Integrated Effects of Working Capital Management and Intellectual Capital on Corporate Profitability and Performance in Emerging Economies

Abstract

The sustained competitiveness and profitability of firms operating in emerging economies depend increasingly on their ability to manage both tangible and intangible resources effectively. Among tangible resources, working capital management plays a crucial role in ensuring liquidity, operational continuity, and short-term financial stability. Simultaneously, intangible resources—particularly intellectual capital in its human, structural, and relational dimensions—have emerged as key drivers of long-term value creation, innovation, and strategic differentiation. While a substantial body of literature has examined working capital management and intellectual capital independently, relatively limited attention has been paid to their integrated impact on firm performance, especially within emerging market contexts characterized by institutional constraints, financial market imperfections, and volatility. This study develops a comprehensive theoretical and empirical framework that synthesizes insights from working capital management theory and intellectual capital theory to explain variations in corporate profitability and performance in emerging economies.
Drawing strictly on established empirical and theoretical studies, this research elaborates on how components of the cash conversion cycle—such as inventory management, receivables collection, and payables deferral—interact with firm-level intellectual capital to influence profitability outcomes. The article adopts a qualitative-descriptive methodological approach, grounded in prior empirical findings, to explain mechanisms through which efficient working capital practices enhance the productivity of intellectual capital, and vice versa. The findings suggest that firms that simultaneously optimize working capital efficiency and strategically invest in intellectual capital are better positioned to achieve superior profitability, resilience, and sustainable competitive advantage. The study contributes to the literature by offering an integrated conceptual model that bridges financial management and knowledge-based perspectives of the firm, providing implications for managers, policymakers, and researchers focused on emerging markets.