Impact of intellectual capital and organizational learning on small and medium enterprises’ innovation capability and performance

Abstract

The present research focused on the performance of Small and Medium Enterprises (SMEs) in the Malaysian manufacturing industry. Poor performance and low GDP of SMEs in the manufacturing industry have negatively impacted the Malaysian economy. Thus, this research is undertaken to address the poor performance of SMEs in the Malaysian manufacturing industry. The present research investigated the relationship between human capital, structural capital, relational capital, and organizational learning with the mediating role of innovation capability and moderating role of manufacturing capability against firm performance. The theoretical framework is grounded based on the Resource-Based View and Dynamic Capability theories. Moreover, a quantitative approach was adopted to examine the research framework. Based on stratified sampling, data were collected from 262 owners/managers of SMEs in the Malaysian manufacturing industry. Statistical Package for the Social Sciences (SPSS) and Partial Least Squares–Structural Equation Modelling (PLS-SEM) were used to analyze the data. Based on fourteen (14) hypotheses that were tested in this study, ten (10) of them were supported, while four (4) were not supported. This study found a positive relationship between human capital, structural capital, relational capital, and organizational learning against innovation capability. In addition, a positive relationship was found between human capital and innovation capability against firm performance. However, the research could not find enough support for a positive relationship between structural capital, relational capital, and organizational learning against firm performance. The present study also found that innovation capability mediates the relationship between human capital, structural capital, relational capital, and organizational learning against firm performance. Furthermore, this research could not find enough evidence that manufacturing capability moderates the relationship between innovation capability and firm performance. This research provided valuable information and created awareness for SMEs' owners/managers in Malaysian manufacturing to improve their firm performance. In addition, the research expanded the current body of knowledge on SMEs in Malaysia. Finally, the research findings will help policymakers formulate or adjust policies that assist SMEs' business growth and boost the national economy.