Intellectual Capital as Key Asset in Iranian Automotive Industry

Journal of Environmental Treatment Techniques

0202, Volume 8, Issue 1, Pages: 429-439

J. Environ. Treat. Tech.

ISSN: 2309-1185

Journal web link: http://www.jett.dormaj.com

Intellectual Capital as Key Asset in Iranian

Automotive Industry

Ahmad Masoomzadeh *, Wan Normeza Wan Zakaria , Maslin Masrom , Tayebeh

Khademi²

Razak Faculty of Technology and Informatics, Universiti Teknologi Malaysia (UTM), Jalan Sultan Yahya Petra, 54100 Kuala Lumpur, Malaysia

Azman Hashim International Business School, Universiti Teknologi Malaysia (UTM), 81310 Skudai, Johor, Malaysia

Received: 29/07/2019

Accepted: 01/09/2019

Published: 20/02/2020

Abstract

The importance of organisational innovation has received much attention in academic and industrial literature over the

years. The ability to innovate in products, services and process is a vital key in generating and sustaining competitive

advantage in an increasingly crowded and complex marketplace. The present study is mainly aimed at examining the effects of

intellectual capital on the performance quality of Iranian auto part manufacturing companies. To this end, this study adopted the

quantitative research approach together with the survey technique in order to collect required data from a total of 275 Iranian auto

part manufacturing companies. The data gathered were subjected to analysis with the use of the structural equation modelling

(SEM) on the basis of the Partial Least Squares (PLS) technique. According to obtained empirical results, intellectual capital

significantly affects the organisational performance and the organisational innovation capability has a great impact on infusion of

the independent factors significance. The resource-based theory can be relevantly applied to the Iranian manufacturing context; it

can be also improved by various dimensions of innovation capability. From a practical perspective, Iranian auto part manufacturing

companies need to be further engaged in the enhancement of their own innovation capabilities.

Keywords: Intellectual Capital, Innovation Capability, Automotive Industry, Iran

and Reinhart’s report, the automotive industry achieved as

Introduction ¹

high as EUR41 billion profit in 2007, which surged up to

EUR 54 billion in 2012 [4]. Mohr et al. suggested that the

profitability will increase to EUR79 billion by 2020 [5].

A geographic comparative analysis in 2007 indicates the

dominance of the BRICS countries, i.e., Brazil, Russia,

India, China and South Africa and the rest of the world

Numerous scholars and many practitioners have

discussed the significant role of innovation in facilitating the

business development [1]. The same relationship exists

between innovation and the automotive industry. During the

past century, the automotive industry has experienced a

considerable development. According the Statista’s reports,

the global sales of passenger cars have remarkably grown

(RoW); they accounted for over 30% of global automotive

profits of EUR12 billion. It increased to roughly 60% (or

EUR31 billion). It means that these countries developed

even more than Europe, Japan, North America, and South

Korea in terms of automotive industry [5].

(

around 79 million as reported in case of the year 2017). In

this regard, the US and China have accounted for the leading

market for car manufacturing and sales [2]. In 2016, the

major automobile producers were the multinational car

manufacturers like Toyota, Daimler, Ford, and Volkswagen.

In the domain of automotive parts supplying, big companies

like Bosch, Denso, Magna, and Continental have been

dominating.

Regarding the employment, the European automotive

market has succeeded to provide approximately 12 million

jobs, whereas Japan and the US have recorded over 5 million

and 8 million jobs [2-3]. Such huge employment opportunity

provided by the automotive industry is correlated with the

way it has performed its business over time. Based on Felton

.1 Iranian Automotive Industry

The imminent benefit of being fully engaged in the

automotive industry has long been recognised by Iran. In the

960s, western companies were widely invited to start a

local automative industry in Iran to provide an appropriate

context for the development of the automotive industry. The

Industrial Development and Renovation Organisation of Iran

(IDRO) discussed the high significance of establishing

domestic car manufacturing companies in this country, e.g.,

Iran Khodro and SAIPA, which owned 46% and 54% of

Corresponding author: Ahmad Masoomzadeh, Razak Faculty of Technology and Informatics, University Technology Malaysia.

E-mail: Ahmad.masoomzadeh@yahoo.com.

