IMPACT OF INTELLECTUAL CAPITAL ON ORGANIZATIONAL PERFORMANCE: EVIDENCE FROM A DEVELOPING COUNTRY.

Author:Barkat, Waseem
Position::Report - Abstract
 
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INTRODUCTION

Intellectual capital is recognized as a central source of competitive advantage. It focuses on intangible resources that contribute to value creation of an organization (Edvinsson & Malone, 1997; Lev, 2000; Subramaniam & Youndt, 2005). IC captures "the sum of all knowledge firms utilized for competitive advantage" (Subramaniam & Youndt, 2005). In prior research, IC found to significantly affect organizational performance (Chen et al., 2005; Subramaniam & Youndt, 2005). However, most of the cases only having intangible resources do not guarantee sustained competitive advantage. It is important to know as how to utilize/process such resource throughout the organization. On the other hand, Knowledge Based View (KBV) of a company recognized the role of knowledge process capability in leveraging and managing knowledge in the organizations (Grant, 1996a & 1996b). Specifically, the IC literature deals with intangible resources in firms, whilst knowledge management, discusses the mechanism through which these resources are controlled and managed. Hence, to gain the idea that how knowledge is created in organizational setup, it's important to understand the interaction between these two aspects. Nevertheless, some previous studies discussed the interaction between knowledge management processes and company's performance (Gold et al., 2001; Hsu & Sabherwal, 2011; Tanriverdi, 2005) but, research lacks to put IC to investigation. Kianto et al. (2014) suggested various conceptual models and among those models, one of them is mediation effect of knowledge process capability among IC and organizational performance. Based on Kianto et al. (2014) conceptual framework, this research discusses an imperative issue that has less discussed. This paper focuses on knowledge process capability that how it mediates between IC and organizational performance? Thus, KBV will guide our attention, how knowledge process capability interacts with IC and organizational performance (Grant, 1996a & 1996b).

In this proposed research framework IC is comprised of human capital, structural capital and relational capital, whereas knowledge process capability is comprised of five subdimensions, i.e. Knowledge acquisition, Knowledge documentation, Knowledge creation, Knowledge transfer and knowledge implementation. In this research the term knowledge management, knowledge management process and knowledge process capability are used interchangeably. Though literature shows, these two areas have developed in parallel, but empirical literature lacks explaining how these two approaches combine and further how these two mechanisms interact for organizational value creation (Eisenhardt & Santos, 2002).

Based on Kianto et al. (2014) conceptual framework and KBV theory, this research try to make two crucial contributions. First, this study empirically tests the mediating effect of knowledge process capability between IC and organizational performance. Second, while adding knowledge process capability, it helps to understand either, which individual dimension of IC has more effects on organizational performance?

LITERATURE REVIEW

Underlying Theory: Knowledge-Based View

The theoretical framework of this research is guided by KBV theory. In KBV theory, knowledge has been considered as the most strategic sources of an organization (Grant, 1996b). Proponents of the KBV recognized such resources are central source of competitive advantage, because such knowledge resources are difficult to imitate, socially complex, immobile and heterogeneous. The theory of KBV further validates that knowledge-related resources add more value for achieving organizational performance then tangible resources (Grant, 1996a & 1996b). Furthermore, knowledge resides in individual and it's obligatory for managers to integrate such individual owned knowledge by providing structural arrangements of co-ordination and cooperation among specialized knowledge workers. Moreover, companies focus on organizational knowledge process flowing through these structural arrangements is utilized by individuals for knowledge creation, storage and deployment. Further, such knowledge management processes lead to organizational performance (Valmohammadi & Ahmadi, 2015). Hence, this research examines the mediating role of knowledge process capability between IC dimensions and organizational performance.

The Relationship between IC and Knowledge Process Capability

Human capital is regarded as the skills, satisfaction and motivation of employees (Bontis et al., 2000). On the other hand structural capital refers to organizational structure, procedures and processes and administrative programs (Bontis et al., 2000; Roos et al., 1997). Finally, relational capital denotes the relations with customers and suppliers and their loyalty toward an organization (Kim & Kumar, 2009). On the other hand, Filius et al. (2000) explained knowledge process capability in five sub segments: knowledge acquisition, documentation, transfer, creation and application. Knowledge is a pivotal part for todays'...

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