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Academy of Strategic Management Journal Volume 20, Issue 2, 2021
1
Marketing Management and Strategic Planning 1939-6104-20-S2-152
THE ROLE OF INTELLECTUAL CAPITAL IN SHAPING
BUSINESS PERFORMANCE: MEDIATING ROLE OF
INNOVATION AND LEARNING
Mário Nuno Mata, ISCAL-IPL Instituto Superior de Contabilidade e
Administração de Lisboa
Hira Aftab, Institute of Business & Information Technology
José Moleiro Martins, Superior Institute of Accounting and Administration of
Lisbon
Sumira Aslam, Institute of Business & Information Technology
Muhammad Ussama Majeed, Institute of Business & Information Technology
Anabela Batista Correia, ISCAL-Higher Institute of Accounting and
Administration of Lisbon
João Xavier Rita, ISCAL-Higher Institute of Accounting and Administration of
Lisbon
ABSTRACT
Organizational performance and their relationship with intellectual capital is becoming
interesting, particularly in times of intense economic turbulence, when companies are looking for
new solutions to maintain and grow their business. The aim of this study is to explore the impact of
intellectual capital on business performance. Self-administered questionnaire containing the
measures of human capital, structural capital, relational capital, business performance, innovation
& creation and learning & education has been used for data collection. Quantitative data have
been analyzed through PLS-SEM techniques. This study has explored that intellectual capital has
positive and significant association with business performance. The study has also examined that
intellectual has direct impact on intellectual capital. Moreover, human capital has also indirect
impact on business performance as innovation & creation and learning & education positively and
significantly mediate the relationship between human capital and business performance. Outcomes
of this research are providing insights to higher education institutions, firms and policymakers to
consider these factors while making strategies and policies to boost the firm’s value.
Keywords: Intellectual Capital, Human Capital, Structural Capital, Customer Capital, PLS-SEM
INTRODUCTION
Traditionally, it is believed that the most essential component of any organization is their
physical assets such as land, labor and capital. There were times when these assets determined the
economic growth of a country. With the emergence of a more globalized world, this era has become
the era of knowledge. With fast development, inter and intra industry has increased tremendously.
Businesses and institutions are in a run to develop and explore opportunities and find ways to
maximize their outputs (Seleim, Ashour & Bontis, 2004). To achieve the desired results firms
cannot rely solely on the physical assets they have. Intellectual capital is as important an asset as
any for a firm. For survival in this global world intellectual capital should be considered vital.
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Marketing Management and Strategic Planning 1939-6104-20-S2-152
In strategic management, the most essential factor is intellectual capital. Intellectual capital
is also known as intangible asset of the company and is believed to be the most valuable asset.
Intellectual capital of the company includes a firm’s tendency or capability to make innovations,
create new processes, develop new technology and methods and bring new procedures and
programs. In this era, where there is pressurized competition everywhere if an organization wants to
win the race, it must have a competitive advantage. One of the competitive advantages of a firm is
its intellectual capital. It boosts the investor’s confidence, as a result, increasing the firm’s
reliability (Kong, 2008).
Intellectual property is the worth of knowledge of the employee in an organization, the
skills, business training or any useful information that may provide the company with a competitive
advantage (Edvinsson & Sullivan, 1996). In this age of knowledge, intellectual capital has become
an asset, and can broadly be defined as; ‘the collection of all informational resources a company has
at its disposal that can be used to drive profits, gain new customers, create new products or
otherwise improve the business. It is the sum of employee expertise, organizational processes, and
other intangibles that contribute to a company's bottom line’ (Guthrie, 2001).
A consensus has been developed that Intellectual Capital (IC) is categorized into three main
components. As IC in itself is as intangible asset it cannot be measured directly (Skandia, 1994).
We measure it with its sub-categories which are as follows:
1. Human Capital: This is defined as ‘the skills, knowledge, and experience possessed by an individual
or population, viewed in terms of their value or cost to an organization’ (Sandberg, 1986).
2. Structural Capital: ‘is the one which consists of the supportive infrastructure, processes, and databases
of the organization that enable human capital to function’ (Skandia, 1994).
3. Relational Capital: ‘is defined as the value inherent in a company's relationships with its customers,
vendors, and other important constituencies’ (Skandia, 1994).
