Purpose of the Article and Main Points
This study examines the quantitative relationship between knowledge management, innovation, and performance. We aim to shed some light on the consequences of Knowledge Management (KM) activities on firm’s innovation and performance. Organizations are unaware of real implications of KM. According to the literature review, we develop a research model showing a positive relationship between knowledge management, and performance as well as its impact on innovation, which in turn contributes to the firm’s performance. Using data from 120 firms that are members of the Iranian Power Syndicate, this model was tested empirically. Based on the Structural Equation Model (SEM) results by Partial Least Square (PLS) method, research hypotheses were supported. Results show that KM activities impact innovation and organizational.
performance directly, and indirectly through an increase in innovation capability. It is found that knowledge creation, knowledge integration, and knowledge application facilitate innovation and performance. Knowledge creation has more significant effects on innovation speed, innovation quality, and innovation quantity, whereas innovation quality, knowledge creation, and knowledge integration has more significant effects on performance. Findings presented in this paper may help academics and managers in designing KM programs to achieve higher innovation,
effectiveness, efficiency, and profitability.
“The modern corporation, as it accepts the challenges of the new knowledge-based economy, will need to evolve into a knowledge-generating, knowledge-integrating and knowledge protecting organization” (Teece, 2000, p. 42). Hence, firms have to continuously work on their specific capabilities, (e.g. dynamic capabilities) to stay competitive. (Teece & Pisano, 1994). Skyrme (2001) defines Knowledge Management (KM) as ‘the explicit and systematic management of vital knowledge, and its associated processes of creation, organizing, diffusion, and exploitation’. From the practice perspective, firms are noticing the importance of managing knowledge if they want to remain competitive (Zack, 1999), and grow (Salojärvi, Furu, & Sveiby, 2005).
Innovation is recognized as a significant enabler for firms to create value and sustain competitive advantage in the increasingly ing environment (Bilton & Cummings, 2009; Subramaniam & Youndt, 2005). In general, innovation not
only makes full use of existing resources, improve efficiency and potential value, but also brings new intangible assets into organization. Firms with greater innovativeness will be more successful in responding to customers’ needs, and in developing new capabilities that allow them to achieve better performance or superior profitability (Calantone, Cavusgil, & Zhao, 2002; Sadikoglu & Zehir, 2010). Innovation is critical to achieve operational efficiency as well as raising service quality (Hsueh & Tu, 2004; Parasuraman, 2010). Accordingly, scholars paid more attention to the effects on firm performance (Clifton, Keast, Pickernell, & Senior, 2010; Jenny, 2005; Liao, Wang, Chuang, Shih, & Liu, 2010; Vaccaro et al., 2010).
As time-based competition has become an important concern for contemporary business organizations, more firms recognized that quick response of their competitors to new product development is posing a critical competitive threat. Therefore, they attempt to introduce new products, services, or processes more quickly (Boyd & Bresser, 2008; Smith, 2011). Robinson (1990) demonstrated that over a broad cross-section of industries, firms that stressed innovation speed could increase their market share. When a firm is faster than its competitors in developing, producing and selling new products, it is able to make market segments in association with service quality and operating efficiency. That is because knowledge contained in these innovations is not readily available to competitors (Liao et al., 2010). Therefore, innovation speed guarantees quicker response to environment by launching new products A. Mardani et al. Journal of High Technology Management Research 29 (2018) 12–26.
Relevant Knowledge Management Frameworks or Theories
with lower times and costs, which eventually improves firm performance (Tidd, Bessant, & Pavitt, 2005). Innovation quality is another key factor influencing firm performance. A high quality of innovation is adopting numerous new products, processes or practices across a broad cross-section of organizational activities. It requires firms to create synergies among these multiple activity domains. Such synergies should be created in a way that is inimitable, encourages newness and contributes to competitiveness.Organizations benefit from increased ideas. Innovative R&D would be more effective in achieving firm performance goals (Brentani, 2001; Singh, 2008).
Quantity innovation which is defined as the number of new or improved products, services and process launched to the market is superior to the average in your industry. In fact, knowledge contributes to producing creative thoughts and generating innovation (Borghini, 2005). That is why innovation is seen as the area of greatest payoff from KM (Majchrzak et al., 2004). Although the relationships between innovation and firm performance have been discussed, few researches consider the specific effects of innovation speed, quality, and quality on firm’s performance. So this paper proposes the hypotheses as follow:
H13. Speed innovation has a direct and significant effect on organizational performance.
H14. Quality innovation has a direct and significant effect on organizational performance.
H15. Quantity innovation has a direct and significant effect on organizational performance.
4. Research methodology
4.1. Construct operationalization
To test the research model, a survey was conducted by companies that are members of Iranian Power Syndicate. A structured questionnaire consisting of close-ended questions was developed. Pretest for the instrument was examined by 6 practitioners (CEOs,enior managers, senior experts of five companies), and 5 academics. The questionnaire was localized for Iran. The seven-point Likert scale ranging from “1” (totally disagree) to “7” (totally agree) was employed in the questionnaire. The question items for the constructs are listed in Appendix A.
The variables of this research are measured using multi-item scales, tested in previous studies. The producing of knowledge scales is based on Fong and Choi (2009). A range of studies (Fong & Choi, 2009) were used to determine the item scale of the knowledgeintegration. The Application of Knowledge is measured based on Fong and Choi (2009). Innovation speed was measured using five items reflecting firm quickness to generate novel ideas, new product launching, new product development, new processes, and new problem solving compared to key competitors. A few studies used similar measures to operationalize firm’s response speed to competitive actions (Chen & Hambrick, 1995; Liao et al., 2010). The measurement of innovation quality was developed from Haner (2002) and Lahiri (2010).
Five items reflect the newness and creativity of new ideas, products, processes, practices, and management of certain company. Quality Innovation scale is based on Lee and Choi (2003). Finally, performance measures are based on Quinn and Rohrbaugh (1983), Hoque and James (2000), and Choi and Lee (2002, 2003).4.2. Data Collection This study examined a sample of 120 firms that are the members of Iranian Power Syndicate. These firms varied in size and
industry. The sample has several advantages. First, production, integration, and application of Knowledge in knowledge intensive firms plays a crucial role in facilitating innovation (e.g. designing new products or services in this highly competitive arena).
Second,today’s dynamic economy depends on the development of innovation. This property makes firms to examine the link between innovation and performance. Data were collected from CEO, senior manager, expert, and senior expert as the key informant due to their knowledge of the firm, access to strategic information, and familiarity with the environment. Informants were promised to obtain a summary of the results if they were interested in this study. 226 questionnaire were collected.
References
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