; and <strong>the</strong> research outcome should not be over generalized. A systemic
view <strong>of</strong> impacting factors interacting toge<strong>the</strong>r in a complex dynamic world is essential. Andreous and
Bontis (2007) identified that only five published studies researched <strong>the</strong> relationship between
intellectual capital stocks and flows by analyzing <strong>the</strong> relationship among intellectual capital
components. The complexity <strong>of</strong> intellectual capital components warrants a deeper and more thorough
investigation. This paper aims to contribute to <strong>the</strong> study <strong>of</strong> innovation and intellectual capital by
proposing a complex model with <strong>the</strong> study <strong>of</strong> an R&D organization in Hong Kong.
Base on <strong>the</strong> literature reviewed, <strong>the</strong> three components <strong>of</strong> intellectual capital are human, structural and
relational capitals. Different measurements have been used for <strong>the</strong>se components. The degree <strong>of</strong>
computational complexity increases as <strong>the</strong> number <strong>of</strong> components and <strong>the</strong>ir interactivities increase.
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