Intellectual capital and innovation in construction firms : the role of learning capability

Abstract

Construction is described as lagging in the pursuit of innovation. This has been suggested as one of the reasons for the poor performance of the industry, prompting calls for the development of a culture of innovation. Exploration and exploitation have been considered as ways by which firms innovate to achieve short-term efficiency and long-term competitiveness. However, knowledge of the ability of construction firms to pursue exploratory and exploitative innovation is limited in the construction related literature; so is knowledge about the organisational attributes and resources that can facilitate their capability to explore and or exploit ideas. Intellectual capital has been suggested to influence the ability of firms to innovate. This notwithstanding, insight into the direct and indirect relationships between intellectual capital and exploratory and exploitative innovation is limited in construction literature. Exploring such relationships raises interest given the potential theoretical implications and the move by the industry towards performance-based contracts that require interventions to enhance competitiveness.

A conceptual model depicting the direct and indirect relationships between intellectual capital, learning capability, exploratory and exploitative innovation and explained by the combination of strategic management theories is developed. Methodological pluralism was adopted, culminating in the development and use of a research plan involving a quantitative questionnaire survey and a qualitative case study. The adoption of methodological pluralism is rooted in the ontological position of critical realism that lends itself to multimethodology. The relationships between the constructs in the model are explored using survey responses from 135 middle and senior management personnel in construction contractor organisations. The data were analysed using a combination of principal component analysis, confirmatory factor analysis, and path analysis using structural equation modelling. For an in-depth exploration of the manifestation of the constructs in a construction setting, a single case study of a large construction contractor firm was undertaken.

The findings reveal that the motivation to innovate goes beyond effectiveness and efficiency considerations, contractors innovate to respond to labour shortages and to create shared value, where innovations produce both economic and social benefits. The study has demonstrated that exploratory and exploitative innovations occur in different forms and at different levels of the firm, by external collaboration or internally developed. The findings have established organisational capital as the most important intellectual asset for innovation, with senior management support as its most vital element. Organisations with a higher organisational capital are more able to pursue both exploratory and exploitative innovation. Such organisations are also more able to absorb new knowledge. Social capital emerges as a key facilitator of exploitative innovation and the absorption of new knowledge. Internal social capital is more cooperative, and firms with a high level of social capital are more able to absorb new knowledge as well as reuse existing technologies and solutions. However, for firms to use their high social capital to achieve a higher exploratory innovation, they need to absorb new knowledge into the firm through their network of interrelationships. The findings offer guidance for interventions in attempts to enhance specific forms of innovation in firms.