Vol. 7(16), pp. 1470-1485, 28 April, 2013

DOI: 10.5897/AJBM11.1493

ISSN 1993-8233 © 2013 Academic Journals

http://www.academicjournals.org/AJBM

African Journal of Business Management

Full Length Research Paper

A study on the effect of intellectual capital and organizational learning process on organizational

performance

Hosein Habibi Badrabadi1 and Taghi Akbarpour2*

1No. 46, Alley No. 60, Shohadaye Haftome Tir St., Shahid Beheshti St., Emam Qomeini Ave., Qom City, Iran.

2No. 51, 7

th Javad-al-Aemeh Alley, Javad-al-Aemeh St., Azadshahr, Yazd City, Yazd Province, Iran.

Accepted 19 December, 2011

Today, the nature of business is facing some important and critical challenges and changes that have changed organizations' economic activities greatly. Issues such as competition expansion, advances in information technology, the changes to organizational structures, and economic units' attempt to land on a pioneer rank have made continuous improvement of organizational performance inevitable. Survival and flourishing in such environments is possible only through achieving a leading place which necessitates implementation of the leading organizations' characteristics and focusing on influencing factors on organizational performance. An effective factor on organizational performance is an organization's intellectual capital which is the issue studied in this article. This research studied the impact of the variable "intellectual capital" on "organizational performance" and meanwhile, it seemed that the variable "organizational learning" also influenced the relation between these two variables and functions as a mediatory variable. The research population consisted of all the managers and employees of Melli Banks including people from the main supervising unit and other service branches in the city of Qom and the data were gathered through questionnaires. To examine the dimensions of the research variables and its construct validity, confirmatory factor analysis was first applied and then, discriminant validity and convergent validity were calculated. For testing the research hypotheses, structural equations modeling was used. Findings showed that the direct effect of intellectual capital on organizational performance was not very strong, but this variable influenced Melli Banks performance through the mediatory variable "organizational learning process". The effect of intellectual capital on organizational learning process was confirmed. Moreover, the findings indicated that organizational learning process had a direct and positive effect on Melli Banks performance. Key words: Intellectual capital, organizational learning process, organizational performance.

INTRODUCTION Today, due to technological developments and advances, the nature of work has shifted from traditional and manual, to intellectual and mental. On the other hand, all the businesses throughout the world are pressed with policies as constant cost reduction and increasing customer-offered value. Therefore, many organizations

are seeking solutions to differentiate their business from that of their competitors through offering quality services, flexibility, and quick innovation and responsiveness and reach higher effectiveness and efficiency. Many believe that in today's competitive world, the surviving organizations are only the ones that enjoy optimum

*Corresponding author. E-mail: msn.akbarpour@gmail.com. Tel: (+98) 913 850 13 45. Fax: (+98) 351 623 42 91.

organizational performance and higher to that of the competitors, make a good use of their opportunities and benefit from the threats on their way. The factors affecting organizations' performance are divided into two categories of inter-organizational and extra-organizational factors. Extra-organizational factors- the roles of which are becoming more and more outstanding in organizations, include economic, social, political, cultural and legal factors and inter-organizational factors consist of issues as social capital, intellectual capital and organizational culture, structure, technology, strategies and organizational learning process. This paper aims at studying the effects of the two factors "intellectual capital" and "organizational learning process"- as important inter-organizational factors on "performance" of Melli Banks in Qom city in Iran. Intellectual capital is defined as a set of knowledge asset that increases the value of an organ-ization's capitals and improves the organization's status comparing to that of the competitors (Marr et al., 2004).

Sinkula (1994) accounts organizational process as a tool by which knowledge is preserved in a way that people other than the producers can use. Organizational learning is the creation of conditions in an organization in which all individuals accept the conditions and changes and welcome the conditions as a continual process (Stata, 1989). The paper's main question is how to assess the effects of these two factors on organizational performance and stride toward premiere performance through using intellectual capital and realization and development of the learning process in the organization.

This study was launched regarding the importance of the issue of organizational performance in the branches of Melli banks and the role of the two factors of intellectual capital and learning process in the organization and the need to identify the effects of the two factors on the organization's performance. The researchers were seeking to know whether the intellectual capital influences the organizational learning process and the organizational performance (financial and knowledge performance) in Melli banks in Qom city.

THEORETICAL BACKGROUND

Intellectual capital

Roos (1998) postulated that the concept of intellectual capital is not the mere understanding and assessment or the illustration of the tacit value of an organization; it also aims at transposing the results of the assessment or illustration of organizational tacit values into new values. Scholars have presented varying perspectives on the matter of intellectual capital composition and meaning. As with most emerging theories, there are many definitions of intellectual capital, but over the last few years, there seems to have formed a consensus of dividing a company’s resources into three different groups. According to studies and definitions by Steward (1994),

Badrabadi and Akbarpour 1471 Edvinsson and Malone (1997), Johnson (1999), and Smith and Parr (2000), intellectual capital is comprised of three components: human capital, structural capital (organizational capital) and relational capital (customer capital). Intellectual capital comprises all knowledge-based resources that create value for an organization but does not enter financial statements (Pablos, 2003). In other words, intellectual capital is "possessing knowledge, making use of experiences, organizational technology, relationship with customers and suppliers, and also possessing professional capabilities which bring a firm a competitive advantage in the market (Edvinson and Malone, 1997).

According to Hall, intellectual capital may be categorized with assets (such as trade names or trademarks, contracts and data bases) or be known as skills (as knowledgeable employees know how to do the work). This capital is a key performance indicator that should be identified, preserved and nurtured by employees to make an organization able to preserve and improve its performance in the changing and turbulent market (UNI, 2001). The outcome of the research conducted by Yang and Lin (2009) also uncovered the relative importance of the three different types of capital to organizational performance. Intellectual capital provides organizations with much organizational value such as creation of profit, determination of strategies (market share, leadership, fame), innovation, customer loyalty, cost reduction, productivity improvement, etc. (Harrison and Sullivan, 2000). Many believe that intellectual capital affects determination of organization's values and its economic performance (Petty and Guthrie, 2000). Intellectual capital management has been recognized as greatly important; organizations with intellectual capital management have shown better performance, compared to the performance of their competitors who have not been enjoying it (Brennan and Connell, 2000). Different writings and documents have considered some components for the concept of intellectual capital that are mentioned thus.

