INFLUENCE OF INTELLECTUAL CAPITAL ON OPERATIONAL PERFORMANCE THROUGH INNOVATION CAPABILITY IN INDONESIA’S DEFENCE INDUSTRY

This research examines the impact of intellectual capital on operational performance through innovation capabilities in the defence industry in Indonesia, PT. Pindad (Persero). Network processes within the company are assessed by internal performance, which is described by the company's operational performance. 142 employees who work in the production function were sampled in this research using the probability-sampling method with a stratified random sampling type. SEM-PLS was used as a data analysis model. Human capital, structural capital and social capital are three components used in the research. This study provides empirical evidence that these three components influence operational performance. In addition, it is known that human capital, structural capital, and social capital affect innovation capability, and the company's operational performance is influenced by innovation capability. In an indirect relationship, the results interpret that the influence of human capital, structural capital and social capital on the company's operational performance can be through innovation capability. This research provides input to the defence industry to improve performance by increasing the intellectual capital owned by the company without ignoring the importance of innovation capability.


INTRODUCTION
The unfavourable global economic situation has been made worse by the global Covid-19 pandemic. The significant weakening of global economic activity occurred due to the lockdown policy or restrictions on population mobility to reduce the virus's spread, which affected the sudden discontinuance of normal company activities in various countries. As a result, the economic recession hit several regions, including Southeast Asia, espe-cially Indonesia. The government (Ministry of State-Owned Enterprises) and SOEs are at the forefront of the nation's guard and make the best contribution to advancing the Indonesian economy to survive economic instability. Therefore, the performance of state-owned enterprises is the primer indicator for assessing of the company's management achievements.
Research focuses on the performance of state-owned enterprises in the national defence industry, particularly in the field of the main weapon system. The defence industry contributes to advancing the Indonesian economy and maintaining national defence. The increasing need for the main weapon system equipment also requires the defence industry to achieve good performance and continue innovating to meet the country's defence equipment needs. The existence of an advanced defence industry makes the national defence system stronger (Karim, 2014). However, the company's operational performance in the defence industry experienced a decline in operating performance for two consecutive years. Production realization declined by 14.24 per cent from the previous year, and production costs increased by 13.15 per cent from the prior year. This increase in expenses is not proportional to the increase in production output, so this is a problem related to the company's operational performance.
The processes and resources in the operation affect the company's operational performance. Therefore, the improvement of company processes and resources needs to be developed in the long term to improve the company's operational performance. In addition the resource is affected by the resource-based view (RBV) (Slack & Brandon-Jones, 2018). The principal objective of RBV is to efficiently align resources, such as products, processes, equipment, facilities, locations and other resources within the company so that the internal environment is a key factor for the company's strategic actions (Radjenović & Krstić, 2017). RBV aims to find sources of internal competitive advantage by developing resources that are core competencies of the company's specific capabilities, especially intangible resources .
The company's core competencies develop from providing human knowledge supported by procedures, systems, processses, and relationships. This combination of intangible resources is known as intellecttual capital , so intellectual capital needs to be the company's focus as an intangible resource to encourage the creation of competitive advantage in the company (Radjenović & Krstić, 2017). This intellectual capital can help synergize the available resources (Radjenović & Krstić, 2017) and generate value for the company, which can ultimately improve the company's operational performance (Alrowwad et al., 2020;Wang et al., 2018). Intellectual capital itself is based on existing knowledge within the company. This perspective allows intellectual capital to be conceptualized into three parts; human capital, structural capital and social capital. These three components represent knowledge in individuals, social relationships, and processes and systems within organizations (Zhang et al., 2017).
In addition, strengthening the innovation capability is considered the key to the company's success (Le & Lei, 2019). Companies with great innovation capabilities can respond quickly to changes by developing new knowledge so that the company will be able to gain a sustainable competitive advantage (Siahaan & Tan, 2020). Innovation capability is based on the ability to exploit the knowledge gained through finding new and better ways of doing things that can create value and increase the company's operational efficiency .
Research conducted by Khalique & De Pablos (2015), Torre et al., (2020) and Wang et al. (2018) shows that human capital affects operational performance, but this is contrary to research conducted by Isa (2015) which shows that company performance is not related to human capital. Research conducted by Isa (2015), Khalique & De Pablos (2015) dan Wang et al. (2018) shows that structural capital affects the company's operational performance, but this is different from the results of research by Oppong et al. (2019) which states that structural capital does not affect on company performance. Research conducted by Agyapong et al. (2017), Hamad et al. (2019), andIsa (2015) show that social capital affects the company's operational performance. However, Khalique & De Pablos's (2015) research shows different results where social capital does not affect company performance.
The findings of Siahaan & Tan (2020) also confirm that innovation capability acts as an intermediary between intellectual capital and company performance. Excellent performance is determined by innovation capability, and intellectual capital of technology companies is influenced by innovation capability. Other research results reveal that human capital, structural capital, and social capital affect the company's innovation capability (Dhar et al., 2020;Fajri & Aziz, 2020;Gebremichael, 2020;Mendoza-Silva, 2021;Putra et al., 2020;Yeşil & Doğan, 2019). Then, innovation capabilities affect the company's operational performance (Dhar et al., 2020;Kafetzopoulos & Psomas, 2015;Sahoo, 2019;Saunila, 2014;. The inconsistency of the previous study can be a research gap used to develop research on the influence of the intellectual capital component on the company's operations. In addition, no research synergistically integrates the three dimensions of intellectual capital, namely human capital, structural capital and social capital in an effort to understand their effect on the operational performance of companies, especially manufacturing companies, making this research more interesting to study.
Based on previous studies, it is suspected that there are variables mediating variables that have an important function in improving the company's operational performance, so this study examines the effect of the intellectual capital component. There are human capital, structural capital and social capital in the company's operational performance mediating innovation capability.

