The Relation Between Network of Collaboration (as a

Relational Capital Dimension) and Firm Innovativeness

Helena Santos-Rodrigues1, Pedro Figueroa Dorrego2, Carlos Maria Jardon3
1
ESTG-IPVC, Viana do Castelo, Portugal
2
Universidade de Vigo, Pontevedra, Spain
3
Universidade de Vigo, Vigo, Spain
Hsantos@estg.ipvc.pt
Figueroa@uvigo.es
cjardon@uvigo.es
Abstract: We know little about how intellectual capital of the firm can contribute to a superior innovativeness at
the firm level, and we know less about the influence of the relational capital on the innovativeness of the firm. To
explore this linkage we’ve considered clients, networks of collaboration, and alliances as dimensions of the
relational capital and we’ve search for a linkage between them using a survey that we’ve passed on 68 firms
working on the auto components sector, established in the Northern Spain and Northern Portugal. From this
study we found, firstly that innovativeness has two main dimensions, perfectly differentiated, the product-process
innovation and the management innovation; secondly that the relational capital influences differently each type of
innovativeness type. We’ve also found that the network of collaboration (a dimension of the relational capital)
influences directly only the product-process innovativeness. These results highlight the importance of relational
capital on the innovativeness performance, and the relevance of the network of collaboration systems on the
innovativeness of the firms. More broadly, our findings highlight the value of intellectual capital as a competitive
advantage in contemporary time.

Keywords: Network of collaboration, relational capital, Intellectual capital, innovativeness

1. Introduction
The premise of this paper is that the firm's internal resource base - and foremost its intellectual capital
- is a determining factor to the innovativeness of the firms. Seems evident that organizational
knowledge is the most important and strategic production factor (Spender and Grant, 1996), and a
critical resource (King and Zeithaml, 2003), that helps to create and sustain the competitive
advantages.

The conceptual framework used in this work draws on the knowledge-based view of the enterprise,
wish premise that a firm’s sustainable competitive advantage stems from resources that are valuable,
rare, inimitable, and nonsubstitutable, and therefore managers should seek to develop and exploit the
firm’s resources which possess these characteristics, either physical, human or organizational
resources (Barney, 1991). The knowledge based view of the firm approach sees on the knowledge
assets these characteristics and in these line the intellectual capital management takes into
consideration all kinds of intellectual activities of the company - since the creation to the dissemination
of the knowledge- but under a strategic focusing on the creation and extraction of value of the
knowledge (improving the capabilities of value creation).

Intellectual capital management is therefore a process to extract value to the organizational

knowledge (Egbu, 2004). But it isn’t a easy task, there are various strategic and operational barriers
to the management of intellectual capital, essentially, the difficulty of identifying and measuring these
intangible assets and establish goals and plans for them.

On the other hand, the firms see on the innovative activity a source of competitive advantage. On
current times the innovation capacity management should focus specifically on the relevant
knowledge management, as it can be the source of innovative activity.

Considering this point of view there are actually several studies that make this connection (For
example: Ahuja, 2000, Subramaniam and Venkatraman, 2001, Subramaniam and Youndt, 2005, Tsai
and Ghoshal, 1998), although the type of relationship between the two concepts is not clear. For
instance we have evidences that the radical and incremental innovative capacity differs on the type of
knowledge needed (Cardinal, 2001) and that the intellectual capital affects the incremental and radical
innovative capacity (Subramaniam and Youndt, 2005). Spite of this, the connection between the
intellectual capital and the innovative capacity is not completely clear, there is no stablished theory

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that explaining how this connection is produced or which are the most decisive knowledge assets that
influence on it. Understanding the relations between the factors that generate the innovation process
and its economic impact on companies is still poor (OCDE/UE, 1997), persists the doubt if there are
some more valuable intellectual capital components than others to business performance in general
and innovativeness in particular.

The main objective of this study will be to verify whether the networks of colaborations formed within
the universe of analysis of this research effectively provide competitive advantages to the partners
through the generation of intangible assets, i.e. through positive variation in their intellectual capital.
Therefore, the research question is: does the Network of collaboration, a relational capital dimension,
influence directly the product and process innovativeness?

The companies producing components for the automotive sector within the European region of
Galicia and Northern Portugal were chosen because of it innovative activity and it important network
collaboration, namely to develop new products and because this industry it’s very formalized and
therefore potential collaborators in this study.

