See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/314246911

INTELLECTUAL CAPITAL AND FINANCIAL PERFORMANCE. EVIDENCES FROM

ITALIAN FIRMS

Article  in  Global Business and Economics Review · January 2017

DOI: 10.1504/GBER.2017.10003413

CITATION READS

1 251

4 authors:

Paola Demartini Francesca Maria Cesaroni

Università Degli Studi Roma Tre Università degli Studi di Urbino Carlo Bo
79 PUBLICATIONS   909 CITATIONS    94 PUBLICATIONS   373 CITATIONS   

SEE PROFILE SEE PROFILE

Paola Paoloni Mara Del Baldo

Sapienza University of Rome Università degli Studi di Urbino "Carlo Bo"
130 PUBLICATIONS   636 CITATIONS    141 PUBLICATIONS   908 CITATIONS   

SEE PROFILE SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Call for Paper: IFKAD 2020 Special Track no. 25 Accounting, Big Data and Neuroscience View project

special issue in women in business View project

All content following this page was uploaded by Paola Paoloni on 08 July 2017.

The user has requested enhancement of the downloaded file.

468 Global Business and Economics Review, Vol. 19, No. 4, 2017

Intellectual capital and financial performance.

Evidences from Italian firms

Paola Demartini*
Department of Business Studies,
University of Rome TRE,
Via Silvio D’Amico, Rome, Italy
Email: paola.demartini@uniroma3.it
*Corresponding author

Francesca Maria Cesaroni and

Mara Del Baldo
Department of Economics, Society and Politics – DESP,
School of Economics,
University of Urbino Carlo Bo,
Via Saffi, 42 – 61029 URBINO (PU), Italy
Email: francesca.cesaroni@uniurb.it
Email: mara.delbaldo@uniurb.it

Paola Paoloni
Department of UNISU,
Niccolò Cusano University,
Via Don Carlo Gnocchi, 3 – 00166 Rome, Italy
Email: paola.paoloni@unicusano.it

Abstract: Traditionally, intellectual capital (IC) is seen as consisting of three

components: human, structural and relational capital. Nevertheless, an
emerging body of literature has started to suggest that three other components
also form part of IC. These are renewal capital (RC), trust capital (TC) and
entrepreneurial capital (EC). This paper shows preliminary results from the
Italian unit of an international project on intellectual capital and value creation.
The article focuses particularly on EC and RC, to ascertain their influence on
the performance of firms using descriptive analysis techniques. Multi-item
scales are used as key tools to achieve the research goals. Our analysis reveals a
markedly positive relationship between EBITDA and EC. RC and EC levels
positively influence ROI. Finally, RC is linked to positive effects on ROA.

Keywords: intellectual capital; entrepreneurial capital; renewal capital;

corporate performance; Italy.

Reference to this paper should be made as follows: Demartini, P.,

Cesaroni, F.M., Del Baldo, M. and Paoloni, P. (2017) ‘Intellectual capital and
financial performance. Evidences from Italian firms’, Global Business and
Economics Review, Vol. 19, No. 4, pp.468–484.

Copyright © 2017 Inderscience Enterprises Ltd.

 Intellectual capital and financial performance 469

Biographical notes: Paola Demartini is a Full Professor at the University of

Rome TRE. She is the Executive Editor of the Review Small Business/Piccola
Impresa. Her research interests include general management, corporate
financial communication and intellectual-based management.

Francesca Maria Cesaroni is an Associate Professor at the University of Urbino

Carlo Bo. Her research interests include general management, corporate
financial communication, small business and entrepreneurship.

Mara Del Baldo is an Associate Professor of Financial Accounting and

Economics of Sustainability and Accountability at the University of Urbino
Carlo Bo (Italy). Her research interests include general management,
integrated and sustainability reporting, corporate social responsibility,
business ethics, small business and entrepreneurship. She is a member of
several scientific editorial boards and networks (CSEAR, EBEN, SPES Forum,
NIBR-WICI-Italian Network of Business Reporting, Global-Corporate-
Governance-Institute, and GBS).

Paola Paoloni is a Full Professor at the ‘Niccolò Cusano’ University, Faculty

of Economy, in Rome. Her research interests include general management,
financial reporting, female entrepreneurship and intellectual-based
management. She is the Scientific Director of ‘IPAZIA’ Gender Study
Observatory in Niccolò Cusano University, Rome.

This paper is a revised and expanded version of a paper entitled ‘What effect is
entrepreneurial capital having on the value creation in italian companies?’
presented at 9th International Forum on Knowledge Asset Dynamics (IKFAD)
on the theme of Knowledge and Management Models for Sustainable Growth,
Matera, Italy, 11–13 June 2014.

1 Introduction

Intellectual capital (IC) and knowledge management (KM) are the two main research
areas addressing the topic of knowledge in organisations. IC literature in particular has its
main focus set on intangible resources and value creation (Edvinsson and Malone, 1997).
KM, on the other hand, investigates mainly the initiatives, strategies, systems and
processes supporting the creation, storage and evaluation of knowledge (Gold et al.,
2001). While there certainly are potential links between IC and KM, previous literature
‘bridging the gap’ to examine the main knowledge-related factors influencing value
creation in firms is somewhat rare.
An international project on IC and value creation was launched by Lappeenranta
University of Technology (LUT, Finland) precisely to investigate this area of research.
The main research question the project set out to answer concerns how IC assets and KM
practices interact for value creation (Kianto et al., 2013).
IC is traditionally viewed as consisting of three components, i.e., human, structural
and relational capital (Bontis, 2001; Guthrie, 2001). In the project led by LUT, three
other elements were identified as part of IC. These are renewal capital (RC), trust capital
(TC), and entrepreneurial capital (EC) (Kianto, 2007, 2008; Demartini and Paoloni, 2013;
Inkinen et al., 2014).
470 P. Demartini et al.