Components of intellectual capital

Different opinions have been expressed about the comprising components and parts of intellectual capital. One of the most welcomed classifications is the classification of intellectual capital into human capital, structural capital and customer (relational) capital and is discussed thus.

Human capital Human capital is the most important asset for an organization and is a source of creativity and innovation. In an organization, employees' tacit knowledge asset is a most crucial component that influences organization's

1472 Afr. J. Bus. Manage.

performance significantly. Nevertheless, solely tacit knowledge is not sufficient for good performance in an organization. The purpose is to turn employees' tacit knowledge into explicit knowledge at all levels to make possible of value creation in the organization. Intellectual capital arises from the sum of employees' professional knowledge, leadership capabilities, risk taking and problem solving capability (Bozbura, 2004). In other words, human capital is indicative of an organization's inventory of knowledge that is hidden in its employees. Human capital in an organization is a combination of individuals' knowledge, skills, capability of innovation and their ability to perform their tasks and consists of the organization's values, culture and philosophy (Bontis, 2001). Human capital forms the base for intellectual capital. In other words, it is a main and primary part for the completion of intellectual capital practices.

Customer capital

It refers to the current and future value of an organization's relation with its customers. The essence of customer capital lies in the knowledge hidden in channels of distribution and relation channels with customers, that is, the knowledge which develops and advances the organization through a change in its nature (Bontis et al., 2000). Some theorists have considered customer capital as relational capital. Relational capital is the knowledge existing in an organization's relations with its customers, raw material suppliers, stakeholders and partners with similar strategies. According to Leif Edvinsson (Director of Intellectual Capital at Skandia which is a finance-service firm in Sweden), the existing of customer, customer relation and potential customers form customer capital. The number and structure of customers are critical to an organization's future value since customer relation constitutes an organization's principle of cash flows (Pablos, 2003).

Customer capital accounts as a major component of intellectual capital and has placed value in marketing and relation channels that an organization has with the leaders of that industry and business. Customer capital accounts a bridge or a catalyst in intellectual capital practices. This capital is a main and decisive requisite to turn intellectual capital to market value and consequently, to an organization's business performance. Without customer capital, market value and business performance are not achievable by an organization.

Customer capital has direct relationship with organization's performance. Studies in Michigan University showed that customers' loyalty could safeguard relations and reduce the fluctuating price of the product and improve the organization's prestige (Chen et al., 2004).

Structural capital

Edvinsson and Malon (1997) define structural capital as

the hard wares, soft wares, data bases, organizational structure, organization's exclusive rights, and all an organization's capabilities that support productivity. From another perspective, structural capital is what remains in the organization when employees go home at night (Roos and Roos, 1997). To put differently, structural capital includes all non-human knowledge stores in an organization (Engstrom et al., 2003). Structural capital is comprised of an organization's culture, organizational structure, organizational learning, organization's operating process and its information system. One of the intellectual capital theorists views structural capital as the main pillar in creation of learning organizations. In his view, if an organization enjoys highly capable employees but suffers from weak systems and procedures, this would impede gaining a favorable level of performance. On the contrary, a strong structure helps to reduce total costs and increase profit and productivity (Bontis, 2003).

Organizational performance Organizational performance is a product or result of executive processes and fulfillment of organizational goals. In another definition, organizational performance is accomplishing the duties assigned to human forces by the organization (Cascio, 1989). Organizational performance includes almost all the purposes associated with competitiveness and production excellence and is related to the concepts of costs, flexibility, velocity, reliability, and quality. Moreover, organizational performance can be described as an umbrella for all the concepts that encompasses every organization's success and practices.

High performing organizations possess certain characteristics in aspects of organization's vision and missions, goals, strategic thought, leadership, organizational design, technology and processes. In a leading performance organization, the main performance propulsions are promulgated by the mission statement. One of the most important and fundamental characteristics of a high performing organization is its vision and mission (Waal, 2005). High performing organizations formulate clear and measurable goals (Hardesty, 2003). Studies indicate that leadership in a leading performance organization knows where to guide the organization and is sure that all the employees understand the organization's direction and are clearly involved and active in helping the organization progress toward its goals (Harpest, 2006). The structures of high performing organizations are of utmost simplicity and the number of junior posts is surprisingly small in such organizations. These kinds of organizations emphasize the use of technology to strategically influence their businesses. In a leading performance organization, statement of mission, selection of a strategy concurrent with the mission and the promulgation of the organization's pivotal values do not suffice since the

processes also need to be efficient to be able to use the limited resources for value creation. These organizations put particular importance on the processes and process management as value is created through the application of effective and efficient processes for customers.

Optimum performance does not happen accidentally but to support it, the structure, strategy and different processes and among them, the learning process need to be commensurate. The increment in employees' capabilities through continuous training can have a direct effect on the organization's financial outcomes (Chen, 2004.).

