Navigating the Digital Era: Role of Intellectual Capital in Enhancing the Financial Performance

DOI

10.2991/978-94-6463-666-6_3How to use a DOI?

Keywords

Digital Transformation; Intellectual Capital; Financial Performance; Government Policy; Small and Medium-sized Enterprises; Manufacturing SMEs; Resource-based View (RBV); Dynamic Capabilities Theory; Institutional Theory

Abstract

Digital transformation has become extremely important for small and medium-sized (SME) manufacturing enterprises for revenue optimization and improving financial performance. However, there is little quantitative research on the mediating role of intellectual capital and the moderating role of government initiatives between digital transformation and financial performance. Additionally, the role of government policy in moderating the relationship between intellectual capital and financial performance in existing research is nonetheless debated. Thus, a theoretical framework is developed in this study based on the resource-based view (RBV), dynamic capabilities theory, and institutional theory to determine the relationship between digital transformation and firms’ financial performance in the Malaysian manufacturing sector. The research population was extracted from the Federation of Malaysian Manufacturers (FMM) website directory using a sample size of 250 firms. Smart PLS version 4 was utilized to assess the quantitative data through the Structural Equation Modelling (SEM) technique. The demographic variables of the study were examined by assessing descriptive statistics utilizing Statistical Package for Social Sciences (IBM-SPSS). The results indicate that intellectual capital impacts the success of digital transformation initiatives, enhancing firms’ ability to improve financial performance. Merely transitioning to digitalization is insufficient; intellectual capital is essential for gaining a competitive edge. The study reveals that government policies, such as tax incentives and infrastructure initiatives, influence financial performance but do not moderate the relationship between digital transformation, intellectual capital, and financial performance in the manufacturing sector. The study emphasizes the necessity of a multi-layered approach, integrating digital strategies with strong intellectual capital to enhance financial performance and sustain competitive advantage. These insights provide a framework for policymakers and industry experts to foster digital transformation, economic growth, and long-term success for Malaysian manufacturing SMEs.

Copyright

© 2025 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Farah Akhtar
AU  - Abdelhak Senadjki
AU  - Vikniswari Vija Kumaran
PY  - 2025
DA  - 2025/03/17
TI  - Navigating the Digital Era: Role of Intellectual Capital in Enhancing the Financial Performance
BT  - Proceedings of the 12th International Conference on Business, Accounting, Finance and Economics (BAFE 2024)
PB  - Atlantis Press
SP  - 21
EP  - 61
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-666-6_3
DO  - 10.2991/978-94-6463-666-6_3
ID  - Akhtar2025
ER  -