International Journal of

Management Research and

Emerging Sciences
Volume 6 Issue 1 (2016) PP. 51-70

Intellectual Capital and Organizational Performance: Mediating Role of

Entrepreneurial Orientation in SMEs Sector of Pakistan
Chaudhry Abdul Khaliq1, Muqqadas Rehman2, Hassan Mobeen Alam3
Munazza Amin4, Nauman Aslam5
Abstract
The emergence of modern societies has created many challenges for organizations to counter
hyper competition in the market. In this regard, firms that are innovatively using their
intellectual resources have not only preeminent chances to grow and sustain in intensive
competitive milieu but also reap significant performance in the marketplace. Therefore, the
main endeavor of this study is to investigate the impact of intellectual capital on
organizational performance of small and medium enterprises of Pakistan. Further, the
mediating role of entrepreneurial orientation which is recently recognized as the most crucial
factor in ameliorating firm performance is also empirically tested in the model. The study
has employed structural equation modeling (SEM) and principle component analysis (PCA)
to test the mediating model. It has been found that human capital and relational capital have
direct and indirect effect on organizational performance while structural capital does not
show any direct relationship with organizational performance. The findings of this research
facilitate the policy makers, practitioners and entrepreneur’s/owner mangers of Pakistan in
particular and other developing country in general to formulate strategies that can accelerate
performance and strengthen SMEs operations across borders.
Keywords: Intellectual capital, Organization performance, Entrepreneurial orientation.
1. Introduction
Intellectual capital is becoming the preeminent resource for creating
economic wealth. Initially, conventional physical assets were considered to
be the dominant components for enhancing the performance of any economic
activity but the current progression in the field of science, technology and
most importantly knowledge based economy increased the importance of
intangible resources (Melnikas, 2011). This shift in the pattern of intangible
resources includes knowledge, expertise, skills, practices and relations with
the stakeholders which can be collectively described as intellectual capital
(Ahangar, 2011).Similarly, a nation’s sustainable economic development and
growth are enormously based on the continuous growth of entrepreneurial
ventures (Minai, Lucky and Olusegun, 2011). Entrepreneurial orientation is a
main factor of firm’s success (Runyan, Droge, & Swinney, 2008).
Entrepreneurial orientation consists of willingness to innovate, seek for risk,
take autonomous actions, and be proactive rather than being aggressive than
rivals towards new market opportunities for an effective change (Wiklund &
Shepherd, 2003). Entrepreneurial orientation is considered a new branch of
1
Assistant Professor, Hailey College of Commerce, Lahore, Pakistan, cakm786@yahoo.com
2
Assistant Professor, Hailey College of Commerce, Lahore, Pakistan, muqqadasrehman@hcc.edu.pk
3
Dean, Hailey College of Commerce, Lahore, Pakistan, dean.commerce@pu.edu.pk
4
Visiting Lecturer, University of education, Lahore, Pakistan, munaza.amin@yahoo.com
5
Lecturer, Superior University, Lahore, Pakistan, naumanaslam91@yahoo.com

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entrepreneurship and it refers to all actions, methods, procedures, activities,