The intangibility of intellectual capital is the reason that throughout all the countries in the
world it has been difficult to deal with it. Most of the time, when measuring the business
performance of an industry the intellectual capital of the firm is taken for granted and is often
ignored. The concept is still not fully developed and accepted in the banking industry of
underdeveloped countries. By considering this problem, this study aims to explore the impact of
intellectual capital on business performance.
Research Objectives and Questions
RO1: To investigate the association between intellectual capital and business
performance of banking sector.
Following research questions have been used to achieve this objective:
RQ1: Does human capital has an association with business performance?
RQ2: Does structural capital has an association with business performance?
RQ3: Does relational capital has an association with business performance?
Second research objective of this study is:
RO2: To investigate the impact of intellectual capital on business performance of
banking sector.
Following research question has been used to achieve this objective:
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Marketing Management and Strategic Planning 1939-6104-20-S2-152
RQ1: Does intellectual capital has an impact on business performance?
Third research objective of this study is:
RO2: To investigate the mediating relationship of human capital and business
performance through innovation & creation and learning & education.
Following research questions have been used to achieve this objective:
RQ1: Does innovation & creation mediates the relationship between human capital and
business performance?
RQ2: Does learning & education mediates the relationship between human capital and
business performance?
LITERATURE REVIEW AND HYPOTHESES DEVELOPMENT
Every company has special knowledge related to procedures, programs, patents, customers,
suppliers, technologies and management skills and it is known as intellectual capital of the company
(Pedro et al., 2018). Intellectual capital includes all the intangible assets that are never represented
on balance sheet or financial statements. Intellectual capital determines the gap that arises in book
value and market value of a firm (Hsu & Fang, 2009). Intellectual capital is all non-tangible asset
that an organization possessed. Intellectual Capital is termed as the brain of the firm and the
currency of the future. The intellectual Capital of a company represents the power of ideas of
employees, and their capability to be innovative and, thus determines the future of the company
growth. (Choudhary et al., 2013). Competitive advantage of a company is based on the knowledge
of the company as it lead to the sustainable intellectual capital (Prinsloo, 2017) Competitive
advantage of the any business is generally subject to the ability of a firm to create, separate,
embrace and disseminate its knowledge and information in the firm. Knowledge sharing in a firm is
an asset on which a firm can sustain and build up the competencies of the firm. (Ahmed Hashmi et
al., 2019).
Theory of Intellectual Capital
With change in global trends, information and knowledge are two weapons that help any
firm to gain competitive advantage. The competitive advantage, at this point simply the primary
concern, but instead the individual competences and knowledge housed in each firm. Any firm can
decide to expand on these qualities and receive the rewards, or just watch while their rivals keep on
augmenting the gap of success (Sharabati et al., 2010). Edvinsson & Malone (1997) are two main
authors that had significantly contributed in directional guidelines for the concept of theory of
intellectual capital. Intellectual capital includes possession of marketing intelligence, trends
knowledge, effective human resource management, technology advancement, and professional
skills that provide distinctive advantage for firm in the market (Edvinsson & Malone, 1997).
Intellectual capital is also considered as “packaged useful knowledge” (Hejase et al., 2016).
Intellectual capital theory depicts that knowledge as an asset played vital role in strategy
development to strategy implementation in a firm just like money or equipment of the firm. Top
level management need to invest in these resources as it will bring greater efficiency in work
performance and provide core competencies that are unable to copy by any rival firm. (Soewarno &
Tjahjadi, 2020).
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Intellectual capital is merger of three major components that are, Human Capital (HC),
Relationship Capital (RC) and Structural Capital (SC). When a firm aligned and balanced these
fundamental components of intellectual capital, firm gain competitive advantage and enhance
business performance and create the best possible financial capital. (Eszter & Jónás, 2012). A firm
that consists of employee’s traits including human, structural and relationship capital, usually have
good working environment, and better HR practices and enhance employee’s productivity and less
employee turnover ratio (Do et al., 2008).
Intellectual capital is becoming a viable option for firms to succeed in market. In last decade
under developing countries are not much focusing on employees’ skills and employees’ motivation
due to fewer resources available and difficulties in doing business. (Fabrizio, 2009). Moreover,
fundamental components are becoming necessary to do business in today’s market. The major
emphasis of the intellectual capital theory is that there must be consistent balance between these
fundamental components in order to gain optimum output from the business. This theory also
provide major supporting guidelines that corporate value for the firms usually does not arise from
the intellectual capital elements directly, instead it only arise from the interaction between these
three fundamental component of the intellectual capital. (Harris, 2000). Intellectual capital concepts
had derived by linking the knowledge to the capital. Intellectual capital considered the knowledge
of the employees as the firms’ biggest assets (Bontis et al., 2000).
