Expert Systems with Applications 39 (2012) 8899–8908

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Expert Systems with Applications

journal homepage: www.elsevier.com/locate/eswa

Knowledge sharing, innovation and firm performance

Zhining Wang a,⇑, Nianxin Wang b
a
Department of Human Resource Management, School of Management, China University of Mining and Technology, Xuzhou 221116, China
b
Department of Information Management, School of Economics and Management, Jiangsu University of Science and Technology, Zhenjiang 212003, China

a r t i c l e i n f o a b s t r a c t

Keywords: This study investigates the quantitative relationship between knowledge sharing, innovation and perfor-
Knowledge sharing mance. Based on the literature review, we develop a research model positing that knowledge sharing not
Innovation only have positive relationship with performance directly but also influence innovation which in turn
Firm performance contributes to firm performance. This model is empirically tested using data collected from 89 high tech-
nology firms in Jiangsu Province of China. It is found that both explicit and tacit knowledge sharing prac-
tices facilitate innovation and performance. Explicit knowledge sharing has more significant effects on
innovation speed and financial performance while tacit knowledge sharing has more significant effects
on innovation quality and operational performance.
Ó 2012 Elsevier Ltd. All rights reserved.

1. Introduction
In the era of knowledge-based economy, resources and compe-
tencies are expected to be the crucial factors for organizations to
survive in dynamic and competitive environment (Subramaniam
& Youndt, 2005; Teece, Pisano, & Shuen, 1997). After pointing out
that knowledge would replace equipment, capital, materials and
labor to become the most important element in production,
Drucker (1993) predicted that competitive advantage in the future
would be determined by knowledge resources, or what is known as
knowledge workers. As the necessary intangible assets for any
organizations, knowledge should be elaborately managed. Conse-
quently, both scholars and practitioners have increasingly paid
great attention to an organization’s ability to identify, capture, cre-
ate, share or accumulate knowledge (Jang, Hong, Bock, & Kim,
2002; Kogut & Zander, 1996; Michailova & Husted, 2003; Nonaka
& Takeuchi, 1995). Particularly in the emerging distributed organi-
zations, effectiveness is highly dependent on how well knowledge
is shared between individuals, teams, and/or units (Alavi & Leidner,
2001; Argote & Ingram, 2000; Huseman & Goodman, 1998;
Pentland, 1995). Knowledge sharing behaviors have been argued
to contribute to the generation of various organizational capabili-
ties such as innovation which is vital to a firm’s performance
(Kogut & Zander, 1996).
Having accepted the importance of knowledge sharing, it is dis-
appointing to note that there is little guidance in the extant litera-
ture as to what knowledge sharing really means in organization and
even less as to what the most direct and quantifiable outcomes of
⇑ Corresponding author.
E-mail addresses: wangzhining@cumt.edu.cn (Z. Wang), nianxin.wang@gmail.
com (N. Wang).
effective knowledge sharing might be (Lee & Choi, 2003). Although
sharing knowledge with colleagues may be very difficult, it is pos-
itively related to reductions in production costs, faster completion
of new development projects, team performance, innovation capa-
bilities, and firm performance including sales growth or revenue
from new products and services (Arthur & Huntley, 2005; Collins
& Smith, 2006; Cummings, 2004; Hansen, 2002; Hansen, Mors, &
Lovas, 2005; C.P. Lin, 2007; H.F. Lin, 2007; Mesmer-Magnus &
DeChurch, 2009). However, some researchers argued that knowl-
edge sharing practices do not directly lead to an improvement of
organizational performance. Rather, organizational performance
may be improved through intermediate outcomes induced by
knowledge sharing practices (Choi & Lee, 2003; Davenport & Pru-
sak, 1998; Hsu, 2008; Law & Ngai, 2008; Liebowitz & Chen, 2001).
So the following questions may arise: whether knowledge sharing
influences firm performance directly? What are the key factors that
would be affected by knowledge sharing activities which would re-
sult in firm performance? According to knowledge management lit-
eratures, this paper argues that explicit and tacit knowledge
sharing practices not only have positive relationships with firm
operational and financial performance directly but also influence
innovation speed and quality which are in turn related to firm
performance.
This study aims to explore the relationships between knowledge
sharing, innovation and firm performance from a holistic perspec-
tive. Based on a survey of 226 managers from 89 high-tech enter-
prises in Jiangsu Province of China, this study employed the
structural equation modeling (SEM) to investigate the research
hypothesis. The present study differs from previous works in three
ways. Firstly, few studies have linked knowledge sharing and firm
performance directly, this research attempts to fill this gap.
Furthermore, this paper does not just testify the influence of

