4. RESEARCH FINDINGS
4.3 Path Analysis
Path analysis was conducted to identify a causal pattern of the variables in the theoretical model. The analysis is an extension of the regression model. In this study, it consists of two parts. In the first part, the causal effects of intellectual capital on business performance were estimated. In the second part, the interactions among human capital, structural capital and relational capital were determined.
First part:
BP = business performance;
SC = structural capital;
HC = human capital;
RC = relational capital; and ε is the error term.
Table 3 Correlation between the main dimensions
Variable Human capital
Structural capital
Relational capital
Business performance
Human capital 1.000 -- -- --
Structural capital 0.747** 1.000 -- --
Relational capital 0.555** 0.706** 1.000 -- Business performance 0.533** 0.492** 0.491** 1.000
*significant at the 0.05 level; **significant at the 0.01 level
Table 4 Correlation between the sub-dimensions
Variable A B C D E F G H I J K L
A. Staff capability 1 -- -- -- -- -- -- -- -- -- -- --
B. Knowledge exchange
among staff 0.55** 1 -- -- -- -- -- -- -- -- -- --
C. Staff education and
training 0.22* 0.59** 1 -- -- -- -- -- -- -- -- --
D. Staff stability 0.32** 0.62** 0.57** 1 -- -- -- -- -- -- -- -- E. Overall business process 0.36** 0.69** 0.57** 0.51** 1 -- -- -- -- -- -- -- F. Organizational design 0.41** 0.46** 0.42** 0.38** 0.62** 1 -- -- -- -- -- -- G. Information system
framework 0.40** 0.75** 0.54** 0.55** 0.67** 0.53** 1 -- -- -- -- -- H. Cooperation with clients 0.35** 0.43** 0.34** 0.36** 0.55** 0.58* 0.45** 1 -- -- -- -- I. Relationship with
cooperative partners 0.33** 0.55** 0.41** 0.39** 0.54** 0.51** 0.60** 0.59** 1 -- -- -- J. Cultivating friendship with
clients 0.19 0.33** 0.35** 0.27** 0.44** 0.48** 0.33** 0.45** 0.55** 1 -- -- K. Financial performance 0.45** 0.36** 0.40** 0.32** 0.34** 0.30** 0.45** 0.33** 0.27** 0.33** 1 -- L. Operations performance 0.32** 0.30** 0.48** 0.48** 0.37** 0.35* 0.35** 0.41** 0.31** 0.47** 0.66** 1
*significant at the 0.05 level; **significant at the 0.01 level
Path coefficients for the model of are reported on the path diagram shown in Figure 2. The results indicate that business performance increases by 0.357 standard units for each 1 standard unit increase in structural capital, which suggests that higher levels of structural capital may contribute to the success of architecture firms. These analyses also reveal that increased levels of relational capital are associated with improvement in the performance of architecture firms. As previous research highlighted the role of human capital in the development of intellectual capital (Roos and Krogh, 1997;
Stewart, 1999; Grantham and Nichols, 1997), the remaining causal paths suggest that increases in human capital tend to improve the degrees of structural capital and relational capital for architecture firms. In addition to the aforementioned cause-effect relationship, the findings also indicate that human capital may influence the
performance of architecture firms via structural capital and relational capital.
5. CONCLUSIONS
The primary purpose of this study was to examine the causal relationship between intellectual capital and business performance. The second objective in this research was to investigate the extent to which intellectual capital are being used in
architecture firms. These were accomplished by an industry-wide survey and analysis of 107 architecture firms. Descriptive statistics were developed to determine levels of human capital, structural capital, relational capital, and business performance. This research also determines the correlations among the three dimensions of intellectual capital (i.e., human capital, structural capital and relational capital) and business performance. Additionally, path analysis was conducted to identify a causal pattern of the variables in the theoretical model.
Human capital Structural capital
R2=0.558
Relational capital R2=0.308
Business Performance R2=0 339 0.036
0.357**
0.268*
0.747**
0.813 0.555**
0.831
*significant at the 0.05 level;
**significant at the 0.01 level 0.664
Figure 2. Path diagram
Results from the analyses suggest that the architecture firms exhibit the highest levels of relational capital. However, these firms indicate the lowest levels of human capital. This suggests that attention should be paid to human resource management in architecture firms. The data analysis also entailed investigating the correlations among the three dimensions of intellectual capital and business performance. For architecture firms, there are positive correlations between the three dimensions of intellectual capital and business performance. The empirical results indicate that human capital exhibits the highest correlation coefficient with business performance.
In summary, the results from the analysis suggest that all the four measures (human capital, structural capital, relational capital, and business performance) are highly correlated. Additionally, there are positive correlations among most of the
sub-dimensions.
Correlation only measures the strength and the direction of the relationship between the variables. Thus, path analysis was conducted to identify a causal pattern of the variables in the theoretical model. In this study, it consists of two parts. In the first part, the causal effects of intellectual capital on business performance were estimated.
In the second part, the interactions among human capital, structural capital, and relational capital were determined. The findings from the path analysis indicate that 6 paths in the model of general contracting firms are significant: 1) structural capital Æ business performance, 2) relational capital Æ business performance, 3) human
capitalÆstructural capital, 4) human capitalÆrelational capital, 5) human capitalÆ structural capital Æ business performance, and 6) human capitalÆrelational capitalÆ business performance. The results also suggest that human capital may influence the performance of architecture firms via structural capital and relational capital.
In summary, as prior research highlighted the role of human capital in the
development of intellectual capital, the causal paths suggest that increases in human capital tend to improve the degrees of structural capital and relational capital for architecture firms. The results of the analyses are consistent with previous theories, which suggest that an effective way to increase intellectual capital is to appropriately invest in employees. Thus, consideration should be given to human resource
management such as staff education and training, staff capability, and knowledge exchange among staff. This research provides empirical evidence that supports the expectation of gaining significant benefits with higher levels of intellectual capital.
The results of this study indicate that intellectual capital is critical to the performance of architecture firms. Findings from this study provide direction for the decision making of investment in intellectual capital.
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