Journal of Environmental Treatment Techniques

0202, Volume 8, Issue 1, Pages: 429-439

Iran’s market as of 2008 [6]. The Iranian automotive

industry has contributed to economic development of the

country accounting for 4% of Iran’s GDP. It has employed

around 12% of Iran’s workforce [7].

human capital; it can only be rented [24]; likewise, only

individuals can generate knowledge, but organizations

cannot do that [25]. When a new member joins a given

organization, s/he carries human capital [26]. As a result,

individuals’ departure from an organization leads to loss of

organizational memory, which in turn may result in a

significant threat to the whole organization. It is due to the

fact that organizational members take away their knowledge,

tacit, skills, and talent when leaving the organization [26].

The aforementioned reasons clearly show the high level of

human capital importance to every organization.

One of the problems of the automotive industry in Iran

is the imposition of manpower in this sector. The

appointment of senior executives and even middle managers

in the corporate structure of domestic automotive companies

is commonplace. In addition, as the majority of the shares of

these companies belong to governmental and quasi-

According to reports released by the International

Organisation of Motor Vehicle Manufacturers (OICA), Iran

ranked 13 in 2011 and dramatically dropped to 18 place

out of 20 world’s biggest car manufacturing countries as of

018. However, Iran’s domestic automakers in collobraton

with government are still cotrol of domestic market with two

big company named as Iran KHordo and SIAPA, but low

export potential because of innovation capacity within this

industry [8].

.2 Aim of Research

Three research objectives have been defined for the

present paper: 1) examining the intellectual capital that

influences the organizational innovation capability of the

Iranian auto-part manufacturers; 2) investigating the impacts

of intellectual capital upon the organizational performance

of Iranian auto-part manufacturers; and 3) examining the

mediating effects of organizational innovation capability

upon the relationships between intellectual capital and

governmental

organizations

and

therefore

these

organizations have a direct involvement in the selection of

senior directors, so the government's assistance and support

from automakers will certainly meet expectations from

them. These expectations are sometimes even ordered for

recruitment at engineer and technician levels. While famous

automotive brands in the world account for over 4% of their

total sales value for research and development (R&D), they

are rapidly seeking to diversify and expand their

products. On average, domestic car makers account for less

than half a percent of sales. This has caused the major

difference between the production of a domestic car over the

years to be limited to modest changes in parts such as lights

or car mirrors. For example, Hyundai Motor has 7 research

and development centres for its international markets, with 3

centres in South Kore and 4 centres in Germany, Japan, India

and the largest research and development centre in the state

of California, USA, focuses solely on the United States

market.

organizational

performance

Iranian-auto-part

manufacturers. A total of three hypotheses were established

to support the research objectives.

Literature Review

.1 Intellectual capital

Most scholars defined the intellectual capital as the

carrier of knowledge [9-10-11]. Intellectual capital (IC) is

commonly defined as intangible assets of companies that are

not explicitly listed in the balance sheets, can affect the

financial performance of a company through disclosing the

relationships among employees, knowledge, ability, and

activity [12]. In cases where financial capital and physical

assets cannot facilitate the competitive advantages, then, it is

time for IC to become the only connection between physical

and nonphysical resources exist in an organization [13]. Not

only, companies viewed intellectual capital (IC) as an

important factor in raising their level of competitiveness and

achievement, it has also attracted the attention of academics

and professionals alike [14-15]. IC, according to Stewart and

Stephanie, can be classified into three dimensions, namely

human capital, structural capital, and customer capital,

which is well-known to many scholars and known as the H-

S-C structure [16-12]. On the other hand, in [17-18-19], IC

is divided into human capital, organizational capital (or

structural capital), and relational capital.

.1.2 Structure Capital

Structural capital refers to the organization capacity for

meeting demand [27]. According to recent studies, the high

performance in organization will achieve by good structure

organization with competent staff [28]. Also, Cabrita and

Bontis [29] defined structural capital as foundation and glue

of the organization is a valuable strategic asset, which

including non-human asset like procedures, methods,

information systems and database.

Structural capital is also referred to as the knowledge and

learning enacted during the whole organizational activities.

When individuals left the organization at the end of the day,

there remains an appreciable wide, deep pool of knowledge

in the organization [26]. Structural capital as the steady

framework for human capital, arrangements with the

components and structures of associations such as databases,

schedules, authoritative culture and anything that makes an

incentive for associations that can help people as they

continued looking for ideal scholarly execution [20-26].

Iranian automakers typically account for less than half a

percentage of sales to R&D and learning. This has caused

the major difference between the productions of an interior

car over the years to limit the appearance of the vehicle. In

To operationalize the three dimension of intellectual

capital, nineteen measures have been exercised. The

questions are adopted and developed and validated by Bontis

[

20].

