The influence of intellectual capital on innovativeness and growth in tourism SMEs: empirical evidence from Slovenia and Croatia1

Abstract The innovative capability of an organisation depends on the intellectual capital that it possesses. Our research attempts to examine the influence individual intellectual capital components have on the innovativeness and consequent growth of a company. This article proposes a classification and measurement method of intellectual capital, highlighting the following three components; human capital, organisational capital, and social capital. Our aim is to explain innovation performance and company growth by showing the importance of each intellectual capital dimension on a specific type of innovation (product, process, marketing, and organisational). To this end, a questionnaire survey was performed on 2800 Slovenian and 1700 Croatian small and medium enterprises (SMEs) in the tourism area. A data sample of 359 companies was analysed using SPSS 19 and the EQS 6 statistical programme to employ multivariate data analyses techniques through developed hypotheses.


Introduction
The ability of a company to perform and grow successfully is influenced by many environmental factors. Intellectual capital is one of the internal environment dimensions of a company and is therefore an important factor in management strategies. It has been agreed that innovation activity can influence the competitiveness and consequently the performance of a company. Within the context of tourism, only a few studies focus on environmental characteristics such as intellectual capital, as being a key factor for innovativeness. Therefore, this study is bridging this gap by analysing the relationship between intellectual capital (including three dimensions according to Subramaniam and Youndt [2005]), innovation and growth. Accordingly, the aim of this study is to answer the following questions: firstly, KEYWORDS tourism; innovativeness; firm growth; intellectual capital what the influence of intellectual capital is on the innovation capabilities of a company, and secondly, what the impact of innovation is on the growth of a company.
In some respects, this study also contributes to literature on the subject. Firstly, unlike the majority of research which is focused on intellectual capital, innovation and growth in the manufacturing sector (Kim & Kumar, 2009;Ling, 2011;Ling & Jaw, 2006;Wu, Lin, & Hsu, 2007), our study specifies this concept in the tourism sector. Our article also presents an answer to the call of Camisón and Monfort-Mir (2012) about the need for quantitative methodology in tourism research that examines factors influencing performance.
In particular, this study hypothesises that intellectual capital dimensions influence innovation, and innovation consequently impacts company growth. By analysing the effects of intellectual capital on innovation and additionally on company growth, this study contributes to the better understanding of how management strategies that develop intellectual capital produce different effects on company performance.
Our article is structured as follows; firstly, a literature review is performed and presented, providing a theoretical background to the study. Within this section a model including the relationships among intellectual capital dimensions, innovation and growth is developed and the hypotheses are also presented. We then continue with the methodology section which includes the description of methods and analyses used in the research, in addition to a report on the analyses results and findings. After limitations and implications for further research, the article closes with a conclusion.
In the tourism sector the customer demand is a powerful generator of innovation. Tourism supply side has to continuously adapt to tourist (Weiermair, 2006). We can agree that a new tourist is pretending to be experienced and flexible. This is the reason why tourism companies have to respond efficiently to the new lifestyles and thus support the innovation (Crnogaj, Rebernik, Hojnik, & Gomezelj, 2014). Aiming to remain competitive, tourism firms and also tourism destinations are forced to develop and offer new or renewed services, thus they are obliged to innovate (Scheidegger, 2006;). Innovation in tourism business has been examined by Weiermair, Peters, and Frehse (2005), Orfila-Sintes et al. (2005), Hipp and Grupp (2005) and Pikkemaat and Weiermair (2007). Innovation can be understood as a key tool for achieving competitiveness.
It is agreed that the ability of a company to innovate is dependent on its ability to utilise its knowledge resources. Innovations are tied to knowledge management processes (Madhavan & Grover, 1998). Many authors examined innovation as an outcome of intellectual capital (Ahuja, 2000;Subramaniam & Venkatraman, 2001). This is why the employees and collective organisational knowledge of a company employee is important (Adamides and Karacapilidis, 2006).
We understand intellectual capital as intangible assets within a company (Stewart, 1991). Edvinsson and Malone (1997) defined intellectual capital as a two-dimensional construct namely human capital and structural capital. Structural capital is additionally divided into organisational and customer capital. Nowadays, customer capital, from a sociological point of view, represents social capital (Subramaniam and Youndt, 2005;Delgado, 2011).
