Unlocking high-growth potential: does intellectual capital efficiency drive European entrepreneurial ventures?

Abstract

Purpose

This paper investigates the influence of intellectual capital (IC) efficiency and its components – human capital efficiency (HCE), structural capital efficiency (SCE) and capital employed efficiency (CEE) – on the growth paths of small and medium-sized enterprises (SMEs) and their likelihood of becoming high-growth firms (HGFs).

Design/methodology/approach

Drawing on the resource-based view (RBV), our study reveals a positive relationship between IC efficiency and the likelihood of becoming HGFs. Using a longitudinal dataset of 554,076 firm-year observations corresponding to approximately 79,158 European SMEs from 2012–2019, our study employs probit regression to examine the impact of IC efficiency on the probability of becoming an HGF. To investigate the impact of IC efficiency across the growth rate distribution, we conduct further analyses via generalized least squares.

Findings

The results show that IC efficiency positively influences the growth paths of small entrepreneurial ventures and their likelihood of experiencing high-growth episodes.

Practical implications

For practitioners, the findings underscore the importance of investing in IC to enhance the growth process of entrepreneurial firms and increase their likelihood of achieving HGF status. Investments in IC can maximize growth potential and competitiveness, informing strategic decision-making.

Social implications

Policymakers should consider the critical role of IC in promoting SME growth and formulate policies that encourage the development of IC among entrepreneurial firms. Such initiatives can stimulate economic growth, innovation and job creation across European economies.

Originality/value

This study contributes to the literature by focusing on entrepreneurial firms and examining how IC efficiency drives their transition to HGF status. This study provides empirical evidence across several European contexts over an extended period, emphasizing the role of IC efficiency in shaping the growth paths of entrepreneurial firms.

Citation

Cattafi, G., Pistolesi, F. and Teti, E. (2024), "Unlocking high-growth potential: does intellectual capital efficiency drive European entrepreneurial ventures?", Journal of Small Business and Enterprise Development, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JSBED-03-2024-0113