decision making processes that caused to enter in new business and support
and encourage entrepreneurial activities (Shiri, Mohammadi, and Hosseini,
2012). Therefore, it is important to study such resources which cannot be
easily emulated by other firms such as intangible resources (intellectual
capital) of the firms and firms’ entrepreneurial orientation. That’s why,
companies are trying to improve and modify their resources (tangible and
intangible resources) accordingly.
These entrepreneurial ventures are majorly comprised of small and medium
enterprises (SMEs) that are playing a vital role in the economic development
of the country (Kachembere, 2011; Beck, Demirguc-Kunt & Levine, 2005)
as compared to large scale industries. Literature revealed that the
contribution of SMEs in the GDP and employment generation of high
income economies is 55% and 65% respectively. However, the SMEs are
accounted for over 60% of the total GDP and over 70% of the total
employment in low income economies and it is almost contributing 70% to
the total GDP and 95% to the total employment of middle income economies
(Subhan, Mehmood and Sattar, 2013). Hence, it can be concluded that SMEs
is the only sector that is playing a significant role in the transition of
agricultural based countries to industrial based economies that ultimately
help the country to achieve sustainable competitive advantages
(Kachembere, 2011).
The existing study will be a pioneer in its nature as to date no empirical
research has been conducted in the context of SMEs sector of Pakistan that
will examine the mediating role of entrepreneurial orientation between firm’s
intellectual resource and organization performance. Even many studies have
discussed intellectual capital and firm performance relationship (Vissa and
Chacar, 2009; Wang, 2008; Chen, 2007).But I hardly find a study which
actually tries to examine the mediating mechanism of entrepreneurial
orientation between intellectual capital and organization performance.
Therefore, the present study is intended to study the mediating mechanism of
entrepreneurial orientation between intellectual capital and organization
performance using SEM (structural equation modeling) analysis.
2. Literature Review
2.1 Intellectual Capital
According to the resource base theory, the main source of enhancing
business performance is the intellectual capital (Ditillo, 1997). Research
agrees that the organizations that considered the intellectual capital as the
most important intangible asset and the major principle of value creation will
definitely grow higher in today’s century. As twenty-first century is based
more on knowledge, the intellectual capital becomes more important than
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physical capital. John Kenneth Galbraith, the first economist who introduced
the term Intellectual capital in 1969, describes the differentiation between
organization’s market value and books value.
Iswatia & Anshoria, (2007) defined intellectual capital as it is the intellectual
material such as information, knowledge, intellectual proprietary, concepts
and experience which is actually creating wealth. According to Santoso
(2011), intellectual capital is important to organizations and positively
influences the business performance. Intellectual capital is the summation of
all knowledge and information that is possessed by all individual in an
organization and provide competitive advantage to organization when used
correctly.Hsu and Fang (2009) stated that intellectual capital created
competitive advantage by including process, strategy, knowledge, culture,
communication network and other intellectual properties to help organization
to achieve their goals. Akdemir and Akpinar (2003) defined intellectual
capital as it is the sum and synergy of company’s experience, knowledge,
relationship, discoveries, processes market presences, innovations and
community influence. It encompasses much more than the company patents,
copyrights, concepts, manuals and other forms of intellectual property. Prior
researchers have their own classification on intellectual capital due to back
ground and research subject and there seems to be no consistency among
evaluation of intellectual capital methods (Leif Edvinsson & Michael S.
Malone, 1997).
But with the increasing discussion of intellectual capital, most of the
researchers follow the study proposed by researchers(N. Bontis, 1999)(Leif
Edvinsson & Michael S Malone, 1997)(Akdemir & Akpinar, 2003) and
follow the human capital, relational capital and structural capital as the
dimensions of intellectual capital.Miller et al., (1999) explore the measures
of intellectual capital by approaching the view point of managers regardless
of company type by mean of interview and concluded that knowledge base
organizations heavily influence on intellectual capital as compared to the
capital intensive companies. The development of intellectual capital theory
has basically been guided by the ideas and thoughts of Leif Edvinsson &
Michael S Malone (1997)
Ali & Ali (2010) stated that intellectual capital is the foundation of
competitive advantage or consistent growth researcher uses exploratory
approach to develop model and found positive association between three
dimensions (human, organizational and relational capital) by adopting
Structural equation modeling technique to test the hypotheses (Marr,
2005)which investigated the strength of intellectual capital in publically
traded company and found the significant positive relationship between
knowledge management and organizational performance.

