The Role Of Innovation And Managerial Capability In The Relationship Between Intellectual Capital And Sustainable Competitive Advantage

Purpose-The purpose of the present study is to examine the role of innovation and managerial capabilities on the relationship between intellectual capital and sustainable competitive advantage of the commercial banks operating in Tanzania.The researcher argues that,innovation mediates the relationship while managerial capabilities the relationship leadimg to sustainable competitive advantage of the commercial banks.The study is founded on four theories namely;resource based view,knowledge based view,resource orchestration,and diffusion of innovation theory.Methodology-Survey method was deployed to collect data from 127 commercial banks operating in Tanzania.The collected data were analyzed in three stages.First,data were analyzed using exploratory factor analysis followed by confirmatory factor analysis and finally,hypotheses were tested using Partial least square-structural equation modeling and linear regression analysis.A total of 889 questionnaires were distributed to the respondents,out of which 406 questionnaires were returned with a response rate of 45.7 percent.Findings-The results show that human capital,structural capital and relational capital have a direct,significant,and positive effect on the sustainable competitive advantage of the Tanzanian commercial banks.The results further indicate that,innovation positively and significantly mediates the relationship between the three elements of intellectual capital(human capital,structural capital,and relational capital)and the bank's sustainable competitive advantage.Moreover,the results show that managerial capability positively moderates the relationship between structural capital and sustainable competitive advantage of the commercial banks operating in Tanzania.On the other hand,the results reveal that managerial capability negatively moderates the relationship between relational capital and sustainable competitive advantage.However,managerial capability was found to have a negative and insignificant moderating effect on the relationship between human capital and sustainable competitive advantage.Similarly,managerial capabilities show a negative and insignificant moderating effect on the relationship between innovation and sustainable competitive advantage.Practical implications-Sustainable competitive advantage tends to improve when strong managerial capabilities of the commercial banks are combined with static intellectual capital particularly structural capital.Thus,to achieve such productive combination,the Tanzanian commercial banks need to frequently develop the capabilities of their existing managers or they should hire competent managers from the labor market who can innovate services,processes,and markets in meeting the bank's target of satisfying both the current and potential clients.To make all these happen,innovative intellectual capital is inevitable.Originality/value-The "static" intellectual capital and dynamic managerial capabilities in collaboration with innovation have been analyzed in a single conceptual model.This sort of combination helps in creating a better understanding of how the two dimensions interact to carate sustainable competitive advantage among the commercial banks.Further,the previous studies on intellectual and sustainable competitive advantage have been using the ordinary least square(OLS)approach which is not friendly when you have a complicated model involving both mediator and moderator.The current study therefore used a combination of two methods namely:partial least square-structural equation modeling(PLS-SEM)and linear regression analysis.