DISCOVERING THE ROLE OF INTELLECTUAL CAPITAL IN LATIN AMERICA: INSIGHTS FROM ECUADOR

This research aims to characterize the intellectual capital in Ecuadorian companies and to validate the applicability of a scale suitable for this context, considering each of its dimensions (human capital, structural capital, and relational capital), as well as innovation aspects of the Ecuadorian companies. The study uses a mixed approach, including factorial analysis and descriptive statistics, using a sample of 88 companies from different economic sectors, located in a single province of Ecuador. The results verified the applicability of the scale and its usefulness for future studies; and they showed that there are different kinds of configurations of intellectual capital, based on the sector and type of innovation usually implemented by companies. In order to be more innovative, construction firms in Ecuador need to focus more on the structural and relational dimensions of intellectual capital, and accommodation and food services industries should orient their efforts toward further developing their human capital. Future studies may explore the opportunities for enhancing innovation performance based on the management of intellectual capital in more detail, using larger sample sizes.


Introduction
Today, knowledge-based organizations are an important part of modern societies (Berezinets, et al. 2016), as companies compete by relying more on their intangible resources as key value factors (Sharabati, Jawad & Bontis, 2010). These intangible resources, which produce important benefits to overcome the weaknesses of small and medium enterprises (Verbano & Crema, 2016;Jordão & Novas, 2017) can be technologies, employee skills, process innovations, organizational structure, creativity, industrial networks, or relationships with customers and external suppliers (Starovic & Marr, 2004;Keong Choong, 2008).

Innovation in emerging countries
In the current context, characterized by globalization and dynamism resulting from technological disruptions and political and economic turbulence, innovation becomes an intrinsic characteristic for companies wishing to survive in the market (Teece, 2010). Innovation is defined by Schumpeter (1927) as the superior condition achieved due to the improvement or development of a new product or production method, or due to the opening of a new market. The interest of managers and academics in innovation is to try to understand how the innovation phenomenon has been growing in recent decades (Baregheh et al. 2009). Baregheh et al. (2009) state that innovation is being analyzed from different disciplines such as management, economics, technology, and engineering. In management, specifically in studies related to knowledge management, innovation has been conceptualized as a product of factors; one of which is the IC of organizations (Edvinsson, Sullivan, 1996;Sullivan, 1998;Bontis & Fitz-Enz, 2002;Subramaniam & Youndt, 2005).
Despite the growing interest in the subject, the number of studies has evolved very unevenly when developed and emerging countries are compared. In developed countries, there are empirical studies that have characterized IC, have developed measurement techniques for that variable, and have analyzed the relationship between IC and innovation (Bontis, 2001;Cabrita & Bontis, 2008;Marques et al. 2006;Maurer et al. 2011;Cabello-Medina et al. 2011;Dumay & Garanina, 2013;Kianto et al. 2017). Looking at studies on IC and innovation in emerging countries, it is evident that those are scarce and limited in scope to some sectors and regions, and therefore there are greater gaps in knowledge (Jardon & Martos, 2012). This lack of studies about the influence of IC on the innovative performance of companies in emerging countries is critical. This is due to the pressure on companies to innovate in a context where customer's demands are often more complex, and companies frequently face global competitors with better institutional support, access to technology, qualified personnel, and other resources (Dávila et al. 2019).
In the following section, IC and its dimensions will be discussed, as well as the theoretical relationship between IC and innovation. Subsequently, this construction will be characterized in the Ecuadorian context, and based on the results, proposals will be developed that will serve for future empirical studies on the relationship between IC and innovative performance.

