Unleashing Potential in SMEs: How Intellectual Capital Fuels Employee Flexibility to Reach Strategic Goals

This paper investigates the impact of intellectual capital on employee flexibility in SMEs, specifically focusing on how human, relational and structural components of intellectual capital contribute to skill and behavioural flexibility. The research addresses the gap in understanding how intellectual capital influences employee adaptability, essential for achieving strategic goals, especially in SMEs with limited resources. We have tried to address these research questions: Does intellectual capital improve skill and behavioural flexibility?; and how does employee flexibility impact the achievement of strategic goals? We have employed an empirical, quantitative research approach. Data has been collected through a structured survey from a sample of 233 Italian SMEs, and the relationships between variables has analysed using Partial Least Squares Structural Equation Modelling (PLS-SEM). Our findings reveal that human capital significantly enhances both skill and behavioural flexibility, while relational capital positively influences these aspects to a lesser extent. Interestingly, structural capital shows no significant direct impact on skill and behavioural flexibility. Both skill and behavioural flexibility demonstrate a significant positive impact on planning effectiveness. Contrary to previous studies, our results indicate that in SMEs, a high level of formalisation favours the achievement of strategic goals without hindering employee flexibility. This research advances the understanding of intellectual capital's role in SMEs by empirically demonstrating its impact on employee flexibility and subsequent performance. For scholars, this study extends the theoretical framework linking intellectual capital, employee flexibility and a firm’s ability to reach strategic goals in SME contexts. It challenges existing assumptions about the relationship between formalisation and flexibility in smaller organisations, opening new avenues for future research. Furthermore, our findings contribute to the ongoing discussion about the unique characteristics of SMEs and how they can effectively manage their resources to remain competitive. For practitioners, particularly SME managers, the study emphasises the critical importance of fostering human and relational capital to achieve greater employee flexibility. By doing so, SMEs can enhance their ability to reach strategic goals.