Intellectual Capital, Corporate Reputation, Corporate Culture and Performance of Firms Listed at the Nairobi Securities Exchange

Abstract

The study focused on intellectual capital, corporate reputation, corporate culture and performance of firms listed on Nairobi Securities exchange. The literature shows that the combined effect of intellectual capital components has an influence on corporate performance. However, most of the literature have shown contradictory results, with some showing that intellectual capital has a positive influence on corporate performance, others show there is no relationship and others negative relationship between intellectual capital and corporate performance. Different from previous studies, the current study introduced corporate reputation as a mediating variable and corporate culture as a moderating variable. The broad objective of this study was to establish the effect of different combinations of predictor variables (Intellectual capital, corporate reputation and corporate culture) on corporate performance. It was guided by four objectives based on the direct influence, mediating effect, moderating effect and joint effect of the study variables on corporate performance. The study was founded on resource based view of the firm theory. The review of literature provided conceptual and empirical gaps that formed the basis of the conceptual model and conceptual hypotheses. The population of the study consisted of fifty (50) companies listed on Nairobi Securities Exchange. The study used cross-sectional survey design where data was collected at one point in time across all the organizations. The survey period covered four financial years from 2009 to 2012. A survey questionnaire was the main tool of data collection and was distributed to the 50 heads of human resource departments in the different firms. The study also utilized secondary data obtained from Capital Market Authority Statistical bulletins and Nairobi Securities Exchange Handbook 2012-2013 to collect data on financial performance. The response rate from the field was thirty four (34) firms (68%). The reliability test showed that study dimensions were reliable, apart from task-oriented culture that had a cronbach alpha of 0.262, thus was not considered for further analysis. The study utilized employeeoriented culture. The researcher divided the hypotheses into two categories; financial and non-financial. Hypotheses were tested one at a time, beginning with non-financial where linear regression analysis were conducted to explain the variation among the variables. Due to the lack of evidence supporting linear relationships between intellectual capital and financial indicators, optimal scaling was used to test the financial measures of performance. The study found that there was significant relationship between intellectual capital and non-financial performance and financial performance measured by return on assets. The findings also indicated that there was no significant relationship between intellectual capital and return on equity and Dividend Yield of firms listed on Nairobi Securities Exchange. It was found that corporate reputation mediates the relationship between intellectual capital and both non-financial performance and financial performance. Employee-oriented culture did not moderate the relationship between intellectual capital and corporate performance. The study established that the joint effect of intellectual capital, corporate reputation, and employee-oriented culture on non-financial performance and financial performance measured by return on assets was greater than individual effect of each predictor variable providing support for the resource based view of the firm. The results have diverse implications for policy, practice and research. There were limitations to the study, but they did not affect the credibility of the results.