Mid Sweden University

The purpose of this study was to outline how startups shape their intellectual capital to create incremental innovation. This has manifested itself as a black-box for practitioners and it has previously been unknown if startups and established firms differentiate themselves during such a process. A comparison was also made between startups in liberal market economies and the European coordinated market economies. A pilot study was conducted initially using an in-depth interview followed by a literature review, an examination of the intellectual capital construct as used in modern research and an online survey, which was sent to 2000 startups. We contributed through our findings with implications that startups construct their intellectual capital differently than established firms to generate innovation. The startups show a significant relationship between the human capital and incremental innovation as opposed to established firms that often put an emphasis on all the three dimensions of intellectual capital. We also found that there is no significant difference between liberal market economies and European coordinated market economies output of incremental innovation. However, they do differ in terms of the importance of relational capital in the creation of incremental innovation. The relational capital is more important in liberal market economies but does not affect the output of incremental innovation. We expect it has subsequent effects on the outcome of the incremental innovation since higher levels of relational capital could be manifested as a competitive advantage.