Int Entrep Manag J (2011) 7:7192

DOI 10.1007/s11365-010-0139-y

The role of intellectual capital in the success of new

ventures
Esther Hormiga & Rosa M. Batista-Canino &
Agustn Snchez-Medina

Published online: 28 March 2010

# Springer Science+Business Media, LLC 2010

Abstract Identifying the factors that contribute to the success of new ventures is a
difficult and challenging task. In that respect, this paper proposes an analysis of the
intellectual capital within new business ventures. Based on the study of a sample of
130 new companies, for the purpose of this work we have analysed the influence of
the proposed intangible assets on the success of newly-created organizations,
acknowledging the key role of the human and relational capital in the first few years
of the life of the business.
Keywords New ventures . Intellectual capital . Success . Intangible assets

Introduction
The field of entrepreneurship is one of the research areas that have seen the greatest
growth in recent decades (Vesper 1996; Gartner 2001; Busenitz et al. 2003). One of
the main reasons for that growth is the recognition of new ventures as one of the
principal mechanisms generating employment and as a motor of the economic
growth of countries by transmitting dynamism and prosperity to a territory and

E. Hormiga (*)
Economics and Business Organization Department, Facultat dEconomia i Empresa,
Universitat de Barcelona, Diagonal 690, 08034 Barcelona, Spain
e-mail: [email protected]
R. M. Batista-Canino : A. Snchez-Medina
Economics and Business Organization Department, Facultad de CCEE y Empresariales,
Universidad de Las Palmas de Gran Canaria, Campus de Tafira,
35017 Las Palmas, Spain
R. M. Batista-Canino
e-mail: [email protected]
A. Snchez-Medina
e-mail: [email protected]

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enabling it to adapt to the structural changes that it is undergoing internally

(Timmons 1990; Amit et al. 1993).
However, although there seems to be general agreement on the importance of new
ventures to the economic growth of regions and countries, that agreement is not so
strong when determining the factors that distinguish successful ventures from
unsuccessful ones. The high death rate of newly created companies indicates that
the study of those factors is an important issue and the greater the amount of
information obtained, the more it will favour the development of firms in the first
years of life. Therefore, it should be stressed that the starting-up of a new business is
a complex process involving the combination of various assets to start the ventures
activity and initiate the different tasks. The fact that the new venture has limited
means, whether physical, financial or intangible, places it in a position of high
vulnerability (Van de Ven et al. 1984).
In the first stages of a new firms development, the identification and acquisition
of resources will be of vital importance to achieving good performance in the long
term (Katz and Gartner 1988; Brush and Greene 1996; Lichtenstein and Brush
2001). Thus, in the last decades the strategic management literature has emphasized
the crucial role of intangible factors or the intellectual capital as determinants of
business competitiveness (Teece 2000). On that line, authors such as Lichtenstein
and Brush (2001) find that intangible assets are more important and critical than
tangible assets in such a decisive period of the life of a business. Thornhill and
Gellatly (2005) found that the investment in intangible assets is associated with a
track record of growth.
In an attempt to shed light on the issue, and following the recommendations of
authors who highlight the importance of undertaking research from multiple
theoretical perspectives within the field of entrepreneurship, and to enrich that field
with contributions from other theoretical approaches (Gartner 2001), we draw on the
literature that examines intellectual capital and stresses the importance of those
intangible assets that provide value to the firm and from which its competitive
advantages may stem.
However, one of the main problems of research into this topic is the fact that
many firms do not explicitly recognise their intangible assets and so do not manage
them correctly (Andriessen 2004). If, from the moment of the organisations
constitution, the managers and owners were aware of the importance of these assets
to the short and medium-term performance of the firm and, especially to the longtem competitive advantage, the management of these assets would improve, as
would the profits they generate. It is paradoxical that firms regularly become
concerned about these assets when they are older rather than when they are in their
infancy. So, why does a firm wait until it is a certain age or size before it begins to
identify and measure its intellectual capital?
All the above leads us to propose the principal objective of this research;
namely, to identify the intangible assets that influence the success of newlycreated firms. To that end, we also propose the following specific objectives in
accordance with the three categories of intellectual capital most frequently
referred to in the literature: human capital, structural capital and relational capital

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(Kaufmann and Schneider 2004; Boedker et al. 2005; Marr and Roos 2005;
Watson and Stanworth 2006):
a) To know the relationship that exists between human capital and the success of
new ventures.
b) To discover the relationship between structural capital and the success of new
ventures.
c) To identify the relationship between relational capital and the success of new
ventures.

