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Asia Pac J Manag (2013) 30:937–964 DOI 10.1007/s10490-011-9257-5

The influence of intellectual capital on organizational performance—Knowledge management as moderator Ya-Hui Ling

Published online: 24 May 2011 # Springer Science+Business Media, LLC 2011

Abstract The main objective of this study is to explain the global performance of firms from an intellectual capital perspective. Samples were selected from a list of the top 1,000 Taiwanese companies using a type of purposive sampling. The selection criteria required sample companies to be located in Taiwan and to compete globally. This study collected 146 valid questionnaires from 146 companies. The results confirm that intellectual capital is positively associated with a firm’s global performance. The results also confirm a moderating effect of knowledge management strategy on the relationship between intellectual capital and global performance. These results imply that a combination of the right type of knowledge management strategy with the right form of intellectual capital will enhance a firm’s performance, although neither the technology-centered nor the people-centered approach should be overused. Keywords Intellectual capital . Knowledge management . Organizational performance . International context While globalization leads to increased competition, customer satisfaction is becoming the key strategy to ensure survival and competitiveness (Afiouni, 2007). Firms can become more sensitive to their customers and gain advantages over their competitors by sharing investment costs across markets and businesses or by leveraging core competences across geographic and product business units (Bartlett & Ghoshal, 2000; Hitt, Hoskisson, & Ireland, 1994; Hitt, Keats, & DeMarie, 1998). Successful companies also tend to manage “individual technocratic entrepreneurs” (i.e., those who are flexible in trying new processes/approaches or innovative This research was supported by the National Science Council. The author would like to thank Professor Eric Tsang and two anonymous APJM reviewers for their helpful and insightful comments and suggestions on multiple drafts of this paper. Special thanks are also given to Rachel Pinkham for editorial assistance. Y.-H. Ling (*) Department of Business Administration, I-Shou University, No. 1, Section 1, Hsueh-Cheng Road, Ta-Hsu Hsiang, Kaohsiung County 840 Taiwan, Republic of China e-mail: [email protected]

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solutions, taking risks, exploring new ideas, and developing new products and services) better than their competitors do (O’Connor, Roos, & Vickers-Willis, 2007; Ojeda-Gomez, Simpson, Koh, & Padmore, 2007). With the rapid growth of the global knowledge economy, intellectual capital has emerged as a concept to update the understanding of the competitive edge of business in knowledge-intensive and rapidly changing business environments (Bose & Oh, 2004; Kavida & Sivakoumar, 2010; Perrott, 2007; Stahle & Hong, 2002). Despite the growing body of research on intellectual capital, however, several deficiencies in the literature need to be addressed. First, the distinction between knowledge management and intellectual capital management needs to be further clarified. Numerous studies have equated intellectual capital with intangible assets, intellectual property, or knowledge management activities (Gates, 1999; Okes, 2005; Rastogi, 2003; Sveiby, 1997). Intellectual capital management, however, deals with the valuation of knowledge in a corporation that is fundamentally different from the creation and utilization of knowledge, which is the focus of knowledge management (McElyea, 2002). The role of knowledge management, however, is to provide access to sources of knowledge rather than to knowledge itself. In other words, intellectual capital management is concerned with grasping and valuing an organization’s knowledge capabilities; knowledge management, in contrast, is concerned with the capability of an organization to transform knowledge into added value (Stahle & Hong, 2002). In a sense, knowledge management strategy is the process (the means) while intellectual capital is the output (the end). Intellectual capital management and knowledge management may thus be treated as two sides of the same coin, although they are not the same (Stahle & Hong, 2002). Second, even though numerous scholars have devoted considerable attention to the measurement of intellectual capital (Brooking, 1996; Edvinsson & Malone, 1997; Marr, Schiuma, & Neely, 2004), very few have considered the international context when developing intellectual capital metrics or measurements. Ling and Jaw (2006) advocated that firms should develop both their “international human capital” to compete in the global market and a measurement of their “international human capital.” In a similar manner, firms also need to possess the kind of intellectual capital that enables them to compete successfully in the global arena of a turbulent international environment. Thus, one aim of this study is to develop appropriate intellectual capital measurements in the international context. Third, even though several studies have found a broadly positive relationship between intellectual capital and organizational performance, most prior research has examined the relationships between intellectual capital and a variety of financial performances (i.e., the studies of Becker, Huselid, and Ulrich [2001], Bozbura [2004], Carpenter, Sanders, and Gregersen [2001], Knight [1999], Narver and Slater [1990], and Ting and Lean [2009]). While financial measures are generally used to assess intellectual capital contributions, other non-traditional measures, such as global initiatives, should be applied to obtain a more realistic and holistic view of intellectual capital contribution to organizational performance, specifically a firm’s performance in the international context. Although some works have implied that intellectual capital is highly related to a firm’s global initiatives, few studies have empirically explored this argument. Ling and Jaw’s (2006) study, for example, confirmed the positive relationship between human capital and a firm’s global initiatives, although it did not investigate the influence of structural capital

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or relational capital on a firm’s global initiatives. Another study by Wu, Chang, and Chen (2008) suggested that the accumulation of intellectual capital enhances a firm’s innovation performance, but innovation performance is not the same as a firm’s global initiatives. Thus, one aim of this study is to measure a firm’s global performance with both financial metrics and non-financial metrics and to investigate the relationship between intellectual capital and global performance using a longitudinal study design. Following Juma’s (2005) study, the independent and dependent variable data of this study were collected at two points in time with a modest lag period of 12 months. Finally, although researchers have devoted much attention to either intellectual capital or knowledge management, findings are surprisingly scarce regarding the interaction effect of knowledge management and intellectual capital on a firm’s global performance. Most studies confirm that knowledge management provides frameworks to manage intellectual capital (Housel & Nelson, 2005; Jih, Helms, & Mayo, 2005; Shih, Chang, & Lin, 2010). There is also evidence to suggest that knowledge management turns intellectual capital into values (Brooking, 1997; Housel & Nelson, 2005; Jih et al., 2005). Shih et al.’s (2010) study, for instance, indicated that the ability to create knowledge is highly relevant to intellectual capital in the banking industry and that the performance of knowledge creation significantly influences the accumulation of human capital. Surprisingly, few studies have empirically investigated the potential moderating effect of knowledge management on the relationship between intellectual capital and organizational performance. Given this close relationship, it might be worth exploring whether the alignment between knowledge management and intellectual capital can enhance a firm’s performance in the international context. Roos, Bainbridge, and Jocobsen (2001), for example, proposed that there are different value-creating mechanisms (e.g., people-centered and process-oriented) for firms that pursue different strategies, although they did not empirically examine the moderating effect of knowledge management strategy. Using Roos et al.’s (2001) study as a starting point, this study seeks to examine the potential moderating effect of knowledge management strategy on the relationship between intellectual capital and global performance. To this end, this study aims to answer the following research questions. First, does intellectual capital enhance a firm’s performance in the global context? If the answer is yes, then what impact does each specific component of intellectual capital (e.g., human capital, relational capital, and structural capital) have on a firm’s multiple dimensions of global performance (e.g., financial performance, global agility, and global innovation)? One potential contribution of this study is the development of appropriate metrics to measure a firm’s intellectual capital that enable it to compete successfully in the global market. Another potential contribution is the inclusion of both financial and non-financial metrics (e.g., global initiatives) to measure a firm’s performance in the global economy and to explain the global performance of firms from an intellectual capital perspective using a longitudinal study design. To the author’s knowledge, this study might represent the first empirical investigation into the relationship between intellectual capital and global initiatives in Taiwan. The second research question is the following: Is there any moderating effect of knowledge management on the intellectual capital–global performance relationship? To what extent does each specific knowledge management strategy moderate this relationship? Even though the effect of intellectual capital on firm performance

