Exploring the Link between Intellectual Capital and Firm Financial Performance through Mediation of Innovation Speed

Abstract

This study aimed to examine the association between intellectual capital and the financial performance of firms, taking innovation speed into account as a mediating factor. Our study paradigm is built upon the innovation literature and the IC viewpoint. Utilizing structural equation modeling, we examine data gathered from the top 10 information technology companies operating in Pakistan, with 320 employees serving as the sample size for the model's testing. The findings indicate a significant association between the elements of intellectual capital, i.e., human and structural capital, and the speed of innovation. This relationship, in turn, improves the financial performance of a company. The speed of innovation serves as a crucial mediator, magnifying the influence of human and structural capital on economic performance. Among the limited number of research papers exploring the potential mediating influence of innovation speed on the association between intellectual capital and firm performance, this study significantly contributes to the existing body of knowledge in human resource management concerning innovation and intellectual capital. Moreover, it offers practical comprehensions for managers on harmonizing their practices and strategies to cultivate intellectual capital while simultaneously striving towards the Firm's financial performance objectives and fostering innovation.