Individual and organizational intellectual capital, ESG dimensions and competitive advantage: a focus on Italian SMEs

Purpose The aim of this study is to explore the influence of intellectual capital (IC), at both the individual and organizational levels, on environmental, social, and governance (ESG) dimensions. It also investigates how these ESG dimensions, ultimately, affect firms’ competitive advantage, focusing on strategic and financial performance outcomes. Design/methodology/approach The study employs a quantitative methodology based on survey data collected from SMEs in Italy. A multilevel framework distinguishes IC at the individual level (human and relational capital) and at the organizational level (structural and organizational capital) to assess their impact on ESG dimensions. The research also utilizes a newly validated perceived-ESG (P-ESG) scale to measure ESG performance and its subsequent effects on strategic and financial performance. We tested hypotheses using structural equation modelling with the partial least squares approach (PLS-SEM). Findings The results show that human capital significantly impacts social sustainability while relational capital supports social and governance sustainability. In addition, it is highlighted that structural capital positively influences all three ESG dimensions, whereas organizational capital strongly drives environmental outcomes but negatively affects social sustainability. Among ESG dimensions, governance sustainability emerges as the strongest determinant of both strategic and financial performance. Social sustainability positively affects strategic performance but exhibits a negative effect on financial performance, reflecting short-term financial constraints for SMEs implementing social initiatives. Originality/value This study is among the first to analyse the multilevel influence of IC on ESG dimensions while utilizing a newly validated scale to measure ESG performance. It also provides novel insights into the distinct effects of ESG dimensions on firms’ competitive advantage, providing a more sophisticated interpretation of the relationship between IC, ESG, and performance.