Intellectual Capital, Members' Participation and Cooperative Performance: The Mediating Role of Management Capabilities

Abstract

The purpose of this paper is to validate the mediating effect of management capability/capabilities (MC) on the relationships between intellectual capital (IC) and cooperative members’ participation (MP) and the cooperatives' financial and non-financial performance. The major aim is to examine the effect of MC in mediating the relationship between influential antecedents and cooperative performance - a topic that is relatively understudied in the literature. The study employs the survey technique to gather data from the respondents. Therefore, the questionnaire is designed to measure the indicators of the prescribed independent and dependent variables. The independent variables consist of MP and IC, which is further itemised into structural capital (SC), human capital (HC) and relational capital (RC), whilst the dependent variable consists of performance measured by financial and non-financial indicators. The questionnaires are distributed to 234 cooperatives that consist of palm oil smallholders cooperatives in Peninsular Malaysia. Among the targeted sample, 44% responded to the survey. The relationships between the characteristics of the Board of Directors and performance are validated through the partial least squares analysis. The findings indicate MC is a significant mediator in the relationships between IC and MP and cooperative performance. Furthermore, MC has been found to have a positive effect on the financial and non-financial performance of the cooperatives. IC and MP have indirect effects on cooperative performance. The ability to influence such a performance lies in the abilities of the management to optimise the benefits obtained from the SC, HC and RC and MP in the cooperative's activities.