Author's Accepted Manuscript

The Impact of Knowledge Management Cap-

abilities and Supplier Relationship Manage-
ment on Corporate Performance
Shu-Mei Tseng

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PII: S0925-5273(14)00124-8
DOI: http://dx.doi.org/10.1016/j.ijpe.2014.04.009
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To appear in: Int. J. Production Economics

Received date: 30 January 2013

Accepted date: 11 April 2014

Cite this article as: Shu-Mei Tseng, The Impact of Knowledge Management
Capabilities and Supplier Relationship Management on Corporate
Performance, Int. J. Production Economics, http://dx.doi.org/10.1016/j.
ijpe.2014.04.009

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 The Impact of Knowledge Management Capabilities and Supplier Relationship
Management on Corporate Performance

Shu-Mei Tseng
Department of Information Management, I-Shou University
No.1, Sec. 1, Syuecheng Rd., Dashu District, Kaohsiung City 84001,Taiwan, R.O.C.
Tel.: (886) 7-6577711 ext. 6574
Fax: (886) 7-6577056
E-mail: y97576@isu.edu.tw
Keywords: Knowledge Management Capability; Supplier Relationship Management;
Corporate Performance

Abstract

Nowadays, the business environment has become more turbulent and more

competitive; hence, supplier relationships have become strategic assets for firm

survival. Furthermore, this relationship has become an important issue for

understanding how firms apply knowledge management capabilities (KMC) to initiate,

enhance, and maintain supplier relationships, as well as enhance corporate

performance. However, few attempts have been made to explore the relation between

KMC, supplier relationship management (SRM) and corporate performance. To

address this lack of knowledge, the present study employed a questionnaire and

statistical analytical techniques to explore the impact of KMC and SRM on corporate

performance. Results indicate that KMC has a positive influence on corporate

performance, while SRM is the partial intervening variable between KMC and

corporate performance. This approach provides valuable suggestions that allow firms
to better their KMC and enhance their supplier relationships and corporate

performance. 

1. Introduction

Due to the fact that knowledge is a key strategic resource to create corporate

value (Drucker, 1993; Zack, 1999; Bhatt et al., 2005), enterprises strive to develop

knowledge to the maximum in order to achieve corporate goals. However, whether an

enterprise can effectively utilize and develop knowledge determines the pros and cons

of knowledge management capabilities (KMC) (Tanriverdi, 2005). Gold, Malhotra,

and Segars (2001) further indicated that the key contributions of KMC are improved

ability to innovate, improved coordination of efforts, and rapid commercialization of

new products. Understanding a firm’s KMC is essential to both providing competitive

advantages and increasing firm performance (Andrew, 2005; Tanriverdi, 2005).

Managers are faced with operational challenges due to emerging factors such as

worldwide sourcing, the lengthening of supply chains, and the necessity for

mass-customized manufacturing (Fugate et al., 2012). Thus, firms have been exerting

effort creating collaborative relationships with their suppliers to enhance their

operational efficiency and effectiveness in the supply chain (Gallear, Ghobadian, and

Chen, 2012). Furthermore, firms have been striving to put their focus on core

1
 
competencies through outsourcing parts of their business; therefore, inter-firm

relationships have become a major element to leverage corporate strategy (Saccani

and Perona, 2007). By supporting partnerships, firms are able to facilitate the process

of creating competitive advantages both at the buyer and supplier sides that lead to

enhancement of market share and profitability.

Although many firms struggle to compete based on product and service, they are

able to differentiate versus their competitors based on logistics service and the

knowledge management practices that support it. Moreover, research has described

components of KMC and demonstrated its impact on firm performance (Miranda, Lee

and Lee, 2011). However, a holistic picture of the relationship among KMC, supplier

relationship management (SRM) and corporate performance has yet to emerge. The

objective of this study was to advance our understanding of the relationships among

KMC, SRM, and corporate performance by addressing the following research

questions at the firm level of analysis: (1) How does KMC improve SRM and

corporate performance? (2) How does SRM influence corporate performance? and, (3)

How do firms better their KMC to enhance their supplier relationships and corporate

performance? 

This study proceeds as follows. The theoretical foundations, research model and

hypotheses section introduces the key constructs of the study and develops hypotheses

2
 
linking KMC to corporate performance and SRM, and how SRM relates to corporate

performance. The methods section presents the procedures used for data collection,

validation of the measurement properties of the constructs, and the test of the

proposed research model. Findings are presented in the results section. Finally, this

study concludes with a discussion of the findings and suggestions for future research.

2. Theoretical Foundations

2.1 Knowledge Management Capabilities

KMC is the ability of an enterprise to leverage existing knowledge through

continuous learning to create new knowledge (Bose, 2003). Liu, Chen, and Tsai (2004)

further explained that KMC not only refers to the ability to acquire knowledge and

information, but also to the organizational capability of protecting knowledge and

information in order to encourage staff to use this ability as a tool to work more

efficiently. Chen and Fong (2012) stated that the root of KMC lies in the high-level

knowledge-based routines that are usually driven by the learning process that is

conducted through knowledge processes. They further elaborated that the firm

condition these processes based on their governance mechanisms and history, hence

path dependencies are generated. In other words, knowledge governance mechanisms

and knowledge processes (e.g., creating, retaining and sharing knowledge) are the

3
 
organizational attributes that reflect the elements of KMC. Deliberate learning is

embedded in the knowledge processes allowing the firm to continually reconfigure

knowledge-based resources and routines in order to provide responses or even to

initiate changes in a market. Knowledge processes are enabled through conducive

governance mechanisms so that the firm is able to configure more effectively.