0957-4174/$ - see front matter Ó 2012 Elsevier Ltd. All rights reserved.
doi:10.1016/j.eswa.2012.02.017
8900 Z. Wang, N. Wang / Expert Systems with Applications 39 (2012) 8899–8908
knowledge sharing on firm performance, but also explores how this
mechanism works through analyzing the mediating effect of inno-
vation. Finally, by discussing the influence of explicit- and tacit
knowledge sharing on innovation speed and innovation quality
which in turn lead to superior firm operational and financial perfor-
mance, this study proposes that when faced with different situation
and requirements in the long term, managers should focus on spe-
cific knowledge sharing behaviors and develop corresponding strat-
egies within their organizations.
The remainder of this paper is organized as follows. Section 2
presents the literature review for introducing key constructs of
our research. Section 3 develops a research model to depict
hypothesized relationships. Section 4 provides research methodol-
ogy for the construct operationalization and data collection. Data
analysis and the findings are reported in Section 5. Implications
and limitations of this study, research directions, and concluding
remarks are discussed in Section 6.
2. Literature review
2.1. Explicit and tacit knowledge sharing
As one knowledge-centered activity, knowledge sharing is the
fundamental means through which employees can mutually ex-
change their knowledge and contribute to knowledge application,
innovation, and ultimately the competitive advantage of the orga-
nization (Wang & Noe, 2010). Based on Polanyi’s (1966) conceptu-
alization, Nonaka and Takeuchi (1995) proposed the Socialization,
Externalization, Combination, and Internalization (SECI) model
which could impliedly explain the function of tacit- and explicit
knowledge sharing in the knowledge creation process. On the
one hand, knowledge sharing turns organizational knowledge into
individual or group knowledge with the process of internalization
and socialization. On the other hand, knowledge sharing can trans-
late individual and group knowledge into organizational knowl-
edge based on the process of externalization and combination.
Knowledge sharing practices in the whole organization are very
important for preserving valuable heritage, learning new tech-
niques, solving problems, creating core competences and initiating
new situations (Hsu, 2008; Hu, Horng, & Sun, 2009; Huang, Chen, &
Stewart, 2010; Law & Ngai, 2008). It is worth mentioning that tacit
knowledge sharing is the foundation of socialization while explicit
knowledge sharing makes combination possible in certain organi-
zation. As to the process of externalization and internalization,
both tacit- and explicit knowledge sharing play key roles in the
transformation of two types of knowledge.
Explicit knowledge sharing comprises almost all the forms of
knowledge sharing that are institutionalized within organizations.
Practices of explicit knowledge sharing appear more common in
the workplace because explicit knowledge can be easily captured,
codified and transmitted. Management mechanisms, such as proce-
dure, formal language, handbooks, and information technology sys-
tem will promote employees’ willingness for sharing their explicit
knowledge (Coakes, 2006; Huang, Davison, & Gu, 2010). In contrast,
face-to-face interaction is the primary means for tacit knowledge
sharing. Keys to tacit knowledge sharing are the willingness and
capacity of individuals to share what they know and to use what
they learn (Holste & Fields, 2010; C.P. Lin, 2007; H.F. Lin, 2007;
Megan Lee, Steven, Sanjib, & Intakhab, 2007). Human experience
is the foundation of tacit knowledge sharing (Nonaka & Takeuchi,
1995; Polanyi, 1966) because individual cannot take advantage of
new knowledge unless he or she has earlier ‘‘social software’’ con-
nected to it. Difficulties that may hinder tacit knowledge sharing in-
clude coworkers’ willingness to share and/or use tacit knowledge,
limited awareness of the tacit knowledge an individual possesses,
difficulty in expressing tacit knowledge that is tied to mental and/
or physical action, and deficiency of applying context-specific tacit
knowledge in other contexts (Holste & Fields, 2010). However,
these barriers may be conquered by trusting relationships between
individuals in the knowledge sharing process (Koskinen, Pihlanto, &
Vanharanta, 2003; Lucas, 2005; Spender, 1996; Spender & Grant,
1996).
2.2. Innovation speed and quality
Innovation speed, which is defined as the time elapsed between
(a) initial development, including the conception and definition of
an innovation, and (b) ultimate commercialization of a new prod-
uct or services into the marketplace, reflects a firm’s capability to
accelerate activities and tasks for building a competitive advantage
relative to its competitors within industries with shortened prod-
uct life cycles (Allocca & Kessler, 2006; Kessler & Bierly, 2002;
Kessler & Chakrabarti, 1996). Emphasis on innovation speed repre-
sents a paradigm shift from more traditional sources of advantage
toward a strategic orientation specifically suited to today’s rapidly
changing business environments. Innovation speed is a crucial ele-
ment to compete in the market for it can result in superior perfor-
mance. A positive association between speed-to-market and
overall new product success has been empirical confirmed (Carbo-
nell & Escudero, 2010; Carbonell & Rodriguez, 2006; Carbonell &
Rodriguez-Escudero, 2009). Since innovation speed is a team-
embodied, socially complex capability that cannot be easily devel-
oped or imitable by competitors (Slater & Mohr, 2006), it enables
firms to keep in close touch with customers and their needs (Tatik-
onda & Montoya-Weiss, 2001). Furthermore, the increasing rate of
competition, technological developments in the marketplace and
shorter product life cycles pressure companies to innovate faster
(Heirman & Clarysse, 2007; Lynn, 2008).
The concept of innovation quality allows making a statement
regarding the aggregated innovation performance in every domain
within an organization by comparing the result, being it a product,
process or service innovation, with the potential and considering
the process on how these results have been achieved (Haner,
2002; Lanjouw & Schankerman, 2004). While innovation has a
strong link to newness or creativity, to quality concepts like stan-
dardization, low tolerance and systematic procedure adhere. With
respect to products or services, innovation quality may be defined
through variables like amount, effectiveness, features, reliability,
timing, costs, complexity, innovation degree, value to the cus-
tomer, and many more. Similar are things with respect to the pro-
