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Knowledge management in service

encounters: impact on customers’


satisfaction evaluations
Priyanko Guchait, Karthik Namasivayam and Pui-Wa Lei

Abstract
Purpose – This paper aims to integrate the knowledge management and marketing literatures to
examine the relationships between knowledge management (KM) practices during a service exchange
and customers’ satisfaction and behavioral intentions.
Design/methodology/approach – Data were collected in an experimental setting using video
scenarios; hypotheses were tested using MANOVA and ANCOVA.
Findings – Results show that tacit rather than explicit KM practices used by service providers have a
greater influence on customer satisfaction and behavioral intentions. The mediating effects of perceived
control and fairness on the relationship between KM practices and customer satisfaction are also found.
Research implications/limitations – This paper extends research in the area of knowledge
management, customer relationship management and services management, and suggests future
theoretical and methodological research directions. Although the sample is representative of the
population, no claims are made to generalize the findings of the study to the broader population.
Priyanko Guchait is a Practical implications – Managers need to understand the value of knowledge management in service
Doctoral Student and encounters and specifically focus on the tacit knowledge that front-line workers possess. Managers
Research Assistant, need to install organizational systems that encourage front-line workers to develop and use tacit
knowledge in service encounters.
Karthik Namasivayam is an
Associate Professor, both at Originality/value – The impact of knowledge management practices on consumer evaluations of
service has received less research attention. No prior studies have investigated the influence of KM
the School of Hospitality
practices in a service encounter context. This paper focuses on the influence of two fundamental
Management, The
knowledge management components, namely tacit and explicit knowledge, on consumer reactions.
Pennsylvania State
Keywords Knowledge management, Customer satisfaction, Relationship marketing,
University, State College,
Customer service management, Service levels
Pennsylvania, USA.
Paper type Research paper
Pui-Wa Lei is Associate
Professor in the Department
of Educational Psychology,
1. Introduction
The Pennsylvania State
University, State College, The concept of knowledge management (KM) has attracted the attention of researchers over
Pennsylvania, USA. the last decade since it is considered an important tool to achieve innovation and
sustainable competitive advantages (Cooper, 2006; Marques and Simon, 2006). Nonaka
(1998) noted that in highly uncertain economies the only sure source of lasting competitive
advantage is knowledge. Several studies found that firms that adopt knowledge
management practices perform better than competing firms that do not (Pathirage et al.,
2007; Marques and Simon, 2006). Knowledge management practices have been
implemented in a wide range of industries including manufacturing, consulting, tourism,
and call centers (Koh et al., 2005).
Extensive research has demonstrated the importance of customer-employee interactions in
customers’ evaluation of overall quality and/or satisfaction with services (Bitner et al., 1990;
Dolen et al., 2004). Research has also identified the relationships between consumer
Received: 14 July 2010
satisfaction and service quality (Parasuraman et al., 1988; Bitner, 1990; Brady et al., 2002),
Accepted: 8 December 2010 perceived control (Hui and Bateson, 1991; Van Raaij and Pruyn, 1998; Namasivayam, 2004),

DOI 10.1108/13673271111137466 VOL. 15 NO. 3 2011, pp. 513-527, Q Emerald Group Publishing Limited, ISSN 1367-3270 j JOURNAL OF KNOWLEDGE MANAGEMENT j PAGE 513
emotional contagion (Pugh, 2001), perceived employee effort (Mohr and Bitner, 1995),
perceived fairness (Judge et al., 2006; Colquitt et al., 2001), and service recovery efforts
(Webster and Sundaram, 1998; Smith and Bolton, 2002). However, the impact of knowledge
management practices on consumer evaluations of service has received less research
attention.
Sigala (2005) proposes that organizations need to implement customer relationship
management (CRM) strategies to enhance profitability and customer loyalty. Recent
research suggests that both CRM and KM are directed towards the same goal: continuous
improvement of processes to meet customer goals (Salomann et al., 2005). Initiatives
emerging from this effort have been labeled as ‘‘customer knowledge management’’ (CKM)
or ‘‘knowledge-enabled CRM’’ (Gibbert et al., 2002; Gebert et al., 2003). Croteau and Li
(2003) note that an organization’s KM capabilities are an important factor affecting CRM
impact. However, recent studies indicate an underutilization of KM practices in the
hospitality/tourism industry (Cooper, 2006; Sigala and Chalkiti, 2007; Hallin and Marnburg,
2007).
There is substantial evidence of the impact of knowledge management practices in building
strong relationships with customers, and enhancing customer satisfaction and
organizational performance (Marques and Simon, 2006; Pathirage et al., 2007). However,
no prior studies have investigated the influence of KM practices in a service encounter
context. KM begins with an understanding that knowledge is broadly classified as explicit
knowledge and tacit knowledge. Each has very particular characteristics, discussed more
fully later in this paper, that influence KM. This paper commences analysis at this
foundational level to ask how consumer reactions differ when service providers use one or
the other form of knowledge. More specifically, this study examines the influence of KM
practices on consumer satisfaction and consumers’ repurchase intentions. This study
focuses strictly on the dyadic interaction between service provider and customer – the
service exchange. KM practices outside these bounds are not within the scope of this study.
Therefore, the focus of this paper is on the influence of two fundamental knowledge
management components, namely tacit and explicit knowledge, on consumer reactions.
The next section reviews relevant literature and provides a discussion of CRM and the
service product to establish the conceptual basis of this study.