Human capital skills and knowledge a firm’s employees have, which they use to solve
problems that arise in a firm (Faggian et al., 2019). Human capital is also considered as the explicit
knowledge in the minds of employees about any aspect of the business or life (Akhmetshin et al.,
2018). Human capital is considered as key to the intellectual capital. Generally, human capital is a
combination of different factors like; education, experience, technological factors, knowledge,
educational background, devoted time, occupational appreciated values, professional qualifications
and competence (Shirinkina & Kodintsev, 2018).
Human Capital has immense importance for the organizations of developing countries as it
is perceived to increase productivity thus profitability of the organization. An organization is often
said to be as good as its people, directors, employees, and leaders who constitute an organization's
human capital. Managed by the Human Resource (HR) department of an organization, HC tends to
migrate, especially in global economies. That is one of the reasons that there is often a shift from
under developing areas or rural areas to more developed or urban areas. (Boon et al., 2018). Human
Capital is considered as the source of innovation and creativity and help in brainstorming new ideas
and new processes. (Abdurakhmanova et al., 2020). Learning and education is also major source of
human capital. Learning new skills enhance the employee’s productivity and in return it increases
the profitability of the firm (Lim et al., 2018).
Structural capital consists of the supportive infrastructure, processes and databases of the
firm that enable human capital to function (Beltramino et al., 2020). Structural Capital is owned by
a firm and remain with a firm even when people leave. Structural Capital mainly includes
capabilities, routines, methods, procedures and methodologies embedded in a firm (Kong, 2017).
SC is the supportive non-physical infrastructure that enables Human Capital to function. It is also
stated that after a specific duration, Human Capital turns into Structural Capital. Structural Capital
was regarded as the skeleton of an entity it aids a firm’s growth and helps reach its objectives.
(Khan et al., 2017) Structural Capital has two main components: (1) Infrastructure Capital (2)
Intellectual Ownership.
Relational Capital is defined as all relationships - market relationships, power relationships
and cooperation - established between firms, institutions and people, which depicts a strong sense
of belonging and a highly developed capacity of cooperation typical of culturally similar people and
institutions (Graça & Kharé, 2020). Relational dependency may be vertical or horizontal, either up
or downstream, shaping different types of cooperative, collaborative or competitive mechanisms in
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Marketing Management and Strategic Planning 1939-6104-20-S2-152
different ecosystem. Relational Capital is actually the knowledge hidden in the external links of the
business such as relation with suppliers, customers, government or other external entities. Customer
& supplier relation and knowledge of marketing channels are important components of relational
capital (Bontis et al., 2018). In simple words, relational capital is actually the possible number of
those customers which area connected with the firm it actually works as a link between Structural
Capital and Human Capital (Campos et al., 2020).
By sharing the information, business provides an opportunity and helps the customer to
determine their cost- benefits analysis (Kumar et al., 2018). Firm’s which are using Relational
Capital effectively are producing more creative and innovative responses to customer demands
(Hung, 2020). Sales of a company can be changed significantly by producing a small change in
customer demand. Innovative behavior of employees is also stimulated by changes of demand.
Performance of the firm is increased when customers get products which are not exactly, they
demanded but better than they demanded. This is the customer focused behavior model (De Jong &
Kemp, 2003).
Business performances are indictors, either financial or non-financial that determine the
faith of the business and determined the achievement of the objectives and goals of the organization
(Lima et al., 2021). To draw a road map, performance measures are very important because it is not
possible that we manage or control a thing which cannot be measured (Essawy et al., 2019).
Business performance is a vital factor of experimental researches related to business procedures and
policies. It is a complicated and multi-dimensional concept. Measurement and evaluation of
performance help top management to examine the success level of an activity performed by an
individual, group or organization according to specific criteria. Business performance can be
measured in subjective and objective ways depending on the financial and non-financial data
(Kostyukova et al., 2017). Financial indicators like profitability, increase in sales rates, investment
achieved from equity capital help in objective performance measurement. While in subjective
performance measurement, non-financial indicators like market share, quality of products, and
number of new products launched in the market, technological advancement and marketing
achievements are used. Primary and secondary resources are available to get data for these
measurements (Chua et al., 2018).