To measure organizational performance, Real et al. (2006) suggested using financial performance as a reasonable substitute of objective measures of business performance (Bontis et al., 2002; Venkatraman and Ramanujam, 1986; Waal et al., 2009). In contrast to the initial scale, in which all the items come together in a single principal factor, the theoretical argumentations posited for the ontological knowledge dimension in the study of Real et al. (2006) concluded to consider the knowledge performance as another necessary measure of organizational performance (Hedlund and Nonaka, 1993; Nonaka, 1994; Nonaka and Takeuchi, 1995). Financial performance is defined as a means to provide financial and resources' well-being to prepare the ground for development. It is calculated through indicators as return on investment (ROI), each employee's productivity average, customer response time, market share and the costs of transactions, etc. Knowledge performance is defined as the qualitative and quantitative growth in products and services arisen from learning and knowledge, the concept which is the determinant of intellectual growth. This is calculated through indicators as the number of the received practical suggestions, the increase in the percentile of the skilled workers through training, the budget dedicated to technology, etc. When referred to the managerial office for Melli Bank, authors found that Melli banks consider the two measures of financial and knowledge performance to assess their organizational performance. This reinforced the concept of employing the variables. The indicators of measurement for the two variables were then customized based on Melli Bank's assessing indicators.

Regarding the preview of background and literature for the concepts of intellectual capitals and organizational performance, the research first hypothesis can be formulated as "Melli banks' intellectual property in Qom city has a positive and significant effect on its organizational performance".

A review of the characteristics of the high performing organizations shows that one of the important factors which influences the relationship between intellectual capital and organizational performance and leads to the improvement of organizational performance is organizational learning process. Therefore, it is briefly explained further.

Badrabadi and Akbarpour 1473 Organizational learning process Learning ability is an important attribute of the human factor that individuals learn before entering the organization but the discussion here is over the knowledge and the skills that employees learn after entering the organization and is described as organizational learning. In views of many authors, among them Huber (1991) and Slater and Narver (1995), organizational learning process is a process consisting of three different stages; 1) information acquisition (production); it points to the gathering and assessing the information related to customers' needs and preferences and the forces in effect reinforcing their needs and wants, 2) information dissemination and distribution; a process in which the information related to market is exchanged within a specific organization, and 3) shared interpretation; a process in which the information becomes meaningful, of course with regard to the existing limitations in information exchange and the development of common understanding and common conceptual models among individuals (Hult et al., 2002). It should be noticed that organizational learning is not a fixed position or a limited goal, but a continuous process of adaptation to environmental conditions and evolution in which the groups within the organization are encouraged to develop skills, knowledge and consensus on the organization's goal (Bayraktaroglu and Kutaniz, 2003).

Based on the given definition, organizational learning in organizations is a process comprised of several stages by implementing which an organization moves toward learning. Based on the researchers and theorists' views (Table 1), four main stages can be mentioned for organizational learning process; 1) information acquisition/creation: search of internal and external environment and gathering useful information for the organization and reviewing the performance outcomes and past experiences and creating new information, 2) information interpretation/exchange: distribution and exchange of information amongst individuals, groups and different divisions of the organization and interpretation of the information by them, 3) information application/knowledge creation: application of information proportionate to the organization's conditions and needs; practical use of the information and examination of its behavioural results, production of new knowledge and adding that to the organization's existing knowledge systems, and 4) knowledge internalization: generalization of the new knowledge throughout the organization and utilization of the new knowledge in daily practices and conversion of the theoretic knowledge to the practical one.

By examining organizational learning process and its definitions, the research's second hypothesis can be stated as: "Melli banks' intellectual capital in Qom city has a positive and significant effect on its organizational learning process". Since the realization of organizational

1474 Afr. J. Bus. Manage.

Table 1. Theorists' views on organizational learning stages.

Theorist's name First stage Second stage Fourth sage Fifth stage

Daft and Weick (1984)

Information gathering Information interpretation

Practical use of information ------------

Huber (1991) Information identification and new knowledge creation

Knowledge exchange and dissemination

Adding the new knowledge to the existing knowledge system

Conversion of the theoretic knowledge to practical

Slater and Narver Information acquisition Information distribution Shared interpretation -------------

Nonaka and Tekeuchi (1995)

Information acquisition Information application Information transfer -------------

Crosen (1991) awareness interpretation integration internalization

Pawlowsky (2001) Identification or creation of new information

Distribution and exchange of the knowledge

Correction and integration of the information

Implementation of the knowledge

learning process and achieving the characteristics of a learning organization is a prerequisite to a leading performance organization, the research's third hypothesis is formulated as:" Melli banks' organizational learning process in Qom city has a positive and significant effect on its organizational performance". Based on the theoretical background and the review of the research's concepts, Figure 1 gives the suggested research model.

As Figure 1 shows, the research suggested model is comprised of the three basic concepts; "intellectual capital", "organizational performance" and organizational learning process". The concept of intellectual capital includes three components namely, human capital, structural capital and customer capital and the concept of organizational learning is subdivided into the two aspects of financial performance and knowledge performance. The research assumed that the variable intellectual capital affected organizational learning. The concept of organizational learning process consists of the three aspects of information acquisition, information interpretation, information application, and information internalization. This concept functions as a mediatory variable between the two variables of intellectual capital and organizational performance and modifies the relationship between these two. RESEARCH METHODOLOGY

This study is the result of a research that is applied based on its purpose and is a descriptive survey based on its method. The research statistical population consisted of all the managers and employees of the Melli banks' Office for Branches Affaires (staff branch) and all the managers and employees of all the branches (line branches) of Melli banks in Qom city in Iran (N=650). 242 individuals were selected as the research statistical sample and information was gathered using systematic random sampling

method. The research questionnaire consisted of 54 questions, 26 of which were designed for measuring intellectual capital, 20 for assessing the practices of organizational learning process and 8 for measuring organizational performance. The questions related to

intellectual capital were designed based on the three aspects of human capital, structural capital and customer capital. The questions related to organizational learning process were also designed based on the four stages of information acquisition/creation, information interpretation/transfer, information application and knowledge creation, and information internalization and finally, the questions related to organizational performance were designed based on the two dimensions of financial performance and non-financial (knowledge) performance. To

assure the research content validity, the questionnaire benefited from the opinions of 15 professors and experts in the field of management using Delphi method and the construct validity of the measuring tool was tested using confirmatory factor analysis as well as the discriminant validity and convergent validity. To determine the reliability of the questions, internal consistency coefficient was applied and the Cronbach's alpha coefficient was calculated for each group of questions. The coefficient for the questions related to

