The Effects of Intellectual Capital and Supplier Knowledge Integration on Innovation

Both China and India are emerging as global centres for innovation. Chinese and Indian manufacturers rely on knowledge from both internal and external sources and supply chain capabilities to develop new products. However, there is limited empirical evidence on how knowledge is leveraged for innovation in these two countries. A research model is proposed to investigate the relationships among intellectual capital, which has three dimensions (i.e., human capital, structural capital and social capital), supplier knowledge integration, supply chain adaptability, and innovation performance in China and India. The hypotheses are empirically tested and compared using multiple group structural equation modelling and data collected from 300 Chinese and 200 Indian manufacturers. The results show that there are both similarities and differences regarding the effects of intellectual capital and supplier knowledge integration on innovation performance in these two countries. Intellectual capital and supply chain adaptability enhance innovation performance in both China and India. We also find that intellectual capital positively associates with supplier knowledge integration, which enhances supply chain adaptability. However, the direct impact of supplier knowledge integration on innovation performance is only significant in India, and the effect of intellectual capital on innovation performance is significantly higher in China than in India.