Influence of Intellectual Capital on Firm Performance through Competitive Advantage and Earnings Quality:Evidence from Thai listed Companies in Service Industry

Abstract

This research aimed to investigate the influence of intellectual capital on firm performance, the influence of intellectual capital on firm performance through competitive advantage, the influence of intellectual capital on firm performance through earnings quality, and the influence of intellectual capital on firm performance through competitive advantage and earnings quality. Intellectual capital was based on four components, including human capital efficiency, structural capital efficiency, capital employed efficiency, and relational capital efficiency, using the MVAIC model. Firm performance was measured by financial and marketing dimensions, including return on assets, return on equity, and Tobin’s Q. Competitive advantage was measured by revenue growth. The samples used in the study consisted of financial report data from 114 listed companies on the Stock Exchange of Thailand in the service industry during the years 2019-2020. Statistical methods employed for analysis included descriptive statistics, correlation analysis, path analysis, and structural equation modeling. The research results indicate that intellectual capital has a direct and positive influence on firm performance, measured by return on equity and return on assets. This highlights its significant impact on financial performance and the enhancement of operational efficiency. However, intellectual capital does not affect Tobin's Q because investors lack awareness of the signals related to intellectual capital within the company. Therefore, disclosing intellectual capital is essential for investors to accurately assess investment risks. The study found that competitive advantage plays a mediating role between intellectual capital and firm performance, as measured by return on equity, return on assets, and Tobin's Q. This result aligns with the resourcebased view theory, emphasizing the importance of strategic planning and process improvement to enhance competitiveness, thereby impacting intellectual capital efficiency and overall firm performance. Furthermore, earnings quality partially mediates the positive influence of intellectual capital on return on equity and return on assets, while it acts as a full mediating variable between intellectual capital and Tobin's Q, supporting the agency theory. Notably, when examining two mediating variables, competitive advantage and earnings quality, the results indicate that competitive advantage serves as a full mediating variable between intellectual capital and return on assets, whereas it only partially mediates the relationship between intellectual capital and return on equity. In addition, earnings quality acts as a full mediating variable between intellectual capital and Tobin's Q. This implies that investments in intellectual capital, measuring operational efficiency, have implications for the quality of earnings that, in turn, affect the business value in the service industry. In conclusion, investment in intellectual capital serves as an indicator of business resource utilization efficiency and firm value creation. This emphasizes that intellectual capital is a vital source of value creation in the digital economic era. Intellectual capital acts as a determining factor that influences firm performance and earnings quality, thereby significantly contributing to a business's competitive advantage. Consequently, promoting appropriate investments in intellectual capital should enhance overall firm performance.