intellectual capital was calculated to be 0.93, for the questions related to organizational learning process was 0.93 and finally, for the questions related to organizational performance proved to be 0.85. The results of the composite (dyadic) reliability tests of the three constructs proved to be 0.77, 0.78 and 0.6.9 for intellectual capital, organizational learning process, and organizational performance, respectively. The Cronbach's alpha coefficient for the entire questionnaire was calculated to be 0.967. As was stated earlier, to test the construct validity, confirmatory factor analysis

was applied and to test the research hypotheses, structural equations modeling was employed. Structural equations modeling on the one hand, examined the extent to which the research conceptual model fitted the associated data and indicators and on the other hand, tested the research hypotheses (the impacts of the variables on each other). The major indicators used to test the fitness of the research conceptual model were goodness of fit index (GFI), adjusted goodness of fit (AGFI), and root mean square error of approximation (RMSEA). It is noteworthy that a model possesses

suitable fitness when the value of GFI and AGFI are higher than 0.90 for the model. Models with RMSEA lower than 0.05 are also suitable models. Models with RMSEA between 0.05 and 0.8 are

Badrabadi and Akbarpour 1475

Figure 1. Authors' suggested research conceptual model.

Table 2. Demographic features of the

research statistical sample.

Variable Percentage

Gender

Male 98.3

Female 1.7

Age

20-30 19.7

31-40 57.9

41-50 22.4

Education

Diploma 54.4

Associate diploma 16

Bachelor 28.3

Master 1.3

Work experience (years)

Below 5 7.9

5-10 31

11-15 32.2

16-20 11.2

Over 20 17.8

acceptable models and those with RMSEA equal to or higher than 1 fit poorly.

RESEARCH FINDINGS The demographic qualities of the research statistical sample are briefly demonstrated in Table 2. According to this table, almost all the sample members were men.

Over 50% of the employees owned a diploma. Around 78% of them were below 40 years old and 63% of the sample members had work experience between 5 and 15 years.

Validity of the measurement tool Due to the author-designed measurement tool, authors tried to assure the utmost validity and reliability. To do so, after examining the content validity of the questionnaire by Delphi method, field data was gathered and construct validity was applied through confirmatory factor analysis method as well as through the calculation of Pearson correlation coefficients to show the discriminant validity and convergent validity of the constructs. The results are explained thus. Construct validity through confirmatory factor analysis Construct validity for intellectual capital through confirmatory factor analysis Here, the indicators of intellectual capital which is comprised of three components of human capital, structural capital and customer capital are illustrated. Accepting or rejecting the factor loadings are determined based on T-values. If the T-value is higher than 2 or lower than -2, the relationship is confirmed (at 0.05 error level) and the relationship is positively significant and negatively significant respectively.

The results of the factor analysis in Table 3 indicates that all the indicators except two indicators namely, "Employees' learning from each other" and "Individuals' not resisting each others' promotion" possess acceptable

Intellectual

capital

Organizational

learning

Organizational

performance

Figure 1: Authors' suggested research conceptual model

Human capital

Customer capital

Structural capital

Acquisition

Interpretation

Application

Internalization

Financial

performance

Knowledge

performance

H1

H2

H3

1476 Afr. J. Bus. Manage.

Table 3. Results of confirmatory factor analysis for intellectual capital indicators.

Intellectual capital

Indicators Level of

significance T-

statistic Factor loading

Standard error

Human capital

Having best employees 0.001 15.08 0.82 0.32 Encouraging freedom in expressing ideas in group meetings

0.001 13.82 0.77 0.41

Proposing new ideas continuously 0.001 13.82 0.77 0.4 Employing the best applicants based on the assimilation program

0.001 11.89 0.7 0.52

Employees' collective attempt to differentiate them from competitors

0.001 11.94 0.69 0.52

Employees' satisfaction from the organization

0.001 11.53 0.68 0.45

Employees' competence at an ideal level 0.001 11.38 0.67 0.55 Employees' cooperation in teams and gaining productivity

0.001 10.39 0.62 0.61

Sharing excellent ideas amongst employees

0.001 9.43 0.58 0.67

Having access to intelligent employees 0.001 9.25 0.57 0.68 Employees' learning from each other 0.001 3.45 0.23 0.95 Individuals' not resisting each others' promotion

0.56 3.45- 0.24- 0.94

Structural capital

Innovation facilitating procedures and systems

0.001 13.01 0.81 0.34

Easy access to information through information systems

0.001 9.99 0.65 0.58

Efficient use of available resources 0.001 9.88 0.64 0.59 Least costs to perform tasks 0.001 9.79 0.63 0.68 Organizational structure facilitator of coordination and cooperation

0.58 2.91- 0.21- 0.96

Customer capital

Assurance of continuous relationship with customers

0.001 13.07 0.75 0.44

Investing on customers' needs 0.001 12.58 0.73 0.47 Encouraging long term relationship with customers

0.001 12.29 0.71 0.49

Customers' general satisfaction from the organization

0.001 12.18 0.71 0.5

considering customers' wants and views 0.001 12.1 0.71 0.5 Employees' understanding of target markets and customers

0.001 10.65 0.64 0.59

Disseminating customers' feedbacks throughout the organization

0.001 10.41 0.63 0.6

Constant contact with customers to get informed of their needs

0.001 9.45 0.59 0.66

Having access to loyal customers comparing to the other banks

0.001 8.15 0.51 0.74

Offering the most valuable services comparing the other banks

0.001 7.45 0.48 0.77

Investors' easy access to required financial information

0.001 7.3 0.47 0.78

Decreasing customers' problem solving time as much as possible

0.001 7.14 0.45 0.79

Biggest market share 0.001 4.37 0.29 0.91

amounts of t-value and factor loadings and these two indicators were omitted from the test tool due to their low factor loadings. Similarly, all the indicators related to structural capital except "Organizational structure facilitator of coordination and cooperation" remained in

the model. Amongst the indicators related to customer capital, only the indicator "the biggest market share" was omitted. Table 4 shows the results for the confirmatory factor analysis of the three components of intellectual capital.

