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The role of intellectual capital in the success of
newventures
Esther Hormiga & Rosa M. Batista-Canino &Agustn
Snchez-Medina
# Springer Science+Business Media, LLC 2010
Abstract Identifying the factors that contribute to the success
of new ventures is adifficult and challenging task. In that
respect, this paper proposes an analysis of theintellectual capital
within new business ventures. Based on the study of a sample of130
new companies, for the purpose of this work we have analysed the
influence ofthe proposed intangible assets on the success of
newly-created organizations,acknowledging the key role of the human
and relational capital in the first few yearsof the life of the
business.
Keywords New ventures . Intellectual capital . Success .
Intangible assets
Introduction
The field of entrepreneurship is one of the research areas that
have seen the greatestgrowth in recent decades (Vesper 1996;
Gartner 2001; Busenitz et al. 2003). One ofthe main reasons for
that growth is the recognition of new ventures as one of
theprincipal mechanisms generating employment and as a motor of the
economicgrowth of countries by transmitting dynamism and prosperity
to a territory and
Int Entrep Manag JDOI 10.1007/s11365-010-0139-y
E. Hormiga (*)Economics and Business Organization Department,
Facultat dEconomia i Empresa,Universitat de Barcelona, Diagonal
690, 08034 Barcelona, Spaine-mail: [email protected]
R. M. Batista-Canino :A. Snchez-MedinaEconomics and Business
Organization Department, Facultad de CCEE y
Empresariales,Universidad de Las Palmas de Gran Canaria, Campus de
Tafira,35017 Las Palmas, Spain
R. M. Batista-Caninoe-mail: [email protected]
A. Snchez-Medinae-mail: [email protected]
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enabling it to adapt to the structural changes that it is
undergoing internally(Timmons 1990; Amit et al. 1993).
However, although there seems to be general agreement on the
importance of newventures to the economic growth of regions and
countries, that agreement is not sostrong when determining the
factors that distinguish successful ventures fromunsuccessful ones.
The high death rate of newly created companies indicates thatthe
study of those factors is an important issue and the greater the
amount ofinformation obtained, the more it will favour the
development of firms in the firstyears of life. Therefore, it
should be stressed that the starting-up of a new business isa
complex process involving the combination of various assets to
start the venturesactivity and initiate the different tasks. The
fact that the new venture has limitedmeans, whether physical,
financial or intangible, places it in a position of
highvulnerability (Van de Ven et al. 1984).
In the first stages of a new firms development, the
identification and acquisitionof resources will be of vital
importance to achieving good performance in the longterm (Katz and
Gartner 1988; Brush and Greene 1996; Lichtenstein and Brush2001).
Thus, in the last decades the strategic management literature has
emphasizedthe crucial role of intangible factors or the
intellectual capital as determinants ofbusiness competitiveness
(Teece 2000). On that line, authors such as Lichtensteinand Brush
(2001) find that intangible assets are more important and critical
thantangible assets in such a decisive period of the life of a
business. Thornhill andGellatly (2005) found that the investment in
intangible assets is associated with atrack record of growth.
In an attempt to shed light on the issue, and following the
recommendations ofauthors who highlight the importance of
undertaking research from multipletheoretical perspectives within
the field of entrepreneurship, and to enrich that fieldwith
contributions from other theoretical approaches (Gartner 2001), we
draw on theliterature that examines intellectual capital and
stresses the importance of thoseintangible assets that provide
value to the firm and from which its competitiveadvantages may
stem.
However, one of the main problems of research into this topic is
the fact thatmany firms do not explicitly recognise their
intangible assets and so do not managethem correctly (Andriessen
2004). If, from the moment of the organisationsconstitution, the
managers and owners were aware of the importance of these assetsto
the short and medium-term performance of the firm and, especially
to the long-tem competitive advantage, the management of these
assets would improve, aswould the profits they generate. It is
paradoxical that firms regularly becomeconcerned about these assets
when they are older rather than when they are in theirinfancy. So,
why does a firm wait until it is a certain age or size before it
begins toidentify and measure its intellectual capital?
All the above leads us to propose the principal objective of
this research;namely, to identify the intangible assets that
influence the success of newly-created firms. To that end, we also
propose the following specific objectives inaccordance with the
three categories of intellectual capital most frequentlyreferred to
in the literature: human capital, structural capital and relational
capital
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(Kaufmann and Schneider 2004; Boedker et al. 2005; Marr and Roos
2005;Watson and Stanworth 2006):
a) To know the relationship that exists between human capital
and the success ofnew ventures.
b) To discover the relationship between structural capital and
the success of newventures.
c) To identify the relationship between relational capital and
the success of newventures.
Literature review and research hypotheses
The constitution of a new venture is a complex process that
involves thecombination of various assets to start the activity and
to initiate the different tasks(Gartner 1985). In the first stages
of the firms development, the entrepreneur, or theentrepreneurial
team, evaluates the assets and decides which are more, or
less,important for the firm, based on his/her expectations for the
firms future. If thatevaluation is performed effectively, it may
lead to the firm achieving significantcompetitive advantages and
even increase its chances of survival (Chandler andHanks 1994;
Brush et al. 1997; Katz and Gartner 1988; Hart et al. 1995;
Lichtensteinand Brush 2001; Edelman et al. 2005) in its early
years.