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seems undoubtedly related to a firm’s knowledge management strategy, surprisingly few scholars have empirically examined the interactive effects of knowledge management and intellectual capital on a firm’s global performance. A third potential contribution of this study is the empirical investigation of the moderating effect of knowledge management on the intellectual capital–global performance relationship. Figure 1 shows the research framework. In the following sections, the existing literature will first be reviewed to develop the research hypotheses. The analytical results will then be presented to identify the detailed relationships among intellectual capital (human capital, structural capital, and relational capital), global performance (financial performance, global agility, and global innovation), and knowledge management strategy (technology-centered or people-centered). Subsequently, discussions and conclusions will be provided based on the analytical results.

Literature review Intellectual capital in the international context Currently, there is a broad consensus that intellectual capital can be usefully characterized into three categories: human capital, relational capital, and structural capital (Cuganesan, 2006; Kim & Kumar, 2009; Mouritsen, Larsen, & Bukh, 2005). Of these, human capital (employee competence) refers to the skill, training, education, experience, and value characteristics of an organization’s workforce (Cuganesan, 2005; Guthrie & Petty, 2000; Seleim, Ashour, & Bontis, 2004). Structural capital (internal structure) refers to the knowledge embedded in organizational structures and processes created by employees and generally owned by the organization (Guthrie & Petty, 2000; Stewart, 1997; Sveiby, 1997). Relational

Knowledge management strategy 1. Technology-centered 2. People-centered

Intellectual capital

Global performance

1. Human capital

1. Financial performance

2. Structural capital

2. Global agility

3. Relational capital

3. Global innovation

Figure 1 The theoretical framework

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capital (external structure) refers to relationships with external stakeholders, which involve a firm’s ability to interact positively with business community members to stimulate potential wealth creation (Bruton, Dess, & Janney, 2007; Cuganesan, 2005; Edvinsson & Malone, 1997). Companies need to possess intellectual capital that can enable them to compete successfully in the global market (Marr et al., 2004; Mavridis, 2005; Stahle & Hong, 2002). The concept of Stahle and Hong’s (2002) “dynamic intellectual capital” is implied here because dynamic intellectual capital has much to do with a firm’s strategy and business environment. It is also an appropriate concept to capture the innovative nature of knowledge in turbulent international business environments. Thus, intellectual capital is both an ability and property of the organization (Stahle & Hong, 2002). On the one hand, intellectual capital is the self-renewing ability and potential of an organization to master, create, or innovate under conditions of constant change (Stahle & Hong, 2002). On the other hand, it is the property produced by the capacity to act in fast-changing global environments (the output of which might be patents, trademarks, business applications, and other intangible assets that often need to be protected from competitors) (Stahle & Hong, 2002). In this study, intellectual capital is conceptualized as the capability of an enterprise to create value in the global market under conditions of constant change. It is composed of human capital, relational capital, and structural capital. Global performance Although studies have discussed the relationship between intellectual capital and organizational performance, organizational performance metrics may not necessarily reflect a firm’s global competiveness or its potential to compete in the global economy. Some studies have considered only the financial aspects of organizational performance, such as equity, assets, or other market-based measures (Reed, Lubatkin, & Srinivasan, 2006; Youndt, Subramaniam, & Snell, 2004). Other studies have considered only the non-financial aspects of organizational performance, such as innovation performance (O’Connor et al., 2007; Subramaniam & Youndt, 2005; Wu et al., 2007) or exporting tendencies (Mavridis, 2005; Seleim et al., 2004). To provide a more realistic and holistic view, both financial and non-financial metrics (global initiatives) were used in this study to measure a firm’s global performance. In terms of financial performance, items were adapted from Ling and Jaw’s (2006) study. In terms of non-financial performance, several studies (Birkinshaw & Fry, 1998; Birkinshaw, Hood, & Jonsson, 1998; Ling & Jaw, 2006) laid the foundation for the global initiatives construct, which refers to “the proactive and deliberate entrepreneurial pursuit of a firm which enables it to compete globally.” Birkinshaw and Fry (1998) suggested two types of initiatives for foreign subsidiaries: (1) the development of new business activity and the leveraging of subsidiary capabilities on an international basis, and (2) the rationalization of existing activities, the removal of inefficient practices, and the optimal location for new investment. Ling and Jaw (2006) identified two kinds of global initiatives: global learning and global marketing. In addition, Bartlett and Ghoshal (2000) suggested three kinds of global competitiveness: global efficiency, multinational flexibility, and worldwide learning. Accordingly, in this study, the global initiatives

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construct encompasses two dimensions: global agility and global innovation (Bartlett & Ghoshal, 2000; Wu, Chiang, & Jiang, 2002). Global agility refers to the ability to respond rapidly to any changes in the unpredictable worldwide market demand (Goldman, Nagel, & Preiss, 1995; Vokurka & Fliedner, 1998). Global innovation refers to a firm’s ability to tap into new opportunities in markets around the world and deliver superior value to customers; it measures a company’s innovation output and work products worldwide but not the innovation process (Kuratko & Hodgetts, 1992). Knowledge management strategy Contemporary knowledge management approaches tend to be situated predominantly within information technology or humanist frameworks with little if any overlap (Gloet & Berrell, 2003; Gloet & Terziovski, 2004). For instance, Sveiby (1997) identified two knowledge management approaches, one focusing on people and the other focusing on technology. Research by Hansen, Nohria, and Tierney (1999) also outlined two distinct knowledge management strategies: a people-to-documents approach (a codification strategy centered on information technology resources) and a personto-person approach (a personalization strategy centered on human resources). Nonaka and Takeuchi (1995) identified four processes of knowledge conversion: externalization, combination, socialization, and internalization. Externalization is a process of articulating tacit knowledge into explicit knowledge; combination is a process of sharing knowledge from explicit to explicit in which individuals exchange and combine knowledge through computerized communication networks; socialization is a process of sharing knowledge from tacit to tacit; and internalization turns explicit knowledge into tacit knowledge and is closely related to “learning by doing” (Nonaka & Takeuchi, 1995). In a sense, Nonaka and Takeuchi’s (1995) externalization and combination modes are more closely related to Sveiby’s (1997) technology-aspect approach, whereas their socialization and internalization modes are more closely related to Sveiby’s (1997) people-aspect approach. Perez and de Pablos (2003) further differentiated two knowledge management perspectives: strategic and operational. Operational knowledge management focuses on the storage of information and uses computer technology to organize and distribute information to and from employees (Perez & de Pablos, 2003). Strategic knowledge management relates the firm’s knowledge to (1) the design of organizational structures that promote knowledge, (2) firm strategy, and (3) the development of knowledge professionals (Perez & de Pablos, 2003). In a sense, strategic knowledge management emphasizes people, whereas operational knowledge management emphasizes technology. Based on the above discussions, two knowledge management strategies, a technology-centered strategy and a people-centered strategy, are proposed for this study. The technology-centered strategy is information technology driven and focuses on the tangible aspects of knowledge management (Hansen et al., 1999; Perez & de Pablos, 2003; Sveiby, 1997). It emphasizes the storage and retrieval of knowledge through codification and documentation so that employees’ knowledge and expertise becomes more accessible and transferable (Hansen et al., 1999; Ponelis & Fairer-Wessels, 1998; Sveiby, 1997). Documents such as communication notes,

