How does intellectual capital spur innovation in economy? A cross-country survey

This study explores the impact of intellectual capital on innovation using a cross-sectional sample of 132 countries: 50 high-income and 82 low-income countries, during the period 2015-2020. Our research provides empirical evidence of the significant impact of intellectual capital on innovation. Analysis of the entire sample revealed that higher levels of knowledge enable the creation of new products and services to meet clients' diversified requirements. However, different results were obtained when we analyzed the two subgroups of high- and low-income countries. We found that the impact in which the level of intellectual capital spurs the increase of innovation is 2.8 times higher in low-income countries than in high-income ones. However, the development process in low-income countries is based on technology transfer rather than on technological development. Additionally, our results for the high-income countries suggest a shallow impact of intellectual capital on innovation. The robustness checks performed consolidate our results. This study could have significant implications for policy-makers, who must acknowledge the vital role of intellectual capital in innovation.