Badrabadi and Akbarpour 1477

Table 4. Results of the confirmatory factor analysis for the dimensions of intellectual capital.

Dimensions Level of significance T-statistic Factor loading Standard error

Intellectual capitals

Human capital 0.01 15.32 0.83 0.31

Structural capital 0.01 15.20 0.83 0.32

Customer capital 0.01 14.22 0.79 0.38

Table 5. Results of the confirmatory factor analysis for the indicators of the organizational learning process.

Organizational learning stages

Indicators Level of significance

T-statistic Factor loading

Standard error

Information

creation/

acquisition

Employees' identification of new ways of performing tasks

0.001 14.26 0.82 0.32

Quick and constant reporting 0.001 13.03 0.76 0.42

Being allowed to exchange and save data 0.001 11.97 0.72 0.49

Identification of new information related to the work area

0.001 11.61 0.70 0.50

Review of past experiences 0.001 7.63 0.50 0.75

Information interpretation/

transfer

Turnover of information amongst organizational units

0.001 16.16 0.90 0.19

Human forces' ability of interpretation 0.001 11.95 0.72 0.49

Exchange of information and learning amongst individuals

0.001 10.63 0.65 0.58

Involvement in decision makings 0.001 7.63 0.49 0.76

Feedbacks, justifications and reasoning about behaviors

0.001 7.37 0.48 0.77

Involvement in people's mental models through dialogues

0.001 5.68 0.38 0.86

Information application/ knowledge creation

Using educational books and pamphlets 0.001 14.56 0.85 0.28

Arranging official educational courses (creating explicit knowledge)

0.001 14.12 0.83 0.31

Information consolidation and integration 0.001 9.86 0.62 0.62

Acquisition of scientific skills (creating implicit knowledge)

0.001 7.73 0.50 0.75

Imitating others' successful methods 0.001 4.41 0.30 0.91

Knowledge internalization

Classification and generalization of knowledge throughout the organization

0.001 13.31 0.80 0.37

Constant improvement of organizational performance

0.001 12.89 0.78 0.40

Converting theoretical knowledge to practical 0.001 11.76 0.72 0.48

Developing competitive advantage 0.001 8.95 0.58 0.67

As Table 4 shows, the results indicated that all the dimensions of intellectual capital possessed acceptable amounts of t-statistic and factor loadings. The factor loadings in Table 4 show that the dimensions (human, structural and customer) were suitable dimensions to measure intellectual capital in Melli banks in Qom city. In measuring the intellectual capital of Qom's Melli bank, human capital and structural capital stood in the first place of importance with factor loadings of 0.83 and

customer capital placed next with a factor loading of 0.79. Construct validity of the organizational learning process through confirmatory factor analysis Here, the results for the confirmatory factor analysis related to the indicators of the dimensions and stages of organizational learning process are offered in Table 5

1478 Afr. J. Bus. Manage. Table 6. Results of the confirmatory factor analysis for the dimensions of organizational learning process.

Number Dimensions of organizational learning process

Level of significance T-statistic Factor loading Standard error

1 Knowledge institutionalization 0.001 12.95 0.79 0.38

2 Information acquisition 0.001 8.37 0.77 0.41

3 Information interpretation 0.001 12.03 0.74 0.45

4 Information leverage 0.001 10.67 0.67 0.55

Table 7. Results of the confirmatory factor analysis for the indicators of organizational performance.

Dimensions Indicators Level of

significance T-

statistic Factor loading

Standard error

Org

aniz

ational perf

orm

ance

Financial performance

assimilation of resources 0.001 13.07 0.99 0.01

The organization's market share 0.001 8.74 0.60 0.64

The rate of the granted mortgage 0.001 8.40 0.58 0.67

Knowledge performance

Increase in sharing of knowledge in the organization vertically

0.001 12.31 0.76 0.43

Increase in sharing of knowledge horizontally (amongst the units)

0.001 10.64 0.68 0.54

Improvement of relationship with customers 0.001 10.68 0.67 0.55

Improvement of employees' efficiency or productivity

0.001 10.47 0.66 0.56

Increase in capability of knowledge acquisition from research institutions and universities

0.001 10.03 0.64 0.59

and then, the four major stages of organizational learning process are discussed and analyzed in Table 6.

The results of the confirmatory factor analysis shown in Table 5 indicates that all the indicators of organizational learning process had acceptable amounts of t-statistic and factor loadings and were suitable to measure the organizational learning process. Table 6 illustrates the relationship between the four dimensions and the entire concept of organizational learning process.

Table 6 shows that none of the dimensions of organizational learning process had to be omitted. The dimension of "knowledge institutionalization" with a 0.79 factor loading had the highest impact on the organizational learning process and the dimension "information leverage" with a 0.67 placed the last. Construct validity of the organizational performance through confirmatory factor analysis

This study considered the two dimensions of "financial" and "knowledge" for the concept of organizational performance in Qom city's Melli banks. Table 7 shows the data related to construct validity of the organizational performance.

Table 7 conveys that the two indicators "assimilation of

resources" related to the dimension of financial performance with a 0.99 factor loading and "Increase in sharing of knowledge vertically based on the organizational hierarchy" related to the dimension of knowledge performance with a 0.76 factor loading were the most powerful indicators to measure organizational performance in Melli banks of Qom city. Table 8 shows the relationship between the financial and knowledge dimensions on the one hand and the concept of organizational performance on the other hand in Qom's Melli banks.