2. Literature review
2.1. CRM (service relationships)
According to Gutek et al. (1999), service relationships occur when customers have repeated
contact with same service provider. Service relationships refer to instances where service
providers know their customers personally and expect to see them again in future (Gutek
et al., 2002). Three distinguishing characteristics of service relationships are: reciprocal
identification, expected future interaction, and a history of shared interaction between
customers and service providers (Gutek et al., 2002). Over time customers and service
providers get to know each other and develop a history of shared interaction on which they
rely to complete a transaction (Gutek et al., 1999). In this study, this conceptualization is
adopted to suggest that returning customers seek evidence of reciprocal identification and
their history with the service organization. When these elements are evident, customers will
be more confident and, consequently, satisfied with the nature of their relationship with the
service provider. Customers discern evidence of reciprocal identification and shared history
by observing frontline service provider behaviors. When the service provider recognizes the
customer (e.g. greet by name) and suggests that the customer occupy the same room as
the previous visit, this indicates the quality of the relationship to the customer, leading to
greater satisfaction. This action by the service provider reassures the customer that the
service organization ‘‘mutually identifies’’ with the customer and that the service provider
‘‘knows about’’ the customers previous transactions with the organization.
Service organizations have recognized this important component of customer relationships
and have installed processes – knowledge management processes – to manage the

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interaction. Sigala (2005) notes the importance of an information and communication
technology system that is well-integrated with KM and relationship management principles
to maximize the benefits of a CRM process. The collection, storage, and dissemination of
information and data within organizations have been examined in the area of knowledge
management and is discussed more fully later in this paper. The next section provides a
conceptualization of the service product that forms the basis of this paper.

2.2. Service product


Recent research in services marketing has shifted conceptual and analytical focus from a
goods-dominant (G-D) to a service-dominant (S-D) logic. G-D logic refers to goods or
products (tangible output) as the main focus of economic exchange and services (intangible
good) as an add-on that enhances the value of a good (Vargo and Lusch, 2008). Contrarily,
S-D logic refers to service as a process of doing something using one’s resources (i.e.
knowledge and skills) to benefit another party, and is identified as the primary focus of a
service oriented economic exchange (Vargo and Lusch, 2008). In a service transaction,
therefore, the focus is on the creation of value rather than products (Lusch and Vargo, 2006).
Value estimations by customers are idiosyncratic and are based on customers’ specific
needs. This service-centric and process-driven logic shifts the locus of value creation from
service providers to a collaborative process of co-creation between customers and service
providers (Vargo and Lusch, 2008). This shift in analysis from service delivery to value
creation adds emphasis to the role of the frontline service provider. Lusch et al. (2008)
propose that service provider competencies (i.e. knowledge and skills) are essential to value
creation.
Following this conceptualization, this study connects the literatures on knowledge
management to customers’ satisfaction with a service. As earlier noted, the knowledge
and skills of the service provider are essential to value creation. Within the bounded area of a
dyadic service interaction, the knowledge and skills of a front line service employee are
considered an intangible component of the service. Research has noted that intangible
components, especially service provider behaviors, have an important role as indicators of
relationship strength (Namasivayam, 2005). Customers estimate they have a stronger
relationship with a service organization when the service provider demonstrates knowledge
of the customer’s preferences. However, the manner in which this knowledge or
understanding is demonstrated has an effect on customer evaluations. Whether the
service provider relies on tacit or explicit knowledge will influence consumers’ satisfaction
with the service.