The structure of this article is indicated in the following. After introduction of the topic, the
bibliographical review is presented addressing both the conceptualization and taxonomy of Relational
capital and network of collaboration. Based on this bibliographical review, the research hypothesis to
be subsequently tested is formulated. Next, the research method adopted is described. Then, the
data collected are analyzed and the research hypothesis is tested. By way of conclusion, final
observations are presented and future steps recommended to assist in testing the exploratory
propositions formulated in this work.
2. Relational capital and innovativeness
There are two fundamental concepts related with the management of knowledge assets: the
"management of Intellectual Capital" or "knowledge management", in which the distinction is not easy
(Petty y Guthrie, 2000), the concepts often are overlap, but there are distinctions at the focus and
objectives level.

Knowledge management deals with aspects related to knowledge in the enterprise, from a practical
point of view and is referenced by authors such as Nonaka (1994), Nonaka y Takeuchi (1995),
Brooking (1996), Ross et al. (1997), Sveiby (1997) y Edvinsson y Malone (1997). Knowledge
management encompasses all types of intellectual pursuits in the company since the creation to the
dissemination of knowledge. From the operational field, knowledge management permit the
implementation of knowledge-related activities (such as creation, capture, processing and use of the
knowledge) and also pushes the collective wisdom and sensitivity to accelerate innovation (Frappaolo
y Capshaw, 1999).

Intellectual Capital Management also refers to all types of intellectual pursuits in the company from
creation to dissemination of knowledge, but under a strategic perspective with a focus on creating and
extracting value of the knowledge (improving the value creation capabilities). There are various
strategic and operational barriers to Intellectual Capital management, derivatives, essentially, from the
difficult task of identifying and measuring these intangible assets and establish targets and plans for
them. So, the concept of Intellectual Capital seeks to identify and classify the strategic knowledge
assets of the organization. Both concepts are complementary and seek to find a way to identify,
access, explore and manage knowledge (Marr et al., 2004).

The intellectual capital literature emphasizes that successful companies are those that have managed
better it intellectual capital than the less successful (Brennan and Connel, 2000) and therefore
emphasizes the role of intellectual capital as valuable assets (Nahapiet and Ghoshal, 1998, Bontis,
2004), the most valuable (Stewart, 1998, Nahapiet and Ghoshal, 1998) the basis of competitive
advantage of the firm (Davenport and Prusak, 1998). The "knowledge that can be converted to value"
(Harrison and Sullivan, 2000: 34) and that has a significant and substantive impact on the firm
performance (Bontis, 1998).

Considering this, the identification of the various categories of intellectual capital should follow the
logic of management: if two intangible resources require various actions of management, should then
belong to different categories (Bontis et al., 1999). In this line, the more usual situation is the

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consideration of three intellectual capital categories as: human capital; structural or organizational
capital and capital relational or client capital (Saint Onge, 1996, I.A.D.E.-C.I.C., 2003, Roos et al.,
1997, Edvinsson and Malone, 1997, Stewart, 1998). These three capitals seek to make explicit the
added value of assets based on knowledge, that have been created and that are identified, or exist in
the organization, by a set of intangible activities related to the value of knowledge in action of
individuals, groups and Organization (I.A.D.E.-C.I.C., 2003).

Numerous factors external to the firm conceivably have an impact on the firm's competitive position.
For this research, we have restricted ourselves to the relational capital, it is considered as the result of
competitive and social intelligence made by the value of relations and actions of the company shared
with external or social workers (I.A.D.E.-C.I.C., 2003).

It is, for example, individual knowledge of the market, customers and suppliers channels as the
knowledge of the impact of government associations or industry (Bontis, 1999). This capital is more
individual than organizational, as it is based on relations between persons outside of the company,
there are authors who therefore consider that this is an intermediate form of intellectual capital
(Nahapiet and Ghoshal, 1998).

But there is a consensus about the consideration that the relational capital refers to the knowledge
due to external relations of the company. This assumption makes it more difficult to coding and
sometimes is forgotten. But for this same reason, is very important that it is identified (Bontis, 1999).

The composition of the relational capital (the main dimensions among it) has different approaches, for
instance the Intellectus model (I.A.D.E.-C.I.C., 2003) considers that it represents the value of the
knowledge of the persons and organization that is the result of the interaction with market agents
(business capital) and the society in general (social capital).