The results shown in Table 8 indicate that both the two dimensions of financial and knowledge performance were suitable dimensions for measuring the organizational performance of the study's population. Based on the values of the factor loadings, it could be claimed that knowledge performance was more important than financial performance for measuring organizational performance. By calculating the construct validity of the measuring tool and leaving out the poor indicators and also by calculating its reliability explained in the methodology, the questionnaire was standardized and the other analyses such as tests of the hypotheses and the test of the research conceptual model were made after ensuring the reliability of the data gathered.

Badrabadi and Akbarpour 1479 Table 8. Results of the confirmatory factor analysis for the dimensions of organizational performance.

Dimensions Level of significance T-statistic Factor loading Standard error

Organizational performance Knowledge performance 0.001 8.37 0.82 0.33

Financial performance 0.001 9.33 0.58 0.66

Construct validity through discriminant and convergent validity Another method to measure the reliability of the measuring tool is through discriminant and convergent validity. As the definition runs, each indicator should bear a higher correlation coefficient with itself (convergent validity) and a lower correlation coefficient with the other indicators. The discriminant and convergent validities are shown for each construct to demonstrate the construct validities more precisely. These were calculated through the Pearson correlation coefficients. As can be drawn from Tables 9, 10, and 11, all the indicators bear a higher level of correlation with themselves than with the other indicators. Construct validity for the intellectual capital through discriminant and convergent validity Table 9 shows the discriminant and convergent validities for the indicators of the intellectual capital. Construct validity of the organizational learning process through discriminant and convergent validity Table 10 shows the discriminant and convergent validities for the indicators of the organizational learning process. Construct validity of the organizational performance through discriminant and convergent validity Table 11 shows the discriminant and convergent validities for the indicators of the organizational performance. Test of the research hypotheses A summary of the research findings related to the test of the hypotheses is illustrated in Table 12. Based on the data in this table, the variable "intellectual capital" influenced the organizational performance of Qom's Melli banks (the first hypothesis). The findings also indicated that intellectual capital had a high and positive impact on the organizational learning of Qom's Melli banks. The

positive and significant impact of organizational learning on organizational performance of Qom's Melli banks was also confirmed (the third hypothesis). On the other hand, the confirmation of the impact of intellectual capital on organizational performance of Qom's Melli banks through organizational learning was another important finding of this study (the major hypothesis).

Based on Table 12, it can be figured out that the two factors, "intellectual capital" and "organizational learning", were important factors that influenced organizational performance-both financial and knowledge performance. However, the impact of intellectual capital was more than organizational learning on organizational performance. The interesting point is that regarding the characteristics that intellectual capital possessed, it influenced organizational learning process to a great extent. However, as is shown in Figure 2, in addition to its direct impact on organizational learning, the variable "intellectual capital" affected organizational performance of Qom's Meli banks indirectly through the organizational learning process. Test of the research model This article used structural equations modeling method to measure the fitness of the research conceptual model. Figure 2 shows the results for the test of the model. By demonstrating the path loadings, significant levels, and the explain power (R

2), the figure illustrates the extent of

the relationship of the three potential variables namely, intellectual capital, organizational learning, and organizational performance. The factor loadings for the observed variables of each latent variable are shown above the arrows.

In addition to the values of the path coefficients and the factor loadings inscribed in Figure 2, a number of important indicators related to fitness of the conceptual model were also obtained. Here, some indicators of measuring the fitness of the conceptual model are calculated and shown in Table 13.

As is shown in Table 13, the values of all the indicators imply a suitable and acceptable fitness of the research conceptual model. Therefore, the consistency of the conceptual model with the data gathered is confirmed. The research fitted conceptual model shows the extent of the direct and indirect impacts of the research main variables on one another in Table 14.

Table 14 proves that the variable "intellectual capital" influenced the organizational performance of Qom's Melli

1480 Afr. J. Bus. Manage.

Table 9. Discriminant and convergent validities for intellectual capital.

Dimensions Dimensions Indicators

Human capital Structural capital Customer capital

Human capital

Having best employees 0.707** 0.154* 0.156* Encouraging freedom in expressing ideas in group meetings

0.714** 0.046 0.154*

Proposing new ideas continuously 0.664** 0.15* 0.147* Employing the best applicants based on the assimilation program

0.762** 0.162* 0.167*

Employees' collective attempt to differentiate them from competitors

0.811** 0.155* 0.156*

Employees' satisfaction from the organization 0.350** 0.097 0.132* Employees' competence at an ideal level 0.739** 0.146* 0.156* Employees' cooperation in teams and gaining productivity

0.787** 0.156* 0.052

Sharing excellent ideas amongst employees 0.654** 0.148* 0.146* Having access to intelligent employees -0.701** -0.178 -0.193*

Structural capital

Innovation facilitating procedures and systems

0.164* 0.725** 0.260*

Easy access to information through information systems

0.254* 0.832** 0.348**

Efficient use of available resources 0.158* 0.771** 0.399** Least costs to perform tasks 0.229* 0.737** 0.341*

Customer capital

Assurance of continuous relationship with customers

-0.178 -0.152* 0.712**

Investing on customers' needs 0.150* 0.240** 0.572** Encouraging long term relationship with customers

0.150* 0.313** 0.661**

Customers' general satisfaction from the organization

0.328* 0.389** 0.586**

considering customers' wants and views 0.209* 0.274** 0.632** Employees' understanding of target markets and customers