LITERATURE REVIEW
Operations management is needed to control production activities (De Toni, 2016). Resources and processes need to be appropriately managed to produce products and services (Wolniak, 2019). Every organization achieves organizational goals by organizing its resources into processes (Radjenović & Krstić, 2017). Managing resources and activities converting inputs into tangible outputs of products or services by organizational expectations is referred to as process. Operations and process management are assessed at the operational level to determine the operational performance of an organization (Slack & Brandon-Jones, 2018).

Operational Performance
Operational performance shows how efficiently a product or service is produced based on several materials that are transformed into finished products with good quality and can be delivered on time (Sharma & Modgil, 2019). In addition, operational performance is used to measure how well the process network in operation is for its customers, both internal and external customers. The goals are to reduce production and service costs and increase revenue by producing quality products and services, making a better design, and running operations smoothly, reducing the risk of failure. Then strengthen operating skills and knowledge within the company to build on existing capabilities to develop innovation (Slack & Brandon-Jones, 2018).
Several indicators can measure operational performance; cost, quality and delivery (Gunday et al., 2011;Kafetzopoulos & Psomas, 2015). Production costs are costs incurred to produce a product. At the same time, quality is related to producing error-free goods or services besides the company's specifications, speed and accuracy in delivering goods according to the agreement between the producer and the customer (Slack & Brandon-Jones, 2018).

Intellectual Capital
Galbraith (1969) first introduced the intellectual capital concept. Galbraith (1969) suggests that intellectual capital is a "value creation process" (Gupta & Raman, 2020;Nazarpoori, 2017;Xu & Li, 2020). Intellectual Capital is a theory related to intangible assets, which reveals that intangible assets are the most important resource for companies that can lead the company to become a superior companies (Khalique & Shaari, 2013). Knowledge that exists within individuals and integration between systems is part of intellectual capital so that companies adopting intellectual capital in their business will be successful in achieving their performance. (Harris, 2014). Intellectual capital is all resources known to everyone in the company that can provide competitive advantage and create wealth (Khalique & Shaari, 2013;Stewart, 1998;Wang et al., 2018). This intellectual capital is based on human capital, social capital and structural capital (Armstrong, 2006;Seemann & Stucky, 2015;Zhang et al., 2017).

Human Capital
Human capital is the collective value of the organization's workforce's abilities, skills, and knowledge (Edvisson & Malone, 1997;Khalique & De Pablos, 2015;Mondy & Martocchio, 2016). Human capital is a component that exists in individuals that cannot be replaced by other components (Abualoush et al., 2018;Harris, 2014;Roos et al., 2005). Human capital indicators are grouped into three indicators; skills, knowledge and expertise (Dhar et al., 2020;Khalique & De Pablos, 2015;Shih et al., 2010;Wang et al., 2018), attitude which is a psychological tendency expressed by a person (Khalique & De Pablos, 2015;Shih et al., 2010) and intellectual agility related to individual learning, perfecting the existing stock of knowledge and adaptability that can be used to produce solutions to the problems faced (Dabić et al., 2021).