These kinds of relations with the external environment are important to the firms, it is often related to
innovation, for example, Baldridge and Burnham (1975), in their study reach the conclusion that the
knowledge entries of the community and from other external organizations are the major determinants
of the innovative behavior of the companies.

The innovative behave is normally related with the generation and adoption of innovations by the
firm.Is usual the assumption that the innovative companies are those who adopts or generates
innovations, or those that on "the analyzed period has introduced product or process, or the
combination of either technologically new or significantly improved." (OCDE/UE, 1997).

So we can consider the innovativeness of a company as the business potential to generate innovative
results. When particularized to the knowledge-based company we have that the innovativeness relies
on the transformation and/or adaptation of the internal capabilities to create and/or adopt innovative,
products, processes or management practices and it is closely linked to its ability to use and leverage
their intellectual capital or their knowledge resources.

But we know that the identification of the intellectual capital elements is insufficient to guarantee the
effective management of them (Pike et al., 2002). There is some evidence that idiosyncrasy
characteristics of companies put the tonic to the relative value of each component and their
interrelationships, as well as the strategy followed by the company.

But, never the less, we think that the intellectual capital influence on the innovative capacity of the
firm. We found no literature referred to studies that contemplate which elements or dimensions of the
relational capital lead to innovativeness. That brings us the definition of our research problem:

The network of collaboration, as a dimension of the relational capital; influences the innovativeness of
a firm?

Businesses learn in different ways: by training, experience, etc... and they do it by using internal or
external sources. One way is to acquire new knowledge through interaction with external partners
such as customers, suppliers, competitors, among others, and with institutions such as universities,
government laboratories, and community, among many others. We verified that the ideas for new or

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improved products often arise from proposals for customers and new applications and uses are often
the result of input from the community, competition, suppliers and others.

A network of external partners, strong and well managed; creates a shield against over-reliance on
existing internal perspectives that can unbalance the dynamics of creativity and value capture
(Shelton et al., 2005). Thus, external partners are a potential source of endless ideas and new
knowledge through innovation; although it doesn’t guarantee that the company innovates.

For example, Hii and Neely (2000) find no association between networks and innovative performance.

Companies face the impossibility of monitoring all critical factors of its business, form partnerships to
build skills and ensure their global presence. Gurriarán González and Dorrego Figueroa (2005a) in
their study of logistics and transport companies in Galicia (Spain) verify that the establishment of
business associations or business clusters can meet the challenge of cooperation between
businesses, increase their ability, competitiveness and profitability by benefiting from the advantages
of joint projects.

The I+D+i networks of collaboration have the great advantage to foster the development of
innovations aimed to a target. Owing privileged mutual knowledge to generate innovative solutions
integrating the knowledge of I+D+i centers and business needs (Gonzalez Gurriarán and Figueroa
Dorrego, 2007).

According to two authors: Gurriarán González and Dorrego Figueroa (2004b, 2004a, 2004c, 2004d,
2005c, 2008, 2006a, 2005b), who spent years studying business chains in Galicia, collaborative key
players change within the sector considered, but generally is important the collaboration with
customers, with centers and technological research, with the government, among companies with
complementary products, with companies from other activities not related to the main activity,
between complementary supply companies or support services, between competitors, through small
business groups with common interests and from other geographical areas.

To sum up, companies can use to innovate collaborative networks with customers, suppliers,
competitors or even with knowledge institutions (universities, laboratories, ID, etc..) (Hii and Neely,
2000). Thus the innovativeness is often determined by innovative inputs (resulted from joint
developments with suppliers, customers or concurrent) involving innovative changes in processes,
products or management/administration practices. Then we set our research hypothesis:

H1: Network of collaboration, a relational capital dimension, influences directly the product and
process innovativeness.
3. Methodology
The genesis of this research was an inquiry into the bibliographical review regarding relational capital
and innovativeness. As mentioned earlier, to innovate companies can use collaborative networks with
customers, suppliers, competitors or even with knowledge institutions (universities, laboratories, ID,
etc..) (Hii and Neely, 2000). Thus the innovativeness is often determined by innovative inputs
(resulted from joint developments with suppliers, customers or concurrent) involving innovative
changes in processes, products or management/administration practices. Based on this central
concept, an in-depth study of the topic was conducted, which made it possible to extract the
hypothesis of this research from the bibliographical review.

