The Lahore Journal
of Business

The Lahore Journal
of Business

Lahore Journal of Business

(HEC recognized journal in “Y” category)

The Lahore Journal of Business is aimed at providing a specialized forum for dissemination of qualitative and quantitative research in various areas of business administration. The LJB invites researchers, policy makers and analysts to submit original theoretical and empirical papers that explore and contribute to the understanding of various areas in the business domain. The Journal aims at bringing together state-of-art research findings, particularly from emerging markets, in various business disciplines including (but not limited to) accounting, banking, management, marketing, finance, investments, human resource management and organizational behavior.

Ramla Sadiq and Safia Nosheen
The Lahore Journal of Business, Volume 9, Issue 1, Apr-Sep 2020, pages 105-144, https://doi.org/10.35536/ljb.2020.v9.i1.a5

This paper carries out the empirical tests in order to validate the hypothesis that resource intangibility, in the form of intangible assets, contributes towards the intellectual capital, and the competitive advantage in the banking sector. Furthermore, it also determines whether the intangibility of a banks’ resources contribute towards the sustainability of the competitive advantage. Finally, it determines which aspects of the banking performance, the intangible assets actually contribute to. In this context, this research utilizes the secondary data, which is extracted from the annual reports of commercial banks that are listed on the primary stock exchanges of Pakistan. The sample that is taken into consideration is divided into two main categories in order to carry out the analysis. These categories include the classification into the Islamic banks and the conventional banks. The Islamic window operations have not been included in the analysis, as the details required for the variable calculations are not consistently available. Moreover, this bifurcation in the sample is also a unique aspect of this research, as the prior literature primarily focuses on the determinants of the intellectual capital in the banking sector. However though, there is no direct study regarding the differences in the resource intangibility in the Islamic banks and the conventional banks, and their subsequent impact on the intellectual capital and competitive advantage. The time frame for the analysis is taken from the year FY2008-FY2018. Also, the findings of this study lead to striking implications for both the Islamic banking theory and the managerial practices in the banking sector of Pakistan. The resource intangibility is to be managed very differently across both categories. Where the intangible assets represent a significant contribution to both the intellectual capital and the competitive advantage for Islamic banks, they also represent a negligible impact on the intellectual capital, and the competitive advantage for conventional banks. This holds true for the conventional performance measures that are taken for the banking sector as well, as shown in the robustness analysis. Future studies may focus on additional countries to determine the consistency of these patterns. Furthermore, the additional explorations are possible, especially when considering this phenomenon. These include the impact of the bank size, the market position, and the country of location, etc.