Gold, Malhotra, and Segars (2001) pointed out that KMC consists of knowledge

infrastructures and knowledge management (KM) processes. Knowledge

infrastructure includes technology, structure, and culture; while KM processes include

the organizational capabilities of knowledge acquisition, conversion, application, and

protection. Simultaneously, in order to effectively leverage knowledge infrastructure,

it is crucial to rely on KM processes, which makes it possible to store, transform, and

transfer knowledge. Tanriverdi (2005) investigated the influence of KMC on the

corporate performance of multi-business firms and divided KMC into product KMC,

customer KMC, and managerial KMC. Furthermore, Tanriverdi also described

knowledge creation, transfer, integration, and leverage as the four main dimensions to

measure the influence of the three kinds of KMC on corporate performance. Fan et al.

(2009) further combined knowledge infrastructure and KM processes and proposed

that 7 attributes (i.e., technology, structure, culture, acquisition, conversion,

application, and protection) be applied in a fuzzy multiple decision-making method to

4
 
measure organizational KMC. On the other hand, Aujirapongpan et al. (2010)

explained corporate KMC through the perspectives of resource-based and

knowledge-based capabilities. Resource-based capability refers to different angles of

resources to investigate KMC and an assumption that possessing different resources

will result in different KMC and influence the infrastructure capability of KMC,

including technology, organizational structure and culture. Furthermore, the

knowledge-based capability perspective particularly emphasizes intangible assets,

KM process and managing different kinds of knowledge. Aspects that influence KMC

from the knowledge-based perspective are expertise, learning, and information

capabilities. Miranda, Lee and Lee (2011) provided a concept of KMC in the context

of accumulating specific stocks (such as human resources, technology infrastructure

and strategic templates) and of how to regulate three key flows or processes (i.e.,

institutionalization, and internal and external learning processes). Based on their

research, the contribution was they developed and preliminarily validated metrics that

can be utilized to assess KMC. Furthermore, they found that the stocks and flows

dimensions of KMC had a strong direct effect on return on assets (ROA). Chen and

Fong (2012), from the perspective of the dynamic capabilities view (DCV), identified

the core components of KM, namely people, processes, technology, organizational

culture and structure, which are the observable attributes of KMC in a firm.

5
 
2.2 Supplier Relationship Management

Supplier relationship management (SRM) is a business process for managing all

contacts between an organization and its suppliers (Kroenke, 2012). Suppliers, here,

refers to any organization that sells something to the firm that operates the SRM

application. Moeller, Fassnacht, and Klose (2006) stated that SRM is the process of

executing activities including setting up, developing, stabilizing, and dissolving

relationships with in-suppliers, as well as observing out-suppliers, in order to generate

and enhance value within these relationships. Simultaneously, both parties can

stabilize their relationship through discussion and adjustment (Johnson, et al., 2004).

Giannakis, Doran, and Chen (2012) further indicated that in supplier relationships,

both parties are engaged in a long-term relationship and high commitment. Therefore,

both parties share the interests of establishing close collaboration through developing

joint products and sharing cost reductions to maximize mutual benefits. Unfortunately,

collaborating enterprises may not be able to understand each other’s information and

production plans, which might render it impossible to achieve positive results and

hinder operations and competitiveness (Christopher, 1998). Consequently, enterprises

collaborating in the supply chain should share their operations information in real

time and establish synchronized operations (William and Connie, 1999). Chang (2005)

stated that increasing the number of business partners increases the potential for both

6
 
interactions and conflicts of interest. Therefore, an enterprise should not only ensure

high cultural compatibility with its channel partners, but that their partners should also

support their business partners’ corporate mission, values, and goals.

Bates and Slack (1998) indicated that the strength of the relationship could be

affected by many factors, including availability of supply in any given industry,

product complexity, buyer knowledge, experience and responsibility for product

service, which all affect the relationship. Heckman (1999) stated that supplier

relationships vary from purely transactional, price-based interactions to highly

interdependent partnerships and alliances. For example, IT products and services

range from routine commodities (e.g., computer supplies and office software licenses)

to highly specific and customized development projects. According to the level of

interaction and cooperation between firms, Saccani and Perona (2007) divided the

buyer-supplier relationship into four types: traditional relationships, operational

relationships, project-based partnerships, and evolved partnerships. The concept of

traditional relationships refers to the situation where suppliers should provide

guarantees on customer service and product quality, while market mechanisms usually

establish prices. Operational relationships are responses towards the need of cost

reduction in relation to the exchange of high volumes of goods with a high frequency.

Project-based partnerships may design, develop or re-engineer a product, the

7
 
production process and the facility layout or help the customer in selecting suppliers.

