MEDIATING ROLE OF OPERATIONAL CAPABILITIES BETWEEN INTELLECTUAL CAPITAL AND ORGANIZATIONAL PERFORMANCE: A PROPOSED THEORETICAL FRAMEWORK.

Author:Hassan, Saad
Position:Report
 
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INTRODUCTION

In strategic management research relationship between the resources and performance is of major concern (Andersen, 2011). Researchers of the comptemporary era are identifying the mechanism that how resources can enhance the performance of an organization (Chen, 2012). From theoretical perspective, resource based theory (RBT) provides predominant framework by positing that unique strategic resources like perfectly inimitable and immobile idiosyncratic knowledge assets and capabilities are required to obtain superior performance (Barney, 1991; Andersen, 2011). Knowledge is assumed to be main element in modern economy and according to knowledge based view (KBV) organizations need knowledge or Intellectual capital for their survival in intensive competition (Stewart, 1997).

Intellectual capital is intangible knowledge based resource which clearly overweighs the tangible corporate value (Edvinsson & Malone, 1997). Moreover, sustainable ability of an organization to compete in the modern era is derived from exploitation and utilization of its knowledge based resources i.e. intellectual capital (Teece et al., 1997; Ling, 2013; Inkinen, 2015; Dzenopoljac et al., 2017). This is the reason that this era employs more effort in understanding and managing intellectual capital framework (Lu, 2014). IC is the important knowledge based resource of the organization that enhances the performance of an organization particularly in the knowledge based economy (Farsani et al., 2012). A plethora of research studies argued that IC has a significant positive effect on the organization performance (Tseng & James, 2005; Subramaniam & Youndt, 2005; Kalkan, Bozkurt & Arman, 2014). Similarly, many have linked IC with the radical innovation and learning capability (Karchegani, Sofian & Amin, 2013; Phusavat, Comepa, Sitko-Lutek & Ooi, 2011; Hsu & Fang, 2009). However, there are wide number of researchers who argued that intellectual capital relation with performance, radical innovation and organizational learning capability is complex (Mosavi, Nekoueizadeh & Ghaedi, 2012; Moghadam et al., 2013; Delgado-Verdeet et al., 2016).

On the other end, many researchers claim that only possession of resources does not mean that the organization will achieve superior performance. Major concern should be on allocation, effective utilization and management of resources (Tseng & James, 2005; Huang, Wu & Rahman, 2012). Resources itself do not provide superior performance without the ability/capability of the organization to transform them according to desired outcome (Huang, Wu & Rahman, 2012; Andersen, 2011). Moreover, organizations do not differ on the basis of resources but differ on the basis of their ability to utilize the resources (Richey et al., 2014; Andersen, 2011; Hunt, 2011). Veritably, resources lead towards capabilities and capabilities transform organizational resources into the performance outcomes (Wang, Dou, Zhu & Zhou, 2015; Dangol & Kos, 2014; Helfat & Winter, 2011; Wu, Melnyk & Flynn, 2010). For that reason, organizations required resources as well as adequate capabilities to attain superior performance and in order to allocate, deploy and coordinate organization resources in distinct and superior way operational capabilities are required (Cavusgil, Seggie & Talay, 2007). Operational capabilities are considered important for business performance as these are the secret ingredient for an organization to attain and maintain superior performance (Wu, Melnyk & Flynn, 2010; Helfat & Winter, 2011).

However, while studying the operational capabilities, dynamic capabilities are considered as its antecedent (Pavlou & El Sawy, 2011; Wilden & Gudergan, 2015). Conversely, if there is always a capability behind a capability then we face an infinite regress problem and it is impossible to identify the ultimate source of performance improvement (Collis, 1994; Cepeda & Vera, 2007). Therefore, performance is augmented through resources and operational capabilities (Eisenhardt & Martin, 2000; Pavlou & El Sawy, 2004). Without operational capabilities resources can lose its value over the period of time (Wu, Melnyk & Flynn, 2010). In addition, Lee & Choi (2003) stated that to refresh or create operational capabilities knowledge based resources i.e. Intellectual capital (Subramaniam & Youndt, 2005) is required. Consequently, both intellectual capital and operational capabilities are complement to each other. However, their relation is completely overlooked.

