How does government support promote firms' intellectual capital? An empirical analysis of micro-mechanisms

Purpose – In transitional economies, government support (GS) is considered to influence the development of the economy and industries and, consequentially, firms’ intellectual capital (IC). However, empirical research has yet to explore the micro-mechanisms through which GS operates. Hence, the purpose of this study is to conduct an empirical inquiry into the specific role of GS on IC, considering the mediating effect of firm operational performance (OP). Design/methodology/approach – Combining the institution-based theory, the resource orchestration paradigm and a dynamic perspective on IC, a new framework is constructed to evaluate the direct and indirect relationships existing among GS policies, firms’ operational performance and IC. These processes and their outcomes are evaluated using mediating models with three steps and a panel regression based on panel data from 3,211 high-tech companies operating in China from 2008 to 2015. Findings – Empirical findings confirm the existence of a significant direct relation between GS and IC and also suggest a mediating effect through operational performance. Originality/value – (1) GS can be considered an institutional signal that boosts the attractiveness of a firm, thus enabling it to hire talent (human capital), build a wide network of relationships in the ecosystem (structural capital) and enhance its current relationships with financial service institutions and other stakeholders (relational capital). (2) This study, which considers GS an external resource, is one of the first attempts to explore how external resources influence firms’ IC development through institutional pressures and mechanisms. The study confirms that multiple strategies exist through which government authorities and policymakers can influence firms’ IC and in particular a combination of institutional factors and firm’s resources and capabilities.