Intellectual Capital, Innovation, and Performance in Construction Contracting Firms

Abstract

The accumulation of intangible assets in the form of intellectual capital (IC) has been recognized to be significant for a firm’s competitiveness. The strategic significance of knowledge for construction contractors, as knowledge-intensive firms, cannot be overemphasized. However, there is a limited number of studies that explore the IC–firm performance (FP) linkage with a focus on construction firms. This study explores the link between IC and FP in construction contracting firms. It also proposes exploratory and exploitative innovation as the mechanisms through which IC evolves to affect FP. The hypotheses linking IC, innovation, and FP are tested with survey data from 135 managers in construction contracting firms in Hong Kong. The results of partial least squares structural equation modeling show that human capital, social capital, and relational capital directly influence FP, but organizational capital does not. Exploratory innovation shows a mix of full and partial mediating effects in the relationships between IC dimensions (except human capital) and FP. In contrast, exploitative innovation plays no mediating role in linking IC with FP. This study has advanced discussions on the effects of IC on FP by examining exploratory and exploitative innovation as the black box elements through which IC is translated into FP. It also makes a novel contextual contribution to the IC–FP literature by exploring their interrelationships in the context of construction contracting firms.