The Italian unit of the project focused on EC and RC to investigate their current level
in medium- and large-sized Italian companies, and ascertain how they affect a firm’s
performance (Demartini and Paoloni, 2013, 2014; Demartini et al., 2015, 2016; Cesaroni
et al., 2014, 2015a, 2015b, 2015c,). Overall, this paper provides unique insights into
corporate EC and RC in Italian companies, as well as guidance to improve the
management of knowledge-based resources in order to stimulate a firm’s economic
performance.
In order to achieve this purpose, the article is organised as follows. Section 2 outlines
a review of the main studies on IC and its components and on IC/KM as performance
drivers. Section 3 introduces the research method, and it is followed by Section 4 on data
analysis. The main findings deriving from the data are presented in Section 5, which is
followed by a discussion of the findings (Section 6) and the conclusions (Section 7).

2 Literature review

2.1 IC: static and dynamic approach

IC is defined as a company’s knowledge-based capital (Dzinkowski, 2000). This can be
understood as either the product of knowledge transformation, or the overall
organisational knowledge. In the 1990s, IC was defined as the sum of three components:
human, organisational (structural), and customer (or relational) capital (Bontis, 2001;
Guthrie, 2001; Nahapiet and Ghoshal, 1998).
The expression ‘human capital’ refers to knowledge, education, skills and
psychometric assessments (McGregor et al., 2004; Teece, 2000). Engstrom et al. (2003,
p.288) defined structural capital as including “all non-human storehouses of knowledge
in organizations”. Therefore, ‘structural capital’ refers to assets such as the corporate
culture, the structure of the organisation, management processes/procedures, data,
patents, trademarks and financial relations. Lastly, relational or customer capital (internal
and external) refers to intangibles such as brands, customers, customer loyalty and
distribution channels. Indeed, consumers are also seen as repositories of knowledge
valuable for an organisation (Bontis, 1998).
More recent studies (Kianto, 2007, 2008; Demartini and Paoloni, 2013) have included
three other components into IC. These are the so-called ‘RC’, i.e., the innovations,
products and services available to a firm; ‘TC’, i.e., the trust involved in an organisation’s
internal and external relationships; ‘EC’, referring to the entrepreneurial activities of an
organisation, and the competence and commitment related to them (Erikson, 2002).
As just mentioned, EC refers to entrepreneurial behaviour in an organisation
(Erikson, 2002); it is defined as a group of competences and attributes of the personnel
that are linked to proactive, ‘aggressive’, risk-oriented decision-making and behaviour
(Lumpkin and Dess, 1996).
RC, on the other hand, refers to an organisation’s ability to self-develop through
learning, continuously renewing, increasing or acquiring new skills and adapting its
operations with innovations (Kianto et al., 2010).
Finally, TC goes back to the idea of social capital (Putnam, 1995); TC enables and
enhances cooperation in decision-making, injects openness and transparency in the
corporate atmosphere and supports motivation levels. In this work, TC is intended as the
trust involved in relationships both internal and external to the organisation (Mayer et al.,
1995).
 Intellectual capital and financial performance 471

We argue that RC, EC and TC should be considered as ‘new’, important dimensions

of IC, to be added to the traditional ones (Kianto et al., 2013). A broader concept of IC
including the three new components can help gain a more holistic understanding of an
organisation’s intangible assets [Kianto et al., (2013), p.1476; Inkinen et al., (2014),
p.2919].
There are two approaches for the evaluation of IC: the static approach focuses on
evaluating the knowledge-related resources; conversely, the dynamic approach is centred
on activities enabling the creation, sharing, enhancement, learning, organisation and use
of knowledge (Kianto et al., 2010). KM can be seen as the management activities aiming
to improve efficiency and effectiveness of a firm’s organisational knowledge resources
(Andreeva and Kianto, 2012). Thus, literature on IC investigates a firm’s intangible
resources, while studies on KM research how intangibles can be managed and controlled
(Gold et al., 2001; Lee and Choi, 2003). This separation has determined a level of
conceptual ambiguity, and in order to resolve it we suggest that the two concepts should
be linked, in line with what suggested by Kianto et al. (2013). Based on this, KM
practices can be understood as the management activities enabling a firm to create value
from IC [Inkinen and Kianto, (2014), p.456].

2.2 KM, IC and performance of a firm

In a knowledge-based view of firms, different levels of performance between
organisations are the result of different knowledge-related resources and varying abilities
in using and generating knowledge (Kogut and Zander, 1992; Spender and Grant, 1996;
Grant, 1996). These two value-generating aspects are intertwined, and they can be
viewed as corresponding to a firm’s IC and KM practices.

Figure 1 IC, KM and organisational performance (see online version for colours)

Source: Kianto (2015)

472 P. Demartini et al.

The impact of IC on a firm’s performance has been widely researched; the results
obtained from previous investigations have not been unanimous, as the creation of value
depends on the interaction of several IC stocks (e.g., Johnson, 1999; Bontis, 1999; Roos
et al., 2001; Reed et al., 2006). KM literature includes a wealth of studies looking at the
impact of the many KM practices on a firm’s performance (e.g., Gold et al., 2001;
Chuang, 2004; Darroch, 2005; Andreeva and Kianto, 2012). However, there is a lack of
research on the impact that the implementation of KM has on knowledge (Inkinen and
Kianto, 2014). The main general goal of our project was to understand the interaction
between IC assets and the relevant KM practices that increases organisational
performance (see Figure 1) (Kianto et al., 2013).
To describe the research model, it is important to point out how the performance of an
organisation may be evaluated in various ways, with different frameworks and indicators
(e.g., innovation, market, customer value, and financial performance). Another important
aspect to discuss concerns the testing of contingent factors (related to company-specific
and environmental attributes) and of how they can influence the relations among KM, IC
and organisational performance.
While adopting the same general framework, the single units involved in the project
developed somewhat different research designs apt for the investigation of specific
relations/types of impact (see Table 1).
Table 1 Research outcomes

