Linking Between Intellectual Capital and SME Performance
Mediating Role of Entrepreneurial Orientation
Nur Atiqah Zakiyyah Ramlee and Hatinah Abu Bakar
Universiti Teknologi MARA (UiTM), Kelantan, Malaysia
Keywords: SME, SME performance, Intellectual capital, Entrepreneurial orientation, Women owned SME.
Abstract: This study attempts to determine the relationship between intellectual capital dimensions consist of human
capital, social capital and organizational capital and women owned SME performance and to determine the
mediating effect of entrepreneurial orientation on the relationship between women’s intellectual capital and
SME performance. The data were collected from women owned SMEs in Kelantan who are the owner or
manager of the firm and 86 usable responses were received from a total of 100 distributed questionnaires,
giving a response rate of 86 percent. The data obtained was analyzed using SPSS 22 and Smart PLS 3.0 to
generate descriptive analysis and hypothesized research model. The finding revealed human capital, social
capital and organizational capital has significant influence towards women owned SMEs performance.
Besides, the study also indicates that entrepreneurial orientation play role as a mediator intellectual capital
(human capital and organizational capital) and women owned SMEs performance, whereas social capital
does not become a mediator between intellectual capital and women owned SME performance relationship.
1 INTRODUCTION
1.1 Problem Statement
SMEs has been lead the business phase around the
world. Ayyagari, Kunt and Maksimovic (2011)
suggested more than 95 percent of enterprises across
the world are SMEs, accounting for approximately
60 percent of the private sector employment. In the
developing countries, the roles of SMEs become
more crucial as they have the potential to improve
income distribution, create new employment, reduce
poverty and facilitate export growth (Ramukumba,
2014). In Malaysian, women have played a very
important role in the economic development and
stabilize the economy in periods of recession
(Ndubisi & Kahraman, 2006). According to Rozy
(2009) women make 50 percent total population, but
only 15 percent of the women own business
enterprises in Malaysia. According to Pages (2005)
women entrepreneurs are becoming more important
players in the entrepreneurial landscape although
there is no data on the number of women involved in
small business, but in the last few decades women
participation in small businesses increased
tremendously. Indeed, there are growing women
entrepreneurs in Malaysia (Teoh & Chong, 2008),
and they play major roles in promoting the
development of Malaysia economic, as well as help
providing job opportunities (Isa & Jusoff, 2009).
Although there are some researches on women
entrepreneurs, they have been conducted extensively
in developed countries, and little has been done on
women entrepreneurs in developing economies, such
as Malaysia (Alam et al., 2011; Hanafi, 2012;
Mahmood & Hanafi, 2012). In a competitive
environment, intellectual capital is a vital constituent
of an organization however, it was found that there
is a lack of studies that examine the impact of
intellectual capital on the organizational
performance of SMEs (Khalique & Isa, 2014).
1.2 Research Objective
The research objective is to investigate the
relationship between intellectual capital and women
owned SME performance and to determine the
mediating effect of entrepreneurial orientation on the
relationship between women’s intellectual capital
and SME performance.
Ramlee, N. and Bakar, H.
Linking Between Intellectual Capital and SME Performance Mediating Role of Entrepreneurial Orientation.
In Proceedings of the 2nd International Conference on Economic Education and Entrepreneurship (ICEEE 2017), pages 527-533
ISBN: 978-989-758-308-7
Copyright © 2017 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved
527

 To determine the significant relationship
between intellectual capital and women owned
SMEs performance.
 To examine whether entrepreneurial orientation
mediates the relationship between intellectual
capital and women owned SMEs performance.
2 LITERATURE REVIEW
2.1 Women Owned SME Performance
Women owned SMEs in Malaysia seems too huge
pressure on progressives towards world economy
(Wahid & Mahmood, 2013) as internal and external
business environment, for example globalization,
technological innovation and demographic and
social change, level of technology, ability of
technology, monetary support and entrepreneurship
(Mahmood & Hanafi, 2012 ; Wahid & Mahmood,
2013). The precise way to access the organization
performance is through growth, financial and sales
portray indicates the organization performance
(Wiklund, 1999).