Literature review and research hypotheses

The constitution of a new venture is a complex process that involves the
combination of various assets to start the activity and to initiate the different tasks
(Gartner 1985). In the first stages of the firms development, the entrepreneur, or the
entrepreneurial team, evaluates the assets and decides which are more, or less,
important for the firm, based on his/her expectations for the firms future. If that
evaluation is performed effectively, it may lead to the firm achieving significant
competitive advantages and even increase its chances of survival (Chandler and
Hanks 1994; Brush et al. 1997; Katz and Gartner 1988; Hart et al. 1995; Lichtenstein
and Brush 2001; Edelman et al. 2005) in its early years.
Since the beginning of the 1990s, authors such as Barney (1991) and Grant
(1991) have established a series of characteristics that are essential to resources if
they are to generate competitive advantage (i.e. rarity, importance, imperfect
imitability, durability). On that basis, the strategic management literature has
stressed the importance of intangible factors as determinants of business competitiveness (Teece 2000).
Intellectual capital: importance and conceptual definition
At the end of the 20th Century, the World economy started to undergo certain
changes that have a decisive impact on aspects such as the generation of wealth and
economic growth (Bradley 1997; Stewart 1998; Andriessen 2004b; Chaharbaghi and
Cripps 2006). Recent years have been marked by the increasing importance of the
role of intangible assets in firms (Miles et al. 1998; Cole 1998; Stewart 1998;
Ventura 1998; Ordez de Pablos 1999; Hansen et al. 1999; Becker et al. 2001; Lev
2001; Kannan and Aulbur 2004; Augier and Teece 2005). Thus, authors like Bontis
(2002) o Bradley (1997) declare that the current trend is for organisations to focus
less on material assets and more on intangible assets when seeking competitive
advantages and that those firms with adequate intellectual capital have a better
chance of survival (Daley 2001).
The concept of intellectual capital was first used in 1969 by John Kenneth
Galbraith in a letter to Michael Kalecki. However, it was Tom Stewart who
popularised the concept in 1991, when Fortune Magazine published his article

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Brainpower: How intellectual capital is becoming Americas most valuable asset

(Bontis 1998). In spite of the vast amount of research on the topic from that time to
date, there is still no single definition that is universally accepted and applied with
some homogeneity in the majority of studies (Caibano et al. 1999; Edvinsson and
Malone 1999; Bukh et al. 2001; Kaufmann and Schneider 2004; Sullivan 2005).
Thus, intellectual capital can be defined as the relationships with customers and
partners, innovation efforts, the infrastructure of the firm and the knowledge and
skill of the members of the organisation (Edvinsson and Malone 1999). Similarly,
Sullivan (1999) indicates that intellectual capital is that knowledge that can be
converted into future profits and comprises resources such as ideas, inventions,
technologies, designs, processes and informatic programs. Stewart (1991) indicates
that intellectual capital is everything that cannot be touched but can earn money for
the firm. On the same line, Lev (2001) considers that intangible resources are those
that can generate value in the future but have no physical or financial form.
When reflecting on the value or benefit contributed by intellectual capital, many
authors have chosen to determine it as the difference between the market value and
the book value of the firm and some even use that difference to define the term
(Brooking 1997; Daley 2001; Lev 2001; Nevado and Lpez 2002; Ordez de
Pablos 1999, 2003; Petrash 1996; Roos et al. 2001; Sveiby 2000).
Finally, it is important to emphasise that, in recent years, various alternatives have
been proposed for the categories that comprise intellectual capital. One classification
based on three dimensions has achieved a certain degree of consensus and it includes
human capital, structural capital and relational capital (Stewart 1998; Sullivan 1999;
Caibano et al. 1999; Brennan and Connell 2000; Snchez et al. 2000; Petty and
Guthrie 2000; Roos et al. 2001; Viedma Mart 2001; Bontis 2002; Ordez de
Pablos 2002, 2003; Palacios-Marqus and Garrigs-Simn 2003; Kaufmann and
Schneider 2004; Boedker et al. 2005; Marr and Roos 2005). We now review each of
those dimensions, including those aspects that the literature on entrepreneurship has
considered relevant to the success of a new firm.
Human capital
Human capital, despite being considered another dimension, is recognised by many
authors as the organisations most important intangible resource (Johanson 2005;
Marr and Roos 2005) by playing a fundamental role in firms in this new knowledgebased economy (Becker et al. 2001, Edvinsson and Malone 1999; Sveiby 1998,
2000) and being the driving force of the other two components of intellectual capital:
relational and structural capital (Fornell 2000). The technological advances
experienced both by firms and by society in general have meant that the required
worker profile is increasingly one with the competencies, attitudes and intellectual
agility that permit critical and systematic thinking within the changing and uncertain
environment that he/she must confront (Bontis 2002). Therefore, human capital is
considered the potential source of innovation and generation of ideas for the firm,
thus providing added value of unquestionable importance (Viedma Mart 2001;
Bontis 1998). Consequently, the lack of adequate human capital may have a negative
effect on the rest of the activities that create value for the firm (Edvinsson and
Malone 1999).