Research unit (authors, year) Relation/impact

University of Lappeenranta, Finland
(Inkinen et al., 2014)
University of Lappeenranta (Inkinen and
Kianto, 2014)
University of Deusto, Spain (Saenz et al.,
2014)
St. Petersburg University, Russia
(Andreeva et al., 2014)
Educons University, Serbia (Cabrilo et al.,
2015)
Hong Kong Polytecnic University (Kianto
et al., 2015)
IC/market performance
IC/innovation performance
KM/market performance
Human relation management (HRM) policies and
practice/KM/IC
HRM policies/KM/IC/innovation performance
IC/customer value
KM/customer value
KM/IC
IC/innovation performance
IC/organisational performance (market
performance, value creation, customer value,
innovation and job satisfaction)

The Italian research unit focused particularly on EC and RC, to ascertain their current
level in medium- and large-sized Italian companies and their influence or potential
influence on the financial performance of a firm.

2.3 RC, EC and performance

Empirical literature on the topic widely agrees that different types of IC are naturally
interwoven, and they have the highest impact on the performance of a firm when
combined. Firms possessing high overall IC therefore have a better financial performance
 Intellectual capital and financial performance 473

(Youndt et al., 2004), higher knowledge productivity (Huang and Wu, 2010), more
intellectual property and higher intellectual firm performance (Namvar et al., 2010),
innovation (Wu et al., 2008) and flexibility of processes (Menor et al., 2007).
Research on the individual IC components and the influence they exert on
organisational performance as stand-alone variables has resulted in a lack of consensus.
Inkinen et al.’s (2014) findings obtained from a Finnish context highlighted how most of
the individual IC components are not directly related to the market and innovation
performance of local firms, in contrast with most of the existing literature. In Serbia,
Cabrilo et al. (2015) found that there is a strong link between EC and innovation of
products, services and management practices; RC, on the other hand, impacts positively
on innovation of production methods/processes. Russian research found that the IC
components positively influencing customer value creation are two, i.e., relational and
human capital (Andreeva et al., 2014). Finally, results pointed to human capital as the
only IC component with a direct influence on the performance of Chinese firms (Kianto
et al., 2015).
We claim that, in periods of economic turmoil and crisis, both RC and EC represent
critical components of IC that may positively contribute to the financial performance of
firms. Here below, we present the argument scaffolding this claim.
According to Gategory et al. (2010), initiative and proactivity are likely to increase
innovative performance, encouraging self-development in a firm. Taking risks, being able
to recognise new opportunities and the ability to take bold decisions are also likely to
help an organisation to generate and/or prototype innovation. Therefore, an organisation
with a high EC stock is likely to have an increased level of competitiveness thanks to
employees willing and enabled to make decisions quickly and show problem-solving
initiative [Inkinen et al., (2014), p.2922].
RC, i.e., a firm’s ability to learn and acquire new knowledge, has a strong link with
various aspects of performance (Nonaka and Takeuchi, 1995; Andreeva and Kianto,
2011, 2012) and competitiveness (Teece et al., 1997; Eisenhardt and Martin, 2000;
Edvinsson, 2002; Wiklund and Shepherd, 2003; Wu et al., 2007, 2008; Wang and Chen,
2013).
A high level of RC (sometimes also called innovation capital, see Chen et al., 2004)
practically translates into the ability to build on existing knowledge and generate new
insight (Maditinos and Theodoridis, 2010), as well as continuously developing new
products, services and ideas [Tseng and Goo, 2005; Kianto et al., (2014), p.2922]. Being
innovative not only means generating new ideas, products and processes, but also
actively implementing them (Hurley and Hult, 1998; Subramaniam and Youndt, 2005).
Calantone et al. (2002) suggested that a firm’s ability to innovate impacts positively on
its performance and contributes to building a competitive advantage by unlocking
creative thinking. Innovativeness also supports the practical application of enhanced
understanding acquired through market activities; this can also have a positive influence
on performance (Han et al., 1998; Hurley and Hult, 1998).
Based on all the above, we hypothesise that both EC and RC have a significant
influence on the financial performance of Italian firms (H1).
474 P. Demartini et al.

3 Research methodology

An empirical research was set up to ascertain the existence of a relationship between

RC/EC levels and a firm’s performance; this was based on a sample of Italian firms
(more specifically, Italian limited liability companies with more than 99 employees).
2,000 such companies were randomly selected from the AIDA database in order to
represent the overall AIDA population in terms of company size, sector and location. For
each selected company, a key informant was contacted with a questionnaire; this was
most often the CEO or HR/KM Director. The questionnaire was filled out online, in the
period between October 2013 and March 2014. 105 questionnaires were filled out by
companies in the sample, with a response rate of 5.25%. After removing questionnaires
with missing data the final dataset was made of 100 suitable responses (see Annex 1).
Further financial and economic data were obtained from the AIDA database (which
stores such data on Italian firms). Descriptive analysis was applied, exploring differences
applicable to companies depending on their size and industry. Data on some corporate
performance indicators were collected, i.e., return on equity (ROE); return on assets
(ROA); growth in turnover/sales; growth in revenue.
The questionnaire was organised into three sections:
1 basic company information
2 IC
3 KM.
The questionnaire comprised of 101 questions, whose answers were based on a five-point
Likert scale. Two multi-item scales (RC and EC) represented the core of the
questionnaire.
In this analysis we considered innovativeness as a stand-alone concept, even though
this is commonly understood as one of the main entrepreneurial skills. As RC refers to an
organisation’s enduring ability to develop through learning and innovation, the relevant
scale comprises of four items dealing with inventiveness and learning. EC, on the other
hand, includes six risk-taking, proactivity and decision-making items referred the
organisation’s personnel. The above items were adapted from Kianto et al. (2010),
Garcia-Morales et al. (2006) and Hughes and Morgan (2007) (see Annex 2). Principal
component analysis (PCA) and multiple linear regressions were applied to the data
collected by means of the questionnaire.