Over the past years, the human capital not really
focusing on women as they are just a minorities in
the workforce, which is totally differ to what
happening nowadays when women become
important in contributing towards nation and global
economy (Moore, Moore, & Moore, 2011).They
agreed that entrepreneurial behavior drive women
owned SMEs into competitive advantage which is
crucial for their business performance (Wahid &
Mahmood, 2013).
2.2 Intellectual Capital and
Performance
Intellectual capital are intellectual materials that can
be captured as assets, such as knowledge,
information, intellectual property, and employees’
experiences, commitments or capabilities (Barney,
2002 ; Wahid & Mahmood, 2013). Hsu and Fang
(2009) has defined intellectual capital encompasses
of several elements namely human capital, structural
capital and relational capital has influence toward
performance. Yet, from the previous literatures
there is no consistency in determining the elements
in intellectual capital (Wahid and Mahmood, 2013).
The dimension that represent intellectual capital-
based view of the organization is human capital,
relational and structural capital (Reed, Lubatkin and
Srinivasan, 2006; Ling, 2012) is significant toward
organization performance. According to Wahid and
Mahmood (2013), most of the organization
entrenched with people, structures and customer in
determining the intellectual capital relationship
towards organization performance. On top of that,
they agreed that intellectual capital role of total
capabilities, knowledge, culture, strategy, process,
intellectual property, and relational networks of a
company which support the company in creating
competitive advantage (Hsu & Fang, 2009). Three
intellectual capital dimension that has been used for
this study were also suggested by (Khalique, Shaari
& Isa, 2011).
2.2.1 Human Capital
Human capital is the heart of intellectual capital as
its contribute to major source of value in the firm
based on the employees’ skills, knowledge and
expertise, competence, attitude and intellectual
agility (Khalique, Shaari & Isa, 2011). Hsu & Fang
(2009) stated, human capital play vital role in
eliciting the business capital embedded in employees
and not owned by the organization which it may be
taken away by the workers and managers’
competence, experience, knowledge, skills, attitude,
commitment and wisdom. The result had shown that
human capital has the direct relationship towards
firm performance (Mohammad, Ansari, Ologbo, &
Rezaei, 2013).
2.2.2 Social Capital
Social capital represents the value of human
connections based on their confidence and on
personal networks (Cohen and Prusak, 2001;
Khalique, Shaari & Isa, 2011) which includes
relationships, attitudes and values that manage
interactions among people and contribute to
economic and social development in a society
(Yazdani and Yagoubi, 2011) based on social
networks, informal relation, formal relation and trust
(Mohtar, Rahman & Abbas, 2015). Organizations
having high social capital can take more competitive
advantage (Naphat and Goshal, 1998; Khalique,
Shaari & Isa, 2011). Social capital were measure
through culture, exchange and relationships and its
playing highly significant role in the development of
intellectual capital in an organization (Cohen &
Prusak, 2001; Subramaniam & Youndt, 2005;
Nahapiet & Ghoshal, 1998; Bueno, Salmador &
Rodrı´guez, 2004).
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2.2.3 Organizational Capital
Structure capital of organization (organizational
capital) represent all the non-human storehouses of
knowledge including database, organizational chart,
strategies routines, process manuals and policies
(Bontis et al., 2000; Wu and Tsai, 2005; Mohtar,
Rahman & Abbas, 2015). It consists of process
capital and innovation capital (Johnson, 1999; Hsu
& Fang, 2009). Structural capital allows the
organization to have better entrepreneurial activities
(Mohammad, Ansari, Ologbo, & Rezaei, 2013).
Organizational capital encompass of structural
capital consists of infrastructure, data and
information, procedures and policies (Mohtar,
Rahman & Abbas, 2015).