.1.1 Human Capital

Human capital as one characteristic of intellectual

capital refers to employees’ skills, cumulative tacit

knowledge, experience and experts’ skills to add value

shared in organizations [21], and the talents and

innovativeness of individuals [22] also as valuable asset or

liability in organizations [23]. It is not possible to own the

Journal of Environmental Treatment Techniques

0202, Volume 8, Issue 1, Pages: 429-439

other words, the structural capital of automobile companies

is not well-suited.

investigation by which to study, because of different

viewpoint about innovation management [32]. According to

Laforet [33], innovation takes place just in cases where a

company enjoys the capability to innovation. As suggested

by Martinez-Roman et al. [34], innovation capability is

consisted of three different elements: knowledge,

organization, and human elements. The term OIC was

pioneered by Perdimo-Ortiz et al. [32] for the definition of

the most important factors that have influence on success of

the innovation practices. Such critical factors can be

translated as OIC elements, and the ability can be evaluated

with the elements.

Innovation capability in this study is categorized into

seven components, pursuing Saunila and Ukko [35] study.

The components are presented in the following. The present

study takes into account this definition since it widely

encompasses the significant elements of innovation

.1.3 Relational Capital

Relational capital refers to all relationships, including

power relationships, market relationships, and cooperation,

which are established amongst the individuals, companies,

and institutions. All these relationships come from a robust

sense of belonging and a high capacity for cooperation,

which can be easily found in contexts containing individuals

and institutions with similarity in their cultural background

[

30]. Relational dependency can be found in either

horizontal or vertical shapes, either down or upstream. Such

dependency forms various types of

cooperation/collaboration mechanisms in variety of

settings. Regional and industrial economists have significant

conceptual differences when they are discussing the

relational capital. Literature consists of a number of studies

that have applied empirical, quantitative, and econometric

techniques to the verification of the relational capital

existence and to conveying its significance to innovation

activities performed in companies. There are also proxies

representing the channels through which knowledge can be

developed locally; that means, it is formed by relational

capital in an indirect way.

This study has two objectives: 1) underlining the most

important conceptual differences between regional and

industrial economists; and 2) verifying the actuality and

significance of relational capital to companies’ innovation

activities through adopting a quantitative empirical approach

together with econometric techniques. Various sectoral,

regional, and company features are also analysed in this

study to investigate their relationship with the effects the

relational capital has upon innovation. In fact, it can be

reasonably expected that relational capital will exert

different impacts in different sectoral, regional contexts of

various companies.

Relational capital or social capital can help companies to

achieve innovation through sharing knowledge and

information [31]. Instances of relational capital include: the

unwaveringness of important clients because of

understanding their requirements and satisfying them

reliably; the common trust and responsibility offered by the

major providers; the dependability and dependence

association from unified accomplices; the notoriety and

connections that an association has created after some time

in its encompassing network; the information of laws and

guidelines just as the campaigning and systems

administration aptitudes; and the basic comprehension and

insight in regard to competitors.

Relational capital in Iranian automobile companies is

better than other stock companies, and the statistics on the

volume of trading and stock prices of car companies are

good. These results show that car companies have relatively

loyal and stable customers. One of the reasons for this is

government support for these stocks.

capability. Companies that hold

a high capacity of

innovation holds to some extent such elements, which are

explained below.

a. The participatory leadership culture element is

identified an organizational culture which helps to

improve innovative activities. The dimension mirrors the

general climate of a firm that patronages and persuades

innovation and a leadership culture that encourages

innovation.

b. The ideation and arranging structures measurement

incorporate the structures and frameworks that effective

innovation requires. This incorporates the creation,

advancement, and usage of thoughts, and the methods in

which the associations work activities are organized.

c. The work climate and well-being dimension, which

involves well-being of employees working in the

company and the work climate made ready in the

company in such a way that innovative activities, which

include collaboration and values, can be simply done.

d. The know-how development dimension, which indicates

that employees’ expertise is an essential part in the

generating of the OIC. This incorporates knowledge and

in addition change in employee aptitudes

e. The regeneration element replicates the firm’s ability to

gain as a matter of fact and to utilize that knowhow to

make and create innovations.

f. The external knowledge element underscores the

significance of misusing outer systems and information

for the general OIC. Accordingly, the element reflects

the association's interior ability to utilize external

knowledge in creating development capacity.

g. The individual activity element communicates that

workers' individual innovation capacity and action are

expected to shape the association's general innovation

ability. This measurement incorporates the attributes

connected with higher innovation capacity and

individual’s inspiration to encourage innovations.

