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Knowledge
Developing a management
conceptual framework of
knowledge management
Rayees Farooq
Mittal School of Business, Lovely Professional University, Phagwara, India
Received 4 July 2018
Revised 3 October 2018
Accepted 2 November 2018
Abstract
Purpose – Knowledge management is a function of learning orientation, knowledge sharing, organizational
memory and knowledge reuse. This paper aims to endeavor to explore a link between knowledge
management and value creation which seem to be fragmented in the literature due to various
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conceptualizations and meanings. The study hypothesized a moderating role of social capital on the
relationship between knowledge management and value creation.
Design/methodology/approach – The study was approached from the theoretical perspective. Study
thoroughly reviews and analyzes the literature by developing a link between knowledge management and
value creation. The studies were explored from selected databases including “Google scholar”, “Emerald” and
“ProQuest” using the keyword search, namely, “Knowledge Sharing”, “Learning Orientation”, “Organizational
Memory”, “Knowledge Re-use”, “Knowledge Management”, “Knowledge-based View”, “Competitive
Advantage”, “Value Creation” and “Social Capital” to reduce the interpretation bias.
Findings – Knowledge management is an important predictor of value creation which can be strengthened
by developing strong interpersonal relationships with all stakeholders. Organizations can create competitive
advantage by managing social capital through knowledge management processes including learning
orientation, knowledge sharing, organizational memory and knowledge reuse.
Research limitations/implications – The study is based on a theoretical model and an apparent
limitation is the non-existence here of contributions and discussions that have been based on empirical data.
Future study may use other moderating and mediating variables such as industry type, market orientation,
human capital and organizational climate to know whether knowledge management directly affects the value
creation or indirectly through these variables. The hypotheses emerged from the model can be operationalized
by generating the items from the review of the literature.
Originality/value – The study contributes to the knowledge management literature by developing a
theoretical model of knowledge management based on underlying dimensions of learning orientation,
knowledge sharing, organizational memory and knowledge re-use.
Keywords Knowledge sharing, Knowledge management, Social capital, Value creation,
Learning orientation, Organizational memory, Knowledge reuse
Paper type Literature review
Introduction
Knowledge management (KM) as a discipline would appear to be somewhere between five
and fifteen years old. It evolved from the thinking of academicians and pioneers such as
Peter Drucker in the 1970s, Karl-Erik Sveiby in the late 1980s, and Nonaka and Takeuchi in
the 1990s (Brun, 2005). There is no consensus among the researchers about KM as a distinct
field and some consider KM as akin to information management and failed to observe the
true significance of KM in their profession (Kebede, 2010). One of the primary reasons that
researchers and practitioners have taken such an interest in KM is that knowledge is viewed International Journal of Innovation
Science
as a resource with significant potential of contributing to firm’s positions of competitive © Emerald Publishing Limited
1757-2223
advantage (Paswan and Wittmann, 2009). DOI 10.1108/IJIS-07-2018-0068
IJIS Until a definition is widely accepted, measuring KM and identifying its effect on
outcomes such as innovation and firm performance will be difficult to determine (Darroch
and McNaughton, 2003). The term KM has been defined in a number of ways in the
literature, but we have adopted the definition of Wang and Ahmed (2003), “KM orientation
is defined here as an organization’s distinctive capability of managing organizational
memory, knowledge sharing, and creating a learning culture”.
KM seems to be fragmented due to lack of underlying procedures and methods to
measure knowledge. The nature of the relationship between KM and value creation has
received considerable attention in the academic literature. Organizations failed to develop
improved measures due to lack of consensus on the measurement of KM. Developing and
maintaining KM is vital to firm’s long-term survival and success (Lin, 2015). Knowledge is
increasingly recognized as a critical resource that can be managed to enhance competitive
position and financial performance of a firm (Darroch, 2005). Researchers emphasize the
importance of developing unique knowledge within firms to deliver new products and
services and to distinguish it from competitors for achieving advantage (Birasnav, 2013).
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Research methodology
The review of the literature was based on following criteria: For identifying the studies
related to KM, value creation, competitive advantage, knowledge-based view and social
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capital, studies were selected based on the procedure suggested by Tranfield et al. (2003).
Undertaking a review of the literature to provide the best evidence for informing policy and
practice in any discipline is a key research objective for the respective academic and
practitioner communities (Tranfield et al., 2003). A procedure was followed whereby studies
were explored from selected databases including Google scholar, Emerald, ProQuest using
the keyword search, namely, “Knowledge Sharing”, “Learning Orientation”, “Organizational
Memory”, “Knowledge Re-use”, “KM”, “Knowledge-based View”, “Competitive Advantage”,
“Value creation” and “Social Capital”. The inclusion and exclusion criteria suggested by
Tranfield et al. (2003) was adopted whereby studies were included based on full-text
availability and keyword search. The studies were excluded based on non-availability of full
texts and doctoral dissertations.
The review of the literature included the studies from 1986 to 2018. The first phase
includes the studies from 1986 to 1997 with some seminal studies, namely, Barney (1986,
1991), Nonaka (1994), Nonaka and Takeuchi (1995) and Grant(1996) as shown in Table I.
The study explores seven studies during this period. The second phase explores the studies
from 1998 to 2008 with a total number of 34 studies. The period includes some of the seminal
work in the field of KM, namely, Alavi and Leidner (1998), Drucker (1999), Hensen et al.
(1999), Baker and Sinkula (1999), Gold et al. (2001) and Darroch and McNaughton (2003). The
last phase includes the studies from 2009 to 2017 with a total number of 28 studies. The
study found 69 studies from 1986 to 2017 which were finally used for the analysis.
1986-1997 (n = 7)
1986 (1) 1986 Barney (1986) Conceptual
1991 (2) 1991 Barney (1991) Conceptual
1991 Conner (1991) Conceptual
1993 (1) 1993 Garvin (1993) Conceptual
1994 (1) 1994 Nonaka (1994) Conceptual
1995 (1) 1995 Nonaka and Takeuchi (1995) Conceptual
1996 (1) 1996 Grant (1996) Conceptual
1998-2008 (n = 34)
1998 (1) 1998 Alavi and Leidner (1998) Empirical
1999 (3) 1999 Drucker (1999) Conceptual
1999 Hensen et al. (1999) Conceptual
1999 Baker and Sinkula (1999) Empirical
2001 (5) 2001 Alavi and Leidner (2001) Conceptual
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Ahmed, 2003; Darroch, 2005) shifted the focus of researchers to the knowledge-based view of
the firm. The resource-based view is often discussed as a theoretical foundation in KM
studies. However, RBV considers knowledge as a generic resource rather than having special
attributes. A knowledge-based view is an extension of RBV proposed by Grant (1996. The
present study emphasizes on knowledge-based view as the theoretical foundation.
There are various conceptualizations and measurements of KM, with little consensus
towards the dimensions of KM. KM is a measure of knowledge sharing, organizational
memory and learning culture (Wang and Ahmed, 2003). Darroch and McNaughton (2003)
measure KM orientation with knowledge acquisition, knowledge dissemination and
responsiveness to knowledge. Lin (2015) proposes KM orientation as a multi-dimensional
construct with organizational memory, knowledge sharing, knowledge absorption and
knowledge receptivity. The lack of consensus on the measures of KM and the need to
develop effective measures including learning orientation, knowledge sharing,
organizational memory and knowledge reuse is highly anticipated. The previous studies
widely examined the relationship between KM and performance (Wang et al., 2008, 2009).
However, there is lack of consensus on the consequences of KM (Darroch, 2005; Wang et al.,
2008; Edvardsson and Oskarsson, 2011; Lin, 2015). KM is an important predictor of value
creation (Edvardsson and Oskarsson, 2011).
The measures of KM including knowledge acquisition, knowledge dissemination and
responsiveness proposed in the previous studies (Darroch and McNaughton, 2003; Darroch,
2005) overlap with the behavioral perspective (intelligence generation, dissemination and
responsiveness) of market orientation proposed by Kohli and Jaworski (1990).
1. Knowledge Knowledge management is the Ha et al. (2016) Knowledge acquisition, knowledge Knowledge management positively affected both
management capability to acquiring the knowledge, conversion, knowledge application and financial and non-financial performance
converting it into new strategy, knowledge protection
applying and protecting it
2. Knowledge Knowledge management orientation is a Darroch and Knowledge acquisition, knowledge Knowledge management orientation affects the
management broader term covering both market and McNaughton dissemination and knowledge innovation and performance and is a broader term
orientation non- market factors including (2003) responsiveness than market orientation
performance and innovation
3. Knowledge Knowledge management is defined as Yusof and Knowledge acquisition, knowledge Knowledge management plays a significant role
management the process of identification, Bakar (2012) conversion, knowledge application and in the growth of construction companies.
optimization and active management of knowledge protection Organizations ineffective in managing the
assets which create value and enhances knowledge makes the knowledge irrelevant
business performance
4. Knowledge Knowledge management is defines as Alavi and Knowledge creation, knowledge storage, Proposed a framework of knowledge management
management the creation, codification, distribution Leidner (1998) knowledge distribution and knowledge and how this knowledge is being codified in order
and applications of knowledge in an application to create competitive advantage
organization
5. Knowledge Knowledge management is the Gold et al. Knowledge infrastructure capability The results have suggested that knowledge
management capability of an organization to store, (2001) (technology, structure and culture) and infrastructure capability (technology, structure
codify and process the knowledge knowledge process capability (Acquisition, and culture) and knowledge process capability
conversion, application and protection) (Acquisition, conversion, application and
protection) can provide a useful benchmark for
managing the knowledge in an organization
6. Knowledge Knowledge management is a group of Zaied et al. Knowledge infrastructure capability The results have suggested that knowledge
management well-defined process used to explore and (2012) (technology, structure and culture) and management positively affects organizational
exploit the knowledge among different knowledge process capability (Acquisition, performance
knowledge management operations conversion, application and protection)
7. Knowledge Knowledge management is the Darroch (2005) Knowledge acquisition, knowledge The study has concluded that only knowledge
management capability of an organization to dissemination and knowledge responsiveness affects performance: however
effectively manage knowledge which responsiveness knowledge acquisition and knowledge
enables the firms to extract more from dissemination does not affect performance.
all resources available to it Innovation is an important predictor of knowledge
management-performance relationship
(continued)
management
knowledge
Table III.
conceptualization of
Knowledge
Measurement and
management
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IJIS
Table III.
S. No. Construct Definition Source Dimensions Findings
8. Knowledge Knowledge management orientation is Wang et al. Organizational memory, knowledge sharing, The results have suggested that knowledge
management the firms relative propensity to build (2009) knowledge absorption and knowledge management orientation affects the performance
orientation organizational memory as well as receptivity and market orientation mediates the relationship
propensity to share, assimilate and be between knowledge management orientation and
receptive to new wisdom performance
9. Knowledge Knowledge management is the process Wang et al. Organizational memory, knowledge sharing, Knowledge management orientation positively
management of codifying, sharing the knowledge, (2008) knowledge absorption and knowledge affects firm performance
orientation propensity to absorb and knowledge receptivity
receptivity
10. Knowledge Knowledge management orientation can Lin (2015) Organizational memory, knowledge sharing, Knowledge management orientation positively
management be defined as the relative propensity of a knowledge absorption and knowledge affects performance
orientation firm to build on receptivity
existing knowledge, as well as to share
knowledge, assimilate external
knowledge within the existing
framework of internal knowledge, and
be receptive to new knowledge
11. Knowledge Knowledge management is defined as Current study Learning orientation, knowledge sharing, Knowledge management is an important predictor
management the capability to create learning culture, organizational memory and knowledge reuse of value creation. Social capital moderates the
facilitate knowledge sharing, store relationship between knowledge management and
productive knowledge and reuse the value creation
existing knowledge
12. Knowledge Knowledge management orientation is Darroch and Knowledge acquisition and responsiveness Knowledge acquisition, knowledge dissemination
management the management function that creates or McNaughton to knowledge are significant for innovation and responsiveness to knowledge
orientation locates knowledge, manages the flow of (2002) than knowledge dissemination
knowledge within the organization
13. Knowledge Knowledge management orientation is Yazhou and Organizational memory, knowledge sharing, Knowledge management orientation positively
management the ability to share, store, assimilate and Jian (2013) knowledge absorption and knowledge affects organizational performance
orientation be receptive to new knowledge receptivity
14. Knowledge Knowledge management is defined as Boumarafi and Organizational culture, organizational Knowledge management positively affects
management the organizations ability to engage in Jabnoun (2008) infrastructure, technical infrastructure, organizational performance
activities specifically designed to management support, reward and vision
facilitate the creation and sharing of clarity
knowledge
(continued)
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15. Knowledge Knowledge management refers to the Liao and Wu Knowledge acquisition, knowledge Organizational learning mediate the relationship
management process to develop and use knowledge (2010) conversion and knowledge application between knowledge management and
within the firm organizational innovation
16. Knowledge Knowledge management is defined as Daud and Knowledge acquisition, knowledge Social capital mediates the relationship between
management the organizational capability to organize Yusoff (2010) conversion and knowledge application knowledge management and firm performance
and making available important
knowledge wherever and whenever it is
needed
17. Knowledge Knowledge management is simply the Chen and Knowledge acquisition, knowledge Knowledge acquisition and utilization play
management process of leveraging organizational Mohamed dissemination, knowledge utilization and significant roles in the development of the
knowledge to deliver a long-term (2007) responsiveness to knowledge organizational knowledge assets which in turn
competitive advantage demands greater knowledge dissemination
capacity to improve business performance
18. Knowledge Knowledge management is a Bagorogoza Knowledge acquisition, knowledge The study found that high performance
management systematic, organized, explicit and and Waal dissemination and responsiveness to organization framework is an important predictor
deliberate ongoing process of creating, (2010) knowledge of knowledge management, competitive
disseminating, applying, renewing and advantage and performance
updating the knowledge for achieving
organizational objectives
Table III.
Knowledge
management
IJIS KM, which emphasizes on converting tacit into explicit knowledge. KM researchers suggest
different models of KM with varied conceptualizations and measurements.
A number of frameworks exist in the KM literature including KM orientation model
(Wang and Ahmed, 2003), KM process capability model (Gold et al., 2001) and KM
orientation model (Darroch and McNaughton, 2002). Wang and Ahmed (2003) suggest KM
orientation as a multi-dimensional construct with knowledge sharing, organizational
memory and learning the culture as its dimensions. Wang et al. (2008) operationalize KM
orientation as a higher-order construct with organizational memory, knowledge sharing,
knowledge receptivity and knowledge absorption as its dimensions. Darroch and
McNaughton (2002) identify three dimensions of KM orientation including knowledge
acquisition, knowledge dissemination and responsiveness to knowledge. Similarly, Gold
et al. (2001) validate KM process capability model with knowledge acquisition, conversion,
application, and protection. In the light of above discussion, KM is proposed as a multi-
dimensional construct with learning orientation, knowledge sharing, organizational
memory and knowledge reuse as its dimensions as shown in Figure 1.
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Figure 1.
Theoretical model of
knowledge
management
significant strategic advantages in the global world of business (Marquardt, 2011). Knowledge
Calantone et al. (2002) conclude that learning orientation affects firm performance and firm management
innovation capability mediates the relationship between learning orientation and business
performance. However, organization age moderate the relationship between learning
orientation and firm performance. Baker and Sinkula (1999) conclude that effect of learning
orientation on organizational performance is mediated by market orientation.
LO is the tendency towards a strong commitment to knowledge, open-mindedness and
shared vision. Organizations believe that learning is only a matter of shared vision,
optimism and providing training to their work-force. This statement is equivocal in nature
as it may change the preferences of the customers. The organizations need to shift their
focus from organizational learning to learning organization by conducting training and
development programs, workshops and seminars so that these organizations will be able to
adapt themselves to this knowledge-based economy. Learning provides the scope for
development of knowledge, skills and abilities to stay ahead in this competitive
environment.
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There are several ways to conceptualize the relationship between learning orientation
and KM. King (2009) opines that organizational learning focuses on the process, and KM
focuses on the content of the knowledge that an organization acquires, disseminates,
processes and uses. KM has an organizational form that corresponds, at least loosely, to the
idea of the idealized learning organization (Firestone and McElroy, 2004). The literature
suggests that learning orientation is the determinant of KM (Garvin, 1993; Baker and
Sinkula, 1999; Vij and Farooq, 2015). Therefore, following hypothesis was formulated:
Organizational memory
Organizational memory is an organizational mechanism that captures, stores, and
disseminates knowledge learned from previous experience that can be brought to bear on
decisions (Wang et al., 2008). Organizational memory is a kind of codification strategy where
explicit knowledge is being stored and memorized on an organizational level. Organizations
gather the knowledge and then knowledge is being stored in the form of databases and
documents and decision-making is taken into consideration. Organizational memory is
defined as the acquisition, storing, dissemination and retrieval of information by
individuals. Organizational memory operates in the same way as the human mind.
Chirumalla and Parida (2016) opine that many organizations consider knowledge reuse
as a major justification for KM and effective business performance. Watson and Hewett
(2006) suggest that firms can leverage knowledge by reusing the existing knowledge that is
codified in a knowledge repository to gain competitive advantage.
According to Jennex and Croasdell (2004), organizational memory can be defined as the
way an organization stores organizational knowledge and applies it to present activities.
The knowledge which is created or which resides in the minds of the people so-called tacit
knowledge is converted into explicit knowledge also called codification strategy.
Organizations cannot store all the knowledge which has been created rather they have to be
selective in their approach to retaining important knowledge and ignoring other redundant
knowledge which can create the value in the long run. Firms which consider information
technology as a valuable resource can gain a competitive advantage by adopting and
implementing the information technology systems which can reinforce the structures and
processes and which ultimately enhances the performance of an organization (Farooq, Knowledge
2016b). management
Hansen et al. (1999) opine that companies that use knowledge effectively pursue one
strategy predominantly and use the second strategy to support the first. We think of this as
an 80–20 split: 80 per cent of their knowledge sharing follows one strategy, 20 per cent the
other. Hence, the firms with robust organizational memory can enhance their business
performance by adopting the codification strategy. The literature suggests that
organizational memory is positively related to KM (Jennex and Croasdell, 2004; Wang et al.,
2008, 2009; Vij and Farooq, 2016). Hence, following hypothesis was proposed:
Knowledge reuse
One of the important themes in KM is the use of information systems in the sharing of
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knowledge between users and non-users. Each type of reuse may have different
requirements for knowledge repositories and reuser’s requirements often remain unmet. If
quality dimensions are associated with these repositories it may help reusers to identify the
repositories that best suit their needs (Rao and Osei-bryson, 2007, p. 370). By reconfiguring
and reusing foreground and background knowledge and reusing the available assets and
different sets of interaction, an organization can build a new asset of knowledge (Harsh,
2007). Markus (2001) identifies four types of knowledge reuse situations including shared
work producers, shared work practitioners, expertize-seeking novices and secondary
knowledge miners. Knowledge creation is regarded as significant and difficult to manage
and knowledge reuse is also a matter of great concern that leads to the better organizational
performance. The researchers are equivocal about the findings of the knowledge reuse. The
knowledge reuse process starts with the creation of knowledge, storing of knowledge and
dissemination of knowledge. Knowledge creation is the more important and vital aspect of
whole KM process. Knowledge creation is not an easy task as different communities of
practices are formed by a group of people who participates in a process of collective
learning. Knowledge reuse is considered as an intermediate outcome that enhances work
performance. The outcomes include faster, better and less costly service, as the reuser does
not have to reinvent solutions already present in the repository (Kankanhalli et al., 2011,
p. 108).
Capturing and documenting knowledge can happen in four ways: First, it involves the
different communities to learn and share their knowledge which can be later searched.
Second, documenting knowledge for possible re-use can happen with a structure using
brainstorming facilitated by the use of electronic meeting systems. Third, documenting
knowledge needs the technical infrastructure and fourth documentation involves the
purifying, indexing, packaging and sanitizing knowledge for later re-use (Markus, 2001).
Storing knowledge in the form of documents or objects requires a lot of effort and resources.
Knowledge gained by individuals, converted into documented or electronic form, stored in a
repository for public access and knowledge seekers search and explore this knowledge from
the repository. Knowledge dissemination involves the sharing of knowledge which is stored
in the form of databases as it involves the willingness to share the knowledge.
There is a lot of time and resources involved in organizing, storing and retrieving the
knowledge, the cost involved in capturing and retrieving and reusing the knowledge.
Knowledge reuse requires the support from the top management including the availability
of technical infrastructure which serves as the backbone for explicit knowledge. Majority of
IJIS the studies developed a positive link between knowledge reuse and KM (Markus, 2001;
Harsh, 2007). On the basis of above discussion, following hypothesis was proposed:
Knowledge-based view
A knowledge-based view of the firm evolved in the strategic management literature
(Nonaka and Takeuchi, 1995). The knowledge-based view was first proposed by Grant
(1996), the knowledge-based view is an extension of resource-based view proposed by
Barney (1991 and was later on extended by others including Alavi and Leidner (1998. The
emerging knowledge-based view is not, as yet, a theory of the firm. There is an insufficient
consensus as to its precepts or purpose, let alone its analysis and predictions, for it to be
recognized as a theory (Grant, 1996). Knowledge is the important resource to gain and
sustain competitive advantage. However, knowledge-based view raises many questions:
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What is knowledge, what are the different types of knowledge, how different types of
knowledge improve the business performance? Knowledge is embedded in and carried
through multiple entities including organizational culture and identity, routines, policies,
systems and documents, as well as individual employees (Alavi and Leidner, 2001). Even
though resource-based view considers knowledge as a generic resource to gain competitive
advantage but knowledge-based view contends that resource-based view considers
knowledge as a generic resource rather than having special attributes.
It does not emphasize different KM capabilities including organizational memory,
knowledge sharing, learning orientation and knowledge reuse. Knowledge-based resources
including knowledge, skills and capabilities are difficult to imitate due to immobility and
heterogeneity of resources. According to Lin (2015, p. 4), it is recognized that firm ability to
exploit existing knowledge (knowledge stocks) and explore new knowledge (knowledge
flows) are the main source of firm sustainable competitive advantage. Knowledge-based
resources are difficult to copy and imitate as these knowledge assets may produce long-term
benefits. These knowledge resources need to be explored and exploited for creating, storing
and disseminating the knowledge. Technical infrastructure (e.g. internet, intranet, databases
and decision support systems) can play a vital in managing and enhancing knowledge
within and outside the organization. Hence, following hypothesis was formulated:
Competitive advantage
The term competitive advantage refers to capability gained through resources including
knowledge skills and abilities to perform at a higher level than its competitors. The
concept of competitive advantage was introduced by Michael Porter (1980 based on lower
cost and differentiation. Porter published a book in 1985 titled, “Competitive advantage:
Creating and sustaining superior performance”, which emphasized three strategies
including cost leadership strategy, differential strategy, and focus strategy. The book
gained a lot of prominence in the 20th century. The major focus of Porter’s strategy is the
productivity growth. Knowledge is itself a generic resource which cannot be copied or
imitated for gaining the sustainable competitive advantage. In an economy where the
only certainty is uncertainty, the one sure source of lasting competitive advantage is
knowledge (Nonaka, 1991).
In the present era of knowledge economy, organizations are continuously striving to Knowledge
create mechanisms for distinguishing themselves from their competitors. The four management
dimensions of the model described above should be viewed as a source of competitive
advantage. Different research questions can be formulated, namely, Does knowledge
sharing lead to the sustainable competitive advantage? Does learning orientation lead to
the sustainable competitive advantage? Does organizational memory lead to the sustainable
competitive advantage? Does knowledge reuse lead to the sustainable competitive
advantage? Which dimension of KM leads to the sustainable competitive advantage?
