Examining the impact of intellectual capital and family ownership on production efficiency of manufacturing SMEs in Pakistan

In Pakistan, manufacturing small and medium sized enterprises (SMEs) play a critical to economic growth. However, they are facing challenges such as production inefficiencies and resource underutilization, which undermine their efficiency. While intellectual capital is considered a key driver of performance, limited empirical evidence exists regarding its impact on production efficiency in context of Pakistani manufacturing SMEs. This study addresses this gap by examining how intellectual capital components impact production efficiency. Additionally, this study explores the moderating role of family ownership in the relationship between intellectual capital components and production efficiency. A cross-sectional survey was conducted using a standardized questionnaire, collecting data from 384 manufacturing SMEs in Lahore, Faisalabad, and Multan. Data were analyzed using partial least squares structural equation modeling (PLS-SEM). The results revealed that organizational capital, relational capital, and social capital positively and significantly impact the production efficiency of the manufacturing SMEs. Human capital and spiritual capital have a significant but negative impact on production efficiency, while technological capital shows no significant effect. Furthermore, the findings of this study revealed that family ownership moderates the relationship between human, organizational, technological and spiritual capital and production efficiency. However, there was no moderating effect of family ownership on the relationship between relational and social capital and production efficiency. These findings offer practical implications for policymakers and SME owners in Pakistan, emphasizing the need for targeted strategies such as employee training, technology awareness, and relationship-building programs to enhance production efficiency of manufacturing SMEs.