Is too much a good thing? The non-linear relationship between intellectual capital and financial competitiveness in the Chinese automotive industry
As one of the five largest industries in China, the automotive industry may well become a prosperous market of production and a large consumer market, but with the 2019 novel coronavirus (COVID-19) outbreak, automotive companies have suffered great losses. How to maintain financial competitiveness (FC) through innovation and knowledge after this calamity has become an area of focus for researchers and practitioners. By analyzing listed Chinese automotive companies over the period 2013–2018, the research focus is to determine the non-linear effect of intellectual capital (IC) on FC. IC is measured by the modified Value Added Intellectual Coefficient (MVAIC) model, and FC is measured through a comprehensive index system. The results reveal a cubic relationship between IC and FC. In addition, physical, innovation, and relational capitals have an S-shaped relationship with FC, whereas human capital has an inverted S-shaped curve. The non-linear effect of SC on FC is not significant. It is recommended that managers optimize investment in IC to drive FC in organizations.
First published online 02 March 2022
This work is licensed under a Creative Commons Attribution 4.0 International License.
Albulescu, C. T., Tămășilă, M., & Tăucean, I. M. (2021). The nonlinear relationship between firm size and growth in the automotive industry. Journal of Industry, Competition and Trade, 21(3), 445–463. https://doi.org/10.1007/s10842-021-00364-6
Alcalde-Delgado, R., Saiz-Barcena, L., Olmo, R., & de Armino, C. A. (2020). Empirical study of the business growth strategy related to the added value by intellectual capital. International Journal of Production Management and Engineering, 8(1), 1–11. https://doi.org/10.4995/ijpme.2020.10817
Asif, J., Ting, I. W. K., & Kweh, Q. L. (2020). Intellectual capital investment and firm performance of the Malaysian energy sector: A new perspective from a nonlinear test. Energy Research Letters, 1(3), 1–4. https://doi.org/10.46557/001c.13622
Bayraktaroglu, A. E., Calisir, F., & Baskak, M. (2019). Intellectual capital and firm performance: An extended VAIC model. Journal of Intellectual Capital, 20(3), 406–425. https://doi.org/10.1108/JIC-12-2017-0184
Brooking, A. (1996). Intellectual capital: Core asset for the new millennium enterprise. International Thomson Business Press.
Cagáňová, D., Hlásniková, P. R., Vraňaková, N., & Chlpeková, A. (2019). Intellectual capital as a key factor in the automotive industry. Mobile Networks & Applications, 24(6), 2024–2031. https://doi.org/10.1007/s11036-018-01206-2
Cheikh, I. B., & Noubbigh, H. (2019). The effect of intellectual capital drivers on performance and value creation: The case of Tunisian non-financial listed companies. Journal of the Knowledge Economy, 10(1), 147–167. https://doi.org/10.1007/s13132-016-0442-0
Chen, M. C., Cheng, S. J., & Hwang, Y. (2005). An empirical investigation of the relationship between intellectual capital and firms’ market value and financial performance. Journal of Intellectual Capital, 6(2), 159–176. https://doi.org/10.1108/14691930510592771
China Association of Automobile Manufacturers. (2020). Sales of automobiles in March 2020. Retrieved May 7, 2020, from http://www.caam.org.cn/chn/21/cate_463/con_5229825.html
Cioca, L.-I., Ivascu, L., Turi, A., Artene, A., & Găman, G. A. (2019). Sustainable development model for the automotive industry. Sustainability, 11(22), 6447. https://doi.org/10.3390/su11226447
Costa, V., Silva, L., & Paula, L. (2020). Intellectual capital and its impact on business performance: An empirical study of Portuguese hospitality and tourism sectors. Intangible Capital, 16(2), 78–89. https://doi.org/10.3926/ic.1550
Dabić, M., Lažnjak, J., Smallbone, D., & Švarc, J. (2019). Intellectual capital, organisational climate, innovation culture, and SME performance: Evidence from Croatia. Journal of Small Business and Enterprise Development, 26(4), 522–544. https://doi.org/10.1108/JSBED-04-2018-0117
Dadashinasab, M., Sofian, S., Asgari, M., & Abbasi, M. (2012). The effect of intellectual capital on performance: A study among Iranian automotive industry. Journal of Basic and Applied Scientific Research, 2(11), 11353–11360.