Since the beginning of the 1990s, authors such as Barney (1991)
and Grant(1991) have established a series of characteristics that
are essential to resources ifthey are to generate competitive
advantage (i.e. rarity, importance, imperfectimitability,
durability). On that basis, the strategic management literature
hasstressed the importance of intangible factors as determinants of
business competi-tiveness (Teece 2000).
Intellectual capital: importance and conceptual definition
At the end of the 20th Century, the World economy started to
undergo certainchanges that have a decisive impact on aspects such
as the generation of wealth andeconomic growth (Bradley 1997;
Stewart 1998; Andriessen 2004b; Chaharbaghi andCripps 2006). Recent
years have been marked by the increasing importance of therole of
intangible assets in firms (Miles et al. 1998; Cole 1998; Stewart
1998;Ventura 1998; Ordez de Pablos 1999; Hansen et al. 1999; Becker
et al. 2001; Lev2001; Kannan and Aulbur 2004; Augier and Teece
2005). Thus, authors like Bontis(2002) o Bradley (1997) declare
that the current trend is for organisations to focusless on
material assets and more on intangible assets when seeking
competitiveadvantages and that those firms with adequate
intellectual capital have a betterchance of survival (Daley
2001).
The concept of intellectual capital was first used in 1969 by
John KennethGalbraith in a letter to Michael Kalecki. However, it
was Tom Stewart whopopularised the concept in 1991, when Fortune
Magazine published his article
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Brainpower: How intellectual capital is becoming Americas most
valuable asset(Bontis 1998). In spite of the vast amount of
research on the topic from that time todate, there is still no
single definition that is universally accepted and applied withsome
homogeneity in the majority of studies (Caibano et al. 1999;
Edvinsson andMalone 1999; Bukh et al. 2001; Kaufmann and Schneider
2004; Sullivan 2005).
Thus, intellectual capital can be defined as the relationships
with customers andpartners, innovation efforts, the infrastructure
of the firm and the knowledge andskill of the members of the
organisation (Edvinsson and Malone 1999). Similarly,Sullivan (1999)
indicates that intellectual capital is that knowledge that can
beconverted into future profits and comprises resources such as
ideas, inventions,technologies, designs, processes and informatic
programs. Stewart (1991) indicatesthat intellectual capital is
everything that cannot be touched but can earn money forthe firm.
On the same line, Lev (2001) considers that intangible resources
are thosethat can generate value in the future but have no physical
or financial form.
When reflecting on the value or benefit contributed by
intellectual capital, manyauthors have chosen to determine it as
the difference between the market value andthe book value of the
firm and some even use that difference to define the term(Brooking
1997; Daley 2001; Lev 2001; Nevado and Lpez 2002; Ordez dePablos
1999, 2003; Petrash 1996; Roos et al. 2001; Sveiby 2000).
Finally, it is important to emphasise that, in recent years,
various alternatives havebeen proposed for the categories that
comprise intellectual capital. One classificationbased on three
dimensions has achieved a certain degree of consensus and it
includeshuman capital, structural capital and relational capital
(Stewart 1998; Sullivan 1999;Caibano et al. 1999; Brennan and
Connell 2000; Snchez et al. 2000; Petty andGuthrie 2000; Roos et
al. 2001; Viedma Mart 2001; Bontis 2002; Ordez dePablos 2002, 2003;
Palacios-Marqus and Garrigs-Simn 2003; Kaufmann andSchneider 2004;
Boedker et al. 2005; Marr and Roos 2005). We now review each
ofthose dimensions, including those aspects that the literature on
entrepreneurship hasconsidered relevant to the success of a new
firm.
Human capital
Human capital, despite being considered another dimension, is
recognised by manyauthors as the organisations most important
intangible resource (Johanson 2005;Marr and Roos 2005) by playing a
fundamental role in firms in this new knowledge-based economy
(Becker et al. 2001, Edvinsson and Malone 1999; Sveiby 1998,2000)
and being the driving force of the other two components of
intellectual capital:relational and structural capital (Fornell
2000). The technological advancesexperienced both by firms and by
society in general have meant that the requiredworker profile is
increasingly one with the competencies, attitudes and
intellectualagility that permit critical and systematic thinking
within the changing and uncertainenvironment that he/she must
confront (Bontis 2002). Therefore, human capital isconsidered the
potential source of innovation and generation of ideas for the
firm,thus providing added value of unquestionable importance
(Viedma Mart 2001;Bontis 1998). Consequently, the lack of adequate
human capital may have a negativeeffect on the rest of the
activities that create value for the firm (Edvinsson andMalone
1999).
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The very nature of new ventures means that a fundamental part of
this humancapital lies in the entrepreneur or entrepreneurial team.
Thus, the first hypothesis inthis work revolves around the proposal
that the greater the value of the assetscomprising the human
capital of newly-treated firms, the greater the success of
thosefirms in their first years.
We now explain the intangible assets that are related to human
capital and havebeen considered important for firms in the first
stage of life.