Evolved partnerships are the result of the needs for the joint development of products

or components that require a tight logistic integration in order to synchronize the

demand and supply or to reduce costs of transportation, warehousing, and

administration.

Buyers and suppliers who share resources can generate competitive advantages

and enhance relationships between firms (Cheung, Myers, and Mentzer, 2010). In

other words, it is crucial for a firm to learn from partners and create differential

advantages and extraordinary returns (Yang and Lai, 2012). Hence, enterprises should

strive to improve communication, information sharing, and participation with their

business partners. Simultaneously, it is possible to reduce speculation and adverse

behaviors through nurturing trust, commitment, and interaction among partners

(Ganesan, 1994; Centola, et al., 2004).

2.3 Corporate Performance

Performance is a crucial issue for all individuals and organizations. Holsapple

and Wu (2011) asserted that a set of unique resources owned by the firm—namely

valuable, rare, difficult to imitate, and irreplaceable by other resources—is the main

driver of corporate performance. Moreover, excellent corporate performance is the

key to competitive advantage. Most scholars have similar perspectives on the

8
 
definition of performance; however, many different criteria have been used to

measure performance. As such, the performance measurement index applied in a

study should be chosen according the research topic (Agarwal et al., 2003; Evan and

Davis, 2005). Moreover, performance evaluation is often employed as the basis for

corporate reward and punishment; hence, selecting the appropriate measurement

index becomes ever more important. Chakravarthy (1986) found that classic financial

measures (such as ROE, ROC, and ROS) are incapable of distinguishing the

differences in performance between firms. Kaplan and Norton (1996) also asserted

that traditional financial accounting measures (e.g., ROI, EPS) can give misleading

signals regarding continuous improvement and innovation. Further, Germain (2001)

stated that performance control can be of two types: internal performance, which is

related to issues such as cost, product quality, and profit level; and benchmarked

performance, which compares cost, quality, customer satisfaction, and operations to a 

standard, such as the industry norm or the practices of its leaders. Fliaster (2004)

argued that the strong orientation of executive culture towards short-term financial

performance measures and its ignorance of personnel issues are supported by current

remuneration systems. This implies that financial measures that are based on

traditional accounting practices, with an emphasis on short-term indicators such as

profit, turnover, cash flow, and share prices, are not entirely suitable for measuring

9
 
corporate performance. Non-financial measures, such as customers, investors, and

stakeholders, have become increasingly important (Edvinsson, 1997; Lee et al., 2005).

Cotora (2007) indicated that it is not possible for a performance measurement system

to appraise corporate performance or analyze value creation patterns without

identifying the inter-relationships and the conversion processes among situations,

contexts, and intangible values such as knowledge, competencies, and partnerships. In

order to consider both financial and non-financial measures, Maltz et al. (2003)

proposed five performance indexes, namely financial performance, market/customer,

process, people development, and future, to evaluate corporate performance. Based on

the results of discussion mentioned above, This study will combination financial

measure and non-financial measure to evaluate corporate performance.

3. Research Model and Hypotheses

The purpose of this research is to understand how KMC influences the

relationship between enterprises and their suppliers, as well as how it can enhance

corporate performance. The basic model studied the relationship between KMC and

corporate performance. The effects of SRM on this relationship were explored. The

research model is shown in Fig. 1.

【 Insert Fig. 1 about here】

10
 
 Knowledge is a key source of competitive advantage that differentiates firms'

performance according to the differences in their knowledge processors, knowledge

processes, and organizational knowledge. Knowledge processors are systems which

can be both human- and computer-based that function to manipulate knowledge

resources; knowledge processes consist of various configurations of knowledge

manipulation conducted by the processors; and, organizational knowledge is what is

being manipulated (Holsapple and Wu, 2011). In other words, an organization’s

ability to accumulate critical knowledge resources and manage their assimilation and

exploitation will affect corporate performance. Kiessling et al. (2009) also stated that

KMC has a positive influence on product improvement, employee innovation and

firm innovation in transitional economies. Yeşil, Koska, and Büyükbeşe (2013)

further explain that knowledge created, transferred and shared in the firms are the

main sources for the innnovation, while innovation is regarded as an important

mechanism to be more competitive and to survive in global business world. Thus,

equipping KMC has become very important in any type of organisation. Hence, this

research assumes that if enterprises can equip excellent KMC, then it is possible to

enhance corporate performance. This research proposes the following hypothesis:

H1: The degree of KMC will have a positive effect on corporate performance.

