Leveraging intellectual capital and dynamic capabilities for service innovation: insights from management consulting firms

Purpose This study examines how intellectual capital components – human, structural, relational and renewal capital (RNC) – impact service innovation performance (SIP) in Chinese management consulting firms. It also investigates the mediating role of dynamic capabilities (DCs) in transforming intellectual capital into innovative service outcomes. The research aims to provide a comprehensive understanding of how consulting firms can strategically leverage their intangible resources and organizational capabilities to sustain a competitive advantage in a rapidly evolving market. Design/methodology/approach The study employs a quantitative research design using survey data from Chinese management consulting firms. Structural equation modeling is utilized to test relationships between intellectual capital dimensions, DCs and SIP. The analysis focuses on the direct effects of human, structural, relational and RNC on innovation, as well as the mediating effect of DCs. This empirical approach integrates theories from the resource-based view (RBV), enterprise capability theory and service innovation literature. Findings Results indicate all four intellectual capital components positively and significantly influence service innovation, with RNC exerting the strongest effect. DCs mediate these relationships by enabling firms to sense opportunities, seize them and reconfigure resources effectively. Human capital (HC) fosters creativity; structural capital supports knowledge management; relational capital enhances client collaboration and RNC drives continuous learning and adaptability. The findings confirm that strategic orchestration of intellectual capital through DCs is essential for sustaining innovation in consulting services. Research limitations/implications The study is limited by its focus on Chinese consulting firms, which may restrict generalizability to other cultural or industry contexts. The cross-sectional design limits causal inferences, suggesting longitudinal studies for future research. Measurement of intellectual capital and DCs relies on self-reported data, which may introduce bias. Further research could explore sector-specific variations, incorporate qualitative insights and examine external environmental factors influencing the intellectual capital innovation relationship. Despite limitations, the findings offer valuable insights for theory development and practical innovation management in knowledge-intensive service industries. Practical implications Consulting firms should invest in targeted HC development, advanced knowledge management systems and robust client relationship management to drive service innovation. Emphasizing continuous learning and renewal through research and development, foresight activities and collaborative partnerships is critical. Firms must enhance DCs by adopting agile project management and digital tools to quickly sense, seize and reconfigure resources. An integrated innovation strategy combining intellectual capital development with capability building helps firms remain competitive and responsive to rapid market changes. These practices foster sustained innovation, improved client satisfaction and organizational resilience. Social implications By enhancing service innovation, consulting firms contribute to more effective and customized solutions for client organizations, potentially improving overall business performance and economic growth. The promotion of continuous learning and talent development supports workforce skill advancement and knowledge diffusion within the industry. Trust-based client relationships foster transparency and collaboration, encouraging ethical business practices. Additionally, innovation driven by intellectual capital and DCs can lead to sustainable consulting services that better address complex societal challenges. These outcomes collectively promote a knowledge-based economy and strengthen the social fabric of professional service ecosystems. Originality/value This study uniquely integrates intellectual capital theory, DCs and service innovation theory to offer a holistic framework explaining innovation performance in consulting firms. It empirically validates the mediating role of DCs in converting intellectual capital into service innovation, extending the RBV with capability orchestration. By focusing on the Chinese management consulting context, the research provides culturally relevant insights into intangible resource management. The multi-theoretical model advances academic understanding and offers actionable strategies for practitioners to enhance innovation through coordinated development of human, structural, relational and RNC alongside dynamic organizational capabilities.