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Another prominient research by Lev (2001) says the organizations which

valued the intangible asset will maximize their organizational performance
and he further said that intellectual capital claimed the future benefits.
Furthermore, Bueno et al., (2004) andLeif Edvinsson & Michael S Malone
(1997) argued that society is rapidly changing from industrial to social;
intellectual capital is most important intangible asset for the growth of
organization in knowledge based economy.
Value creation is the key factor of the strategic management and the
intellectual capital proves it true by having the ability to create value. This
argument clearly facilitates that intellectual capital helps to develop a
strategy. Heidarzadeh (2006) argues that intellectual capital has to be
identified as a primary factor and resource of organizational survival and
value creation. The prior research seems to be no stability in the
classification of intellectual capital previous researchers has their own way to
classify the intellectual capital.
However, in knowledge based economy, intellectual capital is much studied
and most research follows the pattern of Roos, Roos, Dragonetti, &
Edvinsson (1998, N. Bontis (1999) andBozbura (2004). In this century,
human, structural and organizational capital play a vital role in fuelling the
survival and success of a company and it will be determined how right the
intellectual and physical capital mixed to satisfy the stakeholders- customer,
employee, union, shareholder, communities, creditors, and supplier (Zohar &
Marshall, 2004).
2.2 Entrepreneurial Orientation
The term “Entrepreneurship” has been defined in different prospective over
the period of 200years (Hébert & Link, 1988). Entrepreneurship has a
profound impact on organizational performance and is considered as a key
ingredient of a firm’s success. It is considered as important factor that leads
the firm to survival and improves its performance.
The term Entrepreneurial orientation is commonly referred to the
combination of psychological traits, attitudes, values and attributes that are
strongly associated with the strong motivation to engage in entrepreneurial
activities (Covin & Slevin, 1991)(Cooper, Woo, & Dunkelberg, 1988).
According to Lim (2002),entrepreneurial orientation includes five
dimensions: pro-activeness, competitive aggressiveness, innovation,
autonomy and risk taking which positively influence on service firm’s
performance. He used questionnaire technique and chose mangers/owners as
responded of services firm to prove his study.
Runyan, Droge & Swinney (2008) examined the entrepreneurial orientation
and small business orientation and their influence on small and medium

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business performance in the USA. The findings revealed that entrepreneurial

orientation and small marketing orientation have not the same effect on small
firm’s performance. Only entrepreneurial orientation has positive influence
on firm’s performance.
Tajeddini (2010) in his study explored the effect of customer orientation and
entrepreneurial orientation on innovativeness in hotel industry. He selected
156 people randomly from population and reported that entrepreneurial
orientation helps the organization to measure its potential approach.
Hamel, (2000) in his study finds that the firm that really means to
entrepreneurial orientation in today’s business world would grow higher. So
in current business environment, high growth would be a result of
innovation, competitive aggression, risk taking oriented by the firm.
According to the study of G. T. Lumpkin & Dess (1996), entrepreneurial
orientation includes five dimensions. These are innovation, autonomy, pro
activeness, risk taking, and competitive aggressiveness.
2.3 Organizational Performance
For any enterprise, a good performance is always an important goal. In
abroad, vision performance may be defined as an increase in efficacy,
efficiency and working quality in an organization (Andrew D. Szilagyi &
Wallace, 1980). In addition, performance can reveal the means by which a
firm achieves its major goals and as a basis of direction in helping
organizations to appropriate resource in the future.
Organizational performance includes two dimensions: Product performance
and Customer performance. Product performance includes the company
market share, company’s sales and firm’s ability to participate in new era.
Customer performance includes: the rate of new customer acquisition,
customer satisfaction of product and the company’s efforts to preserve and
maintain existing customers.
Hughes and Morgan (2007) stated in his study that business performance
was operationalized through customer performance and product
performance. Customer performance was measured by examining, how
effective the firm had been at attracting, retaining and sustaining customers
and gaining repeated orders. Product performance was evaluated based on
the relative success of the firm's products in generating sales and achieving
market share. He further argues that innovation has a positive and
significance impact on product performance, but there was no significant
relationship between innovation and customer performance.
Gilley et al., (2002) examined the impact of top management team (TMT)
risk-taking propensity on firm performance. The data were collected from
different 16 industries through questionnaire techniques and collected data
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through e-mail survey and questionnaire was answered by top executive of

small and large firms. Performance was operationalized through an extensive
range of measures and came into the conclusion that a collective measure of
product/ process and general risk-taking has an affirmative impact on
performance.
G.T. Lumpkin and Dess (2001) investigated the impact of pro-activeness on
firm performance in Southwestern USA. The study found that pro-activeness
has a positive impact confirm performance (Lumpkin & Dess, 2001).
Figure 1. Hypothesized Conceptual Framework