Market and value-based measures in business performance measurement gives more
appropriate data rather than the accounting-based measurement method. But objective performance
measures are seen to be more dominant and valid to show the financial aims of the business. One of
the ideal measurement methods of financial and non-financial indicators is balanced scorecard
method. (Dinçer et al., 2017). There are many methods to analyze business performance. Studies
find different results and corporate community uses different methods. Every method has its own
advantages in different situations and some capture those important factors which are recognized by
other methods. Traditional measures pay more attention to cash flows, net income and WACC.
Mainly these techniques take into account the tangible assets present in the firm, while in the
knowledge-based economy managers give importance to employees and Intellectual Capital
(Ahmad, 2019).
Several Scandinavian countries have started to publish their Intellectual Capital statements.
Content analysis was conducted on the annual reports of 10,000 Canadian corporations. Results
reflected that there are several Intellectual Capital related terms in the statements and found
significantly small number of instances in which Intellectual Capital disclosure took place.
Organizations that concerned about their relationship with capital market to develop strategic and
tactical initiatives should opt for the voluntary disclosure of intellectual capital (Bontis et al., 2000).
A study conducted in Taiwan showed that intellectual capital elements directly influence a
business’ performance, with the exception of Human Capital. Human Capital indirectly affects
performance through the other three elements of intellectual capital; innovation capital, process
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capital and customer capital. It was also found that there exists a relationship among the three
fundamental components of intellectual capital and the business performance. This study was
applied in high-tech IT industry and helps management identify relevant intellectual capital
elements and their indicators to enhance business performance (Wen-Ying Wang & Chingfu Chang,
2005). World is changing from industrial to knowledge economy and the most important element of
this economy is Intellectual Capital. In recent study the relationship of intellectual capital and
business performance within the National Iranian South Oil Company. In accordance to previous
studies conducted the results showed that there is a positive relationship between the variables
however the difference in psychometric item evaluation came from the unique geographical context
(Ahmadi, 2013). Similarly, theory of intellectual capital also provides a strong ground about the
relationship of these variables.
H1: Human Capital has a positive and significant association with business performance
H2: Structural Capital has a positive and significant association with business performance
H3: Relationship Capital has a positive and significant association with business performance
Human Capital dimensions are related to employee’s innovative work behavior and
employee’s learning and education. In another study human capital dimensions were empirically
tested with the help of a theoretical model and specifically suggests knowledge sharing behavior
among employees as a key mediator (Mura et al., 2012). Whereas, learning and education of
employees were also considered as critical in order to enhance business performance.
H4: Learning and education of the employees positively and significantly mediates the relationship between
human capital and business performance
H5: Innovation and creation positively and significantly mediates the relationship between human capital and
business performance
In another study conducted on Jordanian Telecommunication Companies. Results reflected
that intellectual capital should be taken into serious consideration when formulating a company’s
strategy (Mahoney & Kor, 2015). There was a significant relationship between intellectual capital
and business performance among the companies in the telecommunication sector. Study also found
that there are strong inter-relationships and interactions among the three components of intellectual
capital. Similarly (Bontis et al., 2018) conducted a research on the pharmaceutical industry in
Jordan. He concluded that intellectual capital is of primary interest for the senior executives of the
pharmaceutical firms in Jordan. This study also concluded that there exists a strong correlation
between intellectual capital and business performance.
H6: Intellectual capital has a positive and significant impact on business performance
Independent Variables Dependent Variable
FIGURE 1
CONCEPTUAL FRAMEWORK
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MATERIALS AND METHODS
Data Collection
Research design is the detailed plan according to which research will take place. For the
current study, quantitative research approach has been used. Study setting of the current study is
based on natural environment and data is purely non-contrived in nature as data is collected through
self-administrated questionnaire. Researcher interference was minimum during data collection to
avoid biasness. Unit of analysis is “individual” as study is investigating the impact of intellectual
capital on the business performance of the bank. Research is based on cross sectional data. Data is
collected only one time and nature of the topic and study setting also support that time horizon must
be cross sectional.
