THE MEDIATING ROLE OF DYNAMIC CAPABILITY ON THE RELATIONSHIP BETWEEN INTELLECTUAL CAPITAL AND ORGANIZATIONAL PERFORMANCE

Abstract

Vision 2030 of the Kingdom of Saudi Arabia aims to shift the Kingdom from an oil-based economy to a knowledge-based future economy. In response to the policy guidance drawn from the Vision, public organizations are mandated to embark on organization-wide performance improvement initiatives. To this end, the government has been investing in improving the performance of public higher education institutions (HEIs) in the country, which the Vision documents identified as bastions of its intellectual capital and cornerstones to achieving a knowledge-based economy. However, three years after the launch of the Vision 2030, there is insufficient evidence that the Saudi HEIs have attained any significant positive changes in their operational capabilities. Against this background, this study examined the mediating role of dynamic capability on the relationship between intellectual capital and organizational performance in the Kingdom of Saudi Arabia. By using a cross-sectional and quantitative research design, this study examined the relationship between pertinent variables based on data collected through survey questionnaires administered on 200 academician consist of professors, associate professors, assistant professors and lecturers from three first-generation Saudi universities. Data collected were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) to test the hypothesized mediating effect of dynamic capability on the relationship between intellectual capital and organizational performance. Results of the study revealed that the four dimensions of intellectual capital were positively related to organizational performance through the mediating effect of two dimensions of dynamic capabilities. These findings indicate that dynamic capabilities were positively and significantly related to organizational performance. The findings provide strong evidence that the organizational performance of public HEIs has improved with greater emphasis on developing dynamic capabilities through the enhancement of intellectual capital. This study contributes to the literature in three ways. First, this study clarifies the role that dynamic capabilities play in the intellectual capital—organizational performance relationship. Second, the study adds to the growing body of knowledge on Resource- Based and Dynamic capability views of public HEIs. Third, the findings deepen the contextual understanding of the effect of intellectual capital within the Kingdom of Saudi Arabia.