To verify the hypothesis the companies producing components for the automotive sector within the
European region of Galicia and Northern Portugal were chosen were selected according to the criteria
of been associated or registered in relevant and representative associations of the sector in Galicia
(Fundación Clúster de Empresas de Automoción de Galicia (CEAGA) and North of Portugal
(Associação de Fabricantes de Industria Automóvel (AFIA). Of these, 135 potential collaborators were
located and contacted.

The data was collected from 135 surveys that were sent by mail, from June to October 2007, directed
to the directors of the firms, and included a return envelope pre stamped, a introduction letter were
was requested to the director to fill the survey or to forward it to other qualified person, was also

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included a support letter from AFIA and CEAGA asking the surveyed person to participate in the study
and highlighting the importance of the study.

From these 135 surveys sent, 66 aimed companies located in the North of Portugal and the remaining
69 to companies located in Galicia. After a following period we achieve a total of 68 surveys
completely filled and validated, which corresponds to a 50, 37 % response rate. Of these, 45 surveys
(66 %) come from firms located in Galicia and the remain 23 surveys (34 %) from firms located in the
North of Portugal.

According to {Joia, 2000}, there is no point attempting to measure intellectual capital in absolute
amounts, as only verification of the qualitative or quantitative variation is viable. Therefore, the
independent variable: relational capital included in the survey was based on theoretical work
(I.A.D.E.-C.I.C., 2003, Shelton et al., 2005, I.A.D.E., 2002) and practical work (Cabrita, 2006, Hill and
Neely, 2000) which resulted in 10 items, measured from a 5 point Likert scale (1 = no agreement and
5 = totally agree). Concerning the dependent variable, the product-process innovativeness it has
resulted on 12 items related to product innovation (I.A.D.E.-C.I.C., 2003, Hii and Neely, 2000, Wan et
al., 2005) and process innovation (I.A.D.E.-C.I.C., 2003, Hii and Neely, 2000, Wan et al., 2005), here
was also used the 5 point Likert scale (1 = never and 5 = always).

3.1 Data analysis

To assess the randomness of the sample we have done a not parametric test adjustment X2-sample
population. This test is applied to a sample in which the variable has two or more categories,
comparing the frequencies with the frequencies shown by the population. We consider as a
classification variable the location (Galicia and Northern Portugal) and the respective district areas:
Coruña, Lugo, Ourense, Pontevedra and Aveiro, Braga, Porto, Viana, Vila Real, respectively. It
proved the value of 8.0522, seeing the tables of chi-square with 7 degrees of freedom we get a tail
probability of 0.3280, which is larger than a significance level of 0.05, which accepts the null
hypothesis of equality between the two frequencies. Therefore we verify a good fit of the sample to
the studied population.

We continue with an exploratory data analysis to verify the existence of outliers and missing values.
Respect to outliers, once data are on a Likert scale of five points, no comments could be done
regarded the outlier. As for the missing values we choose to eliminate the responses of two items with
large number of items omitted, and whose elimination does not influence the outcome of the
investigation.

We verify the reliability or consistency of the construct, or the extent to which the indicators converge,
or are correlated with each other to reflect a given construct. To this end, we used to measure the
convergent validity the alpha Cronbach's coefficient, it arise the value of 0,838 to the relational capital
construct and 0,688 to the innovativeness. Thus, for each of the items was conducted to check the
reliability of the scale, excluding those items that does not give good levels of reliability.

Components matrix shows that the items initially considered as representing the relational capital
were explained on 64,075 per cent by 3 common factors obtained through a Varimax with Kaiser
Normalization converged in 7 interactions rotation. The KMO points out a reasonable correlation
between variables (KMO = 0,726). The Bartlett esfericity test has associated a significance level of
0.000, and then there is correlation between some variables. Both testes allow the continuation with
the factorial analysis.

The factor correspondent to network of collaboration (CR) included formal or informal suggestions and
contributions of the customers, suppliers and competitors conducive to innovation in the enterprise.
Well as the use of collaborative networks with suppliers to innovate. In this context we call the factor
"Networks Collaboration (CR).

