Intellectual Capital and Organizational Effectiveness: PLS-SEM approach

  • Мatea Zlatkovic Faculty of Economics University of Banja Luka
Keywords: Partial Least Squares Structural Equation Modeling, Relational Capital, Structural Capital, Human Capital, Competing Values Approach, Intellectual Capital, Organizational Effectiveness,

Abstract


An intellectual capital or intangible assets, as valuable economic resources, is increasingly becoming key driver of organizations' economic performance and competitiveness. The purpose of this research is to examine the three dimensions of intellectual capital i.e. human capital, structural capital, and relational capital, and their interdependence and, to test their direct and total effects on organizational effectiveness according to competing values approach. The proposed research model is tested in product-oriented and service-oriented organizations in the Republic of Srpska, Bosnia and Herzegovina, to establish similarities and differences within these two types of organizations. The research was performed using psychometrically validated questionnaires to measure intellectual capital and organizational effectiveness. To test hypothesized correlations partial least squares structural equation modelling (PLS-SEM) is employed. The main findings from this research are: interdependence of intellectual capital dimensions and their direct effects on certain organizational effectiveness models are significant in both types of organizations but in service-oriented organizations there is insignificant effect of human capital on structural capital, and, finally, total effects analysis shows that positive inter-dependence of intellectual capital dimensions increases the total positive effect of intellectual capital on organizational effectiveness. The final defined structural models show a robust explanation of the organizational effectiveness variance in observed context.

 

Author Biography

Мatea Zlatkovic, Faculty of Economics University of Banja Luka
Business Economics, Management and Marketing

References

Aguirre-Urreta, M. I., & Rönkkö, M. (2018). Statistical inference with PLSc using bootstrap confidence intervals. MIS Quarterly. Retrieved from https://misq.org/skin/frontend/default/misq/pdf/appendices/2018/V42I3Appendices/15_13587_RN_AguirreUrretaRonkkoAppendices.pdf

Barclay, D., Higgins, C., & Thompson, R. (1995). The Partial Least Squares (pls) Approach to Casual Modeling: Personal Computer Adoption Ans Use as an Illustration.

Bollen, L., Vergauwen, P.& Schnieders, S. (2005). Linking intellectual capital and intellectual property to company performance. Management Decision, 43(9), 1161-1185. doi.org/10.1108/00251740510626254.

Bontis, N. (1998). Intellectual capital – An exploratory study that develops measures and models. Management Decision, 36(2), 63-76.doi.org/10.1108/00251749810204142.

Bontis, N. (1999). Managing Organizational Knowledge by Diagnosing Intellectual Capital: Framing and advancing the state of the field. International Journal of Technology Management, 18(5/6/7/8), 433-462.doi.org/10.1016/B978-0-7506-7475-1.50006-3.

Bontis, N., Keow, W. C.,& Richardson, S. (2000). Intellectual capital and business performance in Malaysian industries. Journal of Intellectual Capital, 1 (1), 85-100. doi.org/10.1108/14691930010324188.

Bontis, N., Crossan, M. M., & Hulland, J. (2002). Managing an organizational learning system by aligning stocks and flows. Journal of management studies, 39(4), 437-469.doi.org/10.1111/1467-6486.t01-1-00299.

Bontis, N., Seleim, A., &Ashour, A. (2007). Human capital and organizational performance: a study of Egyptian software companies. Management Decision, 45 (4), 789–801.doi.org/10.1108/00251740710746033.

Cabrita, M. D. R., & Bontis, N. (2008). Intellectual capital and business performance in the Portuguese banking industry. International Journal of Technology Management, 43(1-3), 212-237. Retrieved from http://icbsmonitor.net/Files/CabritaBontisIJTM43.pdf

Chen, J., Zhu, Z., & Yuan Xie, H. (2004). Measuring intellectual capital: a new model and empirical study. Journal of Intellectual capital, 5(1), 195-212. doi.org/10.1108/14691930410513003

Chermack, T. J., Bodwell, W., & Glick, M. (2010). Two strategies for leveraging teams toward organizational effectiveness: Scenario planning and organizational ambidexterity. Advances in Developing Human Resources, 12(1), 137-156. doi.org/10.1177/1523422310365669.

