Analysis of the intellectual capital effect on SMEs' financial performance on West Aceh coast

Abstract

SMEs are essential in national economic growth, so it concerns various groups. Intangible resources such as knowledge and skills are the basis of SMEs' competitive advantage. Integrating these two things will provide a rapid growth acceleration for SMEs. Intellectual capital (CI) is a core concept of the company's strategic resources to create a competitive advantage. SMEs have a more straightforward organizational structure and solid internal social relations than large companies. This study aims to address this gap by analyzing the impact of intellectual capital (CI) on SMEs' financial performance (FP). The design of this research is causal research with a survey method. In taking the sample, non-probability sampling was used with the convenience sampling technique on SME owners along the coast of West Aceh. The hypothesis was tested using the Structural Equation Model (SEM). The findings in this study prove that the three components of intellectual capital, namely human capital (HC), structural capital (SC), and relational capital (RC), affect the financial performance (FP) of SMEs. This study concludes that intellectual capital is significant for the financial performance of SMEs.