The entrepreneurs knowledge. In new ventures, knowledge,
especially that of theentrepreneur, is seen as a crucial asset for
the development of those firms (Vesper1990; Stuart and Abetti
1990). However, it is a very complex task to identify thespecific
sources of the know-how necessary to start up and manage a
business. Apartfrom the problem of identifying the source of
knowledge, the inclusion of humanintangible assets creates a
problem of demarcation: what proportion of theknowledge and skills
of the entrepreneur or employees is part of the firm and
whatproportion is not? (Andriessen 2004). Thus, the principal means
of identifying thefounders knowledge has been to evaluate previous
experience, in other words, theknowledge that he/she acquired from
the activities performed prior to starting up theventure (Stuart
and Abetti 1990; Storey 1994; Bosma et al. 2004; Rauch et al.
2005).On that basis, the first sub-hypothesis proposes that:
H1a: The greater the knowledge of the entrepreneur, the greater
the possibility ofthe venture being successful in its first years
of life.
The entrepreneurs motivation The motive that drives the founder
to develop hisbusiness project can either mean added value for the
firm or have a negative effecton it. Various authors have studied
the influence of motivations on the subsequentsuccess of the firm
and on organisational processes (Gatewood et al. 1995; VanPraag
2003; Van Praag and Cramer 2001; Pea 2002; Collins-Dodd et al.
2004).Most of those authors draw the conclusion that the fact the
owner is driven byintrinsic motivation, that is, by putting a
personal idea into practice, or by the need tobe his/her own boss,
is an asset for the firm, which will have greater chances
ofsurviving and obtaining future rents than if he/she is driven by
the impossibility offinding a job. Therefore, we propose the
sub-hypothesis:
H1b: The stronger the entrepreneurs extrinsic motivation to
create his enterprise,the lower the probability that the business
will be successful in the first yearsof life.
The commitment and resolve of the entrepreneur Since, in the
initial stage of the firm,the routines and processes are not
formally established, it is necessary for theentrepreneur to be
more involved in order to overcome that deficiency. Thus,
thepresence of the entrepreneur will be important to consolidate
control of the organisation,and, if he/she works in the firm, this
will represent reduced labour costs. Therefore, ahigh level of
personal commitment and resolve by the entrepreneur contributes
addedvalue to the firm and may mark the difference between some
entrepreneurial initiativesand others (Timmons 1990). In that
respect, authors such as Cooper et al. (1994) statethat greater
commitment from the entrepreneur has a decisive influence on the
survival
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of the firm. For their part, Pea (2002) and Collins-Dood et al.
(2004) find that there isa positive relationship between the level
of the founders dedication to the businessand the level of success
of the business. Therefore, hard work, as well as strongcommitment
and resolve have been highlighted as important elements for the
smoothrunning of newly-created firms (Martins-Rodrguez 2003). Based
on these assump-tions we proposed the next two sub-hypotheses:
H1c: The greater the entrepreneurs commitment to the venture,
the greater theprobability of the business being successful in its
first years of life.
H1d: The stronger the entrepreneurs resolve, the greater the
probability of thebusiness being successful in its first years of
life.
The entrepreneurs social skills The importance of intellectual
skills, the creation ofknowledge and explicit knowledge tends to be
emphasised in the literature onintellectual capital. However, the
intangible assets that are not intellectual or orientedto the
right-hand side of the brain often tend to be neglected even though
they maybe equally as important to the organisations future: we are
referring to social skills(Andriessen 2004). Two of these social
skills, namely social perception andadaptation, have found
empirical support in that the value they contribute to thefirm in
the initial stage of its life by helping it achieve higher revenues
and profits inthe future (Baron and Markman 2003). In order to
start up a venture, theentrepreneur has to interact with a great
many strangers, and so must display atalent for social adaptability
as well as perceive the characteristics, intentions andmotives of
the other person (Baron and Markman 2003). For these reasons
wesuggest the sub-hypotheses:
H1e: The greater the level of the entrepreneurs social
adaptability, the greater theprobability of the business being
successful in its first years of life.
H1f: The greater the level of the entrepreneurs social
perception, the greater theprobability of the business being
successful in its first years of life.
Interaction of the entrepreneurial team Some years ago, the
entrepreneurialprocess ceased to be considered a merely individual
activity and more and moreresearchers are recognising the fact
that, on many occasions, firms are createdby two or more
individuals (Gartner et al. 1994). The quality of the
interactionamong the team members is considered one of the most
important assets duringthis critical period. Therefore, if the team
members enjoy a healthy relationshipcharacterised by cohesion,
coordination and communication, significant value willbe added to
the firm (Lechler 2001). Given the importance of this type of asset
inthe firm, we suggest that the assets comprising the human
capital, measured interms of the entrepreneurs knowledge, intrinsic
motivation to start up the venture,commitment, resolve and social
skills, as well as the good interaction of theentrepreneurial team,
display a significant positive relationship with the success ofnew
ventures.
H1f: The better the interaction among the members of the
entrepreneurial team, thegreater the probability of the business
being successful in its first years of life.