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The very nature of new ventures means that a fundamental part of this human
capital lies in the entrepreneur or entrepreneurial team. Thus, the first hypothesis in
this work revolves around the proposal that the greater the value of the assets
comprising the human capital of newly-treated firms, the greater the success of those
firms in their first years.
We now explain the intangible assets that are related to human capital and have
been considered important for firms in the first stage of life.
The entrepreneurs knowledge. In new ventures, knowledge, especially that of the
entrepreneur, is seen as a crucial asset for the development of those firms (Vesper
1990; Stuart and Abetti 1990). However, it is a very complex task to identify the
specific sources of the know-how necessary to start up and manage a business. Apart
from the problem of identifying the source of knowledge, the inclusion of human
intangible assets creates a problem of demarcation: what proportion of the
knowledge and skills of the entrepreneur or employees is part of the firm and what
proportion is not? (Andriessen 2004). Thus, the principal means of identifying the
founders knowledge has been to evaluate previous experience, in other words, the
knowledge that he/she acquired from the activities performed prior to starting up the
venture (Stuart and Abetti 1990; Storey 1994; Bosma et al. 2004; Rauch et al. 2005).
On that basis, the first sub-hypothesis proposes that:
H1a: The greater the knowledge of the entrepreneur, the greater the possibility of
the venture being successful in its first years of life.
The entrepreneurs motivation The motive that drives the founder to develop his
business project can either mean added value for the firm or have a negative effect
on it. Various authors have studied the influence of motivations on the subsequent
success of the firm and on organisational processes (Gatewood et al. 1995; Van
Praag 2003; Van Praag and Cramer 2001; Pea 2002; Collins-Dodd et al. 2004).
Most of those authors draw the conclusion that the fact the owner is driven by
intrinsic motivation, that is, by putting a personal idea into practice, or by the need to
be his/her own boss, is an asset for the firm, which will have greater chances of
surviving and obtaining future rents than if he/she is driven by the impossibility of
finding a job. Therefore, we propose the sub-hypothesis:
H1b: The stronger the entrepreneurs extrinsic motivation to create his enterprise,
the lower the probability that the business will be successful in the first years
of life.
The commitment and resolve of the entrepreneur Since, in the initial stage of the firm,
the routines and processes are not formally established, it is necessary for the
entrepreneur to be more involved in order to overcome that deficiency. Thus, the
presence of the entrepreneur will be important to consolidate control of the organisation,
and, if he/she works in the firm, this will represent reduced labour costs. Therefore, a
high level of personal commitment and resolve by the entrepreneur contributes added
value to the firm and may mark the difference between some entrepreneurial initiatives
and others (Timmons 1990). In that respect, authors such as Cooper et al. (1994) state
that greater commitment from the entrepreneur has a decisive influence on the survival

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of the firm. For their part, Pea (2002) and Collins-Dood et al. (2004) find that there is
a positive relationship between the level of the founders dedication to the business
and the level of success of the business. Therefore, hard work, as well as strong
commitment and resolve have been highlighted as important elements for the smooth
running of newly-created firms (Martins-Rodrguez 2003). Based on these assumptions we proposed the next two sub-hypotheses:
H1c: The greater the entrepreneurs commitment to the venture, the greater the
probability of the business being successful in its first years of life.
H1d: The stronger the entrepreneurs resolve, the greater the probability of the
business being successful in its first years of life.
The entrepreneurs social skills The importance of intellectual skills, the creation of
knowledge and explicit knowledge tends to be emphasised in the literature on
intellectual capital. However, the intangible assets that are not intellectual or oriented
to the right-hand side of the brain often tend to be neglected even though they may
be equally as important to the organisations future: we are referring to social skills
(Andriessen 2004). Two of these social skills, namely social perception and
adaptation, have found empirical support in that the value they contribute to the
firm in the initial stage of its life by helping it achieve higher revenues and profits in
the future (Baron and Markman 2003). In order to start up a venture, the
entrepreneur has to interact with a great many strangers, and so must display a
talent for social adaptability as well as perceive the characteristics, intentions and
motives of the other person (Baron and Markman 2003). For these reasons we
suggest the sub-hypotheses:
H1e: The greater the level of the entrepreneurs social adaptability, the greater the
probability of the business being successful in its first years of life.
H1f: The greater the level of the entrepreneurs social perception, the greater the
probability of the business being successful in its first years of life.
Interaction of the entrepreneurial team Some years ago, the entrepreneurial
process ceased to be considered a merely individual activity and more and more
researchers are recognising the fact that, on many occasions, firms are created
by two or more individuals (Gartner et al. 1994). The quality of the interaction
among the team members is considered one of the most important assets during
this critical period. Therefore, if the team members enjoy a healthy relationship
characterised by cohesion, coordination and communication, significant value will
be added to the firm (Lechler 2001). Given the importance of this type of asset in
the firm, we suggest that the assets comprising the human capital, measured in
terms of the entrepreneurs knowledge, intrinsic motivation to start up the venture,
commitment, resolve and social skills, as well as the good interaction of the
entrepreneurial team, display a significant positive relationship with the success of
new ventures.
H1f: The better the interaction among the members of the entrepreneurial team, the
greater the probability of the business being successful in its first years of life.

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Structural capital
The second dimension of intellectual capital is structural capital, which refers to the
knowledge that the firm has been able to internalise and that remains in the
organisation, be in its structure, its processes or in its culture, even when employees
leave (Bontis et al. 2000; Camisn Zornosa et al. 2000; Petrash 1996, 2001). For that
reason, and unlike the human capital, which cannot be totally appropriated by the
organisation, this capital is the property of the firm (Edvinsson 1997) and includes
all the non-human tangibles of the organisation, from the culture or internal
processes to the information systems and data bases (Bontis et al. 2000). Sveiby
(2000) calls this dimension the internal component and includes in it the patents,
structures of functioning, administrative and informatic organisation, the culture,
organisational climate, etc., which are the property of the firm and, therefore, meet
the previously mentioned condition of remaining in the firm when employees
leave.
The evaluation of this type of capital in new ventures is the most complex,
mainly because they are usually not yet consolidated due to the short time that this
type of firm has had to internalise the aspects that contribute value and transform
them into knowledge. Thus, one of the cornerstones of the value of intellectual
capital is precisely the transformation of its human and relational capital into
knowledge inserted into the organisational structures and processes so that it ceases
to belong to individuals and become the property of the organisation (Bontis et al.
2000; Camisn Zornosa et al. 2000; Ordez de Pablos 2003; Meli and Boulard
2003). However, it was decided to study the importance of this type of capital in a
firm that is beginning its activity; therefore, the second hypothesis proposes that
the greater the value of the assets comprising the structural capital of new
ventures, the greater the probability of the business being successful in its first
years of life.
Routines In general, firms confront the uncertainty around them by developing
internal procedures and routines that enable them to access a suitable solution when
a problem arises (Edvinsson and Malone 1999; Roos et al. 2001). Although it is not
possible to talk of the standardisation of the productive or service generation process
in its entirety (Baum and Silverman 2004), during the first years of a firms life and
for certain activities, some routines are established that facilitate the entrepreneurs
work and permit him/her to devote time to those tasks that really need his/her
knowledge, criteria of decision and drive. Thus, by way of example, the fact that the
employees know the steps to take in the case of an incident with customers or
suppliers without having to consult the owner every time helps streamline the
processes and may have a positive effect on the performance of the business. Thus,
the established routines enable these young firms to save time and resources when
seeking a solution to certain problems or facing determined situations, by
simplifying day-to-day decision taking. On that basis:
H2a: The greater the firms adoption of routines that streamline its day-to-day
activities, the greater the probability of the business being successful in its
first years of life.

