THE IMPACT OF INTELLECTUAL CAPITAL DIMENSIONS ON VIETNAMESE INFORMATION COMMUNICATION TECHNOLOGY FIRM PERFORMANCE: A MEDIATION ANALYSIS OF HUMAN AND SOCIAL CAPITAL.

Author:Nhon, Hoang Thanh
Position:Report - Statistical data
 
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INTRODUCTION

Vietnam ICT industry has the bright future as Vietnam has been emerging as a production center for both IT hardware and software services (ITU, 2015). The expected growth rate of Vietnam's ICT market is eight percent in the period of 2016-2020 (ITU, 2015). Hence, the government has devised a master plan for ICT sector which specifies targets for 2020 turning Vietnam into an advanced ICT country (ITU, 2015; Taking-off strategy: Does it stepping up the development of the ICT industry in Vietnam, 2013). However, unlike other well- developed industries in term of inputs, firm size, management knowledge, ICT with short product life cycle, high customer demand and very unpredictable technological changes, attaining and managing Valuable, Rare, Inimitable and Non-Substitutable (VRIN) sources like intellectual capital is very important to superior performance. However, the intellectual capital of Vietnamese ICT firms is a shortage (Taking-off strategy: Does it stepping up the development of the ICT industry in Vietnam, 2013). Therefore, to survive and grow in a highly competitive and uncertain institutional environment, they must increase their efforts in intellectual capital development. Intellectual capital often referred to as the value is created by three types of intangible resources, that is, human capital such as individual's knowledge, skill and education, organizational capital including all non-human knowledge containers involving information and communication systems, databases, process manuals, strategies, routines and social capital regarding to social relationships of an organization or individual with customers, investors, competitors or suppliers (Taking-off strategy: Does it stepping up the development of the ICT industry in Vietnam, 2013). Although the popularities of western studies on intellectual capital have built on the assertion that it is the key source of superior performance, there are very few studies in developing countries validating, operationalizing above propositions where the business environment is very unstable like Vietnam. In this article, several contributions can be made to management literature as the following. Firstly, we extend previous literature by offering insights into the relevance of the social, human and organizational capital, for achieving ICT firm's outstanding performance in the face of environmental uncertainties. Secondly, we advance existing research in this field by explicitly discussing how organizational, social and human capital development leading to the achievement of the outstanding performance. Lastly, we measure the mediating role of the social capital in the model by evaluating the extent to which its effects on performance through organizational and human capital is contingent on environmental uncertainties. In sum, to fill above gaps, we build and validate the conceptual model of the interrelationships among intellectual capital dimensions and firm performance and then suggest how to use the outcome of model test effectively.

THEORETICAL BACKGROUNDS AND HYPOTHESIS DEVELOPMENTS

Resource-Based View

The ICT sector is a service sector, thus, strategic intangible resources such as intellectual capital, resulting from knowledge and skills of employees, processes and information systems and customer relationships are very important. It is claimed that ICT firm with strong intellectual capital can achieve sustainable competitive advantages and differentiate themselves from their competitors (Zeglat & Zigan, 2013; Wernerfelt, 1984). For this reason, we use Resource-Based View (RBV) as a theoretical framework for this study. RBV is an economic tool used to determine the strategic resources available to a firm (Wernerfelt, 1984). Therefore, it is argued that the management and development of intellectual capital are vital means of ICT firm's strategic management and performance (Wernerfelt, 1984). The RBV looking inside the company for resources of superior performance is valuable, enabling firm strategies that improve its efficiency and effectiveness, rare, not available to other competitors, imperfectly imitable, not easily implemented by others and non-substitutable, not able to be replaced by some other non-rare resource (Cao & Wang, 2015).