Intellectual capital is one of the resources within the firm that provide additional value to stakeholders (Shakina & Barajas, 2014). For the purpose of their study (Anatolievna, Molodchik, Anatolievna, & Barajas, 2014) divided three traditional intellectual capital components (human, structural and relational capital) and defined six intellectual capital dimensions, namely management capabilities, human resources capabilities, innovation capabilities, internal process capabilities, networking capabilities, and customer loyalty.
Human capital is all the knowledge possessed by employees; it includes their ability to generate knowledge, their individual values and attitudes, experiences and know-how (Subramaniam & Youndt, 2005). Human capital embraces the knowledge, skills and competencies of individuals. This does not only refer to formal education and training but also to experience and practical learning, primarily acquired in the workplace (Schultz, 1971). Many empirical studies (Davidsson & Honig, 2003;Ucbasaran, Westhead, & Wright, 2008) have tried to determine the impact of human capital on business performance, while some researchers investigate also the importance of demographic processes for stock of human capital (Čepar & Bojnec, 2008). The relevance of education, experience and competencies to innovation capacities seems indisputable. The financial performance of a company depends on human capital (Hurwitz, Lines, Montgomery, & Schmidt, 2002). This is why a company should hire capable employees and experienced managers. Only by doing this they are able to develop new products and bring their skills and innovation capabilities to the highest possible level (Rhyne et al., 2002). Only thanks to innovative managers and employees are companies able to increase their market share to become market leaders. Human capital influences teamwork success, and a company with valuable employees can achieve higher innovation performance. Moreover, Dakhli and De Clercq (2004) showed in their study that there is a positive relationship between human capital and innovation.
Organisational capital refers to knowledge which is accumulated and stored in databases, proceedings, patents, licences, trademarks, manuals and organisational structures. It refers to the intellectual asset that remain even after employees have left the company. It does not depend on individuals and is generally explicit (Hormiga et al., 2011;Longo, Mariani, & Mura, 2009). Keeping in mind the description of the knowledge creation process by Nonaka and Takeuchi (1995), organisational capital is the result of a knowledge spiral where implicit knowledge is converted to explicit knowledge on an organisational level. Edvinsson (1997) determined that organisational capital is created when knowledge becomes company property. Organisational capital belongs to the organisation (Longo et al., 2009). Organisational capital includes all the mechanisms and structures for supporting employees' productivity (Edvinsson & Malone, 1997) and performance with the aim to achieve the overall performance of the company (Bontis, 1998). Organisational capital can be traded, reproduced and shared within the company, while specific elements can even be legally protected as patents and trademarks (Roos & Roos, 1997). Organisational capital is a tool for efficiently performing the process of knowledge transfer, retainability and storage (Cabrita & Bontis, 2008).
Social capital can be defined as knowledge that can be utilised for interactions among individuals, working groups, and their networks of relationships (Nahapiet & Ghoshal, 1998). Zhao, Ritchie, and Echtner (2011) stated that in the area of tourism there are only a few studies dealing with the application of social capital. This is true of regional studies and for the studies of community tourism development. Social capital can influence the performance of stakeholders' participation and additionally has a positive impact on local tourism development (Jones, 2005;Nordin & Westlund, 2009). These researchers define the concept of social capital in different ways. Moreover, in some studies social capital is assumed to be a dependent variable, in others an independent variable. Despite these different assumptions, social capital can be located at all levels; individual, informal social, formal organisational, community, ethnic group and national level (Adler & Kwon, 2002). Nahapiet and Ghoshal (1998) stressed the importance of social relationships. According to them, social networks are closely associated with knowledge flow. Thus, social networks are the source of social interaction and therefore a key factor in gaining sufficient and reliable information. The power of the social capital dimension depends on the quality of networks, i.e., the strengts of ties, the duration of relationship and also the extent of emotional link up. Strong connections also influenced by trust, are important instruments in the process of knowledge transfer, especially tacit knowledge (Inkpen & Tsang, 2005). It is because of the nature of tacit knowledge, and the difficulty to systemise it, that it requires close and repeated interchanges. Therefore, the power and the strength of the relationship arguably influences the knowledge and information transfer and consequently has an impact on innovativeness. Developing