The effect of intellectual capital on firm performance: the mediating role of family management

Purpose - This study aims to investigate the effect of intellectual capital components on firms’ performance, and also examines the influence of the mediating role of family management on such a relationship. Design/methodology/approach - The hypotheses are tested using structural equation modeling for a sample of 46 Jordanian service listed firms during 2014–2019. Findings - The results indicate that intellectual capital efficiency is a key factor that enables firms to achieve higher financial performance and higher market value. Human capital efficiency has a significant positive effect on firms’ profitability as measured by return on assets and earnings per share. No evidence is shown to support that family management has a mediating role on the relationship between intellectual capital and firms’ performance. Practical implications - The results indicate strong evidence of the important role of intellectual capital on firm performance. Accordingly, this study recommends that the managers of service firms should continue to enhance and improve the components of intellectual capital, especially investing more in the competencies and capabilities of employees, including their skills, education and training programs to achieve competitive advantage and ensure continued success in the future, and investors to pay special attention to the components of intellectual capital to predict the performance of the firm and be able to choose the best investment opportunities. Originality/value - This study provides additional insights into the literature of both intellectual capital and family businesses by analyzing data from an emerging market.