The KM process starts with the learning through communities of practices, sharing the
tacit as well as explicit knowledge and then storing the knowledge in the form of databases
and then re-using the knowledge which ultimately creates the sustainable competitive
advantage. Knowledge is often regarded as a resource which is difficult to imitate and a
major contributing factor towards sustainable competitive advantage. According to Halawi
(2005, p. 75), the sustainable competitive advantage is no longer rooted in physical assets
and financial capital but in the effective channelling of intellectual capital. Knowledge is
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seen as a strategic asset to create a sustainable competitive advantage for the firm. The
knowledge-based view of organizations extends the resource-based view of the firm
proposed by Penrose (1959). One of the major apprehensions for the organizations is to
sustain the competitive advantage. Halawi (2005) defines competitive advantage as the
capability to earn returns on investment constantly above the average of the industry.
Sustained competitive advantage can be created by following the value creating strategy
which is not being implemented simultaneously by others. Therefore, following hypothesis
was framed:
Value creation
Knowledge-worker productivity requires that the knowledge worker is both seen and
treated as an “asset” rather than a “cost.” It requires that knowledge workers want to work
for the organization in preference to all other opportunities (Drucker, 1999). The view that
knowledge embodied in new products and services has become the primary source of wealth
creation and the source of sustainable competitive advantage is driven by a number of inter-
related, apparently irresistible impulses of the new economy (Clarke, 2001). Organizations
ability to create new knowledge is regarded as a primary source of a competitive advantage
already today and increasingly so in the future and finding ways to actively support the
process of organizational knowledge creation is, therefore, an activity that should be
prioritized (Stebmark, 2003). Smedlund (2008) suggests that intellectual capital including
social capital, human capital and financial capital forms the knowledge which offers the
organization its value and the organizations uses this knowledge to make a profit. Value
creation is knowledge-intensive and delivered by highly educated employees, who are
frequently closely linked with research and scientific development within their area of
expertise (Lowendahl et al., 2001).
Research which focuses on knowledge as a possible source of innovation and value
creation can enhance their organizational performance. It is not the stock of knowledge that
provides the organizations with a competitive advantage, but the way knowledge is applied
in creating value. When both tacit and explicit knowledge is combined into unique processes
at an organizational level, core competencies may be developed which creates the
sustainable competitive advantage (Lowendahl et al., 2001). Value creation process in KM
starts with input-process-output. Employees and their contributions as input in knowledge
IJIS value creation, the knowledge created by the employees also called tacit knowledge is
processed by retaining the necessary knowledge and excluding the other insignificant stock
of knowledge. The knowledge which is processed is often converted into explicit knowledge
whereby knowledge is stored and codified. Therefore, the knowledge value creation cycle
continues.
KM is an important predictor of value creation. Value creation process starts with an
organizational learning whereby individuals and groups develop a shared vision, strong
commitment to learning and open-mindedness to capture knowledge and make sense out of
it. However, knowledge sharing is the critical success factor in improving the business
performance by motivating and encouraging the employees to share their knowledge to
create superior value and improve performance. Organizational memory facilitates
connection and collaboration from any place and location to improve the access to new and
existing knowledge. Knowledge stored or codified is often reused for creating meaningful
products and services in order to gain a sustainable competitive advantage. The integration
of learning orientation, knowledge sharing, organizational memory and knowledge reuse
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enhances the value creation and creates the superior business performance. Therefore,
managing knowledge without improving the business performance and value creation can
be problematic and may lead to competitive disadvantage.
H7. Social capital moderates the relationship between KM and value creation.
responsiveness) proposed by Kohli and Jaworski (1990). Darroch and McNaughton (2002)
operationalize KM orientation with knowledge acquisition, knowledge dissemination and
responsiveness to knowledge. The KM orientation conceptualized by Wang and Ahmed
(2003) is a function of knowledge sharing, organizational memory and learning the culture.
The present study defines “KM” as the capability to create a learning culture, facilitate
knowledge sharing, store productive knowledge and reuse the existing knowledge.
