ISSN: 2222-6990
Open access
Purpose – The ability to acquire and learn knowledge has been most important challenges faced by business around the word. Especially Small and Medium Enterprises (SMEs). SMEs is a backbone of any emerging economy. The purpose of this paper is to empirically examine the mediating role of absorptive capacity and how it affects Intellectual Capital (IC) and SME efficiency in Pakistan. It also investigates the direct impact of the components of IC on business performance.
Design/methodology/approach – Partial least square-structural equation modeling (PLS-SEM) was used to assess the effect of IC dimensions on performance of SMEs and to analyze the mediating role of absorptive capacity in this relationship. Data were collected from 486 SMEs owner/managers using a survey questionnaire with Likert scale items.
Findings – The findings of the study show that absorptive capacity, played a positive mediating role in the relationship between the dimensions of IC and those of performance of the Small and Medium Enterprises (SMEs). The dimensions of Intellectual Capital were a strong predictor of SMEs performance and had a profound positive influence.
Originality/value – This study contributes to the literature on Intellectual Capital (IC) by examining the role of absorptive capacity in the relationship between IC components and SMEs performance. This research also helps practitioners recognize the importance of transformation and the exploitation of knowledge for business performance.
Akter, S., FossoWamba, S., and Dewan, S. (2017), “Why PLS-SEM is suitable for complex modelling? An empirical illustration in big data analytics quality”, Production Planning & Control, Vol. 28 Nos 11–12, pp. 1011-1021.
Aribi, A., and Dupouet, O. (2015), “The role of organizational and social capital in the firm’s absorptive capacity”, Journal of Knowledge Management, Vol. 19 No. 5, pp. 987-1006.
Aribi, A., and Dupouet, O. (2016), “Absorptive capacity: a non-linear process”, Knowledge Management Research & Practice, Vol. 14 No. 1, pp. 15-26.
Blaug, M. (1976), “The empirical status of human capital theory: a slightly jaundiced survey”, Journal of Economic Literature, Vol. 14 No. 3, pp. 827-855.
Bontis, N. (1998), “Intellectual capital: an exploratory study that develops measures and models”, Management Decision, Vol. 36 No. 2, pp. 63-76.
Bontis, N., and Fitz-Enz, J. (2002), “Intellectual capital ROI: a causal map of human capital antecedents and consequents”, Journal of Intellectual capital, Vol. 3 No. 3, pp. 223-247.
Chaudhary, S., and Batra, S. (2018), “Absorptive capacity and small family firm performance: exploring the mediation processes”, Journal of Knowledge Management, Vol. 22 No. 6, pp. 1201-1216.
Chen, Y.-S., Lin, M.-J. J., and Chang, C.-H. (2009), “The positive effects of relationship learning and absorptive capacity on innovation performance and competitive advantage in industrial markets”, Industrial Marketing Management, Vol. 38 No. 2, pp. 152-158.
Cohen, W. M., and Levinthal, D. A. (1990), “Absorptive capacity: a new perspective on learning and innovation”, Administrative Science Quarterly, Vol. 35 No. 1, pp. 128-152.
Colombo, M. G., and Grilli, L. (2005), “Founders’ human capital and the growth of new technology-based firms: a competence-based view”, Research Policy, Vol. 34 No. 6, pp. 795-816.
Curado, C., and Bontis, N. (2007), “Managing intellectual capital: the MIC matrix”, International Journal of Knowledge and Learning, Vol. 3 Nos 2–3, pp. 316-328.
Curado, C. (2008), “Perceptions of knowledge management and intellectual capital in the banking industry”, Journal of Knowledge Management, Vol. 12 No. 3, pp. 141-155.
Engelman, R. M., Fracasso, E. M., Schmidt, S., and Zen, A. C. (2017), “Intellectual capital, absorptive capacity and product innovation”, Management Decision, Vol. 55 No. 3, pp. 474-490.
Ferreras-Mendez, J. L., Fernandez-Mesa, A., and Alegre, J. (2016), “The relationship between knowledge search strategies and absorptive capacity: a deeper look”, Technovation, Vol. 54, pp. 48-61.
Flor, M. L., Cooper, S. Y., and Oltra, M. J. (2018), “External knowledge search, absorptive capacity and radical innovation in high-technology firms”, European Management Journal, Vol. 36 No. 2, pp. 183-194.
Hair, J., Anderson, R., Black, B., and Babin, B. (2016), Multivariate Data Analysis, 7th ed., Pearson, Upper Saddle River, NJ.
Han, Y., and Li, D. (2015), “Effects of intellectual capital on innovative performance”, Management Decision, Vol. 53 No. 1, pp. 40-56.
Haskel, J., and Westlake, S. (2017), Capitalism without Capital: The Rise of the Intangible Economy, Princeton University Press, Princeton.