Churchill Jr, G. A. (1979). A paradigm for developing better measures of marketing constructs. Journal of marketing research, 64-73. Retrieved from http://statmath.wu.ac.at/people/dittrich/m1bw/trochim_pdfs/zus%E4tzliches%20Material%20Thomas/Churchill1979_JMR.pdf

Clarke, M., Seng, D., & Whiting, R. H. (2011). Intellectual capital and firm performance in Australia. Journal of Intellectual Capital, 12(4), 505-530.doi.org/10.1108/14691931111181706.

Cleary, P. & Quinn, M. (2016). Intellectual capital and business performance: an exploratory study of the impact of cloud-based accounting and finance infrastructure. Journal of Intellectual Capital, 17(2), 255-278. doi.org/10.1108/JIC-06-2015-0058.

Cohen, J. (1988). Statistical power analysis for the behavioral sciences (2nd ed.). Mahwah: Lawrence Erlbaum Associates. Retrieved from http://www.utstat.toronto.edu/~brunner/oldclass/378f16/readings/CohenPower.pdf

Cohen, J. (1992). A power primer. Psychological bulletin, 112(1), 155. Retrieved from https://www.ime.usp.br/~abe/lista/pdfn45sGokvRe.pdf

Demartini, C. (2015). Relationships between social and intellectual capital: empirical evidence from IC statements. Knowledge and Process Management, 22(2), 99-111. doi: 10.1002/kpm.1470.

Denicolai, S., Cotta Ramusino, E., & Sotti, F. (2015). The impact of intangibles on firm growth. Technology Analysis & Strategic Management, 27(2), 219-236. doi.org/10.1080/09537325.2014.959484.

Edvinsson, L., & Sullivan, P. (1996). Developing a model for managing intellectual capital. European management journal, 14(4), 356-364. doi.org/10.1016/0263-2373(96)00022-9.

Edvinsson, L. & Malone, M. S.(1997). Intellectual Capital: Realizing Your Company's True Value by Finding its Hidden Brainpower. New York, NY: Harper Business.

F-Jardon, C., &Martos, M. S. (2009). Intellectual capital and performance in wood industries of Argentina. Journal of Intellectual Capital, 10 (4), 600-616. doi.org/10.1108/14691930910996670.

Ghosh, S., & Mondal, A. (2009). Indian software and pharmaceutical sector IC and financial performance. Journal of Intellectual Capital, 10 (3), 369–388.doi.org/10.1108/14691930910977798.

Gold, A. H., Malhotra, A., & Segars, A. H. (2001). Knowledge management: An organizational capabilities perspective. Journal of management information systems, 18(1), 185-214. doi.org/10.1080/07421222.2001.11045669.

Hair, J. F., Ringle, C. M., & Sarstedt, M. (2011). PLS-SEM: Indeed a silver bullet. Journal of Marketing Theory and Practice, 19(2), 139–151. doi.org/10.2753/MTP1069-6679190202.

Hair, J. F., Hult, G. T. M., Ringle, C. M., & Sarstedt, M. (2017b). A primer on partial least squares structural equation modeling (PLS-SEM) (2nd ed.). Thousand Oaks: Sage Publications.

Halim, S. (2010). Statistical analysis on the intellectual capital statement. Journal of Intellectual Capital, 11(1), 61-73.doi.org/10.1108/14691931011013334.

Hansen, G. S., & Wernerfelt, B. (1989). Determinants of firm performance: The relative importance of economic and organizational factors. Strategic management journal, 10(5), 399-411.doi.org/10.1002/smj.4250100502.

Helfrich, C. D., Li, Y. F., Mohr, D. C., Meterko, M., & Sales, A. E. (2007). Assessing an organizational culture instrument based on the Competing Values Framework: Exploratory and confirmatory factor analyses. Implementation Science, 2(1), 13.doi.org/10.1186/1748-5908-2-13.

