The value of intellectual capital in improving MSMEs’ competitiveness, financial performance, and business sustainability

Abstract

AbstractIntellectual capital is now recognized as a factor influencing organizational progress. However, many Micro, Small and Medium Enterprises (MSME’s) in Indonesia still need to understand the importance of intellectual capital to support their organizational performance. This study aims to strengthen intellectual capital succession in MSME’s in Indonesia to improve their competitiveness, financial performance, and sustainability. The population of this study is all MSME’s players in Indonesia. At the same time, the research sample selection is carried out using the criteria, namely MSME’s that have been running their business for at least ten years and use technology in business activities. The calculation of the minimum number of samples was determined from this research method using the SEM (Structural Equation Modeling) analysis test by carrying out several tests, namely composite reliability, coefficient determination, and hypothesis testing. Scientific tests found that human capital affects structural capital, relational capital, and the competitiveness of MSME’s in Indonesia. Structural and relational capital mediate the strong relationship between human capital and the competitiveness of MSME’s in Indonesia. Structural and relational capital can also mediate the strong relationship between human capital and the continuity of MSME’s businesses in Indonesia. Meanwhile, the relationship between human capital and the financial performance of MSME’s in Indonesia can only be weakly mediated by structural and relational capital. These findings certainly provide new evidence about the importance of intellectual capital for the sustainability and competitiveness of today’s MSME’s businesses.

Keywords

• Financial performance
• intellectual capital
• sustainability organization
• sustainability smes
• strategic sustainability
• M2