How Do Intellectual Capital and Islamic Work Ethics Affect SME Business Performance?

Abstract

This paper explores the effect of intellectual capital (IC) and Islamic Work Ethics (IWE) on Small and Medium Enterprise (SME) business performance. Based on a qualitative study, the results provide support to SME entrepreneurs to understand the effects of IC and IWE on business performance and facilitate them in making the right decision. The qualitative results were obtained from documents analysis and interview sessions. For the interview session, three entrepreneurs (regarded as the key informants) provided a deeper understanding on how IC and IWE had managed to influence SME Business Performance. SME entrepreneurs must realise on the need to maintain a competitive advantage and enhance the opportunity to create profitability through extracting value from IC and IWE. The originality of the paper regards the way it addresses simultaneously IC and IWE, such related concepts. Moreover, findings of this study suggest that SME entrepreneurs should extend practices of Islamic work ethics to employees, customers, vendors, partners and the communities by building a positive environment founded on trust and commitment.

Performance Improvement through the Unification of Islamic Work Ethics in Intellectual Capital : Comparative Study of Malaysia and Indonesia

“…In essence, IC components can offer a clearer comprehension of ideas and how they affect the operation of businesses. Islamic Work Ethics (IWE) advises innovative and fruitful work as a means of improving organizational performance as well as individual pleasure (Zin et al, 2020). It is envisaged that integrating Islamic work principles into intellectual capital will enhance business performance.…”

“…In theory, having a close relationship with Allah SWT will cause one's views and actions to follow religious precepts. (Zin et al, 2017) ; (Zin et al, 2018) ; (Zin et al, 2019) ; (Zin et al, 2020) . Previous research states that IWE contributes to business economic development and influences organizational success (Khalique et al, 2015).…”

“…In essence, IC components can offer a clearer comprehension of ideas and how they affect the operation of businesses. Islamic labor Ethics (IWE) encourages creativity and productive labor as a means of achieving improved organizational performance as well as individual pleasure (Zin et al, 2020). This is because, in comparison to people with low IWE levels, those with high IWE demonstrate a greater sense of ownership over the business.…”