Intellectual capital in tourism SMEs in Azad Jammu and Kashmir, Pakistan
| DOI | https://doi.org/10.1108/JIC-11-2018-0206 |
| Pages | 333-355 |
| Published date | 09 March 2020 |
| Date | 09 March 2020 |
| Author | Muhammad Khalique,Khushbakht Hina,T. Ramayah,Jamal Abdul Nassir bin Shaari |
| Subject Matter | Accounting & Finance,HR & organizational behaviour,Knowledge management,Accounting/accountancy,Information & knowledge management |
Intellectual capital in tourism
SMEs in Azad Jammu and
Kashmir, Pakistan
Muhammad Khalique
School of Management, Universiti Sains Malaysia, Penang, Malaysia and
MUST Business School, Mirpur University of Science and Technology (MUST),
Mirpur, Pakistan
Khushbakht Hina
School of Management, Universiti Sains Malaysia, Penang, Malaysia and
National University of Modern Languages, Islamabad, Pakistan
T. Ramayah
School of Management, Universiti Sains Malaysia, Penang, Malaysia and
Internet Innovation Research Center, Minjiang University,
Fuzhou, China, and
Jamal Abdul Nassir bin Shaari
Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia,
Nilai, Malaysia
Abstract
Purpose –The main aim of this study was to examine the effect of the components of intellectual capital
on the organizational performance of SMEs operating in tourism sector at Azad Jammu and Kashmir
Pakistan.
Design/methodology/approach–In this empirical study, survey approach was used and primary data
were collected through structured questionnaire. A total of 300 structured questionnaire survey forms
were distributed through purposive sampling technique. Two hundred and twenty usable
questionnaire survey forms were returned. Six research hypotheses were constructed to achieve the
objective of this study. Smart Partial Least Square (PLS) 3 was used to test the proposed research
hypotheses.
Findings –The findings showed that two out of six hypotheses were supported. Precisely, customer capital
has appeared as one of the most important components of intellectual capital in model. The results showed that
the overall intellectual capital has effect on the organizational performance of SMEs. Results shed more light on
the effects that the components of intellectual capital have on organizational performance of SMEs, particularly
in the context of Pakistan.
Research limitations/implications–This research is limited to SMEs in tourism sector in Pakistan and the
data were gathered through questionnaire which used mostly subjective measures. Subsequently, findings
may not be applicable to other industries. The research contributes to the development of intellectual capital
literature focused on the organizationalperformance in the perspective of SMEs in emerging economies. Future
research needs to reach beyond the boundaries and understand the effect of intellectual capital on the
performance of organizations.
Originality/value –This study extended the knowledge about the prominence of intellectual capital and its
effect on the organizational performance of SMEs. Moreover, this study identified the level of existence and
measurement of the six components of intellectual capital in SMEs which enables practitioners to develop
adequate strategies to better manage it. To author’s best knowledge, this study can be the first empirical study
which investigates the impact of intellectual capital on the organizational performance of SMEs operating in
tourism sector in Pakistan.
Keywords Intellectual capital, Integrated intellectual capital model, Business environment, Tourism sector,
Azad Jammu and Kashmir, Pakistan
Paper type Research paper
SMEs
operating in
tourism sector
333
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1469-1930.htm
Received 28 November 2018
Revised 20 December 2018
14 June 2019
10 August 2019
1 October 2019
28 November 2019
Accepted 27 December 2019
Journal of Intellectual Capital
Vol. 21 No. 3, 2020
pp. 333-355
© Emerald Publishing Limited
1469-1930
DOI 10.1108/JIC-11-2018-0206
1. Introduction
Many researchers in the field of intellectual capital (such as Halim et al.,2014;Henry and
Watkins, 2013;Inkinen, 2015;Khalique et al.,2014,2015;Khalique and Pablos, 2015 )are
expressing their arguments that in a contemporary business environment, the ability of the
small and mediumenterprises (SMEs) to deliverand perform successfullyis possible only with
the help of intellectual capital. Increasing global competition compels many organizations
around the world to achieve outstanding performance. Organizations need to identify and
manage thekey drivers of performance moreeffectively and efficiently.This study argues that
in order to strengthen the performance, SMEs start with an internal analysis and recognize
their resources and capabilities. SMEs with strong intangible resources can get competitive
advantage and differentiate themselves from their competitors in a cutting edge business
environment.Due to this reason,this study usedthe theory of intellectualcapital as a theoretical
foundation.The theory of intellectual capitallooks inside the SMEs to capitalizethe intangible
resourcesin order to enhance the performance.Intellectualcapital is considered as a catalystfor
generatingvalue-added products, servicesand for improving performance of SMEs.To thrive
and stayalive in a competitiveand dynamic business environment,SMEs have tobe competent
and innovative.Consequently,SMEs need to understand therelationship which existsbetween
intellectual capital and the performance.
The input of small and medium enterprises in the growth of the economy and prosperity of
the nation is widely well understood and recognized. SMEs perform a crucial role in the most
economies across the world, especially developing and emerging economies in gross domestic
product (GDP), employment, social uplifting, export, innovation and sustainability. Throughout
the world, SMEs are an important source of employment, particularly for women, low skill
workers, uneducated andthe youth in rural as wellas in urban areas. According to the World
Bank (2018), the formal SMEs contribute up to 60 percent of total employment and up to 40
percent of national income in emerging economies. The total numbers of business units in
emerging economies are between 365 and 445 million micro small an d medium enterprises
(MSMEs): 25–30 million are formal SMEs; 55–70 million are formal micro-enterprises; 285–345
million are informal enterprises. Furthermore, for the development and potential benefits of
SMEs, the World Bank also estimates that 600 million workers will enter the global workforce in
the next 15 years, mainly in Asia and sub-Saharan Africa. It represents that four out of five new
jobs are expected to be created by SMEs. These predictions clearly showed the significant
contribution of SMEs in designing an emerging economies and landscape.
SMEs are the backbone of tourism industry in a country and considered as knowledge
intensive and highly innovative organizations. It can provide a combination of more
intangible forms of intellectual capital like people’s knowledge and skills than tangible ones
like patents and brand names (Sharabati et al., 2013). Moreover, all countries of the world wish
to have prominent touristic places to attract tourists from all over the world. SMEs operating
in tourism sector can generate massive income in terms of foreign reserves, economic growth
and development. Tourism can promote local culture, traditions, foods and the image of the
country at global level.
In spite of these opportunities the tourism sector in Pakistan is under-developed and less
prioritized. SMEs in this sector are facing complex issues and their survival is uncertain in
Pakistan. The failure rate of tourism and SMEs in Pakistan is at alarming situation and there
is a great need to address this issue in the context of intellectual capital. The revitalization and
renaissance of this sector should be a prime force to drive Pakistan’s economy and can also be
initiating step for the development and growth of various sectors. In contemporary business
environment knowledge workers are considered as the crucial element for the success of
tourism sector. If problem exists in people’s knowledge, experience, education, customer
satisfaction, loyalty, brand, systems, procedures, rules, networking, relationships, research
and development, intellectual property rights, moral values and ethics of SMEs? Then there is
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