Moderating role of dynamic capabilities on the relationship between intellectual capital and innovation performance

Abstract

Ongoing economic imbalances worldwide have demanded a major transformation from an industrial-based economy (relying on tangible assets) into an intellectual capital-based economy (relying on intangible resources). In today’s competitive market scenario, effective manipulation of intellectual capital components has emerged as the basis for value creation, thus leading to the innovative performance of the financial institution. Lately, intellectual capital components (human, struc tural, relational and social) and their implications on innovation performance have generated renewed research interest. Based on these facts, this study examined the impacts of intellectual capital components to gain the competitive advantages of commercial banks of Iraq in terms of improved innovation performance. Direct and indirect effects of various study variables on intellectual capital components and innovation performance were determined to validate such claims. To ascertain the direct influence, the relationship between different antecedent factors such as culture and trust in intellectual capital components was analysed. In addition, a correlation between intellectual capital components (as intangible assets) and innovation performance in the banking sector was established. To find out the indirect impact, the interaction between the various factors of the dynamic capabilities (such as sensing, seizing, and reconfiguring) in moderating the relationship between intellectual capital components and innovation performance was evaluated. The positivism philosophy, deductive approach and quantitative method were used as the research methodology to accomplish the research objectives. In this process, a questionnaire survey and purposive sampling technique were used to collect the responses from 364 employees of the Iraqi commercial banks (with a response rate of 77.4%) to verify the study hypotheses. The obtained data were analysed statistically using the SPSS V.25 and AMOS v.24 software. The results revealed a significant impact of culture and trust (antecedent factors) on various intellectual capital components. Furthermore, a strong connection between these antecedent factors and intellectual capital components was evidenced, confirming the study hypotheses. Interestingly, intellectual capital components were found to enhance the innovation performance of the banks significantly. Besides, the dynamic capabilities were shown to moderate the correlation between intellectual capital components and innovation performance in the Iraqi commercial banks positively. Thus, this will improve the competitive advantages. It was asserted that intellectual capital components implementation could strongly influence the innovation performance of the financial sector, leading to numerous benefits to the bank employees and long-term sustenance. Thus, it can be concluded that commercial banks must consider intellectual capital components as a catalyst for creative innovations. In short, this study provided some valuable insights and guidance to the academicians and practitioners in the financial sector regarding the development of intellectual capital components to enhance the innovation performance, especially for the Iraqi commercial banks to take full advantage of their intangible assets.