The Effects of Intellectual Capital, Strategic Flexibility, and Corporate Culture on Company Performance: A Study on Small and Micro-scaled Enterprises (SMEs) in Gerbangkertosusila Region, East Java

Abstract

The purpose of this study was to examine and analyze the correlation among intellectual capital, strategic flexibility, corporate culture, and company performance. Intellectual capital was assessed through human capital, structural capital, and relational capital while strategic flexibility was determined by several variables, including attention, assessment, and action. Meanwhile, corporate culture was determined by several variables, namely adhocracy culture, clan culture, hierarchy culture, and market culture. This study was conducted based on positivism paradigm applying quantitative research approach. This study applied explanatory survey method. The unit of analysis used in this study was Small and Micro-scaled Enterprises (SMEs) running food industry in Gerbangkertosusila region, East Java Province consisting of 250 SME owners and managers as respondents in this study. The primary data were collected through questionnaire. The data were analyzed using Structural Equation Model with Partial Least Square (SEM-PLS).

The result of descriptive analysis on human capital aspect of SME managers indicated that the managers accommodated new ideas proposed by their employees while the result of analysis on structural capital implied the importance of mass media in delivering information regarding their products towards their customers and relational capital was maintained by building a harmonic relationship with the society. The result of analysis on strategic flexibility variables indicated that attention aspect was focused on routine and mutually positive decisions; assessment aspect was focused on concerning the employees; and action aspect was focused on responses against ever-changing situation as the challenge for the SMEs. Meanwhile the analysis on corporate culture resulted in maintaining healthy working environment as the focus of clan culture aspect while the result of adhocracy aspect of corporate culture indicated encouragement to develop creative thinking as its focus and hierarchy culture was intended to evaluate the standards of operational procedures while market culture was oriented on evaluating the profits gained by the SME. The result of examinations on the hypotheses of this study proved that intellectual capital, strategic flexibility, and corporate culture significantly affected company performance. These three variables would improve the competitiveness and performance of the company as long as these variables were optimally managed.

As the practical significance of this study, this study was expected to provide information for SME owners (and managers) regarding the importance of intellectual capital, flexible strategy, and corporate culture to improve company performance and competitiveness. The information could be used in preparing the internal factors of SME (i.e. intellectual capital, flexibility of strategy, and corporate culture) to improve performance and competitiveness of the company.