Through economics world, intellectual capital
can be seen as the utmost significant firm intangible
assets and as the primary principle of value creation;
intellectual capital has become more important than
physical capital (Mohammad, Ansari, Ologbo, &
Rezaei, 2013).
H1: Human capital has a significant influence on
women owned SME performance.
H2: Social capital has a significant influence on
women owned SME performance.
H3: Organizational capital has a significant
influence on women owned SME performance
2.3 Entrepreneurial Orientation
Mediate Performance
Entrepreneurial orientation portrays the
organizational-level entrepreneurship (Yang, 2008)
and it is significant contributor to a firm’s success
(Mahmood & Hanafi, 2013). Entrepreneurial
orientation mainly contributed to improved business
performance (Yang, 2006). The researcher
emphasized on innovation, proactiveness and risk
taking to refer to an organization’s entrepreneurial
orientation (Wiklund, 1999). This concept has been
used by several researchers in order to access the
level of entrepreneurial orientation of certain
organization.
The implementation of entrepreneurship
orientation is important towards women owned
business as they may benefit from efforts to increase
their level of entrepreneurial orientation in order to
survive the dynamic, fast-faced and complex
business environment which is characterized by
shorter life cycles, globalization, and continuous
improvement in technology (Mahmood & Hanafi,
2013). The authors added the entrepreneurial
orientation act as a mechanism for the survival and
success of women-owned SMEs. The concept of
entrepreneurial orientation comprises of three
dimensions, namely, innovativeness, proactiveness
and risk taking (Miller, 1983; Mahmood & Hanafi,
2013).
H4: Entrepreneurial Orientation mediates the
relationship between human capital and
performance
H5: Entrepreneurial Orientation mediates the
relationship between organizational capital and
performance
H6: Entrepreneurial Orientation mediates the
relationship between social capital and
performance
2.3.1 Innovativeness
Innovativeness in management systems is usually in
response to new environmental conditions, and
improving the way in which people are managed and
work is organized (Arslan & Cevher, 2013). The
benefit of innovation is it would keep them ahead of
their competitors, gaining a competitive advantage
that leads to improved financial results (Wiklund,
1999).
2.3.2 Proactiveness
Proactiveness concerned on pioneering and it is
associated with marker survival positively (Arslan &
Cevher, 2013). The higher level of proactiveness
portray that the organization or individual able to
lead rather than become a competitors follower. The
advantage of proactiveness is it gives firms the
ability to present new products to the market ahead
of competitors, which also gives them a competitive
advantage (Wiklund, 1999).
2.3.3 Risk Taking
Risk taking shows entrepreneurs willingness to
commit their time and energy to making a good idea
an innovative reality in their organization (Arslan &
Cevher, 2013). Entrepreneurs with risk taker
attributes would be brave in facing the business
challenges.
Linking Between Intellectual Capital and SME Performance Mediating Role of Entrepreneurial Orientation
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Figure 1: Theoretical framework.
3 METHODS
The unit of analysis for this study is women owned
SME, which is located in Kelantan. This study
employed quantitative research method and the
instrument used to collect the date was survey
questionnaires. The target population was the SMEs
that owned by women in Kelantan and the resource
personnel were selected as respondents to represent
their firms. The resource personnel (e.g. manager,
executive, supervisor etc.) were selected because
they are the key informants of the firms’ operations
and strategic decisions, and their views often
represent the views of the firms.
In this research 100 questionnaires were
distributed and 86 usable questionnaires used were
collected from respondents. The researcher used
G*Power to compute the acceptable sample size.
G*Power Application designed as a general stand-
alone power analysis program for statistical tests that
commonly used in social and behavioural research
(Erdfelder, Faul & Buchner, 2007). The
application’s calculation shows that total sample size
is 89 and it is near to the 86 usable questionnaires
collected for this study.
The descriptive statistical analysis was
performed using SPSS for Windows 22.0 to analyse
the nature of the data and to develop a profile of
respondents. Partial Least Square (PLS) path
modelling was used to estimate the hypothesized
research model by using Smart PLS 3.0.