2.3. Explicit and tacit knowledge


Knowledge has been classified as personal or shared and public, practical or theoretical,
hard or soft, internal or external, and foreground or background; however, the classification
of knowledge as tacit or explicit is the most widely accepted categorization (Meyer and
Sugiyama, 2007; Nonaka, 1994; Polanyi, 1958; Pathirage et al., 2007). ‘‘Explicit’’ or codified
knowledge is transmittable in formal, systematic language. ‘‘Tacit’’ knowledge, on the other
hand, has a personal quality which makes it difficult to formalize and communicate.
Importantly, tacit knowledge is deeply rooted in individual action, commitment, and
involvement in specific circumstances (Nonaka, 1994).
Jasimuddin et al. (2005) differentiate tacit knowledge and explicit knowledge based on eight
features. Explicit knowledge represents knowledge that can be:
B articulated (Nonaka and Takeuchi, 1995);
B codified in a tangible form (Nonaka and Konno, 1998);
B documented and transmitted, stored in the printed and the electronic media (Koh et al.,
2005);
B stored in external databases (outside human mind);

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‘‘ The knowledge and skills of the service provider are essential
to value creation. ’’

B available in organizational repositories (e.g. organizational databases, documents,


computers, organizational manuals, databases of corporate procedures, and best
practices) (Grant, 1996; Alter, 2002);
B is easily available to anyone in the organization (Hansen et al., 1999);
B is transferred from the ‘‘giver’’ to the ‘‘receiver’’ indirectly through information technology
(i.e. no direct face-to-face contact is required); and
B is not owned by individuals.
Herrgard (2000) suggests that tacit knowledge is the unarticulated knowledge that exists in
human beings acquired by individual processes like experience, reflection, internalization,
or individual talents. The presence of personal elements makes tacit knowledge valuable,
rare, inimitable, and non-substitutable (Brown and Duguid, 1998). This paper suggests that
when service providers employ tacit knowledge in the value creation process, the above
mentioned characteristics of tacit knowledge increase the value of the service product to the
customer. The use of tacit knowledge will strengthen customers’ judgments of the quality of
the relationship with the service provider. Contrarily, when the service provider refers to
documentation, databases, or other sources of information (explicit knowledge) in the value
creation process, customers are likely to discern lower levels of relationship with the service
provider and consequently influence their overall judgments of satisfaction and value in the
exchange. Explicit knowledge management is not context specific, as service employees
simply reuse the knowledge provided by the organization.
In high relationship service contexts, employees possess unique customer-provider dyadic
knowledge based on past transactions with the customer and do not depend on knowledge
made available to them by the organization (Gutek, 1999). Therefore, when consumers
perceive the service provider is using tacit knowledge management practices in a service
exchange they are more likely to perceive the service to have:
B more personal meaning for them;
B a higher relationship (membership) value (Namasivayam, 2005); and
B are more likely to trust the service provider’s assistance in value creation leading to higher
satisfaction and behavioral intentions.
Based on the above the following hypothesis is proposed:
H1. Tacit knowledge management practices will have a stronger impact on consumer
satisfaction than explicit knowledge management.

2.4. Mediation of fairness and control


The positive influence of perceived control and perceived fairness on consumer satisfaction
and behavioral intentions has been demonstrated in a number of studies (Namasivayam,
2004; Seiders and Berry, 1998). Researchers have mostly studied control and fairness as
important antecedents of customer satisfaction and behavioral intentions. However, not
much attention has been given to study the antecedents of control and fairness, other than
studies related to service failure and service recovery (Goodwin and Ross, 1992; Seiders
and Berry, 1998). This study proposes that service providers’ knowledge management
practices have a significant impact on control and fairness perceptions of customers.
Further, when consumers perceive high control and fairness in the service exchange they
are more likely to evaluate the service positively.

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2.4.1. Control and KM. Scholars have suggested that people are more likely to feel and
behave more positively when they perceive high control in any environment (Proshansky
et al., 1974). Empirical studies have found a significant positive relationship between
perceived control and human physical and psychological well-being. In a service encounter
any situational or interpersonal characteristic that enhances customers’ perceived control
will positively affect customer satisfaction and behavioral intentions (Namasivayam and
Hinkin, 2003; Hui and Bateson, 1991; Dabholkar and Sheng, 2009). Surprenant and
Solomon (1987) explained ‘‘personalized service’’ in service encounters as a service
provided based on the recognition of specific unique requirements of a customer as an
individual over and above his/her status as an anonymous service recipient. Personalization
was proposed by scholars as a significant determinant of perceptions of control and
customer satisfaction (Surprenant and Solomon, 1987; Bateson, 1985).
Researchers recommend that service organizations adopt effective KM practices to provide
personalized service experiences that fulfill customers’ unique needs (Sigala, 2004) and
enhance customers’ perceptions of control of the service value creation process leading to
higher satisfaction and behavioral intentions.
Surprenant and Solomon (1987) suggests that ‘‘programmed personalization’’ consisting of
routine actions (such as explicit knowledge management practices including common
information provided to service providers by the organization) to make each person feel like
an individual and not just another customer may not necessarily lead to higher customer
satisfaction. However ‘‘customized personalization’’ (e.g. tacit knowledge management
practices such as service workers using personal and unique knowledge to assist individual
customers) will increase customers’ confidence (perceived control) that they will obtain the
best alternative, one that fulfills their unique needs and influence their satisfaction
evaluations.
More specifically, in a high relationship oriented service, customers will perceive higher
control of the value creation process when service providers employ knowledge about
customer-specific preferences developed through prior transactions. When customers
observe service providers using tacit knowledge to assist in building their desired service
product, they feel more in control. The use of tacit knowledge indicates to customers that the
service provider will provide the required service components based on their awareness of
the consumers’ preferences. Higher perceptions of control lead to higher satisfaction and
behavioral intentions. Therefore, the following hypotheses are proposed.
H2a. Perceived control will mediate the relationship between knowledge
management practices and satisfaction.
H2b. Tacit knowledge management practices will have a stronger impact on
perceived control than explicit knowledge management practices.

