Summary of article including critical review.

2. CRITICAL REVIEW OF THE ARTICLE
TITLE: INTELLECTUAL CAPITAL AND BUSINESS PERFORMANCE IN THE
PORTUGUESE BANKING INDUSTRY
AUTHOR: Maria do Rosário Cabrita, Nick Bontis (2008).
INTRODUCTION
This article theme is to find the intellectual capital effect of business performance in
Portuguese banking industry. The purpose of this research is to examine the interrelationships and interactions among intellectual capital components and business
performance in the Portuguese banking industry.
A past research shows that component of value creation have also changed. Inventory
cannot help in value creation until it is utilize in an effective manner. Similarly knowledge
is not important until it is used with other financial and non financial resources in a
productive way. It is also mentioned that harmonization of different types of resources
and interaction among them provide a higher intellectual.
Intellectual capital defines as the knowledge that can be transforms into value creation.
Another research shows that intellectual capital is important driver of value creation. So
in this research we focus on intellectual capital effect on business performance and
effect of intellectual capital component on value generation.Previous research shows a
positive relationship between intellectual capital and business performance.
PURPOSE OF RESEARCH
The purpose of our study is:
Examine interrelationships among intellectual capital
components and business performance
Test interaction effects among intellectual capital components
and business performance.

3. CONCEPTUALIZING INTELLECTUAL CAPITAL
Three elements of intellectual capital drag out from the literature that are its intangibility,
the fact that it creates value and the growth effect of collective practice.
In this article author used the work of Bontis (1999) as a base paper and utilize the
dimensions of Bontis to measure intellectual capital and its component for performance
of business.
In this article three dimension of intellectual capital is used which are:



Human capital
Structural capital
Relational capital
And two drivers:


trust
culture
HUMAN CAPITAL
Human capital is defined as a source of sustainable competitive advantage, investment
in human beings improves markedly the quality of work. It is also act as a driver of
national economic activity.
Previous research shows that increased training of employees may lead to higher
productivity and enhanced creativity, resulting in satisfied and loyal clients. Team work
is believed to increase innovation, productivity and speed-to-market.
Human capital is based on four elements:




Genetic inheritances
Education
Experience
Attitudes about life and business
STRUCTURAL CAPITAL
Structural capital is defines as a valuable strategic asset, which is comprised of nonhuman assets such as information systems, routines, procedures and databases.
The most advanced banking institutions already employ sophisticated systems to
assess risk management. A research shows that information quality is more related to
improvements in work environment.

4. RELATIONAL CAPITAL
Relational capital is the knowledge embedded in relationships with customers,
suppliers, industry associations or any other stakeholder. Relational capital can be
measured as a function of longevity.
Relational capital also includes market orientation. Previous research shows a positive
relationship between market orientation and business performance, new product
performance, innovation or learning organization.
The concept of relational capital was extended to include ‘stakeholder orientation’ items.
Another research demonstrate that market orientation is a necessary condition to
knowledge management orientation. Competitive intelligence is a market orientation
dimension.Researchers generally agree that the rejuvenation of intellectual capital
inside the firm, requires a sense of alignment with relational to protect the organization
from market consequences.
Culture is the glue that holds together the firm. It evolves over time, from the deep
knowledge of the organization’s internal capabilities, vision, traditions and values. Trust
is a fundamental construct to organizational life.
HYPOTHESES
H1. Human capital is positively associated with structural capital.
H2. Human capital is positively associated with relational capital.
H3. Structural capital is positively associated with relational capital.
H4. Structural capital is positively associated with business performance.
H5. Relational capital is positively associated with business performance.
H6. Relational capital positively moderates the relationship between the human capital
and business performance.
H7. Structural capital positively moderates the relationship between the human capital
and business performance.
H8. Relational capital positively moderates the relationship between the structural
capital and business performance.

5. DATA COLLECTION AND ANALYSIS
This research uses quantitative method of research and is an exploratory form of
research. Data is collected through questionnaire. Total sample size is 53 banks of
Portuguese and data is collected from atleast managers or directors within the
organization.
Spss statistical software is used for data analysis and regression, Kolmogorov-Smirnov
test for normality; and Cronbach’s alpha test for reliability is used.
First the survey instrument is tested by using PLS (Partial least square) and pilot test
shows that the survey instrument is reliable and valid. The value of Cronbach’s alpha
greater than 0.93 which shows that the instrument is reliable and acceptable.
In this research each component of questionnaire is tested by using varimax technique
which shows that all the elements of questionnaire are reliable and valid because the
value is greater than 0.40.
Finally the test applied on hypothesis shows that H1 to H5 are acceptable and
supported and H6 to H8 are not supported.
CONCLUSION
The result shows that human capital is positively related with the structural capital,
human capital is also positively related with relational capital. Human Capital (HC) has
important effects on both structural capital (0.755) and relational capital (0.391). Human
capital influences relational capital not only directly (0.391) but also indirectly through
the structural capital.
Structural capital is positively related with relational capital. Structural capital and
relational capital is positively associated with business performance.
Relational capital is not positively moderates relationship between the human capital
and business performance. Structural capital is also not positively moderate relationship
between the human capital and business performance. In last relational capital is not
positively moderates relationship between the structural capital and business
performance.
The explanatory power (R2) of model 45.4%, some indication that intellectual capital
components interact to influence business performance.

6. STRENGTH



Another important conclusion in this study is that the results of the Portuguese
study confirm similar results found by Bontis in Canada and Bontis et al. in
Malaysia.
Market orientation concept into the intellectual capital phenomenon may also
provide a better understanding of the market orientation.
Contribution of this study relates to human resource management.
WEAKNESS
This research is
only done on
one country
Portuguese.
This research is
only focus on
one industry
banking industry
of country.
In this research
only three
dimension of
intellectual
capital is used.
It is
recommend
ed that
senior
bankers
utilize an
intellectual
capital
framework
when
evaluating
the assets of
a potential
target.
It is argue
that a
thorough
understandi
ng of the
strategic
importance
of
intellectual
capital may
also
encourage
banks to
financially
support the
growth of
Portuguese
knowledge
intensive.
FUTURE IMPLICATION
There is an
immense
opportunity
for
interdisciplin
ary and
crossfunctional
learning.
We suggest
that defining
human
capital as
part of
intellectual
capital helps
organization
s understand
how
employees
create value.
Further
research is
needed to
investigate
whether
these
findings
generalize to
other
countries
and other
industries.
A
longitudinal
study should
be
undertaken
to
determine if
the
associations
identified in
this paper
hold over
time.