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Innovation When one speaks of innovation, one is generally referring to the

introduction of a new product or process (Woo et al. 1989; Kalleberg and Leicht
1991; Karlsson and Olsson 1998); however, because of their vary nature, and in a
certain way, new ventures represent a form of innovation in most cases (Amason et al.
2006). In the context of startups, which are generally small, the level of their
contribution to the innovation activity is considerable and, in some sectors even
exceeds that of large companies (Thurik 1996; Heunks 1998). Moreover, apart from
the introduction of new products, innovation in processes, such as the incorporation of
new technologies, is also very important in new firms (Roure and Maidique 1986;
Siegel et al. 1993; Bruton and Rubanik 2002; Huang and Liu 2005). In fact, in the
specific case of small firms, and despite the fact that any type of innovation usually
stimulates the growth of such firms, Heunks (1998) finds that it is only process
innovation that increases productivity. In light of the above, we propose the subhypothesis that:
H2b: The greater the level of innovation in the organisations, the greater the
probability of the business being successful in its first years of life.
Efficacy in the production of the product/service In studies applied to large,
consolidated firms, the efficiency and efficacy of the productive/service generation
process are two aspects that are of vital importance within the intellectual capital
(Bontis et al. 2000; Hussi 2004). Hence, an exhaustive analysis of the process may
reveal that it entails significant losses of time and money. While this may be a
negative aspect, the firms processes can also become one of its strengths by
providing added value on which one, or several, of the organisations competitive
advantages may depend. The processes are not often definitively established in
newly-created firms but are in a stage of change and adaptation in the early years.
However, in spite of the frequent changes, the first years constitute a critical time for
the future of the firm and aspects such as the time taken to perform the productive/
service generation process or the errors that occur may be determinants of success by
influencing aspects like the customer loyalty or the reputation that the firm is starting
to build (Edelman et al. 2002). For this reason, we propose the following subhipothesis:
H2c: The greater the efficacy of the productive/service generation processes, the
greater the probability of the business being successful in its first years of
life.
Cultural The analysis of the organisations culture is another important aspect
that helps provide an understanding of the intangible assets and of how
knowledge flows within the organisation (Kannan and Aulbur 2004). The culture
and climate existing in newly-created firms will be critical for them to face the
following stages of life and growth (Timmons 1990). Although it is rare to find
consolidated values and a strongly established culture in a firm that is just
beginning its life, certain circumstances occur in these early years that are going to
condition the culture that the entrepreneur wishes to instil or that the company
itself is developing. Although the culture is created by the shared experiences of

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the organisations members, it will be the founder who initiates this process in the
first instance by implanting his/her beliefs, values and suppositions. Basically,
culture has three sources: (1) the beliefs, values and suppositions of the firms
founder; (2) the learning experiences of the members of the organisation, and (3)
the new beliefs, values and suppositions introduced into the firm by new members
and leaders (Schein 2004). When relating cultural characteristics with firm
performance, Denison and Mishra (1995) find that the characteristics of
adaptability, internal consistency and participation exercise a positive influence
on the success of the business. In light of the above, we propose the subhypotheses:
H2d: The fact that, in a newly-created firm, there is an incipient culture
characterised by greater participation by employees will have a positive
effect on the probability of the firm being successful.
H2e: The fact that, in a newly-created firm, there is an incipient culture
characterised by greater adaptability will have a positive effect on the
probability of the firm being successful.
H2f: The fact that, in a newly-created firm, there is an incipient culture
characterised by greater internal consistency will have a positive effect on
the probability of the firm being successful.
Relational capital
Finally, the dimension of relational capital is based on the idea that firms are
considered not to be isolated systems but as systems that are, to a great extent,
dependent on their relations with their environment. Thus, this type of capital
includes the value generated by relationships not only with customers, suppliers or
shareholders, but with all stakeholders, both internal and external. The relationships
of this type that contribute value to the firm are considered to be relational capital. In
other words, it is the knowledge that is found in the relationships between the
organisation and its reference groups. Sveiby (2000) calls this dimension the external
component and includes in it the relationships with customers and suppliers, the
product names, registered trademarks, the reputation and the image. Some of those
elements can be legally protected while in other cases this is practically impossible.
Moreover, investment in many of these assets generates uncertain benefits; for
example, it is difficult to predict the effects of investing in strengthening the image
of the firm (Sveiby 2000). Thus, the final hypothesis proposes that the greater the
value of the assets comprising the relational capital of firms, the greater the success
of those firms in their early years.
Support from informal networks Although it may first seem that the relationships
established with agents linked to the firm are the only significant relationships, the
entrepreneurs personal networks are going to be a fundamental resource for a firm
that is starting its life (Ostgaard and Birley 1994; Lechner and Dowling 2003), and,
within those networks, the support of family and friends will occupy a predominant
position (Brderl and Preisendorfer 1998). In that respect, it is important to stress
that, on most occasions, the family provides both emotional support and active aid to

