Exploration for the relationship between innovation, IT and performance

Abstract

Purpose: This study aims to ask two important research questions: “Do the investments of innovation capital and information technology (IT) capital have a non‐linear relationship with firm performance?” and “Does the interaction between innovation capital and IT capital have synergy effects on firm performance?” Design/methodology/approach: The authors employ multiple regression models and add the squared terms of research and development (R&D) intensity and IT intensity to examine the non‐linear relationship between innovation capital, IT capital and performance. The research sample includes the top 1,000 companies in Taiwan. Findings: The main findings of the study are that: innovation capital has a non‐linear relationship (inverted U‐shape) with firm performance; and IT capital has no significant impact on firm performance. However, after considering the interaction between innovation capital and IT capital, there is a positive effect on firms' performance. Research limitations/implications: This study can be extended in the following ways: researchers can adopt panel data and use more representative measures to examine the dynamic relationship between intellectual capital and performance; and future research should seek to examine the interaction effects of other perspectives of intellectual capital to understand further the comprehensive influence on performance. Practical implications: The research results suggest that more investment in intellectual capital is not always better. Companies should coordinate different perspectives of intellectual capital to improve firm performance. Originality/value: This paper extends prior research's viewpoint and suggests the non‐linear relationship between innovation capital and performance with empirical evidence. The results can provide the reference for further research about the relationship between intellectual capital and performance.