Intellectual capital, knowledge management practices and firm performance

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?

First, the firms were distributed into four distinct profiles based on their overall level of IC and utilization of KMP. Then, the four different IC/KMP profiles were evaluated with regard to their innovation and market performance.

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.

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 shows the merits of letting innovation flourish without strict managerial control, while pinpointing the relevance of knowledge management (KM) in exploitation of IC.

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.