THE EFFECT OF RELATIONAL CAPITAL ON THE INTELLECTUAL CAPITAL AND FIRM PERFORMANCE NEXUS: EVIDENCE FROM THE JORDANIAN INDUSTRIAL SECTOR

Abstract

This study aims to investigate the relationship between intellectual capital (IC), measured through value-added intellectual coefficient (VAICTM) and firm performance, measured through market-to-book (M/B) value ratio of the industrial sector in Jordan, using the relational capital (RC) as a moderating variable. Hierarchical regression models are applied with data collected from 50 industrial companies listed on the Amman Stock Exchange (ASE) during 2008-2017. The results of the analysis show that VAICTM has a significant positive effect on the M/B. In terms of VAICTM components, it has been shown that capital employed efficiency (CEE) has a significant positive effect on the M/B. In addition, RC is found to have a positive effect on the firm performance. Furthermore, RC, measured through relational capital efficiency (RCE) has a moderating role on the relationship between IC and a firm's performance, which negatively affects the performance of industrial sector in Jordan. Similarly, RC also has a moderating role on the relationship between VAICTM components (HCE and SCE) and M/B. The results of this study can be used as a starting point by policymakers and managers of industrial sector in Jordan to understand the importance of IC components and their interactions, especially the relational capital, in developing strategies to improve the firm performance.