STRENGTHENING MSMES PERFORMANCE THROUGH INTELLECTUAL AND RELATIONAL CAPITAL: THE MODERATING ROLE OF INNOVATION CAPABILITIES

Abstract

This study examines the impact of Intellectual Capital (IC), Relational Capital (RC), and Innovation Capability (INC) on the performance of Micro, Small, and Medium Enterprises (MSMEs), while also testing the moderating role of Innovation Capability. Using Partial Least Squares Structural Equation Modeling (PLS-SEM), the findings reveal that both IC and RC positively and significantly influence MSME performance. Intellectual Capital is identified as the most dominant factor, demonstrating that knowledge, skills, and organizational systems play a critical role in enhancing business efficiency and productivity. Relational Capital also contributes to performance by leveraging networks with customers, partners, and institutions as strategic resources. Furthermore, Innovation Capability emerges as a direct predictor of performance, underscoring its importance in building adaptability and competitiveness. However, its moderating effect on the relationship between IC, RC, and performance is not significant. These results provide strong empirical evidence for MSMEs to prioritize the management of intellectual and relational capital while strengthening innovation capability to achieve sustainable growth.