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user manuals, software, company policy documents, or networks are all useful tools for knowledge codification and sharing (Hansen et al., 1999; Perez & de Pablos, 2003; Ponelis & Fairer-Wessels, 1998). Multinational corporations (MNCs) adopting this approach tend to include corporate yellow pages, training lessons, competition intelligence, and add-on components, such as information on global economic, social, political, technological, and market trends in their database (O’Dell & Grayson, 1998; Stewart, 1997; Wang & Ling, 2005). The people-centered approach is driven by organizational learning and focuses on the tacit aspects of knowledge management (Hansen et al., 1999; Perez & de Pablos, 2003; Sveiby, 1997). It transfers flows of knowledge gathered and generated within MNCs’ networks of subsidiaries (Wang & Ling, 2005). It also delivers valuable contributions to facilitate layers of distinctive complex knowledge and competencies to MNCs (Wang & Ling, 2005). The people-centered strategy emphasizes the generation and sharing of knowledge through the interactions among people (Ponelis & FairerWessels, 1998; Stewart, 1997; Sveiby, 1997). Personnel interaction might be enhanced by the formation of practitioner communities, the movement of employees (regular transfer or rotation) (Di Stefano & Kalbaugh, 1999; Doyle, 1998; Stewart, 1997), information exchanges/inter-unit learning forums (Bartlett & Ghoshal, 2000), the formation of communities of practice/learning communities (O’Dell & Grayson, 1998), or the immersion of managers into the corporate culture (Pai, 2005). Intellectual capital and global performance Most prior research on intellectual capital has concentrated on examining the relationships between intellectual capital and a variety of financial performance metrics (Bozbura, 2004; Ting & Lean, 2009). For instance, many studies have proven that being market focused (related to relational capital) has an effect on a firm’s profit rate or market share increase (Bozbura, 2004; Narver & Slater, 1990). The literature also suggests that increasing employees’ capabilities (related to human capital) is positively associated with the financial results of a company (Becker et al., 2001; Bozbura, 2004). Ling and Jaw (2006) confirmed that human capital has a positive impact on a firm’s financial performance. Carpenter et al. (2001) also suggested that CEOs with international assignment experience (related to human capital) create value (return on assets and total stock market returns) for their firms and for themselves. Companies that value employees (human capital) tend to enjoy better shareholder returns or market/book values (Becker et al., 2001; Bozbura, 2004; Knight, 1999). With regard to the non-financial aspects of firm performance, the literature also implies that intellectual capital might relate to a firm’s global initiatives, although few studies have empirically explored this argument. For instance, Wu et al. (2008) suggested that the accumulation of intellectual capital promotes a firm’s innovation performance, even though it may not equal its global initiatives. Ling and Jaw (2006) also confirmed that human capital has a positive influence on a firm’s global initiatives, although they did not consider the influence of structural capital or relational capital on a firm’s global initiatives. Considering the human capital–global initiatives relationship, Ling and Jaw (2006) suggested that human capital, such as the visionary leadership of the top management

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team (TMT), represents an important resource for a firm in achieving global initiatives. When TMT competency is cultivated, it creates a distinct performance environment that enables the organization to adapt, innovate, and ultimately win and sustain competitive advantages (Banutu-Gomez & Banutu-Gomez, 2007; Ling & Jaw, 2006). TMT visionary leadership (human capital) is confirmed to be positively associated with a firm’s innovation performance (Wu et al., 2002). Firms with higher levels of human capital also tend to enjoy better global marketing (Ling & Jaw, 2006). Relational capital (such as positive relationships with customers or suppliers) might enhance a firm’s global initiatives as well. The social networks between a firm and its international customers (relational capital) enable the firm to understand and rapidly meet customers’ needs (global agility) (Goldman et al., 1995). Establishing relations with all sectors between the customer and the supplier (relational capital) thus has an effect on the market share increases (global agility) (Bozbura, 2004; Narver & Slater, 1990). Input from international customers or suppliers (relational capital) also has a positive impact on knowledge generation or sharing, which becomes a source of companywide innovation breakthroughs (global innovation) (Ojeda-Gomez et al., 2007; Spencer, 2003). Social networks (relational capital) might further contribute to the acceptance of such breakthroughs (global innovation) within broad organizational or industry settings (Subramaniam & Youndt, 2005). The literature also implies that structural capital might enhance a firm’s global initiatives. Through the utilization of new organizational structure(s) or systems (structural capital), customer satisfaction and competitiveness (global agility) might be achieved (Goldman et al., 1995; Ling & Jaw, 2006). Structural capital is perceived to be a primary determinant of enterprise performance in small innovative enterprises (Tovstiga & Tulugurova, 2007). The greater a firm’s structure(s) or systems (structural capital), the more likely it is that innovations (global innovation) will occur by improving upon existing knowledge (Subramaniam & Youndt, 2005). In accordance with the aforementioned discussion, the following hypotheses are proposed: Hypothesis 1a Human capital is positively associated with a firm’s global performance (financial performance, global agility, and global innovation). Hypothesis 1b Relational capital is positively associated with a firm’s global performance (financial performance, global agility, and global innovation). Hypothesis 1c Structural capital is positively associated with a firm’s global performance (financial performance, global agility, and global innovation).