Dai, L. X., & Wei, S. X. (2010). Financial competitiveness evaluation of Chinese listed companies of electrical equipment section: Based on AHP. In 2010 International Conference on Logistics Engineering and Intelligent Transportation Systems. IEEE. https://doi.org/10.1109/LEITS.2010.5664985
Dobson, A. J., & Barnett, A. G. (2008). An introduction to generalized linear models. CRC Press. https://doi.org/10.1201/9780367807849
Dženopoljac, V., Janoševic, S., & Bontis, N. (2016). Intellectual capital and financial performance in the Serbian ICT industry. Journal of Intellectual Capital, 17(2), 373–396. https://doi.org/10.1108/JIC-07-2015-0068
Edvinsson, L., & Malone, M. S. (1997). Intellectual capital: Realizing your company’s true value by finding its hidden brainpower. Harper Business.
Ge, F. L., & Xu, J. (2021). Does intellectual capital investment enhance firm performance? Evidence from pharmaceutical sector in China. Technology Analysis & Strategic Management, 33(9), 1006–1021. https://doi.org/10.1080/09537325.2020.1862414
Ginesti, G., Caldarelli, A., & Zampella, A. (2018). Exploring the impact of intellectual capital on company reputation and performance. Journal of Intellectual Capital, 19(5), 915–934. https://doi.org/10.1108/JIC-01-2018-0012
Gross-Gołacka, E., Kusterka-Jefmańska, M., & Jefmański, B. (2020). Can elements of intellectual capital improve business sustainability? – The perspective of managers of SMEs in Poland. Sustainability, 12(4), 1545. https://doi.org/10.3390/su12041545
Haris, M., Yao, H. X., Tariq, G., Malik, A., & Javaid, H. M. (2019). Intellectual capital performance and profitability of banks: Evidence from Pakistan. Journal of Risk and Financial Management, 12(2), 56. https://doi.org/10.3390/jrfm12020056
He, Y., Dong, J., & Bai, R. H. (2011). The evaluation model of financial competitiveness in telecom enterprises. In Q. Zhou (Ed.), Communications in computer and information science: Vol. 209. Advances in applied economics, business and development (pp. 24–32). https://doi.org/10.1007/978-3-642-23020-2_4
Hermawan, S., Hariyanto, W., & Biduri, S. (2020). Intellectual capital, business performance, and competitive advantage: An empirical study for the pharmaceutical companies. Quality – Access to Success, 21(175), 103–106.
Horak, S., & Taube, M. (2016). Same but different? Similarities and fundamental differences of informal social networks in China (guanxi) and Korea (yongo). Asia Pacific Journal of Management, 33(3), 595–616. https://doi.org/10.1007/s10490-015-9452-x
Janoševic, S., & Dženopoljać, V. (2012). Impact of intellectual capital on financial performance of Serbian companies. Actual Problems of Economics, 133, 554–564.
Jelínková, E., & Jiřincová, M. (2015). Diversity Management as a tool of managing Intellectual Capital. Journal of Competitiveness, 7(4), 3–17. https://doi.org/10.7441/joc.2015.04.01
Jordão, R. V. D., & de Almeida, V. R. (2017). Performance measurement, intellectual capital and financial sustainability. Journal of Intellectual Capital, 18(3), 643–666. https://doi.org/10.1108/JIC-11-2016-0115
Kalantar, F. (2013). Evaluating the efficiency of intellectual capital through data envelopment analysis approach (Case study: Automotive industry and component manufacturers). European Online Journal of Natural and Social Sciences, 2(3(s)), 1397–1406.
