In a fast changing business environment with accelerated technological development, new knowledge resources and developing dynamic capabilities are becoming vital issues in economic knowledge. Drawing on the Resource-based View in small and medium-sized enterprises (SMEs) and competitive dynamics perspectives, there has been a recent rise in the number of practitioners and academics integrating the knowledge resources of SMEs, which are intellectual capital (IC) and absorptive capacity (ACAP) to achieve superior performance. The main objective of this study is to investigate the mediating role of absorptive capacity on the relationship between intellectual capital and firm performance in high-tech sector SMEs in the UK.
Current research proposed a model for the direct and indirect relationships of IC- performance through ACAP, thereby increasing contributions to knowledge in the field of strategic management. A research conceptual framework was developed with reliance on an existing body of literature in the field of study. It integrates the effects of intellectual capital with absorptive capacity to create and develop dynamic capabilities in pharmaceutical, biotechnology, and the publishing of computer games firms. A quantitative research employing surveys, the selected method of study was justified, because of the number of SMEs and their being geographically widespread around the UK. A five-point Likert-type scale has been used to measure research variables.
A research conceptual framework has been developed and tested by using a structural equational modelling methodology. The results of this study suggested that high-tech SMEs could enhance and improve their financial outcome, if they associate and integrate the firm’s intellectual capital with the firm’s absorptive capacity to create or develop dynamic capabilities, which has greater significant effects on firm performance. This research concludes by saying that high performance firms respond rapidly to new knowledge and also that there is a strong association between IC and ACAP affecting the performance of SMEs. It is also concluded that CEOs and managers are able to enhance the level of performance in high-tech SMEs by the creation or development of dynamic capabilities through the integration between firm IC and ACAP.