4 The matrix of PCA

To ascertain the existence of statistically significant relationships between IC components

and a firm’s performance we developed a model based on multiple linear regressions.
This was preceded by a PCA, in order to transform the variables connected to the various
IC components into a smaller set of artificial variables.
 Intellectual capital and financial performance 475

The initial matrix derived from the analysis of the answers provided by the companies
on the several components of IC through the questionnaire. The percentage of explained
variance was applied to reduce dimensionality. Each first component of each IC branch is
responsible for at least 60% of the variance; therefore, the first component for each
category has been considered (see Table 2).
Subsequently, a multiple linear regression model was developed. In this model:
• dependent variables are represented by performance indicators EBITDA, ROI and
ROA (2011–2013)
• three variables are used as control variables (i.e., sales, percentage of R&D personnel
and tangibility – this latter represents the respondents’ perception on the proportion
of tangible/intangible assets of a company)
• dummy variables are also used (location, employees, and industrial sector).
Table 2 PCA – results

Principal components for each IC

Percentage of variance explained by the first component
element:
Human capital 60.4%
Structural capital 72.6%
Internal relational capital 70.5%
External relational capital 69.9%
Renewal capital 70.8%
Entrepreneurial capital 79.7%
Trust capital 75.9%

5 Findings

Based on the listed variables, we developed three multiple regression models (one per
performance indicator used as a dependent variable).

5.1 First model: EBITDA

This model is summarised by the following equation:
EBITDAi = β 0 + β1humancapitali + β 2 structuralcapitali
+ ß3 int relationalcapital + βextrelationalcapital
+β5 entrepreneurialcapital + β6 trustcapital
+β 7 renewalcapital + β8 R & Dshare + β9 sales
+β9 highedu + β10 dummy sec tor
+β11dummylocation + β12 dummyemployees + βi
476 P. Demartini et al.

The model shown in Table 3 has an R2 = 31.6% and an Adjusted R2 = 17.6%. The low
adjusted R2 value results from the many explanatory variables present in the model. The
p-value underlines the existence of a statistically significant relationship between
EBITDA and EC. To obtain a highly adaptable model, only the explanatory variables
previously showing the lowest p-value levels were subsequently considered in the
analysis. A new model was thus obtained (see Table 4). This latter unveils a statistically
significant positive relationship between EBITDA and external relational capital as well.

5.2 Second model: ROI

This model is summarised by the following equation:
ROIi = α 0 + α1humancapitali + α 2 structuralcapitali
+α3 int relationalcapital + α 4 extrelationalcapital
+α5 entrepreneurialcapital + α 6 trustcapital + α 7 renewalcapital
+α8 R & Dshare + α9 sales + α9 highedu + α10 dummy sec tor
+α11dummylocation + α12 dummyemployees + αi

It shows a R2 = 33.3% and an adjusted R2 = 20.8%. We decided to simplify this model

as well, by eliminating variables with an excessively high p-value. The resulting model
(see Table 5) has an R2 = 32.7% and an adjusted R2 = 26.4%.
Through the analysis of the p-value we could identify statistically significant positive
RC/ROI and EC/ROI relationships. Furthermore, we also identified a statistically
significant positive ROI/TC relationship.
Table 3 Regression analysis: EBITDA MEDIA

Predictor Coef. SE coef. T P

Constant 16.358 7.937 2.06 0.042
R&DSHARE –0.06804 0.06990 –0.97 0.333
PRODVSER –0.3103 0.2958 –1.05 0.297
HIGHEDU –0.00010 0.03824 –0.00 0.998
Human Cap –0.781 1.261 –0.62 0.538
Int Rel Cap –1.742 1.119 –1.56 0.677
Renewal Cap 0.166 1.027 0.16 0.872
Ext Rel Cap 0.432 1.036 0.42 0.123
Struct Cap –1.042 1.214 –0.86 0.393
Trust Cap 1.221 1.237 0.99 0.327
Entrepr Cap EC 1.2943 0.7390 1.75 0.044
dummy1 –19.692 3.876 –5.08 0.033
dummylocat –33,305 50027 –0.67 0.507
dummy employ 60,149 50753 1.19 0.239
Notes: S = 10.2082, R-sq = 31.6%, R-sq(adj) = 17.6%.
 Intellectual capital and financial performance 477

Table 4 Regression analysis: EBITDA

Predictor Coef. SE coef. T P

Constant 13.927 5.777 2.41 0.018
R&DSHARE –1,585 1224 –1.30 0.199
PRODVSER –0.3699 0.2767 –1.34 0.185
Ext Rel Cap 1.7896 0.9475 1.89 0.052
Trust Cap 1.441 1.242 1.16 0.249
Struct Cap –1.534 1.224 –1.25 0.114
Entr Cap 1.1148 0.5743 1.94 0.042
Dummyindsect –19.554 3.715 –5.26 0.023
dummy employ 5.475 2.242 2.44 0.017
Notes: S = 9.93720, R-sq = 29.7%, R-sq(adj) = 26.6%.
Table 5 Regression analysis: ROI

Predictor Coef. SE coef. T P

Constant 11.950 4.772 2.50 0.015
R&DSHARE –0.04343 0.04966 –0.87 0.285
PRODVSER –0.4196 0.2090 –2.01 0.048
Renew Cap RC –2.0172 0.7115 –2.84 0.006
Ext Rel Cap –0.7998 0.7134 –1.12 0.266
Trust Cap 1.0819 0.6437 1.68 0.097
Entr Cap 1.1896 0.5172 2.30 0.024
Dummyloc 1.751 1.564 1.12 0.166
dummy employ –3.672 1.531 –2.40 0.019
dummy1 –11.172 2.743 -4.07 0.032
Notes: S = 6.74916, R-sq = 32.7%, R-sq(adj) = 26.4%.

