Intellectual Capital, Knowledge Management and Sustainable Competitive Advantage on SMEs in Malaysia

Intellectual capital has gained recognition in entrepreneurship, especially in Small and Medium Enterprises. It is said that SMEs are vulnerable and not robust enough to withstand the onslaught of economic and global competition. Many SMEs do not realize the importance of intellectual capital, and, therefore, are unable to leverage its benefits. Intellectual capital is said to be the key resource in a firm's sustainable competitive advantage. The aim of this study is to investigate the impact of intellectual capital on the sustainable competitive advantage of SMEs. Intellectual capital has evolved rapidly in recent years, thus leading to the formation of new types of capital - human capital, structural capital, innovation capital, technological capital, relational capital and social capital - which are included in intellectual capital for this study. In addition, knowledge management is included to heighten the impact of intellectual capital on sustainable competitive advantage. This paper analyzes the process through which entrepreneurs in Malaysia use this resource to obtain competitive advantage. This study is a cross-sectional analytical study. Structured questionnaires were distributed to CEOs, owners and managers of Malaysian SMEs through a survey. A total of 140 questionnaires were returned. Partial Least Squares software was utilized to analyze the data. Intellectual capital and knowledge management have a strong impact on sustainable competitive advantage; however, knowledge management did not mediate the relationship between intellectual capital and the sustainable competitive advantage of SMEs in Malaysia. Suggestions and recommendations were discussed.