Does intellectual capital matter in performance management system-organizational performance relationship? Experience of higher education institutions in Indonesia

Abstract

Purpose The purpose of this paper is to investigate whether performance management system (PMS) has a positive effect on organizational performance. Furthermore, it also investigates whether intellectual capital (IC) mediates PMS-organizational performance relationship. Design/methodology/approach This study is designed as a quantitative research employing a partial least squares structural equation modeling (PLS-SEM). Using an online survey, data are collected from the HEIs managers under the Ministry of Research, Technology and Higher Education, the Government of Indonesia (MRTH-GOI). This research uses a mediation model approach to test the indirect effect of IC. Findings The results reveal that PMS has a positive direct effect on organizational performance of the HEIs in Indonesia. Further analysis proves that IC partially mediates PMS-organizational relationship. Research limitations/implications This research is context-specific for Indonesia and caution should be used when generalizing it to other countries. It implies that the better the organizational performance of the HEIs, the better the quality of life in the society. PMS and IC play a crucial role in the era of knowledge economy. Practical implications The HEIs managers should design and implement a reliable PMS. They also should properly manage the IC (human capital, structural capital, relational capital) so that they can enhance organizational performance in areas of teaching, research and community service as the core business of the HEIs. Social implications As the global education competition has become a serious issue in each HEI in Indonesia, the results of this study contribute to providing an approach on how to achieve a better organizational performance which brings more benefits to the society. The HEIs display a strategic role in improving the quality of life of society. The knowledge economy requires society to enhance the quality of education at all levels. This research model and results provide empirical evidence of the importance of IC which mediates the relationship between PMS and organizational performance. When the HEIs in Indonesia implement this model of managing IC, the society will get more benefits in terms of the improvements in the quality of education, teaching, research and community service from the HEIs. The better the HEIs performance, the better the quality of life of the society in the era of knowledge economy. Originality/value This research brings together issues that are usually examined separately in previous studies. It employs a mediation research model to explore the central role of IC in PMS- organizational performance relationship which is rarely researched. This is also the first study exploring the three constructs of PMS, IC and organizational performance in the Indonesian HEIs research setting.

The Impact of Intellectual Capital on Sustainable Competitive Advantage and Organizational Learning with mediating role of University Entrepreneurship: Evidence from Private Universities in Egypt

“…Regarding the Egyptian context, a study by Elsharnouby and Elbanna (2018) found that relational capital and human capital had a significant positive impact on SCA in Egyptian HEIs. Moreover, Eltahir et al (2019) found that IC has a significant and positive impact on the financial and non-financial performance of HEIs in Egypt. This supports the thesis advanced by Kadir et al (2021), who proposed a conceptual framework for building the IC of leaders in Egyptian universities in order to accomplish SCA.…”

“…Similarly, Elsharnouby and Elbanna (2018) found that human and relational capital have a significant positive influence on OL at Egyptian HEIs. In addition, a study by Eltahir et al (2019) found that IC had a significant and positive impact on OL in Egyptian HEIs. The impact of intellectual capital on organizational learning at Egyptian HEIs was also investigated by Rami and Maged (2018).…”

Exploring the “Can Do” and “Will Do” factors of human capital to enhance university performance

“…The performance and ranking of a university often serve as significant measures in the endeavor to transform the education system within a country (Aburizaizah, 2022;Boyadjieva, 2017;De La Poza et al, 2021;Tilak, 2016), including in Aceh, Indonesia. The excellence in performance and position of a university is consistently associated with its substantial contributions to the innovation system, economic growth, and social development of a region (Anggraini & El Pebrian, 2021;Chankseliani et al, 2021;Cricelli et al, 2018;Passaro et al, 2018;Tjahjadi et al, 2019;Wright & Horta, 2018). The contributions of universities to such development and progress can manifest in various forms, including research outputs yielding licenses, patents, and high-quality publications, fostering an elite cohort of graduates who are skilled and professionally employable, and the contributions of academic staff who provide services towards regional development (Anggraini & El Pebrian, 2021;Barra & Zotti, 2017;Forliano et al, 2021;Pugh et al, 2022;Tee, 2016).…”

“…This phenomenon also applies to universities, where human resources and inherent intangible elements such as intellectual capital, knowledge, social capital, and other tacit dimensions form the backbone and frontline in achieving university performance and sustained competitive advantage. Human resource factors with various intangible elements constitute the core competencies of a university and serve as the primary inputs and sources for various Tridharma activities (teaching, research, and publication, as well as community and industry service), which are the three main missions of a university's existence (Anggraini & El Pebrian, 2021;Barra & Zotti, 2017;Martin-Sardesai & Guthrie, 2018;Ramírez & Gordillo, 2014;Tjahjadi et al, 2019;Ulum, 2019). Additionally, human resources are the main driving force behind the governance and management of higher education institutions, encouraging various efforts to improve performance continuously (Anggraini & El Pebrian, 2021;Cricelli et al, 2018).…”

“…For example, Cricelli's et al (2018) study on universities in Colombia measures human capital using indicators such as the number of full-time academic staff, expenditure on non-academic staff salaries, and the number of students enrolled in Ph.D., Bachelor's, and specialization programs. Similarly, studies conducted by Tjahjadi et al (2019) on universities in Indonesia measure human capital using indicators such as the academic and professional qualifications of educational and research staff, scientific productivity, lecturer and researcher quality, graduate quality, professional qualifications of administrative staff, teaching competence, research competence, human capital efficiency, teamwork skills, leadership skills, and training activities. As a result, when the unit of analysis focuses on the macro level, the differences in human capital characteristics among individuals are obscured (Morris et al, 2016).…”