Sample size for the current study is 150. PLS-SEM has the higher level of statistical power with
the small sample size (Jr et al., 2018). Purposive sampling technique has been used to gather
accurate and relevant responses. As this study focused on the banking sector that is why a screening
question has been added in order to screen out the irrelevant responses.
Instrumentation
Due to COVID-19 and lockdown in many countries around the globe, the data have been
gathered online through google forms. This questionnaire was originally developed by Canadian
author Dr. Nick Bontis in 1998. For this study, the questionnaire has been circulated among the
employees of public and private banks. Five-point likert scale is used to record the view of
respondents. Questionnaire is adapted from the Bontis & Sharabati studies (Bontis et al., 2000;
Sharabati et al., 2013). Questions have been phrased, adjusted and adapted according to the
guidelines for a good questionnaire (Morrison et al., 2010).
Human Capital is measured with the help of 5 items. Innovation & creation and Learning &
education are measured with 5 items each. (1=strongly disagree and 5=strongly agree). Relational
Capital and Structural Capital have 7 and 8 items respectively. Business performance is measured
with the help of 7 items. Pilot testing has been conducted before data collection process in order to
check the understandability of the questionnaire. 20 people were included in the pilot testing and
after working on their suggestions and feedbacks we finalized the questionnaire. Response rate of
the current study is 60%, which is considered as excellent response rate. So, this study has the fair
representation of the population and having a good response rate, therefore, generalization of the
results is higher.
Data Analysis Tools and Techniques
Smart PLS 3.1 is used for the evaluation of the measurement model and determination of the
Path relationship of the variables. Data cleaning, data coding and preliminary data analysis of
demographics, such as descriptive statistics and frequency distribution of the demographics have
been calculated with the help of SPSS 23. Structural Equation Modeling (SEM) is a multivariate
statistical data analysis technique that provide better results for hypothesis testing and validity or
reliability of the instrument. Moreover, PLS is non parametric in nature that is why it can manage
and handle not normal data with ease and also work with both metric and quasi metric data (Hair et
al., 2014). Hair and his colleagues in 2016 recommended the step wise approach for data analysis in
PLS-SEM. Measurement theory and structural theory are engaged in developing path model.
Firstly, the measurement model is evaluated in order to find the reliability and validity of the items
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of each construct. When the validity and reliability is established, hypothesis is tested with the help
of path coefficient and overall variance R2.
RESULTS
Demographics
A detailed analysis of the demographics of the study has been done through the SPSS. This
help to develop a clearer and meaningful summary of data. Demographic profiling has immense
importance as it helps to generalize the results on large population and provide better insights to
organizations to better understand and implement the strategies. The descriptive statistics for the
gender of the survey showed that 72 percent of respondents are male and 28 percent are female. The
majority (61%) of the respondents are those individuals which belong to the age group (35-40),
while the 57% individual belong to the age group ranges from 31-35. Whereas 48.6% respondents
are from public corporation and 51.7% are from private corporation. A large number of respondents
belong to the non-HR staff, making it 61.3% of the total, whereas 38.8% are from HR position.
Table 1
DEMOGRAPHIC STATISTICS OF THE RESPONDENTS
Items
Categories
Percentage
Gender
Male
72
Female
28
Age
Below 26
0
26-30
21
31-35
57
35-40
61
More than 40
11
Type of corporation
Public
48.6
Private
51.7
Employment Status
SVP
0
VP
6
AVP
29.3
OG1
43.3
OG2
14.6
OG3
6.6
Measurement Model Assessment
PLS-SEM has different step wise approach for reflective and formative measurement model.
Current study has reflective measurement model. In reflective measurement model, firstly, indicator
reliability and internal consistency have been evaluated. Internal consistency reliability is evaluated
through the Cronbach’s Alpha and composite reliability. Values of all the items of each constructs
are in range of (0.7-0.9) i.e., above the critical level. It reflects that all the indicators of each
construct show consistency in measuring that construct. In next step, outer loadings are examined in
order to check indicators reliability. Outer loadings of all the reflective items are above the
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communality level i.e., 0.708. For the purpose of discriminant validity, Fornell-Larcker Criterion
and HTMT ratio have been calculated. HTMT ratio represents the significant results that all values
are above the critical level (Human Capital - 0.459, Relationship Capital - 0.557, Structural Capital
-0.641). Whereas, in Fornell-Larcker Criterion the correlation between items and relevant construct
is higher than the correlation of items with other variable. So, discriminant validity is established.