cess domain of innovation quality. Although innovation quality is
one of the most important factors for company applying innova-
tion strategy to compete in the market, determining it might be
faced with more challenges due to the increased complexity, the
difficulty to identify catalysts and the need to integrate measure-
ments on so-called soft issues, such as relative citation ratio, cita-
tion-weighted patents, science linkage, scope of innovations, and
so on (Lahiri, 2010; Ng, 2009; Tseng & Wu, 2007).
3. Research model and hypotheses
This paper aims to investigate the underlying influencing mech-
anism between knowledge sharing, innovation and firm perfor-
mance. A research model in which knowledge sharing is
proposed to influence firm performance directly and through inno-
vation indirectly is brought forward, as shown in Fig. 1.
3.1. Innovation and performance
Innovation has been recognized as a significant enabler for
firms to create value and sustain competitive advantage in the
 Z. Wang, N. Wang / Expert Systems with Applications 39 (2012) 8899–8908
Fig. 1. The research model.
increasingly complex and rapidly changing environment (Bilton &
Cummings, 2009; Subramaniam & Youndt, 2005). In general, inno-
vation can not only make full use of existing resources, improve
efficiency and potential value, but also bring new intangible assets
into organization. Firms with greater innovativeness will be more
successful in responding to customers’ needs and in developing
new capabilities that allow them to achieve better performance
or superior profitability (Calantone, Cavusgil, & Zhao, 2002;
Sadikoglu & Zehir, 2010). Innovation is critical to achieving opera-
tional efficiency as well as to raising service quality (Hsueh & Tu,
2004; Parasuraman, 2010). Accordingly, scholars have gradually
paid more attention to the effects various aspects of innovation
have on firm performance (Clifton, Keast, Pickernell, & Senior,
2010; Jenny, 2005; Liao, Wang, Chuang, Shih, & Liu, 2010; Vaccaro,
Parente, & Veloso, 2010).
As time-based competition has become an important concern
for contemporary business organizations, more and more firms
have recognized that quick response of their competitors to new
product development posed a critical competitive threat and,
therefore, attempt to introduce new product, service or process
even more quickly (Boyd & Bresser, 2008; Smith, 2011). Robinson
(1990) demonstrated that over a broad cross-section of industries,
firms that stressed innovation speed could increase their market
shares. When developing, producing or selling new products faster
than its competitors, a firm is able to erect market segments in
association with service quality and operating efficiency because
knowledge contained in these innovations is not readily available
to competitors (Liao et al., 2010). Therefore, innovation speed guar-
antees quicker responses to environment by launching new prod-
ucts with lower times and costs, which eventually improve firm
performance (Tidd, Bessant, & Pavitt, 2005). Innovation quality is
another key factor influencing firm performance. A high quality
of innovation involves synonymously adopting numerous new
products, processes or practices across a broad cross-section of
organizational activities. It requires firms to create synergies
among these multiple activity domains. Such synergies should be
created in a manner that is inimitable, encourages newness and
8901
contributes to competitiveness. Organizations benefit from in-
creased ideas and more innovative R&D would be more effective
in achieving firm performance than less innovative R&D (Brentani,
2001; Singh, 2008). Although the relationships between innovation
and firm performance have been discussed, few researches con-
sider the specific effects that innovation speed and quality have
on firm operational and financial performance, respectively. So this
paper proposes the first two couples of hypotheses.
H1a. Innovation speed is positively associated with firm opera-
tional performance.
H1b. Innovation speed is positively associated with firm finan-
cial performance.
H2a. Innovation quality is positively associated with firm oper-
ational performance.
H2b. Innovation quality is positively associated with firm finan-
cial performance.
3.2. Knowledge sharing and innovation
Innovation initiatives tend to depend heavily on employees’
knowledge, skill, and experience in the value creation process.
According to this view, knowledge sharing can be seen as valuable
inputs for innovation because of their characteristics of firm-
specific, socially complex, and path-dependent (Chiang & Hung,
2010; Dimitris, Konstantinos, Klas Eric, & Gregory, 2007; Gachter,
von Krogh, & Haefliger, 2010; Su-Chao & Ming-Shing, 2008). It is
obvious that a firm’s ability to transform and exploit knowledge
may determine its level of innovation, such as new problem-solving
methods and new product for rapid reaction to the market demand
(Goh, 2002; Marina du, 2007; Tidd et al., 2005). However, organiza-
tions can only begin to effectively manage knowledge when
employees are willing to sharing their knowledge. On-going sharing
of knowledge contributes to innovations in teams, units and/or the
whole organization. To better fulfill innovative tasks, employees al-
ways have to borrow from tacit knowledge (skills or experience) of
their colleagues or search for explicit knowledge (institutionalized
8902 Z. Wang, N. Wang / Expert Systems with Applications 39 (2012) 8899–8908
approaches or practices) existing in the company. Therefore, a firm
that can promote sharing knowledge practices within groups or
organizations is likely to generate new ideas for developing new
business opportunities, thus facilitating innovation activities
(Lundvall & Nielsen, 2007; Michael & Nawaz, 2008).
Many authors have pointed out that sharing knowledge among
employees would lead to faster responses to customer require-
ments at a lower cost in operations (Sher & Lee, 2004). Others have
linked knowledge sharing to the learning and market orientations
with the beliefs that sharing knowledge is an integral part of an
organization’s learning activities, leading to improvements in mar-
ket sensing and innovation activities (C.P. Lin, 2007; H.F. Lin, 2007;
Ordaz, Cruz, & Ginel, 2010). Moreover, knowledge sharing would
facilitate a broad range of changes to the organization (Calantone
et al., 2002; Law & Ngai, 2008; Vaccaro et al., 2010). Thus both
the explicit and tacit components of organizational knowledge
sharing practices play an important role in innovation (Haindl,
2002; Mascitelli, 2000; Taminiau, Smit, & de Lange, 2009; Xie,
Wang, & Wu, 2008; Xu, Houssin, Caillaud, & Gardoni, 2010).
Gopalakrishnan and Bierly (2001) have proposed a new topol-