2.4.2. Fairness and KM. As noted in the previous section, appropriate KM practices ensure
customers desired levels of perceived control over the value creation process. However, KM
practices may not always influence customers’ perceptions of control over the value creation
process. For example, when in order to create a suitable product a service provider performs
certain value adding processes obscured from customers’ direct observation, customers are
unlikely to perceive control over the processes. In this instance, service provider behaviors
indicate the quality of the interaction to the customer. Research has shown that when service
providers demonstrate courtesy, consideration, impartiality, and appropriate knowledge

‘‘ Customers estimate they have a stronger relationship with a


service organization when the service provider demonstrates
knowledge of the customer’s preferences. ’’

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collectively termed fair behaviors, customers are reassured of the service providers’ service
intentions (Namasivayam, 2004; Seiders and Berry, 1998). As noted earlier, when service
providers demonstrate knowledge about the customers’ preferences, this is important to
establishing relationship quality in the minds of the customer with effects on satisfaction
(McColl-Kennedy and Sparks, 2003). Accordingly, in the absence of perceptions of control
over the processes, appropriate demonstration of customer and product knowledge
reassures customers of both their value to the organization and that they will receive their
desired product (Namasivayam and Hinkin, 2003).
Recently, scholars have proposed more focus on CRM strategies to seek, gather, and store
the right information to provide personalized and unique guest experiences (Sigala, 2004).
In a service encounter when consumers perceive that service providers are effectively using
knowledge management to assist them create the desired service product customers are
more likely to perceive the service exchange process to be fair.
Customers in a service relationship who perceive that their service provider employs tacit
knowledge to assist in the value creation process will report higher levels of perceived
fairness. As noted earlier, the adoption of tacit knowledge in interactions indicates a stronger
relationship and adds value to any interpersonal interaction (Figure 1). Further, reliance on
tacit knowledge reassures the customer of the service intentions of the service provider – that
the customer will receive the best ‘‘deal’’ possible due to expected future interactions, shared
history, and reciprocal identification (Gutek et al., 1999). Since explicit knowledge is codified
and external to the service provider, it is less likely to reassure customers of reciprocal
identification and a shared history. Therefore the following hypotheses are formulated:
H3a. Tacit knowledge management rather than explicit knowledge management
practices will have a stronger impact on perceived fairness.
H3b. Perceived fairness will mediate the relationship between knowledge
management practices and satisfaction.

3. Methodology
3.1. Sample and procedure
Participants included 36 staff members and 110 management students from two
management departments at a Northeastern university in United States. Since no
significant differences were found, the student and non-student samples were combined
making the overall sample size 146. A total 52 percent of the sample was female and the
average age was 26 years (range 18-64 years). The study attempts to attain diversity in
sample demographics to overcome one major limitation of an experimental study, namely the
limited generalizability of findings to a population. Deliberate sampling for heterogeneity was
adopted in this study by recruiting both student and non-student sample, to increase external
validity of the findings of this study (Cook and Campbell, 1979). Participants were randomly
assigned to either a tacit or explicit knowledge management experimental condition.

Figure 1 Conceptual model

Control

Fairness
Knowledge
Management
Satisfaction Behavioral
Tacit Intentions
Explicit

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Researchers have demonstrated the ecological validity of videos in general, and also in
simulating service settings (Bateson and Hui, 1992). Moreover, video clips have been shown
to have high predictive validity in a number of different settings, including interpersonal
interactions (Ambadi et al., 2000). Knowledge management practices were manipulated
using two video scenarios. The experiment was conducted in a hotel setting. Before watching
the video, participants were asked to imagine they were in a hotel, where they had stayed in
the past. The video showed a front desk clerk enacting the two experimental conditions. The
video was made from the point of view of the camera – the front desk clerk looks and speaks
directly into the lens of the camera as if the respondent were being addressed. In the first video
scenario, the front desk clerk uses tacit knowledge to assist the customer (i.e. the employee
recognizes the guest and assists the customer with the knowledge about the customers’
preferences based on past service transactions). In the second video scenario, the front desk
clerk uses explicit knowledge to help the customer (i.e. the service employee uses external
resources (e.g. a computer) to retrieve information and does not possess any knowledge
about the customer from past transactions). To control for gender effects, both male and
female front-desk clerks were used in the study. Respondents were randomly assigned to
watch one of the two video scenarios. After watching the video, respondents completed a
survey questionnaire consisting of Likert type scale items.
A between subject analysis of variance (ANOVA) and an analysis of covariance (ANCOVA)
design in SPSS 17.0 was utilized to test the hypotheses. The dependent variables measured
were satisfaction and behavioral intentions, and the mediating variables were perceived
fairness and perceived control.

3.2. Knowledge management manipulation check item generation


The success of the knowledge management manipulation was measured using two scales
developed for this study. The scales measured tacit and explicit knowledge management.
Items were generated for each scale based on the dimensions proposed by Jasimuddin
et al. (2005). Face and content validity of the scales was ensured following Hinkin and
Tracey’s (1999) analysis of variance approach.
Using ANOVA to assess each item (Hinkin and Tracey, 1999), the results showed that 14 of
32 explicit KM items had significantly higher mean score on explicit KM construct than tacit
KM construct. These 14 items were retained. Similarly, 14 items out of 32 were retained for
the tacit KM construct.
Cronbach’s alpha for perceived tacit KM scale was .95. A sample item is, ‘‘The service
provider helped me using knowledge off the top of his/her head.’’ Cronbach’s alpha for
perceived explicit KM scale was .92 indicating adequate reliability. A sample item is, ‘‘The
service provider used external sources (e.g. computers; manuals) to retrieve information, in
order to help me.’’

3.3. Measures
Satisfaction was measured with three items adapted from a three-item satisfaction scale
developed by Lee et al. (2000). A sample item is, ‘‘I am satisfied to do business with this
hotel.’’ Cronbach’s alpha was 0.94.
Behavioral intention was measured with three items adapted from a three-item behavioral
intention scale developed by Lee et al. (2000). A sample item is, ‘‘I will definitely use this
hotel again.’’ Cronbach’s alpha was 0.93.
Perceived control was measured with three items adapted from a perceived control scale
developed by Namasivayam (2004). A sample item is, ‘‘The service encounter had everything
that was essential for the service I needed.’’ Cronbach’s alpha was found to be 0.85.
Perceived fairness was measured with eight items adapted from Truxillo and Bauer (1999),
and Colquitt (2001). A sample item is, ‘‘Overall, I believe that the service process was fair.’’
Cronbach’s alpha was found to be 0.81.
All items were measured on a scale of 1 (do not agree) to 7 (completely agree).

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3.4. Analysis
ANOVA was used to test the influence of knowledge management practices on consumer
satisfaction, behavioral intentions, perceived fairness, and perceived control. The
hypothesized mediation effects of perceived control and perceived fairness on the
relationship between knowledge management and dependent variables (satisfaction and
behavioral intentions) were tested using ANCOVA.

4. Results
4.1. Manipulation checks
To examine the effectiveness of the knowledge management manipulation, participants
completed the perceived tacit and explicit knowledge management scales developed for
this study.
Results indicate that respondents in the tacit KM condition perceived higher tacit KM
(M ¼ 3:56, s:d: ¼ 0:84) than respondents in the explicit KM condition (M ¼ 2:41,
s:d: ¼ 0:84; F ½1; 106 ¼ 50:16, p , 0:01). Similarly, results also indicate that respondents
in the explicit KM condition perceived higher explicit KM (M ¼ 3:80, s:d: ¼ 0:52) than
respondents in the tacit KM condition (M ¼ 2:53, s:d: ¼ 0:78; F ½1; 108 ¼ 100:06, p , 0:01)
providing support for the effectiveness of the manipulations.
Table I presents the correlation matrix. The correlations are all in the desired direction.
Significant correlations were found between KM practices and perceived fairness,
satisfaction, and behavioral intentions. Although the correlation between KM and
perceived control was in the desired direction, the relationship was not significant.
Therefore, the correlations indicate that the respondents reported higher perceptions of
fairness, satisfaction, and behavioral intentions in the tacit KM condition compared to the
explicit KM condition. Additionally, positive correlations were found between perceived
control, perceived fairness, satisfaction, and behavioral intentions.