For the purpose of convergent validity, AVE has been examined. HC have highest value i.e., 0.678
and RC have 0.554. All the values are above minimum acceptance level of 0.50 and reflect that
there are lesser numbers of errors in the indicators.
This section may be divided by subheadings. It should provide a concise and precise
description of the experimental results, their interpretation, as well as the experimental conclusions
that can be drawn.
FIGURE 2
SEM MODEL – REPRESENTATION OF BOTH MEASUREMENT AND STRUCTURAL
MODEL
Structural Model Assessment
VIF and tolerance values have been examined in order to check the collinearity issues. VIF
is considered as “the reciprocal of tolerance”. All the values for VIF are in between 1.123 to 2.661.
Thus, there is no collinearity issue reported. Path coefficients are evaluated in order to evaluate the
hypothesized relationship. For the path coefficients, bootstrapping has incorporated with 5000
samples (Hair et al., 2014). Both t statistics and p values are evaluated in order to determine the
significance of the relationship. According to Hair et al and his colleagues, the critical level of t
statistics is 1.96. Whereas, p values less than 0.005 are considered as significant. The path
coefficient value of Human Capital (HC) → Business Performance (BP) is 0.323, whereas the path
coefficient value of Structural Capital (SC) → Business Performance (BP) is 0.500. Lowest value
of Path coefficient is for the relationship between Relationship Capital (RC) → Business
Performance (BP) i.e., 0.289. Whereas the p values and t statistics are shown in Table 2, that
represent that t statistics for the Human Capital (HC) → Business Performance (BP) is 4.002
(t>1.96), more than the critical level of significance. Whereas the p value is also significant (0.000).
Similarly, t statistics for the relationship between Structural Capital (HC) → Business Performance
(BP) is 7.526 (t>1.96), and similarly, t statistics for the relationship between the Relationship
Capital (RC) → Business Performance (BP) 3.867 (t>1.96). In both hypothesized relationship, p
values are also significant.
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Table 2
PATH COEFFICIENTS
Original
Sample (O)
MMean
(M)
Standard Deviation
(STDEV)
T
Statistics
P
Values
HC – BP
0.323
0.302
0.045
4.002
0.000
SC – BP
0.5
0.504
0.056
7.526
0.000
RC – BP
0.289
0.29
0.045
3.867
0.000
Coefficient of Determination (R2 Value) is next step in evaluation of structural model. Value
of R2 is usually 0.25 for weak effect, 0.50 for moderate or substantial effect and 0.75 for strong
effect on endogenous construct. Coefficient of Determination (R2) of the Business Performance
(BP) is 0.732 which is considered as strong impact as it is close to 0.75 (strong impact) and above
0.50 (substantial impact) as indicated by the recommendations (Hair et al., 2012). While Innovation
& Creation (IC) has lowest value of 0.467 and consider as weak to moderate effect. Whereas
Learning & Education of Employees (LEE) has a value of 0.704 consider as strong impact by
exogenous construct. Values of R square and adjusted R square have very much less difference that
represent that model is parsimonious.
Table 3
COEFFICIENT OF DETERMINATION (R2)
Endogenous
Construct
R Square
R Square Adjusted
BP
0.732
0.721
IC
0.467
0.464
LEE
0.704
0.702
Mediation Analysis
This study includes two indirect effects (1) HC → (IC) → BP and (2) HC → (LEE) → BP.
In first indirect effect, innovation & creation is mediating the relationship between human capital
and business performance. In second indirect effect, learning & education of employees is
mediating the relationship between human capital and business performance. The path coefficient
value of HC → (IC) → BP is 0.377 and t statistics for this relationship is 5.006; more than critical
level (t>1.96). Whereas p value is also significant. Second mediation is HC → (LEE) → BP. The
path coefficient value of HC → (IC) → BP is 0.400 and similarly, t statistics for this relationship is
8.627; more than critical level (t>1.96).
Table 4
TOTAL INDIRECT EFFECT
Original
Sample (O)
Mean
(M)
Standard Deviation
(STDEV)
T
Statistics
P
Values
HC > IC >
BP
0.377
0.379
0.039
5.006
0
HC > LEE
> BP
0.4
0.404
0.047
8.627
0
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CONCLUSION
Current study is providing the direct and indirect impact of intellectual capital on business
performance of banking sector. Firms usually don’t rely only on Intellectual Capital, which has
three dimensions i.e., Human Capital, Structural Capital and Relational Capital but also have some
capabilities which serve as main driver of better performance of firms.