To operationalize the seven dimension of organizational

innovation capability thirty-four measures have been

exercised. The questions are adopted and validated

according to culture assessment instrument (OCAI)

developed by Saunila et al, [36].

.2 Innovation Capability

Organizational innovation capability been proposed to

be a multi-faceted develop. There is no regular method for

Journal of Environmental Treatment Techniques

0202, Volume 8, Issue 1, Pages: 429-439

.3 Organizational Performance

minds. This has been recognized as a significant

The performance of a company, as a dependent variable,

innovation/creation source in a given organization. It can be

described as a combination of qualities and thinking trend of

the staff [42]. Staff creativity enable them the use their

knowledge and innovation continuously and innovation,

thus improve business processes and new services, leading

to competitive advantage [43]. Relational capital is referred

to as the knowledge value that is deposited within the

marketing channels in an organization; this knowledge is

essentially formed by business trends [44]. This capital has

higher direct effects on gaining corporate value and has

increasingly turned into an important factor in business [45].

Thus, customer capital creates connections between the firm

and the competition world and will enable the firm to take

part in competitions [46]. Structural capital can be regarded

as a culture, organizational structure, operational processes,

and information systems.

A review of literature confirmed lack of emperical

research into the effects of intellectual capital on

performance of the Iranian automotive industry. This

research conceptualize that intellectual capital related

activities done by the Iranian auto part manufacturing firms

can assist the firms to push organisational innovation

capacity by way of new products, designs and parts. The

Iranian firms’ initiatives toward structural (e.g.

establishment of organisation structure to fit creativity and

innovation), relational (e.g. management of supply chain)

and human capital (e.g. training and development to foster

innovation) would assist the auto part firms to innovate to

achieve growth. In this context the succeeding assumption is

expressed:

is of a high significance those scholars who work on any area

of management. Such extensive construct allows both

managers and scholars to make necessary assessments on the

company over time and to establish an effective and

inclusive setting for comparison of the company with its

rivals. Briefly, the key criterion applicable to the evaluation

of companies and their activities and environments is the

organizational performance [37]. As discussed by Sink et al.

[

38], the classical approach to performance evaluation

indicates that organizational performance is in fact a

complicated interrelationship amongst six performance

criteria, i.e., efﬁciency, effectiveness, productivity, quality,

proﬁtability, and innovation [39]. In this study firm

performance was measured from subjective view. To

evaluate firm performance thirteen items were taken into

consideration. The measures considered here were extracted

from research previously carried out in this area of study.

.4 Proposal Research Model

The theoretical model of the study has been formalized

by inculcating the hypothesis formulations’ point in Figure

Intellectual capital

Human capital

Structural Capital

Relational capital

H1: There is a positive relationship between intellectual

capital and organizational innovation capability

Innovation Capability

.5.2 Organizational Innovation Capability and

Participatory leadership culture

Ideation and organizing structures

Work climate and wellbeing

Know-how development

Regeneration

Organizational Performance

Greater part of past research on the connection between

advancement ability and authoritative execution concurs that

capacity and hierarchical has beneficial outcome on

hierarchical execution [47]. Beforehand, the vast majority of

the investigations utilized R&D use as the chief

advancement measure. Be that as it may, R&D use

External knowledge

Individual activity

experiences

a few inadequacies when utilized as a

development measure. For instance, the propensity towards

the modest representation of the truth of R&D in littler firms

constrains the relevance of such a measure to catch the

condition of advancement. This has brought about another

age of research that reviews the impact of advancement

capacity on authoritative execution by concentrating on the

complexities of development ability as contributions of

hierarchical execution [47]. Firms with an abnormal state of

advancement capacity have more elevated amounts of

profitability and monetary development than firms with a

low degree of development ability. The examination by Rhee

et al. [48] reasoned that development capacity affects

execution. These outcomes demonstrate that presentation

can be gotten from the inclination for advancement. Sanz-

Valle et al. [49], announced a positive and huge connection

between authoritative development ability and hierarchical

execution. Studies have likewise proposed that hierarchical

development capacity is a significant determinant of

Organizational

Performance

Figure 1: Proposal Framework

.5 Development of Hypothesis

The hypotheses of this research are discussed in this

sub section:

.5.1 Intellectual Capital and Organizational Innovation

Capability

Intellectual capital is known as a strategic resource for

an organisation [40]. In late 1990s, management scholars

categorized intellectual capital into human capital, relational

capital and structural capital [41]. Human capital indeed

refers to the knowledge that exists implicitly in the staff’s

Journal of Environmental Treatment Techniques

0202, Volume 8, Issue 1, Pages: 429-439

authoritative presentation builds, for example, benefits [50].

