Mediating Effect of Entrepreneurial Orientation on the Intellectual Capital-Performance Relationship in the Malaysian Banking Sector

The competitive environment today dictates that banks must manage their resources well and becoming more entrepreneurial in order to survive and prosper. However few empirical studies had been conducted in examining the combined effect of intellectual capital (IC) and entrepreneurial orientation (EO) on performance of banks in Malaysia. This study sought to answer the following research questions: 1) What is the state of intellectual capital among banks in Malaysia? 2) What is the state of entrepreneurial orientation among banks in Malaysia? 3) What is the relationship between intellectual capital and entrepreneurial orientation of banks in Malaysia? 4) Does intellectual capital influence the performance of banks in Malaysia? 5) Does entrepreneurial orientation influence the performance of banks in Malaysia? 6) Does entrepreneurial orientation mediate the effect of intellectual capital on performance of banks in Malaysia? To answer these research questions, the following hypotheses were formulated: 1) There are significant relationships between dimensions of IC (human, relational and structural capitals) and entrepreneurial orientation, 2) There are significant relationships between dimensions of IC and performance, 3) There is significant relationship between EO and performance, and 4) EO mediates the relationship between dimensions of IC and performance. This study employed the quantitative approach through a survey instrument design. The population was the branch managers of locally incorporated commercial banks in Malaysia. The local banks were chosen because most of them have extensive branch networks, even in rural areas. Data were collected using questionnaires, and the constructs used were developed from prior research and previously tested for reliability. The variables used were created as one dimensional except intellectual capital which was loaded with three dimensions or constructs. Principal components factor analysis was employed to extract and rotate factors. Descriptive statistics were used to analysis the characteristics of respondents including frequency, means and measures of variability. Multivariate techniques employed were correlation and multiple regressions. The findings revealed that only structural capital of the three dimensions of IC had significant and positive relationship with entrepreneurial orientation, while human capital and structural capital had significant and positive relationship with performance. Significant relationship was found between entrepreneurial orientation and performance, while EO only partially mediate the relationship between structural capital and performance. This study concluded with the discussions on the findings, its contribution and limitations as well as some suggestions for future research.