Huang, C.-F. ,and Hsueh, S.-L. (2007a), “A study on the relationship between intellectual capital and business performance in the engineering consulting industry: a path analysis”, Journal of Civil Engineering and Management, Vol. 13 No. 4, pp. 265-271.
Huang, C.-F., and Hsueh, S.-L. (2007b), “A study on the relationship between intellectual capital and business performance in the engineering consulting industry: a path analysis”, Journal of Civil Engineering and Management, Vol. 13 No. 4, pp. 265-271.
Hussinki, H., Ritala, P., Vanhala, M., and Kianto, A. (2017), “Intellectual capital, knowledge management practices and firm performance”, Journal of Intellectual Capital, Vol. 18 No. 4, pp. 904-922.
Inkinen, H. (2015), “Review of empirical research on intellectual capital and firm performance”, Journal of Intellectual Capital, Vol. 16 No. 3, pp. 518-565.
Jansen, J. J., Van Den Bosch, F. A., and Volberda, H. W. (2005), “Managing potential and realized absorptive capacity: how do organizational antecedents matter?”, Academy of Management Journal, Vol. 48 No. 6, pp. 999-1015.
Jardon, C. M., and Martos, S. M. (2012), “Intellectual capital as competitive advantage in emerging clusters in Latin America”, Journal of Intellectual Capital, Vol. 13 No. 4, pp. 462-481.
Jensen, K. W., Simon, E., and Parent, R. (2011), “Absorptive capacity: a proposed operationalization”, Knowledge Management Research & Practice, Vol. 8 No. 2, pp. 146-160.
Johnson, W. H. A. (2002), “Leveraging intellectual capital through product and process management of human capital”, Journal of Intellectual Capital, Vol. 3 No. 4, pp. 415-429.
Jones, T. M., Harrison, J. S., and Felps, W. (2018), “How applying instrumental stakeholder theory can provide sustainable competitive advantage”, Academy of Management Review, Vol. 43 No. 3, pp. 371-391.
Krishna, P. V., Babu, M. R., and Ariwa, E. (Eds) (2012), Global Trends in Information Systems and Software Applications, Vol. 270, Springer Berlin Heidelberg, Berlin and Heidelberg, available at: https://doi.org/10.1007/978-3-642-29216-3
Lavie, D. (2006), “The competitive advantage of interconnected firms: an extension of the resource-based view”, Academy of Management Review, Vol. 31 No. 3, pp. 638-658.
Leal-Rodriguez, A. L., Roldan, J. L., Ariza-Montes, J. A., and Leal-Millan, A. (2014), “From potential absorptive capacity to innovation outcomes in project teams: the conditional mediating role of the realized absorptive capacity in a relational learning context”, International Journal of Project Management, Vol. 32 No. 6, pp. 894-907.
Vinding, L. A. (2006), “Absorptive capacity and innovative performance: a human capital approach”, Economics of Innovation and New Technology, Vol. 15 Nos 4–5, pp. 507-517.
Mariano, S., and Walter, C. (2015), “The construct of absorptive capacity in knowledge management and intellectual capital research: content and text analyses”, Journal of Knowledge Management, Vol. 19 No. 2, pp. 372-400.
Mehralian, G., Nazari, J. A., and Ghasemzadeh, P. (2018), “The effects of knowledge creation process on organizational performance using the BSC approach: the mediating role of intellectual capital”, Journal of Knowledge Management, Vol. 22 No. 4, pp. 802-823.
Minbaeva, D. B., Pedersen, T., Bjorkman, I., and Fey, C. F. (2014), “A retrospective on: MNC knowledge transfer, subsidiary absorptive capacity, and HRM”, Journal of International Business Studies, Vol. 45 No. 1, pp. 52-62.
Mubarik, M. S., Govindaraju, V. G. R., and Devadason, E. S. (2016), “Human capital development for SMEs in Pakistan: is the “one-size-fits-all” policy adequate?”, International Journal of Social Economics, Vol. 43 No. 8, pp. 804-822.
Mubarik, S., Chandran, V. G. R., and Devadason, E. S. (2016), “Relational capital quality and client loyalty: firm-level evidence from pharmaceuticals, Pakistan”, The learning organization, Vol. 23 No. 1, pp. 43-60.
Mubarik, M. S., Chandran, V. G. R. and Devadason, E. S. (2018), “Measuring human capital in small and medium manufacturing enterprises: what matters?”, Social Indicators Research, Vol. 137 No. 2, pp. 605-623.
Mubarik, S., Naghavi, N., and Mubarik, M. F. (2019), “Governance-led intellectual capital disclosure: empirical evidence from Pakistan”, Humanities and Social Sciences Letters, Vol. 7 No. 2, pp. 141-155.