Kamukama, N., & Sulait, T. (2017). Intellectual capital and competitive advantage in Uganda’s microfinance industry. African Journal of Economic and Management Studies, 8(4), 498–514. https://doi.org/10.1108/AJEMS-02-2017-0021
Kirikkaleli, D., & Ozun, A. (2019). Innovation capacity, business sophistication and macroeconomic stability: Empirical evidence from OECD countries. Journal of Business Economics and Management, 20(2), 351–367. https://doi.org/10.3846/jbem.2019.9602
Koç, H. (2017). Differentiation of leadership manager behavior between industries in terms of intellectual capital (tourism and automotive sector example). Journal of Tourism and Gastronomy Studies, 5(1), 147–159. https://doi.org/10.21325/jotags.2017.65
Kompalla, A., Kopia, J., & Tigu, G. (2016). Analysis of correlation between intellectual capital and traditional key performance indicators within the automotive industry. Retrieved January 20, 2021, from https://www.researchgate.net/publication/303893766_Analysis_of_correlation_between_intellectual_capital_and_traditional_key_performance_indicators_within_the_automotive_industry_Literature_review
Kweh, Q. L., Ting, I. W. K., Lu, W.-M., & Le, H. T. M. (2021). Nonlinearity in the relationship between intellectual capital and corporate performance: Evidence from Vietnamese listed companies. Journal of Intellectual Capital. https://doi.org/10.1108/JIC-03-2020-0105
Lee, C. S., & Wong, K. Y. (2019). Advances in intellectual capital performance measurement: A state-of-the-art review. The Bottom Line, 32(2), 118–134. https://doi.org/10.1108/BL-12-2018-0051
Lin, D. C., Wen, S., Miao, X., & Ying, C. (2019). Evaluation of financial competitiveness of the listed insurance companies. In Proceedings of the 2019 4th International Conference on Financial Innovation and Economic Development (ICFIED 2019). Atlantis Press. https://doi.org/10.2991/icfied-19.2019.5
Liu, F., Dutta, D. K., & Park, K. (2021a). From external knowledge to competitive advantage: Absorptive capacity, firm performance, and the mediating role of labour productivity. Technology Analysis & Strategic Management, 33(1), 18–30. https://doi.org/10.1080/09537325.2020.1787373
Liu, S., Yu, Q., Zhang, L., Xu, J., & Jin, Z. J. (2021b). Does intellectual capital investment improve financial competitiveness and green innovation performance? Evidence from renewable energy companies in China. Mathematical Problems in Engineering, 2021, 9929202. https://doi.org/10.1155/2021/9929202
Liu, Z. T., & Lin, L. P. (2011). Comparative studies on financial competitiveness in fertilizer manufacturing listed companies of China. In 2011 International Conference on Management and Service Science (pp. 1–3). IEEE. https://doi.org/10.1109/ICMSS.2011.5998442
Llopis-Albert, C., Rubio, F., & Valero, F. (2021). Impact of digital transformation on the automotive industry. Technological Forecasting and Social Change, 162, 120343. https://doi.org/10.1016/j.techfore.2020.120343
López-Fernández, J., Somohano, F. M., & Garcia, F. J. M. (2014). The Intellectual Capital and the relevance of non-financial information about innovation in the Spanish automotive sector from an accounting perspective: A proposal of an indicator. https://doi.org/10.2139/ssrn.2864269
Lu, S. C., & Wang, M. X. (2019). Evaluation of financial competitiveness of listed companies in Hebei province. Science & Technology for Development, 15(6), 598–606 (in Chinese).
Lu, Y. Z., Tian, Z. R., Buitrago, G. A., Gao, S. W., Zhao, Y. J., & Zhang, S. (2021). Intellectual capital and firm performance in the context of Venture-Capital Syndication background in China. Complexity, 2021, 3425725. https://doi.org/10.1155/2021/3425725
Luo, X. T. (2017). A study on the financial competitiveness of listed companies – taking agricultural listed companies as an example. In Proceedings of the 2017 International Conference on Education, Economics and Management Research (ICEEMR 2017). Atlantis Press. https://doi.org/10.2991/iceemr-17.2017.60
Lv, W. W., & Salam, Z. A. (2020). Evaluation and research on financial competitiveness of innovation-driven enterprises based on interval data mining. International Journal of Pattern Recognition and Artificial Intelligence, 34(12), 2059040. https://doi.org/10.1142/S0218001420590405
Maditinos, D., Chatzoudes, D., Tsairidis, C., & Theriou, G. (2011). The impact of intellectual capital on firms’ market value and financial performance. Journal of Intellectual Capital, 12(1), 132–151. https://doi.org/10.1108/14691931111097944
Masoomzadeh, A., Zakaria, W. N. W., Masrom, M., & Khademi, T. (2020). Intellectual capital as key asset in Iranian automotive industry. Journal of Environmental Treatment Techniques, 8(1), 429–439.