0.297* 0.374** 0.600**

Disseminating customers' feedbacks throughout the organization

0.378** 0.388** 0.533**

Constant contact with customers to get informed of their needs

0.205* 0.254** 0.689**

Having access to loyal customers comparing to the other banks

0.241* 0.231* 0.665**

Offering the most valuable services comparing the other banks

0.382** 0.193* 0.673**

Investors' easy access to required financial information

0.394** 0.223* 0.638**

Decreasing customers' problem solving time as much as possible

0.395** 0.314** 0.709**

**Correlation is significant at the 0.01 level (2-tailed); *correlation is significant at the 0.05 level (2-tailed). banks much more than the organizational learning did and thus, points out the great importance of the intellectual capital in the study population. In addition to its direct impact on organizational performance (0.46) which was higher than the impact of the organizational learning (0.33), intellectual capital also indirectly and through the impact of the mediatory variable (organizational learning) influenced organizational performance (0.31). The total impact of intellectual capital on organizational performance was obtained to be 0.77

which is considered to be remarkable. In this regard, it should be noted that although the direct impact of intellectual capital on organizational performance was 0.46, the impact of the same variable on organizational learning process was 0.96. In other words, the amount of the impact of intellectual capital on organizational performance through the mediatory variable "organizational learning process" was also substantial. That is to say intellectual capital tried to influence organizational performance indirectly through realization

Badrabadi and Akbarpour 1481 Table 10. Discriminant and convergent validities for the indicators of the organizational learning process.

Process Process

Indicators

Information creation/

acquisition

Information interpretation/

transfer

Information application

/knowledge creation

Knowledge internalization

Information creation/ acquisition

Employees' identification of new ways of performing tasks

0.700** 0.512** 0.429** 0.455**

Quick and constant reporting 0.590** 0.464** 0.325** 0.368**

Being allowed to exchange and save data 0.501** 0.252** 0.125** 0.284**

Identification of new information related to the work area

0.748** .485** 0.361** .502**

Review of past experiences 0.585** 0.508** 0.451** 0.485**

Information interpretation/ transfer

Turnover of information amongst organizational units

0.546** 0.800** 0.488** 0.430**

Human forces' ability of interpretation 0.449** 0.708** 0.439** 0.493**

Exchange of information and learning amongst individuals

0.574** 0.768** 0.341** 0.454**

Involvement in decision makings 0.545** 0.692** 0.404** 0.575**

Feedbacks, justifications and reasoning about behaviors

0.556** 0.582** 0.451** 0.533**

Involvement in people's mental models through dialogues

0.510** 0.604** 0.349** 0.361**

Information application /knowledge creation

Using educational books and pamphlets 0.404** 0.317** 0.840** 0.364**

Arranging official educational courses (creating explicit knowledge)

0.421** 0.326** 0.902** 0.416**

Information consolidation and integration 0.421** 0.386** 0.756** 0.418**

Acquisition of scientific skills (creating implicit knowledge)

0.410** 0.223** 0.558** 0.350**

Imitating others' successful methods 0.367** 0.346** 0.612** 0.328**

Knowledge internalization

Classification and generalization of knowledge throughout the organization

0.656** 0.564** 0.630** 0.810**

Constant improvement of organizational performance

0.503** 0.432** 0.324** 0.790**

Converting theoretical knowledge to practical 0.386** 0.458** 0.569** 0.653**

Developing competitive advantages 0.315** 0.154** 0.82** 0.719**

**Correlation is significant at the 0.01 level (2-tailed); *Correlation is significant at the 0.05 level (2-tailed). and improvement of organizational learning process in the study's organization. This indicates

that the variable "organizational learning" modified the impact of intellectual capital on organizational

performance and brought about an influential synergy between these variables. That means

1482 Afr. J. Bus. Manage.

Table 11. Discriminant and convergent validities for organizational performance.

Dimensions Dimensions

Indicators

Financial performance

Knowledge performance

Financial performance

Assimilation of resources 0.851** 0.359**

The organization's market share 0.871** 0.157*

The rate of the granted mortgage 0.828* 0.260*

Knowledge performance

Increase in sharing of knowledge in the organization vertically 0.150* 0.718**

Increase in sharing of knowledge horizontally (amongst the units) 0.343* 0.746**

Improvement of relationship with customers 0.362* 0.808**

Improvement of employees' efficiency or productivity 0.242* 0.762**

Increase in capability of knowledge acquisition from research institutions and universities 0.259* 0.711**

**Correlation is significant at the 0.01 level (2-tailed); *Correlation is significant at the 0.05 level (2-tailed).

Table 12. Results for the test of the research hypotheses based on the structural equations modeling.

Hypotheses Path coefficient T-statistic Level of significance Test result

First hypothesis (H1): positive impact of intellectual capital on organizational performance

0.46 2.10 0.01 (H1) confirmed

Second hypothesis (H2): direct impact of intellectual capital on organizational learning

0.96 13.06 0.01 (H2) confirmed

Third hypothesis (H3): positive impact of organizational learning on organizational performance

0/33 2/19 0.01 (H3) confirmed

Major hypothesis: impact of intellectual capital on performance through organizational learning

0/96 30/06 0.01 Major hypothesis confirmed

that for improving organizational performance beside investment on intellectual capitals and their applications, Qom's Melli banks managers need to focus on the variable "organizational learning process" which has been generated through the improvement of the intellectual capital.

DISCUSSION AND CONCLUSION

As stated earlier, the purpose of this paper was to

determine the amount of impact of intellectual capital on organizational performance considering organizational learning process in Qom city's Melli banks and its branches. To do so, the issue of intellectual capital and its components and also the variables "organizational performance" and "organizational learning process" were studied first and then, the relationships amongst the variables were examined. This study sought to find answers to two major questions; the first

question was whether there was a compromise between the research conceptual model and the gathered data and the second question was whether the enhancement of intellectual capital influenced organizational learning and organizational performance of Qom's Melli banks. The answer to the first question is that by using confirmatory factor analysis, all the dimensions and indicators of the three variables, namely intellectual capital, organizational performance

Badrabadi and Akbarpour 1483

Figure 2. Results for the test of fitness of the conceptual model.

Table 13. Assessment of fitness of the research conceptual model.