Obeidat, B. Y., Tarhini, A., Masa’deh, R., and Aqqad, N. O. (2017), “The impact of intellectual capital on innovation via the mediating role of knowledge management: a structural equation modelling approach”, International Journal of Knowledge Management Studies, Vol. 8 No. 3, pp. 273-298.
Pablos, O. de P. (2004), “The nurture of knowledge-based resources through the design of an architecture of human resource management systems: implications for strategic management”, International Journal of Technology Management, Vol. 27 Nos 6–7, pp. 533-543.
Ortiz, B., Donate, M. J., and Guadamillas, F. (2018), “Inter-organizational social capital as an antecedent of a firm’s knowledge identification capability and external knowledge acquisition”, Journal of Knowledge Management, Vol. 22 No. 6, pp. 1332-1357.
Petti, C., and Zhang, S. (2016), “The role of absorptive capacity in Chinese firms”, Measuring Business Excellence, Vol. 20 No. 2, pp. 1-12.
Rafique, M., Hameed, S., and Agha, M. H. (2018), “Impact of knowledge sharing, learning adaptability and organizational commitment on absorptive capacity in pharmaceutical firms based in Pakistan”, Journal of Knowledge Management, Vol. 22 No. 1, pp. 44-56.
Saunders, M., Lewis, P., and Thornhill, A. (2009), Research Methods for Business Students, 5th ed., FT Prentice Hall, Harlow.
Schilke, O., Hu, S., and Helfat, C. E. (2018), “Quo vadis, dynamic capabilities? A Content-analytic review of the current state of knowledge and recommendations for future research”, Academy of Management Annals, Vol. 12 No. 1, pp. 390-439.
Schultz, T. W. (1961), “Investment in human capital”, The American Economic Review, Vol. 51 No. 1, pp. 1-17.
Secundo, G., Lombardi, R., and Dumay, J. (2018), “Intellectual capital in education”, Journal of Intellectual Capital, Vol. 19 No. 1, pp. 2-9.
Sekaran, U., and Bougie, R. (2013), Research Methods for Business: A Skill-Building Approach, 6th ed. John Wiley and Sons, New York, NY.
Shafique, I., and Kalyar, M. (2018), “Linking transformational leadership, absorptive capacity, and corporate entrepreneurship”, Administrative Sciences, Vol. 8 No. 2, pp. 1-17.
Sharabati, A. A., NajiJawad, S., and Bontis, N. (2010), “Intellectual capital and business performance in the pharmaceutical sector of Jordan”, Management Decision, Vol. 48 No. 1, pp. 105-131.
Shih, K., Chang, C., and Lin, B. (2010), “Assessing knowledge creation and intellectual capital in banking industry”, Journal of Intellectual Capital, Vol. 11 No. 1, pp. 74-89.
Soo, C., Tian, A. W., Teo, S. T. T., and Cordery, J. (2017), “Intellectual capital-enhancing HR, absorptive capacity, and innovation”, Human Resource Management, Vol. 56 No. 3, pp. 431-454.
Tseng, C., Chang Pai, D., and Hung, C. (2011), “Knowledge absorptive capacity and innovation performance in KIBS”, Journal of Knowledge Management, Vol. 15 No. 6, pp. 971-983.
Van Dijk, A., Hendriks, P., and Romo-Leroux, I. (2016), “Knowledge sharing and social capital in globally distributed execution”, Journal of Knowledge Management, Vol. 20 No. 2, pp. 327-343.
Welbourne, T. M., and Pardo-del-Val, M. (2009), “Relational capital: strategic advantage for small and medium-size enterprises (SMEs) through negotiation and collaboration”, Group Decision and Negotiation, Vol. 18 No. 5, pp. 483-497.
Wernerfelt, B. (1984), “A resource-based view of the firm”, Strategic Management Journal, Vol. 5 No. 2, pp. 171-180.
Youndt, M. A., Subramaniam, M., and Snell, S. A. (2004), “Intellectual capital profiles: an examination of investments and returns”, Journal of Management Studies, Vol. 41 No. 2, pp. 335-361.
Zahra, S. A., and George, G. (2002), “Absorptive capacity: a review, reconceptualization, and extension”, The Academy of Management Review, Vol. 27 No. 2, pp. 185-203.
In-Text Citation: (Khan & Yusoff, 2023)
To Cite this Article: Khan, A. I., & Yusoff, W. F. W. (2023). The Impact of Dimensions of Intellectual Capital on Small and Medium Enterprise (SMEs) Performance in Pakistan with a Mediating Role of Absorptive Capacity. International Journal of Academic Research in Business and Social Sciences, 13(3), 110 – 127.
Copyright: © 2023 The Author(s)
Published by HRMARS (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode