Knowledge management and organizational
performance: a decomposed view
Annette M. Mills and Trevor A. Smith
Annette M. Mills is a Senior
Lecturer in the Department
of Accounting and
Information Systems, at the
University of Canterbury,
Christchurch, New
Zealand. Trevor A. Smith is
a Lecturer in the
Department of
Management Studies at the
University of the West
Indies, Jamaica, West
Indies.
Received: 6 May 2010
Accepted: 1 September 2010
PAGE 156 j JOURNAL OF KNOWLEDGE MANAGEMENT
Abstract
Purpose – The purpose of this paper is to evaluate the impact of specific knowledge management
resources (i.e. knowledge management enablers and processes) on organizational performance.
Design/methodology/approach – The study uses survey data from 189 managers and structural
equation modeling to assess the links between specific knowledge management resources and
organizational performance.
Findings – The results show that some knowledge resources (e.g. organizational structure, knowledge
application) are directly related to organizational performance, while others (e.g. technology, knowledge
conversion), though important preconditions for knowledge management, are not directly related to
organizational performance.
Research limitations/implications – The survey findings were based on a single dataset, so the same
observations may not apply to other settings. The survey also did not provide in-depth insight into the
key capabilities of individual firms and the circumstances under which some resources are directly
related to organizational performance.
Practical implications – The study provides evidence linking particular knowledge resources to
organizational performance. Such insights can help firms better target their investments and enhance
the success of their knowledge management initiatives.
Originality/value – Prior research often utilizes composite measures when examining the knowledge
management-organizational performance link. This bundling of the dimensions of knowledge
management allows managers and researchers to focus on main effects but leaves little room for
understanding how particular resources relate to organizational performance. This study addresses this
gap by assessing the links between specific knowledge management resources and organizational
performance. The results show that some resources are directly related to organizational performance,
while others are not.
Keywords Knowledge management, Organizational performance, Surveys
Paper type Research paper
1. Introduction
For many organizations achieving improved performance is not only dependent on the
successful deployment of tangible assets and natural resources but also on the effective
management of knowledge (Lee and Sukoco, 2007). As such, investments in knowledge
management continue to increase dramatically from year to year. According to AMR
Research, US firms would have invested $73 billion on knowledge management software in
2007, increasing by almost 16 percent in 2008 (McGreevy, 2007). Forrester Research Inc.
(2010) also reports that 20 percent of small and medium-businesses in North America and
Europe plan to implement CRM or information and knowledge management tools in 2010 or
later, representing the fastest growing software segment among small and
medium-businesses. Much of the overall spending by firms on knowledge management
initiatives is driven by strategic imperatives that depend on the effective management of the
knowledge resource (Lee and Sukoco, 2007). As such, one of the main reasons firms invest
j VOL. 15 NO. 1 2011, pp. 156-171, Q Emerald Group Publishing Limited, ISSN 1367-3270 DOI 10.1108/13673271111108756
in knowledge management is to build a knowledge capability that facilitates the effective
management and flow of information and knowledge within the firm.
Different resources make up the knowledge capability of a firm. These include technology
infrastructure, organizational structure and organizational culture which are linked to a firm’s
knowledge infrastructure capability; and knowledge acquisition, knowledge conversion,
knowledge application and knowledge protection which are linked to the firm’s knowledge
process capability (Alavi and Leidner, 2001; Gold et al., 2001). Taken together, these
resources determine the knowledge management capability of a firm, which in turn has been
linked to various measures of organizational performance (Grant, 1996; Gold et al., 2001;
Lee and Sukoco, 2007; Zack et al., 2009).
Given the composite nature of knowledge capabilities, most firms will possess different
levels and combinations of resources (i.e. knowledge enablers and processes) that
collectively make up their knowledge capability. The contribution that each resource makes
to organizational performance is therefore likely to vary across firms; it is this unique makeup
that enables benefits such as competitive advantage and improved performance.
Although research suggests that a firm’s knowledge management capabilities in
combination, impact organizational performance (Gold et al., 2001; Zaim et al., 2007) it is
likely that only some of the resources that make up these capabilities will contribute to
organizational performance on their own (Grant, 1991). However, prior research has tended
to bundle the dimensions that make up knowledge capabilities. This approach has the
advantage of enabling managers and researchers to focus on main effects, but leaves little
room for understanding how particular resources relate to organizational performance.
For example, firms that decide to enhance their overall capabilities may start with a decision
about the applications they need, then move to decisions about the infrastructure and other
processes needed to support the application (e.g. how knowledge will be acquired,
converted and protected). Focusing on individual knowledge enablers and processes can
therefore provide a more fundamental understanding of a firm’s knowledge capability and
enhance management decision-making at the resource level. A more detailed evaluation of
the links between the individual dimensions of knowledge management capabilities and
organizational performance can address this gap.
Using survey data from 189 senior- and middle-level managers in the service and
manufacturing sectors and structural equation modeling techniques, it is expected that this
study will provide insights into the links between individual knowledge enablers and
processes, and organizational performance. The outcomes will not only provide managers
and researchers with quantitative evidence linking particular knowledge resources to
organizational performance but will also shed light on how firms can enhance the success of
their knowledge management initiatives through a more targeted and direct approach to
implementation. The outcomes will also address gaps in the literature regarding the lack of
large-scale empirical evidence linking knowledge management to organizational
performance (Zack et al., 2009).

2. Literature review
Gold et al. (2001) proposed a model of knowledge management capabilities that has since
become one of the most widely cited in the knowledge management literature. In this model,
Gold et al. theorized knowledge management capabilities as multidimensional concepts
that incorporate: a process perspective which focuses on a set of activities, that is,
knowledge process capabilities and an infrastructure perspective which focuses on
enablers, that is, knowledge infrastructure capabilities (Alavi and Leidner, 2001; Lee and
Choi, 2003). These in turn are composed of multiple dimensions: knowledge infrastructural
capability comprises technology, organizational culture and organizational structure while
knowledge process capability is made up of knowledge acquisition, knowledge conversion,
knowledge application, and knowledge protection (Gold et al., 2001).

j j
VOL. 15 NO. 1 2011 JOURNAL OF KNOWLEDGE MANAGEMENT PAGE 157
 Prior research suggests these enablers and processes are necessary preconditions for
effective knowledge management (Alavi and Leidner, 2001; Davenport et al., 1998). Thus
most researchers using the Gold et al. framework will model the knowledge infrastructure
and knowledge process capabilities as composite constructs, when examining the links
between knowledge capabilities and outcomes such as organizational performance,
knowledge management success, and strategy implementation (Chan and Chao, 2008;
Jennex and Olfman, 2005; Laframboise et al., 2007; Paisittanand et al., 2007). For
example, Gold et al. (2001) found that both knowledge infrastructure capability and
knowledge process capability are positively related to organizational performance. This
approach has the benefit of allowing researchers to focus on the main effects and
enhancing parsimony.
However, what is not well known is whether there are differential relationships (including null
or cancelling effects) between the individual dimensions of knowledge process capability
and knowledge infrastructure capability, and organizational performance and the nature of
these relationships (Law et al., 1998; Petter et al., 2006). To address this gap, this study
examines a decomposed Gold et al. (2001) model, analyzing the structural model at the
level of the individual resource vis-à-vis organizational performance. The outcomes are
expected to provide specific insights into the knowledge management – organizational
performance link by identifying those knowledge resources (i.e. enablers and processes)
that are directly related to organizational performance.

2.1 The theoretical model

When it comes to the relationship between IT resources and organizational performance the
resource-based view (RBV) offers a useful lens for understanding this link. In essence, the
RBV argues that ‘‘firms possess resources, a subset of which enables them to achieve
competitive advantage, and a further subset which leads to superior long-term
performance’’ (Wernerfelt, 1984, p.108). However, the RBV is void of a single definition of
the term ‘‘resource’’ (Wade and Hulland, 2004) with many researchers using the terms
‘‘resources’’ and ‘‘capabilities’’ interchangeably (Christensen and Overdorf, 2000; Gold
et al., 2001; Sanchez et al., 1996). However, Grant (1991) suggests that a firm’s resource is
the basic unit of analysis and provides direct input to the production process while the firm’s
capability represents an aggregation of resources or ‘‘the capacity for a team of resources to
perform some task or activity’’ (Grant, 1991, p. 119). Thus ‘‘resources are the source of a
firm’s capabilities, [and] capabilities are the main source of its competitive advantage’’
(Grant, 1991, p. 119). Consequently, both resources and capabilities can contribute to a
firm’s bottom-line (Grant, 1991). However, few resources are productive on their own and, it
is the overall capabilities that are considered the true drivers of the firm’s productivity (Grant,
1991).
The RBV also recognizes that while some resources may lead to performance
enhancements, others do not, and that the combination may differ across industries and
firms. As such, a key challenge for firms is to identify and leverage those resources that
directly impact organizational performance (Wade and Hulland, 2004; Zack et al., 2009).
Based on this understanding of the relationship between resources, capabilities and
organizational performance, the next section examines knowledge management
capabilities, the resources that make up these capabilities, and the theorized links
between these resources and organizational performance. A decomposed model of
knowledge management capabilities is then assessed vis-à-vis organizational performance,
and the results compared with a composite model of knowledge management capabilities.
Implications for future research and practice follow.

2.2 Knowledge management capabilities

Knowledge management supports the aggregation of resources into capabilities (Maier and
Remus, 2002). Knowledge management capabilities can be categorized into two broad

j j
PAGE 158 JOURNAL OF KNOWLEDGE MANAGEMENT VOL. 15 NO. 1 2011
types – knowledge infrastructure capability and knowledge process capability (Gold et al.,
2001).
2.2.1 Knowledge infrastructure capability. Prior research recognizes the importance of
having a supportive and effective knowledge infrastructure to underpin a firm’s knowledge
management initiatives (Davenport and Völpel, 2001; Paisittanand et al., 2007). Different
elements make up a firm’s knowledge infrastructure capability. This study adopts the Gold
et al. (2001) typology which views technology, organizational culture and organizational
structure as key components of a firm’s knowledge infrastructure capability (Davenport and
Völpel, 2001; Paisittanand et al., 2007).
Technology. The technology element of knowledge infrastructure comprises the information
technology (IT) systems that enable the integration of information and knowledge in the
organization as well as the creation, transfer, storage and safe-keeping of the firm’s
knowledge resource. Although an appropriate technology infrastructure is essential for
effective knowledge management, studies that examine the link between information
technologies and measures of organizational performance are often inconclusive, and fail to
demonstrate whether IT is directly related to performance (Powell and Dent-Micallef, 1997;
Webb and Schlemmer, 2006). For example, Powell and Dent-Micallef (1997) in their study of
US firms, found that IT in and of itself did not enhance organizational performance, but could
increase organizational performance when combined with other human and business
assets. Teece et al. (1997) further suggested that the absence of an association between
technology and performance could be because technology (e.g. IS resources) is easily
copied, making it a fragile source of competitive advantage.
Although technology is not always linked directly to organizational performance, research
shows that when combined with other resources IT can enhance performance and lead to
sustained advantage (Clemons and Row, 1991; Powell and Dent-Micallef, 1997). So
although the technology infrastructure may not contribute directly to organizational
performance, it is an essential enabler of other knowledge resources such as knowledge
acquisition and knowledge application processes, which may themselves enhance
organizational performance (Seleim and Khalil, 2007).
Organizational culture. In the context of knowledge management is considered a complex
collection of values, beliefs, behaviors and symbols that influences knowledge management
in organizations (Ho, 2009). Hence, a knowledge-friendly culture is regarded as one of the
most important factors impacting knowledge management and the outcomes from its use
(Alavi et al., 2005-2006; Davenport et al., 1998; Ho, 2009). Sin and Tse (2000) found that
organizational cultural values such as consumer orientation, service quality, informality and
innovation were ‘‘significantly associated with marketing effectiveness’’ (Sin and Tse, 2000,
p. 305). More recently, Aydin and Ceylan (2009) also showed that cultural dimensions were
related to organizational performance.
Changes in corporate culture are also regarded as necessary for implementing knowledge
management programs (Bhatt, 2001): ‘‘the ability of an organization to learn, develop
memory, and share knowledge is [therefore] dependent on its culture’’ (Turban et al., 2005,
p. 496). Thus, positive changes in culture are expected to impact organizational
performance and add momentum to other improvements taking place elsewhere in the
organization (Richert, 1999).
Organizational structure comprises the organizational hierarchy, rules and regulations, and
reporting relationships (Herath, 2007) and is considered a means of co-ordination and
control whereby organizational actors can be directed towards organizational effectiveness.
Knowledge management theorists largely conclude that changes in an organization’s
structure, such as moving from hierarchical to flatter networked forms, are essential for the
effective transfer and creation of knowledge in the organization (Beveren, 2003; Gold et al.,
2001; Grant, 1996; Nonaka and Takeuchi, 1995). Such changes by extension have been
positively associated with improved outputs in both service and financial terms (Richert,
1999). Thus it is expected that:

j j
VOL. 15 NO. 1 2011 JOURNAL OF KNOWLEDGE MANAGEMENT PAGE 159
 H1. Technology is not (directly) related to organizational performance.
H2. Organizational culture is positively related to organizational performance.
H3. Organization structure is positively related to organizational performance.

2.2.2 Knowledge process capability. Gold et al. (2001) suggested that knowledge process
capabilities (required for storing, transforming and transporting of knowledge throughout the
organization) are needed for leveraging the infrastructure capability. Four broad dimensions
are identified – ‘‘acquiring knowledge, converting it into useful form, applying or using it,
and protecting it’’ (Gold et al., 2001, p. 190).
Knowledge acquisition. The term ‘‘acquisition’’ refers to a firm’s capability to identify, acquire
and accumulate knowledge (whether internal or external) that is essential to its operations
(Gold et al., 2001; Zahra and George, 2002). Acquiring knowledge can involve several
aspects including creation, sharing and dissemination. Knowledge acquisition reflects in
part, a subset of a firm’s absorptive capacity – more specifically, it can be viewed as a
‘‘potential capacity’’ that reflects a firm’s ability to use its knowledge to create advantage, but
does not guarantee that knowledge will be used effectively (Cohen and Levinthal, 1990).
Research suggests strong and positive links between knowledge acquisition and
performance measures. For example, Song (2008) showed that knowledge creation
practices were significantly related to organizational improvement. Further, when acquired
knowledge is used appropriately, a significant and positive link is observed between
knowledge acquisition and organizational performance (Lyles and Salk, 1996; Seleim and
Khalil, 2007).
Knowledge conversion. Knowledge that is captured from various sources (both internal and
external to the business) needs to be converted to organizational knowledge for effective
utilization within the business (Lee and Suh, 2003). This conversion process, which takes
place along the supply chain of data, information and knowledge, is transient in nature and
so organizations must speedily convert data into information and information into
organizational knowledge to maximize benefits from the conversion process (Bhatt, 2001).
Thus, it is expected that the knowledge conversion process could influence performance
outcomes.
Knowledge application. Bhatt (2001, pp. 72-73) stated that: ‘‘knowledge application means
making knowledge more active and relevant for the firm in creating value’’. For organizations
to create value they need to apply knowledge to their products and services by various
means such as repackaging available knowledge, training and motivating its people to think
creatively, and utilizing people’s understanding of the company’s processes, products and
services. For example, many organizations encourage organizational learning in which
individuals and teams can apply the knowledge gained to initiatives’ such as new product
development with the ultimate aim of improved performance in areas such as ‘‘speed to
market’’ and innovation (Sarin and McDermott, 2003). Droge et al. (2003, p.544) also argues
that ‘‘in the long run, firms that create new knowledge at a lower cost and more speedily that
competitors, and then apply that knowledge effectively and efficiently, will be successful at
creating competitive advantage’’.
For knowledge to impact organizational performance it has to be used to support the firm’s
processes. Hence, it is through knowledge utilization that acquired knowledge can be
transformed from being a potential capability into a realized and dynamic capability that
impacts organizational performance (Cohen and Levinthal, 1990; Seleim and Khalil, 2007;
Zahra and George, 2002).
Knowledge protection. Knowledge protection is necessary for effective functioning and
control within organizations. This would typically include the use of copyright and patents
along with information technology systems that allow knowledge to be secured by filename,
user name, password and file-sharing protocols that ascribe rights to authorized users (Lee
and Yang, 2000). However, knowledge protection is often challenging in part because the

j j
PAGE 160 JOURNAL OF KNOWLEDGE MANAGEMENT VOL. 15 NO. 1 2011
copyright laws that are intended to protect knowledge are limited in their treatment of the
knowledge environment (Everard, 2001). Notwithstanding such limitations, the knowledge
protection process should not be abandoned or marginalized (Gold et al., 2001) and
protecting knowledge from illegal and inappropriate use is essential for a firm to establish
and maintain a competitive advantage (Liebeskind, 1996). Moreover, since knowledge is
crucial for competitive advantage, storing and protecting knowledge is expected to create
value for the organization (Lee and Sukoco, 2007).
Taken altogether, it is expected that:
H4. Knowledge acquisition is positively related to organizational performance.
H5. Knowledge conversion is positively related to organizational performance.
H6. Knowledge application is positively related to organizational performance.
H7. Knowledge protection is positively related to organizational performance.

2.2.3 A composite model of knowledge management capabilities. There is a general

consensus in the literature that knowledge management is linked to organizational
performance (Gold et al., 2001; Gosh and Scott, 2007; Lee and Sukoco, 2007; Liu et al.,
2005; Zaim et al., 2007). For example, Gold et al. (2001) and Zaim et al. (2007) showed that
both knowledge infrastructure capability and knowledge process capability have a
significant and positive impact on organizational effectiveness. Lee and Sukoco (2007)
found that knowledge management capabilities affect innovation and organizational
effectiveness. Gosh and Scott (2007) also argued that knowledge infrastructural capabilities
such as technology, organizational culture and organizational structure, need to correspond
with knowledge process capabilities (e.g. actual flow and use of knowledge) in order to
achieve considerable improvements in effectiveness. In assessing the relationship between
knowledge management practices and performance outcomes, Zack et al. (2009) found
that knowledge management practices are related to measures of organizational
performance. Thus, it is expected that:
H8. Knowledge infrastructural capability is positively related to organizational
performance.
H9. Knowledge process capability is positively related to organizational
performance.

3. Methodology
Decomposed models are used in research to examine complex structures at lower-levels of
detail. Decomposed models stem from the notion that the constructs under investigation
represent complex concepts that are often best represented as multidimensional in nature.
These multidimensional constructs take different forms when it comes to theorizing the
relationships between the construct and its sub-dimensions. One form is the aggregate
construct, which typically consists of an algebraic composite of its dimensions (Law et al.,
1998). Under these conditions changes in the dimensions lead to changes in the constructs;
this is similar to the relationship between a formative (causal) construct and its indicators
where changes in the indicators lead to changes in the construct (Petter et al., 2007).
The knowledge infrastructure capability and knowledge process capability (Gold et al.,
2001) are examples of aggregate constructs. Since the overall construct is formed from its
underlying dimensions, the dimensions need not be correlated; thus inferences drawn at
higher-levels of analysis may not apply at the dimensional level (Law et al., 1998). For
example, if there are opposing effects or null effects at the lower-level these may be
overlooked if the analysis focuses on the higher-level. Decomposed models address this
problem by removing the causal structures from the aggregate construct and directly
relating the individual dimensions to other constructs in the research model (Petter et al.,
2007).

j j
VOL. 15 NO. 1 2011 JOURNAL OF KNOWLEDGE MANAGEMENT PAGE 161
 Since the aim of this research was to better understand the relationships between the
individual factors that make up the firms’ knowledge management capabilities and
organizational performance, two levels of analysis were conducted. First, a decomposed
model of knowledge management capabilities was examined – this looked at the links
between organizational performance and particular resources (i.e. enablers and processes)
that make up a firm’s knowledge infrastructural capability and knowledge process
capability. The composite model was also evaluated and the results compared with the
findings from the decomposed model.

3.1 The sample

To evaluate the research hypotheses, a survey was developed to capture measures of
knowledge management capabilities and organizational performance. The measures
consisted of multi-item constructs (with four to six items each) adapted from Gold et al.,
2001:
B knowledge infrastructure capability which comprised technology, organizational
structure, and organizational culture;
B knowledge process capability which comprised knowledge acquisition, knowledge
conversion, knowledge application, and knowledge protection; and
B organizational performance.
All items were assessed using seven-point Likert-type scales, anchored with ‘‘Strongly
agree’’ and ‘‘Strongly disagree’’.
Approximately 500 surveys were distributed to students enrolled in graduate MBA and MSc
programs in Jamaica. Like Gold et al. (2001), respondents at a management-level in their
firms were considered the most suitable for this study, as they were more likely to be aware of
the firms’ knowledge management capabilities. Responses were returned by 265 (53
percent) persons, of which 189 (37.8 percent) from management-level staff were usable. Of
these, 164 (86.8 percent) responses were from the service sector and 25 (13.2 percent) from
manufacturing. Of the firms, 80.4 percent employed 50 persons or more; 65.6 percent
employed 100 or more persons.

3.2 Data analysis and results

PLS-Graph 3.0 (Build 1130) and SPSS version 17.0 were used to assess the links between
knowledge management capabilities and organization effectiveness, and bootstrapping
(using PLS-Graph with 200 samples) used to evaluate the significance of the model paths.
First, the measurement model was assessed. Ideally, item loadings should exceed 0.707;
loadings of 0.60 are also acceptable if there are additional indicators (Chin, 1998). The
results showed one item measuring knowledge acquisition returned a loading of 0.40; this
item was therefore excluded. Item loadings for all other constructs ranged from 0.668 to
0.926 exceeding minimum thresholds (Table I).
Descriptive statistics (i.e. mean and standard deviation (SD)) for each construct are shown
in Table II. Table II also shows that composite reliabilities ranged from 0.918 to 0.963 and
average variance extracted (AVE) from 0.635 to 0.789 exceeding recommended cut-offs
(Chin, 1998). Construct AVEs were also greater than the variance shared between the
constructs (Table III) satisfying the criteria for discriminant validity (Chin, 1998).
Decomposed model of KM capabilities. Turning to the structural model, the results showed
the decomposed model accounted for 0.754 of the variance observed for organizational
performance (Figure 1). Of the knowledge infrastructural capabilities, only organizational
structure (b ¼ 0.209; p # 0.05) was significant vis-à-vis organizational performance;
technology infrastructure (b ¼ 2 0.003) was not expected to be significant. Hypotheses H1
and H3 were supported. Contrary to expectation, organizational culture was not significant
(b ¼ 0.055); H2 was therefore not supported.

j j
PAGE 162 JOURNAL OF KNOWLEDGE MANAGEMENT VOL. 15 NO. 1 2011
Table I Item loadings

Constructs Item loadings

Technology (TC)
TC05 0.693
TC06 0.926
TC07 0.919
TC09 0.898
Organizational culture (CU)
CU01 0.781
CU02 0.770
CU04 0.804
CU09 0.841
CU10 0.844
CU13 0.798
Organizational structure (ST)
ST03 0.811
ST04 0.855
ST05 0.782
ST06 0.668
ST07 0.846
ST10 0.736
ST11 0.860
Knowledge acquisition (AQ)
AQ01 0.820
AQ03 0.806
AQ05 0.866
AQ08 0.854
AQ12 0.857
Knowledge conversion (CN)
CN03 0.836
CN04 0.881
CN05 0.849
CN08 0.885
CN09 0.905
CN10 0.870
Knowledge application (AP)
AP03 0.848
AP04 0.923
AP05 0.895
AP06 0.896
AP07 0.901
AP08 0.907
AP10 0.844
Knowledge protection (PT)
PR01 0.895
PR02 0.876
PR03 0.888
PR04 0.853
PR07 0.860
PR08 0.753
PR10 0.825
Organizational performance (OP)
OP01 0.781
OP07 0.898
OP08 0.896
OP12 0.906
OP13 0.865
OP14 0.890

j j
VOL. 15 NO. 1 2011 JOURNAL OF KNOWLEDGE MANAGEMENT PAGE 163
 Table II Descriptive statistics, composite reliabilities (CR) and average variance extracted
(AVE)
Constructs Mean SD CR AVE

Knowledge infrastructure capabilities

Organizational structure (ST) 4.414 1.446 0.924 0.635
Organizational culture (CU) 5.215 1.378 0.918 0.651
Technology (TC) 4.569 1.646 0.921 0.747
Knowledge process capabilities
Knowledge acquisition (AQ) 5.309 1.268 0.923 0.707
Knowledge conversion (CN) 4.929 1.384 0.950 0.759
Knowledge application (AP) 5.140 1.447 0.963 0.789
Knowledge protection (PT) 4.930 1.473 0.948 0.725
Organizational performance (OP) 4.810 1.478 0.951 0.763

Table III Inter-construct correlations and discriminant validity

Constructs ST CU TC AQ CN AP PT OP

Knowledge infrastructure capabilities

Organizational structure (ST) 0.797
Organizational culture (CU) 0.745 0.807
Technology (TC) 0.557 0.481 0.864
Knowledge process capabilities
Knowledge acquisition (AQ) 0.639 0.666 0.565 0.841
Knowledge conversion (CN) 0.720 0.748 0.636 0.737 0.871
Knowledge application (AP) 0.715 0.754 0.604 0.724 0.813 0.888
Knowledge protection (PT) 0.595 0.591 0.600 0.588 0.641 0.642 0.851
Organizational performance (OP) 0.742 0.723 0.576 0.718 0.752 0.822 0.669 0.873

Note: Italicized items represent the square-root of the variance shared between the constructs and their measures; the off-diagonal
elements are the correlations among the constructs

For knowledge process capability, three processes were significant vis-à-vis organizational
performance: knowledge acquisition (b ¼ 0.146; p # 0.05), knowledge application
(b ¼ 0.412; p # 0.001), and knowledge protection (b ¼ 0.148; p # 0.05); H4, H6 and H7
were supported. Knowledge conversion capability was not significant (b ¼ 0.025); H5 was
not supported.

Assessment of the composite model. Next, latent variable scores representing the
dimensions of knowledge process capability and knowledge infrastructural capability were
extracted and used to assess the composite model. Consistent with recommended
guidelines, indicator weights for all seven dimensions were examined (Table IV); all except
knowledge conversion were significant vis-à-vis their respective constructs at p # 0.05
(Chin, 1998; Petter et al., 2007). However, this does not mean knowledge conversion was
unimportant. Further examination of the item loadings showed the construct demonstrated
‘‘absolute’’ importance when assessed independently of other indicators (Cenfetelli and
Basellier, 2009). The results also showed that, knowledge application was the most
important of the dimensions in terms of relative importance.

The results of the structural model tests showed that the composite (second-order) model
accounted for 0.748 of the variance observed for organizational performance (Table V).
Consistent with expectations, knowledge infrastructural capability (b ¼ 0.251; p # 0.05)
and knowledge process capability (b ¼ 2 0.639; p # 0.001) were both significant vis-à-vis
organizational performance, supporting hypotheses H8 and H9.

Finally, a summary of the results of the model tests for the decomposed model and the
composite model are shown in Table V.

j j
PAGE 164 JOURNAL OF KNOWLEDGE MANAGEMENT VOL. 15 NO. 1 2011
Figure 1 The results at the dimensional level

Knowledge Infrastructure
Capability Technology
Infrastructure

Organizational -0.003
Culture 0.055

Organizational 0.209**
Structure
Organizational
Performance

0.146** R2 = 0.754
Knowledge
Acquisition

0.025
Knowledge 0.148**
***
Conversion 0.412
Knowledge
Knowledge Protection
Knowledge Process Application
Capability

Note: * p ≤ 0.01; ** p ≤ 0.05; *** p ≤ 0.001

Table IV Indicator weights and significance levels

Construct Weight t-statistic Significance

Organizational structure 0.457 3.991 p # 0.001

Organizational culture 0.440 3.966 p # 0.001
Technology 0.252 3.455 p # 0.001
Knowledge acquisition 0.210 2.222 p # 0.05
Knowledge conversion 0.122 1.105 ns
Knowledge application 0.572 6.464 p # 0.001
Knowledge protection 0.213 2.792 p # 0.05

4. Discussion and Implications

Consistent with expectations, the study results provided strong empirical support for the
decomposed model, accounting for 0.754 of the variance observed for organizational
performance. For the composite model (Table V), the amount of variance explained was
0.748, and was similar to the decomposed model. The links between organizational
performance and knowledge process capability and knowledge infrastructure capability
returned path weights of 0.251 and 0.639 respectively. Altogether, these findings are
consistent with prior research that has observed similar orders of magnitude for the path
weights and variance explained in respect of knowledge management and organizational
performance (Gold et al., 2001; Zaim et al., 2007).

The results for the decomposed model (Table V) showed that of the three infrastructural
capabilities, only organizational structure had a significant impact on organizational

j j
VOL. 15 NO. 1 2011 JOURNAL OF KNOWLEDGE MANAGEMENT PAGE 165
 Table V Summary of results for the model tests
Hypotheses Path Significance

Decomposed model
Knowledge infrastructural capability
H1. Technology is not (directly) related to
organizational performance 0.003 ns
H2. Organizational culture is positively related
to organizational performance 0.055 ns
H3. Organizational structure is positively
related to organizational performance 0.209 p # 0.05
Knowledge process capability
H4. Knowledge acquisition is positively related
to organizational performance 0.146 p # 0.05
H5. Knowledge conversion is positively related
to organizational performance 0.025 ns
H6. Knowledge application is positively related
to organizational performance 0.412 p # 0.001
H7. Knowledge protection is positively related
to organizational performance 0.148 p # 0.05
R-Squared (R 2) 0.754 –

Composite model
H8. Knowledge infrastructural capability is
positively related to organizational performance 0.251 p#0.05
H9. Knowledge process capability is positively
related to organizational performance 0.639 p # 0.001
R-Squared (R 2) 0.748 –

performance; neither technology nor organizational culture had a significant impact on

organizational performance. For knowledge process capability, knowledge acquisition,
knowledge application and knowledge protection also impacted organizational
performance, but not knowledge conversion.

Altogether, these results suggest that although the individual resources collectively
determine the knowledge management capabilities construct, not all are directly linked to
organizational performance. This is consistent with the resource-based view which suggests
that only a subset of a firm’s capabilities when leveraged appropriately reflect direct
contributions to performance measures (Grant, 1991). For example, Seleim and Khalil
(2007) found that of five knowledge processes studied (e.g. acquisition, creation,
application) only knowledge application was directly linked to organizational performance.
So although, knowledge management capabilities may contribute directly to organizational
performance and each resource significant in respect of its construct (Zaim et al., 2007), in
some cases the contribution of particular resources may be more indirect through their
impact on other factors linked to organizational performance. For example, while Seleim and
Khalil (2007) did not uncover a positive link between organizational performance, and
knowledge acquisition and knowledge creation, their study showed both processes were
directly related to knowledge application which in turn was related to organizational
performance.

The study results have several implications for knowledge management in firms. For
example, research suggests appropriate investments in knowledge management initiatives
can enhance organizational performance. However, this study shows that not all of the
resources are direct contributors. Although resources such as technology, culture and
knowledge conversion are necessary for effective knowledge management (Gold et al.,
2001) they did not impact organizational performance directly. However, firms can ill afford
to neglect these dimensions as they work in combination with and support other resources,
such as knowledge acquisition and knowledge application that may contribute directly to
organizational success (Van den Bosch et al., 1999; Seleim and Khalil, 2007).

j j
PAGE 166 JOURNAL OF KNOWLEDGE MANAGEMENT VOL. 15 NO. 1 2011
Second, this research showed that inferences about an overall capability do not necessarily
apply when it comes to individual resources. For example, the current findings are consistent
with research which suggests that particular knowledge resources (e.g. technology,
organizational structure, knowledge acquisition, etc) are directly related to knowledge
management capabilities (Gold et al., 2001; Zack et al., 2009; Zaim et al., 2007) and are
therefore important in forming a firm’s overall knowledge capability. However, for studies that
use composite models, it is difficult to identify which resources directly impact organizational
performance. Although some studies shed light on this gap (Zack et al., 2009), there remains
a gap in the literature regarding empirical evidence linking particular knowledge resources
to performance. The current study addresses this gap by identifying specific enablers and
processes that are directly related to organizational performance.
The combination of resources that is most effective for an organization is also likely to differ
across firms. Since there are no ‘‘silver-bullet’’ combinations when it comes to enhancing
organizational performance, it is incumbent on managers not only to recognize that all the
resources are important, but also to identify which resources and consequently which
capabilities are most salient to organizational performance. Such insights can help
managers identify appropriate strategies aimed at deploying combinations of knowledge
management resources that better support the firm’s goals. Furthermore, since the
combinations may be unique across firms, this provides an opportunity for competitive
advantage and sustained performance.
Although this study offers insights into the dynamic nature of the knowledge management
resource, there are some constraints. For example, since a firm’s knowledge capability is a
composite of the individual resources that make up the knowledge capability, different firms
and industries may have different combinations that yield similar outcomes. As such, while
the outcomes of this study suggest, for example that organizational structure was linked to
organizational performance and culture was not for the study sample, the same may not
apply to other settings. This can be expected as performance indicators such as
competitive advantage are created and maintained by such differences. It is therefore
important that firms recognize the variableness of knowledge capabilities and the need to
deploy strategies that lead to the acquisition and deployment of those capabilities that are
most relevant to the firm’s goals.
As with other survey-based research, this study is subject to the possibility of response bias
such that managers for reasons such as poor recall or role characteristics may under-report
or over-report the knowledge management activities of their firm. Having two or more
respondents for each firm can help minimize this effect, but may limit how many data can be
collected (Gold et al., 2001).
Finally, this study also does not provide in-depth insight into the capabilities of individual
firms. Such insights would enable a better understanding of the individual capabilities that
make up a firm’s knowledge capability, why differences may occur, and under what
circumstances do some resources impact organizational performance and others do not.
Future research is therefore needed to examine in greater detail the links between the
individual capabilities that make up knowledge resources, and organizational performance.

5. Conclusion
The literature is replete with studies that suggest knowledge management impacts
organizational performance. However, there has been little elaboration of the relationships at
the dimensional level vis-à-vis organizational performance. Yet when it comes to making
decisions about a firm’s knowledge capability, these are often made at the level of the
individual resource. This study addresses this gap by assessing a decomposed model of
knowledge management capabilities. The aim was to provide insights into the relationships
between particular knowledge resources and organizational performance that can help
firms identify appropriate strategies for investing in and effectively deploying the knowledge
resource.

j j
VOL. 15 NO. 1 2011 JOURNAL OF KNOWLEDGE MANAGEMENT PAGE 167
 The results showed that for the current study, organizational structure, knowledge
acquisition, knowledge application and knowledge protection were significantly related to
organizational performance. However, technology, organizational culture and knowledge
conversion did not have a significant impact. Taken altogether, the findings suggest that
although the individual resources collectively determine a firm’s overall knowledge
management capability which, as a composite is related to organizational performance,
each resource is not directly linked to performance. The decomposed model therefore offers
insights into relationships at the dimensional level that are not readily inferred from
composite models.
In the final analysis, this study offers useful insights into the knowledge management –
performance link. First, there has been little research that decomposes the effects of
knowledge management in relation to organizational performance. The results suggest the
decomposed approach is useful for understanding the complex relationships embodied in
the knowledge management – performance link, which cannot be surmised from a
composite model. Such an approach is useful for research aimed at acquiring an in-depth
understanding of knowledge management, as opposed to achieving parsimony or focusing
on main effects.
The findings also suggest a number of avenues for future work. First, the study outcomes
suggest different relationships exist between particular resources, and organizational
performance. At the same time, the literature also shows that for multifaceted concepts such
as knowledge infrastructure capability and knowledge process capability there is no
commonly agreed conceptualization of which components make up these capabilities (Alavi
and Leidner, 2001; Gold et al., 2001; Lee and Yang, 2000). Thus it seems likely that different
compositions of knowledge infrastructure and knowledge process capabilities may lead to
different outcomes. Further research is therefore needed to understand the differences
among the capabilities including firm-level differences and how this relates to organizational
performance.
Finally, the literature calls for further research into the links between knowledge capabilities
and organizational performance, and for large-scale empirical evidence supporting these
links (Zack et al., 2009). This study addresses this call by examining the links between the
individual dimensions of knowledge capabilities and organizational performance. However,
other success factors such as user satisfaction and perceived benefits can also be
explored.

