Intellectual Capital and a Firm’s Sustainable Performance and Growth before and during the COVID-19 Crisis: A Comparative Analysis of Small and Large European Hospitality Firms

Abstract

This study explores the critical role of intellectual capital (IC) in ensuring the sustainable performance and growth of European hospitality firms, both large and small, during the unprecedented COVID-19 crisis. Based on an extensive analysis of data from 42,516 accommodation, food, and travel sector firms operating in 18 EU countries during 2012–2021, this research provides crucial insights into the differential impacts of human, structural, and relational IC on profitability and asset growth. The results show that human IC positively affects SMEs’ profitability, while relational IC benefits both small and large firms. On the other hand, structural IC negatively impacted asset growth for both SMEs and large firms before the crisis but had no impact during the crisis. This study offers crucial insights for policymakers, investors, and business leaders alike, emphasizing the importance of investing in human and relational IC as key drivers of sustainable growth and profitability in the hospitality industry. The findings of this study will help firms better navigate the challenges and uncertainties of crises, such as COVID-19, ensuring their long-term viability and success.

1. Introduction

The COVID-19 pandemic has caused unprecedented challenges for the hospitality industry worldwide, leading to significant impacts on businesses of all sizes [1]. As a result, hospitality firms have had to rethink their strategies and operations and navigate supply chain disruptions, reduced demand, revenues, and increased uncertainty [2]. Consequently, it has become essential for managers and policymakers to explore new strategies to sustain the performance and growth of hospitality firms during this crisis.

One potential resource for firms to maintain sustainable performance and growth is intellectual capital (IC), which refers to a firm’s intangible assets, such as human, relational, and structural capital [3]. IC has been identified as a key driver of firm performance and innovation, particularly in knowledge-intensive sectors, such as the hospitality industry [4]. However, there has been limited research on the impact of IC on the performance and growth of hospitality firms during the COVID-19 crisis.

Therefore, this study aims to investigate the role of IC in the sustainable performance and growth of small and large European hospitality firms during the pandemic. Specifically, we will examine the impact of human, relational, and structural capital on the profitability and asset growth (AG) of firms operating in the accommodation, food, and travel sectors and compare the results across small and large firms. By doing so, we hope to contribute to the literature on IC and financial performance and gain insights into the unique challenges and opportunities facing the hospitality industry during the COVID-19 crisis. The findings of this study may also inform managers and policymakers in the hospitality industry as they seek to build sustainable and resilient businesses in the post-COVID era.

This study is relevant because the COVID-19 pandemic has led to the adoption of new strategies in the hospitality industry to deal with its effects, such as the shift towards technology-centered business models that rely more heavily on IC [5]. Before the pandemic, the European hospitality industry was experiencing significant growth in the number of hotels and overnight stays [6]. However, policy responses to the pandemic have taught us new strategic ways to leverage IC for better performance. Therefore, evaluating how firms have adjusted their structural capital in response to the pandemic is also important [7]. The decline of the hospitality industry due to the pandemic has led to a significant reduction in the number of workers [8,9], making it essential to explore the role of human capital in the industry’s sustainability.

The literature suggests that IC positively affects firms’ profitability through increased incentive capabilities [10,11,12] in developed and developing economies. Some researchers have studied IC for firms operating in different countries and industries and found that IC performs a crucial role during the pandemic [13,14,15,16]. More recently, Ref. [17] studied the role of structural capital in the business industry’s financial cash flow for uncertainty. With respect to the hospitality industry, Ref. [18] found that IC was a relevant factor before and during COVID-19 for the Serbian hospitality firm’s performance.

While previous studies have examined the impact of IC on firm profitability in various countries and industries, little research has been completed on the role of all three components of IC, i.e., human, structural, and relational, in developed countries’ economies, where the pandemic has brought new technological advancements to improve the hospitality industry. This study attempts to fill this gap in the literature by providing deeper insights into the importance of IC for EU countries. The hospitality industry is a crucial sector for many EU countries, employing millions of people and contributing significantly to their economies. By understanding the impact of IC on the profitability and asset growth of firms in this industry, policymakers, and business leaders can make more informed decisions about where to allocate resources and investments.

Moreover, this study examines the relationship between IC and AG in the hospitality industry, as corporate asset developments are crucial in linking IC and industry performance and are fundamental for material and immaterial firm growth [19]. The study adds to earlier research that analyzed IC during times of crisis in many businesses only with respect to financial performance.

Lastly, exploring the differences in IC between small and large hospitality firms during a crisis is important, as these types of firms may have different resources and capabilities to manage the crisis. Additionally, the crisis may affect small and large firms differently, and understanding these differences could help design policies and strategies to support the sustainability of the hospitality industry. This insight is particularly relevant for policymakers seeking to support small- and medium-sized enterprises in the hospitality industry, as they may have different needs and challenges compared to larger firms.

This study’s findings suggest that effective management of IC performs a crucial role in the survival of the hospitality industry, especially during periods of financial turmoil. The study highlights the importance of investing in human capital through ongoing training and development programs to enhance employees’ professional competencies and boost their productivity. Additionally, the effective use of structural capital can contribute to employee productivity and professional development. Furthermore, the effective management of relational capital can lead to increased customer retention, higher revenue, and improved profitability, which are essential for the long-term success of a firm in the hospitality industry. The study emphasizes the interdependence between IC and physical assets and the need for a balanced approach to investment in both areas. By adopting such an approach, hospitality firms can achieve improved financial performance and maximize their return on investment. These findings provide valuable insights for hospitality managers and financial analysts seeking to improve their organizations’ performance and profitability.

Overall, this study’s findings provide valuable guidance for policymakers, investors, and business leaders in EU countries, emphasizing the importance of investing in human and relational IC and enhancing structural IC to drive sustainable growth and profitability in the hospitality industry, especially in times of crisis, such as COVID-19. By leveraging these insights and implementing strategies to support IC development, EU countries can strengthen their hospitality industry’s resilience and competitiveness, creating a more prosperous and sustainable future for all.