ogy of two types of innovation based on the theories of knowledge
from three dimensions: tacit-explicit, systemic-autonomous and
simple-complex. Abou-Zeid and Cheng (2004) argued that the
two types of innovation are, respectively, associated with knowl-
edge creation and utilization activities. Swan (2007) analyzed the
links between knowledge and innovation from three different per-
spectives: production, process and practice. Although the relation-
ships between knowledge sharing and various aspects of
innovation have been empirically tested in details (Brockman &
Morgan, 2006; Hall & Andriani, 2002, 2003; Lee, Ooi, Tan, & Chong,
2010; Leiponen, 2006; Liu, Chen, & Tsai, 2005), few researches con-
sider the specific effects that explicit and tacit knowledge sharing
practices have on innovation speed and innovation quality, respec-
tively. To fill in the gaps, this paper proposes the second two cou-
ples of hypotheses.
H3a. Explicit knowledge sharing is positively associated with
innovation speed.
H3b. Explicit knowledge sharing is positively associated with
innovation quality.
H4a. Tacit knowledge sharing is positively associated with
innovation speed.
H4b. Tacit knowledge sharing is positively associated with
innovation quality.
3.3. Knowledge sharing and firm performance
Teece (2007) have suggested that knowledge constitutes valu-
able intangible assets for creating and sustaining competitive
advantages. In organization contexts, people can learn, not only
from their own direct experiences, but also from the experiences
of others. Because employees interact with one another, knowledge
gathered by one person can be transferred to his/her colleagues
through feedback, explanation, help, or advice (Hutzschenreuter &
Horstkotte, 2010; Kang & Kim, 2010). Exchange of knowledge
between individuals brings knowledge sources together and manip-
ulates it into new knowledge structures or routines (Jo, Richard,
Bella Ya-Hui, Chi-Min, & Peter, 2008; Kumar & Ganesh, 2009; Mingu-
ela-Rata, Lopez-Sanchez, & Rodriguez-Benavides, 2010). Van den
Hooff and De Ridder (2004) have suggested in this context about
the explicit knowledge sharing process, whereby anyone distributes
information from different sources to others, may contribute to
efficiency and effectiveness. As to tacit knowledge sharing, dialogue
stimulates organization members to share their experience and
think together, so that individual opinions play a role but are not
decisive (Akbar, 2003; Matthew & Sternberg, 2009). As a result, both
knowledge sharing practices are to enhance the recipients’ knowl-
edge, skills and experience as well as their ideas and attitudes.
Furthermore, contributors can deepen their understanding of exist-
ing knowledge, explicit or tacit, based on feedback and discussion
(D’Eredita & Barreto, 2006; Desouza, 2003). Therefore, employees
can not only quickly respond to the needs of the environment, but
also reduce the cost of solving the problem (Sher & Lee, 2004).
Organizational knowledge sharing can be the backbone of orga-
nizational learning and bring enormous benefits to an organization
(Down, 2001; van Woerkom & Sanders, 2010). These practices have
a positive relationship with organizational human capital (employ-
ee competencies), which contribute to organizational performance
(Hsu, 2008). Law and Ngai (2008) found knowledge sharing and
learning behaviors would lead to better performance through the
improvement of business process, product and service offerings
of a firm. Du, Ai, and Ren (2007) explored the quantitative relation-
ship between knowledge sharing and firm performance based on a
survey in Xi’an, China, with contextual factors in consideration and
found that different dimensions of knowledge sharing play various
roles leading to performance differently. Although the empirical
relationships between knowledge sharing and firm performance
have been examined, few researches consider the specific effects
that explicit and tacit knowledge sharing practices have on differ-
ent firm performance, namely operational and financial perfor-
mance. In this paper based on the above discussions, we propose
the last two couples of hypotheses.
H5a. Explicit knowledge sharing is positively associated with
firm operational performance.
H5b. Explicit knowledge sharing is positively associated with
firm financial performance.
H6a. Tacit knowledge sharing is positively associated with firm
operational performance.
H6b. Explicit knowledge sharing is positively associated with
firm financial performance.
3.4. Control variable
To account for differences among firms, one control variable is
included in our research model: firm size. It is selected because
of their potential impacts on firm performance as suggested by
previous research. Firm size reflects a firm’s past success and
may impact current performance (Ravichandran & Lertwongsatien,
2005). It is viewed as an indicator of leadership in the inter-firm
relationship, power of pricing and bargaining, and the pervasive-
ness of operation and management routines, all of which can influ-
ence firm performance. Employee number was used to measure
firm size in our study.
4. Research methodology
4.1. Construct operationization
A survey was conducted in China to test our research model. A
questionnaire was developed and pilot tested before the formal
data collection. Whenever possible, measurement items were
adapted from existing scales in the literature. Some modifications
were made to align the scales with the Chinese context. An expert
panel of three knowledge management professors, five CEOs and
senior business managers examined the face validity of the mea-
surement items. The seven-point Likert-type scales ranging from
‘‘1’’ (totally disagree) to ‘‘7’’ (totally agree) were used throughout
the questionnaire. The question items for the constructs are listed
in Appendix A.
 Z. Wang, N. Wang / Expert Systems with Applications 39 (2012) 8899–8908
Explicit knowledge sharing is measured by six items. They in-
clude the following practices for the company’s: (1) collecting
and using formal reports or documents (Reychav & Weisberg,
2010); (2) training and development programs (Liebowitz, 1999);
(3) IT systems (Alavi & Leidner, 2001). A seven-item scale of tacit
knowledge sharing is developed by reference to a range of studies
(Bock, Zmud, Kim, & Lee, 2005; Holste & Fields, 2010; C.P. Lin,
2007; H.F. Lin, 2007; Reychav & Weisberg, 2010). These scales con-
tain employee experience, know who and know where, employee
professionalism and lessons from past failures.
Innovation speed was measured using five items reflecting firm
quickness to generate novel ideas, new product launching, new
product development, new processes, new problem solving as
compared to key competitors. A few studies have used similar