strong social capital requires the time and efforts of all network members. The membership of such social networks is composed from the company stakeholders, namely customers, suppliers, and competitors. These organisation stakeholders are strategic partners and often provide the organisation with important and valuable information. In aiming to satisfy the needs of a customer, a company should improve their products and services. Nemec Rudež and Mihalič (2007), in their study of the hotel industry, divided social capital into end-customer relationship capital (relations with end-customers) and non-end-customer relationship capital (relationships with commercial partners in the private sector, and relationships with other partners such as the government, associations and non-governmental organisations). In doing so, they wished to stress the increasing importance of different relationships in the hotel business. Many researchers agree that customer involvement is invaluable in achieving innovation and economic success. Being a member of a social network can be a crucial element in the process of new product/service ideas and product/service development (Gales & Mansour-Cole, 1995). Some studies have also confirmed that customer participation in the early stages of idea generation and innovation is critical to the success of innovation (Gupta & Souder, 1998). This is especially true for service industries, such as tourism-related industries (hotel, tourist agencies, restaurants), where the social capital of managers may be of a great importance. The external networks between these kinds of companies may facilitate collaboration and influence the travelling experience (Ooi et al., 2015). Through the manager's social capital (ties with other manager members of the network), a company may receive or exchange resources (Wincent, Anokhin, & Ortqvist, 2010). This is also an opportunity to learn the best business practices from other companies.
The concept of innovativeness is explaining the degree to which a company is earlier in adopting new ideas than other companies on the market (Avlonitis & Tzokas, 1994). The ability to innovate refers to the adoption or successful implementation of new ideas, processes, or products. But why are some companies more innovative than others? Which determinants explain the more efficient innovative activities of some companies in comparison to others? And moreover, what are the economic consequences of innovative activities?
There have been some recent studies on the sources of innovation. At the present moment, we are aware that the innovation capacity of a company depends heavily on its intellectual capital, including its different dimensions; human capital (experience, skills, and employee development, teamwork), organisational capital (databases, proceedings, patents, licences, trademarks, manuals and organisational structures) and social capital (relationship networks). The importance of these intangible assets and knowledge has been studied by various researchers (Mariz-Pérez et al., 2012;Sumedrea, 2013;Kalkan, Bozkurt, & Armanc, 2014).
Intellectual capital is closely linked to the organisation's innovativeness. In their study Subramaniam and Youndt (2005) found that organisation's intellectual capital influence the capabilities for incremental and radical innovations. They also recognised the complexity of the connection between intellectual capital and innovative capabilities. Al-Dujaili (2012) investigated the impact of intellectual capital dimensions (human, structural, and of customers) to innovation in the companies and confirmed that there is an impact of intellectual capital to organisational innovation. More researchers found that the intellectual capital of an organisation (consisting of its human, social, and organisational capital) is influencing innovation capabilities (Wu & Sivalogathasan, 2013) or innovation performance (Zerenler, Hasiloglu, & Sezgin, 2008;El Telbani, 2013).
These authors focused on the antecedents of innovation, such as the possession of adequate employee and management competencies, attitudes, good relationships within the workforce and with the environment, and adequate organisational technology, etc. Because of globalisation and strong competition in the marketplace, innovation is considered as a necessity for every company. In aiming to retain a competitive advantage and achieve market success, companies need to recognise new opportunities, be creative, and develop new products/services and new market strategies (Tajeddini, 2010). Only by implementing new ideas can companies create value. This statement is valid for all types of innovation such as product/service development, process improvements, marketing and organisational practices. For the purpose of this study, we have adopted the Oslo Manual (2005) classification of innovation that discusses four types of innovation; product innovation (new products and services, major improvements in the functional or user characteristics of existing goods and services), process innovation (major changes in methods, equipment and software), marketing innovation (new sales techniques, new financial methods) and organisational innovation (new organisational methods in commercial practice, workplace organisation or external relations of a company).