Table II reports the means and standard deviations for all variables of interest. The means
reported in Table II show patterns as expected. The means of perceived control, perceived
fairness, satisfaction, and behavioral intentions were higher in the tacit knowledge
management condition than explicit knowledge management condition.

Table I Correlation matrix (N ¼ 138) (Listwise deletion)


KM Fairness Control Satisfaction Behavioral intentions

KM a
Fairness 0.27** (0.81)
Control 0.15* 0.45** (0.85)
Satisfaction 0.36** 0.73** 0.57** (0.94)
Behavioral intentions 0.34** 0.60** 0.52** 0.82** (0.93)
a
Notes: Cronbach’s alphas reported on the diagonal in parentheses; KM: 1 ¼ Tacit KM; 0 ¼ Explicit
KM; *p , 0.1; ** p , ;0.01

Table II Means and standard deviations


Satisfaction Behavioral Intentions
Variables Fairness (N ¼ 141) Control (N ¼ 144) (N ¼ 145) (N ¼ 146)

Explicit KM 3.6 (0.59) 3.3 (0.85) 3.4 (0.88) 3.4 (0.94)


Tacit KM 4.0 (0.57) 3.60 (0.87) 4.1 (0.85) 4.1 (0.84)

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4.2. Tests of hypotheses
The analyses included gender of service employee, gender of respondents, and age as
control variables. Age and gender of respondents did not have any influence on outcomes
and are therefore not discussed further in this paper. Since employee gender was found to
influence the outcomes (outcome variable means were higher for the male employee),
employee gender was used as a covariate in further analyses. The dependent variable,
consumer satisfaction, was first subjected to an analysis of variance (ANOVA) to compare
the tacit and explicit knowledge management conditions. The ANOVA table (Table III) shows
significant effect of knowledge management on consumer satisfaction with the service
exchange. Results show that tacit KM has a greater impact on customer satisfaction
compared to explicit KM (F ½1; 144 ¼ 25:83, p , 0:01). Therefore, H1 is strongly supported.
H2a proposes the mediating effect of perceived control on the relationship between KM
practices and customer satisfaction. H2b predicts that KM will have a positive effect on
perceived control (i.e. tacit KM will have a greater impact on perceived control than explicit
KM). Baron and Kenny (1986) propose several necessary steps to test mediation. First, the
independent variable (KM) should have a significant effect on the dependent variable
(satisfaction). As reported earlier, KM significantly affects consumer satisfaction
(F ½1; 144 ¼ 25:83, p , 0:01). Second, the independent variable (KM) should significantly
affect the mediator (perceived control); this requirement was marginally supported
(F ½1; 143 ¼ 2:81, p , 0:1). Therefore, H2b is partially supported as well. Third, an analysis
of covariance (ANCOVA) was conducted with perceived control as covariate to test the third
and fourth requirements for mediation. Results show that control was significantly related to
satisfaction (F ½1; 142 ¼ 58:82, p , 0:01). Results indicate that although KM has a
significant relationship with satisfaction the size of the relationship reduces (from
(b ¼ 0:71 (F ½1; 144 ¼ 25:83, p , 0:01) to (b ¼ 0:54; F ½1; 142 ¼ 20:67, p , 0:01)) when
control was partialed out, indicating a partial mediating effect. Therefore, H2a is supported.
A similar procedure was followed to test H3b, which predicted that perceived fairness
mediates the relationship between KM and customer satisfaction. The influence of KM on
customer satisfaction was reported earlier satisfying step 1. There was a significant effect of
KM on perceived fairness (F ½1; 140 ¼ 14:30, p , 0:01), satisfying step 2. Results indicate
that tacit KM had a greater impact on customer perceptions of fairness in the service
exchange process, compared to explicit KM, supporting H3a. When fairness was
introduced as covariate in the model, fairness had a significant effect on satisfaction (F[1,
140], 126.06, p , 0:01). The effect of KM on satisfaction is reduced (from (b ¼ 0:71
(F ½1; 144 ¼ 25:83, p , 0:01) to (b ¼ 0:36; F[1, 140] ¼ 11.17, p , 0:01)) when fairness was
partialed out, indicating a partial mediating effect. Therefore, H3b is supported.

