An Investigation of the Effects of Intellectual Capital on Innovations in the Egyptian Banks: The Mediating Role of Organisational Capital

Abstract

This research aims to analyse the direct and indirect effects of human capital, social capital and customer capital on the different types of innovations via organisational capital in the service sector. It also examines the interaction among the different types of innovations including product, process and organisational innovations and tests the role of human capital, social capital and customer capital in supporting organisational capital. This research employs the first stage of Actor Network Theory named problematisation to justify the research model. This study adopts a positivism philosophy, a deduction approach and a quantitative method as the research methodology. Hence, a questionnaire was used to gather data from 198 managers in the Egyptian banks (54% response rate). Structural Equation Modelling by Partial Least Square (warp PLS 3.0) was applied to test the research hypotheses.

The research findings indicate that product, process and organisational innovation are positively associated with organisational capital. It is found that social capital and human capital have direct and indirect positive effects on both product and organisational innovation via organisational capital. It appears that social capital and human capital do not have a direct influence on process innovation whereas organisational capital fully mediates the relationship between social capital, human capital and process innovation. The study explores the direct and indirect positive effects of customer capital on three types of innovation through organisational capital. Additionally, organisational innovation has a positive relation with process and product innovation, which is significantly associated with process innovation. The most significant influence of intellectual capital is on product innovation, followed by organisational innovation, whereas the least significant influence is on process innovation. Moreover, the results also show that there are no significant differences between the public and private banks in terms of the path coefficients. The effect size of organisational capital on product and process innovation in the private banks is substantially larger than it is in the public banks. In the same way, the private banks have relatively larger effect sizes for human capital on product and process innovation via organisational capital than those in the public banks. Unexpectedly, in the public banks, the positive effect size of customer capital on product and process innovation via organisational capital is larger than it is in the private banks.

This study has contributed to intellectual capital, innovation and service sector literature. It explores many benefits for the managers of the banks. It suggests that they should view intellectual capital as a catalyst for the different types of innovations. For example, banks should maintain and promote social connections amongst their employees to support innovation and to foster the cohesion of informal organisation.