Intellectual capital and firm innovation: incentive effect and selection effect

We examine the relationship between intellectual capital (measured by manually constructed human capital and organizational capital) and firm innovation of Chinese listed firms. Empirical results show that human capital and organizational capital positively affect the R&D investment and the number of various patent applications. Moreover, the relationship between intellectual capital and innovation activities is influenced by macroeconomic factors, industry characteristics and firm heterogeneity. Therefore, intellectual capital has incentive effect and selection effect on firm innovation in typical developing countries, such as China.