References
Alavi, M. and Leidner, D.E. (2001), ‘‘Review: Knowledge management and knowledge management
systems: conceptual foundations and research issues’’, MIS Quarterly, Vol. 25 No. 1, pp. 107-36.
Alavi, M., Kayworth, T.R. and Leidner, D.E. (2005-2006), ‘‘An empirical examination of the influence of
organizational culture on knowledge management practices’’, Journal of Management Information
Systems, Vol. 22 No. 3, pp. 191-224.
Aydin, B. and Ceylan, A. (2009), ‘‘The role of organizational culture on effectiveness’’, Ekonomie a
Management (E þ M), Vol. 3, pp. 33-49.
Beveren, J.V. (2003), ‘‘Does health care for knowledge management?’’, Journal of Knowledge
Management, Vol. 7 No. 1, pp. 90-5.
Bhatt, G.D. (2001), ‘‘Knowledge management in organizations: examining the interaction between
technologies, techniques, and people’’, Journal of Knowledge Management, Vol. 5 No. 1, pp. 68-75.
Cenfetelli, R.T. and Basellier, G. (2009), ‘‘Interpretation of formative measurement in information systems
research’’, MIS Quarterly, Vol. 33 No. 4, pp. 689-707.
Chan, I. and Chao, C. (2008), ‘‘Knowledge management in small and medium-sized enterprises’’,
Communications of the ACM, Vol. 51 No. 4, pp. 83-8.
Chin, W.W. (1998), ‘‘The partial least squares approach to structural equation modeling’’,
in Marcoulides, G. (Ed.), Modern Methods for Business Research, Lawrence Erlbaum Associates,
Mahwah, NJ, pp. 295-336.

j j
PAGE 168 JOURNAL OF KNOWLEDGE MANAGEMENT VOL. 15 NO. 1 2011
Christensen, C.M. and Overdorf, M. (2000), ‘‘Meeting the challenges of disruptive change’’, Harvard
Business Review, Vol. 78 No. 2, pp. 67-75.
Clemons, E.K. and Row, M.C. (1991), ‘‘Sustaining IT advantage: the role of structural differences’’, MIS
Quarterly, Vol. 15 No. 3, pp. 275-92.
Cohen, W.M. and Levinthal, D.A. (1990), ‘‘Absorptive capacity: a new perspective on learning and
innovation’’, Administrative Science Quarterly, Vol. 35 No. 1, pp. 128-52.
Davenport, T.H. and Völpel, S.C. (2001), ‘‘The rise of knowledge towards attention management’’,
Journal of Knowledge Management, Vol. 5 No. 3, pp. 212-21.
Davenport, T., Delong, D. and Beers, M. (1998), ‘‘Successful knowledge management programs’’, Sloan
Management Review, Vol. 39 No. 2, pp. 43-57.
Dröge, C., Claycomb, C. and Germain, R. (2003), ‘‘Does knowledge mediate the effect of context on
performance? Some initial evidence’’, Decision Sciences, Vol. 34 No. 3, pp. 541-68.
Everard, J. (2001), ‘‘We are Plato’s children’’, Library Management, Vol. 22 Nos 6/7, pp. 297-302.
Forrester Research Inc. (2010), ‘‘Forrester: 2010 software spending devoted to existing systems more
than emerging technologies’’, available at: www.businesswire.com/portal/site/home/permalink/
?ndmViewId ¼ news_view&newsId ¼ 20100217005273&newsLang ¼ en (accessed 30 April 2010).
Gold, A.H., Malhotra, A. and Segars, A.H. (2001), ‘‘Knowledge management: an organizational
capabilities perspective’’, Journal of Management Information Systems, Vol. 18 No. 1, pp. 185-214.
Gosh, B. and Scott, J.E. (2007), ‘‘Effective knowledge management systems for a clinical nursing
setting’’, Information Systems Management, Vol. 24 No. 1, pp. 73-84.
Grant, R.M. (1991), ‘‘The resource-based theory of competitive advantage: implication for strategy
formulation’’, California Management Review, Vol. 33 No. 3, pp. 114-35.
Grant, R.M. (1996), ‘‘Toward a knowledge-based theory of the firm’’, Strategic Management Journal,
Vol. 17, Winter Special Issue, pp. 109-22.
Herath, S.K. (2007), ‘‘A framework for management control research’’, Journal of Management
Development, Vol. 26 No. 9, pp. 895-915.
Ho, C. (2009), ‘‘The relationship between knowledge management enablers and performance’’,
Industrial Management & Data Systems, Vol. 109 No. 1, pp. 98-117.
Jennex, M.E. and Olfman, L. (2005), ‘‘Assessing knowledge management success’’, International
Journal of Knowledge Management, Vol. 1 No. 2, pp. 33-49.
Laframboise, K., Croteau, A., Beaudry, A. and Manovas, M. (2007), ‘‘Interdepartmental knowledge
transfer success during information technology projects’’, International Journal of Knowledge
Management, Vol. 3 No. 2, pp. 47-67.
Law, K.S., Wong, C. and Mobley, W.H. (1998), ‘‘Toward a taxonomy of multidimensional constructs’’,
Academy of Management Review, Vol. 23 No. 4, pp. 741-53.
Lee, C.C. and Yang, J. (2000), ‘‘Knowledge value chain’’, Journal of Management Development, Vol. 19
No. 9, pp. 783-93.
Lee, H. and Choi, B. (2003), ‘‘Knowledge management enablers, processes, and organizational
performance: an integrative view and empirical examination’’, Journal of Management Information
Systems, Vol. 20 No. 1, pp. 179-228.
Lee, H. and Suh, Y. (2003), ‘‘Knowledge conversion with information technology of Korean companies’’,
Business Process Management Journal, Vol. 9 No. 3, pp. 317-36.
Lee, L.T. and Sukoco, B.M. (2007), ‘‘The effects of entrepreneurial orientation and knowledge
management capability on organizational effectiveness in Taiwan: the moderating role of social capital’’,
International Journal of Management, Vol. 24 No. 3, pp. 549-73.
Liebeskind, J. (1996), ‘‘Knowledge, strategy, and the theory of the firm’’, Strategic Management Journal,
Vol. 17, Winter Special Issue, pp. 93-107.
Liu, P.L., Chen, W.C. and Tsai, C.H. (2005), ‘‘An empirical study on the correlation between the
knowledge management method and new product development strategy on product performance in
Taiwan’s industries’’, Technovation, Vol. 25 No. 7, pp. 637-44.

