Academic journal article Business: Theory and Practice

Exploring Dynamic Capabilities, Intellectual Capital and Innovation Performance Relationship: Evidence from the Garment Manufacturing

Academic journal article Business: Theory and Practice

Exploring Dynamic Capabilities, Intellectual Capital and Innovation Performance Relationship: Evidence from the Garment Manufacturing

Article excerpt

Introduction

Facing a more intense business competition, and rapidly changing consumers' preferences, the organisations need to find new ways of maintaining their existence. With this in mind, the conception of dynamic capabilities emerges as critical factors to ensure organisational growth and competitiveness (Eisenhardt and Martin 2000, Zahra et al. 2006, Zheng et al. 2011, Chien and Tsai 2012, Babelyte-Labanauske and Nedzinskas 2017). Since it was first introduced more than 20 years ago by Teece et al. (1997), the importance of dynamic capabilities has attracted many responses from academics (Eisenhardt and Martin 2000, Zahra et al. 2006, Ambrosini and Bowman 2009, Barreto 2010, Li and Liu 2014) and practitioners. Several theoretical works have been written to uncover this thought (Eisenhardt and Martin 2000, Winter 2003, Teece 2007).

The academic discussion on competitive advantage also emphasised the critical function of knowledge stock (Chien and Tsai 2012) or intellectual capital (Castro et al. 2013, Wang and Chen 2013). It is considered as the intangible asset (Petty and Guthrie 2000, Bueno et al. 2004, Chen et al. 2005) that critically helps organisations to achieve competitive advantage (Joeliaty 2012) and sustainable success (Subramaniam and Youndt 2005).

At the same time, several scholarly articles also discuss the role of innovation for achieving organisational competitive advantage. Various organisational activities in designing, producing, marketing and distributing of its products are aimed at fulfilling market demands. Since each activity may lead to specific cost position and/or product differentiation, therefore, the unique pricing or products can create a competitive advantage. Hence, innovation is a way to create organisational competitiveness (Azis et al. 2014).

Even though some efforts have been undertaken to comprehend the above mentioned notions of dynamic capabilities, intellectual capital, and innovation, further efforts focused on empirical analyses of the interplay among those variables are needed (Wu et al. 2007, Hsu and Wang 2012, Han and Li 2015, Ansari et al. 2016). Previous works concluded that dynamic capabilities mediated intellectual capital impacts on innovation performance (e.g. Hsu and Wang 2012, Han and Li 2015, Ansari et al. 2016). Differently, Wu et al. (2007) concluded that dynamic capabilities moderated the causal relationship between intellectual capital and innovation performance. However, Ambrosini and Bowman (2009) argued that organisational value creation is the product of dynamic capabilities through resource base. In other words, Ambrosini and Bowman (2009) proposed that the resource base was the direct product of dynamic capabilities. In accordance, Teece et al. (1997) and Teece (2009) described dynamic capabilities as organisational competencies to develop, mobilise and maintain its intangible assets in supporting sustainable organisational performance. Taking on the argument of Ambrosini and Bowman (2009), Teece et al. (1997) and Teece (2009) above, this study proposes dynamic capabilities as the antecedent of intellectual capital leading to innovation performance.

In addition, previous studies on dynamic capabilities, intellectual capital and innovation performance were conducted in the technology-based (Wu et al. 2007, Hsu and Wang 2012), petrochemical (Ansari et al. 2016), and biochemical firms, mostly in large organisations and in developed countries (Protogerou et al. 2011). However, previous research rarely consider the more traditional sector, such as garment manufacturing in small and medium enterprises (SMEs) of a developed country. In fact, the business environment of garment manufacturing sector is very competitive, highly volatile and unpredictable (Bruce et al. 2004, Nayak and Padhye 2015). The garment manufacturing continuously needs to deliver high-quality products, develop new brands, enter or create new markets and respond to a variety of customer expectation (Kapelko and Oude Lansink 2014), since its products have a short life cycle. …

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