Exploration for the Relationship between Innovation, IT and Performance

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