Structural Capital
Structural capital is represented as supporting human capital useful in delivering and storing intellectual material (Edvisson & Malone, 1997;Harris, 2014;Zhang et al., 2017). Structural capital aims to codify a useful set of transferable knowledge to preserve knowledge that may be lost and connect people with the data, experts, and expertise that comprise the body of knowledge (Stewart, 1998;Zhang et al., 2017). Two indicators measure the structural capital indicator; infrastructure and systems, policies and procedures (Khalique et al., 2018;Khalique & De Pablos, 2015;Wang et al., 2018). Infrastructure is everything that supports the implementation of a process, while components or parts and materials to achieve an interconnected goal that aims to facilitate the flow of information is called a system. Policies and procedures are a series of concepts that serve as basic guidelines in implementing a job (Khalique & De Pablos, 2015).

Social Capital
Social capital is a resource both owned and potentially in the company, available and derived from relationships between individuals or social units (Ganguly et al., 2019). This social capital helps companies develop intellectual capital through their contribution to combining and exchanging knowledge between employees (Mazzucchelli et al., 2021;Nahapiet & Ghoshal, 1997). Social capital motivates employees to be able to express knowledge and share experiences. At the same time, it also enables employees to decide and agree on the process or product development jointly, improves process efficiency and effectiveness and encourages employees to comply with company regulations (Zhang et al., 2017). Social capital is categorized into three indicators; structural social capital, relational social capital and cognitive social capital (Hamad et al., 2019;Khalique & De Pablos, 2015;Mazzucchelli et al., 2021;. Social capital comes from the bonds between members, cooperation and the uniqueness of team members. Relational social capital comes from relationships that result from respect, trust and friendship. Cognitive social capital comes from the common vision, rules and norms within the company (Mazzucchelli et al., 2021).

Innovation Capability
Innovation capability is the ability that allows companies to develop the knowledge and thoughts generated by employees into new systems, processes or products that provide benefits to the company (Siahaan & Tan, 2020;Sivalogathasan & Wu, 2015). The development of innovation capabilities can continuously improve operating efficiency, especially in improving production processes. This improvement in the production process can enhance the quality of the product, where the new production process can minimize errors in the process, thereby minimizing operating costs (Saunila & Ukko, 2012). Innovation capability is classified into three indicators; product innovation capability, process innovation capability and organizational innovation capability. Product innovation capability is the company's ability to provide different or new products or service improvements in the market to obtain customer satisfaction. Process innovation capability is the company's competence to give a better manufacturing process or service than the current operation to achieve better performance This process innovation is believed to streamline operational costs or produce more production output for the company (Nazarpoori, 2017). At the same time, organizational innovation capability is the company's competence to reduce administrative costs that aim to improve company performance, reduce transactions, and increase employee satisfaction in the workplace (Kafetzopoulos & Psomas, 2015).

Hypothesis Development The effect of human capital on operational performance
Human capital is a collection of knowledge possessed by individuals and individual abilities in a company that determines the company's success (Torre et al., 2020). Individuals who are experienced, skilled, and competent to make decisions correctly or effectively under time pressure are what the company needs to resolve problems properly (Wang et al., 2018). Therefore, companies with human capital above the average will have the expected performance (Torre et al., 2020). Based on this, the hypotheses proposed in the study are: H1: Human capital positively and significantly affects operational performance.

The effect of structural capital on operational performance
Structural capital is the organization's infrastructure, such as databases, process manuals, procedures and enterprise systems that aim to generate value for the company. The existence of processes, procedures and manual systems is a way for companies to distribute and maintain the skills and knowledge that have been acquired from time to time so that the competitive advantage gained can last a long time (Torre et al., 2020). Furthermore, companies that invest in structural capital will be able to improve their procedures or work processes to improve product quality and solve problems more effectively and efficiently (Wang et al., 2018). Then the hypothesis proposed as the second hypothesis in this study is: H2: Structural capital positively and significantly affects operational performance.

The effect of social capital on operational performance
Interactions between people in organizations are governed by relationships and attitudes, part of social capital (Sivalogathasan & Wu, 2015). In addition, social capital increase the ability of employees to transfer knowledge and ideas between employees (Agyapong et al., 2017). Therefore, social capital an important in improving the company's operational performance (Hamad et al., 2019;Khalique et al, 2015). Based on this, the hypotheses proposed in the study are: H3: Social capital positively and significantly affects operational performance.

