The Journal of Applied Business Research – November/December 2013 Volume 29, Number 6 2013 The Clute Institute Copyright by author(s) Creative Commons License CC-BY 1673 Intellectual Capital In Mexican SMEs From The Perspective Of The Resource-Based And Dynamic Capabilities Views Alain Daou, Laval University, Canada Egide Karuranga, Laval University, Canada Zhan Su, Laval University, Canada ABSTRACT This paper combines the resource-based and dynamic capabilities views to examine intellectual capital in Mexican small and medium enterprises (SMEs) and its relation to competitive advantage. Following an exploratory approach, this paper relies on face-to-face interviews with managers to take an in-depth look at the three components of intellectual capital: human, organizational, and relational capital. Further, a SME typology is proposed and the examined companies are categorized accordingly. Dynamic SMEs have instituted internal and external processes to respond rapidly to change, allowing them to sense opportunities and threats and subsequently benefiting from competitive advantages. This analysis can help both managers and policymakers put appropriate programs in place to encourage SME development and growth by identifying the impact of intellectual capital. The generalizability of the results is limited by the small sample size and the focus on one geographic region in Mexico. This study contributes to the limited literature on intellectual capital in SMEs in emerging markets. Moreover, very few papers have analyzed intellectual capital from the perspective of the dynamic capabilities view. Keywords: Intellectual Capital; Dynamic Capabilities View; Resource-Based View; SME, Emerging Markets; Mexico 1. INTRODUCTION ntellectual capital (IC), often defined in terms of human, organizational, and relational capital, has become a key determinant of the success of small businesses, especially during transitions from traditional factors of production to a knowledge-based economy (Piperopoulos, 2010). According to some authors, the competitive advantages and performance of small and medium enterprises (SMEs) are largely influenced by their intellectual capital (Cabello & Kekäle, 2008; Cohen & Kaimenakis, 2007; Jardón & Martos, 2009; Lopez, 2006). In fact, intellectual capital is one of the main assets of businesses that support competitive advantages and are also the basis for value creation (Edvinsson & Malone, 1997). It has been demonstrated that IC generally has a positive impact on firm performance. However, its impact on SME performance in emerging economies is even stronger because for these companies, access to financial capital is limited. In addition, the role of these types of companies is crucial for local development (Jardón & Martos, 2009; Piperopoulos, 2010). For instance, in Mexico, one of the major emerging countries, the last census conducted by the National Institute of Statistics and Geography (INEGI) in 2009 stipulated that SMEs represent 98.4% of all firms and support 78.5% of employment at the national level. Due to the small size and client proximity of SMEs, they have the ability to respond quickly to changes and adapt by managing the different opportunities or challenges they may encounter. With regard to innovation, it has been proven that SMEs generate more innovations per unit of financial capital than larger firms (OECD, 2010). Flexibility also allows these firms to adapt to niche markets and outperform large firms in terms of research and development (R&D) (Bhagavatula, Elfring, van Tilburg, & van de Bunt, 2010; Çakar & Ertürk, 2010). I