From Intellectual Capital to Firm Performance: The Mediating Role of Knowledge Management Capabilities

The importance of intellectual capital (IC) in organizations is well accepted. Several authors have examined the effects of IC on innovation and firm performance. We argue that IC does not directly affect innovation or firm performance; instead, the firm's knowledge management (KM) capabilities mediate the effect of IC on innovation and firm performance. We propose a theoretical-model of how two KM capabilities (knowledge enhancement and knowledge utilization) mediate the effects of three types of IC (social capital, human capital, and organizational capital) on innovation and firm performance. The model is tested using survey data and secondary data on 533 public-listed companies in Taiwan. The results of structural equation modeling support the theoretical model with two exceptions: the path from human capital to knowledge enhancement capability is not supported, and human capital has an unexpected direct effect on innovation. Other than this unexpected effect of human capital on innovation, the effect of IC on innovation is mediated by KM capabilities. Moreover, innovation fully mediates the effects of KM capabilities on firm performance. Overall, this study provides insights into the mediating roles of knowledge enhancement and knowledge utilization in the relationship between IC and innovation.