Relatively to the innovativeness, the variables initially considered refer to the product-process
innovativeness. The factorial analysis points to a reasonable correlation between variables (KMO =
0,536). The Bartlett test has associated a significance level of 0.000, then there is correlation between
some variables. Both testes allow the continuation of the factorial analysis.

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 Helena Santos-Rodrigues et al.

The components matrix shows that the items initially considered are explained on 67,562 % by 2
common factors obtained through a Varimax with Kaiser Normalization converged in 3 interactions
rotation. One factor concerns the market introduction of product innovations with significant
importance and it contribution to improve the firm benefits, the introduction of significant process
innovations and it importance to reduce costs and other improvements. We call it innovative product
and process capacity (CI_Prod_proce).
4. Results
For the data analysis we did a regression analysis with the variables of Relational Capital and
product-process Innovativeness, selecting the B's with values that excess 0,200, it demonstrates the
existence of relationships between the constructs.
Table 1: Regression between network of collaboration and product-process innovativeness
Unstandardized Stand.
Coeficientes Coef. t Sig.
B Std. Error Beta
Network of collaboration
,288 ,098 ,288 2,931 ,005
(CR)
From the analysis of table 1, we verify that the product-process innovativeness is determined by
network of collaboration (0,288 sig. 0.005). We will have a variation in the ability to innovate products
and processes with each variation of a unit in collaborative networks of 0.320.

By this way we validate our research hypothesis confirming the influence of network of collaboration
on the product-process innovativeness. This highlight the importance of the knowledge derived from
the relationships with network of collaboration on the innovativeness of the firm.

Our research suggests that the intellectual capital influences the innovative capacity of companies
producing components for the automotive industry located in the Euro region of Galicia North
Portugal.

We found that Relational Capital is relevant to the Product-Process innovativeness, specifically the
participation on networks of collaboration aimed to create or adopt innovations. Considering the
context in the study, companies that collaborate in networks achieve beneficial results in terms of the
ability to create or adopt successful product and process innovations.

In this line, within the automotive sector, Gonzalez Gurriarán and Figueroa Dorrego (2006b) identified
as a strategic priority of the automotive sector the development of collaborative multidisciplinary
projects. Collaborative networks can be viewed as a source of innovation to increase firm ability to
innovate in products and processes.

Our findings contradict the results of Hii and Nelly (2000) research, they doesn’t found in his research
support to the proposition that pointed to the influence of networks (Relational Capital) on the
innovative performance of the company.
5. Conclusion
Throughout this work the goals were accomplishing and, in synthetic terms, confirmed the influence of
intellectual capital on the innovation capacity. But there are peculiarities and specificities of the
different innovative capacities that have implications for theory and management.

We can conclude that the firms producing components for the automotive sector located in Galicia
and North of Portugal can improve the product and process innovativeness when considering the
knowledge derived from network of collaboration. So the firms, should engage efforts on participate
into collaboration networks mainly in situations that the aim of the collaboration is potentiate the
innovativeness of the firms.

But this conclusion has to take into account that the study was particularized to a sector very
important but peculiar, and it was just focused only on one dimension of the relational capital.

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We have also validated the importance of the relational capital on the firm innovativeness. We believe
that we have found a portal for the extension of the relational capital research to other dimensions.

We have not considered; nor were the intention of this research; the development of new products or
solutions with extern working groups, for instance located in different geographic spaces (as the
companies working on the B2B market automobile components sector) here the information
technologies work as a communication and approach vehicle between the agents.

Therefore, the analysis of the relationship between intellectual capital and the innovativeness
considering the active participation with external working groups on the development of innovations is
a door to further research.

Other open doors to further research could be pointed out, for instance, we had collect data through a
survey conducted in a single period of time according to our research proposal, but the innovative
capacity is also a dynamic, longitudinal phenomenon. This latter aspect was not part of our objectives
and was not considered in our investigation, so we cannot draw conclusions about the evolution of
innovation capacity. But we propose that further research is done on this field.

Other methodological consideration is the fullness of the questionnaire and is sending methodologies.
Our survey was sent by post, it implies the difficulty of it and their responses follow-up, since the lack
of staff investigator leaves the freedom of interpretation of the survey. Moreover, isn’t controllable the
fulfillment of the requirement pre-established that the questionnaire should be answered by a
director/senior manager.
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