The remainder of the study is organized such that Section 2 discusses the literature and hypothesis development, followed by a brief discussion of the empirical methodology in Section 3. Section 4 discusses the results of the study, and Section 5 summarizes the findings and practical implications.

2. Literature Review and Hypothesis Development

IC components are related to the resource-based view (RBV) and knowledge-based theory, which have been the overarching themes for the hospitality industry in the last 20 years and provide support for the theoretical foundation [18,20]. According to RBV, a company’s performance is influenced by its unique, strategic resources, which give it a competitive advantage in finance [7]. According to the knowledge-based theory of the firm, innovation, creativity, efficiency, and customer satisfaction are vital in achieving sustainable competitive advantage [13]. As a company’s strategic assets are both tangible and intangible, one should exercise extreme caution when making investments and evaluating the contribution of the company’s perceptible and immaterial assets because it is difficult to separate their effects from one another [10]. This implies that while continuously aiming to maximize the synergy effect, investment in one type of AG may directly or indirectly impact the investment in additional support [19]. The knowledge that can be turned into value or intellectual assets [11] is what generates a company’s revenue in finance [21]. Knowledge product structural generativity is essential for expanding talent retention in knowledge-intensive offerings and setting them apart from the firm’s competition [22].

IC is crucial for creating value and improving performance, and companies must focus on investing in and utilizing IC practically to provide quality goods and services [8,9,23]. Human and structural capital combine to form IC, with employee knowledge, skills, capabilities, motivation, and experience critical to value creation [15]. The value of human capital rises due to employees’ professional development, and the company should make additional investments in capital, growth assets, and structural assets to generate value for company finance [13].

H1. 

Human capital positively and significantly impacts the hospitality firm’s profitability and AG during the crisis.

Ref. [24] state that structural capital allows the impact of IC to be seen in the firm’s financial fluency, with all non-human knowledge resources and organizational procedures being related to structures for conducting commercial transactions. Structural capital enables the workforce to enhance their on-the-job performance, which helps to improve overall FP [25]. Additionally, structural capital in terms of the organization’s profitability is more critical for overall performance [15]. Relational capital includes a company’s brand equity, reputation, customer relationships, partnership agreements, licenses, and knowledge derived from relationships with internal and external stakeholders [26].

Performance and IC are critical components in developing an organization’s overall FP [27,28]. Despite extensive research on the connection between IC and performance [13,29,30], it is claimed that businesses continue to use IC ineffectively [31]. During a crisis, the situation deteriorates even more, and management must examine the organization’s essential traits and resources to pinpoint particular risk areas that need attention [8].

Metrics used by management to monitor a company’s financial success and improve its strategy include profitability indicators [32]. These data assist managers and financial analysts in determining the activities and performance of a hotel’s strengths and weaknesses, and the effectiveness of carrying out recent and past actions [15]. Indicators of profitability that are frequently used in the hotel industry include return on assets (ROA), return on equity (ROE), and revenue per available room (RPR). Traditional measurements are crucial control tools for evaluating tourism from the hospitality performance perspective [33]. Effective use of human, structural, and rational capital can also contribute to high performance [34].

H2. 

Structural capital positively and significantly impacts the hospitality firm’s profitability and AG during the crisis.

According to [15], performance is influenced by both external factors, such as competition, and internal factors, such as employee productivity. Some studies in the hotel and tourism sector partially confirmed that the impact of IC on business performance is related to AG [35]. However, previous research suggests a weak or only marginally significant relationship between IC and performance, which is related to financial effectiveness [36].

Furthermore, the COVID-19 pandemic has significantly affected the hospitality industry, and studies examining the impact of IC and other factors on business performance during this crisis are needed [19]. Comparing outcomes between the pandemic and pre-pandemic periods can also provide valuable insights for hotel management to adjust their strategies accordingly. Ultimately, effective utilization of both tangible and intangible assets can lead to improved financial success and sustainable growth for hotels in the long run.

It is important to understand the relationship between assets and employee performance and how human intellectual capital can contribute to both productivity and financial performance [20]. Improving employee knowledge, skills, attitude, and tangible assets, can lead to better performance outcomes [37]. Additionally, AG’s role in effectively using intangible capital to achieve satisfactory employee performance is a critical area of research. This information can help managers and financial analysts to understand better the factors contributing to a company’s success and inform strategies to improve performance [8,31,38].

Previous studies found that profitability has benefited through effective IC management [37,39]. Hotels’ success is significantly impacted by human capital, an essential element of IC [40]. Workers’ capacity to develop their professional competencies is increased by structural capital [41]. Furthermore, IC usage significantly affects employee performance, and its favorable impact on employee performance will affect the company’s performance [31,42]. The study by [43] found that the COVID-19 crisis negatively influenced company performance, particularly low-performing businesses, in most sectors and raised firm risk. Furthermore, the study discovered that the national government’s effectiveness is crucial in reducing the detrimental effects of COVID-19 on business operations and performance.

Knowledge is a prerequisite for human productivity, and applying knowledge increases its applicability [10]. Managers must enhance the staff structure and invest in human capital via ongoing training to boost employees’ contribution to firm performance, particularly in developing economies ([41]. Workers with high levels of human capital create value and are more productive, improving resource use and increasing production efficiency [44]. As a foundation for IC, structural capital fosters employee performance improvement [28].

Moreover, the effect of asset finance on the relationship between IC and hotel profitability metrics is very important [8]. The results revealed that investing in one form of asset, either directly or indirectly, obstructs investing in other assets since there is a synergy between physical assets and IC [45]. Even though the knowledge-based economy has altered the strategic role of assets in firms [39], the success of hotels’ business operations and their ability to perform satisfactorily is dependent on how effectively they use both asset growth and IC [37]. Using structural capital and other components of IC more effectively can increase hospitality performance. The fact that IC is far more crucial than asset growth for producing value in service-based sectors might be one reason for this detrimental effect [46]. There is a link between IC and hospitality firms’ financial performance in small and large organizations, as there is a human, structural, and rational capital expending role that can improve asset and hospitality performance in developed countries.

H3. 

Relational capital positively and significantly impacts the hospitality firm’s profitability and AG during the crisis.

3. Empirical Methodology

3.1. Sample Design and Data

Our firm-level database covered the period from 2012 to 2021, collected from the ORBIS database provided by Bureau van Dijk (BvD) (The database was accessed through a paid subscription to the Center for Studies and Advanced Training in Management and Economics at the University of Évora (CEFAGE-UE)) and macro-level data from the World Bank Statistics. To cover a normal time span after the global financial crisis and before the COVID-19 crisis, our sample period starts from 2012.

Table 1. Sample selection and composition.

Search Step		No. Firms
	1. World region: European Union (27)	2,866,568
	2. NACE Rev. 2 codes: 55, 56, 79	116,023
Firms with complete data		42,516
Hospitality sectors
	55—Accommodation	18,146
	56—Food and beverage service activities	21,580
	79—Travel agency, tour operator reservation service, and related activities	2790
Total final sample: 18 EU countries		42,516
	Small firms	38,960
	Large firms	3556

provides details of the sample selection. We used NACE Rev. 2 classification, which was used by used by a number of researchers, including [47] and [48]. After screening firms that do not fulfill the data requirements for IC and control variables, we also excluded firms from countries with significantly fewer observations to avoid country-level risk bias. The study uses an unbalanced panel data approach, which allows for free entry and exit of firms to avoid survivor bias [49]. We found 199,745 observations, representing 42,516 hospitality sector firms operating in 18 EU countries during the period from 2012 to 2021. Appendix A reports the number of firms and observations per industry and country.

3.2. Measures of Firm Performance and Asset Growth

In this study, firm performance and asset growth are used as dependent variables, the components of IC as independent variables, and control variables at the firm and macro levels. Estimating corporate performance using financial ratios is a better method when dealing with companies of different sizes and in different locations. Therefore, we used ROA, the most widely used performance indicator in hospitality and tourism studies [48] which captures both profitability and asset productivity. In addition, we used total asset growth, a commonly used indicator of firm growth in the literature [50,51].

3.3. Measures of Intellectual Capital

There is no universally accepted measure of IC. Several proxies have been developed in different disciplines to measure IC, depending on different data measures. Most of the companies in our sample are privately held; therefore, market price data was not available. In addition, there were very few companies with data on marketing or advertising expenditures, further limiting our options for IC proxies. We use an accounting perspective and data availability to define the single proxy in the financial statements that reflect the relevant categories, i.e., human, structural, and relational capital.

Human capital, which reflects the talents, skills, and expertise of employees, is best approximated by financial statement data when market price data are not available [52]. A company’s ability to attract and retain talented employees can be measured by the salaries it pays its employees [53]. Companies pay higher salaries to attract and retain talented and skilled human capital [54]. Ref. [55] find labor costs to be an indicator of human capital investment, and higher labor costs, along with other measures, are associated with higher returns [56]. Based on these findings, we used the natural log of labor costs as a proxy for human capital, which has been used by many researchers (Table 2).

Structural capital reflects organizational capabilities, culture, processes, patents, copyrights, trademarks, and databases. These variables are not directly reflected in the company’s balance sheet, but we can gain insights into the efficiency of a company’s operations and its ability to effectively use its structural capital through the efficient use of working capital. Numerous previous studies have shown that the working capital turnover ratio is an effective indicator of firms’ operational efficiency (Table 2). A higher working capital turnover ratio indicates lower capital overutilization, higher inventory turnover, shorter operating cycle, and better firm performance [57,58]. Higher working capital turnover also indicates that a firm is able to generate more revenue with less money tied up, reflecting the efficient use of structural capital by the firm [59]. Based on the available data and the results of previous research, this study used working capital turnover to evaluate structural capital.

Relational capital reflects the establishment and maintenance of relationships with suppliers, customers, and other stakeholders. These relationships and intangible assets contribute to a company’s competitive advantage and long-term success. Previous research has indicated various metrics for evaluating relationship capital, including revenue growth (Table 2). Customer loyalty performs an important role in increasing sales through repeat purchases, referrals to the company, and valuable feedback [60]. In addition, successful implementation of customer-centric strategies, such as personalized marketing, excellent customer service, and effective customer relationship management (CRM) systems, relies on nurturing and leveraging relationship capital to create a competitive advantage and drive revenue growth [61]. Furthermore, a positive brand image can lead to increased customer acquisition, customer retention, and, ultimately, revenue growth [62]. Thus, revenue growth is a measurable and tangible indicator of the effectiveness of customer relationships, brand reputation, and customer-focused strategies. By focusing on revenue growth, companies indirectly reflect their ability to leverage relationship capital, which includes intangible assets critical to long-term success.

Table 2. IC measurement proxies.

IC Dimensions	Measures
Human Capital (HC)	Staff cost (Ballester et al., 2002; Chu et al., 2011; Sardo et al., 2018; Sydler et al., 2014; Yu et al., 2015) [59,63,64,65,66]
Structural Capital (SC)	Working capital turnover (Knight, 1999; Sardo et al., 2018; Yu et al., 2015) [57,59,66]
Relational Capital (RC)	Revenue growth (Dzinkowski, 2000; Lim and Dallimore, 2004; Sardo et al., 2018; Tseng and Goo, 2005) [59,67,68,69]

Table 2. IC measurement proxies.

IC Dimensions	Measures
Human Capital (HC)	Staff cost (Ballester et al., 2002; Chu et al., 2011; Sardo et al., 2018; Sydler et al., 2014; Yu et al., 2015) [59,63,64,65,66]
Structural Capital (SC)	Working capital turnover (Knight, 1999; Sardo et al., 2018; Yu et al., 2015) [57,59,66]
Relational Capital (RC)	Revenue growth (Dzinkowski, 2000; Lim and Dallimore, 2004; Sardo et al., 2018; Tseng and Goo, 2005) [59,67,68,69]

3.4. Measures of Control Variables

We used current assets (CR), cash-to-assets ratio (CASHTA), and debt-to-assets ratio (LEV) as firm-level control variables. These financial variables are mostly used in tourism studies as the main control variables for financial performance and growth [70,71,72,73,74,75]. The current ratio is measured by the ratio of current assets to current liabilities, and CASHTA is measured by cash and cash equivalents relative to the company’s total assets. Both ratios are expected to have a significant, positive impact on tourism firms’ performance and growth [71,73,76]. Leverage is measured by the ratio of debt to equity. Researchers have reported mixed results on the relationship between debt and profitability. For instance, Ref. [70] and Ref. [77] reported a negative relationship between Greek and Spanish hospitality firms, respectively. On the other hand, Ref. [75] and Ref. [73] reported a positive relationship between U.S. restaurants and global hospitality firms, respectively.

Next, we used the annual gross domestic product (GDP) growth rate and inflation (INF) as macro-level independent variables because hospitality firms attract customers from different countries, which affects their performance. The results of previous studies suggest that GDP has a positive effect [71,72,73,74] and inflation [78] has a negative effect on hospitality firms’ performance.

3.5. Empirical Models

Our study is conducted in four main steps. First, we tested the impact of IC components on the profitability and AG of hospitality sector firms. Considering that the impact of IC components may not be immediate, we included them for the current and previous periods. To do so, we used a fixed-effect panel data model, where we controlled firm-specific, country, and time effects. The following equations represent our estimation model:

$${PROF}_{\mathrm{ict}}={\alpha }_0+{\beta }_1{ROA}_{ict-1}+{\beta }_2{HC}_{ict}+{\beta }_3{SC}_{ict}+{\beta }_4{RC}_{ict}+{\beta }_5{HC}_{ict-1}+{\beta }_6{SC}_{ict-1}+{\beta }_7{RC}_{ict-1}+{\beta }_8{CR}_{ict}+{\beta }_9{CASHTA}_{ict}+{\beta }_{10}{LEV}_{ict}+{\beta }_{11}{INF}_{ict}+{\beta }_{12}{GDP}_{ict}+{FixedEffects}_{+}{ϵ}_{ict}$$

(1)

$${AG}_{\mathrm{ict}}={\alpha }_0+{\beta }_1{ROA}_{ict-1}+{\beta }_2{HC}_{ict}+{\beta }_3{SC}_{ict}+{\beta }_4{RC}_{ict}+{\beta }_5{HC}_{ict-1}+{\beta }_6{SC}_{ict-1}+{\beta }_7{RC}_{ict-1}+{\beta }_8{CR}_{ict}+{\beta }_9{CASHTA}_{ict}+{\beta }_{10}{LEV}_{ict}+{\beta }_{11}{INF}_{ict}+{\beta }_{12}{GDP}_{ict}+{FixedEffects}_{+}{ϵ}_{ict}$$

(2)

where the dependent variable PROF in Equation (1) is the return-on-assets for firm i of country c in year t, and AG in Equation (2) is a proxy of firm growth Measured through the asset growth ratio. HC, SC, and RC are the human, structural, and relational IC, respectively. The study controls for a set of firm and country characteristics, including the return-on-assets of the previous period (ROA_t−1), current ratio (CR), cash-to-asset ratio (CASHTA), leverage (LEV), inflation (INF), and gross domestic product (GDP).

Second, to differentiate the impact of IC components with respect to firm size, we divide our sample into small and large firms. To do so, we follow the European Union recommendation2003/361/EC of 6 May 2003 concerning the definition of small, medium, and large enterprises. According to which a firm is defined as SME if it has fewer than 250 employees, less than 50 million euros annual turnover, and assets of more than 43 million euros.

Third, to analyze the impact of the COVID-19 pandemic, the sample period is divided into two sub-samples: before and during the crisis. This analysis will help to analyze the differences in the impact of IC components with respect to the pandemic for large and small firms.

All firm-level variables are winsorized at the bottom 1 and 99 percentiles to rule out the effect of outliers. Furthermore, all variables are max normalized. After conducting a Hausman test, a fixed-effect panel data model with clustered standard errors at the firm level was selected to run the specification of both models. The fixed-effect panel data model allows for time-varying covariates and controls for unobservable firm-level heterogeneity [79], while the clustered standard errors account for both serial and cross-sectional correlations [80].

4. Empirical Results

4.1. Descriptive Statistics

Table 3. Descriptive Statistics.

Panel A: Summary Statistics
	ROAt−1	HC	SC	RC	HCt−1	SCt−1	RCt−1	CR	CASHTA	LEV	INF	GDP
Mean	0.039	6.238	32.689	10.638	6.289	32.821	13.822	2.020	0.139	0.156	0.899	0.884
Std. Dev.	0.132	1.337	132.431	64.889	1.334	130.071	63.273	4.730	0.213	0.346	1.023	3.339
Panel B: Correlations
ROAt−1	1.000
HC	0.012	1.000
SC	0.010	−0.012	1.000
RC	0.053	−0.012	0.075	1.000
HCt−1	0.000	0.952	−0.030	−0.152	1.000
SCt−1	0.001	−0.012	−0.087	0.041	−0.022	1.000
RCt−1	0.028	−0.045	0.018	0.052	−0.073	0.077	1.000
CR	0.093	−0.092	−0.003	−0.019	−0.082	−0.008	−0.011	1.000
CASHTA	0.244	−0.047	0.007	0.015	−0.052	0.003	0.005	0.121	1.000
LEV	0.101	−0.034	0.002	−0.008	−0.028	0.005	0.019	−0.004	−0.085	1.000
INF	0.033	0.058	0.042	0.175	0.004	0.041	0.047	0.030	0.025	−0.019	1.000
GDP	0.003	0.081	0.027	0.310	−0.007	0.008	−0.009	0.013	−0.015	0.022	0.356	1.000
VIF	1.09	3.96	1.02	1.35	4.2	1.02	1.02	1.03	1.08	1.02	1.16	1.27

Note: Panel A reports the descriptive statistics, and panel B reports the correlation matrix.

