Measurement of intangible assets using higher-order construct model

Purpose: Intangible assets (IA) have been described as a multidimensional concept. However, there is a gap in research that considers IAs as a higher-order construct (HOC). Therefore, this paper aims to focus on demonstrating how IAs can be properly specified and measured as HOCs, given IA’s four major dimensions in small- and medium-sized enterprises (SMEs). Design/methodology/approach: A HOC model is applied using a partial least squares–structural equation modeling (PLS-SEM) repeated-indicator approach. This approach helps validate the argument for considering IAs as HOCs by testing the basic requirements of the construct model. Findings: The main finding from testing the model’s reliability, validity, multicollinearity and redundancy analysis indicates that the establishment of IAs as a HOC model is valid. Additionally, the simulation study results support the use of the proposed model. Research limitations/implications: The proposed model is believed to enhance the proper understanding of IAs and their relationship with organizational outcomes. Additionally, the model can inform organizational management of the integrative approach needed to effectively synchronize their strategic resources for improved performance of entrepreneurially growing SMEs. Originality/value: This paper is the first to show the measurement of IAs as HOCs using PLS-SEM, based on IA’s updated dimensions. The authors believe that this paper paves the way for future discussion on IA measurement to conduct rigorous impactful studies with larger sample size.