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Structural capital
The second dimension of intellectual capital is structural
capital, which refers to theknowledge that the firm has been able
to internalise and that remains in theorganisation, be in its
structure, its processes or in its culture, even when
employeesleave (Bontis et al. 2000; Camisn Zornosa et al. 2000;
Petrash 1996, 2001). For thatreason, and unlike the human capital,
which cannot be totally appropriated by theorganisation, this
capital is the property of the firm (Edvinsson 1997) and
includesall the non-human tangibles of the organisation, from the
culture or internalprocesses to the information systems and data
bases (Bontis et al. 2000). Sveiby(2000) calls this dimension the
internal component and includes in it the patents,structures of
functioning, administrative and informatic organisation, the
culture,organisational climate, etc., which are the property of the
firm and, therefore, meetthe previously mentioned condition of
remaining in the firm when employeesleave.
The evaluation of this type of capital in new ventures is the
most complex,mainly because they are usually not yet consolidated
due to the short time that thistype of firm has had to internalise
the aspects that contribute value and transformthem into knowledge.
Thus, one of the cornerstones of the value of intellectualcapital
is precisely the transformation of its human and relational capital
intoknowledge inserted into the organisational structures and
processes so that it ceasesto belong to individuals and become the
property of the organisation (Bontis et al.2000; Camisn Zornosa et
al. 2000; Ordez de Pablos 2003; Meli and Boulard2003). However, it
was decided to study the importance of this type of capital in
afirm that is beginning its activity; therefore, the second
hypothesis proposes thatthe greater the value of the assets
comprising the structural capital of newventures, the greater the
probability of the business being successful in its firstyears of
life.
Routines In general, firms confront the uncertainty around them
by developinginternal procedures and routines that enable them to
access a suitable solution whena problem arises (Edvinsson and
Malone 1999; Roos et al. 2001). Although it is notpossible to talk
of the standardisation of the productive or service generation
processin its entirety (Baum and Silverman 2004), during the first
years of a firms life andfor certain activities, some routines are
established that facilitate the entrepreneurswork and permit
him/her to devote time to those tasks that really need
his/herknowledge, criteria of decision and drive. Thus, by way of
example, the fact that theemployees know the steps to take in the
case of an incident with customers orsuppliers without having to
consult the owner every time helps streamline theprocesses and may
have a positive effect on the performance of the business. Thus,the
established routines enable these young firms to save time and
resources whenseeking a solution to certain problems or facing
determined situations, bysimplifying day-to-day decision taking. On
that basis:
H2a: The greater the firms adoption of routines that streamline
its day-to-dayactivities, the greater the probability of the
business being successful in itsfirst years of life.
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Innovation When one speaks of innovation, one is generally
referring to theintroduction of a new product or process (Woo et
al. 1989; Kalleberg and Leicht1991; Karlsson and Olsson 1998);
however, because of their vary nature, and in acertain way, new
ventures represent a form of innovation in most cases (Amason et
al.2006). In the context of startups, which are generally small,
the level of theircontribution to the innovation activity is
considerable and, in some sectors evenexceeds that of large
companies (Thurik 1996; Heunks 1998). Moreover, apart fromthe
introduction of new products, innovation in processes, such as the
incorporation ofnew technologies, is also very important in new
firms (Roure and Maidique 1986;Siegel et al. 1993; Bruton and
Rubanik 2002; Huang and Liu 2005). In fact, in thespecific case of
small firms, and despite the fact that any type of innovation
usuallystimulates the growth of such firms, Heunks (1998) finds
that it is only processinnovation that increases productivity. In
light of the above, we propose the sub-hypothesis that:
H2b: The greater the level of innovation in the organisations,
the greater theprobability of the business being successful in its
first years of life.
Efficacy in the production of the product/service In studies
applied to large,consolidated firms, the efficiency and efficacy of
the productive/service generationprocess are two aspects that are
of vital importance within the intellectual capital(Bontis et al.
2000; Hussi 2004). Hence, an exhaustive analysis of the process
mayreveal that it entails significant losses of time and money.
While this may be anegative aspect, the firms processes can also
become one of its strengths byproviding added value on which one,
or several, of the organisations competitiveadvantages may depend.
The processes are not often definitively established
innewly-created firms but are in a stage of change and adaptation
in the early years.However, in spite of the frequent changes, the
first years constitute a critical time forthe future of the firm
and aspects such as the time taken to perform the
productive/service generation process or the errors that occur may
be determinants of success byinfluencing aspects like the customer
loyalty or the reputation that the firm is startingto build
(Edelman et al. 2002). For this reason, we propose the following
sub-hipothesis:
H2c: The greater the efficacy of the productive/service
generation processes, thegreater the probability of the business
being successful in its first years oflife.