Innovation is the key factor influencing competition for a company and also one of the most important factors of sustainable competitive advantage. Innovativeness causes product improvements, increases the added value (Coombs & Bierly, 2006) make higher sales revenues (Ivankovič, Janković, & Peršić, 2010) and thus helps companies to survive. Innovative companies are more efficient and dynamic and consequently more profitable (Mansury & Love, 2008). We agree that innovation depends on knowledge-intensive organisational processes within a company.
Taking these insights into account, we propose a research model (see Figure 1)

Measurement of variables
Data was acquired via a structured email survey questionnaire, from companies involved in different activities within the tourism sector. After performing a pilot study and having received no recommendations from the pilot group, we concluded that all questions were clear and comprehensible. We received no recommendations from the pilot group. All constructs were measured with questions adapted from existing scales. All items were measured on a 5-point Likert-type scale where 1 = strongly disagree and 5 = strongly agree.   These scales were already used and empirically tested by Nieves et al. (2014) and Gomezelj Omerzel (2014). The dependent variable Growth was measured by two items (market share and profitability); this scale was already used and empirically tested by Antončič and Hisrich (2001) and Gomezelj Omerzel (2010).

Sample and data collection
The final version of the questionnaire was sent to managers of the tourism companies in Slovenia and Croatia with anonymity being assured. To ensure the comprehension of questions and comfort of respondents, the questionnaire was written in their native language (either Slovenian or Croatian). Out of 2800 questionnaires, sent by e-mail to Slovenian companies, and 1700 questionnaires, sent by e-mail to Croatian companies. Two-hundred and seventeen completed and usable questionnaires were returned from Slovenia and 142 from Croatia. This was used for the analysis, which is only a preliminary study (as we are still collecting the data).
In Slovenia the majority of companies, 80 or 36.9%, operated in the restaurant industry, followed by companies who provide accommodation with 57 or 26.3% respondents, 28 of them (12.9%) were tourist agencies or tour operators, 18 (8.3%) were from the transport sector, 14 (14.4%) of them from amusement activities, and 17 of them (7.8%) performed other activities in the area of tourism. The majority of companies (70 or 32.3%) were more than 20-years-old, followed by those from 10-to 20-years-old (62 or 28.6%) and by those from 5-to 10-years-old (36 or 16.6%). Other companies were younger than five years. The majority (155 or 71.4%) of companies have less than 10 employees, 46 (21.2%) of them between 11 and 50 employees, 13 of them have more than 51 employees. The majority of the companies (74 or 34.1%) marked that their total sales in the last year at between 200,000 and 1 million EUR, 63 (29%) of them earned less than 50,000 EUR, 45 (20.7%) of them earned between 50,000 and 200,000 EUR, other companies earned more. In Croatia the majority of companies, 57 (40.1%) operated in the restaurant industry, followed by companies who provide accommodation with 47 or 33.1% respondents, 16 of them (11.3%) were tourist agencies or tour operators, eight (5.6%) were from the transport sector, six (11.3%) of them from amusement activities, and seven of them (4.9%) performed other activities in the area of tourism. The majority (42 or 29.6%) of companies were from five-to 10-years-old, followed by those from 10-to 20-years-old (39 or 27.5%) and then by those that are more than 20-years-old (32 or 22.5%). Other companies were younger than five years. The majority (89 or 62.7%) of companies have less than 10 employees, 31 (21.8%) of them between 11 and 50 employees, 22 of them have more than 51 employees. The majority of the companies (41 or 28.9%) marked that they had earned less than 50,000 EUR, 37 (26.1%) marked their total sales in the last year at between 200,000 and 1 million EUR, 36 (25.4%) of them earned between 50,000 and 200,000 EUR, other companies earned more.

Data analysis
In the first phase of analysis, we calculated means and standard deviations for Slovenia and Croatia separately. In the rest of the analysis we treated the data from the Slovenian and Croatian sample as one. We calculated Cronbach's alpha reliabilities for all the scales (intellectual capital, innovativeness) and presented them in Tables 1 and 2. As Growth was measured with only two items we did not perform an FA. Instead we formed the variable Growth by calculating the mean of two items, Growth 1 and Growth 2. In order to increase the validity and reliability of the proposed model, both exploratory and confirmatory factor analyses were performed.