Intellectual capital
The academic literature has provided several definitions related to IC. One of the most influential was established by the authors Stewart & Losee (1994) who considered IC as "the knowledge a company has in order to create a competitive advantage". It also constitutes the knowledge that is generated within the organization and that can be converted into tangible benefits (Edvinsson & Sullivan, 1996;Sullivan, 2000).
For Lev (2001), IC is also an intangible source of value, transmitted by innovations in specific projects or human resource management practices of an organization. Marr, Schiuma, & Neely (2004) further consider that IC is represented by the combination of resources and intangible activities that allows an organization to obtain a competitive advantage through the transformation of material, and financial and human resources into a system capable of creating stakeholder value and organizational innovation. Jordão & Novas (2017) consider that IC is composed of the relationship between the material and immaterial resources in the possession of an organization. The same interpretation is made by Kujansivu & Lönnqvist (2007), who mention that IC is made up of all the intangible and non-physical goods that are important in a knowledgeintensive industry.
For Stewart (1997) and Bontis (2001), IC is intellectual material, represented in knowledge, experience, intellectual property, and information that can be used to create wealth; however, Dumay (2016) makes a clarification to this definition considering that it does not take into account the totality of the nature of IC to create wealth, affirming furthermore that the basis of the value creation process (monetary, social, and sustainable) is key to deduct the value and characterization of the IC. Dženopoljac, et al. (2016) further consider that the potential of IC in corporate performance will be evident in terms of the management of this intangible resource.
Current researchers of IC such as Bontis et al. (2015), Dumay & Garanina (2013), and Kianto, et al. (2010) recognize this intangible asset as a term under construction and with multiple facets, since IC constitutes a multidimensional concept of knowledge assets, experience, and practical capabilities to create value of products and services Dumay (2016), using the intelligence rather than just the financial aspect (Allameh, 2018).
At the same time, it is important to highlight that due to the lack of direction related to the classification of intangible assets, there are several arguments related to this issue which have resulted in IC being categorized between two to four dimensions (Dženopoljac et al., 2016). However, to address this weakness, Bontis (1998);Roos, et al. (1997); Sullivan (2000); Roos (2017), Matricano (2016), Wee & Chua (2016); and Buenechea-Elberdin (2017) identified three main components to categorize IC: human capital, structural capital, and relational capital.
Human capital constitutes the combined knowledge, skill, and innovation capacity that employees have in order to accomplish a task . It also contains a series of characteristics such as education, knowledge, cultural value, and corporate identity that can influence creativity and the willingness to create new ideas within the company (McGregor, et al. 2004;Martín-de-Castro, et al. 2011). This gives satisfaction to the employee and the improvement of personal and organizational performance (Martínez-Torres, 2006). Sayyed (2018) determines that human capital is one of the largest and most important dimensions of IC in an organization. Bontis (1998) also points out that human capital constitutes a source of innovation and a strategic element for an organization. FitzPatrick, et al. (2013) agrees with this argument, and, further considers that human capital is one of the key resources of strategic renewal and therefore cannot be replaced by machines; since human capital is "the intelligence of the member of the organization" (Bontis, 1998, 65).
Structural capital constitutes the knowledge incorporated in the structures and processes of the organization, and it includes databases, patents, trademarks, research and development, technology, information systems, strategies, organizational charts, manuals and programs, and all the capabilities of the organization that support employee productivity Bontis, 2001;Petty &Cuganesan, 2005 andNazari &Herremans, 2007). Casas Nova, et al. (2017) also pointed out that the procedures, rules, systems, and routines are elements that together define the organizational system (structure and processes). Through structural capital, the company can turn the innovation and energy of its human resources into the property of the organization (Seleim, et al. 2004;Casas Novas et al. 2017). Furthermore, it is considered internal capital since the accumulated knowledge within the company's structures, processes, and capacities remain in the company when the employee goes home (FitzPatrick, et al., 2013).
Relational capital constitutes a network of relations between people and groups of people, through which information and knowledge is transferred in a shared way (Roberts, 2003). Relational capital symbolizes the best attitude of an organization to incorporate the knowledge that comes from the interaction with the external community, such as suppliers, customers, government, and industry and that it develops throughout its existence (Bontis, 1998;Inkinen, 2015). It is embedded in marketing channels, brand names, reputation, customer satisfaction, franchisees, suppliers, and partners (Bontis, et al. 2000;Davey et al. 2009). Casas Novas et al. (2017) also emphasizes that this capital is not owned by the organization, but it can establish corrective measures with a view to its development and determine connectivity between the elements (internal and external) essential for its formation.
Despite fundamental differences in each of the components of IC, they are not always found separately in organizations. Individual knowledge, for example, is related to human capital, and is often codified and institutionalized through structural capital, which is transferred and used in social networks by social capital. Therefore, the different dimensions of IC influence organizational outcomes, including innovation (Machado et al. 2017).