Masoomzadeh, A., Zakaria, W. N. W., Masrom, M., Streimikiene, D., & Tavakoli, R. (2019). Organizational innovation factors, capabilities and organizational performance in automotive industry. Montenegrin Journal of Economics, 14(3), 83–100. https://doi.org/10.14254/1800-5845/2019.15-3.6
Morris, C. (2015). An industry analysis of the power of human capital for corporate performance: Evidence from South Africa. South African Journal of Economic and Management Science, 18(4), 486–499. https://doi.org/10.4102/sajems.v18i4.1191
Myszewski, J. M. (2014). On development capability. Research in Logistics & Production, 4(1), 55–66.
Nedelcu, A. C., Banacu, C. S., & Frasineanu, C. (2014). The impact of intellectual capital on automotive firm’s performance – Case study. Retrieved January 21, 2021, from http://conferinta.management.ase.ro/archives/2014/pdf/69.pdf
Ni, Y. S., Cheng, Y.-R., & Huang, P. Y. (2021). Do intellectual capitals matter to firm value enhancement? Evidences from Taiwan. Journal of Intellectual Capital, 22(4), 725–743. https://doi.org/10.1108/JIC-10-2019-0235
Nigam, N., Mbarek, S., & Boughanmi, A. (2021). Impact of intellectual capital on the financing of startups with new business models. Journal of Knowledge Management, 25(1), 227–250. https://doi.org/10.1108/JKM-11-2019-0657
Nimtrakoon, S. (2015). The relationship between intellectual capital, firms’ market value and financial performance: Empirical evidence from the ASEAN. Journal of Intellectual Capital, 16(3), 587–618. https://doi.org/10.1108/JIC-09-2014-0104
Ousama, A. A., Hammami, H., & Abdulkarim, M. (2020). The association between intellectual capital and financial performance in the Islamic banking industry: An analysis of the GCC banks. International Journal of Islamic and Middle Eastern Finance and Management, 13(1), 75–93. https://doi.org/10.1108/IMEFM-05-2016-0073
Ovechkin, D. V., Romashkina, G. F., & Davydenko, V. A. (2021). The impact of intellectual capital on the profitability of Russian agricultural firms. Agronomy, 11(2), 286. https://doi.org/10.3390/agronomy11020286
Pulic, A. (2000). VAICTM – an accounting tool for IC management. International Journal of Technology Management, 20(5–8), 702–714. https://doi.org/10.1504/IJTM.2000.002891
Rafiei, M., Feyzi, T., & Azimi, H. (2011). Intellectual capital and its effect on economic performance: A case study in Iranian automotive industry. Journal of American Science, 7(6), 497–507.