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the entrepreneur. In many cases, family members and friends become a fundamental
source of funding as well as labour, which represents a saving. Thus, on the one
hand, the work done by family members during the first years of a business can help
compensate for the financial restrictions and reduce expenditure on staff during that
period and, on the other, the loyalty and security offered by a family member
working in the business means less effort in the control of the entrepreneurial
activity (Sanders and Nee 1996; Brderl and Preisendorfer 1998). Moreover, the
support of the entrepreneurs life-partner can provide emotional stability that
benefits the activity of the new firm (Brderl and Preisendorfer 1998). Thus, we
propose that:
H3a: The greater the support that the entrepreneur receives from his/her informal
networks, the greater the probability of the business being successful in its
first years of life.
Reputation In the context of new ventures, reputation is an intangible asset that can
have various interpretations and perspectives. In that respect, it will be the result of
the prestige or renown that may precede the entrepreneur and that which the
organisation has been able to acquire during its first months or years. In these early
stages, a good reputation can help not only to attract new customers and promote
customer loyalty, but also to obtain funding or resources that would not be available
without this intangible asset (Shane and Cable 2002). Thus, an entrepreneur or firm
that has managed to improve on or build a good reputation will have more
probability of surviving and obtaining higher profits. However, undertaking
activities that damage this intangible may have negative repercussions for the
organisation that make it complicated to forge a new reputation or recover lost
prestige (Kupferberg 1998; Michalisin et al. 2000; Lechner and Dowling 2003).
Therefore we suggest that:
H3b: The better the reputation acquired by the firm, the greater the probability of
the business being successful in its first years of life.
Connectivity Within the networks established in the early years, alliances with
other firms can have significant impact on the performance of new ventures
(Pea 2002): collaborations and alliances with other businesses can support the
development of the firm by providing information, knowledge and complementary
resources (Cohen and Levinthal 1990; Deeds and Hill 1999; Lee et al. 2001).
Moreover, the establishment of agreements can help attract investors for the new
venture by giving legitimacy to the business by dispelling possible doubts about
recovering the investment (Lee et al. 2001). In addition, the relationships that the
firm establishes with its environment, the contacts made with other organisations in
the same or a different sector will be important. Thus, any alliances, whether
formal or informal, can constitute communications channels, the obtaining of
resources or access to distribution channels. Moreover, the events, trade fairs and
congresses related to the business constitute another means to absorb relevant
information about the specific market in which the firm moves and about

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entrepreneurial activity in general (Ordez de Pablos 2003). For these reasons, we

propose that:
H3c: The greater the connectivity of the company, the greater the probability of the
business being successful in its first years of life.
Accessibility Another very important aspect for the functioning of firms is the degree
of closeness and access to the customer, especially for non-manufacturing and salesoriented businesses. Thus, the location of the business, depending on its activity, can
have a critical influence on its progress (Martins Rodrguez 2003). In any case, the
fact that customers can easily access the business and feel close provides added
value to the firm. Moreover, being located in a strategic place, such as a pedestrian
zone or a very busy area in the case of retail businesses, or in a prestigious building
in the case of a firm offering professional services, can have a positive effect on the
success of a startup.
H3d: The greater the firms accessibility to the customers, the greater the
probability of the business being successful in its first years of life.
Supplier profile This asset refers to both the size and the location of the supplier. In
that respect, in the case of newly-created firms, Pea (2002) obtains interesting
results that point to the fact that the most successful firms happened to be those who
made greater volume purchases, in other words, those who used fewer suppliers.
Pea (2002) also finds that having higher proportion of local suppliers has a positive
influence on performance. The interesting results of that study led us to include this
asset in the model in order to test whether a particular supplier profile could be an
asset of any value to the firm. More specifically, the studied profile consisted of
checking the new firms purchase volume and the location of the suppliers.
Consequently, we propose that:
H3e: The fewer suppliers that newly-created firms concentrate their purchases on,
the greater the probability of the business being successful.
H3f: The higher the percentage of local suppliers of a newly create firm, the greater
the probability of the business being successful in its first years of life

Research methodology and design

In order to test the hypotheses relating intellectual capital to the success of newlycreated firms, primary data were gathered by means of a questionnaire. For the
purpose of operationalising the concept of the new firm, and in line with Reynolds et al.
(2005), this work considers a newly-created firm to be one with more than 3 and
less than 42 months of life. Moreover, the firms in questing really had to be
performing a new activity: in other words, any firm that had simply modified its
legal status or changed owner was excluded from the sample of this study.
Although the data provided by the Informa organisation established that a total of