According to the best knowledge of authors of this study no previous study has highlighted the link of intellectual capital with operational capabilities. Therefore, this research fill the gap in existing literature by proposing a conceptual framework that links IC with the organizational performance through the mediating role of operational capabilities. In addition to this, present study also differentiates among different types of organizational capabilities. Therefore, this study is unique in sense that differentiates operational capabilities with other organizational capabilities and develops the relation of intellectual capital with operational capabilities.

In the following discussion, this paper reviews the theoretical background of variables under study. Further, in the light of RBV proposed conceptual framework is drawn. Reminder of paper includes conclusion and discussion followed by future recommendations.

THEORETICAL BACKGROUND AND CONCEPTUAL FRAMEWORK

Intellectual Capital

From past few decades, organization's endogenous factors are considered as key driver for creating value for an organization (Wernerfelt, 1984; Barney, 1986; Rumelt, 1991). Particularly, there is consent among RBV scholars that intangible resources based on knowledge are determinants of organization's sustainable performance (Newbert, 2008). However, intangible resources in other words knowledge or intellectual assets (Delgado- Verdeet et al., 2016) have proven to be problematic in term of their identification and measurement from RBV (Reed et al., 2006). To conquer these issues intellectual capital based view has emerged as suitable theoretical approach (Martinde Castro et al., 2013; Delgado-Verdeet et al., 2016). According to this perspective, both knowledge based assets and intellectual assets are considered to be equal and called intellectual capital (Subramaniam & Youndt, 2005).

IC has been defined in many ways. Research scholars presented the definition of IC in their own way. For instance, Steward (1997) defined the IC as the stock of collective knowledge, expertise, skills, information technologies, intellectual property, customer satisfaction and team management that contribute towards the wealth of the organization. In the similar context, Bontis et al. (2000) defined the IC as the knowledge submitted by the individual workers and organization to achieve the sustainable competitive advantage. More specifically, Cabrita (2009) stated that IC is the set of intangible resources which include skills and competencies that enable the firm to increased organizational performance. IC is accumulated through different levels within the organization, namely individual (human capital) organizational (structural capital) and inter-organizational (Relational capital) (Delgado-Verdeet et al., 2016).

Human capital is the cornerstone compared to the rest of the component of IC (Moon & Kym, 2006). It refers to the intelligence, knowledge, competencies, creativity, behavior, attitude, aptitude and education, leadership abilities, learning capacity, experience and skills of individuals in the organization. All these attributes originates from the knowledge and skills embedded in the employees. Human capital makes the organization's development possible therefore; they are required to carry out firm's activities (Sveiby, 1998; Bozbura, 2004; Youndt & Snell, 2004; Bollen & Schnieders, 2005; Tovstiga & Tulugurova, 2007; Huang & Hsueh, 2007; Cabrita & Bontis, 2008; F-Jardon & Martos, 2009; Hsu & Fang, 2009; Sharabati, Jawad & Bontis, 2010; Chien & Chao, 2011; Ling, 2013; Inkinen, 2015).

Second core dimension of IC is structural capital. SC is the structure and mechanism which support employees. Further, it is the routine of the organization which makes the individual assets into the organizational asset (Bollen & Schnieders, 2005; Sharabati, Jawad & Bontis, 2010; Kamukama, Ahiauzu & Ntayi, 2011). It is the knowledge that remains in organization when peoples depart. Additionally, it includes all those factors that support employee's productivity or mechanism of the organization which in turn resulted in individual performance as well as overall business performance (Edvinsson & Malone, 1997; Kamukama et al., 2011).

In addition to the human and structural capital, third main component of IC is relational capital. It represents the knowledge of the organization embedded in the external relationship. RC includes relationship of organization with its suppliers, customers, competitors, agents and shareholders, members of society, strategic partners and informal networks...

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