(Panel-A) presents the descriptive statistics of the variables. Regarding IC components, the average level of human capital is lower than the structural and relational capital of hospitality sector firms, in line with the findings of [81]. Moreover, the average leverage in the hospitality industry is about 16%, which is inconsistent with previous studies that suggest the hospitality industry is highly leveraged. Table 3 (Panel B) presents the pairwise correlation coefficients and VIF values of the independent variables. For all variables, the correlation coefficients are less than 0.224, indicating no significant multicollinearity problem in the econometric specification. Moreover, the VIF values of all independent values are well below 10, and the Colin test also confirms the absence of multicollinearity problems [82].

4.2. IC and Sustainable Firm Performance and Growth

The results of the panel data models for Equations (1) and (2) are presented in

Table 4. Impact of IC on profitability and AG.

Variable	Full Sample	Industry Sample
		Accommodation	Food	Travel
Panel A: Profitability
ROAt−1	0.054 *** (0.003)	0.064 *** (0.004)	0.059 *** (0.004)	−0.033 *** (0.012)
HC	−0.068 *** (0.015)	0.029 * (0.016)	−0.26 *** (0.028)	−0.048 (0.054)
SC	−0.013 *** (0.002)	−0.012 *** (0.003)	−0.022 *** (0.004)	0.018 ** (0.008)
RC	0.479 *** (0.008)	0.404 *** (0.009)	0.677 *** (0.016)	0.301 *** (0.021)
HCt−1	0.141 *** (0.015)	0.087 *** (0.017)	0.353 *** (0.029)	−0.185 *** (0.054)
SCt−1	−0.004 * (0.002)	−0.005 ** (0.002)	−0.007 * (0.004)	0.017 ** (0.008)
RCt−1	0.08 *** (0.005)	0.07 *** (0.006)	0.088 *** (0.008)	0.075 *** (0.017)
CR	0.019 ** (0.009)	−0.006 (0.009)	0.043 *** (0.017)	0.296 *** (0.045)
CASHTA	0.345 *** (0.006)	0.303 *** (0.008)	0.385 *** (0.009)	0.205 *** (0.016)
LEV	−2.448 *** (0.051)	−1.743 *** (0.057)	−3.227 *** (0.089)	−2.304 *** (0.244)
INF	−0.02 *** (0.002)	−0.017 *** (0.002)	−0.02 *** (0.004)	−0.03 *** (0.007)
GDP	0.059 *** (0.001)	0.055 *** (0.001)	0.062 *** (0.002)	0.07 *** (0.004)
Constant	−0.012 ** (0.006)	−0.034 *** (0.007)	−0.013 (0.01)	0.092 *** (0.021)
R2	0.194	0.143	0.227	0.094
Panel B: AG
ROAt−1	0.026 *** (0.001)	0.033 *** (0.003)	0.026 *** (0.001)	−0.004 (0.005)
HC	−0.019 *** (0.006)	−0.061 *** (0.009)	0.008 (0.010)	0.095 *** (0.021)
SC	0.042 *** (0.001)	0.03 *** (0.001)	0.052 *** (0.001)	0.053 *** (0.003)
RC	0.153 *** (0.003)	0.104 *** (0.005)	0.241 *** (0.006)	0.111 *** (0.008)
HCt−1	−0.126 *** (0.006)	−0.098 *** (0.009)	−0.118 *** (0.010)	−0.221 *** (0.021)
SCt−1	0.002 ** (0.001)	0.003 ** (0.001)	0.001 (0.001)	0.003 (0.003)
RCt−1	−0.003 (0.002)	−0.005 (0.004)	−0.006 ** (0.003)	0.017 *** (0.007)
CR	0.020 *** (0.004)	0.025 *** (0.005)	0.018 *** (0.006)	−0.024 (0.018)
CASHTA	0.040 *** (0.002)	0.018 *** (0.005)	0.058 *** (0.003)	0.015 ** (0.006)
LEV	0.187 *** (0.022)	0.022 (0.032)	0.438 *** (0.03)	0.227 ** (0.095)
INF	0.026 *** (0.001)	0.030 *** (0.001)	0.02 *** (0.001)	0.023 *** (0.003)
GDP	−0.024 *** (0.000)	−0.03 *** (0.001)	−0.019 *** (0.001)	−0.009 *** (0.001)
Constant	0.057 *** (0.002)	0.065 *** (0.004)	0.039 *** (0.003)	0.053 *** (0.008)
R2	0.0717	0.024	0.136	0.163
Observations	157,229	73,191	73,064	10,974
Year FE	Yes	Yes	Yes	Yes
Country FE	Yes	Yes	Yes	Yes

Standard errors in parentheses; ***, **, and * denote significance at 1%, 5%, and 10% levels, respectively.

. The findings demonstrate that the ROA of the previous period has a significant positive impact on the FP and AG of hospitality industry firms, supporting hypothesis 1. Moreover, the study found that the impact of different IC components varies. Specifically, the human capital of the current period affects the profitability of hospitality sector firms negatively, while this impact is positive for the previous year’s ROA, confirming that human capital has a positive impact on firms’ profitability in subsequent years. These findings indicate that investing in hospitality sector employees’ knowledge and skills can help firms develop new and innovative services, products, and marketing strategies that can attract new customers and increase revenue. However, the human capital’s negative impact on AG implies that investing in highly qualified and skilled workers can be costly and limits firms’ ability to invest in fixed assets. Furthermore, highly skilled employees may be more likely to leave for better opportunities elsewhere [83], resulting in high turnover rates and increased recruitment costs. These findings suggest that a balance must be struck between investing in human capital to enhance firm performance and ensuring that the firm can afford to invest in the assets necessary for long-term growth and sustainability, particularly in the travel industry.

SC has an opposite effect, i.e., a significant negative impact on profitability and a positive impact on AG, rejecting Hypothesis 2 for profitability and accepting for AG. As structural capital is proxied by WC, maintaining a high level of WC can tie up a significant amount of a firm’s resources, leading to increased costs and reduced profitability. Moreover, this high level of WC indicates that a firm is not managing its resources efficiently and may be experiencing cash flow difficulties [84], which can impact profitability negatively. On the other hand, a high level of WC provides firms with the necessary resources to invest in fixed assets and take advantage of new opportunities as they arise, further supporting AG. These findings suggest hospitality firms should manage their WC efficiently to support AG while maintaining profitability. This can be achieved through effective financial management practices, such as optimizing inventory levels, reducing accounts receivable and accounts payable, and managing cash flow effectively.

