Intellectual capital as a mediator: exploring the impact of human resource management practices on organizational performance

Purpose This research examines the contribution of human resource management practices on enhancing organizational performance and the mediating effect of intellectual capital in Addis Ababa, Ethiopia's large manufacturing industry. Design/methodology/approach This study employs a quantitative research design, collecting data from 264 large manufacturing firm human resource directors in Addis Ababa via a structured questionnaire. Partial least squares structural equation modeling (PLS-SEM) is used to analyze the relationships between HRM practices, intellectual capital and organizational performance. Findings Findings illustrate a positive and significant relationship between bundle HRM practices and each intellectual capital category as well as bundle HRM practice and organizational performance. Structural capital plays a significant mediating role in the relationship between HRM practices and non-financial organizational performance (NFOP). However, human capital and relational capital do not have significant mediating effects in this case. Practical implications The findings highlight the need to prioritize HRM practice bundles that strengthen structural capital to boost organizational performance. Managers should note the limited mediation of human and relational capital and adjust their strategies accordingly. Originality/value It highlights the critical mediating role of structural capital, offering new knowledge into the process through which HRM practices are translated into performance outcomes. The findings emphasize the necessity of molar HRM practices rather than individual practices to enhance structural capital, and this provides companies in low-resource environments with practical recommendations to achieve enhanced performance.