Intellectual capital and innovation
Innovation is defined as the openness and willingness to create and test new ideas given by a cultural aspect of the company to seek new ways of doing things, being creative in their methods of operation and product introduction (Schumpeter, 1927;Calantone et al. 2002). Several empirical studies (Fernández, et al. 2000;Subramaniam & Youndt;2005) concluded that intangible factors have a significant influence on innovation outcomes. For that reason, organizations have realized that they can achieve sustainable innovation through IC and that their success depends largely on their ability to manage this valuable intangible asset (Tootifar, et al. 2014;Buenechea-Elberdin, 2017), since knowledge assets, including IC, are essential to maintaining an appropriate innovation environment and developing sustainable innovative capabilities in a competitive environment (Allameh, 2018). Therefore, IC is seen as an antecedent for innovation (Chahal & Bakshi, 2015).
Some empirical studies have explored the role of IC and its dimensions (relational, structural, and human capital) for enhancing innovation performance. Most studies suggest that relational capital has a positive influence on innovation performance (Capello & Faggian, 2005;Zerenler, et al. 2008;Dorrego, et al. 2013;of Cabrilo & Dahms, 2018). The study by Dorrego et al. (2013) using data from SMEs from different industries shows that relational capital is an antecedent of product innovations. More evidence about the positive influence of relational capital on innovation performance was shown in the study by Zerenler, et al. (2008) in a Turkish automotive parts firm, and in studies using data from medium and large-sized manufacturing and service firms from Serbia (Cabrilo & Dahms, 2018) and Italy (Capello & Faggian, 2005). In addition, Capello & Faggian (2005) evidenced that in firms from high technology sectors, the contributions of relational capital to innovation are higher. In SMEs, the situation is not different: using data from high tech Italian manufacturing firms, the study of Agostini, et al. (2017) shows that firms with more relational capital tend to have better firm outcomes.
Regarding structural capital, its importance for leveraging innovation performance was highlighted by several studies around the world (Cabrilo & Dahms, 2018). Using data from Turkish manufacturing firms, Bayraktaroglu, et. al (2019) demonstrated that structural capital is positively related to innovation performance. Similar results were obtained by Agostini & Nosella (2017)  1011 Human capital is highlighted by academics as a critical dimension of IC. Some studies show a direct relationship between human capital and innovation performance (Bayraktaroglu, et al. 2019), and some others posit that this relationship is moderated for organizational capabilities, for instance absorptive capacity (Engelman et al., 2017). The study by Engelman et al. (2019) uses data from Brazilian manufacturing firms and highlights the positive influence of human capital on absorptive capacity, and of absorptive capacity on innovation performance. Similar results were obtained in the study by Xu & Li (2019), which analyzes high tech and low tech manufacturing SMEs from China, and provides evidence that the impact of human capital in high-tech SMEs is greater than that in non-high-tech SMEs. Despite few studies (Cabrilo & Dahms, 2018) providing evidence of a significant influence of human capital on innovation performance, there seems to be a consensus in academia about the significance of this relationship.

Methodology
For this paper's purpose, a mixed approach was used. First, a survey was applied in order to collect information about levels of IC and innovation in firms from Loja, Ecuador. In the second step, the scale used for measuring IC was statistically assessed. In the final step, the study presents a descriptive analysis for explaining relevant aspects related to the dimensions of IC and innovation.

Sample
The selected sample was of 88 companies from the city of Loja, from the main economic sectors of the Province of Loja-according to the results of the National Economic Census (INEC, 2011)-such as manufacturing, commerce, information and communication, construction, professional activities, lodging, and food services, as described in Table 1. Companies with active status, and registered with the "Superintendencia de Compañias Valores y Seguros of Ecuador" were considered as the basis for the study. The obtained sample represents 21% of the total of 424 companies from these sectors in Loja Province. The information was collected through face-toface surveys with managers of tactical or strategic levels of the target companies, between March and August 2018. relational capital; and finally, in the fifth block, data related to innovation was collected.The first and fifth blocks of the survey were developed on the basis of open and closed questions; while, from the second to the fourth block, the design was elaborated with a Likert scale, using a scale of 5 options: (1) strongly disagree, (2) disagree, (3) neither agree nor disagree, (4) agree, and (5) strongly agree.
The scale for IC was developed based on several relevant studies from around the world. The human capital dimension was measured using 11 items based on Ganesan et al. (1996), Babin & Boles (1996), Bontis (2013) The instrument was selected as it was considered appropriate for the Ecuadorian context, after conceptual and applicability validations with two academic specialists from the authors' institution, and two external academics. According to Creswell, & Creswell (2017), some questions were added and others were modified to guarantee applicability to the Ecuadorian context. Finally, the new IC instrument was validated by a group of five Ecuadorian entrepreneurs to ensure its functionality before data collection. This instrument is shown in Table 2.