5.3 Third model: ROA

This model is summarised by the following equation:
ROAi = λ 0 + λ1humancapitali + λ 2 structuralcapitali
+ λ 3 int relationalcapital + λ 4 extrelationalcapital
+ λ 5 entrepreneurialcapital + λ 6 trustcapital + λ 7 renewalcapital
+ λ8 R & Dshare + λ 9 sales + λ 9 highedu + λ10 dummy sec tor
+ λ11dummylocation + λ12 dummyemployees + λ i

Also for the third model, all the explanatory variables selected initially formed part of the
regression model. This model shows an R2 = 26.6% and an adjusted R2 = 16.6%. The
new model built with low p-value explanatory variables shows an R2 = 28.6% and an
adjusted R2 = 26.1%. P-values are shown in the following Table 6.
This model identifies statistically significant positive ROA/human capital and
ROA/RC relationships.
478 P. Demartini et al.

Table 6 Regression analysis: ROA

Predictor Coef. SE coef. T P

Constant 0.658 5.807 0.11 0.610
Human Cap 2.903 1.031 2.82 0.006
Renewal Cap –2.0836 0.7477 –2.79 0.007
Int Rel Cap –1.0969 0.7595 –1.44 0.152
Struct Cap –1.3376 0.9459 –1.41 0.161
Trust Cap 1.0978 0.9177 1.20 0.135
dummy indsect –6.686 2.979 –2.24 0.027
R&S share 0.10895 0.05930 1.84 0.070
Sales –0.2840 0.2383 –1.19 0.237
dummy employ –3.144 1.497 –2.10 0.039
Notes: S = 8.23428, R-sq = 28.6%, R-sq(adj) = 26.1%.

6 Discussion

The significant positive EBITDA/EC relationship underlines the importance of EC. This
is indeed a key intangible resource for the enhancement of corporate value, and it needs
to be developed in an evolving context; this needs to happen both at a structural level
(i.e., the corporate culture), and at the level of entrepreneurial behaviour and skills.
Taking risks and having the ability to make strategic choices quickly both affect
profitability, as they bring a firm to embrace uncertainty and exploit new business
opportunities. Aggressiveness in decision-making (i.e., aggressive price competition,
access to new markets) enhances business performance, in that it helps decrease the
competitors’ ability to anticipate and/or react to new corporate strategies (Lumpkin and
Dess, 1996). Other attributes showing a positive influence on performance are autonomy
and independence; these are here meant as the employees’ ability and desire to support
the firm in quickly facing market changes and perceiving new market needs (Hughes and
Morgan, 2007).
ROI values, namely data on a company’s profitability in the form of returns on
investment, confirm the positive influence of RC and EC on operative economic
efficiency. It could then be concluded that companies with high RC and EC can achieve a
better performance regarding the profitability of assets and investments (Inkinen et al.,
2014).
Lastly, the statistically significant positive ROA/RC relationship confirms the
hypothesis that RC is ‘the new bottom line’ IC component (Edvinsson, 2002; Andreeva
and Kianto, 2011, 2012). The ever evolving context indeed requires companies to
develop/renew their knowledge continuously and to be capable of sustaining
competitiveness, especially in a market turmoil (Teece et al., 1997; Eisenhardt and
Martin, 2000; Inkinen et al., 2014). Innovativeness is positively linked to value creation
and performance, as it influences positively a company’s profitability by allowing firms
to respond quickly to new customer needs, and therefore contributing to their competitive
advantage (Calantone et al., 2002; Rauch et al., 2009).
 Intellectual capital and financial performance 479

7 Conclusions

The impact of RC and EC on the performance of Italian medium and large companies
was analysed in this article, seeing these two types of capital as stand-alone IC
components. The paper discussed how RC concerns a company’s ability to develop
through learning with the acquisition of new knowledge and skills. EC, on the other hand,
was shown to be linked to entrepreneurial behaviour. To ascertain the existence of
statistically significant relationships between IC components and performance, a multiple
linear regression model was developed. This type of analysis was preceded by a PCA.
Statistical data unveiled a significant positive EBITDA/EC relationship. Furthermore, the
same analysis also confirmed the positive influence of RC and EC on ROI, as well as a
positive ROA/RC relationship.
In the era of knowledge economy, the findings of this study show that EC and RC are
an organisation’s key resources, which enable innovation performance as well as
organisational growth. These IC components also increase effectiveness in responding to
current and future challenges, such as sudden market changes.
The main limitation of this study is connected to the use of a questionnaire as a means
to gather data; indeed, this translates into data potentially affected by the respondents’
perceptions. Nevertheless, the outcomes of this study represent a first research step on the
topics of investigation. The article focuses on Italian companies, but in the future, the
analysis will be widened to different samples. Furthermore, a comparative analysis will
be carried out to contrast results from the Italian context with those from other units of
the project. Currently, results are not entirely comparable due to each unit having focused
on the impact of IC/KM on different areas of performance (i.e., innovation, market, value
creation, and financial performance).

