The Effect of Intellectual Capital on Firm's RD Performance: Role of Absorptive Capacity

The study aims to empirically examine the influence of intellectual capital (IC) on the RD performance of a firm. Study also investigates the role of potential and realized absorptive capacity in the association between IC and RD performance. PLS-SEM was applied to examine the hypothesized relationships. Data are collected from 117 firms of the Electrical and Electronics sector of Malaysia using a survey questionnaire. The findings exhibit that there is a link between IC and RD performance with a strong stress on the direct role of all three components of intellectual capital as enhancers of RD performance. The realized absorptive capacity, measured as the transformation and exploitation of knowledge, positively mediates the relationship between the intellectual capital and the RD performance. Meanwhile, the potential absorptive capacity, measured as the acquisition and assimilation of knowledge has no autonomous mediating effect on RD performance. Based on the model developed in the study, knowledge acquisition and assimilation contributes to the building of the realized absorptive capacity which further contributes to the RD performance. This study advances the literature on intellectual capital and RD management by examining the role of IC in RD performance as well as the mediating role of potential and realized absorptive capacity in the relationship between intellectual capital and RD performance. It also helps industry practitioners understand the importance of intellectual capital and absorptive capacity and offers some strategic insights to the organization for building RD performance.