How does intellectual capital drive firm performance via dynamic capabilities: evidence from India

Abstract

Purpose

This study examines how intellectual capital (IC) drives firm performance via the lens of dynamic capabilities (DCs). Drawing on resource-based view (RBV) and dynamic capability view (DCV), the authors elaborate the mediating role of learning, integration and reconfiguration DC in the Indian banking context.

Design/methodology/approach

A sample of 358 top- and middle-level managers from the Indian banking sector was administered with structured questionnaires for data collection. Structural equation modeling (SEM) and Sobel test were used to analyze the data and test the hypothesized mediating effect.

Findings

The findings reveal that learning and integration DCs are key mediators in IC and banks' performance relationships in an emerging economy context. In contrast, the analysis revealed partial mediating role of reconfiguration DC. Furthermore, the learning DC has been identified as the primary mediating mechanism for transforming bank's IC into performance benefits.

Practical implications

This study provides an important implication for the IC and DC link by empirically developing and validating a model in the Indian banking sector and making a several contributions to the related literature. This sector needs to incorporate and strengthen their IC and DCs to attain enhanced performance in today's dynamic environment. Bank managers can use these findings to bring their knowledge-related activities to channelize specific DCs to transform banks' IC when seeking to improve overall performance. Theoretically, this study extends previous research by outlining a set of organizational elements that tend to influence firm performances with the help of IC, learning, integration and reconfigurations DCs.

Originality/value

Although several studies have investigated the links between IC, DC and firm performance, studies on emerging economies are scarce. This study is one of the most in-depth investigations of the relationship between IC, learning, integration and reconfiguration DCs and firm performance in an integrated framework, with a particular focus on the banking sector of an emerging economy.