Structural
Capital

Entrepreneurial Organization
Human Capital Performance
Orientation

Relational
Capital

3. Research Methodology
This study is an explanatory study in a nature that required primary data for
analysis. Data were collected by means of self-administered survey
questionnaire and response was mandatory on five point Likert scales. The
population in this study was manufacturing SMEs units in Lahore region. A
total of 300 managers from the sampling frame were sent with the
questionnaire randomly and 218 usable responses were returned giving a
response rate of 72.6% which was quite satisfactory and used for inferential
analysis.
Questionnaire (appendix) consists of 36 questions related to intellectual
capital, entrepreneurial orientation and organizational performance and four
questions related to demographic. The questionnaire was based on the
questionnaire used by Rudez and Mihalic (2007), Bontis (1999) and Moon
and Kym (2006) to measure the variables of intellectual capital. This study
was based on the study of Lumpkin & Dess (1996) to measure the

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entrepreneurial orientations variables and was based on the work of Hughes

and Morgan (2007) to measure the organizational performance.
Demographic section contains questions about respondents’ gender,
education, age of their firm and total number of products their company
produces or manufactured. The reason for adopting this questionnaire is to
study the impact of same variables as the proposed study was well tested on
reliability and validity scales.
Questionnaire that was administered consisted of three intellectual capital
variables which are Human capital (4 items), Structural capital (4 items),
Relational capital (5 items), Risk taking (3 items), Innovation (3 items), Pro-
activeness (3 items), Competitive Aggressiveness (3 items), Autonomy (6
items) and Organizational Performance (5 items).The questionnaire was well
tested by researchers on internal consistency and other measures. The Likert
scale is question type based on a rating scale designed to measure the attitude
or reaction.
This research can be described as a quantitative study. Different statistical
techniques are used to test the reliability and validity of data, scale and
hypotheses. CFA along with regression analysis has been used to test the
data reliability and statistical relationship of the variables.
3. Analysis and Findings
4.1 Reliability, Validity and Descriptive Statistics
Special care was taken in this study to ensure reliability and validity. To
evaluate the descriptive statistics of the instrument, SPSS software has been
used. Reliability test was conducted to determine the internal consistency of
the measures used and SPSS and AMOS software. Table 1 lists descriptive
statistics including means and standard deviation which indicate that the
measurement has good reliability (Nunnally & Bernstein, 1978).
Table 1. Mean, SD, and Cronbach’s Alpha of the Scale
Variables Means Standard Deviation
Human Capital 4.0998 0.52700
Structural Capital 3.9713 0.57103
Relational Capital 4.0211 0.51172
Entrepreneurial Orientation 3.9641 0.42155
Organizational Performance 3.9156 0.56620
Table 2 shows the results of factor analysis and reliability analysis, the
values of factor loading and values of α depicts the Cronbach alpha obtained
from reliability analysis of SPSS software. Item statements with significant
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loading (.40) were retained and insignificant and negatively

significant/insignificant statements (< .40) were removed from the respective
scales and were not used for data analysis. Cronbach alpha greater than 0.5
indicates acceptable reliability of the data in social sciences.
Table 2 provides that all items belonging to all variables of investigation in
the study obtained good results and data are reliable for using into further
analysis. Similarly, the values of Cronbach alpha are also greater than 0.5;
therefore, data are also satisfactory reliable.
Table 2. Factor Loading and Reliability Testing

