Intellectual capital, social capital components and internal control weaknesses: evidence from Iran’s business environment

Abstract

Purpose This paper aims to determine whether there is a relationship between intellectual capital and social capital and internal control weaknesses and assess the relationship between the variables of intellectual capital and social capital and internal control weaknesses. Design/methodology/approach The statistical population consists of 1,309 firm-year observations from 2014 to 2020. The research hypothesis is tested using statistical methods, including multivariate, least-squares and fixed-effects regression. Findings The results demonstrate a negative and significant relationship between intellectual capital, social capital and internal control weaknesses. The study also finds that increased intellectual and social capital quality improves human resource utilization, control mechanism, creativity and firm performance. The results also show that intellectual capital and social capital enhancement will reduce internal control weaknesses in the upcoming years. Originality/value This paper is the pioneer study on the relationship between intellectual capital and social capital and internal control weaknesses in Iran, carried out separately and in exploratory factor analysis. This paper considers intellectual capital components for theoretical factor analysis, including human capital, structural capital and customer capital. Internal control weakness is assessed based on financial, non-financial and information technology (IT) weaknesses.