4 RESULTS AND DISCUSSION
Table 1: Construct validity and reliability.
Hair, Ringle and Sarstedt (2011) claimed the quality
of the measurement model was assessed by
examining convergent validity includes factor
loading, average variance extracted (AVE) and
composite reliability (CR). The above table shown
that, results show that indicator loadings for all items
exceeded the recommended value of 0.5 (Hair,
Black, Babin & Anderson, 2009). AVE were in the
range of 0.574 to 0.769, which is above the
recommended value of 0.5, and CR ranged from
0.836 to 0.947 which exceeded recommended value
of 0.7 (Hair et al., 2009).
Table 2: Discriminant validity.
EO
HC
OC
P
SC
EO
0.757
HC
0.621
0.799
OC
0.686
0.326
0.877
P
0.784
0.510
0.491
0.831
SC
0.603
0.742
0.388
0.522
0.792
Constructs
Items
Loadings
AVE
CR
Women Owned
SME
Performance
DOP1
0.870
0.574
0.947
DOP2
0.791
DOP3
0.848
DOP4
0.720
DOP5
0.861
DOP6
0.882
DOP7
0.834
DOP8
0.828
Human
Capital
AHC1
0.817
0.639
0.898
AHC2
0.828
AHC3
0.790
AHC4
0.775
AHC5
0.784
Organizational
Capital
AOC1
0.844
0.769
0.943
AOC2
0.868
AOC3
0.887
AOC4
0.888
AOC5
0.896
Social Capital
ASC1
0.776
0.628
0.894
ASC2
0.829
ASC3
0.737
ASC4
0.837
ASC5
0.788
Entrepreneurial
Orientation
CEO1
0.695
0.574
0.915
CEO2
0.765
CEO3
0.785
CEO4
0.825
CEO5
0.738
CEO6
0.768
CEO7
0.705
CEO8
0.771
ICEEE 2017 - 2nd International Conference on Economic Education and Entrepreneurship
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The utmost common method of validating the
discriminant validity as suggested by Hair et al.
(2010) and Fornell and Larcker (1981) the square
root of the average variance extracted (AVE) for
each construct is greater than the correlation
between the constructs. The above table indicate that
there is adequate discriminant validity since the
diagonal elements are significantly greater than the
off-diagonal elements in the corresponding rows and
columns.
Table 3: Heterotrait-Monotrait ratio.
However, Fornell and Larcker (1981) was
recently criticized by Henseler et al. (2015), that in
most cases the above methods fails to fully
scrutinize and validate the issue of discriminant
validity and suggested the multitrait-multimethod
(HTMT) matrix, to assess discriminant validity.
Gold, Malhotra and Segars, (2011) propose a value
of 0.90 can claimed that there is a lack of
discriminant validity. Hence, the result show that
discriminant validity is fulfilled the threshold (table
3).
Figure 2: Structural models.
4.1 Hypotheses
Path analysis was performed to evaluate the
structural model. Based on Hair et al; (2011), the
primary evaluation criteria for structural model are
R
2
values and the level of significance of the path
coefficients.
Based on Cohen (1988) for a good model, the
value of R
2
of endogenous latent variable should be
more than 0.26. According to figure 1, the R² was
found 0.614, indicating that Intellectual Capital
dimension consists of human capital, social capital
and organizational capital can account for 61.4%
percent of the variance in SME performance, which
represent a substantial range.
Table 4: Hypotheses direct relationship result.
Significant value P < 0.05
For H1, H2 and H3 which stated intellectual
capital (human capital, social capital and
organizational capital) has a significant influence on
women owned SME performance, the result
indicates that human capital (β = 0. 268, t-
values=2.980), social capital (β = 0.149, t-
values=1.841) and organizational capital (β =
0.405, t-values=6.073) has a significant relationship
found between women owned SME performance.