Henseler, J., Ringle, C. M., & Sinkovics, R. R. (2009). The use of partial least squares path modeling in international marketing. In New challenges to international marketing (pp. 277-319). Emerald Group Publishing Limited. doi:10.1108/S1474-7979(2009)0000020014.

Henseler, J., Ringle, C. M., & Sarstedt, M. (2015). A new criterion for assessing discriminant validity in variance-based structural equation modeling. Journal of the Academy of Marketing Science, 43(1), 115–135. doi.org/10.1007/s11747-014-0403-8.

Hormiga, E., Batista-Canino, R. & Sánchez-Medina, A. (2011). The impact of relational capital on the success of new business start-up. Journal of Small Business Management, 49(4), 617-638. doi.org/10.1111/j.1540-627X.2011.00339.x.

Ilyin, D.S. (2014). The impact of intellectual capital on companies‘ performance: evidence from emerging markets. Korporativnye Finansy, 32 (4), 46–66. Retrieved from https://cyberleninka.ru/article/v/the-impact-of-intellectual-capital-on-companies-performance-evidence-from-emerging-markets

Jöreskog, K. G. (1971). Simultaneous factor analysis in several populations. Psychometrika, 36(4), 409–426. doi.org/10.1007/BF02291366.

Kalliath, T. J., Bluedorn, A. C., & Gillespie, D. F. (1999). A confirmatory factor analysis of the competing values instrument. Educational and Psychological Measurement, 59(1), 143-158.doi.org/10.1177/0013164499591010.

Kannan, G., & Aulbur, W. G. (2004). Intellectual capital: measurement effectiveness. Journal of intellectual capital, 5(3), 389-413.doi.org/10.1108/14691930410550363.

Kline, R. B. (2011). Principles and practice of structural equation modeling. New York: Guilford Press. Retrieved from ftp://158.208.129.61/suzuki/PP_SEM_3e.pdf

Lohmöller, J.-B. (1989). Latent variable path modeling with partial least squares. Heidelberg: Physica. doi.org/10.1007/978-3-642-52512-4

St-Pierre, Josee and Audet, Josee (2011). Intangible assets and performance – Analysis on manufacturing SMEs. Journal of Intellectual Capital, 12(2), 202-223. doi.org/10.1007/978-3-642-52512-4_5.

Marr, B., &Chatzkel, J. (2004). Intellectual capital at the crossroads: managing, measuring, and reporting of IC. Journal of Intellectual Capital, 5(2), 224-229.doi: 10.1108/14691930410533650

Meles, A., Porzio, C., Sampagnaro, G., Verdoliva, V. (2016). The impact of the intellectual capital efficiency on commercial banks performance: evidence from the US. J. Multinatl. Financ. Manage. 36, 64–74. doi:10.1016/j.mulfin.2016.04.003

Morariu, C. (2014). Intellectual capital performance in the case of Romanian public companies. Journal of Intellectual Capital, 15(3), 392-410.doi.org/10.1108/JIC-05-2014-0061.

Moslehi, A., Mohaghar, A., Badie, K., & Lucas, C. (2006). Introducing a toolbox for IC measurement in the Iran insurance industry. The Electronic Journal of Knowledge Management, 4(2), 169-180. Retrieved from file:///C:/Users/w7/Downloads/ejkm-volume4-issue2-article79.pdf

O'Sullivan, K. J., & Schulte Jr, W. D. (2007). Models for human capital management: human resource management of intellectual capital. International Journal of Learning and Intellectual Capital, 4(4), 453-466.doi.org/10.1504/IJLIC.2007.016338

Phusavat, K., Comepa, N., Sitko-Lutek, A. & Ooi, K. (2011). Interrelationships between intellectual capital and performance. Industrial Management & Data Systems, 111(6), 810-829.doi.org/10.1108/02635571111144928

Pirozzi, M.G. & Ferulano, G.P. (2016). Intellectual capital and performance measurement in healthcare organizations: an integrated new model. Journal of Intellectual Capital, 17(2), 320-350. doi.org/10.1108/JIC-07-2015-0063.