The exploratory factor analysis was performed using SPSS 19.0 (a single factor was extracted for each dimension), while for both the confirmatory factor analysis and testing of the proposed H4 hypotheses structural equation modelling (SEM) was performed, using EQS 6 software.
Communalities and factor loadings for all items were above 0.5, thus no item was eliminated for further analysis. The factor loadings for the Human Capital construct are between 0.782 and 0.892, for both the Social capital construct and Organisational capital between 0.846 and 0.925. The KMO values for these three constructs are between 0.737 and 0.834; Communalities and factor loadings for all items were above 0.5, thus no item was eliminated for further analysis. The factor loadings for the Product innovation are between 0.772 and 0.839, for the Process innovation construct between 0.727 and 0.857, for the Marketing innovation construct between 0.744 and 0.846 and for the Organisational innovation between 0.828 and 0.942. The KMO values for the four constructs are between 0.809 and 0.895; therefore, all values are at acceptable levels. The significance of Bartlett's test for each dimension was 0.000 (p<0.001). Factor analysis results signify good discriminant validity, as all the measurement items loaded highly on their own constructs. The reliability of constructs was measured with the Cronbach Alpha coefficient, with values ranging from 0.850 to 0.881. Therefore, all constructs have good reliability. Moreover, the values of total variance explained are from 62.6% to 71.9%. The correlations between model constructs are presented in Table 3.
All the constructs included in the proposed model are significantly and positively correlated. The Pearson correlations coefficients are ranging from the lowest 0.266 (between Organisational capital and Growth) to the highest 0.731 (between Human and Social capital). Table 3 shows, that the correlation coefficient (1) between Human Capital and all the Innovation dimensions, between Social capital and all the Innovation dimensions as also between Organisational capital and all the Innovations dimensions are statistically significant. This means that there exists a significant relationship between Human Capital and Innovation, between Social capital and innovations and between Organisational capital and Innovation. Therefore, the three hypothesis (H1, H2 and H3) are confirmed.

Results
Finally, the EQS Multivariate Software version 6.1 was utilised for confirmatory factor analysis and the testing the H4. By performing the structural equation model (see Figure 2), we examine the significance of the relationship among the independent and the dependent factors of the analysed model. Path coefficients indicate the strength of each individual relationship. By interpretation of these path coefficients we can support or reject the hypotheses. Since no non-normality was found in the data, the Elliptical Reweighted Least Square (ERLS) estimation method was used. As recommended by Hair et al. (2006), the fit of the model was assessed with multiple indices: the non-normed fit index (NNFI), the comparative fit index (CFI), and the root mean square error of approximation (RMSEA). Values of NNFI and CFI are greater than 0.90 and indicate a good model fit (Byrne, 2004). The RMSEA index is less appropriate, but as this index is sensitive to the sample size and model complexity (Hu and Bentler, 1999), it has an acceptable value (0.10) in our case. The strong and positive relationship (0.75, p < 0.01) between innovativeness and growth explicitly presents the importance of innovativeness for the growth of a company.
The results support our hypotheses H4.