measures to operationalize firm’s response speed to competitive
actions (Chen & Hambrick, 1995; Liao et al., 2010). The measure-
ment of innovation quality was developed from Haner (2002)
and Lahiri (2010). Five items reflect the newness and creativity
of new ideas, products, processes, practices and management of
certain company.
Operational performance was measured by six items adapted
from Bowersox et al. (2000) which originally contained 13-items
‘‘performance metrics’’. Final scales of this study incorporate cus-
tomer service, cost management, quality, productivity and asset
management performance metrics. The questions for measuring
financial performance of the firm were previously used by Claycomb
et al. (1999). Inman et al. (2011) have used similar items to measure
financial performance, which reflect the average return on invest-
ment, average profit, profit growth and average return on sales.
4.2. Data collection
This study examined a sample of 89 high technology firms in
Jiangsu, one of the most developed provinces in China. The sample
has several advantages. First, knowledge sharing in knowledge-
intensive firms plays a crucial role in facilitating innovation such
as designing leading new products or services in this highly com-
petitive arena. Second, the transitional economy in China strongly
depends on the development of innovation. This property makes
high technology firms good settings for examining the link be-
tween innovation and performance. Third, these firms offer rich
settings for testing the hypotheses because each firm encourages
knowledge sharing seriously and connects it to operational or
financial performance.
Data were collected using CEO/general manager and senior
manager as the key informant because of their knowledge of the
firm, access to strategic information, and familiarity with the envi-
ronment. They were mailed a questionnaire and a letter explaining
the purpose of this study and offered the research results if respon-
dents returned the completed questionnaire. Questionnaires were
sent to a total of 551 managers and 209 usable questionnaires were
collected, representing a response rate of 37.9%. The 209 respon-
dents averaged 44.2 years in age and had 19 years of work experi-
ence; the male-to-female ratio was approximately 7.3–1. They
were either top managers (general managers and chairmen of
boards of directors) or functional managers. The former accounted
for 29.8% of the respondents and the remaining were functional
managers. The responding companies varied in size and industries,
and had an average of 196 employees and 11.3 years of history.
Table 1 reports profiles of the responding companies in details.
We assessed non-response bias by following Armstrong and
Overton (1977). Chi-square tests and T-test were used to compare
the earliest 52 respondents and the last 52 respondents on context
variables. The results indicated no significant differences between
the two groups in business type, number of employees, revenue
and capital (p > 0.05).
8903
5. Results
5.1. Measurement model
We firstly performed a confirmatory factor analysis (CFA) to
evaluate the overall measurement model. In order to evaluate
the validity of measurement model, convergent validity and dis-
criminant validity were assessed. Convergent validity is the degree
to which factors that are supposed to measure a single construct,
agree with each other. We tested convergent validity by assessing
factor loadings which should be significant and exceed 0.5, com-
posite reliabilities which should exceed 0.6, and the average vari-
ance extracted (AVE) that should be more than 0.5 for all
constructs (Fornell & Larcker, 1981). In our model, all the factor
loadings and composite reliabilities fall in the acceptable ranges
and are significant at the 0.01 level. Factor loadings range from
0.77 to 0.93. Composite reliabilities (CR) range from 0.88 to 0.97.
AVE ranges from 0.67 to 0.81. The results show that our model
meets the convergent validity criteria. We evaluated the internal
reliability of scales by Cronbach’s alpha (C-a); this statistic ranges
from 0.89 to 0.97, which are all higher than 0.7 (Nunnly & Bern-
stein, 1994). Table 2 shows the means, SD, factor loading, AVE,
CR and C-a of every constructs.
Discriminant validity is the degree to which, factors that are
supposed to measure a specific construct do not predict conceptu-
ally unrelated criteria (Kline, 2010). We used Fornell and Larcker’s
approach to assess discriminant validity. In this approach, the AVE
for each construct should be higher than the squared correlation
between the construct and any of the other constructs. Table 3
indicates that the measurement model has satisfactory discrimi-
nant validity. In Table 3, diagonal elements in italics are the AVE
and off-diagonal elements are the squared correlations between
constructs. It is obvious that each diagonal element is higher than
respective off-diagonal elements. Therefore, all constructs in the
measurement model were judged as having adequate discriminant
validity.
We assessed the measurement model fit by evaluating: (1)
absolute fit measures including observed normed v2 (v2/df), good-
ness of fit index (GFI) and root mean square error of approximation
(RMSEA); (2) incremental fit measures including normed fit index
(NFI), adjusted goodness of fit (AGFI) and comparative fit index
(CFI); and (3) parsimonious fit measures including parsimony
goodness-of-fit index (PGFI) and parsimony normed fit index
(PNFI). As shown in Table 4, all fit indices met satisfactory levels.
Therefore, we can conclude that the model fits the data well and
thus is able to explain the research hypotheses.
5.2. Structural model
Table 5 and Fig. 2 show the results of hypothesis testing of the
structural relationship among the latent variables.
For H1a and H1b, we examined the effects of innovation speed
on operational performance and financial performance, respec-
tively. As Table 5 and Fig. 2 show, the effect of innovation speed
on operational performance and financial performance, have val-
ues of 0.296 and 0.251 (p < 0.05), hypothesis 1a and 1b were
supported.
Contrary to hypothesis H2a, innovation quality has no direct ef-
fect on operational performance (p > 0.10). However, innovation
quality is positively associated with financial performance
(p < 0.10). Hence, a firm’s innovation quality appears to enhance
a firm’s financial performance, but that is not the case with opera-
tional performance.
For H3a and H3b, we examined the effects of explicit knowledge
sharing on innovation speed and innovation quality, respectively.
As Table 5 and Fig. 2 show, the effect of explicit knowledge sharing
8904 Z. Wang, N. Wang / Expert Systems with Applications 39 (2012) 8899–8908