The relationship between KM and business performance is widely examined in the
literature (Wang et al., 2009; Lin, 2015). The relationship between KM and value creation is
fragmented or incomplete. Therefore, the present study extends the dynamic capability
perspective of KM to improve the value creation in knowledge-intensive firms. The study
hypothesized the moderating effect of social capital on the relationship between KM and
value creation. KM brings together the multiple dimensions including learning orientation,
knowledge sharing, organizational memory and knowledge reuse and their implementation
requires a systematic approach to organizational effectiveness and value creation. Therefore
it is important to link KM to value creation, without managing the knowledge using these
dimensions; it is unlikely that it will add value to the organization.
The relationship between KM and value creation has a logical explanation. If the KM is
lacking in a firm, it will be problematic to create a good learning organization, facilitate the
exchange of productive knowledge, the codification of explicit knowledge and reusing the
knowledge. The integration of these dimensions to measure KM can be a key competency to
sustain the competitive advantage. Learning orientation is not enough to ensure the
successful implementation of KM practices. The use of other capabilities such as knowledge
sharing, organizational memory, and knowledge reuse is needed to effectively measure KM
across firms. Wang and Ahmed (2003) suggest that KM orientation is a function of
knowledge sharing, organizational memory and learning the culture. However, the need to
include knowledge reuse as a part of KM is required to develop a valid measure of KM. By
reconfiguring and reusing foreground and background knowledge and reusing the available
assets and different sets of interaction, an organization can build a new asset of knowledge
(Harsh, 2007). Merely investing in organizational memory to manage knowledge may
be useful in the short run; however, learning orientation, knowledge sharing and knowledge
reuse are required to realize the benefits in the long run.
KM plays a vital role in the development of the social capital in organizations. McElroy
et al. (2006) suggest that trust, beliefs, norms, rules and networks are the significant
determinants of social capital and which improves the KM capabilities of organizations.
Organizations can create competitive advantage by managing social capital through KM
IJIS processes including learning orientation, knowledge sharing, organizational memory and
knowledge reuse. Organizations can use inter-organizational relationships, namely,
customers, buyers and suppliers to create new knowledge. The new knowledge created can
be converted into meaningful products and services. The study contributes to the
knowledge-based view of the firm by considering learning orientation, knowledge sharing,
organizational memory and knowledge reuse as the important strategic asset to achieve
superior business performance. The study provides the rationale for empirically validating
these propositions emerged from each dimension to operationalize the KM model.
Managerial implications
KM can be used as a tool to measure KM capabilities. The lack of effective measures for KM
can be a bottleneck to improve business performance. The present study suggests that
merely focusing on knowledge sharing as a part of KM is not sufficient. However, the value
creation lies in KM capabilities, namely, learning orientation, knowledge sharing,
organizational memory and knowledge reuse that are difficult to copy and imitate. The
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study proposes a new taxonomy to classify different KM capabilities into four dimensions of
KM.
Managers should frame the policies for successful implementation of KM capabilities:
first, executives should provide the employees with good organizational culture, feeling of
trust and top management support for a strong commitment to learning, open-mindedness
and shared vision to have better learning orientation. Second, they should provide the
organizational rewards for sharing the tacit knowledge as a valuable addition to their
products and services. Third, they should overcome the problem of strategic choice between
personalization and codification and should follow them in 80:20 proportions according to
Hansen et al. (1999). Deciding the ideal strategy mix between personalization and
codification strategy can improve the business performance (Farooq, 2017).
The idea that social capital is a determinant of an organizations capacity for KM has
practical implications for managers of businesses in general and specifically for
managers of organizations that are trying to enhance their ability to manage knowledge
(Hoffman et al., 2005, p. 98). Organizations should develop strong ties with customers,
buyers and employees to help them in creating, storing and disseminating the
knowledge. Organizations will perform better if they have good social capital. Social
media and the improved social capital helps in promoting organizational efforts in KM,
which eventually leads to higher level of organizational knowledge quality (Baharati
et al., 2015). Social capital can help organizations improve their value creation by
enhancing knowledge sharing activities and social interactions to gain the sustainable
competitive advantage. Firms that operate under high social capital enable their
employees to create a good learning culture and knowledge sharing in the long run.
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