Intellectual Capital and Corporate Performance through Competitive Advantage: Evidence from Indonesia

ABSTRACT

Since the Covid-19 pandemic, the business organizations' performance has experienced great shocks, including Indonesian banking. This study aimed to investigate Indonesia's banking organizations' performance based on intellectual capital (IC), corporate governance (CG), and enterprise risk management (ERM) with competitive advantage (CA) mediation. It intended to develop a new model that could theoretically contribute to scientific civilization with practical implications for business, particularly the banking industry. Secondary data used was obtained from the Indonesia Stock Exchange (IDX). The sample comprised 185 observations consisting of 37 banks selected through purposive sampling, with the criteria of submitting annual report data for five consecutive years of observation (2016-2020). Data were analyzed using partial least squares structural equation modeling (PLS-SEM). The results showed that IC, CG, and ERM do not directly affect OP. However, IC and CG significantly affect CA, which significantly influences OP. CA indirectly mediates the effect of IC and CG on organizational performance (OP). These results confirmed a new model regarding the effect of IC and CG on OP mediated by CA. Therefore, the bank's OP could improve through IC and CG supported by CA. In line with this, the Indonesian banking sector should simultaneously improve IC, CG, and CA through strategic policies and approaches. The new model developed in this study could be adopted by taking the different fields and samples, other indicators, and using different analytical tools such as Lisrel.