Implementing Maqasid Sharia as performance measurement of SMEs in halal industry: the role of intellectual capital and Islamic innovation

The halal business sector in Indonesia is growing rapidly, supported by rising global demand and government initiatives such as the Indonesia Halal Industry Master Plan 2023–2029. At the regional level, this plan is implemented through local autonomy to strengthen Indonesia’s position as a global halal hub. In Banyumas, the largest regency in Central Java, Small and Medium-Sized Enterprises dominate the economy, yet most still operate at the micro level with limited capacity for strategic performance evaluation. Although these businesses are expected to reflect Islamic principles, performance measurement based on Maqasid Sharia is not yet widely or effectively implemented. Many Small and Medium-Sized Enterprises continue to rely on conventional indicators that overlook ethical, spiritual, and social dimensions align with Islamic values. This study explores how Intellectual Capital components, which consist of human, structural, relational, and spiritual capital affects Maqasid Sharia performance, with Islamic Innovation as a mediator. Data were collected through purposive sampling with a convenience approach from 207 halal Small and Medium-Sized Enterprises with at least five employees, engaged in halal industry value chain. The data were analyzed using Partial Least Square-Structural Equation Modeling. The results show that relational and spiritual capital significantly enhance Maqasid Sharia performance, whereas human and structural capital have no direct effect. Structural, relational, and spiritual capital also strengthen Islamic Innovation, which in turn mediates their relationship with Maqasid Sharia performance. This study extends Resource-Based Theory by integrating Islamic perspectives, demonstrating that sustainable advantage depends not only on tangible assets but also on ethical, knowledge-based, and spiritual dimensions. The findings provide valuable insights for policymakers and SME practitioners on how to strengthen Maqasid Sharia performance through intellectual capital and Islamic innovation.