Cultural The analysis of the organisations culture is another
important aspectthat helps provide an understanding of the
intangible assets and of howknowledge flows within the organisation
(Kannan and Aulbur 2004). The cultureand climate existing in
newly-created firms will be critical for them to face thefollowing
stages of life and growth (Timmons 1990). Although it is rare to
findconsolidated values and a strongly established culture in a
firm that is justbeginning its life, certain circumstances occur in
these early years that are going tocondition the culture that the
entrepreneur wishes to instil or that the companyitself is
developing. Although the culture is created by the shared
experiences of
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the organisations members, it will be the founder who initiates
this process in thefirst instance by implanting his/her beliefs,
values and suppositions. Basically,culture has three sources: (1)
the beliefs, values and suppositions of the firmsfounder; (2) the
learning experiences of the members of the organisation, and (3)the
new beliefs, values and suppositions introduced into the firm by
new membersand leaders (Schein 2004). When relating cultural
characteristics with firmperformance, Denison and Mishra (1995)
find that the characteristics ofadaptability, internal consistency
and participation exercise a positive influenceon the success of
the business. In light of the above, we propose the
sub-hypotheses:
H2d: The fact that, in a newly-created firm, there is an
incipient culturecharacterised by greater participation by
employees will have a positiveeffect on the probability of the firm
being successful.
H2e: The fact that, in a newly-created firm, there is an
incipient culturecharacterised by greater adaptability will have a
positive effect on theprobability of the firm being successful.
H2f: The fact that, in a newly-created firm, there is an
incipient culturecharacterised by greater internal consistency will
have a positive effect onthe probability of the firm being
successful.
Relational capital
Finally, the dimension of relational capital is based on the
idea that firms areconsidered not to be isolated systems but as
systems that are, to a great extent,dependent on their relations
with their environment. Thus, this type of capitalincludes the
value generated by relationships not only with customers, suppliers
orshareholders, but with all stakeholders, both internal and
external. The relationshipsof this type that contribute value to
the firm are considered to be relational capital. Inother words, it
is the knowledge that is found in the relationships between
theorganisation and its reference groups. Sveiby (2000) calls this
dimension the externalcomponent and includes in it the
relationships with customers and suppliers, theproduct names,
registered trademarks, the reputation and the image. Some of
thoseelements can be legally protected while in other cases this is
practically impossible.Moreover, investment in many of these assets
generates uncertain benefits; forexample, it is difficult to
predict the effects of investing in strengthening the imageof the
firm (Sveiby 2000). Thus, the final hypothesis proposes that the
greater thevalue of the assets comprising the relational capital of
firms, the greater the successof those firms in their early
years.
Support from informal networks Although it may first seem that
the relationshipsestablished with agents linked to the firm are the
only significant relationships, theentrepreneurs personal networks
are going to be a fundamental resource for a firmthat is starting
its life (Ostgaard and Birley 1994; Lechner and Dowling 2003),
and,within those networks, the support of family and friends will
occupy a predominantposition (Brderl and Preisendorfer 1998). In
that respect, it is important to stressthat, on most occasions, the
family provides both emotional support and active aid to
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the entrepreneur. In many cases, family members and friends
become a fundamentalsource of funding as well as labour, which
represents a saving. Thus, on the onehand, the work done by family
members during the first years of a business can helpcompensate for
the financial restrictions and reduce expenditure on staff during
thatperiod and, on the other, the loyalty and security offered by a
family memberworking in the business means less effort in the
control of the entrepreneurialactivity (Sanders and Nee 1996;
Brderl and Preisendorfer 1998). Moreover, thesupport of the
entrepreneurs life-partner can provide emotional stability
thatbenefits the activity of the new firm (Brderl and Preisendorfer
1998). Thus, wepropose that:
H3a: The greater the support that the entrepreneur receives from
his/her informalnetworks, the greater the probability of the
business being successful in itsfirst years of life.
Reputation In the context of new ventures, reputation is an
intangible asset that canhave various interpretations and
perspectives. In that respect, it will be the result ofthe prestige
or renown that may precede the entrepreneur and that which
theorganisation has been able to acquire during its first months or
years. In these earlystages, a good reputation can help not only to
attract new customers and promotecustomer loyalty, but also to
obtain funding or resources that would not be availablewithout this
intangible asset (Shane and Cable 2002). Thus, an entrepreneur or
firmthat has managed to improve on or build a good reputation will
have moreprobability of surviving and obtaining higher profits.
However, undertakingactivities that damage this intangible may have
negative repercussions for theorganisation that make it complicated
to forge a new reputation or recover lostprestige (Kupferberg 1998;
Michalisin et al. 2000; Lechner and Dowling 2003).Therefore we
suggest that:
H3b: The better the reputation acquired by the firm, the greater
the probability ofthe business being successful in its first years
of life.
Connectivity Within the networks established in the early years,
alliances withother firms can have significant impact on the
performance of new ventures(Pea 2002): collaborations and alliances
with other businesses can support thedevelopment of the firm by
providing information, knowledge and complementaryresources (Cohen
and Levinthal 1990; Deeds and Hill 1999; Lee et al. 2001).Moreover,
the establishment of agreements can help attract investors for the
newventure by giving legitimacy to the business by dispelling
possible doubts aboutrecovering the investment (Lee et al. 2001).
In addition, the relationships that thefirm establishes with its
environment, the contacts made with other organisations inthe same
or a different sector will be important. Thus, any alliances,
whetherformal or informal, can constitute communications channels,
the obtaining ofresources or access to distribution channels.
