Malaysian healthcare industry is facing a challenging outlook, spilling from a rapid changing in operating business environment, including spiralling operating cost and high expectation on the quality of delivery system in healthcare. Malaysia has decided to position itself as a hub for healthcare services. There are two types of hospital in this country, either funded by government or funded by private sector. This research is focusing on hospital which is funded by private sector or known as private hospital due to the fact that these hospitals must be focusing on efficiency in order to sustain in healthcare industry. It is vital for the private hospital to plan and manage their resources wisely and strategically in order to deliver high performance and also growth. One of the resources that are important and critical is Intellectual Capital(IC). Healthcare industry which is highly dependent on Human Capital, Structural Capital, Innovation Capital and Relational Capital is one of the industries that should embrace the importance of managing its IC. A shortage or high turnover of skilled workforce in healthcare is always a real challenge for hospitals. The demand for a skilled worker is high in healthcare sector which definitely will give a significant impact on IC of an organisation especially hospital. In addition, a view and characteristic of the leader which can be translated as leadership style in these private hospitals are also playing a major role in ensuring that a high performance services can be delivered. Hypothetically, managing of IC effectively will result in enhance hospitals' performance. Currently, there are few studies that evaluated the relationship between leadership styles, IC and hospital performance. However, this study focuses on how leadership styles either transformational leadership or transactional leadership style would affect the development of IC as a strategy that would give impact to the performance of private hospitals based on Upper Echelon Theory. The objective of this paper is to propose a framework for research to study the above issues. By acknowledging this reality, the management of the hospitals need to formulate a sound strategic planning of IC and this strategic planning should be executed by determine, focus and highly capable leaders.