Factor Alpha
Items
Loading value
a. Human Capital
1. The percentage of provisions of trainings is higher in my .962 .842
organization.
2. The employees in our firm have higher degree (bachelor, .947
engineer, masters, etc.) as compared to our counterparts.
3. The employees have ample experience to perform .924
assigned work satisfactorily.
4. The employees have right mix of knowledge, skills, .963
abilities that required in our industry.
b. Structural Capital
5. Our firm always tries to innovate and encourage the .944 .812
inception of new ideas.
6. Our firm practices the ethos (beliefs, objectives, values) .702
that added value in the organisational process.
7. The higher management always encourages the .807
participation of employees in effective decision making
processes.
8. In our firm, higher management always supports and .830
leads the organisational processes.
c. Relational Capital
9. The employees always encourage to involve our .932 .799
customers in providing solution
10.Our firm has most strengthening relational base in the .982
industry.
11.The employees always encourage to involve our .927
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suppliers in providing solution

12.Our firm has one of the best pools of suppliers in the .971
industry.
13.The employees always encourage to involve our allies in .984
providing solution
Entrepreneurial Orientation
14.The conception of risk taking is always considered a .769 .856
positive element for the employees in our firm.
15.The employees are always encouraged to initiate new .903
ideas with moderate risk orientation.
16.The focus of our firm is always towards exploiting and .825
initiating prevailing opportunities in the industry.
17.Our firm always encourages in initiating modifications .814
and creativity in the business.
18.Our firm uses innovative and creative methods to deal its .718
operations.
19.Our firm usually tries to find innovative ways to .825
complete activities
20.Our firm usually works as initiator in handling .881
prevailing situation (e.g. counterpart’s policies, new
projects and working in teams).
21.Our firms always prefer to work on new opportunities. .866
22.Our firm usually works as pioneer in initiating any .792
actions that bother other competitors as well.
23.Our firm is highly competitive and innovative. .856
24.Usually, our firm prefers to adapt aggressive strategies to .874
compete with competitors.
25.Our firm prefers to maneuver the intensity of .866
competition as much as it can.
26.The firm encourages employees to think out of the box .710
without interfering in their ideas.
27.The higher management allows employees to introduce .807
innovative of performing their jobs efficiently.
28.The higher management gives employees freedom to .801
speech about introducing new ideas related to their work
assignments.

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29.The firm has open communication system that .863

encourages employees to share their ideas.
30.The firm empowers its employee to act alone if it is in .840
the good faith of business.
31.The employees have access to information they needed. .854
Organizational Performance
32.The firm is enjoying good profit margin from the sales .940 .775
of our competing products.
33.The firm has significant market share as compared to our .947
competitors.
34.Our firm is focused and has ability to attract potential .824
customer this year.
35.Our firm has ability to expand the volume of its existing .968
customers this year.
36.Our firm has higher rate of customer retention .903

Figure 2. Structural Equation Model:

Figure 2 shows that human capital, structural capital and relational capital
have associated with organisational performance through entrepreneurial
orientations as mediation.
The model shows that human capital has a positive impact on entrepreneurial
orientation so the first hypothesis (H1a) is accepted. Human capital has
positive impact on organizational performance so the fourth hypothesis (H 2a)
is also accepted.
Structural capital has positive impact on entrepreneurial orientation so the
second hypothesis (H1b) is accepted. Structural capital has indirect impact on
organizational performance so the fifth hypothesis (H2b) is rejected.
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Relational capital has positive impact on entrepreneurial orientation so the