The effect of innovation capability on operational performance
Innovation capability is the ability of a company to modify knowledge and ideas into a new system continuously, process or product (Siahaan & Tan, 2020;Sivalogathasan & Wu, 2015). It is believed that product and process innovation can improve the company's operational performance by improving product quality, speeding up production processes, and increasing efficiency, while organizational innovation is used to increase cost efficiency (Kafetzopoulos & Psomas, 2015;Mendoza-Silva, 2021). Therefore, the higher the company's innovation capability, the higher the company's operational performance . Based on this, the hypotheses proposed in this study are: H4: Innovation capability positively and significantly affects operational performance.

The effect of human capital on operational performance mediated by innovation capability
The value of employees will automatically increase in terms of unique skills if the company invests in human resources. This causes increased innovation capabilities and innovation capabilities that play an important role in company performance. (Gebremichael, 2020). To develop innovation capabilities, companies must utilize knowledge resources that are sourced from human capital. The company's high innovation capability causes the company's operational performance to be higher (Saunila, 2014). Increased innovation capabilities can help companies reduce production costs, improve product quality, and on-time delivery (Kafetzopoulos & Psomas, 2015). Based on this, the hypotheses proposed in the study are: H5: Human capital positively and significantly affects operational performance mediated by innovation capability.

The effect of structural capital on operational performance mediated by innovation capability
Superior company performance is determined by the company's innovation capability, while intellectual capital determines the company's innovation capability (Siahaan & Tan, 2020). Therefore, to develop innovation capabilities, companies need infrastructure that can be used to store various company information such as systems, databases, procedures, and process manuals. In addition, the company's ability to innovate in processes is often in the form of improvements in production processes, increased efficiency in production (Gopalakrishnan & Damanpour, 2001). As a result, it reduce production costs, and thus generate more benefits for the company (Paananen, 2009). So innovation capability is an important component for companies to improve their operational performance (Gunday et al., 2011;. Based on this, the hypotheses proposed in the study are: H6: Structural capital positively and significantly affects operational performance mediated by innovation capability.

The effect of social capital on operational performance mediated by innovation capability
Social capital supports the implementtation of new ideas that have the potential to increase a company's innovation capability (Yeşil & Doğan, 2019). Social networks allow exchanging information that can improve innovation capabilities and ultimately lead to increased company performance. Companies that have innovation capabilities are believed to respond to changes in their environment quickly so that they can improve their performance (Ruiz-Jiménez & Fuentes-Fuentes, 2013). Based on this, the hypotheses proposed in the study are: H7: Social capital positively and significantly affects operational performance mediated by innovation capability.

Research Conceptual Framework
This research examines the effect of human capital, structural capital and social capital on the company's operational performance. In addition, this study also uses innovation capability as a mediating variable. Figure 1 is an illustration of the conceptual framework for research.

RESEARCH METHODS
A quantitative approach with the type of explanatory research is used in this study. Explanatory research explains the relationship between one variable and another by testing hypotheses that have been formulated previously (Panday, 2015).

Participants and Data Collection
The population in this research were permanent employees of levels 3 and 4 who served as junior managers and group leaders in 53 production sub-departments at PT. Pindad (Persero) with a total population of 214 people. A probability sampling technique with a stratified random sampling type was used as a sampling technique. Collecting data using a questionnaire with a Likert scale consisting of five points. The questionnaires were distributed directly by visiting 142 respondents spread across the production area, both the production area of Pindad Bandung and Pindad Turen, Indonesia. The distribution of the questionnaires was carried out in the period from December 2021 to January 2022. The characteristics of the respondents in this study consisted of gender, age, years of service, and educational background. Table 1 represents the characteristics of the respondents. Table 1 shows that 100% of the respondents are male, considering that the object of this research is a manufacturing company with production machines operated by male workers and operating for three shifts. Moreover, 76.1% of respondents are over 40 years old, and the working period is over 30 years. This data is in line with the object of this research where respondents are personnel who regulate the course of production and manage resources in the production function. Therefore they must have experience and understand production well. Educational background 78.87% high school because the company requires high school workers for the production function with the aim that these workers can be further developed based on organizational culture.

