The Effect of Intellectual Capital on Firm’s R&D Performance: Role of Absorptive Capacity

The study aims to empirically examine the influence of intellectual capital (IC) on the R&D performance of a firm. Study also investigates the role of potential and realized absorptive capacity in the association between IC and R&D performance. PLS-SEM was applied to examine the hypothesized relationships. Data are collected from 117 firms of the Electrical and Electronics sector of Malaysia using a survey questionnaire. The findings exhibit that there is a link between IC and R&D performance with a strong stress on the direct role of all three components of intellectual capital as enhancers of R&D performance. The realized absorptive capacity, measured as the transformation and exploitation of knowledge, positively mediates the relationship between the intellectual capital and the R&D performance. Meanwhile, the potential absorptive capacity, measured as the acquisition and assimilation of knowledge has no autonomous mediating effect on R&D performance. Based on the model developed in the study, knowledge acquisition and assimilation contributes to the building of the realized absorptive capacity which further contributes to the R&D performance. This study advances the literature on intellectual capital and R&D management by examining the role of IC in R&D performance as well as the mediating role of potential and realized absorptive capacity in the relationship between intellectual capital and R&D performance. It also helps industry practitioners understand the importance of intellectual capital and absorptive capacity and offers some strategic insights to the organization for building R&D performance.