Moreover, the events, trade fairs andcongresses related to the
business constitute another means to absorb relevantinformation
about the specific market in which the firm moves and about
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entrepreneurial activity in general (Ordez de Pablos 2003). For
these reasons, wepropose that:
H3c: The greater the connectivity of the company, the greater
the probability of thebusiness being successful in its first years
of life.
Accessibility Another very important aspect for the functioning
of firms is the degreeof closeness and access to the customer,
especially for non-manufacturing and sales-oriented businesses.
Thus, the location of the business, depending on its activity,
canhave a critical influence on its progress (Martins Rodrguez
2003). In any case, thefact that customers can easily access the
business and feel close provides addedvalue to the firm. Moreover,
being located in a strategic place, such as a pedestrianzone or a
very busy area in the case of retail businesses, or in a
prestigious buildingin the case of a firm offering professional
services, can have a positive effect on thesuccess of a
startup.
H3d: The greater the firms accessibility to the customers, the
greater theprobability of the business being successful in its
first years of life.
Supplier profile This asset refers to both the size and the
location of the supplier. Inthat respect, in the case of
newly-created firms, Pea (2002) obtains interestingresults that
point to the fact that the most successful firms happened to be
those whomade greater volume purchases, in other words, those who
used fewer suppliers.Pea (2002) also finds that having higher
proportion of local suppliers has a positiveinfluence on
performance. The interesting results of that study led us to
include thisasset in the model in order to test whether a
particular supplier profile could be anasset of any value to the
firm. More specifically, the studied profile consisted ofchecking
the new firms purchase volume and the location of the
suppliers.Consequently, we propose that:
H3e: The fewer suppliers that newly-created firms concentrate
their purchases on,the greater the probability of the business
being successful.
H3f: The higher the percentage of local suppliers of a newly
create firm, the greaterthe probability of the business being
successful in its first years of life
Research methodology and design
In order to test the hypotheses relating intellectual capital to
the success of newly-created firms, primary data were gathered by
means of a questionnaire. For thepurpose of operationalising the
concept of the new firm, and in line with Reynolds et al.(2005),
this work considers a newly-created firm to be one with more than 3
andless than 42 months of life. Moreover, the firms in questing
really had to beperforming a new activity: in other words, any firm
that had simply modified itslegal status or changed owner was
excluded from the sample of this study.Although the data provided
by the Informa organisation established that a total of
Int Entrep Manag J
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19,469 companies registered in the Canary Islands during the
period of study(March 2002 to April 2005), the SABI data base that
was available to theUniversity of Las Palmas de Gran Canaria in
July 2005 only provided contactinformation (telephone, fax or
e-mail) about 2,615 companies; therefore, the finalnumber of firms
to which the questionnaire was sent was 1,288. After
variouscommunications with the firms, a total of 147 completed
questionnaires werereceived, of which 130 were valid. This
represents a response rate of 8.3% and asample error of 8.55%.
In all cases, the questionnaire was completed by an owner of the
business whoalso took an active part in the daily activity of the
firm and, preferably, was theowner with greatest responsibility.
Moreover, all the firms had been formed betweenMarch 2002 and April
2005 in the Canarian Autonomous Community, whichensured that all
the analysed units had been created within the same economic
andfiscal framework.
The dependent variable in this research is the success of
newly-created firms.Subjective indicators were used to measure that
variable by means of the perceptionsof the founders: a method that
has been widely used in previous research works (VanGelderen et al.
2000; Zahra and Bogner 2000; Rhodes and Butler 2004). Thus, aseries
of questions asked the entrepreneur to indicate, on a 7-point
Likert scale, his/her level of satisfaction with sales, ROA,
growth, the achievement of the initiallyestablished objectives, the
overall success of the firm, and success in relation to
itscompetitors. The final dependent variable is a construct
resulting from aconfirmatory factor analysis of those 6 indicators
that confirmed the existence of asingle factor. Moreover, in order
to confirm the validity of the previously mentionedsubjective
measures, the questionnaire also asked for objective data of
success, suchas the growth of sales and of profitability in
relation to the previous year, expressedas percentages. The high
correlation between the subjective and objective measuresis
significant proof of that validity.
The independent variables are grouped into three dimensions:
human capital,structural capital and relational capital. The
dimension of human capital includes sixintangible assets: (1) The
entrepreneurs knowledge of the business, measured bymeans of
his/her experience, using his/her number of years experience in the
sectoras the indicator (Van de Ven et al. 1984; Sandberg and Hofer
1987; Duchesneau andGartner 1990; Chandler and Jansen 1992; Van
Praag 2003). That indicator iscomplemented with information about
the entrepreneurs knowledge by means oftwo items based on those
proposed by Feeser and Willard (1990) and Cooper et al.(1994). The
aim of those items was to identify the degree of similarity by
comparingthe current customers and competitors and the knowledge
and skills necessary todevelop the activity in the new firm with
those of the firm in which the entrepreneurpreviously worked. (2)
The motivation that led the entrepreneur to create his/herbusiness
was studied by proposing a series of motives that the entrepreneur
had toevaluate on a 7-point Likert scale according to the
importance he/she attaches toeach of them (Roberts 1989; Gimeno et
al. 1997; Watson et al. 1998; Pea 2002).The reasons for becoming an
entrepreneur included extrinsic motivation and intrinsicmotivation.