References
Andreeva, T. and Kianto, A. (2011) ‘Knowledge processes, knowledge-intensity and innovation: a
moderated mediation analysis’, Journal of Knowledge Management, Vol. 15, No. 6,
pp.1016–1034.
Andreeva, T. and Kianto, A. (2012) ‘Does knowledge management really matter? Linking KM
practices, competitiveness and economic performance’, Journal of Knowledge Management,
Vol. 16, No. 4, pp.617–636.
Andreeva, T., Garanina, T., Bezginova, Y. and Sergeeva, A. (2014) ‘Customer value creation
process in russian companies: the role of intellectual capital and knowledge management
practices’, in ICICKM2014-Proceedings of the 11th International Conference on Intellectual
Capital, Knowledge Management and Organisational Learning: ICICKM2014, Academic
Conferences Limited, p.9.
Bontis, N. (1998) ‘Intellectual capital: an exploratory study that develops measures and models’,
Management Decision, Vol. 36, No. 2, pp.63–76.
Bontis, N. (1999) ‘Managing organisational knowledge by diagnosing intellectual capital: framing
and advancing the state of the field’, International Journal of Technology Management,
Vol. 18, Nos. 5–8, pp.433–462.
Bontis, N. (2001) ‘Assessing knowledge assets: a review of the models used to measure intellectual
capital’, International Journal of Management Reviews, Vol. 3, No. 1, pp.63–76.
480 P. Demartini et al.

Cabrilo, S., Kianto, A. and Raspopovic, N. (2015) ‘The effect of IC on different aspects of
innovation performance in Serbian companies’, Paper presented at the 10th International
Forum on Knowledge Asset Dynamics – IFKAD 2015, published in Proceedings IFKAD 2015,
Bari, Italy, 10–12 June, pp.989–1000.
Calantone, R.J., Çavuşgil, S.T. and Zhao, Y. (2002) ‘Learning orientation, firm innovation
capability, and business performance’, Industrial Marketing Management, Vol. 31, No. 6,
pp.515–524.
Cesaroni, F.M., Del Baldo, M., Demartini, P. and Paoloni, P. (2014) ‘Intangibles and
entrepreneurial capital’, Proceedings of the 13th International Conference of the Society for
Global Business and Economic Development – SGBED Managing the Intangibles: Business
and Entrepreneurship Perspectives in a Global Context, Ancona, Italy, 16–18 July, pp.14–27.
Cesaroni, F.M., Del Baldo, M., Demartini, P. and Paoloni, P. (2015a) ‘Entrepreneurial, renewal and
trust capital of Italian firms: insights from an empirical study’, in International Journal of
Management, Knowledge and Learning, Vol. 4, No. 1, pp.3–23.
Cesaroni, F.M., Del Baldo, M., Demartini, P. and Paoloni, P. (2015b) ‘Entrepreneurial and renewal
capital of Finnish and Italian firms’, Insights from an Empirical Study in MakeLearn 2015:
Managing Intellectual Capital and Innovation for Sustainable and Inclusive Society,
Proceedings of the MakeLearn and TIIM Joint International Conference, Bari, Italy,
27–29 May, ISSN: 2232-3309.
Cesaroni, F.M., Del Baldo, M., Demartini, P. and Paoloni, P. (2015c) ‘Entrepreneurial, renewal and
trust capital: are they factors influencing corporate performance? Evidence from Italian firms’,
Sidrea International Workshop: Managing and Disclosing Intellectual Capital and other
Non-Financial Capitals: Emerging Issues, Ancona, School of Economics ‘G. Fuà’, 15 July,
Proceedings D.M. Edizioni, ISBN: 978-88-99198-04-06.
Chen, J., Zhu, Z. and Xie, H.Y. (2004) ‘Measuring intellectual capital: a new model and empirical
study’, Journal of Intellectual Capital, Vol. 5, No. 1, pp.195–212.
Chuang, S.H. (2004) ‘A resource-based perspective on knowledge management capability and
competitive advantage: an empirical investigation’, Expert Systems with Applications, Vol. 27,
No. 3, pp.459–465.
Darroch, J. (2005) ‘Knowledge management, innovation and firm performance’, Journal of
Knowledge Management, Vol. 9, No. 3, pp.101–115.
Demartini, P. and Paoloni, P. (2013) ‘What effects is entrepreneurial capital having on the value
creation in Italian companies?’, Paper presented at 8th International Forum on Knowledge
Asset Dynamics – IFKAD 2013, Zagreb, pp.3070–3089.
Demartini, P. and Paoloni, P. (2014) ‘Defining the entrepreneurial capital construct’,
Chinese Business Review, November, Vol. 13, No. 11, pp.668–680, DOI: 10.17265/1537-
1506/2014.11.002.
Demartini, P., Cesaroni, F.M., Del Baldo, M. and Paoloni, P. (2015) ‘Intellectual capital in Italian
firms: evidences from an empirical study’, 4th Workshop – Innovative Processes in SMEs,
Re-positioning of SMEs in the Global Value System, University of Urbino Carlo Bo,
DESP – Department of Economics, Society, Politics, 24–25 September, Proceedings
ISBN: 9788894122701.
Demartini, P., Cesaroni, F.M., Del Baldo, M. and Paoloni, P. (2016) ‘Entrepreneurial and renewal
capitals as key resources of organisations’, in Rabar, D., Ksenija Černe, K. and Zenzerović, R.
(Eds.): EU Future Perspectives: Innovation, Entrepreneurship & Economic Policy,
Juraj Dobrila University of Pula Publisher, ISBN: 978-953-7320-24-9.
Dzinkowski, R. (2000) ‘The measurement and management of intellectual capital: an introduction’,
Management Accounting, Vol. 78, No. 2, pp.32–36.
Edvinsson, L. (2002) Corporate Longitude, Book House Publishing, Stockholm.
Edvinsson, L. and Malone, M.S. (1997) Intellectual Capital: Realizing Your Company’s True
Value by Finding its Hidden Roots, Harper Business, New York.
 Intellectual capital and financial performance 481