Table 1 Table 2
Profiles of responding companies. Results of CFA and internal reliability testing.

Characteristics Frequency Percentage Constructs Mean SD Items Loading AVE CR C-a

(100%)
Explicit knowledge 3.95 0.84 es1 0.88 0.78 0.96 0.95
Industry type sharing (ES) es2 0.90
Information and communications 28 31.46 es3 0.88
Electronics, mechatronics and 12 13.48 es4 0.88
optoelectronics es5 0.86
Petrochemicals and plastics 14 15.73 es6 0.91
Chemicals 22 24.72
Tacit knowledge 4.06 0.98 ts1 0.91 0.81 0.97 0.97
Medicals 8 8.99
sharing (TS) ts2 0.93
Others 5 5.62
ts3 0.90
Total 89 100.00
ts4 0.93
Number of employees ts5 0.85
<100 27 30.34 ts6 0.88
100 to <500 24 26.97 ts7 0.91
500 to <1000 22 24.72
Innovation speed (IS) 4.22 0.81 is1 0.86 0.76 0.94 0.94
>1000 16 17.98
is2 0.9
Total 89 100.00
is3 0.87
Annual sales (in RMB) is4 0.85
<1 million 34 38.20 is5 0.87
1 to <10 million 26 29.21
Innovation quality 4.18 0.78 iq1 0.81 0.74 0.93 0.93
10 to <100 million 22 24.72
(IQ) iq2 0.83
>100 million 7 7.87
iq3 0.89
Total 89 100.00
iq4 0.91
Capital (in RMB) iq5 0.85
<1 million 41 46.07
Operational 4.44 0.74 op1 0.80 0.74 0.95 0.95
1 to <10 million 23 25.84
performance (OP) op2 0.88
10 to <100 million 19 21.35
op3 0.87
>100 million 6 6.74
op4 0.83
Total 89 100.00
op5 0.89
op6 0.89
Financial 4.17 0.58 fp1 0.80 0.67 0.89 0.89
performance (FP) fp2 0.77
fp3 0.86
on innovation speed, has a value of 0.455 and is statistically signif- fp4 0.84
icant (p < 0.05), providing support for H3a. The effect of explicit
knowledge sharing on innovation quality, has a value of 0.315
and is statistically significant (p < 0.05), providing support for H3b.
For H4a and H4b, we examined the effects of tacit knowledge
sharing on innovation speed and innovation quality, respectively.
As Table 5 and Fig. 2 show, the effect of tacit knowledge sharing Table 3
Discriminant validity analysis.
on innovation speed, has a value of 0.117 and is non-significant
(p > 0.10), not providing support for H4a. The effect of tacit knowl- Constructs ES TS IS IQ OP FP
edge sharing on innovation quality, has a value of 0.220 and is sta- ES 0.78
tistically significant (p < 0.10), providing support for H4b. TS 0.32 0.81
Contrary to hypothesis H5a, explicit knowledge sharing has no IS 0.24 0.14 0.76
direct effect on operational performance (p > 0.10). The standard- IQ 0.18 0.15 0.19 0.74
OP 0.10 0.23 0.15 0.07 0.74
ized estimate ( 0.085) is slightly negative, yet not significant. FP 0.23 0.17 0.21 0.15 0.07 0.67
However, explicit knowledge sharing is positively associated with
financial performance (p < 0.05), supporting hypothesis H5b.
Hence, a firm’s explicit knowledge sharing appears to enhance a
firm’s financial performance, but that is not the case with opera- As to the direct effects, Table 6 shows: (1) explicit knowledge
tional performance. sharing on innovation speed is larger than on innovation quality
By H6a and H6b, we examined the effects of tacit knowledge (0.455 > 0.315); (2) explicit knowledge sharing on financial perfor-
sharing on operational performance and financial performance, mance is larger than operational performance (0.250 > 0.085); (3)
respectively. As Table 5 and Fig. 2 show, the effect of tacit knowl- tacit knowledge sharing on innovation quality is larger than on
edge sharing on operational performance. Estimate of regression innovation speed (0.220 > 0.117); (4) tacit knowledge sharing on
weight is 0.425 and statistically significant (p < 0.05), providing operational performance is larger than on financial performance
support for H6a. The effect of tacit knowledge sharing on financial (0.425 > 0.150); (5) innovation speed on operational performance
performance has a value of 0.150 and is statistically significant is larger than on financial performance (0.296 > 0.251); and (6)
(p < 0.10), providing support for H6b. innovation quality on financial performance is larger than opera-
tional performance (0.132 > 0.005).
As to the indirect effects, Table 6 firstly confirms the mediator
5.3. Effect analysis role of both innovation speed and quality between knowledge
sharing and firm performance. Furthermore, the indirect effects ex-
This study does not just testify the influence of knowledge plicit knowledge sharing has on financial performance is larger
sharing on firm performance, but also explores how this mecha- than operational performance (0.156 > 0.136). Finally, the indirect
nism works through innovation, direct/indirect effects and total effects tacit knowledge sharing has on financial performance is
effects were calculated, respectively, and listed in Table 6. larger than operational performance (0.058 > 0.036).
 Z. Wang, N. Wang / Expert Systems with Applications 39 (2012) 8899–8908 8905