It has been discovered that there exists a reasonable contrast

in gainfulness between firms with abnormal state

authoritative development ability and firms with a low

degree of advancement capacity [51]. Notwithstanding

generally speaking execution and benefit, the impacts of

development ability on operational execution have been

considered. Developments ability themselves affect

operational execution as to efficiency, lead times, quality,

and adaptability [52].

Advancement capacity is likewise essentially identified

with volume adaptability, item blend adaptability, unit

assembling cost, and speed of new item presentation [53].

Murat Ar and Baki [54] affirmed that item and procedure

advancement prompted better execution, when estimated by

deals, productivity, and piece of the overall industry. The

relationship was more grounded with item advancement than

procedure development. There are thinks about that have

inspected the impact of hierarchical development ability on

corporate execution, yet there are just a couple of

concentrates that have examined the connection between

advancement capacity and execution in SMEs. It has been

expressed that SMEs with solid advancement capacity will

pick up aggressiveness against contenders, empowering

them to accomplish prevalent execution [55].

To end with, Tseng and Goo [58] made a number of analyses

on connections between value creation and IC. A firm’s

value is often based on the unintelligible intellectual capital

owned by the company. Therefore, it is expected that

efficacy of intellectual capital affects the performance of

organization in a direct way.

If a company holds a robust structural capital, it will be

capable of providing appropriate settings required to make

use of human capital. It helps the company to effectively

captivate customers and generate novel products [59].

Literature makes available sufficient evidence indicating the

positive influence of IC on performance quality of

companies. According to Bontis et al. [60], IC is positively

correlated with the company’s performance and market

values. As a result, majority of companies tend to dedicate

enough resources in order to manage efficiently their

available IC such that a higher quality performance could be

achieved. A number of researchers have confirmed a positive

relationship between IC and a firm’s performance; on the

other hand, some others support a negative relationship. For

example, Marvridis [61] found that the Japanese banks that

have better performance are those which have made the

outmost use of their intellectual capital. Iranian automobile

industry’s concentration toward intellectual capital would be

able to influence organisational performance. Such a stand

had been made in numerous literature – albeit within

different country setting. The importance of intellectual

capital in pushing the boundary of performance for Iranian

market is highly plausible since concentrated training,

development activities, structural and relationship building

exercises would help in creating business performance. In

this context, the following hypothesis is formulated:

The contention on development capacity prompting

authoritative development is plainly obvious in the writing

as talked about before. Iranian car part assembling firms

would almost certainly harvest authoritative development if

their advancement ability is consistently diffused over the

business. The current automobile part makers ought to

participate in higher request development capacity creation

inside the business with a perspective on introducing

development opportunities. In accordance with this

contention, it is posited that:

H3: There is a positive relationship between intellectual

capital and organizational performance.

H2: There is a positive relationship between organizational

innovation capability and organizational performance.

Methodology

The present research made use of self-administered

questionnaires as a reliable instrument to gather required

data. The questionnaires provided were posted to the auto

part manufacturing firms managers. For the purpose of this

study, the minimum sample size was set to be 265.

Therefore, the researchers sought the participation of 300

companies under the supplier company category. Finally,

.5.3 Intellectual Capital and Organizational

Performance

Intellectual capital (IC) has been recognized widely as a

key factor in the enhancement of the organizational

performance. The factor causing a given business to succeed

is dependent on the quality of the knowledge accessible for

the construction and expansion of products/services of a high

reliability, which are well matched with specific individuals’

needs. IC can be taken into consideration to measure the

capacity of a company for wealth production. Remember

that IC is not concrete and physical by nature; however, it is

an incomprehensible asset attained using the assets that are

connected to human resources, organizational performance,

as well as the relationships that may be created outside the

organization. All such characteristics help to create value

which cannot be sold or bought because it is a totally

intrinsic phenomenon. The literature suggests that the

company’s performance is connected to its intellectual

capital [56]. In addition, Chen et al. [57] succeeded to

explore imperative relationships among the four IC

elements, i.e., innovation, customer, structural and human

capital, and the business performance. Moreover, they

explored a remarkable relationship among the IC elements.