The moderating effect of knowledge management strategy Findings regarding the interactive effects of knowledge management and intellectual capital on global performance are scanty, even though most prior studies have confirmed that knowledge management provides frameworks to manage intellectual capital and converts intellectual capital into values (Brooking, 1997; Housel & Nelson, 2005; Jih et al., 2005; Shih et al., 2010). It is likely that the alignment

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between knowledge management and intellectual capital may enhance a firm’s global performance. For example, although Roos et al. (2001) did not examine the moderating effect of knowledge management strategy, they did propose that there are different valuecreating mechanisms (people-centered and process-oriented) for firms pursuing different strategies. In a sense, Roos et al.’s (2001) people-centered strategy is similar to the people-centered knowledge management strategy in the present study, whereas their process-oriented strategy is similar to the technology-centered knowledge management strategy in this study. For instance, a people-centered company relies heavily on its human capital and relational capital (Roos et al., 2001). Value (organizational performance) is delivered through knowledgeable and competent individuals (human capital) who use these attributes to form personal relationships with their customers (relational capital) (Roos et al., 2001). Literature on international human resource management also suggests that competent global managers (human capital) with strong international networks (relational capital) enhance a firm’s competiveness (Antal, 1993). An important factor in successful international management is the existence and development of cross-cultural competencies (human capital) and international networks (relational capital) (Antal, 1993). A peoplecentered knowledge management strategy that focuses on enhancing global managers’ interpersonal interactions might facilitate the development of their cross-cultural sensitivity (human capital) or interpersonal networks (relational capital), which in turn build a firm’s global competitiveness. As a result, a people-centered knowledge management strategy may positively moderate the human capital–global performance relationship and the relational capital–global performance relationship. A process-oriented company, however, places more emphasis on its organizational resources (structural capital) and organizational relationships (relational capital) (Roos et al., 2001). Human resources are still important, although their relative importance is lower than in a people-centered organization (Roos et al., 2001). Value is created through customer relationships (relational capital), formalized training and recruitment processes (structural capital), or a more standardized/system-focused production approach (structural capital) (Roos et al., 2001). In a sense, Roos et al.’s (2001) process-oriented strategy is similar to the technology-centered knowledge management strategy in this study. Knowledge databases (related to the technology-centered knowledge management strategy) combined with a firm’s business process or management infrastructure (structural capital) can help companies work globally (Stewart, 1997). Superior relations with customers or suppliers (relational capital) combined with knowledge databases (related to the technology-centered knowledge management strategy) also help companies to innovate globally (global innovation). Accordingly, a technologycentered knowledge management strategy may positively moderate the relational capital–global performance relationship or the structural capital–global performance relationship. Based on the above discussions, the following hypotheses are proposed: Hypothesis 2a A people-centered knowledge management strategy positively moderates the relationship between human capital and a firm’s global performance (financial performance, global agility, and global innovation).

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Hypothesis 2b A people-centered knowledge management strategy positively moderates the relationship between relational capital and a firm’s global performance (financial performance, global agility, and global innovation). Hypothesis 2c A technology-centered knowledge management strategy positively moderates the relationship between structural capital and a firm’s global performance (financial performance, global agility, and global innovation). Hypothesis 2d A technology-centered knowledge management strategy positively moderates the relationship between relational capital and a firm’s global performance (financial performance, global agility, and global innovation).

Methodology Sampling and research procedure The sample was selected from a list of the top 1,000 Taiwanese companies published by CommonWealth Magazine. Given the exploratory nature of this research, a particular type of purposive sampling was used for the exploratory research in which the researcher selects a sample to meet specific criteria (Dess, Lumpkin, & Covin, 1995, 1997; Emory & Cooper, 1991; Kerlinger, 1986). The selection criteria were that sample companies had to be located in Taiwan and compete globally. A broad group of organizations and industries was included in our study to increase the generalizability of the findings. However, only those firms with foreign subsidiaries were included in the study to increase the likelihood that participating organizations would utilize somewhat formalized intellectual capital management. In addition to examining websites, direct contacts were made (via email or telephone) to identify firms with foreign subsidiaries. Two questionnaire surveys were administered to obtain the information. Following Subramaniam and Youndt’s (2005) study, different key informants were used to obtain survey information for the independent (intellectual capital, knowledge management strategy, and other organizational characteristic variables) and dependent variables (global performance). Because this was a longitudinal study, data collection occurred at two different time periods. The first set of data (the independent variables) was collected twelve months before the second set of data (the dependent variable). A questionnaire assessing the independent variables was first mailed to the vice presidents of human resources. Based on the selection criteria, 500 questionnaires were distributed to secure information for the independent variables. Approximately one year later, another questionnaire assessing the dependent variable was mailed to the general managers of the same organizations that had replied to the previous questionnaire to assess their global performance. Given the lack of any empirical evidence for the appropriate lag between intellectual capital and global performance, it seemed prudent to assess the impact of intellectual capital after a modest time lag. To increase the accuracy of the responses, the respondents were assured of the confidentiality of their responses. After deleting questionnaires with incomplete

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answers, this study collected a total of 146 valid questionnaires from 146 companies. Table 1 shows the breakdowns of the samples. Of the samples, 69.9% (N = 102) belonged to the manufacturing industry, 24.7% (N = 36) belonged to the service industry, and the remaining 5.5% (N = 8) were missing data. With regard to firm tenure, 17.8% (N = 26) of the sample consisted of companies with a firm tenure of 10 years or less, 26% (N = 38) with a firm tenure between 10 and 20 years, and 56.2% (N = 82) with a firm tenure of more than 20 years. In terms of firm capital, 13.1% (N = 19) of the sample consisted of companies with a firm capital of US $3,000,000 or less, 42.5% (N = 62) with a firm capital between US$3,000,000 and US$10,000,000, and 42.5% (N = 62) with a firm capital of more than US $10,000,000 (the remaining 2.1% was missing data). The respective proportion of the sample in terms of firm size was as follows: 8.9% (N = 13) were companies with 50 employees or less, 8.9% (N = 13) were companies with between 51 and 300 employees, and 82.2% (N = 120) were companies with more than 300 employees. Measurements Two questionnaires were employed in this study. The first questionnaire contained the intellectual capital instrument, the knowledge management strategy instrument, and several items pertaining to organizational characteristics. The second questionnaire contained the global performance instrument. To ensure content validity, the constructs were selected based on a thorough review of prior literature. For clarity and face validity, each construct and item were reviewed by a group of five academic colleagues and five business partners to further revise the research instruments. With the exception of items regarding the organizational characteristics, respondents were asked to rate the statements on a five-point Likert scale.

Table 1 Sample profile. Characteristics Industry

Firm no. = 146 Manufacturing industry Service industry Missing data

Tenure (Years)

Capital (US dollars)

Firm size (No. of employees)