Ran, F., & Zhang, X. L. (2011). Financial competitiveness evaluation on sporting goods listed enterprises: A China study. African Journal of Business Management, 5(17), 7404–7409. https://doi.org/10.5897/AJBM11.137
Royston, P. (2013). Marginscontplot: Plotting the marginal effects of continuous predictors. The Stata Journal, 13(3), 510–527. https://doi.org/10.1177/1536867X1301300305
Sardo, F., & Serrasqueiro, Z. (2018). Intellectual capital, growth opportunities, and financial performance in European firms: Dynamic panel data analysis. Journal of Intellectual Capital, 19(4), 747–767. https://doi.org/10.1108/JIC-07-2017-0099
Sardo, F., & Serrasqueiro, Z. (2019). On the relationship between intellectual capital and service SME survival and growth: A dynamic panel data analysis. International Journal of Learning and Intellectual Capital, 16(3), 213–238. https://doi.org/10.1504/IJLIC.2019.100537
Sardo, F., Serrasqueiro, Z., & Alves, H. (2018). On the relationship between intellectual capital and financial performance: A panel data analysis on SME hotels. International Journal of Hospitality Management, 75, 67–74. https://doi.org/10.1016/j.ijhm.2018.03.001
Shvetsova, O. A., Tanubamrungsuk, P., & Lee, S. (2021). Organization leadership in the automobile industry: Knowledge management and intellectual capital. The Open Transportation Journal, 15(1), 16–30. https://doi.org/10.2174/1874447802115010016
Smriti, N., & Das, N. (2018). The impact of intellectual capital on firm performance: A study of Indian firms listed in COSPI. Journal of Intellectual Capital, 19(5), 935–964. https://doi.org/10.1108/JIC-11-2017-0156
Ståhle, P., Ståhle, S., & Aho, S. (2011). Value added intellectual coefficient (VAIC): A critical analysis. Journal of Intellectual Capital, 12(4), 531–551. https://doi.org/10.1108/14691931111181715
Tálas, D., & Rózsa, A. (2015). Financial competitiveness analysis in the Hungarian dairy industry. Competitiveness Review, 25(4), 426–447. https://doi.org/10.1108/CR-03-2015-0016
Teixeira, A. A. C., & Ferreira, C. (2019). Intellectual property rights and the competitiveness of academic spin-offs. Journal of Innovation & Knowledge, 4(3), 154–161. https://doi.org/10.1016/j.jik.2018.12.002
Ting, I. W. K., Ren, C., Chen, F. C., & Kweh, Q. L. (2020). Interpreting the dynamic performance effect of intellectual capital through a value-added-based perspective. Journal of Intellectual Capital, 21(3), 381–401. https://doi.org/10.1108/JIC-05-2019-0098
Ulubeyli, S., & Yorulmaz, D. (2020). Intellectual capital based reputation for market internationalization: The case of engineering consultancy firms. Journal of Intellectual Capital, 21(1), 40–61. https://doi.org/10.1108/JIC-01-2019-0010
Urban, B., & Joubert, G. C. D. S. (2017). Multidimensional and comparative study on intellectual capital and organisational performance. Journal of Business Economics and Management, 18(1), 84–99. https://doi.org/10.3846/16111699.2016.1255990
Vijayakumar, A. (2018). Financial competitiveness of firms: A study of the Indian automobile industry. SMART Journal of Business Management Studies, 14(1), 91–103. https://doi.org/10.5958/2321-2012.2018.00010.6
Vishnu, S., & Gupta, V. K. (2014). Intellectual capital and performance of pharmaceutical firms in India. Journal of Intellectual Capital, 15(1), 83–99. https://doi.org/10.1108/JIC-04-2013-0049
Vogt, W. P., & Johnson, B. (2011). Dictionary of statistics & methodology: A nontechnical guide for the social sciences. Sage Publications.
Volkova, N., & Shagun, V. (2017). Modern trends of development of the world economy and financial competitiveness of enterprises. Retrieved April 14, 2020, from https://www.shs-conferences.org/articles/shsconf/pdf/2017/07/shsconf_ies2017_01031.pdf
Weqar, F., Khan, A. M., & Haque, S. M. I. (2020). Exploring the effect of intellectual capital on financial performance: A study of Indian banks. Measuring Business Excellence, 24(4), 511–529. https://doi.org/10.1108/MBE-12-2019-0118
Xie, D., & Wang, J. T. (2014). Research on financial competitiveness evaluation of listed company – Take pharmaceutical and biological products industry listed companies for example. Chinese Agricultural Science Bulletin, 30(26), 70–76 (in Chinese).