75 managers participated in the survey. The data gathered

were subjected to required analyses with the use of the

structural equation modelling (SEM) on the basis of the

Partial Least Squares (PLS) technique. A model was

constructed by means of the Smart PLS software to examine

the direct impact of IC on organisational performance and

also the mediating effect of the organisational innovation

capability between IC and organisational performance.

Results and Discussion

Before running the SEM test, the data were normalized;

The, the normality was examined by means of the skewness

and kurtosis analyses. Kurtosis measures the distribution

peak and shows how the distribution is high around the mean

[

62]. On the other hand, skewness measures the degree of

distribution asymmetry. Taking into consideration a rule of

thumb, in case of a normal data distribution, both kurtosis

Journal of Environmental Treatment Techniques

0202, Volume 8, Issue 1, Pages: 429-439

and skewness must be ranged between -2 and +2. In addition,

the Kolmogorov-Smirnov and Shapiro-Wilk statistics were

applied to each construct. As confirmed by the obtained

results, both kurtosis and skewness were ranged from -2 to

In the present paper, the Pearson’s correlation was used

to calculate the bivariate correlation matrix, whereas

multiple regression procedure with collinearity diagnostic

option was applied to the calculation of VIF and tolerance

effect. Non-response is a major challenge facing studies

using surveys as an instrument for gathering data. As

suggested by Atif et al. [66], a non-response bias analysis is

needed to be carried out notwithstanding how low or how

high response rate has been obtained. To this end, the Mann-

Whitney-U-test was conducted for non-response biasness in

this research. It was calculated through taking into

consideration the dissimilarity between early and late

respondents concerning the means of all variables.

+2 for all items, and indicating normality of the data are in

the acceptable range. The kurtosis privileges are +/- 2 times

the standard error and the degree of fracture is +/- 1 times

the standard error, the potential for limiting data analysis and

post-result interpretation [62].

The univariate outliers or anomalies were distinguished

by considering recurrence appropriations of Z scores of the

watched information [62]. In any case, any univariate

exception was not identified for this examination; this was

because it made use of a 7-point Likert scale ranging

between 1 and 7. Moreover, the attributed information

anomalies were identified with the use of univariate

Table 3: Observing Non-Response Biasness through Mann-

Whitney-U-Test

(

histograms, box-plots, and institutionalized Z score). As per

Hair [63], for an enormous example estimate, a flat out (Z)

3.5 shows an extraordinary perception. The outcome

OIC

Mann-Whitney

055.500

7608.500

9331.000

demonstrated that the institutionalized (z) scores of the

credited factors extended from – 3.90 to 2.50, showing that

none of the variable surpassed this limit. This is appeared as

below.

Wilcoxon W

16646.500 17199.500 18647.000

-3.553

520

-2.710

.657

-.081

.936

Asymp. Sig. (2-

tailed)

Table 1: Examination of Outliers

Minimum

Maximum

Z score (OP)

Z score (IC)

Z score (OIC)

-1.96817

1.84475

The results introduced in Table below indicate that the

notable quantity in any construct is at the very least or

equivalent to 0.5 likelihood value. Therefore, it can be said

that in this paper, non-response bias is negligible. A

descriptive investigation was done for all constructs and

questions. The statistic profile of the members is checked on

as far as gender, position in organization and education

foundation. Regarding gender, roughly 75% of participants

were male and the rest of them (25%) were female. All of

the participants were business managers. Majority of

respondent indicated having undergraduate degree (52%),

with 33% of them having a master’s degree. Another 7% of

them indicated having a PhD degree, while 4% were school

leavers.

-1.64628

-1.77446

1.36168

1.94811

Previous to running the model, there is a need for

properly checking the multicollinearity problem in case of

continuous and dummy variables. According to Tabachnick

and Fidell [64], multicollinearity appears when it is difficult

to detect the separate impact of independent variables upon

the dependent one due to the existence of strong

relationships amongst them. That is, multicollinearity refers

to a certain condition in which there is a high correlation

among explanatory variables.