≦10

Percent

102

69.9

36

24.7

8

5.5

26

17.8

10–20

38

26.0

>20

82

56.2

≦$3,000,000

19

13.1

$3,000,000–$10,000,000

62

42.5

>$10,000,000

62

42.5

Missing data

3

2.1

13

8.9

≦50 51–300 ≧301

13

8.9

120

82.2

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The main reason for using a five-point Likert scale instead of standardized indicators was the difficulty of standardizing the measurement of intellectual capital or global performance in any meaningful way. Most intellectual capital indicators have been developed based on the specialized strategies, objectives, and contexts of an organization (Kim & Kumar, 2009). Intellectual capital indicators may have different categories and names for different companies because they are developed for an organization’s specific strategies and goals (Kim & Kumar, 2009). From a reporting perspective, many of the organizational performance measures were difficult to verify objectively because they often differ across firms and industries (Skinner, 2008). Many of the organizational performance measures are industryspecific or firm-specific and thus are not subject to standardization or comparison (Skinner, 2008). Intellectual capital In this study, intellectual capital was conceptualized as the capability of an enterprise to create value in the global market under conditions of constant change (Stahle & Hong, 2002). In the intellectual capital-based view of the firm (Reed et al., 2006), intellectual capital is composed of three resources that have been theoretically linked to a firm’s competitive advantage. Specifically, the intellectual capital-based view deals with knowledge that is created by and stored in a firm’s three capital components: (1) individuals (human capital), (2) organizational structures, processes, and systems (structural capital), and (3) relationships and networks (relational capital) (Cuganesan, 2005; Reed et al., 2006; Subramaniam & Youndt, 2005). Accordingly, in this study, intellectual capital includes three main components: human capital, structural capital, and relational capital. Human capital refers to the valuable and unique knowledge, skills, abilities, expertise, or experiences of the employees that should be kept out of reach of other companies (Chen & Lin, 2003; Ling & Jaw, 2006). In this study, human capital refers mainly to the competency of the TMT that is critical to a firm’s success in the global market (Brooking, 1996; Jaw, Ling, & Chang, 2001; Ling & Jaw, 2006; Roos, Roos, Edvinsson, & Dragonetti, 1998). Ling and Jaw’s (2006) study laid the foundation for the revised human capital indicators of this study. Relational capital refers to the knowledge embedded within a network of relationships with external stakeholders, such as customers or suppliers (Burt, 1992; Coleman, 1998; Youndt et al., 2004). Studies by Bontis (1998) and Subramaniam and Youndt (2005) laid the foundation for the revised relational capital indicators. Structural capital refers to the institutionalized knowledge and codified experience embedded in organizational systems and processes (Bozbura, 2004; Reed et al., 2006; Seleim et al., 2004). Studies by Bontis (1998) and Gold, Malhotra, and Segars (2001) also laid the foundation for the revised structural capital instrument. Knowledge management strategy Following Sveiby’s (1997) and Hansen et al.’s (1999) studies, two knowledge management approaches were identified for this study: the technology-centered strategy and the people-centered strategy. The technology-centered strategy focuses on the technological aspects of knowledge management practices, such as the conversion of knowledge into documents or patents or the enhanced productivity achieved via equipment renewal. The people-

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centered strategy, however, focuses on the human aspect. With a people-centered strategy, knowledge management practices such as mentoring or on-the-job training are used to accumulate and transfer employee areas of expertise. Studies by Sveiby (1997) and Hansen et al. (1999) laid the foundation for the revised knowledge management instrument, which was adapted and revised from Gold et al.’s (2001) knowledge management capabilities instrument. Global performance In this study, both financial and non-financial metrics (global initiatives) were included to measure a firm’s global performance. In terms of the financial performance measures, following Ling and Jaw’s (2006) study, perceived performance scales were used to measure a firm’s average EPS (earning per share) and average operational revenues (after-tax net income) for the previous three years. Using the perceived performance scales relative to objective performance scales permits comparisons across firms and industries. The literature also shows wide use of subjective scales and strong correlations between subjective and objective organizational performance measures (Song, Droge, Hanvanich, & Calantone, 2005). In terms of the non-financial performance measures, two constructs were identified to measure a firm’s global initiatives: (1) global agility and (2) global innovation (Bartlett & Ghoshal, 2000; Wu et al., 2002). Global initiatives refer to the proactive and deliberate entrepreneurial pursuits of a firm that enable it to compete globally (Birkinshaw & Fry, 1998; Birkinshaw et al., 1998; Ling & Jaw, 2006). Global agility measures a firm’s ability to learn and respond quickly to changes (Kim & Mauborgne, 2000). Global innovation measures a firm’s ability to tap into new opportunities in markets around the world and deliver superior value to customers (Hitt et al., 1998; Ling & Jaw, 2006). Ling and Jaw’s (2006) study laid the foundation for the revised global initiatives measurement. Control variables Firm age and firm size (including firm capital and employee number) were used as control variables in the analyses. Age and size have been shown to vary with organizational performance (Hannan & Freeman, 1984; Reed et al., 2006; Youndt et al., 2004). Because knowledge creation and diffusion are evolutionary in nature, the degree to which an organization develops its intellectual capital may vary with its age (Youndt et al., 2004). Likewise, organizational size may influence the development of intellectual capital via the access to resources (Serenko, Bontis, & Hardie, 2007; Youndt et al., 2004). Age is computed as the number of years since the founding of the organization (Reed et al., 2006). Size is computed as (1) firm capital and (2) number of employees (Reed et al., 2006; Youndt et al., 2004).

Results Analytical procedure The analytical procedure of this study is as follows. First, factor analyses were conducted to identify the appropriate dimensions for intellectual capital, knowledge management strategy, and global performance. Subsequently, correlation analyses

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were conducted to provide preliminary evidence of the research hypotheses. Regression analyses were then employed to examine the relationship between intellectual capital and global performance. Finally, hierarchical regression analyses were conducted to investigate the moderating effect of knowledge management strategy on the intellectual capital–global performance relationship. Factor analyses Prior to factor analyses, the convenience of the data for factor analysis was examined using the Kaiser-Mayer-Olkin (KMO) test. Tavşancıl (2002) indicated that the KMO test should be administered to detect the adequacy of the data, which is acquired from the sample in factor analysis. The KMO value of each scale is higher than .60 (KMO of intellectual capital = .882; KMO of knowledge management strategy = .707; KMO of global performance = .857), which confirms the convenience of the data for factor analysis (Kaiser, 1974). Given the exploratory nature, exploratory factor analyses were conducted to determine the proper dimensions of intellectual capital, knowledge management strategy, and global performance. The specific method applied in the current study was the factor analysis of principal component extraction with varimax rotation. For intellectual capital, the 15 items were loaded onto three factors: human capital (α = .845), relational capital (α = .861), and structural capital (α = .975). For knowledge management strategy, the seven items were loaded onto two factors: technology-centered knowledge management strategy (α = .744) and people-centered knowledge management strategy (α = .552). For global performance, the 13 items were loaded onto three factors: financial performance (α = .951), global agility (α = .882), and global innovation (α = .871). These reliabilities are acceptable; as suggested by Nunnally (1978) and Chau and Lai (2003), an alpha of .5 or .6 is sufficient at the early stages of research. Checking data quality To avoid common method variance, a number of procedures recommended by Podsakoff and Organ (1986) and Williams, Cote, and Buckley (1989) were employed. At the questionnaire design stage, items for the independent and dependent variables were separated into different sections of the survey instrument to reduce the impact of the theory of respondents’ implicit effectiveness. After the data had been collected, exploratory factor analyses were performed across the sets of items used to measure intellectual capital, knowledge management strategy, and global performance. Seven factors with Eigenvalues greater than one emerge from a factor analysis of the three variables in this study (cumulative variance explains 66.425%). The first factor accounts for only 13.849% of this variance, suggesting that common method variance does not have a substantial effect on the findings. In addition, following McEvily and Marcus (2005) and Podsakoff and Organ (1986), confirmatory factor analysis (CFA) was used as a more sophisticated test of the hypotheses that a single factor can account for all of the variance in its data. This technique assumes that “if a substantial amount of common method variance is present, a single factor will emerge, and it will account for the majority of the