This research has highlighted those three dimensions of Intellectual Capital i.e., Human
Capital, Structural Capital and Relational Capital have positive and significant association with
business performance of banking sector. These findings of current study are consistent with some
earlier studies (Bin, 2011; Mushraf, 2011; Samad, 2013).
Moreover, the results of the current research also confirm that Structural Capital and
Relational Capital and Human Capital have direct impact on business performance of banking
sector. These outcomes have been supported by many past researches as according to (Zeithaml et
al., 1988) satisfied customer can influences the financial performance of firm. Structural Capital
includes knowledge sharing adds value to Human Capital which ultimately increases the business
performance (Bontis, 2001).
In addition, current study also examined that Human Capital has indirect impact on business
performance as Human Capital affects business performance through innovation & creation. This
outcome is consistent with past research (Bontis et al., 2005). In order to gain competitive
advantage and business performance, human knowledge and creative skills play an important role
(Agarwala, 2003 & Samad, 2012).
It has also been found that Human Capital affects business performance through learning &
education. The focus of the present study was to identify a variable which mediates the relationship
between Intellectual Capital and business performance because along with Intellectual Capital firms
also possess some factors that supports their Intellectual Capital.
In current study, we identify that learning & education positively and significantly mediate
the relationship between Human Capital and business performance. This can be elaborated as when
a firm provides the learning opportunity to their employees then it adds value in the Human Capital
of firm which would ultimately boost the firm’s value by increasing firm’s financial performance.
This predicts that firms can boost their performance when managers pay attention towards the
Human Capital, Structural Capital and Relational Capital of the firm.
Findings of current study have theoretical and managerial implications. This study is
providing better understanding to banks about the role of Intellectual Capital on business
performance of banking sector. Current study is considering some mediators to provide clear
understanding of link between Intellectual Capital and bank’s performance. So, this study is
fulfilling the gap between theoretical and practical work. This study has investigated the direct
impact of Intellectual Capital on bank’s performance but also explored the indirect effect of Human
Capital on bank’s performance through innovation & creation and learning & education. So, current
study is also providing managerial implications by highlighting that to increase the bank
performance mangers must boost the importance of Intellectual Capital and capabilities that
mediates the relationship between business performance and Intellectual Capital.
This study is providing guidelines to Higher Education Institutions that HEIs must provide
opportunities to students so that they can understand the importance of intellectual capital in firms
and learn those skills, which can help in increasing firm’s value. Current study is also providing
insights to policymakers so that they make those strategies and policies that can promote the culture
of training and educate employees with necessary knowledge and skills so that they can contribute
towards the better business performance which results in more value distribution between firm’s
stakeholders.
Focus is only on banking sector in this study is a limitation. The outcomes of current study
may not be generalized on different industries and different sectors. Another limitation of this
Academy of Strategic Management Journal Volume 20, Issue 2, 2021
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Marketing Management and Strategic Planning 1939-6104-20-S2-152
research is that data was collected during COVID-19 pandemic. Due to limited time, limited money
and the country's present situation made the analysis challenging and limited the discovery of many
aspects.
Future research may be conducted to study the three-dimensional concept of organizational
intellectual capital – rational capital, emotional capital and spiritual capital, which can be measured
by rational intelligence, emotional intelligence and spiritual intelligence, respectively. Future
studies can be conducted on different sectors other than banking sector can help to explore more
about the relationship between intellectual capital and business performances. Future studies can be
conducted in other developing and developed countries so a clear comparison can be obtained
because results may differ when moving across different countries. Various other factors can be
utilized in future studies to investigate how they mediate the relationship between intellectual
capital and business performance. It can help firms and policymakers to add those factors in their
strategies that can add value in their business performance. Further researches can increase the
sample size for data collection to predict better and more accurate results.
After applying the PLS-SEM techniques the current study concluded that intellectual capital has
positive and significant association with business performance. Moreover, it has been examined that
intellectual capital has direct impact on business performance. However, current study has also
explored that human capital has indirect impact on business performance of banking sector.
Innovation & creation positively and significantly mediates the relationship between human capital
and business performance. It has also been explored that learning & education positively and
significantly mediates the relationship between human capital and business performance.
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