Two more commonly-used methods for detection of

multicollinearity severity level are: the inspection of the

bivariate and multivariate correlation matrix and the

calculation of the variance inflation factors (VIF) and

tolerance impact [64]. As maintained by Pallant [68], the

tolerance effect shows that the variability defined by the

independent variable is unique, while VIF acts on the

contrary. Lower tolerance (say, below 0.1) and larger VIF

The results of descriptive statistics of variables is

untaken in Table below that shows there are 5 constructs and

6 items are collected for the questionnaire, the result shows

that maximum average is related to OP (mean = 4.0573) and

minimum is related to the OIC (mean = 3.9245) variable and

IC construct was above medium level in seven-point scale

(i.e., Mean = 4.0004).

Table 4: Descriptive Statistics on Variables

(

say, above 10) demonstrates the multicollinearity

Construct

Item

Mean

4.0573

4.0004

3.9245

Std. Deviation

.92802

occurrence [65].

Table 2: Pearson correlation for observing multicollinearity

.92736

OIC

.86910

OIC

1.000

-.201

.1 Hypothesis Testing

At this step, the relationships among latent variables

hypothesis testing) are examined. Subsequent to running a

1.000

Dependent Variable: OP

(

PLS model, estimations are made in regard to the path

coefficients, which denote the hypothesized relationships

Journal of Environmental Treatment Techniques

0202, Volume 8, Issue 1, Pages: 429-439

that link the constructs. The path coefficient values are

standardized on values ranging between -1 and + 1, with

coefficients closer to +1 (which denote strong positive

relationships) and coefficients closer to -1 (which denote

strong negative relationships). It is true that the values that

are close to -1 or +1 are almost always statistically

significant; though, there is a need to obtain a standard error

with the use of bootstrapping in order to test for significance.

and organizational performance (β = 0.2144; t = 2.077),

which implies 1% increased innovation capability leading

to a 20.44 % increased organizational performance. This is

quite a substantial relationship in Iranian automobile

industry. Higher productivity, better profitability [53], lead

times, quality, and flexibility [55] seem to have been

experienced by the auto-part firms in Iran. This could be

attributed to the fact that Iranian automobile industry is

leveraged upon the push for innovative product

development, thus lack of it may hinder performance. The

economic condition (e.g. sanctions and other) requires the

auto firms to be constantly innovating in order to achieve

growth.

.2 The Effect of intellectual capital and organizational

innovation capability

The effect of intellectual capital on organizational

innovation capability was the first hypothesis. The results

indicated that intellectual capital has positive and significant

effect on organizational innovation capability (β =0.1876; t

Table 5: The Results of Main Hypotheses

=3.6513).

Path

Standard

t-value

coefficient (β) Error (SE)

.3 The Effect of Organizational Innovation Capability

and Organizational Performance

IC -> OIC

OIC -> OP

IC -> OP

0.1876

0.2144

0.2159

0.0514

0.1032

0.0663

3.6513

2.077

The effect of organizational innovation capability on

organizational performance was the fourth hypothesis. The

results established that organizational innovation capability

has a positive effect on Project performance (β= 0.2144, and

t = 2.077).

3.2566

Table 6: The Mediating Effect of OIC on the Relationship

between IC and OP

.4 The Effect of Intellectual Capital and Organizational

Performance

The effect of Intellectual Capital on Project performance

IC ->

OIC

OIC -> OP

was fifth hypothesis. As demonstrated by the obtained

results, IC positively affects the organizational performance

(

β= 0.2159 and t = 3.2566).

Beta 0.9441 0.9611

0.9523

0.0058

Discussion

.1 The relationship between IC and OIC

A positive and significant relationship between IC and

0.0056 0.0031

169.72 308.75

65.584

organizational innovation capability is assumed by the first

research hypothesis. The obtained results confirmed the

existence of a positive and significant relationship between

IC and IOC (β = 0.1876; t = 3.6513). This indicate that for

every 1% of increase in intellectual capital elements (i.e.

comprised of human capital, structural capital and relational

capital), auto-part manufacturers’ innovative capability

would increase by 18.76%. This implies that the role of

intellectual capital in pushing the dimension of innovative

capability of the automation industry in Iran remains crucial.

This finding is consistent with the findings presented by

Abeysekera [46] and Lopez [43-59]. These authors found

intellectual capital to have a positive effect on organizational

innovation capability. On a more recent note, Han and Li

value

IC -> OP Mediated by OIC

IC ->

OIC

OIC -> OP

0.5841

Beta 0.3815 0.9597

0.059

.4641

0.0035

0.0602

value

272.82

9.7024

Type of mediation: Partial

[

67] found intellectual capital having a significant effect on

Sobel Z value: 145.098 significance at p< 0.000

innovative performance in Chinese firms. The importance of

these dimensions was examined by Mariz-Pérez et al. [68],

Sumedrea [69]and Kalkan et al. [70] amongst others. The

general consensus is that innovation is a necessity for

organizations, should they aim to be competitive.