Measurement
Three indicators measure human capital; skills, knowledge and expertise with 4 question items adopted from Khalique & De Pablos (2015) and Wang et al. (2018), attitude with 4 question items adopted from Khalique & De Pablos (2015) and Shih et al. (2010) intellectual agility with 4 question items adopted from Dabić et al., dan Khalique & De Pablos (2015). Two indicators measure structural capital; infrastructure and system consisting of 4 question items and policies and procedures consisting of 6 question items adopted from Khalique & De Pablos (2015). Three indicators measure social capital; structural social capital consisting of 4 question items adopted from Liu (2017) dan Mazzucchelli et al. (2021), relational social capital consisting of 4 question items and cognitive social capital consisting of 3 question items adopted from Mazzucchelli et al., (2021). Finally, innovation capability is measured by three indicators; product innovation consisting of 4 question items adopted from Kafetzopoulos & Psomas (2015), process innovation consisting of 4 question items and organizational innovation consisting of 4 question items adopted from Gunday et al. (2011) dan Kafetzopoulos & Psomas (2015). Operational performance is measured by cost, delivery and quality indicators, each indicator consisting of 2 questions adopted from Kafetzopoulos & Psomas (2015). Measurement using a five-item Likert scale. Table 2 shows the research construct and its measurement.

Data Analysis Technique
The research model was analyzed by structural equation modeling with the Partial Least Square approach. The software used in this study is SmartPLS 3.0. PLS is a variant-based structural capital equation analysis that can simultaneously test structural models (Avkiran & Ringle, 2018). PLS is used in this study because the information generated is efficient and easy to interpret, especially on complex models, can be used on small data sets, and can be used to analyze and develop theories because it can predict relationships between constructs (Avkiran & Ringle, 2018; Hair, 2014).

RESULT AND DISCUSSION Measurement Model
The validity and reliability of the model are assessed by outer model analysis (Hair, 2014). Discriminant and convergent validity are used as a tool to test validity, while composite reliability and Cronbach's alpha are used as tools to test reliability. Table 3 shows the results of processing validity and reliability. Table 3 describes the value of outer loading (convergent validity) greater than 0.7 so that all items are declared valid. the variables of human capital, structural capital, social capital, innovation capability, and operational performance have an AVE value above 0.5. It means that all variables are eligible for discriminant validity. In addition, Table 3 also shows that the value of Cronbach's alpha for each variable is more than 0.6, so all research variables used are reliable. Composite reliability is more than 0.70, which means that these variables are in the high reliability category.

Structural Model
The structural model analysis is carried out to convince researchers that the model built is accurate (Hair, 2014). The PLS structural model in this study was evaluated by looking at the coefficient of determination (R 2 ), predictive relevance (Q 2 ), and Goodness of Fit (GoF). Figure 2 shows the results of structural model testing. The R 2 value is used to assess how much influence certain variables have on the dependent variable (Avkiran & Ringle, 2018). R 2 values are shown in Table 4.
Measurements related to how well the results of the observation value from the research model are measured using Q 2 (Hair, 2014). The result of the Q 2 calculation in this study is 0.9421, so this research model can explain the information contained in the research data of 94.21%. While the GoF coefficient has a value range of 0 to 1 (Hair, 2014). The goodness of fit value is calculated as follows: The goodness of fit value indicates that the model has a high ability to explain empirical data (> 0.36) (Hair, 2014).

