Intellectual Capital And Firm Performance

This is an era that the knowledge economy dominates in our daily life. The intellectual capital has gradually taken the place of the traditional factors and become the only most important strategic resource today. The capacity to manage knowledge-based intellect is the critical skill of this era. To make the best use of intellectual capital to create value, it is important to study empirically on the relationship between intellectual capital and firm performance. The purpose of this research is to understand how intellectual capital affects firm performance and how the interactions of the components of intellectual capital affect firm performance. Basing on the past literature review, I state the necessity to study on the relations between intellectual capital and firm performance, and develop a conceptual model involving intellectual capital and firm performance and collect data of firms in China to test hypotheses of the relation between intellectual capital and firm performance.In this study, questionnaire was used as research instrument during the data collecting. I sent out altogether 399 questionnaires to firms in different provinces in China and got back 147. The ratio of callback of valid questionnaire is 36.8%. In the data processing procedure, I mainly used correlation analysis, confirmatory factor analysis and structural equation modeling to verify hypotheses in the model. After quantitative analysis and theoretical exploration, some important results and conclusions are as follows:(1) Using the nested model approach of structural equation modeling, I compared the Chi square and other fitness indices of four nested models and validated the conceptual model, which described the relation between intellectual capital and the financial performance, operational performance and effectiveness performance, acceptable.(2) Using limited-information factor analysis approach and second order confirmatory factor analysis, this dissertation tests the dimension of the components of intellectual capital, i.e., human capital, organization capital and relational capital.Results show that there are four dimensions of human capital, that is, employees' attitudes and capability, the overall employees' quality, employee's turnover and training investment. Organization capital involves four dimensions: organization routine and culture, communication and cooperation, knowledge management and innovation investment. Relational capital contains three dimensions: the relation with customers, the relation with suppliers and relations with other stakeholders.(3) Path analysis results show three components of intellectual capital lead into performance directly. Human capital is significantly positive to financial performance, operational performance and effectiveness performance. Organization capital can enhance the financial performance, operational performance and effectiveness performance. Relational capital also positively related to financial performance, operational performance and effectiveness performance.(4) This dissertation decomposed correlations in the model into direct, indirect, spurious and unanalyzed effects. Results show that the interrelationships among the three components of intellectual capital have a significantly positive effect on firm performance. To be specific, the correlations between organizational capital and human capital, organization capital and human capital affects financial performance, operational performance and effectiveness performance positively. The correlations between human capital and organization capital, relation capital and organization capital have positive effects on financial performance, operational performance and effectiveness performance. The correlations between human capital and relation capital, organization capital and relation capital also have positive effects on financial performance, operational performance and effectiveness performance.