Indicators for fitness of the conceptual model

Calculated values of the indicators

Acceptable values of the indicators

Chi square 65.74 -

DF 24 -

Chi square/DF 2.73 Chi square/DF<3

RMSEA 0.08 RMSEA=0.08

GFI 0.94 GFI > 0.90

AGFI 0.9 AGFI > 0.90

Table 14. Direct, indirect, and total impacts of the variables on the performance of

Qom's Melli banks.

Indicator Direct impact Indirect impact Total impact

Intellectual capitals 0.46 0.31 0.77

Organizational learning 0.33 - 0.33

and organizational learning except four indicators related to intellectual capital were confirmed. Based on the results of the confirmatory factor analysis, the conceptual mode was tested using structural equations modeling method and finally, some different indicators confirmed the fitness of the model.

To answer the second question, based on the obtained results and by considering the path coefficients amongst the variables shown in Figure 2, it is concluded that

intellectual capital influenced organizational performance and also organizational learning of Qom's Melli banks. The impact of organizational learning on organizational performance was also confirmed. It is noticeable that intellectual capital influenced organizational performance of Qom's Melli banks more than organizational learning process did. Moreover, the research findings also showed that the impact of intellectual capital on organizational learning process (path coefficient=0.96) is

Figure 2: Results for the test of fitness of the conceptual model

Human capital

Structural capital

Customer capital

Acquisition

Interpretation

Application

Internalization

Financial performance

Knowledge performance

Intellectual

capital

Organizational

learning

Organizational

performance

PL: .96 SL: .01 t: 13.05 R

2: .70

PL: .46 SL: .01 t: 2.10

R2: .35

PL: .82 SL: .001

t: 8.37

PL: .33 SL: .01 t: 2.19

R2: .55

PL: .77 SL: .001

t: 8.37

PL: .74 SL: .001 t: 12.03

PL: .67 SL: .001 t: 10.67

PL: .79 SL: .001 t: 12.59

PL: .83 SL: .01 t: 15.32

PL: .79 SL: .01 t: 14.22

PL: .83 SL: .01 t: 15.20

PL: .58 SL: .001

t: 9.33

1484 Afr. J. Bus. Manage. much more than its impact on organizational performance (path coefficient=0.46).

Based on the obtained results, it can be claimed that development and improvement of the status of intellectual capital and its three dimensions - human, structural, and customer capital influenced the development and realization of organizational learning process in the studied organization and also the development and improvement of organizational learning process and progressing toward learning organizations can highly influence organizational performance. The organization needs to try to boost its intellectual capital and its dimensions and to prepare the necessary infrastructure to realize organizational learning process to improve its financial and knowledge performance and achieve a performance leading organization. The organization's investment and focus on development of the human capital through training its employees in different general and specific areas and turning them into knowledgeable employees, improvement of the customer capital through improvement of communications and interactions processes amongst the employees and managers inside and outside of the organization, and improvement of structural capital through creation of an atmosphere and culture which encourages learning, group work and teamwork in the organization, all contribute to development and improvement of performance. If Qom's Melli banks want to facilitate the development of intellectual capital and the realization of organizational learning process, they need to design a framework for the qualifications and competencies of the employees and managers in dimensions of their knowledge, skills and capabilities and plan for their development based on their competencies. The banks also need to plan and implement a succession planning system for the organization's key employees. Moreover, the organization needs to plan a support and motivating a system of the employees' premiere ideas to apply them just in time in its operational processes. The organization is recommended to enhance its structural capital through a number of practices including increasing the efficiency of the human force, augmenting the organization's equipments, designing a support system based on the efficiency of the human resource to approach toward a learning organization, removing restrictive regulations, removing waste procedures and long and complicated hierarchies to decrease bureaucracy. It also needs to create a support culture through designing supporting and motivating systems to improve creativity and innovation, learning and development of the human force.

To improve their customer (relational) capital, Qom's Melli banks need to plan for improvement of relationships with customers and investors and to notify their employees of target markets and customers. The customers' feedbacks should be propagated throughout the organization and planning should be done based on these feedbacks. The organization is suggested to pay

special attention to organizational learning process and to prepare the necessary educational substructure to contribute to the process of the employees' knowledge acquisition within and outside the organization. Development and supporting "Education and Research Center for Bank Melli Iran" and also outsourcing the educational courses which the organization itself is not able to afford can be useful. It is also suggested that the organization facilitate the internalization process of knowledge and employees' sharing of each others' implicit knowledge as a major organizational knowledge source through group thinking, collective problem solving, job rotation, and in-service training. Managers can contribute to better organizational learning through documentation and providing the necessary books, pamphlets and other practical and educational software.

The researchers confronted some limitations, among which was the measuring tool. The researchers used a self-made questionnaire that was applied after its reliability was tested. Moreover, the research studied the impacts of intellectual capital on organizational performance and learning only in Qom city's Melli banks while the generalization of the results to the country's all Melli banks or other banks is controversial. To increase the generalizability of the results, the study is suggested to be done in Melli bank in other cities as well. Only by the results of such studies and their comparison can we obtain a more concise understanding of the study's variables throughout the country. Therefore, future researchers are suggested to try to find answers to two questions associated with the current study; 1) what are the limitations and obstacles in the way of development and realization of intellectual capital and organizational learning process in Melli banks and other state and private banks? and 2) what factors improve the intellectual capital and successful realization of organizational learning process in Melli banks and other private and state banks?

ACKNOWLEDGEMENTS

The authors acknowledge the assistance of their professors, Mr. Qorbanizadeh and Mr. Sanjari at Allameh Tabataba'e University for steering them towards insightful references. They also thank the respondents in Qom's Melli banks for taking the time to help us collect the data. Mr. Habibi would like to thank his parents for their countless help and support. Mr. Akbarpour is grateful to his brothers, Hussein and Hadi and his friends Saeed Rezaei, Amir Afsar and Mohsen Hejazi who encouraged his interest in doing the research paper. Thanks also go to Hadiseh Panahi for keeping him motivated while accomplishing the research.

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