Eisenhardt, K.M. and Martin, J.A. (2000) ‘Dynamic capabilities: what are they?’, Strategic
Management Journal, Vol. 21, Nos. 10–11, pp.1105–1121.
Engstrom, T.E.J., Westnes, P. and Westnes, S. (2003) ‘Evaluating intellectual capital in the hotel
industry’, Journal of Intellectual Capital, Vol. 4, No. 3, pp.287–303.
Erikson, T. (2002) ‘Entrepreneurial capital: the emerging venture’s most important asset and
competitive advantage’, Journal of Business Venturing, Vol. 17, No. 3, pp.275–290.
Garcia-Morales, V., Llorens-Montes, F. and Verdu-Jover, A. (2006) ‘Antecedents and
consequences of organizational innovation and organizational learning in entrepreneurship’,
Industrial Management & Data Systems, Vol. 106, No. 1, pp.21–42.
Gategory, D., Dess, G., Lumpkin, J. and Covin, G. (2010) ‘Entrepreneurial strategy making and
firm performance: tests of contingency and configurationally models’, Strategic Management
Journal, Vol. 18, No. 9, pp.677–695.
Gold, A.H., Malhotra, A. and Segars, A.H. (2001) ‘Knowledge management: an organizational
capabilities perspective’, Journal of Management Information Systems, Vol. 18, No. 1,
pp.185–214.
Grant, R.M. (1996) ‘Toward a knowledge-based theory of the firm’, Strategic Management
Journal, Vol. 17, No. S2, pp.109–122.
Guthrie, J. (2001) ‘The management, measurement and the reporting of intellectual capital’,
Journal of Intellectual Capital, Vol. 2, No. 1, pp.27–41.
Han, J., Kim, N. and Srivastava, R. (1998) ‘Market orientation and organizational performance: is
innovation a missing link?’, Journal of Marketing, Vol. 62, No. 4, pp.30–45.
Huang, Y.C. and Wu, Y.C.J. (2010) ‘Intellectual capital and knowledge productivity: the Taiwan
biotech industry’, Management Decision, Vol. 48, No. 4, pp.580–599.
Hughes, M. and Morgan, R.E. (2007) ‘Deconstructing the relationship between entrepreneurial
orientation and business performance at the embryonic stage of firm growth’, Industrial
Marketing Management, Vol. 36, No. 5, pp.651–661.
Hurley, R.F. and Hult, G.T.M. (1998) ‘Innovation, market orientation, and organizational learning:
an integration and empirical examination’, Journal of Marketing, Vol. 62, No. 3, pp.42–54.
Inkinen, H. and Kianto, A. (2014) ‘Knowledge management practices and firm
performance-empirical findings from Finland’, in European Conference on Knowledge
Management, Academic Conferences International Limited, Vol. 2, p.455.
Inkinen, H., Kianto, A., Vanhala, M. and Ritala, P. (2014) ‘Intellectual capital and
performance – empirical findings from Finnish firms’, Paper presented at 9th International
Forum on Knowledge Asset Dynamics, IKFAD 2014, Matera, pp.2918–2933.
Johnson, W.H. (1999) ‘An integrative taxonomy of intellectual capital: measuring the stock and
flow of intellectual capital components in the firm’, International Journal of Technology
Management, Vol. 18, Nos. 5–8, pp.562–575.
Kianto, A. (2007) ‘What do we really mean by dynamic intellectual capital?’, International Journal
of Learning and Intellectual Capital, Vol. 4, No. 4, pp.342–356.
Kianto, A. (2008) ‘Development and validation of a survey instrument for measuring
organizational renewal capability’, International Journal of Technology Management, Vol. 42,
No. 1, pp.69–88.
Kianto, A. (2015) ‘Value creation in the knowledge economy’, Presentation at Roma Tre
University, 19 March [online] https://sites.google.com/site/corporategovernancelab/eventi
(accessed 25 January 2016).
Kianto, A., Ritala, P., Spender, J.C. and Vanhala, M. (2014) ‘The interaction of intellectual capital
assets and knowledge management practices in organizational value creation’, Journal of
Intellectual Capital, Vol. 15, No. 3, pp.362–375.
Kianto, A., Gang, L. and Lee, R. (2015) ‘Knowledge management practices, intellectual capital and
firm performance: empirical evidence from Chinese companies’, in European Conference on
Knowledge Management, Academic Conferences International Limited, p.424.
482 P. Demartini et al.