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19,469 companies registered in the Canary Islands during the period of study
(March 2002 to April 2005), the SABI data base that was available to the
University of Las Palmas de Gran Canaria in July 2005 only provided contact
information (telephone, fax or e-mail) about 2,615 companies; therefore, the final
number of firms to which the questionnaire was sent was 1,288. After various
communications with the firms, a total of 147 completed questionnaires were
received, of which 130 were valid. This represents a response rate of 8.3% and a
sample error of 8.55%.
In all cases, the questionnaire was completed by an owner of the business who
also took an active part in the daily activity of the firm and, preferably, was the
owner with greatest responsibility. Moreover, all the firms had been formed between
March 2002 and April 2005 in the Canarian Autonomous Community, which
ensured that all the analysed units had been created within the same economic and
fiscal framework.
The dependent variable in this research is the success of newly-created firms.
Subjective indicators were used to measure that variable by means of the perceptions
of the founders: a method that has been widely used in previous research works (Van
Gelderen et al. 2000; Zahra and Bogner 2000; Rhodes and Butler 2004). Thus, a
series of questions asked the entrepreneur to indicate, on a 7-point Likert scale, his/
her level of satisfaction with sales, ROA, growth, the achievement of the initially
established objectives, the overall success of the firm, and success in relation to its
competitors. The final dependent variable is a construct resulting from a
confirmatory factor analysis of those 6 indicators that confirmed the existence of a
single factor. Moreover, in order to confirm the validity of the previously mentioned
subjective measures, the questionnaire also asked for objective data of success, such
as the growth of sales and of profitability in relation to the previous year, expressed
as percentages. The high correlation between the subjective and objective measures
is significant proof of that validity.
The independent variables are grouped into three dimensions: human capital,
structural capital and relational capital. The dimension of human capital includes six
intangible assets: (1) The entrepreneurs knowledge of the business, measured by
means of his/her experience, using his/her number of years experience in the sector
as the indicator (Van de Ven et al. 1984; Sandberg and Hofer 1987; Duchesneau and
Gartner 1990; Chandler and Jansen 1992; Van Praag 2003). That indicator is
complemented with information about the entrepreneurs knowledge by means of
two items based on those proposed by Feeser and Willard (1990) and Cooper et al.
(1994). The aim of those items was to identify the degree of similarity by comparing
the current customers and competitors and the knowledge and skills necessary to
develop the activity in the new firm with those of the firm in which the entrepreneur
previously worked. (2) The motivation that led the entrepreneur to create his/her
business was studied by proposing a series of motives that the entrepreneur had to
evaluate on a 7-point Likert scale according to the importance he/she attaches to
each of them (Roberts 1989; Gimeno et al. 1997; Watson et al. 1998; Pea 2002).
The reasons for becoming an entrepreneur included extrinsic motivation and intrinsic
motivation. (3) The entrepreneurs commitment was captured by the number of hours
per week devoted to the business, which is one of the most widely used methods to
measure this variable (Van de Ven et al. 1984; Basu and Goswami 1999; Pea 2002;

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Collins-Dodd et al. 2004). (4) Resolve was measured by means of the scale proposed
by Baum and Locke (2004) and, to that end, the informants had to evaluate
statements about three of the items proposed by those authors. (5) The entrepreneurs
social skills, namely, social perception and social adaptability were measured
according to the hypotheses in the work of Baron and Markman (2003) in which
they examine the influence of these skills of the successful entrepreneur. (6) Finally,
and in relation to the entrepreneurial team, the teams social interactions were
measured by means of the scales proposed by Lechler (2001), which measure
aspects such as the communication, coordination and cohesion of the entrepreneurial
team.
The dimension of structural capital includes six assets. (1) The degree of process
innovation, which, following the works of Solem and Steiner (1998) and Wolff and
Pett (2006), led us to ask directly about the importance of new technologies in the
productive/service generation process of the business, as well as about the level of
implementation of the technologies. (2) To know the degree of efficacy of the
productive/service generation process of the firm, we used some indicators similar to
those used by Kaplan and Norton (1997) and Bontis et al. (2000), which reflect the
number of complaints received in a determined period of time, as well as the
increase or reduction in the average time taken to perform the production process.
(3) The degree to which the routines were established in the firm was asked directly
by means of a statement which the informants had to evaluate on a 7-point Likert
scale. Finally, the incipient culture of the firm was assessed by means of the scale
proposed by Denison and Mishra (1995). Those authors relate the proposed cultural
traits with higher performance in the firm, and principally highlight the characteristics of (4) participation, (5) adaptability and (6) internal consistency. Eight of the
items proposed by those authors were formulated as statements and used to measure
these characteristics.
Finally, the dimension of relational capital comprises five assets. (1) relationships
with customers and suppliers, both current and potential, were measured by the time
devoted to establishing and maintaining these relationships, specifically by the hours
per week spent keeping in contact with present and new customers and suppliers
(Birley et al. 1991; Greve and Salaf 2003; Sawyerr et al. 2003; Witt 2004). (2)
Support from informal networks was measured by means of the scale proposed by
Brderl and Preisendofer (1998), which aims to reflect the amount of active and
emotional support received from the entrepreneurs life-partner as well as from
family and friends. (3) The connectivity of the firm was quantified by the number of
firms with which some type of agreement had been established: an indicator used by
Lee et al. (2001), Ordez de Pablos (2003) and others. (4) The asset of accessibility
and closeness to the customer was included in the model, after taking into
considerations the reflections made subsequent to the qualitative study of this
research. Thus, the items used are inspired by those in the works of Hoogstra and
Van Dijk (2004), who attach significant importance to the accessibility of new firms.
Thus, the entrepreneurs were asked to evaluate, on a 7-point Likert scale, the
importance that they attach to the present location of the business, as well as to the
ease of access for customers by being in a busy zone, and to the closeness of
suppliers. (5) Finally, two indicators used by Ordez de Pablos (2003) were
employed to measure the firms reputation: the percentage of customers that the