11
 
 Dyer and Nobeoka (2002) explained that information sharing and knowledge

learning are interrelated in SRM because these activities improve mutual trust

amongst suppliers and coordinate profit distribution to enhance the development of

supplier relationships. Having close relationships with particular suppliers may

contribute to improving corporate performance as it becomes possible to reduce costs,

achieve constant improvements in quality, and improve the design of the new

products (Goffin, Lemke, and Szwejczewski, 2006). As a result, firms rely on the

skills and knowledge of their staff to improve the relationships between company and

suppliers, as well as enhance corporate performance. Paulraj et al. (2008) indicated

that the key relational competency in buyer-supplier relationships (BSR) lies in

knowledge sharing since this helps enhance the performance of both buyers and

suppliers. For example, the focus of knowledge sharing could be placed on sharing

strategically sensitive data such as “external strategic data” (e.g., customer

preferences and competitor actions) and “internal strategic data” (e.g., strategic plan)

that will contribute to driving financial and market performance. Another example is

the sharing of sell-through and inventory status data allowing the firm to reduce the

bullwhip effect and improve operational performance (Lee et al., 1997; Frazier et al.,

2009; Liu et al., 2012). According to knowledge-based theory, Yang et al. (2009)

argued that improvement in BSR is a result of the dyadic quality performance in terms

12
 
of mutual conformance to the quality requirements of the parties that are involved in

the BSR. They also posited that the information technology (IT) capability of a firm,

effective communication with suppliers and customer KMC are the main factors that

determine the dyadic quality performance. Dyadic quality performance is the quality

conformance of the parties that are involved in a BSR meeting that aims to reach an

agreement on the quality requirements and expectations in their economic exchange.

Hence, established partnerships with suppliers can help a firm increase

effectiveness when working with important suppliers who are willing to share

responsibility to succeed in offering products (Gallear, Ghobadian, and Chen, 2012).

Organizations should work closely and be aligned to eliminate redundancies. This

study considered that the adoption of partnerships with suppliers is beneficial to

corporate performance, and thus, proposes the following hypothesis,

H2: The association between the degree of KMC and corporate performance is
mediated by SRM.

4. Methodology

4.1 Measures development

After developing the research framework, a structured questionnaire survey was

adopted because this is the most appropriate way to collect relevant primary data. This

study developed the questionnaire draft based on the previous literature. The measures

development are as follows.

13
 
 KMC, the independent variable in the research model, refers to the ability of an

enterprise to leverage existing knowledge to create and protect new knowledge (Bose,

2003; Gold, Malhotra, and Segars, 2001). As this research intended to examine the

effect of KMC on corporate performance, this research conducted the concept of KM

processes to classify KMC into knowledge acquisition, conversion, application, and

protection (Gold, Malhotra, and Segars, 2001). Thus, measures development was

measured through its operationalized facets including knowledge acquisition,

conversion, application, and protection.

Corporate performance, the dependent variable of this research, refers to an

evaluation on the effectiveness of individuals, groups, or organizations. In order to

combine financial measure and non-financial measure to evaluate corporate

performance. This research adopted Maltz et al. (2003) and Fliaster (2004) proposed

performance indexes to assess the effectiveness of organizations.

There is little empirical research on SRM, the mederating variable of this

research, in knowledge management (Blome, Schoenherr and Eckstein, 2013). These

gaps reflect the lack of reliable measures of the SRM between organizations and their

suppliers. Thus, this research developed the measure based on the definition of SRM

proposed by Giannakis, Doran, and Chen. It refers to an organization and its suppliers

are engaged in a long-term relationship and high commitment. Moreover, they share

14
 
the interests of establishing close collaboration through developing joint products and

sharing cost reductions to maximize mutual benefits. Therefore, collaboration and

customized service dimensions were adopted as this research measure of SRM.

The language used in explaining questions was plain Chinese and easily

understood. The draft questionnaire was tested by scholars and experts, which led to

minor modifications in the wording of some survey items. In other words, the

research constructs were operationalized by means of related studies and a pilot test.

When developing the measurement, a seven-point Likert-type scale, ranging from 1

(strongly disagree) to 4 (neutral) to 7 (strongly agree), was used to measure the

research variables. The final questionnaire comprises four parts, and includes KMC,

SRM, corporate performance, and the demographics of the sample.

4.2 Samples and data collection

Samples were restricted to a list of the largest Taiwanese corporations compiled

by China Credit Information Service (2011), from which 500 corporations were

selected. Middle-top managers were asked to fill out the questionnaire since they tend

to play key roles in organizational activities. The link to the online questionnaire of

this study was distributed to the companies at the beginning of May 2012, with 114

questionnaires returned by June 2012. Although all returned questionnaires were valid,

the effective response rate was 22.8%. Table 1 shows the demographic breakdown of

15
 
the sample, which includes industries, annual sales, number of employees, job

position, and years of experience.

【 insert Table 1 about here】

First, this research applied item analysis to measure the relevance of each

questionnaire item. Results show that the research variables (i.e., KMC, SRM, and

corporate performance) were appropriate. Second, exploratory factor analysis (EFA)

was employed and questionnaire items which had not reached the standard for factor

selection were deleted. Factors, eigenvalue higher than 1, were then named based on

the relation of the questionnaire items for each factor. From the results of factor

analysis, this research eventually divided KMC into knowledge conversion and

knowledge protection; SRM was divided into customized services and collaboration;

whilst corporate performance was divided into financial performance and

non-financial performance. The results of EFA and the final questionnaire items are

shown in Tables 2 and 3.

【 insert Table 2-3 about here】

4.3 Reliability and Validity

Table 4 outlines the results of the item analysis and reliability tests performed on

16
 
the final questionnaire items. The item-to-total correlation, which was calculated

between each individual item and the sum of the remaining items, was used to

determine the item analysis. When the item-to-total correlation score was lower than

0.4, the case was eliminated from further analysis. Internal consistency measures

(Cronbach’s alpha) were conducted in order to assess the reliability of the

measurement instruments. The reliability level is acceptable if the value is at least 0.8

for basic research and 0.7 for exploratory research (Nunnally, 1978).

Construct validity testifies to how well the results gained from the use of the

measure fit the theories around which the test is designed. A factor analysis is used to

examine construct validity (Cavana, Delahaye and Sekaran, 2001). Content validity of

the instruments was established by adopting the constructs that have already been

validated by other scholars and experts. This research compared the factors (the

construct validity) with the intended structure (content validity). The construct

validity mirrors the content validity, showed in table 2. From the analyses mentioned

above, it was found that the questionnaire items on each factor met the requirements

of reliability and validity.

【 insert Table 4 about here】

5. Analysis and results

5.1 Pearson’s correlation analysis

17
 
 Table 5 shows that the correlation coefficient between KMC and corporate

performance is 0.551, which is a positive correlation. In terms of knowledge

conversion and knowledge protection, their correlation coefficients with corporate

performance are 0.540 and 0.390, respectively. These results indicate that all

measured items have a strong correlation and reach a significant level (**p < 0.01).

Thus, KMC has a significant positive correlation with corporate performance. The

correlation coefficient between KMC and SRM is 0.546, which is a positive

correlation. The correlation coefficients of both KMC factors—knowledge conversion

and knowledge protection—with SRM are 0.532 and 0.392, respectively. For the

correlation among all KMC factors, results show a strong correlation reaching a

significant level (**p < 0.01). Thus, KMC has a significant positive correlation with

SRM. The correlation coefficient between SRM and corporate performance is 0.602,

showing a highly positive correlation. The correlation coefficients of both SRM

factors—customized services and collaboration—with corporate performance are

0.597 and 0.463, respectively. Results support that all SRM factors have a strong

correlation and reach a significant level (**p < 0.01); thus, SRM has a significant

positive correlation with corporate performance.

【 insert Table 5 about here】

18
 
5.2 Testing the mediating effects of SRM

This research tested the mediating effects of SRM based on the four criteria

proposed by Baron and Kennv (1986).

5.2.1 KMC and corporate performance

The regression analyses for KMC on corporate performance and SRM, and SRM

on corporate performance are given in Table 6. The β values and adjusted R2 for KMC

on corporate performance are 0.644 and 0.298, respectively, and show that KMC has

a significant effect on corporate performance. Consequently, the research result

supports Hypothesis H1, which means that the degree of KMC has a positive effect on

the degree of corporate performance. The β values and adjusted R2 for knowledge

conversion and knowledge protection on corporate performance are 0.543, 0.124, and

0.299, respectively (multiple-regression analyses). These results indicate that

knowledge conversion has significant effects on corporate performance (p-value is

0.000), while knowledge protection does not (p-value is 0.084).

5.2.2 KMC and SRM

Table 6 shows that the β values and adjusted R2 for KMC on SRM are 0.497 and

0.292, respectively. Results suggest that KMC has a significant effect on SRM.

Therefore, the research result indicate that the degree of KMC has a positive effect on

the degree of SRM. The β values and adjusted R2 for knowledge conversion and

19
 
knowledge protection on SRM are 0.411, 0.101, and 0.291, respectively

(multiple-regression analyses). These results show that knowledge conversion has

significant effects on SRM (p-value is 0.000), while knowledge protection does not

(p-value is 0.070).

5.2.3 SRM and corporate performance

Table 6 shows that the β values and adjusted R2 for SRM on corporate

performance are 0.773 and 0.356, respectively. These results indicate that SRM has a

significant effect on corporate performance. Thus, the research result suggests that the

degree of SRM has a positive effect on the degree of corporate performance. The β

values and adjusted R2 for customized services and collaboration on corporate

performance are 0.575, 0.195, and 0.364, respectively (multiple-regression analyses).

These results indicate that customized services have significant effects on corporate

performance (p-value is 0.000), while collaboration does not (p-value is 0.064).

5.2.4 KMC, SRM, and corporate performance

Table 7 presents the multiple regression analysis for KMC and SRM on

corporate performance. The β values for KMC and SRM on corporate performance

are 0.371 and 0.550, respectively. The model is denoted as

ŷ = 0.317x1 + 0.428x2 + ε , (where ŷ is corporate performance, x1 is KMC, x2 is

2
SRM). All variables show a positive significant relation. The adjusted R is 0.422 and

20
 
the explained variation for all variables is higher; consequently, KMC and SRM have

significant effects on corporate performance.

【 insert Table 6-7 about here】

The test results of mederating effect show that all four conditions are satisfied

and the results show that, as proposed in Hypothesis H2, the association between the

degree of KMC and corporate performance is mediated by SRM. Furthermore, based

on Tables 6 and 7, it was found that the standardized coefficient of KMC on corporate

performance is 0.644. The standardized coefficients of KMC and SRM on corporate

performance are 0.371 and 0.550, respectively. The path coefficient for KMC on

corporate performance decreased from 0.644 to 0.371, showing that SRM had a

partial mediating effect on KMC and corporate performance. This research further

applied path analysis to investigate the influence of KMC and SRM on corporate

performance. Results show that the value of direct impact of KMC on corporate

performance is 0.644; the value of direct impact of KMC on SRM is 0.497; and, the

value of direct impact of SRM on corporate performance is 0.773. Hence, the indirect

impact of KMC on corporate performance is 0.497*0.773=0.384, while the total value

of KMC on corporate performance is 0.644+0.384=1.028. Based on the results of the

direct and indirect impact of KMC on corporate performance, it can be seen that both

KMC and SRM hold significant influence on corporate performance. Therefore, if a

21
 
firm wishes to enhance its corporate performance, it not only has to improve its KMC,

but should also invest in SRM so that it is possible to effectively enhance corporate

performance. In other words, the influence of KMC on corporate performance during

the process will partially affect SRM and then, in turn, will affect corporate

performance.

6. Limitations

Although the findings of this study have a number of meaningful implications

for practitioners, it has some limitations. First, this research applied a purposive

sampling method and obtained a fairly adequate number of respondents. However, the

results may include some bias since the effective questionnaire response rate was only

22.8%. Therefore, it is suggested that future research should apply a random sampling

method to collect more responses and increase the generalizability. Second, this

research investigated the impact of KMC and SRM on corporate performance in a

Taiwanese context that contains a specific set of societal, cultural and linguistic

attitudes and behaviors. Moreover, the measurement scale items of this study was

translated from ‘plain’ Chinese to English may cause slight variations in meaning.

Therefore, future research could extend this study to other regions of the world. Third,

a regression analysis method was applied to simplify the research framework and to

investigate the relationship amongst KMC, SRM, and corporate performance. Hence,
22
 
it might be difficult to explain the overall model of this research. It is therefore

suggested that future researchers could apply the Structural Equation Model (SEM) to

further verify the model in order to simplify the elaboration of the research structure.

However, since the structure of this study is very simple, it is not necessary to apply

complex statistical methods for data analysis. On the other hand, caution must be

exercised in the application of complex statistical methods since they easily generate

fabricated results and decrease reliability. Nevertheless, the simple structure of this

study makes this limitation acceptable.

7. Implications and conclusions

According to the result of the Pearson’s correlation analysis (Table 5) and the

regression analysis (Table 6), there is a significantly positive effect of KMC on SRM

and corporate performance. Moreover, the knowledge conversion factor of KMC

shows significant positive effects on SRM and corporate performance. This means

that if knowledge conversion is superior, it can significantly enhance SRM and

corporate performance. Thus, an enterprise should encourage their employees to

participate in knowledge conversion activities, as well as enhance their SRM and

corporate performance. For example, a firm should allow their employees to equip

themselves with the ability to record, store, filter, select, classify, generalize, and share

23
 
corporate knowledge, as well as transfer corporate knowledge to individuals and 

disseminate knowledge from individuals into the organization. In addition, this study

showed that knowledge protection does not have significant effects on SRM and

corporate performance. Further investigation found that the primary cause of

knowledge protection not having significant effects on SRM and corporate

performance is that neither companies nor employees are equipped with a knowledge

protection capability. That is, on the one hand employees are not equipped with the

ability to apply information technology to prevent any inappropriate knowledge access,

but on the other enterprises have not established effective protective policies and

procedures to prevent knowledge from any inappropriate access, usage, and theft.

Therefore, an enterprise should establish a governance mechanisms and effective

policy to protect knowledge and prevent any inappropriate access and usage.

According to the result of the Pearson’s correlation analysis (Table 5) and the

regression analysis (Table 6), there is a significant positive effect of SRM on

corporate performance. Moreover, the customized services factor of CRM shows

significantly positive effects on corporate performance. This means that if customized

services are superior, corporate performance is significantly enhanced. Thus, an

enterprise should particularly emphasize customized services to efficiently increase

corporate performance. For example, a firm should effectively identify, acquire and

24
 
classify suppliers in order to demand that target suppliers provide customized

products and services. Moreover, a firm can maintain close interactions with its

suppliers to establish long-term relationships and learn valuable knowledge. In

addition, this study showed that the collaboration factor of SRM does not have

significant effects on corporate performance. Further investigation found that the

primary cause of collaboration not having significant effects on corporate

performance is that neither companies nor employees are equipped with the ability to

cooperate with their suppliers to improve the logistics and shipping processes, the

production and operation processes, inventory management and the quality of products

or services. Therefore, enterprises should establish effective policies and procedures to

collaborate with their suppliers.

Based on the results of testing the mediating effects of SRM and path analysis, it

was found that KMC holds direct influence in enhancing corporate performance;

moreover, SRM is also indirectly interrelated in terms of enhancing corporate

performance. This shows that KMC determines how information and knowledge can

be acquired, selected and applied from the external environment. Therefore, firms

should apply their KMC to gather knowledge from suppliers to maintain and enhance

their relationship with suppliers as well as improve corporate performance. When a

firm possesses better KMC, it can deal with different explicit and implicit matters in

25
 
supplier information, and then extract and transform this into strategies which can

support its operations and marketing, as well as enhance SRM and corporate

performance. That is, a firm should rely on its KMC to enhance SRM so that it can

eventually enhance its corporate performance.