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covariance in the independent and criterion variables” (Podsakoff & Organ, 1986). Common method variance was estimated by comparing a model that loaded all of the observed variables onto a single latent variable with a measurement model that loaded observed variables onto theoretically assigned latent variables. The χ2 value for the measurement model is significantly lower than the χ2 value for the single factor model, indicating a superior fit to the data (difference in χ2 = 748.923, difference in df = 28, p < .001). Consequently, there is no common method variance problem with the data in this study. Correlation analyses results Table 2 shows the correlations among the dimensions of all variables (intellectual capital, knowledge management strategy, global performance, and the control variables). The correlation matrix provides the initial evidence of Hypotheses 1a, 1b, and 1c, stating that intellectual capital (human capital, relational capital, and structural capital) is positively associated with global performance (financial performance, global agility, and global innovation). Intellectual capital (human capital, relational capital, and structural capital) is also positively associated with knowledge management strategy (technology-centered and people-centered), and knowledge management strategy (technology-centered and people-centered) is positively associated with global performance (financial performance, global agility, and global innovation). Regression analyses results—the main effect Table 3 shows the analysis results of the influence of intellectual capital and knowledge management strategy on global performance. With regard to the main effect, firm age, firm capital, and firm size were entered into the regression model as control variables. Subsequently, a regression analysis was employed to examine the relationship between intellectual capital (human capital, relational capital, and structural capital) and global performance (financial performance, global agility, and global innovation). Based on the results, intellectual capital has a positive impact on a firm’s global performance. For instance, structural capital has a positive impact on financial performance (β = .357, p < .05) (Model 2). Human capital (β = .465, p < .001), relational capital (β = .344, p < .001), and structural capital (β = .130, p < .05) have positive impacts on global agility (Model 5). Human capital (β = .234, p < .001), relational capital (β = .353, p < .001), and structural capital (β = .358, p < .01) also have positive impacts on global innovation (Model 8). In other words, Hypotheses 1a, 1b, and 1c are supported. Structural capital has positive impacts on a firm’s financial performance (Model 2) and non-financial performance (global initiatives) (Models 5 and 8). Human capital and relational capital also have positive impacts on a firm’s global initiatives (global agility and global innovation) (Models 5 and 8). Hierarchical regression analysis results—the moderating effect To examine the moderating effect of knowledge management strategies, the main effect terms KM1 (the technology-centered knowledge management strategy) and

3.688

3.252

3.434

3.601

8. Global agility

9. Global innovation

10.Technology-centered strategy

11.People-centered strategy

* p < .05, ** p < .01 (2-tailed).

3.021

7. Financial performance

3.860

4. Human capital

3.731

6.943

3. Firm capital

3.396

8.184

2. Firm size

6. Structural capital

6.036

1. Firm age

5. Relational capital

Means

Variables

.644

.748

.796

.647

1.054

.818

.673

.632

2.295

2.655

2.075

S.D.

Table 2 Descriptive statistics and pearson correlations.

.366**

.313**

.096

.004

−.044

.011

.117

.129

−.101

.192*

−.078

−.030

.072

.102

.572**

.119

2

.019

.066

−.118

1

.501**

.130

.557**

.606**

−.027

.735**

.291**

.452**

.422**

.083

.073

.019

.049

.037

4

.043

3

.379**

.600**

.583**

.723**

.355**

.697**

5

.408**

.593**

.591**

.643**

.397**

6

.235**

.321**

.592**

.381**

7

.493**

.674**

.570**

8

.384**

.467**

9

.545**

10

952 Y.-H. Ling

***

***

***

−.794

.357*

Structural capital

***

328.185

Adjusted R

+

p < .10;

*

p < .05;

Degree of freedom

2

**

p < .01;

p < .001.

2,139

.918 5,136

.913 13,128

.915

118.475

530.600

2823.684

***

***

338.468

***

726.260

***

3,138

.918

6,135

.992

14,127

.992

1276.347

3,138

.878

6,135

.969

.195*

.571*

KM2 × Structural capital

F (full model)

−.045

−.340

KM2 × Relational capital

14,127

.969

311.082

.016

−.071

−.144 **

−.037***

−.391+

KM2 × Human capital

.034 −.145

.060 −.154*

.250

.276+

−.017

−.266

.868+

−.320

.749

.419

−.307

−.088***

−.598

.358**

.353***

.234

***

−.080***

.433

−.094

.310

.599

.086*

.062*

−.013

−.004 .070*

Model 9

Model 8

KM1 × Structural capital

.178

KM1 × Human capital

.465

**

.183***

.176***

Model 7

Global innovation

KM1 × Relational capital

.903

People-centered approach (KM2)

Technology-centered approach (KM1)

295.584

.130*

.551 −.605

.344***

.837

***

.025

.199

.193***

.263

.145

Firm capital

Human capital

.004

−.007

Relational capital

.272

Firm size .019

.050

Model 6

.002

Model 5

−.149

.119

*

.178***

Model 4

−.082

.010

Model3

Global agility

Global initiatives

.102

***

.036

.268**

*

Model 2

Model 1

Financial performance

Global performance (Regression coefficients)

.064

Firm age

Predictors

Table 3 The influence of intellectual capital and knowledge management strategy on global performance.

***

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KM2 (the people-centered knowledge management strategy) as well as all of the interaction terms were entered in the model. The results are described below. In terms of financial performance, some moderating effects of knowledge management strategies are found. A people-centered knowledge management strategy positively (β = .571, p < .05) moderates the structural capital–financial performance relationship (Model 3). When combined with a people-centered knowledge management approach, structural capital has a relatively more positive effect on financial performance. In addition, a people-centered knowledge management strategy (β = −.391, p < .10) negatively moderates the human capital–financial performance relationship (Model 3). When combined with a people-centered knowledge management strategy, however, human capital has a relatively more negative effect on a firm’s financial performance. In terms of non-financial performance (global initiatives), some moderating effects of knowledge management strategies are also found. For instance, the results indicate that there are moderating effects of knowledge management strategy between intellectual capital and global agility (Model 6). A technology-centered knowledge management strategy negatively moderates the impact of structural capital on a firm’s global agility (β = −.154, p < .05). That is, when combined with a technology-centered knowledge management approach, structural capital has a relatively more negative effect on global agility. Furthermore, a people-centered knowledge management strategy negatively moderates the impact of human capital (β = −.037, p < .001) and relational capital (β = −.045, p < .01) but positively moderates the impact of structural capital on a firm’s global agility (β = .195, p < .05). When combined with a people-centered knowledge management approach, both human capital and relational capital have a relatively more negative effect on global agility, although structural capital has a relatively more positive effect on global agility. There are moderating effects of knowledge management strategies between intellectual capital and global innovation as well (Model 9). A technology-centered knowledge management strategy positively moderates the impact of human capital on a firm’s global innovation (β = .276, p < .10). When combined with a technology-centered knowledge management strategy, human capital has a relatively more positive impact on a firm’s global innovation. A technology-centered knowledge management strategy helps to transform the knowledge embedded in people (human capital) into real value. In summary, while there are indeed moderating effects of knowledge management strategy on the relationship between intellectual capital and global performance, this study also found some unexpected moderating effects. Hypothesis 2a is not supported because a people-centered knowledge management strategy does not positively moderate the relationship between human capital and a firm’s global performance; instead, a people-centered knowledge management strategy negatively moderates the relationship between human capital and a firm’s financial performance (Model 3) and global agility (Model 6). Similarly, Hypothesis 2b is not supported because a people-centered knowledge management strategy does not positively moderate the relationship between relational capital and a firm’s global performance, although a people-centered knowledge management strategy negatively moderates the relationship between relational capital and a firm’s global agility (Model 6). Hypothesis 2c is not supported because a technology-centered knowledge

