Intellectual Capital-based Value Creation Model: Evidence from Small and Medium-sized Enterprises

Purpose - The purpose of this paper is to explore the relevance of an Intellectual Capital-based Value Creation model (ICVC model) to the daily practice of small and medium-sized enterprises (SMEs). The paper reports on research undertaken with SMEs from the service sector in three EU countries: Bulgaria, Finland and Scotland. Each of these countries is representative of a different stage in the development of a knowledge-based economy (KBE). Only knowledge that contributes to the value creation process and sustainable competitive advantage of the firm is strategy relevant. We argue that the conceptual framework developed from our research is more appropriate strategy management tool to be applied in practice in the knowledge-based economy. Design/methodology/approach - We consider data drawn from two sources. First, a literature review of theory and previous studies gives an overview of the current understanding of, and attitude towards, the value creation process. Key limitations of an IC-based strategy perspective identified from our conceptual analysis are discussed. Second, an exploratory study based on qualitative data analysis of three case studies and twenty one semi-structured interviews with senior managers of SMEs gives evidence about the relevance and sustainability of the IC-based model we present. The interview approach was adopted in order to gain data that would provide a realistic picture of day-to-day practice and enable comparison with the developed theoretical model. Originality/value - Drawing upon findings from our literature review of strategy (Barney 1986, 1991; Penrose, 1959; Porter, 1985; Wernerfelt, 1984; Zack, 1999) and knowledge management (Spender, 1989; Nonaka, and Takeuchi, 1995; Edvinsson, 1997; Sveiby, 1997; Stewart, 1997; Roos et al., 2005), and considering evidence from our qualitative data analysis, we prove the relevance and sustainability of an ICVC Model. Further, we argue that sustainable competitive advantage depends on the attitudes of SMEs towards value. In a KBE, both tangible and intangible outcomes should be considered as value generation factors. Practical implications - The application of this ICVC model will contribute to improving the SME's policies and practices on strategy management. Following this IC-based conceptual framework, SMEs will be better adapted to and more competitive in a KBE.