Hypothesis Test
The direct effect hypothesis test is carried out by examining the coefficients and significance of each variable to determine whether each hypothesis proposed in the study can be accepted/supported or not.
An effect is declared significant if it has a p-value of less than 0.05 and tstatistic > 1.96, whereas if the p-value is above 0.05 and t-statistic < 1.96, then the effect is declared insignificant. Table 5 is the result of calculating the direct effect.
The indirect effect hypothesis testing in this study also uses the SmartPLS software. The effect of mediation is considered significant if the results of tstatistic > 1.96 and p-values <0.05 for each variable X on variable Y through variable Z. Table 5 shows that the human capital variable (X1) has a significant effect on the operational performance variable (Y), with a t-statistic value of 2.279 (>1.96) and a pvalue of 0.023 (<0.05). The path coefficient of human capital's effect on operational performance is positive with a value of 0.227, therefore H1 is accepted. The structural capital variable (X2) has a significant effect on the operational performance variable (Y), with a t-statistic value of 2.565 (> 1.96) and p-values of 0.011 (<0.05), therefore H2 is accepted. The social capital variable (X3) has a significant effect on the operational performance variable (Y), with a t-statistic value of 2.604 (>1.96) and p-values of 0.009 (<0.05). The path coefficient of social capital's effect on operational performance is positive with a value of 0.259. Therefore, H3 is accepted. The innovation capability variable (Z) also has a significant effect on the operational performance variable (Y), with a t-statistic value of 2.734 (>1.96) and a p-value of 0.006 (<0.05), so H4 is also accepted. Table 6 is the result of the calculation of the mediation test. Table 6 shows the indirect effect between the human capital variable (X1) on the operational performance variable (Y) through the innovation capability variable (Z), which has a path coefficient of 0.083, with a t-statistic value of 2.089 (> 1.96) and p-values of 0.037 (p<0.05), indicating partial mediation effect on operational performance. These results confirm H5, so H5 is accepted. The indirect effect between the structural capital variable (X2) on the operational performance variable (Y) through the innovation capability variable (Z) has a path coefficient of 0.090, with a t-statistic value of 2.145 (> 1.96) and p-values of 0.032 (<0, 05), indicating partial mediation effect on operational performance. These results confirm H6, so H6 is accepted. The indirect effect between the social capital variable (X3) on the operational performance variable (Y) through the innovation capability variable (Z) has a path coefficient of 0.089, with a t-statistic value of 2.076 (> 1.96) and p-values of 0.038 (<0, 05), indicating partial mediation effect on operational performance. These results confirm H7, so H7 is also accepted.

Discussion
This study examines the influence of intellectual capital on the company's operational performance through innovation capabilities. Innovation capability was chosen as a mediating variable to overcome the gap related to intellectual capital on inconsistent operational performance. The first hypothesis results of this study indicate that human capital has a significant effect on the operational performance of the defence industry company in Indonesia. These results are significant because all human capital indicators from each individual in the company are important indicators in improving the company's operational performance. A decrease in human capital will also reduce the company's operational performance. Companies always need employees who have the expertise, skills, and experience and can solve problems well (Wang et al., 2018). Companies that invest in human resources will make the company have the expected performance (Torre et al., 2020). These results support empirical Khalique & De Pablos (2015), Torre et al. (2020) and Wang et al. (2018), studies that state that human capital has a positive and significant effect on the company's operational performance. It also provides evidence that human resources in the company are important resources, so employees should be a component that takes an important role in various processes carried out in the company's dayto-day (Torre et al., 2020).
Second, the second hypothesis result of this study indicates that the structural capital variable affects the operational performance of the defence industry company in Indonesia. The effect of structural capital is significant on operational performance because infrastructure, systems, policies and procedures are important in improving the company's operational performance. The better the company's infrastructure, systems, policies and procedures, the company's operational performance will increase. These results support the empirical studies conducted by Isa, 2015, Khalique & De Pablos, 2015and Wang et al., 2018, which also state that structural capital has a positive and significant effect on the company's operational performance. The existence of manual processes, procedures and systems is a way for companies to transfer and maintain skills and knowledge obtained from time to time so that the competitive advantage gained can last a long time. In addition, the company's systems and procedures can also direct employees towards company goals which can positively affect the company's operational performance. (Torre et al., 2020).
Third, the third hypothesis result of this study indicates that the social capital variable affects the operational performance of the defence industry company in Indonesia. The significant influence of social capital on operational performance is due to collaboration, interaction and relationships between employees, mutual trust between employees, and the similarity of goals between employees within the company who have a role in improving the company's operational performance. These results support the study conducted by Agyapong et al. (2017), Hamad et al. (2019) and Isa (2015), who also states that social capital affects the company's operational performance. The coefficient value owned by the social capital variable is also the largest compared to other variables. This indicates that social capital is the capital that most affects the operational performance of defence industry companies in Indonesia.
Fourth, the study results that innovation capability has a positive and significant effect on the operational performance of companies in the defence sector in Indonesia. The effect of innovation capability on operational performance is because companies that have capabilities in product innovation, process innovation and organizational innovation are able to help companies improve their operational performance in terms of lowering costs, improving product quality and meeting predetermined delivery targets. This supports the research conducted by Kafetzopoulos & Psomas (2015), Liu et al. (2020), Sahoo (2019), and Saunila (2014) which also prove empirically that innovation capability is able to improve company performance.
Fifth, this study indicates that the innovation capability variable positively and significantly mediates the impact of the human capital variable on the operational performance of the defence industry company in Indonesia. The mediating effect of innovation capability can occur because human capital is an important capital to increase innovation capability that helps companies to produce useful solutions to improve performance better in the long term (Gebremichael, 2020;Liu et al., 2020;. In addition, several journals state that the higher the innovation capability of a company, the higher the company's operational performance (Kafetzopoulos & Psomas, 2015;Saunila et al., 2014). Therefore, human capital can be used to improve innovation capabilities and this innovation capability helps improve company performance . The results of this study are also in accordance with the research of Dhar et al. (2020) and Liu et al. (2020), which states that human capital affects organizational performance through innovation capabilities.
Sixth, this research indicates that innovation capability positively and significantly mediates the effect of structural capital on the operational performance of defence industry companies in Indonesia. The mediating effect of innovation capability can occur because structural capital is able to provide and transfer knowledge through infrastructure, systems, databases and procedures that can be used to improve the company's innovation capability (Fajri & Aziz, 2020;, companies with great innovation capabilities will be able to continue to develop their knowledge so these companies will be able to obtain sustainable benefits (Siahaan & Tan, 2020), such as creating efficiency and reducing production costs which have an impact on the better operational performance of the company (Gopalakrishnan & Damanpour, 2001;Paananen, 2009).
Seventh, the seventh hypothesis results of this study show that innovation capability positively and significantly mediates the effect of social capital on operational performance in defence industry companies in Indonesia. The mediating effect of innovation capability can occur because employee reciprocity is fundamental to ensuring that knowledge can be shared through quality information exchange. This quality information enhances the company's innovation capability (Mendoza-Silva, 2021;Putra et al., 2020). Several other studies also discuss that innovation capability is able to improve the company's operational performance (Mendoza-Silva, 2021;Putra et al., 2020;Yeşil & Doğan, 2019). This study produced results that did not contradict the research of WU & Sivalogathasan (2013) that social capital can affect the ability to innovate. Therefore, with increased innovation capabilities, the company's operational performance is also getting better.

