Strategy, Intellectual Capital, and Operating Performance

Abstract

Purpose: This study analyses the relation of intellectual capital (IC) with future operating performance under the prism of different strategic orientations or explanations for the relation of IC with the future operating performance. Design/methodology/approach: Our final data sample consists of 11,085 firm years observations of US listed firms for the period 2000-2019. We emphasize on organizational capital and R&D capital as measures of a firm’s IC intensity. We adopted the methodology proposed by Bentley et al. (2013) for strategy classification. Findings: Strategy affects the likelihood a firm to be classified as a low or high IC intensive. Organizational capital improves future operating performance across firms with the same (i.e., prospectors or defenders) or with different (i.e., unrestricted data sample) strategic orientation. R&D capital affects mostly prospectors’ future operating performance. Depending on the measure of IC intensity or operating performance, both the investing and the signalling hypothesis for the positive relation of IC with future operating performance seem to hold. Strategic repositioning has no significant effect on the relation of IC with future operating performance. Originality: The contribution of this study is that examines if a firms’ strategic orientation or repositioning affects the relation of IC with future operating performance as well as the empirical validity of different explanations for this relation. Research limitations/implications: We relied on quantitative research instruments for our research design. A combination of qualitative with quantitative data might provide further insights on the relation of strategy, IC, and future operating performance.