(3) The entrepreneurs commitment was captured by the number of
hoursper week devoted to the business, which is one of the most
widely used methods tomeasure this variable (Van de Ven et al.
1984; Basu and Goswami 1999; Pea 2002;
Int Entrep Manag J
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Collins-Dodd et al. 2004). (4) Resolve was measured by means of
the scale proposedby Baum and Locke (2004) and, to that end, the
informants had to evaluatestatements about three of the items
proposed by those authors. (5) The entrepreneurssocial skills,
namely, social perception and social adaptability were
measuredaccording to the hypotheses in the work of Baron and
Markman (2003) in whichthey examine the influence of these skills
of the successful entrepreneur. (6) Finally,and in relation to the
entrepreneurial team, the teams social interactions weremeasured by
means of the scales proposed by Lechler (2001), which
measureaspects such as the communication, coordination and cohesion
of the entrepreneurialteam.
The dimension of structural capital includes six assets. (1) The
degree of processinnovation, which, following the works of Solem
and Steiner (1998) and Wolff andPett (2006), led us to ask directly
about the importance of new technologies in theproductive/service
generation process of the business, as well as about the level
ofimplementation of the technologies. (2) To know the degree of
efficacy of theproductive/service generation process of the firm,
we used some indicators similar tothose used by Kaplan and Norton
(1997) and Bontis et al. (2000), which reflect thenumber of
complaints received in a determined period of time, as well as
theincrease or reduction in the average time taken to perform the
production process.(3) The degree to which the routines were
established in the firm was asked directlyby means of a statement
which the informants had to evaluate on a 7-point Likertscale.
Finally, the incipient culture of the firm was assessed by means of
the scaleproposed by Denison and Mishra (1995). Those authors
relate the proposed culturaltraits with higher performance in the
firm, and principally highlight the character-istics of (4)
participation, (5) adaptability and (6) internal consistency. Eight
of theitems proposed by those authors were formulated as statements
and used to measurethese characteristics.
Finally, the dimension of relational capital comprises five
assets. (1) relationshipswith customers and suppliers, both current
and potential, were measured by the timedevoted to establishing and
maintaining these relationships, specifically by the hoursper week
spent keeping in contact with present and new customers and
suppliers(Birley et al. 1991; Greve and Salaf 2003; Sawyerr et al.
2003; Witt 2004). (2)Support from informal networks was measured by
means of the scale proposed byBrderl and Preisendofer (1998), which
aims to reflect the amount of active andemotional support received
from the entrepreneurs life-partner as well as fromfamily and
friends. (3) The connectivity of the firm was quantified by the
number offirms with which some type of agreement had been
established: an indicator used byLee et al. (2001), Ordez de Pablos
(2003) and others. (4) The asset of accessibilityand closeness to
the customer was included in the model, after taking
intoconsiderations the reflections made subsequent to the
qualitative study of thisresearch. Thus, the items used are
inspired by those in the works of Hoogstra andVan Dijk (2004), who
attach significant importance to the accessibility of new
firms.Thus, the entrepreneurs were asked to evaluate, on a 7-point
Likert scale, theimportance that they attach to the present
location of the business, as well as to theease of access for
customers by being in a busy zone, and to the closeness
ofsuppliers. (5) Finally, two indicators used by Ordez de Pablos
(2003) wereemployed to measure the firms reputation: the percentage
of customers that the
Int Entrep Manag J
-
entrepreneur believes to have recommended the firm and the
percentage that repeatafter the first purchase or service. Apart
from those two indicators, the entrepreneurswere asked directly for
their opinions about the reputation acquired by the firm in
itsfirst years of life and the improvement that it has entailed for
the firm in relation toits closest competitor.
Moreover, a series of control variables that may influence the
dependent variableand condition the final results was also
analysed. These variables are: (1) the sectorto which the firm
belongs, represented by 5 dummy variables and a control variable
primary sector, industrial, construction, retail and catering,
financial, legal andtechnological activity, and other activities -;
(2) the size of the organisation, measuredby the number of
employees at the time of the survey; (3) the firms age in months
and,finally, (4) the entrepreneurs perception of the number of
competitors in the specificzone in which the firm operates.
The firms comprising the sample have an average age of 29
months, with 4workers and 2.3 partners. Multiple Regression Models
were used to validate thework hypotheses. The nature of the
dependent variable meant that a valid alternativewould have been to
use an ordinal probit or logit model; however, since success
wasmeasured by means of six items, the interpretation of the model
would have beenconsiderably more complicated. In addition, there
are few individuals positioned atextreme values and, consequently,
the use of regression models was moreappropriate.
Analysis and interpretation of results
In this section, the data are analysed with the aim of testing
the hypotheses. Table 1shows the regressions corresponding to the
analysis of the relationships betweeneach of the dimensions of
intellectual capitalhuman, structural and relationalcapitaland the
success of new firms. Moreover, when a series of control
variableswere also considered, it can be seen that firms operating
in financial, legal andtechnical activities display a higher level
of success than other firms in the sample(see Table 1).