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entrepreneur believes to have recommended the firm and the percentage that repeat
after the first purchase or service. Apart from those two indicators, the entrepreneurs
were asked directly for their opinions about the reputation acquired by the firm in its
first years of life and the improvement that it has entailed for the firm in relation to
its closest competitor.
Moreover, a series of control variables that may influence the dependent variable
and condition the final results was also analysed. These variables are: (1) the sector
to which the firm belongs, represented by 5 dummy variables and a control variable
primary sector, industrial, construction, retail and catering, financial, legal and
technological activity, and other activities -; (2) the size of the organisation, measured
by the number of employees at the time of the survey; (3) the firms age in months and,
finally, (4) the entrepreneurs perception of the number of competitors in the specific
zone in which the firm operates.
The firms comprising the sample have an average age of 29 months, with 4
workers and 2.3 partners. Multiple Regression Models were used to validate the
work hypotheses. The nature of the dependent variable meant that a valid alternative
would have been to use an ordinal probit or logit model; however, since success was
measured by means of six items, the interpretation of the model would have been
considerably more complicated. In addition, there are few individuals positioned at
extreme values and, consequently, the use of regression models was more
appropriate.

Analysis and interpretation of results

In this section, the data are analysed with the aim of testing the hypotheses. Table 1
shows the regressions corresponding to the analysis of the relationships between
each of the dimensions of intellectual capitalhuman, structural and relational
capitaland the success of new firms. Moreover, when a series of control variables
were also considered, it can be seen that firms operating in financial, legal and
technical activities display a higher level of success than other firms in the sample
(see Table 1).
The second of the regressions presented in Table 1 shows the influence of human
capital on success, with the intangible assets in this dimension explaining 40.2% of
the variable. As Hypothesis 1 predicted, there is a significant and positive correlation
between human capital and success. Thus, the assets that are shown to be significant
are: the interaction of the entrepreneurial team (=0.263, p<0.05), commitment to
the firm (=0.244, p<0.05), specific knowledge of the business (=0.275, p<0.05)
and the resolve of the entrepreneur ( =0.283, p< 0.01). The fact that the
entrepreneur has a higher degree of extrinsic motivation to open the business has a
negative effect on its success (=-0.299, p<0.01). Thus, the resulting regression
model only excludes the assets referring to the entrepreneurs social perception and
adaptability and the control variables. Those data lead us not to reject the first of the
proposed hypotheses that predicted that the presence of different assets of human
capital favours short-term success.
The third regression relates the assets of structural capital to business success and
the results are significantly poorer. In that respect, the assets within this category

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85

Table 1 Multiple regression models: results

Variables

Model 1a Model 2a

Model 3a Model 4a Model 5a

Control variables
Sector: primary

-0.093

-0.082

-0.113

-0.038

Sector: industrial

-0.025

0.090

-0.087

0.123

Sector: construction

-0.007

-0.013

0.099

0.104

0.126

0.068

0.184**

Sector: financial, legal & technical activity 0.243**

Sector: other activities

0.017

0.077

0.027

0.079

Size

0.169

0.002

0.086

0.125

Age

-0.090

-0.193

-0.082

0.036

No of competitors

0.178*

0.052

0.024

0.152

Variables of human capital

Extrinsic motivation

-0.299***

Commitment to the firm

0.244**

Team interaction

0.263**

Knowledge

0.275**

Resolve

0.283***

Social adaptability

0.087

Social perception

0.120

-4.574***(2)
2.068**(5)
3.090***(4)

Variables of structural capital

Participation

0.129

Adaptability

0.283**

Internal consistency

0.180

Innovation

0.263**

Routines

-0.147

Efficacy

-0.016

Variables of relational capital

Accessibility

0.203**

Informal support network

0.357*** 2.525**(3)

Reputation

0.504*** 3.174***(1)

Connectivity

0.152*

Local suppliers

0.180*

Large suppliers

0.081

1.687

4.227***

1.499

6.051*** 18.993***

0.108

0.527

0.212

0.517

Total adjusted R

0.044

0.402

0.071

0.432

0.672

* p<0.10, ** p<0.05, ***p<0.01

a

Standardised coefficients

Sector: Retail and catering used a reference category

explain only 7.1% of the dependent variable, which casts doubt on their short-term
effect. More specifically, two of the six assets included in the multiple regression,
namely, innovation (=0.263, p<0.05) and adaptability (=0.283, p<0.05), are
significant in the joint model. In this case, apart from the other assets belonging to