third hypothesis (H1c) is accepted. Relational capital has positive impact on
organizational performance so the sixth hypothesis (H2c) is also accepted.
Entrepreneurial orientation has positive impact on organizational
performance so the seventh hypothesis (H3) is accepted.
The above SEM shows that the all the dimensions of intellectual capital have
direct impact on the entrepreneurial orientation and structural capital has
only indirect effect on organizational performance with the entrepreneurial
orientation as mediating variable.
Table 4. Model Fitness Summary
Fit indices Reference value Model Value Overall Model Fit
CMIN/DF CMIN/DF<5 1.658 YES
RMR RMR<0.5 0.001 YES
AGFI AGFI≥O.9 0.945 YES
GFI GFI closer to 1 0.997 YES
CFI CFI closer to 1 1.000 YES
RMESA RMESA≤0.1 0.550 YES
PCLOSE PCLOSE≥0.05 0.312 YES
Degrees of Freedom (DF), Root mean square residual (RMR), Goodness of
Fit Index (GFI), Adjusted Goodness of Fit Index (AGFI), Root Mean Square
Error of Approximation (RMSEA)
The above table value shows the goodness of fit test with the help of DF,
RMR, GFI, AGFI, CFI, RMRSEA, PCLOSE values. Table 4.18 summaries
the results and shows that all values of goodness of fit are supporting the
model. This show model is fit.
Table 5. Estimated Coefficients in the Final Model
Path Estimate S.E. C.R. P
EO <--- Structural 0.803 .127 4.685 ***
EO <--- Human 0.790 .091 6.950 ***
EO <--- Relational 2.212 .201 9.085 ***
OP <--- Human 0.698 .106 7.099 ***
OP <--- Relational 0.877 .135 7.184 ***
OP <--- EO 0.438 .092 6.383 ***
*** Significant at α=0 .001 level

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The above table shows that the human capital, structural capital and
relational capital have associated with organizational performance but

significant with full mediation of entrepreneurial orientation. All factors of

intellectual capital are significantly related with organizational performance
but structural capital has insignificant relationship with organizational
performance but has direct impact on entrepreneurial orientation and
indirectly influence on organizational performance. Human capital and
relational capital have significant association with organizational
performance (OP) at p<0.001 and has direct effect.
Thus it is concluded from the structural model and table shows that there is a
positive and significant relationship between human capital and
organizational performance with the SRW=0.698, p<0.001. With the value
of SEW=0.877, P<0.001, there is positive and significant relationship
between relational capital and organizational performance at the level of 1%
significance between relational capital and OP at the level of 1%
significance.
To further confirm the mediating effect of entrepreneurial orientations, we
conduct a SOBEL test and found that entrepreneurial orientations mediate
the relationship between intellectual capital and organizational performance
at p<0.00.
Figure 3. Conceptual Frame Work

Figure 3 indicates whether or not intellectual capital affects business

performance via mediating role of entrepreneurial orientation.
Table 6 shows the relationship between intellectual capital and
organizational performance with the mediation of entrepreneurial orientation
that was run through SOBEL test Calculator.
Thus SOBEL test concludes that entrepreneurial orientation mediates the
relationship between intellectual capital factors and organizational
performance at the p<0.001. So the H4a (t=4.434, p<0.001) is accepted
because entrepreneurial orientation mediates the relationship between human
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capital and organizational performance. H4b (t=9.271, p<0.001) is accepted

because the hypothesis is entrepreneurial orientation which mediates the
relationship between structural capital and organizational performance.
SOBEL test supports the hypothesis H4c (t=8.975, p<0.001) that
entrepreneurial orientation mediates the relationship between relational
capital and organizational performance.
Table 6. Sobel Test Values
Variables Variable T-value Sig
Human Capital Entrepreneurial orientation
4.434 **
Organizational performance
Entrepreneurial orientation **
Structural Capital 9.271
Organizational performance
Entrepreneurial orientation
Relational Capital 8.975 **
Organizational performance
** Significant at α=0 .01 level.
4. Discussion and Implications
The study helps to explain the importance of the intellectual capital and its
all factors on organizational performances in manufacturing sector. The
importance of intellectual capital for organizational sustainable expansion
cannot be over emphasized in today’s self-motivated world. This specifically
becomes more important in strong market competition where corporations
strive to offer utmost value added good and services to its customers.
Therefore, firms are considering intellectual capital special factor to enhance
organizational performance. Based on theoretical background and conceptual
model, this research examined the relationships among intellectual capital,
entrepreneurial orientation and organizational performance in SMEs of
manufacturing sectors in Pakistan. In this study, we found that intellectual
capital both directly and indirectly through the entrepreneurial orientation
influences organizational performance. Hence, entrepreneurial orientation
plays a mediating role between intellectual capital and organizational
performance.
This study explores the mediating effect of entrepreneurial orientation
between intellectual capital and organizational performance. The multiple
regression analysis proves that there is significance relationship between
intellectual capital and organizational performance. The result of structural
equation model shows that intellectual capital has a positive impact on
entrepreneurial orientation.