Xu, J., Haris, M., & Yao, H. X. (2019). Should listed banks be concerned with intellectual capital in emerging Asian markets? A comparison between China and Pakistan. Sustainability, 11(23), 6582. https://doi.org/10.3390/su11236582
Xu, J., & Li, J. S. (2019). The impact of intellectual capital on SMEs’ performance in China: Empirical evidence from non-high-tech vs. high-tech SMEs. Journal of Intellectual Capital, 20(4), 488–509. https://doi.org/10.1108/JIC-04-2018-0074
Xu, J., & Li, J. S. (2022). The interrelationship between intellectual capital and firm performance: Evidence from China’s manufacturing sector. Journal of Intellectual Capital. https://doi.org/10.1108/JIC-08-2019-0189
Xu, J., & Liu, F. (2020). The impact of intellectual capital on firm performance: A modified and extended VAIC model. Journal of Competitiveness, 12(1), 161–176. https://doi.org/10.7441/joc.2010.01.10
Xu, J., & Liu, F. (2021). Nexus between intellectual capital and financial performance: An investigation of Chinese manufacturing industry. Journal of Business Economics and Management, 22(1), 217–235. https://doi.org/10.3846/jbem.2020.13888
Xu, J., & Wang, B. H. (2018). Intellectual capital, financial performance and companies’ sustainable growth: Evidence from the Korean manufacturing industry. Sustainability, 10(12), 4651. https://doi.org/10.3390/su10124651
Xu, J., & Wang, B. H. (2019). Intellectual capital and financial performance of Chinese agricultural listed companies. Custos e Agronegocio On Line, 15(1), 273–290.
Xu, J., & Zhang, Y. (2021). Exploring the nonlinear effect of intellectual capital on financial performance: Evidence from listed shipping companies in China. Complexity, 2021, 9004907. https://doi.org/10.1155/2021/9004907
Xu, X. L., Chen, H. H. & Zhang, R. R. (2020). The impact of intellectual capital efficiency on corporate sustainable growth-Evidence from from smart agriculture in China. Agriculture, 10(6), 199. https://doi.org/10.3390/agriculture10060199
Yang, J. L., & Sun, T. T. (2017). An empirical study on the financial competitiveness of A-share listed companies in Shanghai stock market under the reform of supply side. In Proceedings of the Second International Conference on Economic and Business Management (FEBM 2017) (pp. 443–448). Atlantis Press. https://doi.org/10.2991/febm-17.2017.58
Yao, H. X., Haris, M., Tariq, G., Javaid, H. M., & Khan, M. A. S. (2019). Intellectual capital, profitability, and productivity: Evidence from Pakistani financial institutions. Sustainability, 11(14), 3842. https://doi.org/10.3390/su11143842
Yaseen, S. G., Dajani, D., & Hasan, Y. (2016). The impact of intellectual capital on the competitive advantage: Applied study in Jordanian telecommunication companies. Computers in Human Behavior, 62, 168–175. https://doi.org/10.1016/j.chb.2016.03.075
Yu, H. C., Wang, W. Y., & Chang, C. (2015). The stock market valuation of intellectual capital in the IT industry. Review of Quantitative Finance and Accounting, 45(2), 279–304. https://doi.org/10.1007/s11156-014-0437-5
Zardini, A., Ricciardi, F., & Rossignoli, C. (2015). The relational capital of the IT department: Measuring a key resource for creating strategic value. Journal of Intellectual Capital, 16(4), 835–859. https://doi.org/10.1108/JIC-12-2014-0132
Zhang, L., Yu, Q., Jin, Z. J., & Xu, J. (2021). Do intellectual capital elements spur firm performance? Evidence from the textile and apparel industry in China. Mathematical Problems in Engineering, 2021, 7332885. https://doi.org/10.1155/2021/7332885
Zhang, X. Y. (2019). Evaluation of the operating ability of China’s big data industry – From the perspective of level differences of industry chain. Journal of Tianjin University of Commerce, 39(4), 67–72.
Zhu, Y. M., Hipel, K. W., Ke, G. Y., & Chen, Y. (2015). Establishment and optimization of an evaluation index system for brownfield redevelopment projects: An empirical study. Environmental Modelling & Software, 74, 173–182. https://doi.org/10.1016/j.envsoft.2015.09.012
Zhu, Z. H., Zhu, Z. W., Xu, P., & Xue, D. W. (2019). Exploring the impact of government subsidy and R&D investment on financial competitiveness of China’s new energy listed companies: An empirical study. Energy Reports, 5, 919–925. https://doi.org/10.1016/j.egyr.2019.07.013