Relational capital has a significant positive impact on the profitability and AG of hospitality sector firms; this outcome supports Hypothesis 3. A strong reputation and positive relationship with customers and stakeholders can lead to increased customer loyalty and support the development of new business opportunities [59], resulting in increased profitability and AG. Additionally, strong relationships with suppliers can lead to favorable pricing and terms, reducing costs and increasing profitability. Relational capital also helps firms access new resources and technologies and is crucial for innovation [85], supporting AG and expansion. However, the positive impact of relational capital on hospitality firms’ AG can become negative in subsequent years. This may be due to over-reliance on relations, leading to complacency and a lack of investment in other areas, such as technology, infrastructure, and talent [86]. This can limit a firm’s ability to innovate, grow, and adapt to changing market conditions, resulting in stagnation and decline. Therefore, it is important for hospitality sector firms to invest in other areas, such as technology, infrastructure, and talent, to support long-term growth and sustainability.

In terms of control variables, the study found that the current ratio (CR) and cash-to-asset ratio (CASHTA) have a significant positive impact on the profitability and AG of hospitality industry firms. However, this relationship is not significant for the accommodation and travel industries, possibly due to differences in liquidity levels. The higher level of liquidity could result in lower interest income, leading to no significant relationship between liquidity and the firm’s profitability [87]. The impact of leverage on profitability was negative due to increased interest expenses and risk but positive on AG due to increased funding for investment. The study suggests that firms must manage their debt levels carefully to balance the benefits of debt financing with potential risks for long-term growth and sustainability.

Moreover, this study analyzed the impact of macroeconomic variables on hospitality firms’ performance. Inflation has a significant negative relationship with profitability due to increased costs and reduced consumer spending but a positive relationship with AG due to increased asset values and construction costs. However, inflation may limit firms’ ability to finance and execute new projects due to higher financing costs. On the other hand, GDP has a positive relationship with profitability due to increased consumer spending and demand [48,88] but a negative relationship with AG due to increased competition for limited resources and infrastructure costs during periods of economic growth.

4.3. Impact of IC on Performance and AG for Small and Large Firms

We try to uncover the differences in the impact of IC components with respect to firm size (

Table 5. Impact of IC on profitability and AG for firm size subsamples.

Variable	Small Firms Size Dummy = 0	Large Firms Size Dummy = 1
Panel A: Profitability
ROAt−1	0.052 *** (0.003)	0.092 *** (0.01)
HC	−0.087 *** (0.016)	0.072 ** (0.035)
SC	−0.014 *** (0.002)	−0.013 ** (0.006)
RC	0.503 *** (0.009)	0.325 *** (0.018)
HCt−1	0.166 *** (0.017)	−0.034 (0.035)
SCt−1	−0.005 ** (0.002)	0.000 (0.006)
RCt−1	0.08 *** (0.005)	0.089 *** (0.014)
Constant	−0.013 ** (0.006)	−0.008 (0.017)
R2	0.1954	0.214
Panel B: AG
ROAt−1	0.025 *** (0.010)	0.033 *** (0.006)
HC	−0.009 (0.007)	−0.098 *** (0.021)
SC	0.043 *** (0.001)	0.036 *** (0.003)
RC	0.153 *** (0.004)	0.160 *** (0.010)
HCt−1	−0.128 *** (0.007)	−0.103 *** (0.021)
SCt−1	0.002 ** (0.001)	0.001 (0.003)
RCt−1	−0.002 (0.002)	−0.008 (0.008)
Constant	0.051 *** (0.003)	0.109 *** (0.010)
R2	0.090	0.030
Observations	140,959	16,270
Controls	Yes	Yes
Year FE	Yes	Yes
Industry FE	Yes	Yes
Country FE	Yes	Yes

Standard errors in parentheses; *** and ** denote significance at 1% and 5% levels, respectively.

). The results indicate that the impact of human capital on hospitality firms’ profitability and AG may depend on the firm’s size and scale. While human capital can be a valuable resource for all hospitality firms, larger firms may be better positioned to leverage this resource and generate higher profits at the start. However, the large scale of operations, communication breakdowns, organizational silos, and cultural barriers can limit the effectiveness of human capital in subsequent years. Conversely, the positive impact of human capital on the profitability of hospitality SMEs can be explained by the value of knowledge, skills, and expertise in driving business performance [59,89]. The negative impact of human capital on AG can be attributed to the fact that SMEs may prioritize investments in human capital over tangible assets due to financial constraints or other strategic considerations. Furthermore, the findings for the impact of SC are similar; the impact is significant and negative for profitability and positive for the AG of small and large firms. The findings suggest that relationships with customers, suppliers, and other stakeholders perform a significant role in increasing the profitability and AG of both types of firms. The results are in line with previous studies [90,91].

4.4. Impact of IC on Performance and AG during the Crisis

In this section, we analyze the differences in the impact of IC components for small and large firms during the crisis periods (

Table 6. IC and the impact of COVID-19 on profitability and AG.