Analysis Method
In line with the objective of the present work, which was to characterize the IC and innovation in the companies of Loja, this work had two parts. First, statistical validations of the reliability and validity of the used scale were made to verify if it was applicable and could correctly represent the variables of IC in the Ecuadorian context. Next, the collected data went through a descriptive analysis, following suggestions from Creswell, & Creswell, (2017). The results were presented and discussed with Ecuadorian and international specialists regarding IC and innovation.

Results analysis and discussion
After data collection, the suitability of the instrument to measure the components of IC and innovation in the Ecuadorian context was verified (Chart 2). The reliability of each category was confirmed by verifying values greater than 0.6 for indicator loadings (Hair et. al 2010) and values higher than 0.7 (threshold suggested by Nunnally & Bernstein, 1994) for each construct, following the tests of Dijkstra-Henseler, Jöreskog, and Cronbach's alpha. Convergent validity was confirmed by verifying that the average variance extracted from each construct (AVE) was above 0.5, following the suggestions of Fornell & Larcker (1981). Then, divergent validity was confirmed by verifying that the cross-loadings and the HTMT coefficient (Heterotrait-Monotrait Ratio) were lower than 0.9 for each category, as suggested by Fornell & Larcker (1981). Finally, it was verified that all the indicators or questions had a VIF (variance inflation factor) index lower than 3.3 to guarantee the absence of multicollinearity. After the first assessment of the above-mentioned indicators (first iteration), indicator H1 (VIF > 3.3) was eliminated to avoid multicollinearity; indicators H11, E10, and R5 (loadings less than 0.6) to guarantee reliability; and indicators H8, H9, E3, E4, R3, and R4 (for cross loadings) to guarantee discriminant validity (see details in the Appendix). The second interaction yielded values showing correct reliability and validity, as can be seen in Table 2.  After ensuring that the scale adequately measured IC and its dimensions, the existence of a high correlation between them can be observed, according to the numbers shown in Table 3. This result is similar to previous studies (Bozbura, 2004)  1014 toward improving their competencies, rather than as a result of a strategy focused on a certain dimension or set of dimensions of IC. After verifying the scale, IC characteristics and innovation of the studied companies were analyzed using descriptive analysis.  Figure 1 identifies, on average, greater efficiency of the three components of IC (human, structural, and relational) in companies where family ties are not predominant. These results are due to the fact that in family businesses there are greater restrictions or a tendency to increase the dispersion of ownership and even more of their intangible assets. At the same time, a lower average (3.92) was observed in family businesses for relational capital, as most family businesses avoid maintaining entries of external people for fear that they may take control of the organization (Goyzueta, 2013). However, Rodríguez-Suárez, et al. (2013) emphasize the external relations that family businesses must maintain, because of their decision-making processes and, above all, because they are dynamic companies. In Figure 2, the contribution of the female gender in determining intellectual capital is shown, denoting that when there is greater involvement of women (between 75% and 100% and between 25% and 50%), the structure of IC in each of its components (human, structural, and relational) has a greater contribution to the results of the organization. It is considered that women have the ability to create a favorable environment for companies (Granelli & Robotti, 2016). On the other hand, studies such as that of López (2013) consider that in organizations there should be an equal presence of men and women, constituting a source of creativity and inclusion for entities. Other research supports this statement by ensuring that to assess the IC and management of organizations, the distinction between men and women does not matter because the most relevant factors are the competencies of workers and not their gender (Trequattrini, et al, 2018).  1016 Figure 3 shows the distribution of the components of IC by each economic sector of study. It can be seen that in the service sectors, especially knowledge-intensive ones-those related to professional, scientific, and technical activities-there is greater efficiency of human capital. For instance, previous studies in Tunisian ICT firms showed that incremental innovations are positively linked to human capital (Berraies, 2019). Other studies highlighted the importance of human capital and relational capital for innovation in knowledge-intensive firms (Capiello et al., 2020). Regarding accommodation and food services, results from the present study evidenced that these firms needs to focus on the development of human capital (the IC dimension with the lowest mean), in line with previous studies that highlighted the relevance of human capital with information technology (Rudež & Mihalič, 2007) and structural capital (Kim et al., 2012).