Quinn, R. E., & Cameron, K. (1983). Organizational life cycles and shifting criteria of effectiveness: Some preliminary evidence. Management science, 29(1), 33-51.doi.org/10.1287/mnsc.29.1.33.

Quinn, R. E., & Rohrbaugh, J. (1983). A spatial model of effectiveness criteria: Toward a competing values approach to organizational analysis. Management Science, 29, 363-377.doi.org/10.1287/mnsc.29.3.363.

Quinn, R. E. (1988). Beyond rational management: Mastering the paradoxes and competing demands of high performance. Jossey-Bass.

Ramadan, B.M., Dahiyat, S.E., Bontis, N. & Al-dalahmeh, M.A. (2017). Intellectual capital, knowledge management and social capital within the ICT sector in Jordan. Journal of Intellectual Capital, 18(2), 437-462. doi.org/10.1108/JIC-06-2016-0067.

Reed, K. K., Lubatkin, M., & Srinivasan, N. (2006). Proposing and testing an intellectual capital‐based view of the firm. Journal of Management studies, 43(4), 867-893.doi.org/10.1111/j.1467-6486.2006.00614.x

Sharabati, A.A.A., Naji Jawad, S. & Bontis, N. (2010). Intellectual capital and business performance in the pharmaceutical sector of Jordan. Management Decision, 48(1), 105-131. doi: 10.1108/00251741011014481.

Shortell, S. M., O'Brien, J. L., Carman, J. M., Foster, R. W., Hughes, E. F., Boerstler, H., & O'Connor, E. J. (1995). Assessing the impact of continuous quality improvement/total quality management: concept versus implementation. Health services research, 30(2), 377.Retrieved from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1070069/pdf/hsresearch00047-0111.pdf

Sriranga, V. & Vijay, K.-G. (2014). Intellectual capital and performance of pharmaceutical firms in India. Journal of Intellectual Capital, 15(1), 83-99, doi.org/10. 1108/JIC-04-2013-0049

Stewart, T.A. & Stephanie, L. (1994). Your Company’s Most Valuable Asset: Intellectual Capital. Fortune, 130, 68-74. Retrieved from http://archive.fortune.com/magazines/fortune/fortune_archive/1994/10/03/79803/index.htm

Stone, M. (1974). Cross-Validatory Choice and Assessment of Statistical Predictions. Journal of the Royal Statistical Society. Series B (Methodological), 36(2), 111-147. Retrieved from http://www.jstor.org/stable/2984809

St-Pierre, J., & Audet, J. (2011). Intangible assets and performance: Analysis on manufacturing SMEs. Journal of Intellectual Capital, 12(2), 202-223.doi.org/10.1108/14691931111123395

Wang, Q., & von Tunzelmann, N. (2000). Complexity and the functions of the firm: breadth and depth. Research Policy, 29(7-8), 805-818.doi.org/10.1016/S0048-7333(00)00106-2.

Youndt, M. A., & Snell, S. A. (2004). Human resource configurations, intellectual capital, and organizational performance. Journal of managerial issues, 337-360.Retrieved from https://www.jstor.org/stable/40604485.

Youndt, M. A., Subramaniam, M., & Snell, S. A. (2004). Intellectual capital profiles: An examination of investments and returns. Journal of Management studies, 41(2), 335-361.doi.org/10.1111/j.1467-6486.2004.00435.x

Zammuto, R. F., & Krakower, J. Y. (1991). Quantitative and qualitative studies of organizational culture (pp. 83-114). JAI Press Inc.

Zerenler, M., Hasiloglu, S. B., & Sezgin, M. (2008). Intellectual capital and innovation performance: empirical evidence in the Turkish automotive supplier. Journal of technology management & innovation, 3(4), 31-40. doi.org/10.4067/S0718-27242008000200003.

Published
2019/01/14
Section
Original Scientific Paper