Variable	Before Crisis			During Crisis
	All Firms	Small Firms	Large Firms	All Firms	Small Firms	Large Firms
Panel A: Profitability
ROAt−1	0.056 *** (0.003)	0.055 *** (0.003)	0.076 *** (0.009)	−0.523 *** (0.017)	−0.526 *** (0.018)	−0.512 *** (0.041)
HC	−0.187 *** (0.016)	−0.207 *** (0.018)	−0.049 (0.034)	0.037 (0.121)	0.033 (0.130)	−0.136 (0.291)
SC	−0.013 *** (0.002)	−0.014 *** (0.002)	−0.006 (0.005)	0.006 (0.016)	0.001 (0.017)	0.061 (0.043)
RC	0.342 *** (0.008)	0.366 *** (0.009)	0.193 *** (0.017)	0.348 *** (0.040)	0.36 *** (0.043)	0.354 *** (0.100)
HCt−1	0.199 *** (0.016)	0.226 *** (0.017)	0.017 (0.033)	0.364 *** (0.101)	0.344 *** (0.106)	0.605 (0.386)
SCt−1	−0.009 *** (0.002)	−0.009 *** (0.002)	−0.005 (0.005)	−0.004 (0.016)	−0.001 (0.018)	−0.022 (0.037)
RCt−1	0.049 *** (0.005)	0.05 *** (0.005)	0.035 *** (0.013)	0.134 *** (0.043)	0.133 *** (0.045)	0.377 (0.258)
Constant	0.012 ** (0.006)	0.010 (0.007)	0.030 * (0.016)	−0.152 *** (0.058)	−0.135 ** (0.060)	−0.257 (0.220)
R2	0.215	0.215	0.226	0.004	0.002	0.034
Panel B: AG
ROAt−1	0.022 *** (0.001)	0.022 *** (0.001)	0.022 *** (0.006)	−0.025 *** (0.009)	−0.022 *** (0.009)	−0.021 (0.037)
HC	0.036 *** (0.007)	0.043 *** (0.007)	−0.011 (0.022)	−0.215 *** (0.062)	−0.275 *** (0.063)	0.313 (0.262)
SC	0.042 *** (0.001)	0.042 *** (0.001)	0.039 *** (0.003)	0.036 *** (0.008)	0.037 *** (0.008)	0.019 (0.039)
RC	0.162 *** (0.004)	0.159 *** (0.004)	0.18 *** (0.011)	0.047 ** (0.021)	0.063 *** (0.021)	−0.100 (0.090)
HCt−1	−0.155 *** (0.007)	−0.16 *** (0.007)	−0.124 *** (0.021)	0.074 (0.052)	0.044 (0.051)	0.902 *** (0.347)
SCt−1	0.003 *** (0.001)	0.003 *** (0.001)	0.002 (0.003)	−0.001 (0.008)	−0.002 (0.009)	0.019 (0.033)
RCt−1	−0.002 (0.002)	−0.001 (0.002)	−0.011 (0.008)	0.005 (0.022)	0.009 (0.022)	−0.287 (0.232)
Constant	0.04 *** (0.003)	0.038 *** (0.003)	0.063 *** (0.010)	0.060 ** (0.030)	0.089 *** (0.029)	−0.600 *** (0.198)
R2	0.079	0.094	0.039	0.013	0.015	0.023
Observations	133,291	119,270	14,021	23,938	21,689	2249
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Industry FE	Yes	Yes	Yes	Yes	Yes	Yes
Country FE	Yes	Yes	Yes	Yes	Yes	Yes

Standard errors in parentheses; ***, **, and * denote significance at 1%, 5%, and 10% levels, respectively.

). The findings suggest there was a positive impact of human capital on SMEs’ profitability before and during the crisis, in the long run, which may be due to their need to compete based on their employees’ skills, knowledge, and expertise to deliver high-quality service with limited resources. Hence, this human capital investment helped SMEs survive during periods of financial turmoil. On the other hand, in the long run, the impact of human capital on AG was negative for both types of firms before the crisis. However, this impact became positive for large firms during the crisis as firms might realize the need to invest in human capital due to changes in the business environment, such as changing customer preferences or supply chain disruptions, which may require firms to adapt quickly. Additionally, during a crisis, asset investment was riskier and more expensive for firms due to the high level of uncertainty. On the other hand, investing in human capital may be a more cost-effective and lower-risk way to maintain or enhance the firm’s competitiveness and ability to generate revenue, resulting in a positive impact on human capital.

With respect to the structural capital of the previous year, there was a significant negative impact on profitability and a positive one on AG before the crisis for SMEs, while this became insignificant during the crisis for both types of firms. This could be attributed to firms taking advantage of the positive impact of WC growth in the short run but missing out on opportunities to expand and grow in the long run. During the COVID-19 crisis, there was a drastic liquidity crunch, and hospitality firms were struggling for survival [73], reducing the impact of structural capital on the asset structure.

Furthermore, the results of the study reveal a positive impact of relational capital on hospitality SMEs and large firms’ profitability before and during the COVID-19 crisis due to the ability of strong relationships with customers, suppliers, and other stakeholders to enhance revenue generation and cost efficiency. The results are in line with the recent findings of [91] for Korean and US firms. However, this impact became insignificant during the crisis for large firms, probably due to severe disruption and uncertainty in the hospitality industry in large European countries, and the focus on cost-cutting measures rather than revenue growth. Overall, the findings suggest that relationships with customers, suppliers, and other stakeholders particularly help SMEs to generate profit and increase their chance of survival during the crisis. These findings are in line with those of [92] for German SMEs during the financial crisis.

4.5. Further Analysis

We did an additional analysis to determine the consistency of our findings across various quantiles. This research seeks to determine whether our findings changed between the low and high quantiles to provide a complete picture of the relationship between dependent and explanatory variables [93]. We use quantiles of 25%, 50%, 75%, and 90% and report our results in

Table 7. Quantile Regression.