ENTREPRENEURSHIP AND SUSTAINABILITY ISSUES
In manufacturing companies, there is a greater predominance of structural capital. Surprisingly, the present study showed a predominance of human capital in firms from the construction sector. Even though Lin et al. (2018) posit that business performance in the construction industry relies highly on IC, a recent study by Duodu & Rowlinson (2019) with firms from the construction sector in Hong Kong evidenced that both the structural and relational dimensions have a positive influence on innovation performance, while the effect of human capital on innovation is through the other dimensions. It may be proposed that firms from the construction sector in Loja may be able to increase their innovation performance if they focus on improving their structural and relational capital.
In this regard, it is important to note that Machado, et al. (2017) highlighted the differences in the IC configurations that companies of various types have, and in turn, stated that there is always a synergy between the components of the IC, which act together to achieve competitiveness. Due to the characteristics of the sample and the context of the study, there is more product innovation (in goods and services) in the economic sectors analyzed represented in Chart 4. Recent research has shown that companies in Latin America tend to develop incremental product innovations, as they are constantly looking for foreign product designs and adapting them to local environments (Davila, et al. 2018). In line with Hipp & Grupp (2005), in non-knowledge-intensive services (e.g. ICT, construction, housing, and food services) where cost and time ENTREPRENEURSHIP AND SUSTAINABILITY ISSUES ISSN 2345-0282 (online) http://jssidoi.org/jesi/ 2020 Volume 8 Number 2 (December) http://doi.org/10. 9770/jesi.2020.8.2(61) efficiency are important, the present study found that innovation has been carried out on products. Studies by Kianto et, al. (2010), Schilling (2011), andBuenechea-Elberdin (2017) also state that the intensity with which the IC influences innovative performance will also depend on the location of the company, the industry to which it belongs, its level of technology, and its size.  Figure 5 shows that companies which innovate in processes have different IC structures to companies that innovate in goods or services. The first ones have a greater focus on their human capital, because the knowledge, experience, skills, and creativity of the employees are fundamental for the creation of new processes (Mariz Perez et al. 2012). Companies that innovate in products also develop a higher structural capital, as this type of innovation is more complex (mainly in emerging countries), because it requires an adequate integration of specialized knowledge in people, towards final goods and services, supported by organizational processes and technology (Davila, et al. 2018). The support of organizational processes and technology in the launching of products contributes to the reduction of production costs, the faster completion of development projects, to the creation of spaces for innovation, to improving decision-making and results coordination, and to increasing the sales or revenue from new products and services (Huang, et al. 2010;Chen, et al.,2017).
At the same time, the present study showed that all companies, regardless of the type of innovation they present, pay attention to relational capital as external knowledge is a critical input for the innovative performance of organizations (Fosfuri & Tribó, 2008). On this point, Subramaniam & Youndt (2005) state that organizations generate innovations when their individual experts communicate, network, and share knowledge with each other. Dost, et al. (2016) concluded that IC is significantly associated with innovation, whether in products or processes, which is consistent with the results of the present research.

Conclusions
The main academic contribution of this study was the adaptation and verification of a scale to analyze IC in emerging countries. This scale can be used in future research, which seeks to identify relationships between IC and organizational outcomes, such as innovation and financial performance, in companies located in Ecuador or other emerging countries.
In addition, the main empirical contribution of this study is the description of the components of IC in Ecuadorian companies. The results show that the configurations of IC may vary in companies according to their sector and the type of innovation usually practiced by each company. This study identified some opportunities related to IC, for improving their innovation performance in firms from Loja. Accommodation and food services may focus on the development of human capital, and construction firms may improve their innovativeness if they increase their efforts to enhance both structural and relational capital. A dynamic view of IC covers the integration of all its components, which means considering the effects and relationships with each other, in order to understand in a broad and organized way the strengths of each organization, and to promote successful innovation.
IC appears to be an important potential engine of innovation for Ecuadorian companies, especially those located in the city of Loja. However, a proposition of this study is that not all companies need a high level of development of all IC dimensions. The level of development required for each dimension depends on its own characteristics, such as economic sector, size, or location. However, it is important to emphasize that all IC dimensions should work together to ensure that the IC contributes to creating value (Casas Novas et al. 2017). Further studies may help to explain which levels of IC and its dimensions are needed in order to achieve superior innovation performance, taking into consideration their sector and size. This will allow the development of guidelines for decision makers improving the efficiency in the allocation of its resources, by prioritizing the dimensions of IC that are most relevant to each organization.