The objective of this study was to assess the impact of KMC on corporate

performance by considering SRM. Results show that KMC is the major factor for

enhancing corporate performance, and that SRM is a significant intervening factor

between KMC and corporate performance. In other words, whether an enterprise can

effectively enhance their corporate performance determines the pros and cons of

KMC and SRM. Hence, both KMC and SRM have become key strategic tools and

significant attributes of competitive advantage (Garrido-Moreno and

Padilla-Meléndez, 2011). This study further found that there were many companies

that have not established a complete knowledge protection strategy, and hence,

knowledge protection cannot trigger significant influence on SRM and corporate

performance. In other words, neither companies nor employees are equipped with the

ability to cooperate with their suppliers, and thus collaboration cannot trigger

significant influence on corporate performance. Therefore, corporations should not

only establish concrete knowledge protection strategies and procedures, but more

importantly, also nurture the culture of organizational knowledge protection so that

26
 
each staff member can understand the significance of knowledge protection (Coakes

et al., 2010). Because buyer-supplier relationships are usually long term, the

interaction between and within each company is highly complex regardless of its level

of collaboration (Ford et al., 2003). Hence, enterprises should establish effective

policies and procedures to collaborate with their suppliers, and utilize enterprise

authority to strengthen collaborations and prevent conflict (Hult, et al., 2004).

Acknowledgement
Supported by National Science Council (Taiwan) under grant NSC 99-2410-H-214
-020-MY2

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 32
 
Table 1
Profile of the respondent firms (n = 114)
Percentage of firms Percentage of firms
Industries Job position of the interviewee
Traditional manufacturing industry 18.4 CEO, general/vice manager 10.5
High tech industry 26.3 (Vice) division manager, assistant manager 27.2
Service industry 42.1 Chairperson, chief, project supervisor 15.8
Others 13.2 Administrator, executive board, engineer 28.9
Others 17.5

Annual sales (NTD) Years of work experience

Less than 30 million 21.1 ≦3 years 12.3
30 million to 100 million 10.5 3-5 years 7.0
100 million to 5 billion 29.8 5-10 years 3.5
5 billion to 15 billion 6.1 10-15 years 36.8
15 billion to 30 billion 4.4 15-20 years 19.3
30 billion to 50 billion 7.9 Over 20 years 21.1
50 billion and above 20.2

Number of employees
Less than 300 37.7
301 to 1,000 19.3
1,001 to 2,000 5.3
2,001 to 3,000 4.4
3,001 to 4,000 0
4,001 to 5,000 7.9
Over 5,001 25.4

33
 
Table 2 Results of the exploratory factor analysis (EFA).
Factors Variance Cumulative of Factors
1 2 3 4 5 6 explained variance explained named
KMC1 .796 .126 .131 .103 .150 -.127 17.086 17.086 Knowledge
KMC2 .786 .035 .146 .252 .140 .091 conversion
KMC3 .717 .246 .044 .068 .038 .272
KMC4 .701 -.007 .267 .270 .164 .075
KMC5 .696 .183 .137 .186 .203 .125
KMC6 .650 .334 .040 -.034 .035 .156
KMC7 .646 .087 .064 .285 .182 .276
KMC8 .205 .209 .113 .889 .137 .122 10.994 28.08 Knowledge
KMC9 .212 .205 .121 .886 .100 .117 protection
KMC10 .288 .041 .032 .860 .010 .090
SRM1 .185 .828 .200 .082 .139 .142 14.438 42.518 Customized
SRM2 .159 .767 .142 .210 .235 .148 services
SRM3 .183 .748 -.002 .151 .147 .305
SRM4 .148 .731 .110 .123 .234 .231
SRM5 .163 .655 .345 .032 .331 -.020
SRM6 .119 .192 .074 .230 .835 .123 10.838 53.356 Collaboration
SRM7 .173 .404 .034 -.024 .735 .165
SRM8 .116 .174 .091 -.067 .720 .358
SRM9 .347 .193 .049 .153 .680 -.019
CP1 .235 .205 .875 .050 .049 .186 11.216 64.572 Financial
CP2 .201 .072 .849 .067 .043 .274 performance
CP3 .085 .213 .830 .136 .088 .185
CP4 .163 .199 .243 .135 .202 .788 9.614 74.186 Non-financial
CP5 .050 .371 .298 .187 .111 .671 performance
CP6 .288 .240 .392 .086 .196 .621
CP7 .397 .212 .256 .128 .252 .531

Table 3 Measurement scale items for model variables

KMC (Chen and Fong, 2012; Gold, Malhotra, and Segars, 2001; Tanriverdi, 2005; Fan et al., 2009;
Aujirapongpan et al., 2010; Miranda, Lee, and Lee, 2011)
1. Knowledge conversion
We are already equipped with the ability to filter and select knowledge.
We are already equipped with the ability to methodically classify and generalize corporate
knowledge.
We are already equipped with the ability to transfer corporate knowledge to individuals.
We are already equipped with the ability to record and store various knowledge.
We are able to proactively share our own knowledge.
We are already equipped with the ability to apply knowledge to adjust strategic direction.
Our company is already equipped with the ability to retrieve knowledge from individuals in the
organization.
2. Knowledge protection
Our company has established effective protective policies and procedures to prevent knowledge
theft.
Our company has established effective protective policies and procedures to prevent knowledge
from any inappropriate access and usage.
We are already equipped with the ability to apply information technology to prevent any
inappropriate knowledge accessing.