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As for the important effect of human capital on entrepreneurial orientation as

the important predictor is concerned, it proves that good quality
knowledgeable human resource can have an entrepreneurial intention in
knowledge intensive industry.
Structural capital also significantly influences entrepreneurial orientation and
gives importance in investing information technology and innovation that
will definitely help a firm to utilize and take full advantage of knowledge
value to get better its entrepreneurial orientation.
Relational capital, in this study, explained the relationship between customer
and suppliers, where sustaining a good connection is essential. An
organization should make good relationships with its stakeholder-customer,
supplier and others to get better entrepreneurial orientation. Furthermore, our
findings support a positive relationship between intellectual capital and
performance. Intellectual capital is one of the major or important sources of
gaining competitive advantages.
On the basis of resource base view, organizations gain competitive advantage
and better performance through acquiring, maintaining and subsequently
using tangible and intangible assets that are important for developing
competitive advantage and achieving superior performance. The findings
also support the previous studies by concluding that there is a positive
association between entrepreneurial orientation and performance (Hughes &
Morgan, 2007) and (Lumpkin, Cogliser, & Schneider, 2009).
This research also explores the association between intellectual capital and
performance via mediating role of entrepreneurial orientations. The finding
of this study shows that all the dimensions of intellectual capital influences
organizational performance through entrepreneurial orientations. Therefore,
entrepreneurs and mangers need to realize that if they really need to
maximize their intellectual capital, it is mandatory to improve and enhance
their entrepreneurial orientations because entrepreneurial orientation reflects
up to what extent a firm is innovative and competitively aggressive.
Entrepreneurial orientation helps organizational members to devote
themselves to be more innovative and competitively aggressive, more
proactive and more risk taker. These five dimensions evaluate that how much
a firm is able to respond in intensive market and as today researchers agrees
that in knowledge base economy, intellectual capitalism an important source
of gaining competitive advantage. The findings of this research shows that
we can say entrepreneurial orientation including risk, innovation, autonomy,
competitive aggressive and pro-activeness which are the important keys to
fully implement intellectual capital in organization in order to gain superior
level of performance.

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The results from the final structural model authenticate the relations between
entrepreneurial orientations and firm performance. In other terms,
organizational performance improves considerably by giving more attention
to entrepreneurial orientation. The final structural model confirms the
mediating role of entrepreneurial orientation in relationship of intellectual
capital and organizational performance.
5.1 Implications
In accordance with the result of this study, the following suggestions are
proposed for developing intellectual capital and entrepreneurial orientation.
The component of intellectual capital should be strengthened. In order to
strengthen the human capital, mangers should measure the level of staff
competence including their knowledge, abilities and skills. In order to fortify
the structural capital, managers should have greater focus on organisational
culture, information technology and organisational processes. For this, firms
hold short and long term teamwork training and encouragement of managers
and employees to perform actively in group and perform effective activities
and create supportive culture. Supportive culture can be proposed for
designing incentive and reward system and reinforce innovation, re-
engineering process and human resource to minimize cost, save time and
improve quality. To strengthen the relational capital which includes customer
loyalty, satisfaction and relationships with suppliers and other business
partners, the firms need to improve the communication with customer and
check their satisfaction level on continuous basis. For enhancing the growth
of entrepreneurial orientation, the subsequent suggestions are presented.
Firms have to design risky projects, commit part of their resources in these
projects, and conduct training workshops for exchanging ideas to identify
opportunity for creating innovative ideas.
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