As outlined above, we seek to examine the effects of internal and external resources of
organisations on innovation performance as well as the relationship between the two
resources. In building the theoretical background of this study, we drew upon the concepts
of intellectual capital and social capital suggested by Nahapiet and Ghoshal (1998) as
primary resources for organisational innovation. According to Nahapiet and Ghoshal (1998),
the term "intellectual capital" refers to the knowledge and knowing capability of a social
collectivity, such as an organization, intellectual community, or professional practice” (p.
245), while social capital is defined as ”the sum of the actual and potential resources
embedded within, available through, and derived from the network of relationships
possessed by an individual or social unit” (p. 243). Intellectual capital is a valuable resource
in the form of accumulated knowledge which is embedded within an organisation, while
social capital resides in the relationships firms have with their network partners. Nahapiet
and Ghoshal (1998) argued that innovation is the ultimate outcome of the creation of new
knowledge which results from the combination and interaction between intellectual capital
and social capital of firms.