The role of intellectual and financial capital in competitiveness and performance: A study of emerging small and medium enterprises

The present research scrutinizes the influence of intellectual capital and financial capital (FC) on the small and medium enterprises' (SMEs) performance with a competitive advantage (CA) as a mediator. A plethora of research has been carried out to test the relationships among intellectual capital (IC), FC, and firm performance (FP) across the globe. However, studies on the CA as a mediator among these variables are rare in SMEs. Moreover, none of the studies of this landscape could be traced in developing countries particularly in Pakistan. This research examines the mediating role of CA between IC and FP as well as between FC and FP. A self-administered survey was used to gather information from 178 registered ventures located in Rawalpindi and Islamabad Regions. The findings of this study display that IC and FC have a significant positive impact on the performance of SMEs, also significant and positive association exists between CA and FP. The path between IC and SMEs performance as well as between FC and SMEs performance is significantly mediated by the CA. The results recommend that SMEs should give attention to both IC and FC to sustain their position in the competitive markets.