Table 4 Table 6
Overall fit indices of the CFA model. Direct, indirect, and total effects analysis.

Fit index Scores Recommended cut-off value Predictor/dependent IS IQ OP FP

Absolute fit measures Direct effects
v2/df 1.472 62a; 65b ES 0.455 0.315 0.085 0.250
GFI 0.832 P0.90a; P0.80b TS 0.117 0.220 0.425 0.150
RMSEA 0.048 <0.08a; <0.1b IS 0.296 0.251
IQ 0.005 0.132
Incremental fit measures
NFI 0.898 P0.90a Indirect effects
AGFI 0.804 P0.90a; P0.80b ES 0.136 0.156
CFI 0.965 P0.90a TS 0.036 0.058
Parsimonious fit measures Total effects
PGFI 0.72 The higher, the better ES 0.051 0.406
PNFI 0.82 The higher, the better TS 0.460 0.208
a
Acceptability: acceptable.
b
Acceptability: marginal.

6. Discussion, implications and concluding remarks

Table 5
Standardized path coefficients. 6.1. Theoretical contributions

Hypotheses Estimate p Remarks

Knowledge sharing practices in firms are suggested by many
H1a IS ? OP 0.296** <0.001 Supported authors to contribute to competitive advantage. More recently,
H1b IS ? FP 0.251** 0.001 Supported some studies empirically discussed the effects of knowledge shar-
H2a IQ ? OP 0.005 0.948 Not Supported
H2b IQ ? FP 0.132* 0.067 Supported
ing on various aspects of innovation. However, few researches link
H3a ES ? IS 0.455** <0.001 Supported knowledge sharing, innovation and firm performance from a holis-
H3b ES ? IQ 0.315** <0.001 Supported tic perspective. By proposing a model discussing the influence of
H4a TS ? IS 0.117 0.141 Not Supported explicit- and tacit knowledge sharing on innovation speed and
H4b TS ? IQ 0.220* 0.008 Supported
innovation quality which in turn lead to firm operational and finan-
H5a ES ? OP 0.085 0.342 Not Supported
H5b ES ? FP 0.250* 0.006 Supported cial performance, this study contributes to fill the gap existing in
H6a TS ? OP 0.425** <0.001 Supported the literature. The empirical findings of this study confirm a major-
H6b TS ? FP 0.150* 0.061 Supported ity of pronounced hypothesis except three ones: tacit knowledge
Firm scale ? OP 0.085 0.910 Not Supported sharing on innovation speed, explicit knowledge sharing on opera-
Firm scale ? FP 0.071 0.910 Not Supported tional performance and innovation quality on operational perfor-
*
Significant at the 0.10 level (2-tailed). mance. Through effects analysis, this study provides a possible
**
Significant at the 0.05 level (2-tailed). mechanism by which knowledge sharing practices contribute to
innovation and firm performance. The mediator roles of innovation
speed and quality are also confirmed. That is, both explicit and tacit
As to the total effects, we can see from Table 6 that explicit knowledge sharing practices will contribute to firm operational and
knowledge sharing has on financial performance is larger than financial performance directly or through the improvement of
operational performance (0.406 > 0.051). On the contrary, total ef- innovation speed or quality. Compared with existing literatures,
fects tacit knowledge sharing has on operational performance is this study has not only conceptualized the linkages between knowl-
larger than financial performance (0.460 > 0.208). edge sharing, innovation and performance, but also given a more