j j
VOL. 15 NO. 1 2011 JOURNAL OF KNOWLEDGE MANAGEMENT PAGE 169
 Lyles, M.A. and Salk, J.E. (1996), ‘‘Knowledge acquisition from foreign parents in international joint
ventures: an empirical examination in the Hungarian context’’, Journal of International Business Studies,
Vol. 27 No. 5, pp. 877-903.
McGreevy, M. (2007), ‘‘AMR research finds spending on knowledge management will hit $73B in 2007’’,
available at: www.amrresearch.com/Content/view.aspx?pmillid ¼ 20768 (accessed 30 April 2010).
Maier, R. and Remus, U. (2002), ‘‘Defining process-oriented knowledge management strategies’’,
Knowledge and Process Management, Vol. 9 No. 2, pp. 103-18.
Nonaka, I. and Takeuchi, H. (1995), The Knowledge Creation Company: How Japanese Companies
Create the Dynamics of Innovation, Oxford University Press, New York, NY.
Paisittanand, A., Digman, L.A. and Lee, S.M. (2007), ‘‘Managing knowledge capabilities for strategy
implementation effectiveness’’, International Journal of Knowledge Management, Vol. 3 No. 4,
pp. 84-110.
Petter, S., Straub, D. and Rai, A. (2007), ‘‘Specifying formative constructs in information systems
research’’, MIS Quarterly, Vol. 31 No. 4, pp. 623-56.
Powell, T.C. and Dent-Micallef, A. (1997), ‘‘Information technology as competitive advantage: the role of
human, business, and technology resources’’, Strategic Management Journal, Vol. 18 No. 5, pp. 853-77.
Richert, A. (1999), ‘‘Lessons from a major cultural change workshop programme’’, Industrial and
Commercial Training, Vol. 31 No. 7, pp. 267-71.
Sanchez, R., Heene, A. and Thomas, H. (1996), Introduction: Towards the Theory and Practice of
Competence-based Competition, Pergamon Press, Oxford.
Sarin, S. and Mcdermott, C. (2003), ‘‘The effect of team leader characteristics on learning, knowledge
application, and performance of cross-functional new product development teams’’, Decision Sciences,
Vol. 34 No. 4, pp. 707-39.
Seleim, A. and Khalil, O. (2007), ‘‘Knowledge management and organizational performance in the
Egyptian software firms’’, International Journal of Knowledge Management, Vol. 3 No. 4, pp. 37-66.
Sin, L.Y.M. and Tse, A.C.B. (2000), ‘‘How does marketing effectiveness mediate the effect of
organizational culture on business performance? The case of service firms’’, Journal of Services
Marketing, Vol. 14 No. 4, pp. 295-309.
Song, J.H. (2008), ‘‘The key to organizational performance improvement: a perspective of organizational
knowledge creation’’, Performance Improvement Quarterly, Vol. 21 No. 2, pp. 87-102.
Teece, D.J., Pisano, G. and Shuen, A. (1997), ‘‘Dynamic capabilities and strategic management’’,
Strategic Management Journal, Vol. 18 No. 7, pp. 509-33.
Turban, E., Aronson, J.E. and Liang, T. (2005), Decision Support Systems and Intelligent Systems,
7th ed., Prentice-Hall, Upper Saddle River, NJ.
Van den Bosch, F.A.J., Henk, W., Volberda, H.W. and de Boer, M. (1999), ‘‘Co-evolution of firm
absorptive capacity and knowledge environment: organizational forms and combinative capabilities’’,
Organization Science, Vol. 10 No. 5, pp. 551-68.
Wade, M. and Hulland, J. (2004), ‘‘Review: the resource-based view and information systems research:
review, extension, and suggestions for future research’’, MIS Quarterly, Vol. 28 No. 1, pp. 107-42.
Webb, B.R. and Schlemmer, F. (2006), ‘‘The impact of strategic assets on financial performance and on
internet performance’’, Electronic Markets, Vol. 16 No. 4, pp. 371-85.
Wernerfelt, B. (1984), ‘‘A resource-based view of the firm’’, Strategic Management Journal, Vol. 5 No. 2,
pp. 171-80.
Zack, M., Mckeen, J. and Singh, S. (2009), ‘‘Knowledge management and organizational performance:
an exploratory analysis’’, Journal of Knowledge Management, Vol. 13 No. 6, pp. 392-409.
Zahra, S.A. and George, G. (2002), ‘‘Absorptive capacity: a review, reconceptualization, and
extension’’, Academy of Management Review, Vol. 27 No. 2, pp. 185-203.
Zaim, H., Tatoglu, E. and Zaim, S. (2007), ‘‘Performance of knowledge management practices: a causal
analysis’’, Journal of Knowledge Management, Vol. 13 No. 6, pp. 392-409.

j j
PAGE 170 JOURNAL OF KNOWLEDGE MANAGEMENT VOL. 15 NO. 1 2011
About the authors
Annette Mills is a Senior Lecturer at the University of Canterbury (New Zealand). Annette
holds a PhD in Information Systems from the University of Waikato (New Zealand). She has
published a number of refereed articles in edited books and journals including Information
and Management, and Computers and Education. She currently serves on the editorial
boards for the Journal of Cases on Information Technology as an Associate Editor, the
Journal of Global Information Management, and the International Journal of e-Collaboration.
Her research interests include social computing, technology adoption and diffusion, service
expectations, and user sophistication. Annette Mills is the corresponding author and can be
contacted at: annette.mills@canterbury.ac.nz
Trevor Smith is the head of the units of Marketing, International Business, Entrepreneurship
and Strategy in the Department of Management Studies at the University of the West Indies,
Mona. He lectures in Marketing and Research Methods at both undergraduate and graduate
Levels. His research interests include consumer marketing, tourism and hospitality
management and business strategy. Another area of interest is knowledge management
and its impact on firms’ performance. He is also a consultant in field of marketing research
and strategy.

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com

Or visit our web site for further details: www.emeraldinsight.com/reprints

j j
VOL. 15 NO. 1 2011 JOURNAL OF KNOWLEDGE MANAGEMENT PAGE 171