Impact of Intellectual Structural Capital and Knowledge-Based Dynamic Capabilities on the Financial Performance of the Indigenous Craft Industry in Sri Lanka

Abstract

This study attempts to identify the relationships between Intellectual Structural Capital (ISC), Knowledge-Based Dynamic Capabilities (KBDCs), and Financial Performance (FP), with special reference to the Indigenous Craft Industry (ICI) in Sri Lanka. The data were collected through a structured questionnaire from 231 owners of firms selected from indigenous crafts villages in Sri Lanka. The PLS-SME method was used to analyse data. The study found that ISC positively influences KBDCs, but does not directly affect the FP of ICI firms in Sri Lanka. Further, it revealed that the owners' ability to acquire knowledge and create knowledge have a positive impact on FP, and both variables fully mediate between ISC and the FP. By strengthening knowledge acquisition and knowledge creation capabilities of owners of ICIs and applying a proper mechanism to utilise ISC to transform tacit intellectual knowledge into explicit intellectual knowledge, the FP of firms in the ICI can be optimised.