5. Discussion
The results show that tacit, rather than explicit, knowledge management has a greater
influence on customer satisfaction and behavioral intentions in a service encounter. This
shows the importance of tacit knowledge management in value creation especially in a high
relationship-oriented service context. When customers perceive that the service provider is

Table III Summary of ANOVA, satisfaction as dependent variable


Source SS df MS F

Corrected model 24.88 2 12.44 17.91*


Intercept 791.72 1 791.72 1139.69*
Employee gendera 8.24 1 8.24 11.86*
KM 17.94 1 17.95 25.83*
Error 98.64 142 0.69
Total 2189.56 145
Corrected total 123.53 144

Notes: aEmployee gender: 1 ¼ Male; 0 ¼ Female; *p , 0.01

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using tacit knowledge they are more likely to believe that service providers possess
knowledge of the customer’s preferences (customer-provider dyadic knowledge developed
through personal experience with the customers in past transactions). Use of tacit
knowledge strengthens the customer-service provider relationship. In these conditions,
customers are more likely to trust the service provider’s assistance in value creation resulting
in positive evaluations of the service exchange.
Moreover, a partial mediation effect of perceived control on the relationship between KM
practices and customer satisfaction was also found in the study. The results clearly indicate
that when service providers use tacit knowledge during a service exchange customers are
more likely to perceive higher control in the value creation process compared to when
service providers use explicit knowledge. Use of tacit knowledge by service providers
ensure the customers that service providers possess knowledge about customer-specific
preferences developed through prior transactions. Therefore, the use of tacit knowledge by
service employees provide an indication to customers that the service employee will provide
the appropriate service components (based on their knowledge about the customers’
preferences) to assist customers in building their desired service product. This assurance
enhances customer perceptions of control in the service exchange process as they are
certain that they will be able to create the desired service product. Consequently, higher
perceptions of control lead to positive service exchange evaluations.
Although a partial mediating effect of control was found, the effect was weak. Additionally,
the effect of KM on control was not very high. The results clearly support the propositions
made earlier that KM practices may not always influence customers’ perceptions of control
over the value creation process as often service provider perform certain value adding
processes which customers might fail to observe, resulting in lower perceptions of control. In
these conditions, customers look for fair service provider behaviors, which indicate the
quality of customer-service provider interaction (Namasivayam and Hinkin, 2003).
A mediating effect of perceived fairness on the relationship between KM practices and
customer satisfaction was found in this study. These results indicate that when service
providers use tacit knowledge to assist customers in a service exchange, the customers
consider the service exchange to be fairer compared to when service providers use explicit
knowledge. Use of tacit knowledge indicates stronger relationships and adds value to the
interpersonal interaction between customers and service providers. Reliance on tacit
knowledge also assures customers about the service intentions of the service provider to
provide the best service components possible to maintain the service relationship. More
specifically, when customers believe that the service providers are adopting the appropriate
procedures (i.e. use of tacit knowledge in service encounters) to maintain the
customer-provider service relationship, customers are assured that they will be treated
fairly. These higher perceptions of fairness result in higher satisfaction levels and positive
behavioral intentions.
The correlation matrix (Table I), and means and standard deviations (Table II), provide
evidence of the relationship between knowledge management and behavioral intentions,
and satisfaction and behavioral intentions. The correlation matrix shows positive
relationships between KM and behavioral intentions. Table II shows means for behavioral
intentions, which are higher for tacit KM condition compared to explicit KM condition.
Significant relationships were found between satisfaction and behavioral intentions.
Moreover, ANCOVA results clearly indicate that tacit rather than explicit knowledge
practices have a greater influence on customers’ behavioral intentions (b ¼ 0:66;
F ½1; 146 ¼ 15:54, p , 0:01) after controlling for employee gender. No separate

‘‘ Use of tacit knowledge strengthens the customer-service


provider relationship. ’’

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hypotheses were formulated to test satisfaction-behavioral intentions linkages as the
relationship is well established and current results replicate prior findings (Brady and
Robertson, 2001; Gonzalez et al., 2007).

6. Implications
Managers need to understand the value of tacit knowledge and focus on the tacit knowledge
that front-line workers possess. Front-line workers regularly interact with customers in
service encounters and as a result service relationships develop. Based on their personal
experiences, service providers build their tacit knowledge about customers’ preferences
and employ this tacit knowledge in future service encounters to strengthen customer-service
provider relationship. Therefore, managers need to install organizational systems that
encourage front-line workers to develop and use tacit knowledge in service encounters.
Moreover, managers need to understand that it is not always possible for front-line workers in
a service setting to follow strict rules and regulations to assist customers. Each customer
might approach a service provider with completely different requirements. Managers cannot
provide front-line employees with solutions to every problem (i.e. explicit knowledge is not
always available to employees) (Namasivayam, 2005). Therefore, front-line employees have
to use their tacit knowledge to handle customers’ unique problems (Gutek, 1999).
Organizational leaders can take necessary steps (e.g. training) to enhance the skills and
knowledge of their front-line employees so that employees utilize tacit knowledge
management in service encounters.
However, this study does not intend to suggest that tacit knowledge practices are uniformly
better. Managers must make informed decisions about the appropriate knowledge practice
in customer facing processes based on their organization’s strategic intent. If a repeat and
loyal client base and a differentiated product are important facets of the organization’s
strategy then tacit knowledge practices add value. If on the other hand, the organization
competes on the basis of volume or a low cost standardized or commoditized product, then
explicit knowledge practices will add value to the strategic posture.