SRM (Chang, 2005; Christopher, 1998; Giannakis, Doran, and Chen, 2012; Moeller, Fassnacht, and Klose,
2006; William and Connie, 1999;Yang and Lai, 2012)
1. Customized services
Suppliers can provide customized products/services for our company to enhance our
relationships.
We can effectively classify our suppliers and then demand our target suppliers to provide
customized products/services.
We can learn valuable knowledge from our existing suppliers.
We can maintain close interactions with our suppliers to establish long-term relationships.
34
 
 We can effectively identify and acquire the correct suppliers.

2. Collaboration
We are willing to cooperate with our suppliers to improve the logistics and shipping processes.
We are willing to cooperate with our suppliers to improve the production and operation
processes.
We are willing to cooperate with our suppliers to improve the quality of products/services.
We are willing to cooperate with our suppliers to improve the inventory management.

Corporate Performance (Agarwal et al., 2003; Edvinsson, 1997; Evan and Davis, 2005; Holsapple and Wu,
2011; Lee et al., 2005; Maltz et al., 2003)
1. Financial performance
Compared with other companies in the same industry, Our profit rate is very high.
Compared with other companies in the same industry, Our return on investment is very high.
Compared with other companies in the same industry, Our sales amount is very high.
2. Non-financial performance
Compared with other companies in the same industry, Our company vigorously invest on the
development of new technology.
Compared with other companies in the same industry, Our company vigorously invest on the
development of new market.
Compared with other companies in the same industry, Our company is able to grasp the right
timing for launching new products or services.
Compared with other companies in the same industry, Our company is able to retain outstanding
staff.

Table 4
Reliability results for each construct
Item analysis
Reliability
Constructs Items (item-to-total
(Cronbach’s alpha)
correlations)
.702; .764; .690; .692; .900
Conversion 7 .715; .573; .683
.892
KMC
Protection 3 .905; .905; .809; .937
Customized .801; .782; .732; .743; .899
5 .664
.895
SRM services
Collaboration 4 .758; .725; .644; .617 .847
Financial
Corporate performance
3 .896; .803; .781 .912
Performance Non-financial
.898
performance
4 .760; .687; .735; .666 .860

Table 5
35
 
Correlation analysis
Standard
Mean deviation KMC CV PT SRM CS CL CP FP NFP
KMC 3.697 .598 .763
#
CV 3.686 .593 .921** .713
#
PT 3.725 .899 .800** .501** .878
#
SRM 3.978 .544 .546** .532** .392** .744
#
CS 3.939 .602 .504** .475** .386** .912** .746
#
CL 4.026 .620 .467** .474** .305** .867** .586** .743
#
CP 3.583 .699 .551** .540** .390** .602** .597** .463** .738
#
FP 3.488 .824 .417** .414** .286** .413** .439** .282** .878** .851
#
NFP 3.654 .741 .562** .546** .405** .648** .618** .529** .917** .615** .653
**. p < 0.01; *. p < 0.05
#
. The shaded numbers in the diagonal row are Average Variance Extracted (AVE)
Note: CV: Conversion; PT: Protection; CS: Customized services; CL: Collaboration; CP: Corporate Performance; FP:
Financial performance; NFP: Non-Financial performance

Table 6
Regression analysis
Corporate Performance
Variable β Std. E Beta t-value p-value Adjusted R2
KMC 0.644 0.092 0.551 6.992 0.000** 0.298
Conversion 0.543 0.107 0.461 5.060 0.000** 0.299
KMC
Protection 0.124 0.071 0.159 1.746 0.084
SRM
Variable β Std. E Beta t-value p-value Adjusted R2
KMC 0.497 0.072 0.546 6.900 0.000** 0.292
Conversion 0.411 0.084 0.448 4.893 0.000** 0.291
KMC
Protection 0.101 0.055 0.167 1.829 0.070
Corporate Performance
Variable β Std. E Beta t-value p-value Adjusted R2
SRM 0.773 0.097 0.602 7.973 0.000** 0.356
Customized 0.575 0.107 0.495 5.349 0.000** 0.364
SRM services
Collaboration 0.195 0.104 0.173 1.869 0.064
** p < 0.01

Table 7
Regression analysis for KMC and SRM on Corporate Performance
Corporate Performance
Variables
β Std. E Beta t-value p-value Adjusted R2
KMC 0.371 0.100 0.317 3.717 0.000** 0.422
SRM 0.550 0.110 0.428 5.020 0.000**
** p < 0.01

36