Discussion
A company is represented by a series of different resources. If intellectual capital represents one of the internal intangible resources, we can agree that it is an important element for the innovativeness and consequently for company performance. Based on the studied literature, it was concluded that the ability of a company to perform successfully and to grow is influenced by many environmental factors. Intellectual capital is one of the internal environment dimensions of a company and therefore important in business strategies. It has been agreed, that innovation activity can influence the competitiveness and therefore the performance of a company. In tourism only a few studies focus on environmental characteristics such as intellectual capital, as being a key factor for innovativeness. Moreover, they do not analyse the importance of intellectual capital related variables, as well as fail to mention their influence on company performance. The results of our study indicate that intellectual capital is significantly related to innovativeness and consequently to the growth of tourism companies. The proposed model, including innovativeness and growth, that was tested in this study, can be seen as relatively robust as the hypothesised relationships were supported. Human capital, social capital and organisational capital are important elements for company innovation activities. The correlation coefficients, that are presented in Table 3 show that there exists a significant relationship between Human Capital and Innovation, between Social capital and innovations and between Organisational capital and Innovation. All the Pearson correlations coefficients between these dimensions are positive and statistically significant, ranging from 0.338 to 0.533. The social capital dimension is positively related to innovativeness (and growth). It means that the more employees are skilled at collaborating with each other, sharing information and interact and exchange ideas, the more the firm will be innovative (and will grow). There is a positive correlation also between human capital and innovativeness (and growth). This means that the more employees are creative, bright, experts and capable to develop new ideas and knowledge, the more the firm is capable to innovate (and to grow). And finally, the more the firm uses different ways to store the knowledge, contains valuable ways of doing business and embeds much of its knowledge in structures, systems and processes, the more the firm is innovative and is growing. The results of our study are in accordance with other similar studies. In many studies, innovation has been demonstrated as an outcome of intellectual capital (Ahuja, 2000;Subramaniam & Venkatraman, 2001). Adamides and Karacapilidis (2006) stated that employees and collective organisational knowledge is important. Also the recent studies on the sources of innovation showed that the innovation capacity of a company depends heavily on its intellectual capital, including its different dimensions; human capital (experience, skills, and employee development, teamwork), organisational capital (databases, proceedings, patents, licences, trademarks, manuals and organisational structures) and social capital (networks of relationships). The importance of these dimensions was studied also by Mariz-Pérez et al. (2012), Sumedrea (2013), Kalkan et al. (2014) and others. All these authors agreed that innovation is considered as a necessity for every company. If a company wants to be competitive and achieve market success, it needs to recognise new opportunities, be creative, and innovative (Tajeddini, 2010). Only by implementing innovation can companies create new added value.
This study explored the literature on intellectual capital, innovation and their effect on tourism firm growth. According to the literature, the model and four hypotheses were developed. Our results strongly supported all four hypotheses and we demonstrated that tourism firms' intellectual capital is positively related to innovativeness and also that innovativeness has a positive impact on a firm growth. According to these results we can state that intellectual capital elements affect firms' growth as well.
The results of our study can only be generalised to a certain extent, as only a sample of tourism companies was included in the survey. Future research in diverse industries, preferably including several service sectors for a comparative study, is needed to further generalise the model. Further research is also necessary to validate the questionnaire. Although this study is strong, it also has some limitations that need to be acknowledged. This study is limited to Slovenian and Croatian companies. The factors were studied on data collected by a questionnaire which used mostly subjective measures. Our model probably does not cover all the elements of intellectual capital but it can be considered satisfactory enough, since it still includes a high number of dimensions and elements. Despite the limitations, this study makes important contributions and implications.

Conclusion
This article offers a presentation of the research, performed in two neighbouring countries, namely Slovenia and Croatia. The research attempts to examine the correlations between individual intellectual capital and innovativeness as also the influence of innovativeness on the growth of a company. We proposed a classification and measurement method of intellectual capital, highlighting the following three components; human capital, organisational capital, and social capital. Our aim is to explain innovation performance and company growth by showing the importance of each intellectual capital dimension on a specific type of innovation (product, process, marketing, and organisational).
To the authors' knowledge no updated study focusing on the link between intellectual capital, innovation and firm growth in tourism has been published recently. Thus, the present study represents an attempt to fill this gap. Our article contributes, first, to the understanding of innovativeness in the tourism business. The interest in this subject will continue to grow. The importance of innovativeness for tourism business and tourism industry competitiveness has been recognised by both researchers and practitioners. The tourism sector has specific characteristics, and the human factor is of great importance (Camisón & Monfort-Mir, 2012). For these reasons, tourism innovation is very dependent of intellectual capital of the firm.
Innovativeness, as an output of different company environmental factors, including intellectual capital, and on the other side as an influencing factor for company performance, has recently received a lot of attention from scholars, managers, and governments. However, no relevant studies explore the relationships between organisational capital dimensions, innovativeness and company growth in the tourism industry in Slovenia or Croatia. It explores the relationship between the three dimensions of intellectual capital (i.e., human capital, social capital, and organisational capital), and innovativeness and the impact of innovativeness on company growth.