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management strategy does not positively moderate the relationship between structural capital and a firm’s global performance; instead, a technology-centered knowledge management strategy negatively moderates the relationship between structural capital and a firm’s global agility (Model 6). Hypothesis 2d is not supported because the results are not significant. Additional moderating effects are observed when a people-centered knowledge management strategy positively moderates the relationship between structural capital and a firm’s financial performance (Model 3) and global agility (Model 6), and some findings suggest that a technology-centered knowledge management strategy positively moderates the relationship between human capital and a firm’s global innovation (Model 9).

Discussion Based on the above analyses, the results provide further empirical support for the relationship between intellectual capital and an organization’s global performance. For instance, the results confirm Ling and Jaw’s (2006) findings that the competency level of the TMT (human capital) enhanced a firm’s global initiatives. The results also confirm Berardo’s (2009) study in which organizations performed better by adding more partners (relational capital), as long as such additions did not result in excessive complexities. In this study, although only structural capital had a direct positive impact on a firm’s bottom line (financial performance), all three types of intellectual capital had direct positive impacts on a firm’s global initiatives (global agility and global innovation). As a result, intellectual capital not only enhanced a firm’s financial performance but also enhanced its non-financial performance in the international context. In addition, some moderating effects of knowledge management strategy were found between intellectual capital and global performance. For instance, a technology-centered knowledge management strategy positively moderated the human capital–global innovation relationship (Model 9). The combination of human capital and a technology-centered knowledge management strategy enhanced a firm’s global innovation. The implication is that human capital is critical to innovative success when a technology-centered knowledge management strategy is used. The people-centered knowledge management strategy also positively moderated the structural capital–financial performance relationship and the structural capital– global agility relationship. The analytical results show that the combination of a people-centered knowledge management strategy and structural capital enhances a firm’s financial performance and global agility. Structural capital is critical to a firm’s global performance when a people-centered knowledge management strategy is adopted. Institutionalized knowledge and codified experience (related to structural capital) work with a people-centered knowledge management strategy (for instance, sharing knowledge through personnel interaction or acquiring knowledge from external stakeholder) to enhance a firm’s financial performance and global agility. Furthermore, this study shows moderate support for Gloet and Terziovski’s (2001) idea that competitive advantage lies in an integration of the two approaches. Hansen et al.’s (1999) study found that firms that pursued an assemble-to-order product or service strategy emphasized the technology-centered knowledge

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management strategy, whereas firms that pursued highly customized service offerings or product innovation strategies invested mainly in the people-centered knowledge management strategy. Hansen et al. (1999) also found that companies that used knowledge effectively pursued one strategy predominantly and used the second strategy to support the first; executives who tried to excel in both strategies risked failing at both. While Hansen et al.’s (1999) research suggested that technology-centered and people-centered strategies in knowledge management may be mutually exclusive, research by Gloet and Terziovski (2001) suggested that competitive advantage lies in an integration of the two approaches. The results of this study confirm the latter finding that neither the technology-centered nor the people-centered approach should be overused. For instance, when structural capital is combined with knowledge management initiatives that focus heavily on information technology (related to the technology-centered knowledge management strategy), a firm’s global agility can be negatively impacted. The aforementioned results also further support Parker, Cross, and Walsh’s (2001) conclusion that knowledge management initiatives that focus too heavily on information technology (the technology-centered knowledge management strategy) often miss opportunities to improve performance through employee knowledge (related to human capital) and the enhancement of employee networks (related to relational capital). In addition, when human capital is combined with a people-centered knowledge management strategy (for instance, personnel interaction), it can negatively impact a firm’s financial performance and global agility. When relational capital is combined with a people-centered knowledge management approach, it can also negatively impact a firm’s global agility. Managerial implications Based on the abovementioned findings, some managerial implications may be suggested. First, intellectual capital may contribute to a firm’s organizational performance. In terms of financial performance, only structural capital has a positive impact on a firm’s financial results. With regard to non-financial performance, however, all three types of intellectual capital (human capital, relational capital, and structural capital) can have a positive impact on a firm’s global agility and global innovation. As a result, intellectual capital enhances a firm’s performance even in the international context. Firms should pay more attention to the management of intellectual capital to succeed in the global market. Second, the findings also provide new insights into the importance of structural capital. Structural capital is the only type of intellectual capital that has a direct positive impact on a firm’s financial performance and non-financial aspects of global performance. Knowledge and experience embedded in organizational systems and processes (related to structural capital) are critical for firms seeking to tap into new market opportunities worldwide (related to global agility) to deliver superior value to customers (related to global agility) and to enjoy new technologies or products more than its international competitors (related to global innovation). Firms are advised to use information technology to store employee knowledge or operation processes, to sort competition intelligence information or global market information, and to offer such information to their global mangers to respond quickly and effectively to

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changes or emergency situations and to enjoy lower costs for new products or new technological developments. Third, even though the other two types of intellectual capital (human capital and relational capital) do not have a direct positive impact on a firm’s bottom line, they can still have a direct positive impact on a firm’s non-financial performance. Knowledge embedded in either internal employees (human capital) or in relationships with external stakeholders (relational capital) enhances a firm’s global initiatives, even though it may not directly contribute to a firm’s bottom line. To enjoy global agility and global innovation, it is important for a firm to cultivate and enhance the competency (human capital) and interpersonal networks (relational capital) of its TMT, respectively. Finally, the results indicate that a combination of the right type of knowledge management strategy and intellectual capital can enhance a firm’s global performance. For instance, structural capital has a relatively more positive effect on a firm’s financial performance and global agility when combined with a peoplecentered knowledge management strategy. Institutionalized knowledge and codified experience (related to structural capital) shared through personal interactions or acquired from external stakeholders (related to a more people-centered knowledge management strategy) enhances a firm’s financial performance and global agility. The combination of human capital and the technology-centered knowledge management strategy also enhances a firm’s global innovation. While research studies suggest that it is difficult to establish returns on investment from knowledge management, the desired results can still be obtained through successful implementation (Anantatmula & Kanungo, 2010). Indeed, the better the alignment between the right form of intellectual capital and knowledge management strategy, the better the contributions made by knowledge management and intellectual capital management toward organizational performance. Contributions and limitations This study makes several contributions. First, the findings contribute to the literature by sorting and categorizing the various intellectual capital measures to provide a useful tool for examining a firm’s intellectual capital in an international context. The dimensions and measures provided by this study might serve as a starting point for further studies on the management of intellectual capital in the global arena. Second, the results support earlier emphases on the positive relationships between a firm’s intangible assets and organizational performance (Mavridis, 2005; O’Connor et al., 2007; Subramaniam & Youndt, 2005; Wu et al., 2007). This study expands upon prior intellectual capital literature not only by investigating the intellectual capital–organizational performance relationship but also by investigating the impacts of different forms of intellectual capital (human capital, relational capital, and structural capital) on a firm’s performance in the global economy (global agility, global innovation, and financial performance). Third, this study might serve as a theoretical foundation for further research by identifying the measurements and determinants of a firm’s global performance (financial performance and global initiatives). Although researchers have devoted considerable attention to intellectual capital, findings regarding its influence on

