The Strategic Contribution of Intellectual Capital to Firm Performance: Testing the Conditional Effect of Family Management in Indonesia

This research examines the influence of intellectual capital (IC) on the financial performance of public non-financial companies in Indonesia stock market for 2018- 2023, with return on equity (ROE) as a measurement for the performance. In this paper, IC is defined based on the modified value added intellectual capital (MVAIC) model which measures the value creation of an organization by considering human capital, structural capital, relational capital, and efficiency of employees. Family management (FM) is proposed as a moderator to investigate whether the participation of family members in managerial positions reinforces (i.e., weakens) the link among MVAIC and firm performance. The research uses a quantitative design with purposive sampling, generating 3095 firm-year observations belonging to 742 non-financial companies. The findings provide empirical evidence that IC has had a positive and significant effect on ROE, suggesting that companies with effective use of intangibles have a higher ability to increase shareholder value. On the other hand, FM does not moderate between MVAIC and ROE, which means that the presence of family members in managerial positions either drives or limits transformation of IC into financial results. These results provide additional support to the applicability of the Resource-Based View (RBV) in explaining the strategic role of intangible assets and emphasize the neutral effect of family firm among Indonesian public companies. Our findings offer meaningful insights for managers and regulators in terms of the fine-tuning of intellectual capital and governance mechanisms to underpin sustainable firm performance.