The Mediating Effects of Sensemaking and Measurement on the Intellectual Capital and Performance Linkage

Abstract

Intellectual capital can be a major factor that can aid Caribbean policy makers as the region transitions from its agricultural based economy to service based economies with tourism being the largest contributor to GDP. This paper adds to the extant literature by providing literature on IC within the Caribbean and the tourism industry. Additionally, while the research has emphasized defining and measuring IC and its components, and their impact on firm’s performance theoretical questions remain concerning the synergistic, dynamic and contextual nature of IC. In addition, the use of sensemaking to provide the foundation for understanding the interaction of the IC components and firm’s performance will further enhance the IC literature. This paper reports on the development and testing of a theoretical model concerning the mediating effects of measurement of IC and sensemaking on the components of IC and performance linkage. This quantitative study used structural equation modeling (SEM) to test the model and structural relationships among the components of IC and performance mediated by sensemaking and measurement of IC. Independent variables used in the model were HC, RC and SC; with sensemaking and measurement of IC being the mediating variables and performance, a composite scale measuring managers’ perception on relative changes of their performance of financial and non‑financial measures, being the dependent variable. The study shows that HC, RC and SC are related to sensemaking, that measurement of IC is associated with performance, that measurement of IC mediates the relationships between RC and performance and SC and performance, and it validates the relationship between HC and performance.