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this dimension, all the control variables were also left out of the model. With regard
to the second of the proposed hypotheses, it would be more complicated than for the
previous hypothesis to state that structural capital plays a determining role in
the immediate success of newly-created firms because of the low percentage of
the dependent variable that it explains.
The fourth regression includes the effect of the assets of relational capital on the
success of new businesses. As Table 1 shows, all the relational capital assets
included in the model are significant except the asset labelled supplier profile, which
refers to those firms that opt to purchase from only a few suppliers. These assets
explain 43.2% of the independent variable. Thus, reputation (=0.504, p<0.01),
support from informal networks (=0.357, p<0.01) and good accessibility (=0.203,
p<0.05) display a high level of significance. Lastly, connectivity (=0.152, p<0.10)
and having local suppliers (=0.180, p<0.10) display levels of significance that are
very close to acceptable. Thus, the third hypothesis cannot be rejected since the assets
of relational capital explain quite a high percentage of the initial success of the firm.
Finally, a hierarchical multiple regression model with all the assets of intellectual
capital and the control variables was applied in order to assess the relative weight of
each asset on the success of the firm (see Model 5). This regression explained almost
70% of the variance of the independent variable, namely the success of newlycreated firms. The variable that most explains that success is the firms reputation.
The asset with the second highest weight if the entrepreneurs lack of extrinsic
motivation; in other words, the entrepreneur had decided to start up the business for
reasons other than the impossibility of finding a job. That asset is followed in
importance by the support received from informal networks and the entrepreneurs
resolve. Finally, the good interaction of the team behind the business idea is the last
asset included in the model and displays a level of significance of 5%.
The results suggest that the intellectual capital of new firms is positively associated
with the success perceived by the entrepreneur. Hence, the principal value of this work
lies in its identification of the most important intangible assets of organisations in their
early life and showing their importance to the initial success of those firms. The partial
results reveal that both the human and the relational capital play a fundamental role in
the development of new firms while the structural capital is relatively important, which
is logical since it is still being developed in very young firms.
The joint analysis by means of the inclusion of all the assets in the multiple
regression analysis reveals that the significant assets are those that are directly or
indirectly related to the personal links or characteristics of the members of the
entrepreneurial team. However, the factor that exercises a stronger influence on
success is the reputation acquired by the firm in its first months/years of life. This
demonstrates that it is of vital importance for the firm to obtain a good reputation
from the moment it starts functioning; thus, customers will recommend the firm and
become repeat customers. Moreover, the activities related to the business will be
facilitated if the different agents with influence on the firm come to know it and trust
in its good functioning. The second most important asset refers to the support
received from the entrepreneurs informal networks, including his/her life-partner as
well as family and friends. In that respect, on many occasions, the financial, and
especially the emotional, support received from those close to the entrepreneur can
have a positive influence on the functioning of the business.

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87

Following those assets mentioned above, both the absence of motivation to open
the business for necessity and the resolve of the founder are among the factors that
provide value to the firm via, among other aspects, their positive influence on the
success of the firm. Finally, the good coordination, cohesion and communication of
the team members is the last asset considered important when analysing the joint
influence of the assets within the category of intellectual capital.

Conclusions, limitations of the study and recommendations

This research constitutes one of the first steps towards a better understanding of the
importance of intangible assets in newly-created firms. The results reveal the
relationship between intangible assets and the success of newly-created firms. One
of the principal conclusions reached in this study is the importance of human capital
to the performance of firms in the first stage of life. Thus, the results show the
importance of the already frequently highlighted role of the entrepreneur, whether
because of his/her knowledge or the time and effort invested in the venture.
Moreover, if the company is formed by a team, satisfactory intercommunication
between the members plays a key role since, bad communication and coordination
could lead to an inability to develop the business idea in an appropriate way and
represent a liability for the firm.
Since the firms in the study are all in a stage of early development, structural
capital is the most difficult category of intellectual capital to evaluate. Thus, the
results of the analysis of this type of assets indicate that only internal consistency,
innovation and adaptability are significant. Therefore, one can suspect that, in new
ventures, the structural capital that provides value in the firms early days is that
which enables the firm to innovate and easily adapt to the environment, although
having established certain routines that help the efficacy of the internal processes
may have a positive effect in the medium or long term.
The last of the analysed dimensions is relational capital, which is shown to play a
significant role in the firms under study. In general, the results of the analysis
highlight the value provided by assets whose nature is defined by the relationships
that the firm establishes with its environment. Of these assets, it is unquestionably
the reputation acquired that contributes greater value in the short term and, in these
early and uncertain times, is essential to capture new customers.
With regard to future lines of research, and following the path opened up in this work,
it is recommended that future studies are oriented towards the identification of the
relationships between the assets that could not be included in this study; for example, the
influence of established networks on the structural capital of the organisation. It would
also be interesting to undertake a longitudinal analysis of the evolution of these
intangibles over time in order to know the impact they have on the long-term success of
the firms.
Focusing on the limitations of the work, its should be stressed that, since the final
data were obtained by means of questionnaires, it was not possible to perform a
deeper and more exhaustive analysis, especially in the case of the more qualitative
aspects. In that respect, many of the analysed assets, such as networks, have an
essentially qualitative and accumulative nature, which presents serious problems for

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the quantitative studies in this work. Thus, that limitation opens up what may be a
new line of research in which it would be interesting to carry out case studies that
examine the role of intangible assets in the early years of the business.
It is important to point out that this work has not been able to offer a complete
analysis of the impact of the variables of environment on the composition of the
intangible assets of each firm and, consequently, on the way in which that impact
conditions the success of newly-created firms. It should also be stressed that this
research focuses on a very early stage of the life of the firm and that the effects of
some assets may take longer to appear. As regards the sample, and also due to the
characteristics of the population of the study and of the setting of the research,
the firms participating in the empirical study mostly belong to the tertiary sector
and operate within a particular economic and fiscal framework. This final
limitation calls for the study of firms performing some other type of activity
because of the possible significance of analysis by specific sectors that can study
the specificity of the assets and establish the interrelations between a greater
number of intangibles: not to mention the need to replicate the study in other
local contexts.

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