.3 The Relationship between IC and OP

The relationship between intellectual capital and

organizational performance was the fifth hypothesis. The

obtained results showed positive and significant

.2 The Relationship between OIC and OP

The relationship between organizational innovation

relationship between organizational innovation capability

and organizational performance (β = 0.2159; t = 3.2566), that

shows when one percent of intellectual capital increases,

leads to a rise in organizational performance by 21.59% in

capability and organizational performance was the second

hypothesis. The result showed that a positive and significant

relationship between organizational innovation capability

Journal of Environmental Treatment Techniques

0202, Volume 8, Issue 1, Pages: 429-439

the sample Iranian auto-part manufacturing companies. It

has a high consistency with findings reported in related

literature [56]. If companies invest in human capital,

relational capital, and structural capital, they achieve a

significant improvement in their business performance. The

higher the employee’s absorptive capacity and cognitive

ability are, the better organisation’s performance would be.

Similarly, efficient relationship management with all

stakeholders as well as having structured processes, systems

and infrastructure, would lead to improved business

performance. This has been evidenced in this study, in the

context of Iranian firms.

Ethical issue

Authors are aware of, and comply with, best practice in

publication ethics specifically with regard to authorship

(avoidance of guest authorship), dual submission,

manipulation of figures, competing interests and compliance

with policies on research ethics. Authors adhere to

publication requirements that submitted work is original and

has not been published elsewhere in any language.

Competing interests

The authors declare that there is no conflict of interest

that would prejudice the impartiality of this scientific work.

Authors’ contribution

All authors of this study have a complete contribution

for data collection, data analyses and manuscript writing

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She

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Information

Strategy,

Information

Technology

Management

Systems,

ICT

Ethics

and

Society, Decision Modelling,

and Research Methodology.

[

Tayebeh Khademi

PhD Candidate of Azman Hashim

International Business School,

Universiti Teknologi Malaysia

[

(UTM), 81310 Skudai, Johor,

Malaysia

Journal of Environmental Treatment Techniques

0202, Volume 8, Issue 1, Pages: 429-439

Appendix: Examination of Normality

Skew

ness

Skew

ness

Item

Kurtosis

Item

Kurtosis

IC1

IC2

IC3

IC4

IC5

IC6

IC7

IC8

IC9

IC10

IC11

-.160

-.422

.062

.213

.133

-.187

-.204

.080

-.283

-.210

-.236

-.622

-.538

-.931

-.402

-.223

-.774

-.422

-.732

-.834

-.666

-.859

OIC15 -.376

OIC16 -.033

-.617

-.609

-.679

-.605

-.787

-.530

-.147

-.538

-.498

-.622

-.264

OIC17

.059

OIC18 -.336

OIC19 -.131

OIC20 -.082

OIC21 -.191

OIC22 -.422

OIC23

.109

OIC24 -.160

OIC25 -.093

OIC26 -.336

OIC27 -.214

IC12

IC13

IC14

IC15

IC16

IC17

IC18

IC19

-.304

-.160

.415

-.022

-.142

-.151

-.115

-.136

-.709

-.878

-.320

-.911

.009

-.880

-.764

-.903

-.605

-.418

-.732

-.842

-.679

-.842

-.714

-.684

OIC28

.080

OIC29 -.287

OIC30 -.206

OIC31 -.231

OIC32 -.296

OIC33 -.219

OIC1

OIC2

OIC3

OIC4

OIC5

OIC6

OIC7

OIC8

OIC9

-.336

.022

-.148

.274

.012

.093

.076

-.141

-.168

-.605

-.312

-.561

.008

-.462

-.500

-.350

-.360

-.994

-.179

-.593

OIC34 -.192

-.641

-.622

-.264

-.223

-.320

-.815

-.962

.009

OP1

OP2

OP3

OP4

OP5

OP6

OP7

OP8

OP9

OP10

-.160

-.093

.133

.415

-.153

-.078

-.142

-.079

-.127

-.336

-.588

-.786

-.605

OIC10 .149

OIC11 -.309

OIC12 .109

OIC13 .059

OIC14 -.067

-.498

-.679

-.832

OP11

OP12

OP13

-.168

.065

.059

-.994

-.647

-.679