The Impact of Intellectual Capital on Innovational Activity of Small and Medium Enterprises

Over the past decade researchers regard both intellectual capital and innovation capability as the principal components which create the competitive advantage of the company. Nevertheless, the relationship between these factors for small and medium enterprises within emerging market has not been subjected to conscious scrutiny. Therefore, Russian managers and owners cannot weigh the benefits and costs of their innovation capability and make decisions related to expanding its activity to the broader markets. Thus, the general purpose of this research is to gain an in depth understanding of interaction effect between intangibles or intellectual capital components and product innovation in Russian SMEs of the manufacturing industry. The author proposes the new explanation of innovation capability. We pursue the aim not just to analyze whether intellectual capital factors affect innovation, but to shed the light on the main factors which have the strongest influence and to assess what can be the predicted probability of transmitting to the higher level of innovation. The author uses logit model regression for cross-sectional data. The findings confirm that intellectual capital may either boost the probability of switching to higher level of innovation or remain it at the same level without any significant changes.