Intellectual capital efficiencies and performance of SMEs in KSA

The advent of innovations and knowledge-based businesses has expanded the importance of Intellectual Capital (IC) in their performance. IC is considered as an assortment of intangible assets. Small- and Medium Enterprises (SMEs), usually characterised by fewer tangible and higher intangible assets, have vast untapped potential to gain a sustainable competitive advantage by utilising IC. The present paper is an endeavour to understand the impact of IC on SMEs’ performance listed in the parallel market of Saudi Arabia called NOMU. The study measured the IC efficiency among the SMEs in KSA for the period from 2016 to 2018. The study, which is grounded in strong theoretical roots with a validated methodology, also identified IC’s impact on profitability and productivity for the said duration among the quoted sector. Value Added Intellectual Coefficient (VAIC) was utilised as a proxy measure for IC. Return on Assets (ROA) and Assets to Turnover Ratio (ATO) has been used as the proxy measure of profitability and productivity, respectively. The Ordinary Least Square (OLS) regression method has been deployed to draw the impact of VAIC and its components upon SMEs’ profitability and productivity. The results were statistically significant, indicating that VAIC impacts profitability and productivity. However, the components of VAIC failed to draw a significant impact on productivity. The study findings would help SMEs owners take note of IC and its components in reaching higher profitability and productivity levels.