7. Limitations and future directions


Although the study makes valuable contributions in the field of service management, it has
limitations. The study utilizes video clips to simulate the setting. The main disadvantage of
this method is that subjects may not completely identify with the imaginary situation;
however, previous studies have demonstrated the validity of using such methods (Bateson
and Hui, 1992). Future studies need to test the findings in field settings with actual
knowledge management practices used by service providers. The studies can be done in
settings such as airports, restaurants, supermarkets, and other service establishments to
ensure broader generalizability of the results.
Second, future studies can also test the relationships with a different sample. Although age
and the student and non-student sample did not affect influence of knowledge management
on outcomes, the current sample may not be entirely representative of the population. The
current study makes no attempt to generalize the findings to broader population. However
field studies in future can enhance the generalizability of this study. Future field studies can
be done with samples that include business travelers, and repeat customers in hotels,
restaurants, banks, which may be more representative of the population. Additionally, an
investigation of these relationships in different cultural contexts is also important. In some
cultures, it might be considered as invasion of privacy if service providers assist customers
utilizing knowledge based on prior transactions.
Third, future studies should compare the influence of knowledge management dimensions in
high versus low relationship-oriented service (Gutek et al., 1999). It may be that in low
relationship services customers prefer service providers to use explicit knowledge
management practices, and their use of tacit knowledge may be considered ‘‘programmed’’
leading to negative evaluations. These propositions need to be tested in future studies.

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Fourth, this study manipulated knowledge management and gender of service providers.
Although service provider gender emerged as a significant factor, no interactions between
gender and KM practices were found. Gender of service providers was used as a control
variable in the current study. Future studies can explore if service employee gender,
customer gender, and knowledge practices interact. Further, studies can also investigate
the influence of employee race, gender and knowledge management to see the impact on
outcomes. Under what conditions is the interaction seen as most fair or satisfying?
This study used perceptions of control and fairness as mediators. Partial mediating effects of
perceived fairness and control were found in this study. Future studies can investigate the
three-way interaction of control, fairness, and knowledge management. Other mediating
variables such as trust and self-esteem need to be investigated. Service providers using
tacit knowledge management and making sincere efforts to maintain relationships with their
customers are likely to enhance customer self-esteem and customer trust with the provider
and the organization, which leads to positive evaluations.
Although there was substantial evidence of the influence of KM on perceptions of control, the
impact was not strong. One explanation for the lower influence of KM practices on
perceptions of control could be that customers often do not perceive direct control in a
service exchange process. In this case, consumers focus more on the fairness of the
procedures adopted by service employees to evaluate the exchange. These procedural
fairness perceptions re-establish customer perceptions of control (Namasivayam, 2004).
Therefore, future studies can investigate if certain KM practices, lead to higher fairness
perceptions and whether such increase in fairness perceptions leads to perceptions of
control and customers’ satisfaction in an exchange.
The current study focused on one dimension, procedural fairness. Future studies can
perform a detailed examination of the influence of knowledge practices on three dimensions
of fairness: procedural, interactional and informational fairness. These investigations can
help researchers and practitioners better understand the relationships between knowledge
practices and customer evaluations of service exchanges.

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About the authors


Karthik Namasivayam is an Associate Professor of Organizational Behavior at the School of
Hospitality Management, The Pennsylvania State University. He received his Masters and
PhD from Cornell University. He has published peer-reviewed articles in the areas of
intellectual capital in service industry, services management, consumer satisfaction, and
human resources management.
Pui-Wa Lei is an Associate Professor at the Department of Educational and School
Psychology and Special Education, Pennsylvania State University. She received her PhD
from the University of Iowa. Her research interests are in methodological issues of
multivariate statistical analyses, particularly structural equation modeling and multilevel
modeling. Her research has been published in professional journals of measurement and
statistics.
Priyanko Guchait is a Doctoral Student in the School of Hospitality Management at The
Pennsylvania State University. His research focuses on the application of the theoretical
frames from organizational behavior, and organizational psychology to the service industry.
He received his Masters in Hospitality Management from University of Missouri-Columbia
and Masters in Human Resources and Employment Relations from The Pennsylvania State
University. He has published peer-reviewed articles in the areas of services
management/marketing, consumer satisfaction, and human resources management.
Priyanko Guchait is the corresponding author and can be contacted at: pug117@psu.edu

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