Panel A: Profitability
	(25)	(50)	(75)	(90)
ROAt−1	0.551 *** (0.003)	0.634 *** (0.001)	0.587 *** (0.004)	0.365 *** (0.094)
HC	−0.076 *** (0.009)	−0.168 *** (0.005)	−0.252 *** (0.001)	−0.154 *** (0.022)
SC	−0.028 *** (0.001)	−0.009 *** (0.000)	−0.026 *** (0.001)	−0.033 *** (0.005)
RC	0.348 *** (0.01)	0.525 *** (0.001)	0.75 *** (0.003)	1.352 *** (0.134)
HCt−1	0.082 *** (0.008)	0.176 *** (0.004)	0.273 *** (0.001)	0.193 *** (0.072)
SCt−1	0.003 (0.002)	−0.010 *** (0.001)	0.010 *** (0.001)	0.053 * (0.029)
RCt−1	−0.006 (0.008)	0.015 *** (0.004)	−0.012 *** (0.002)	0.138 (0.114)
CR	−0.012 *** (0.003)	−0.015 *** (0.001)	−0.036 *** (0.001)	−0.066 (0.051)
CASHTA	0.061 *** (0.001)	0.110 *** (0.000)	0.272 *** (0.000)	0.417 *** (0.079)
LEV	−0.469 *** (0.025)	−0.298 *** (0.001)	−0.729 *** (0.025)	−1.807 *** (0.666)
INF	−0.018 *** (0.001)	−0.009 *** (0.001)	−0.001 (0.001)	0.040 (0.043)
GDP	0.05 *** (0.000)	0.026 *** (0.000)	0.016 *** (0.000)	0.019 (0.016)
Panel B: AG
ROAt−1	0.007 *** (0.000)	0.022 *** (0.000)	0.023 *** (0.002)	0.017 *** (0.001)
HC	0.067 *** (0.000)	0.019 *** (0.002)	−0.018 ** (0.008)	−0.003 ** (0.001)
SC	0.010 *** (0.000)	0.021 *** (0.000)	0.049 *** (0.000)	0.092 *** (0.000)
RC	0.077 *** (0.000)	0.158 *** (0.001)	0.241 *** (0.002)	0.358 *** (0.001)
HCt−1	−0.065 *** (0.000)	−0.029 *** (0.001)	0.007 (0.005)	−0.034 *** (0.001)
SCt−1	0.003 *** (0.000)	0.002 *** (0.000)	0.006 *** (0.001)	0.010 *** (0.000)
RCt−1	−0.003 *** (0.000)	0.017 *** (0.001)	0.030 *** (0.002)	0.064 *** (0.001)
CR	0.009 *** (0.000)	−0.013 *** (0.002)	−0.003 (0.004)	−0.023 *** (0.001)
CASHTA	0.014 *** (0.000)	0.032 *** (0.001)	0.045 *** (0.000)	0.059 *** (0.000)
LEV	−0.051 *** (0.001)	0.000 (0.003)	0.124 *** (0.019)	0.513 *** (0.004)
INF	0.015 *** (0.000)	0.019 *** (0.000)	0.022 *** (0.000)	0.020 *** (0.000)
GDP	−0.011 *** (0.000)	−0.015 *** (0.000)	−0.017 *** (0.001)	−0.032 *** (0.000)
Observations
Firm year dummies	Yes	Yes	Yes	Yes

Standard errors in parentheses; ***, **, and * denote significance at 1%, 5%, and 10% levels, respectively.

, Panel A for profitability and Panel B for AG. The results show that the human capital of the previous period positively impacts the profitability and negatively impacts the AG of hospitality sector firms. The results are similar for the structural and relational capital for most of the quartiles for the profitability and AG of firms. Hence, our results overall are consistent in the low and high quantiles, suggesting that all three components of IC perform a crucial role for hospitality firms, and owners should closely manage them for value creation [81].

5. Conclusions

The study aims to determine the influence of IC on sustainable firm performance during the COVID-19 pandemic crisis, with a focus on the impact of IC on firms’ profitability and asset growth. It also examines the value of resources (human, structural, and rational capital) during times of crisis for small and large hospitality firms. Based on a sample of 42,516 hospitality sector firms operating in 18 EU countries during the period between 2012 and 2021, the empirical findings show that IC has a significant impact on the profitability and growth of these firms. Specifically, human intellectual capital positively impacts the profitability of large firms and SMEs before and during the COVID-19 crisis but has a negative impact on AG. In contrast, structural intellectual capital had a negative impact on AG but no impact during the COVID-19 crisis. Relational, intellectual capital had a positive impact on the profitability of both large firms and SMEs before and during the COVID-19 crisis, but its impact was insignificant for large firms during the crisis. These findings highlight the importance of IC for the profitability and growth of hospitality firms and suggest that different types of IC may have varying impacts on different aspects of sustainable performance and growth.

The results of this study have important implications for hospitality firms, policymakers, and investors. Specifically, our findings highlight the critical role of IC in shaping the sustainable performance and growth of hospitality firms during times of crisis. For instance, small firms may benefit from investing in human and structural intellectual capital to enhance their profitability. In contrast, large firms may need to focus on relational, intellectual capital to sustain their asset growth. Furthermore, the impact of IC may be influenced by external factors such as economic conditions and crises. Therefore, hospitality firms should focus on building and leveraging their IC to enhance their profitability and growth. This can be achieved through various strategies. First, for human capital, firms should prioritize employee training and development programs to enhance their skills and knowledge, which can positively impact their performance, and, ultimately, the firm’s profitability. Next, regarding structural capital, firms should focus on improving their operational efficiency and financial management, as shown by the negative impact of working capital growth on asset growth. By streamlining their processes and optimizing their use of resources, firms can improve their profitability and maintain their financial health. Finally, for relational capital, firms should prioritize building strong relationships with their customers and suppliers, as shown by the positive impact of operating revenue growth on profitability. Maintaining these relationships can help firms withstand economic downturns and maintain their competitive advantage. Hence, management must prioritize building and maintaining strong relationships with customers, suppliers, employees, and other stakeholders to maximize their overall performance. By doing so, hospitality firms can improve their ability to navigate challenges and achieve sustained success in a highly competitive industry. Policymakers can use these findings to design targeted policies and programs that support the development of intellectual capital in the hospitality sector. Additionally, investors can use this information to make informed decisions about where to allocate their resources by considering firms’ intellectual capital profiles.

The limitations of this study provide suggestions for future research. First, the study is limited to the European hospitality industry, so future research could expand the scope of the study to include other regions or industries to enhance the generalizability of the findings. Second, the study relies on secondary data sources. Future research could use primary data sources or a combination of primary and secondary data sources to generalize the findings of the study. Finally, the study does not take into account the specific characteristics and strategies of individual firms to examine the specific characteristics and strategies of individual firms and how they impact the relationship between IC and firm performance and growth.