Fig. 2. Research model and testing results. Note: ⁄significant at the 0.10 level (2-tailed) and ⁄⁄
significant at the 0.05 level (2-tailed).
8906 Z. Wang, N. Wang / Expert Systems with Applications 39 (2012) 8899–8908

specific detail by dividing knowledge sharing as explicit- and tacit 2. People in my organization frequently share reports and official
one, innovation as speed and quality, and performance as opera- documents that they prepare by themselves with members of
tional and financial one. Therefore, the proposed model might be my organization.
used as an alternative theoretical model for evaluating knowledge 3. People in my organization frequently collect reports and official
sharing, innovation and performance in future studies. documents from others in their work.
4. People in my organization are frequently encouraged by knowl-
6.2. Practical implications edge sharing mechanisms.
5. People in my organization are frequently offered a variety of
This study has practical implications. The relationships between training and development programs.
knowledge sharing, innovations and firm performance may provide a 6. People in my organization are facilitated by IT systems invested
guide as to how companies should achieve better performance by for knowledge sharing.
using knowledge sharing and innovations. Scales put forward in this
study offer a checklist for companies to evaluate themselves in certain A.2. Tacit knowledge sharing
domain. Companies should think over the important antecedents that
lead to the explicit or tacit knowledge sharing in improving innovation 1. People in my organization frequently share knowledge based on
speed or quality. Furthermore, strategies and programs for innovation their experience.
speed or quality should be designed for various firm performances. 2. People in my organization frequently collect knowledge from
Future research therefore needs to give proper considerations to the others based on their experience.
strategies and implementation of programs supporting these activi- 3. People in my organization frequently share knowledge of
ties in order to enhance firm performance. know-where or know-whom with others.
4. People in my organization frequently collect knowledge of
6.3. Limitations and opportunities know-where or know-whom with others.
5. People in my organization frequently share knowledge based on
This study has limitations. First, potential common method their expertise.
variance may result from the use of self-report data. Second, the 6. People in my organization frequently collect knowledge from
cross-sectional data did not allow a longitudinal investigation of others based on their expertise.
the conceptual framework examined in this paper. Third, though 7. People in my organization will share lessons from past failures
the hypothesis model was empirically supported, it was rather sim- when they feel necessary.
ple and incorporated only six constructs. So we would like to point
out the opportunities to expand the model to incorporate other A.3. Innovation speed
antecedent and consequent constructs to form a more comprehen-
sive model. As a suggestion for further improvement, we need to 1. Our organization is quick in coming up with novel ideas as com-
note the importance of the sustainability of the operational and pared to key competitors.
financial performance generated in knowledge management activi- 2. Our organization is quick in new product launching as com-
ties. A longitudinal sample collected over multiple points of time pared to key competitors.
would help to support this research objective. 3. Our organization is quick in new product development as com-
Nevertheless, this study has produced empirical evidence to pared to key competitors.
substantiate the hypothesized associations that both explicit and ta- 4. Our organization is quick in new processes as compared to key
cit knowledge sharing practices will contribute to firm operational competitors.
and financial performance directly or through the improvement of 5. Our organization is quick in problem solving as compared to
innovation speed or quality. Explicit knowledge sharing has more key competitors.
significant effects on innovation speed and financial performance
while tacit knowledge sharing has more significant effects on inno- A.4. Innovation quality
vation quality and operational performance. The findings are
encouraged to bring more insight into how organizations should 1. Our organization does better in coming up with novel ideas as
enhance their performance with well-conceived knowledge sharing compared to key competitors.
or innovation strategies and practices. 2. Our organization does better in new product launching as com-
pared to key competitors.
Acknowledgements 3. Our organization does better in new product development as
compared to key competitors.
This research is partly supported by National Science Founda- 4. Our organization does better in processes improving as com-
tion of China (Grant Nos. 71101065 and 70971056), Chinese Edu- pared to key competitors.
cation Ministry Foundation of Humanities and Social Sciences for 5. Our organization does better in management improving as
Young Scholar (Grant Nos. 11YJC630218 and 10YJC630242), the compared to key competitors.
Fundamental Research Funds for the Central Universities (Grant
No. JGJ 110761) and Higher School Philosophy & Social Sciences A.5. Firm operational performance
Foundation of Jiangsu Province Education Department (Grant No.
2010SJB630020). 1. Customer satisfaction of our organization is better as compared
to key competitors.
Appendix A 2. Quality development of our organization is better as compared
to key competitors.
A.1. Explicit knowledge sharing 3. Cost management of our organization is better as compared to
key competitors.
1. People in my organization frequently share existing reports and 4. Responsiveness of our organization is better as compared to key
official documents with members of my organization. competitors.
 Z. Wang, N. Wang / Expert Systems with Applications 39 (2012) 8899–8908 8907

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