The second of the regressions presented in Table 1 shows the
influence of humancapital on success, with the intangible assets in
this dimension explaining 40.2% ofthe variable. As Hypothesis 1
predicted, there is a significant and positive correlationbetween
human capital and success. Thus, the assets that are shown to be
significantare: the interaction of the entrepreneurial team
(=0.263, p
- explain only 7.1% of the dependent variable, which casts doubt
on their short-termeffect. More specifically, two of the six assets
included in the multiple regression,namely, innovation (=0.263,
p
-
this dimension, all the control variables were also left out of
the model. With regardto the second of the proposed hypotheses, it
would be more complicated than for theprevious hypothesis to state
that structural capital plays a determining role inthe immediate
success of newly-created firms because of the low percentage ofthe
dependent variable that it explains.
The fourth regression includes the effect of the assets of
relational capital on thesuccess of new businesses. As Table 1
shows, all the relational capital assetsincluded in the model are
significant except the asset labelled supplier profile, whichrefers
to those firms that opt to purchase from only a few suppliers.
These assetsexplain 43.2% of the independent variable. Thus,
reputation (=0.504, p
-
Following those assets mentioned above, both the absence of
motivation to openthe business for necessity and the resolve of the
founder are among the factors thatprovide value to the firm via,
among other aspects, their positive influence on thesuccess of the
firm. Finally, the good coordination, cohesion and communication
ofthe team members is the last asset considered important when
analysing the jointinfluence of the assets within the category of
intellectual capital.
Conclusions, limitations of the study and recommendations
This research constitutes one of the first steps towards a
better understanding of theimportance of intangible assets in
newly-created firms. The results reveal therelationship between
intangible assets and the success of newly-created firms. Oneof the
principal conclusions reached in this study is the importance of
human capitalto the performance of firms in the first stage of
life. Thus, the results show theimportance of the already
frequently highlighted role of the entrepreneur, whetherbecause of
his/her knowledge or the time and effort invested in the
venture.Moreover, if the company is formed by a team, satisfactory
intercommunicationbetween the members plays a key role since, bad
communication and coordinationcould lead to an inability to develop
the business idea in an appropriate way andrepresent a liability
for the firm.
Since the firms in the study are all in a stage of early
development, structuralcapital is the most difficult category of
intellectual capital to evaluate. Thus, theresults of the analysis
of this type of assets indicate that only internal
consistency,innovation and adaptability are significant. Therefore,
one can suspect that, in newventures, the structural capital that
provides value in the firms early days is thatwhich enables the
firm to innovate and easily adapt to the environment,
althoughhaving established certain routines that help the efficacy
of the internal processesmay have a positive effect in the medium
or long term.
The last of the analysed dimensions is relational capital, which
is shown to play asignificant role in the firms under study. In
general, the results of the analysishighlight the value provided by
assets whose nature is defined by the relationshipsthat the firm
establishes with its environment. Of these assets, it is
unquestionablythe reputation acquired that contributes greater
value in the short term and, in theseearly and uncertain times, is
essential to capture new customers.
With regard to future lines of research, and following the path
opened up in this work,it is recommended that future studies are
oriented towards the identification of therelationships between the
assets that could not be included in this study; for example,
theinfluence of established networks on the structural capital of
the organisation. It wouldalso be interesting to undertake a
longitudinal analysis of the evolution of theseintangibles over
time in order to know the impact they have on the long-term success
ofthe firms.
Focusing on the limitations of the work, its should be stressed
that, since the finaldata were obtained by means of questionnaires,
it was not possible to perform adeeper and more exhaustive
analysis, especially in the case of the more qualitativeaspects. In
that respect, many of the analysed assets, such as networks, have
anessentially qualitative and accumulative nature, which presents
serious problems for
Int Entrep Manag J
-
the quantitative studies in this work. Thus, that limitation
opens up what may be anew line of research in which it would be
interesting to carry out case studies thatexamine the role of
intangible assets in the early years of the business.
It is important to point out that this work has not been able to
offer a completeanalysis of the impact of the variables of
environment on the composition of theintangible assets of each firm
and, consequently, on the way in which that impactconditions the
success of newly-created firms. It should also be stressed that
thisresearch focuses on a very early stage of the life of the firm
and that the effects ofsome assets may take longer to appear. As
regards the sample, and also due to thecharacteristics of the
population of the study and of the setting of the research,the
firms participating in the empirical study mostly belong to the
tertiary sectorand operate within a particular economic and fiscal
framework. This finallimitation calls for the study of firms
performing some other type of activitybecause of the possible
significance of analysis by specific sectors that can studythe
specificity of the assets and establish the interrelations between
a greaternumber of intangibles: not to mention the need to
replicate the study in otherlocal contexts.
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Int Entrep Manag J
The role of intellectual capital in the success of new
venturesAbstractIntroductionLiterature review and research
hypothesesIntellectual capital: importance and conceptual
definitionHuman capitalStructural capitalRelational capital
Research methodology and designAnalysis and interpretation of
resultsConclusions, limitations of the study and
recommendationsReferences
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