Enhancing Sustainable Competitive Advantage in SMEs: Aligning Intellectual Capital and Business Performance Model

Sustainable competitive advantage has always been a fascinating discussion in many updated literature, given its significant role in organizational sustainability. However, although previous studies found that intellectual capital and business performance are among the prominent predictors of sustainable competitive advantage, literature that provides insights into the relationship between the concepts still needs to catch up. Consequently, this study aims to examine how sustainable competitive advantage and business performance are affected by intellectual capital. Besides, the present study attempt to strengthen the grasp of the path and condition for enhancing sustainable competitive advantage by investigating the mediating role of business performance and moderating strategic flexibility. The data was collected from the questionnaire filled by 414 respondents from 69 SMEs in Indonesia that were examined using Structural Equation Modelling. The findings showed that intellectual capital significantly affected financial and non-financial performance and sustainable competitive advantage. In addition, non-financial performance has a role in mediating intellectual capital and sustainable competitive advantage; meanwhile, strategic flexibility has a role in moderating non-financial performance and sustainable competitive advantage. The study’s implications are then elaborated further in the paper.