Firm Performance

The firm has been examined by academia for a considerable time in measuring the health of the firm. The reliable and valid measurement of performance is critical for research. Initially, relying on a purely financial perspective, the firm performance measurement has been gradually extended to multiple dimensions. Several classification criteria have been suggested. Venkatraman & Ramanujam proposed that firm performance should be measured in terms of financial and operational aspects (Venkatraman & Ramanujam, 1986). Financial performance is measured by indicators such as sales growth, earning per share and profitability which is reflected by return on investment, return on sales and return on equity. However, operational or non-financial performance emphasizes factors such as product quality and productivity, market share and marketing effectiveness (Demirbag, Tatoglu, Tekinkus & Zaim, 2006). To ensure that firm performance is measured accurately, Dess & Robinson recommended that firm should employ both financial and non-financial performance measurement. Rather than relying on a single indicator, utilizing multiple indicators enables firms to measure performance via more complex and informative measures as well as assess the contribution of each indicator to the latent variable (Dess & Robinson, 1984).

Intellectual Capital

The Impact of Human, Organizational and Social Capital on Firm Performance

The first definition of intellectual capital was suggested by an economist, John Kenneth Galbraith in 1969, he believes that intellectual capital is not only an intangible asset but also an ideological process (Bontis, 1998; Edvinsson & Sullivan, 1996; Huang & Jim, 2010). Other scholars suggest that intellectual capital is the accumulation of all knowledge, information, intellectual property, experiences, social networks, capabilities and competencies that enhance organizational performance not only held by individuals but also embed in its business process (Bontis, Chua & Richardson, 2000; Subramaniam & Youndt, 2005; Rastogi, 2003). Rastogi offers a comprehensive definition describing intellectual capital "as the holistic or meta-level capability of a company to coordinate, orchestrate and deploy its knowledge resources toward creating value in pursuit of its future vision" (Choo, Tayles & Luther, 2010). Over past years, the concept of intellectual capital has been defined in multiple ways, resulting in a lack of consensus regarding its components (Intellectual Capital Information). However, synthesizing the existing academic discussions, we find that the widely accepted definition for intellectual capital should have three components: human, organizational and social capital (Bontis, 1998; Phusavat, Comepa, Sitko-Lutek & Ooi, 2011; Hsu & Fang, 2009; Sharabati, Jawad & Bontis, 2010; Aramburu & Saenz, 2011).

Embedded in employees, human capital may be defined as the summation of abilities, skills, attitude, commitment, experience and educational background of employees that enable them to act in ways which are economically valuable to both individual and to the firm (Shih, Chang & Lin, 2010). Human capital brings value to the company as a criterion of competency and creativity possessed by employees which allows them to identify business opportunities, create new knowledge and solve problems (Nonaka & Von Krogh, 2009). The firm does not have its own human capital but rather lease the acquired knowledge, skills and experience of the employee. Quality of human capital in a firm is influenced by hiring practices and training activities (Gilbert, Von & Broome, 2017). The economic value of human capital is dependent on how an employer uses and develops. Therefore, scholars confirmed that it is deemed as the most important intangible resource of firm's development, especially in innovative sectors like ICT (Cao & Wang, 2015). Hence, the first hypothesis is proposed as the following:

[H.sub.1]: Human capital has a positive and significant influence on firm performance.

Defined as the institutionalized knowledge and codified experiences preserved in the organizational image, culture, routines, procedures, information systems and patents (Gilbert, Von & Broome, 2017; Nahapiet & Ghoshal, 1998) organizational capital is a strategic intangible asset. The purpose of organizational capital is to coordinate communication and action among individuals in an organization (Gilbert, Von & Broome, 2017). From the literature review, scholar suggests three distinct dimensions of organizational capital as the following: (a) the structural, (b) the cultural and (c) knowledge dimension (Gilbert, Von & Broome, 2017). The first dimension, structural dimension, refers to the formal procedures and processes of the organization providing the decision-making guideline. This includes human resource policies and guidelines of the labor-management practices such as hiring, tasking, staffing and disciplinary action (Nonaka & Von Krogh, 2009; Gilbert, Von & Broome, 2017, Nahapiet & Ghoshal, 1998). The cultural dimension accounts for processes serving for the long-term strategy of the firm. This include formal objectives, strategic plan, mission, values, vision (Akdere & Roberts, 2008; Djuric & Filipovic, 2015), the organizational culture and...

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