Kianto, A., Hurmelinna-Laukkanen, P. and Ritala, P. (2010) ‘Intellectual capital in service- and
product-oriented companies’, Journal of Intellectual Capital, Vol. 11, No. 3, pp.305–325.
Kianto, A., Ritala, P., Inkinen H. and Vanhala, M. (2013) ‘The interaction of intellectual capital
stocks and knowledge management practices in organizational value creation’, Paper
presented at 8th International Forum on Knowledge Asset Dynamics – IFKAD 2013, Zagreb,
pp.1473–1482.
Kogut, B. and Zander, U. (1992) ‘Knowledge of the firm, combinative capabilities, and the
replication of technology’, Organization Science, Vol. 3, No. 3, pp.383–397.
Lee, H. and Choi, B. (2003) ‘Knowledge management enablers, processes, and organizational
performance: an integrative view and empirical examination’, Journal of Management
Information Systems, Vol. 20, No. 1, pp.179–228.
Lumpkin, G.T. and Dess, G. (1996) ‘Clarifying the entrepreneurial orientation construct and
linking it to performance’, Academy of Management Review, Vol. 21, No. 1, pp.135–172.
Mayer, R.C., Davis, J.H. and Schoorman, F.D. (1995) ‘An integrative model of organizational
trust’, Academy of Management Review, Vol. 20, No. 3, pp.709–734.
Maditinos, D.I. and Theodoridis, K. (2010) ‘Satisfaction determinants in the Greek online shopping
context’, Information Technology & People, Vol. 23, No. 4, pp.312–329.
McGregor, J., Tweed, D. and Pech, R. (2004) ‘Human capital in the new economy: Devil’s
bargain?’, Journal of Intellectual Capital, Vol. 5, No. 1, pp.153–164.
Menor, L.J., Kristal, M.M. and Rosenzweig, E.D. (2007) ‘Examining the influence of operational
intellectual capital on capabilities and performance’, Manufacturing & Service Operations
Management, Vol. 9, No. 4, pp.559–578.
Nahapiet, J. and Ghoshal, S. (1998) ‘Social capital, intellectual capital and the organizational
advantage’, The Academy of Management Review, Vol. 23, No. 2, pp.242–266.
Namvar, M., Fathian, M., Akhavan, P. and Reza Gholamian, M. (2010) ‘Exploring the impacts of
intellectual property on intellectual capital and company performance: the case of Iranian
computer and electronic organizations’, Management Decision, Vol. 48, No. 5, pp.676–697.
Nonaka, I. and Takeuchi, H. (1995) The Knowledge-Creating Company, Oxford University Press,
New York.
Putnam, R.D. (1995) ‘Bowling alone: America’s declining social capital’, Journal of Democracy,
Vol. 6, No. 1, pp.65–78.
Rauch, A., Wiklund, J., Lumpkin, G.T. and Frese, M. (2009) ‘Entrepreneurial orientation and
business performance: an assessment of past research and suggestions for the future’,
Entrepreneurship Theory and Practice, Vol. 33, No. 3, pp.761–787.
Reed, K.K., Lubatkin, M. and Srinivasan, N. (2006) ‘Proposing and testing an intellectual
capital-based view of the firm’, Journal of Management Studies, Vol. 43, No. 4, pp.867–893.
Roos, G., Bainbridge, A. and Jacobsen, K. (2001) ‘Intellectual capital analysis as a strategic tool’,
Strategy & Leadership, Vol. 29, No. 4, pp.21–26.
Saenz, J. Aramburu, N. and Buenechea, M. (2014) ‘Intellectual capital and value creation in Spain:
making the transition from a brick-based economy towards a knowledge-based economy’,
Paper presented at 9th International Forum on Knowledge Asset Dynamics, IKFAD 2014,
Matera, pp.2754–2791.
Spender, J.C. and Grant, R.M. (1996) ‘Knowledge and the firm: overview’, Strategic Management
Journal, Vol. 17, No. S2, pp.5–9.
Subramaniam, M. and Youndt, M.A. (2005) ‘The influence of intellectual capital on the types if
innovative capabilities’, Academy of Management Journal, Vol. 48, No. 3, pp.450–463.
Teece, D.J. (2000) Managing Intellectual Capital, Oxford University Press, Oxford.
Teece, D.J., Pisano, G. and Shuen, A. (1997) ‘Dynamic capabilities and strategic management’,
Strategic Management Journal, Vol. 18, No. 7, pp.509–533.
 Intellectual capital and financial performance 483

Tseng, C.Y. and Goo, Y.J.J. (2005) ‘Intellectual capital and corporate value in an emerging
economy: empirical study of Taiwanese manufacturers’, R&D Management, Vol. 35, No. 2,
pp.187–201.
Wang, D. and Chen, S. (2013) ‘Does intellectual capital matter? High-performance work systems
and bilateral innovative capabilities’, International Journal of Manpower, Vol. 34, No. 8,
pp.861–879.
Wiklund, J. and Shepherd, D. (2003) ‘Knowledge-based resources, entrepreneurial orientation, and
the performance of small and medium-sized businesses’, Strategic Management Journal,
Vol. 24, No. 13, pp.1307–1314.
Wu, S.H., Lin, L.Y. and Hsu, M.Y. (2007) ‘Intellectual capital, dynamic capabilities and innovative
performance of organizations’, International Journal of Technology Management, Vol. 39,
Nos. 3–4, pp.279–296.
Wu, W.Y., Chang, M.L. and Chen, C.W. (2008) ‘Promoting innovation through the accumulation
of intellectual capital, and entrepreneurial orientation’, R&D Management, Vol. 38, No. 3,
pp.265–277.
Youndt, M.A., Subramaniam, M. and Snell, S.A. (2004) ‘Intellectual capital profiles: an
examination of investments and returns’, Journal of Management Studies, Vol. 41, No. 2,
pp.335–361.

Annex 1

Table A1 Sample description

Sector geolocation Primary Secondary Tertiary Total

Centre 14 26 40
Northern Italy 4 16 25 45
Southern Italy 7 8 15
Total 4 37 59 100
Employees sector 100–500 500–1,000 > 1,000 Total
Primary 3 1 4
Secondary 25 5 7 37
Tertiary 34 7 16 59
Total 64 14 22 100

Annex 2

Operationalisation variables for RC and EC

To what extent do the following statements on renewal apply to your company?
(1 = completely disagree, 5 = completely agree)
RENCAP1 Our company has acquired a great deal of new and important knowledge.
RENCAP2 Our employees have acquired a great deal of important skills and abilities.
RENCAP3 Our company can be described as a learning organisation.
RENCAP4 The operations of our company can be described as creative and inventive.
 484 P. Demartini et al.

To what extent do the following statements on the entrepreneurial orientation apply to

your company? (1 = completely disagree, 5 = completely agree)
ENTCAP1 Risk-taking is regarded as a positive personal quality in our company.
ENTCAP2 Our employees take deliberate risks related to new ideas.
ENTCAP3 Our employees are excellent at identifying new business opportunities.
ENTCAP4 Our employees show initiative.
ENTCAP5 The operations of our company are defined by independence and freedom in
performing duties.
ENTCAP6 Our employees have the courage to make bold and difficult decisions.

View publication stats