CONCLUSION AND RECOMMEN-DATION
This study builds a conceptual framework related to the influence of intellectual capital, which is represented in three dimensions, namely human capital, structural capital and social capital on operational performance through the company's innovation capabilities. This study concludes that human capital influences operational performance, so increasing human capital owned by the company can increase the company's operational perfor-mance. Structural capital can affect operational performance. Therefore, increasing the company's structural capital will improve the company's operational performance. Social capital also affects operational performance positively and significantly, so the better the social capital owned by the company, the company's operational performance will also increase. Innovation capability also affects the company's operational performance, so when the company has good innovation capabilities, the company's operational performance will also be good. In addition, the results of this study also show that human capital, structural capital and social capital have a positive and significant effect on operational performance through innovation capability.
This research supports operational management theory, which states that all processes require adequate and wellmaintained resources to produce the expected outputs. (De Toni, 2016;Slack & Brandon-Jones, 2018). In addition, this study provides empirical evidence showing that intellectual capital is an important capital that companies must manage, so this research supports the theory of Resource Based View (RBV). This theory is the theoretical basis for intellectual capital that companies can use to improve performance. The RBV concept states that to achieve good performance, companies must have adequate resources (Slack & Brandon-Jones, 2018).
Acceptance of the hypothesis reveals practical managerial implications, particularly for Indonesia's defence industry companies. First, companies need to improve their human resources by improving their performance reward system based on the calculation of each employee's key performance indicators so that the performance rewards obtained are in accordance with the performance of each employee, which can later motivate employees to improve their performance, which in turn helps the company in improving operational performance. Second, companies need to increase structural capital by completing and updating production procedures in accordance with current conditions which must be socialized regularly with the aim of minimizing production errors which will ultimately help companies improve their operational performance. Third, companies need to increase social capital by increasing mutual trust between employees to facilitate the flow of information and knowledge between employees, such as holding regular monthly production meetings that emphasize cooperation and interaction. Fourth, in terms of innovation capabilities, companies need to improve existing work methods, get rid of inefficient processes and improve processes that can still be used to streamline processes to reduce production costs which can then help companies improve their operational performance.
This research is only limited to the use of three components of intellectual capital: human capital, structural capital, and social capital, according to the conditions of the object under study. Future research can use customer capital and innovation capital as other dimensions of intellectual capital to develop research on intellectual capital and company performance. This research is also limited to the production function in PT. Pindad (Persero). The study results may differ if applied to a more general manufacturing or service company. Further researchers can conduct research by involving employees from companies engaged in other manufacturing or services.