Hence H1, H2 and H3 were supported.
Table 5: Mediator result.
Furthermore, the above table shows result of an
indirect effect between entrepreneurial orientation
and SME performance. The result revealed all
entrepreneurial orientation play role as a mediator
except social capital. The result shows human
capital (β = 0. 342, t-values=3.092), social capital
(β = 0.149, t-values=1.829) and organizational
capital (β = 0.517, t-values=6.002). Thus, the study
can conclude that entrepreneurial orientation
mediates the relationship between intellectual capital
(human capital and organizational capital) and
women owned SME performance, however social
capital does not mediate the entrepreneurial
orientation and women owned SME performance.
Hence, H4, H6 were supported while H5 was not
supported. This result also supported with the
values of Boot CI: [LL, UL] straddle a 0 in between
EO
HC
OC
P
SC
EO
HC
0.706
OC
0.751
0.359
P
0.849
0.562
0.528
SC
0.683
0.869
0.436
0.581
Hypothesis
beta
t
value
Sig.
Result
H1:
HC – WOP
0.268
2.980
0.002
Supported
H2:
SC – WOP
0.149
1.829
0.047
Supported
H3:
OC – WOP
0.405
6.073
0.000
Supported
Hypothesis
beta
t
value
LL
UL
Result
H4: HC – EO
– WOP
0.342
3.092
0.023
0.582
Supported
H5: SC – EO –
WOP
0.149
1.841
-0.030
0.363
Unsupported
H6: OC – EO
– WOP
0.517
6.002
0.313
0.722
Supported
Linking Between Intellectual Capital and SME Performance Mediating Role of Entrepreneurial Orientation
531

indicating that entrepreneurial orientation is a
mediator intellectual capital (human capital, social
capital and organizational capital) and women
owned SME performance.
5 CONCLUSIONS
The purpose of this study was to determine the
relationship between entrepreneurial orientation
mediate intellectual capitals towards women owned
SME performance. In conjunction with Malaysia to
empower SMEs among Malaysian, the result of this
research is beneficial to several bodies such as the
SMEs, business owners, the Malaysian government,
as well as all the agencies involved in Malaysia
SMEs entrepreneurial activities such providing best
approaches for women owned entrepreneur to
compete in competitive business environment.
Training to improve the intellectual capital among
these groups may be one of the approach for that
reason. On top of that, the result of this research
shows that the government to encourage
entrepreneurship among women as it would
contribute to the nation economic growth.
The three constructs that make up intellectual
capital (human capital, social capital and
organizational capital) are identified to influence
each other. The finding of this study confirm that
significant relationship exists between intellectual
capital comprised of human capital, social capital
and organizational capital and women owned SME
performance. These findings also highlight the
importance of increasing intellectual capital among
the owner/managers of SMEs especially women
owned company. Consequently, SMEs need to
nurturing entrepreneurship based on human capital,
social capital and organizational capital to enable
them to survive and for the growth of the company
as well as contribute to women Malaysian economic
growth. This study also indicates that entrepreneurial
orientation also may enhance women owned SME
performance. Particularly, focusing intellectual
capital and entrepreneurial orientation (focusing on
innovative, proactive and risk taking) as a mediator
in the women owned SMEs is vital as it employs a
significant influence on women owned SME
performance for human capital and organizational
capital. As a result, these finding indicate that it may
be helpful for women in Malaysia who are the
owner/manager of SMEs in order to place concern
more on intellectual capital and entrepreneurial
orientation in achieving their above average
performance.
However, this study has several limitations that
need to be addressed by future research. The
limitation could be mitigated given to this prior
study to compare the approaches to women owned
SMEs form other regions and the results could be
generalized to all women owned SMEs in Malaysia.
ACKNOWLEDGEMENTS
We would like to thank to Universiti Teknologi
MARA (UiTM) for funding this project under the
Research University Grant (RMC) 600-
IRMI/PBT5/3(0016/2016).
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