Intellectual capital and performance: testing interaction effects

Abstract

PurposeThe purpose of this paper is to examine the interaction effect of intellectual capital elements and how they fuse to affect financial performance in microfinance institutions. The major purpose is to explore the appropriate blend or mix of intellectual capital elements that explains the source of value creation – hence performance – in microfinance institutions.Design/methodology/approachThe paper adopts the ModGraph program (Excel version) along with the Kenny and Boran approach to test conditional hypotheses.FindingsThe magnitude effect of human capital on performance depends on any of structural or relational capital; hence the assumption of nonadditivity is met. However, no significant interaction effects were established between relational and structural capital.Research limitations/implicationsOnly a single research methodological approach was employed and future research through interviews could be undertaken to triangulate. Furthermore, the findings from the present study are cross‐sectional – future research should be undertaken to examine the multiplicative effects studied in this paper across timePractical implicationsIn order to boost the wealth of microfinance institutions in Uganda, managers should always endeavor to find a viable intellectual capital mix or blend that can add value to the firm.Originality/valueThis is the first study that focuses on testing the interactive effects of intellectual capital elements on financial performance in Ugandan microfinance institutions.

The Impact of Intellectual Capital on Organizational Performance

“…& Bontis, N., 2004;Wang, W. Y. & Chang, C., 2005;Cabrita, M. D. R. & Bontis, N., 2008;Kamukama, N., Ahiauzu, A. & Ntayi, J. M. 2010;Sharabati, A.…”

The Effect of Intellectual Capital on Organizational Performance: The Mediating Role of Knowledge Sharing

“…However, it can be seen that the most accepted framework of IC consists of three components which are: human capital (human resources), structural capital (organizational values), and relational capital (relationships) (see [66] [67] [68] [69]). Furthermore, [13] mentioned that these three IC dimensions are interrelated and hence have a significant influence on a firm's value position and performance. This is supported by [70] who mentioned that intellectual capital must include human capital, structural capital, and relational capital for organizations to achieve their goals as they are interdependent and intertwined with each other.…”

“…These investments, also known as intellectual capital, are taking over the need to invest in the physical and financial capital of the firm [12]. In addition, [13] stated that organizations have shifted their attention to intellectual capital instead of the traditional physical and financial capital as a basis for competition. This is due to the fact that intellectual capital is being recognized as the foundation for success in today's knowledge economy [14].…”

TQM and Performance Linkage in the Microfinance Institutions: The Mediating Role of IT Capability

“…For the studies related to institutionalist school, the focus is mainly on the efficiency of MFIs to generate profit and to reach more the poor people. Measures such as profitability (Kamukama, 2010;Kamukama, 2011), sustainability (Thapa, 2009;Kinde, 2012) and efficiency (Caudill, Gropper, & Hartarska, 2009;Haq, Skully, & Pathan, 2010) used as single dimensions to measure the performance based on the view of institutional school.…”