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global performance are limited. While some studies have discussed the influence of intellectual capital on bottom line profits (Bozbura, 2004; Roos et al., 1998), innovation performance (Mavridis, 2005; O’Connor et al., 2007; Subramaniam & Youndt, 2005; Wu et al., 2007, 2008), or exporting tendencies (Mavridis, 2005; Schiuma & Lerro, 2008; Seleim et al., 2004), few empirical studies have focused on the relationship between intellectual capital and global initiatives. In this study, an attempt was made to fill this gap in the literature by exploring the influence of intellectual capital on a firm’s global initiatives. To the authors’ knowledge, this study represents the first empirical investigation into the relationship between intellectual capital and global initiatives in Taiwan. The results suggest that intellectual capital has an important effect on a wide variety of global performance measures. The findings are not only in accordance with similar studies but also provide new insights into the management of intellectual capital in the international context. Another possible contribution of this study is the finding concerning the moderating effects of knowledge management strategy on the intellectual capital–global performance relationship. Efforts were made to integrate knowledge management strategy and intellectual capital management. The results suggest that for intellectual capital to contribute effectively to a firm’s global performance, proper alignment between intellectual capital and knowledge management strategy is a requirement. It should be noted, however, that a study of this kind does have limitations. First, because of the difficulty in standardizing the measurement of intellectual capital or global performance in any meaningful way, a subjective and self-reported five-item Likert scale was used based on the judgment of the respondents. Using perceived performance scales relative to objective performance permits comparisons across firms and industries. The literature also shows that there are strong correlations between subjective and objective organizational performance measures (Song et al., 2005). For a more comprehensive future study, it is recommended that objective firm performance measures be included for comparison. Second, caution must be exercised concerning the application of the structural equation model. The consistency of the model with the data does not necessarily constitute a proof of causality; it only lends support to it (Pang, 1996). The specification search of the model also has the potential to capitalize on chance factors in the data. Thus, the results of the model should be considered to be limited to the variables specified within the model.

Conclusion This paper provides further empirical support for the relationship between intellectual capital and an organization’s multiple dimensions of performance in the international context. Although only structural capital has a direct positive impact on a firm’s bottom line (financial performance), all three types of intellectual capital have direct positive impacts on a firm’s global initiatives (global agility and global innovation). As a result, intellectual capital enhances not only a firm’s financial performance but also its global initiatives. In addition, the results confirm Gloet and Berrell’s (2003) statement that while there are fundamental differences between the two main approaches to knowledge management, no single best way exists. A moderating effect of the knowledge

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management strategy was observed in the relationship between intellectual capital and global performance. The results suggest that a combination of the right types of knowledge management strategy and intellectual capital will enhance a firm’s global performance. That is, an alignment between the right forms of intellectual capital and knowledge management strategy can contribute to a firm’s performance in the international context.

Appendix The question items of intellectual capital, knowledge management strategy, and global performance Intellectual Capital 1. Human capital (α = .845) 1. Our top management teams are able to integrate and lead a culturally diverse work force. 2. Our top management teams are willing to empower employees all over the world. 3. Our top management teams are able to cope with pressures or hardships efficiently. 4. Our top management teams are able to deal with global emergency situations quickly and efficiently. 5. Our top management teams take initiatives to absorb worldwide information. 6. Our top management teams are able to identify and take advantage of global business opportunities. 2. Relational capital (α = .861) 1. My organization offers good customer service to our international customers. 2. My organization significantly values the relationships with our international customers and business partners. 3. My organization develops new business through networks with our international customers or business partners. 4. My organization has internal mechanisms to forecast the demand of international customers with accuracy. 3. Structural capital (α = .975) 1. In my organization, lessons learned from past experiences are widely available to those who undertake similar tasks. 2. In my organization, information on global, economic, social, political, technological, and market trends are widely available to our international managers 3. In my organization, instant solutions or reference information to workrelated problems are widely available to our employees all over the world. 4. In my organization, valuable global competitive intelligence information has been sorted and stored.

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5. In my organization, internal search engines (e.g., knowledge maps or corporate yellow pages) are available to match those who have questions with those who have answers. Knowledge Management Strategy 1. Technology-centered knowledge management strategy (α = .744) 1. My organization often converts corporate culture or shared values into documented materials. 2. My organization often converts employee knowledge or expertise into documented materials. 3. My organization often enhances productivity (product/service quality and quantity) by renewing equipment. 4. My organization encourages patent applications so that employee knowledge or expertise all over the world can be converted into company-owned assets. 2. People-centered knowledge management strategy (α = .552) 1. In my organization, most of the knowledge is embedded in employees all over the world. 2. In my organization, knowledge is often shared through personnel interactions, such as mentoring or rotations. 3. My organization often acquires knowledge through strategic alliances, technology cooperation, mergers, acquisitions, or technology licensing. Global Performance 1. Financial performance (α = .951) 1. My organization enjoyed higher average operational revenues (after-tax net income) than our international competitors over the past three years. 2. My organization enjoyed higher average EPS (Earning Per Share) than our international competitors over the past three years. 2. Global agility (α = .882) 1. My organization responds quickly to local business opportunities. 2. My organization absorbs global information (from customers, suppliers, competitors or industry leaders) quickly. 3. Global learning capability is a source of my organization’s global competitive advantage. 4. My organization responds quickly and effectively to worldwide emergency situations. 5. My organization responds quickly and effectively to worldwide technology and market changes. 6. My organization is able to store global employee knowledge/expertise or operational processes. 7. My organization utilizes industry leaders or international competitors to learn benchmarks.

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3. Global innovation (α = .871) 1. My organization invests more on R&D than its international competitors. 2. My organization enjoys lower costs on new product development or new technology development than its international competitors. 3. My organization enjoys more new technology development or new product development than its international competitors. 4. A large portion of my organization’s profits comes from new products or technology development.

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Ya-Hui Ling (PhD, National Sun-Yat-Sen University) is an assistant professor in the Department of Business Administration, I-Shou University. Her research interests include intellectual capital and knowledge management with a focus on the Asia Pacific region. She has published journal articles in the International Journal of Human Resource Management, Personnel Review, Sun Yat-Sen Management Review, Asia Pacific Management Review, and Journal of Human Resource Management.

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