Business and Society

The Impact of Organizational Culture and Structure on Knowledge

Sharing
Md. Zahidul Islam
Faculty of Business, Universiti Brunei Darussalam

Ikramul Hasan
Faculty of Business, Universiti Brunei Darussalam

Ali Yusob Md. Zain

Faculty of Business, Universiti Brunei Darussalam

Abstract

The aim of this paper is to examine how organizational culture, structure influence
knowledge sharing in Malaysian MNCs. We pointed out that knowledge is shared through the
organizational culture and structural systems which involve some key factors, i.e., support
and collaboration, learning and development, leadership and commitment, formalization and
centralization. As support and collaboration encourage learning and development for the
knowledge worker enabling leadership roles to be cultivated and exercised to its full
potential in the circumference of the organizational culture. On the other hand, design of the
structure can be an essential factor that constrains the knowledge sharing
practice in the organization. The approach of this research is quantitative in nature. The
research findings indicate that out of the five independent variables, learning and
development, leadership commitment and formalization are positively related to knowledge

knowledge sharing among their employees. The findings of this research are limited to

The conclusions of this study are based on the interpretation of survey results administered to
90 managerial staff in a number of Multinational Corporations in Penang, Malaysia. Further
studies are required to draw a more generalized conclusion. The paper contributes to the
body of literature relating to knowledge sharing in the high-tech semiconductor industry.

Keywords: Knowledge sharing, organizational culture, organizational structure

1.0 Introduction

Effective use of intellectual capital is one of the important issues faced by organizations in
-driven economy where managing knowledge is considered as
a key component of the strategy to create a sustainable competitive advantage (Oliver and
Kandadi, 2006; Walczak, 2005). Since the management of knowledge is an integrated array
of processes that capture, store and disseminate knowledge in an organization, the term
organizational knowledge refers to more than just the database and information systems in
the organization (Obeid and Moubaiddin, 2010). Organizational literature represents a range
of definitions and perspectives on knowledge e.g. Maruta (2012), knowledge is basically

Considering these learning and experience issues; Obeid and Moubaiddin (2010) and Alavi
and Leidner (2001) urged that the information becomes knowledge once it is processed in the
mind of an individual and managing knowledge allows knowledge workers and decision
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makers to learn what they need, when they need it and to improve organizational
performance. The combination and exchange of knowledge for creating new knowledge
require the presence of social capital. Guzman (2008) believes that knowing is a form of
in the historical, social and
cultural contexts in which it emerges and is embodied in a variety of forms and media. Gold
et al. (2001) mentioned that three key factors - culture, structure and technology enable the
maximization of social capital towards knowledge sharing. Previous research which
examined the importance of social capital in the sharing of knowledge between individuals
suggested that knowledge sharing is contingent upon social interaction, and this is important
for management to be aware of in order to make successful decisions in determining the

Barner-Rasmussen, 2003; Kostova and Roth, 2003; Reiche, Kraimer and Harzin, 2007).
Based on this premise, it would be interesting to study how Malaysian MNCs make decisions
on gaining competitive advantage over others. This study focuses on two areas: culture and
structural dimension, from the social capital perspective that were previously found to have
higher impacts on knowledge sharing.

2.0 Literature Review

2.1 Knowledge Sharing

Knowledge is considered a key element in business success. The importance of knowledge

for organizations is due to the fact that the sum of knowledge acquired externally and
internally, constitutes a sustainable resource for maintaining competitive advantage
(Kamasak and Bulutlar, 2010). Teh and Sun (2012) and Lin (2007) define knowledge sharing

et al. (2006) define

knowledge creation as a continuous process of learning by acquiring a new context, a new
view of the world and new knowledge in overcoming the individual boundaries and
constraints imposed by existing information parameters (Kamasak and Bulutlar, 2010). An
effective knowledge management system pays off in fewer mistakes, less redundancy,
quicker problem solving, better decision making, reduced research development costs,
increased worker independence, enhanced customer relations and improved service by
disseminating knowledge from one individual or group to another within the organization
(Ford and Chan, 2003; Becerra-Fernandez, 1999). Ghobadi and D'Ambra (2012) and
Szulanski (2000) also found that knowledge sharing provides individuals with a better
understanding of the know-how and skills of others, and makes them capable of responding
to situational demands even though the complexity of the task is beyond the cognitive
capabilities of each member. Ryan, Windsor, Ibragimova and Prybutok (2010), believed that
material assets will depreciate in value with usage whereas knowledge assets appreciate in
value with usage because ideas breed new ideas, and shared knowledge stays with the giver
while enriching the receiver (Davenport and Prusak, 1998). Once knowledge is created there
is an economy of scale that results from its sharing because shared knowledge stimulates the
creation of new knowledge which enhances its competitiveness. On the other hand Gupta and
Govindarajan (1991) and Inkpen and Tsang (2005) found that MNC can be regarded as a
network of capital, product, and knowledge transactions among units, and the primary reason
why MNCs exist is because of their ability to transfer and exploit knowledge more
effectively and efficiently in the intra-corporate context than through external market
mechanisms.

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2.2 Organizational Culture

A knowledge- based enterprising culture is arguably one of the most important conditions
leading to the success of knowledge sharing (Kazi, 2005) as organizations represent different
Islam,
Ahemd, Hasan and Ahmed, 2011). According to Tuan (2012) and Koot (2004) organizational
culture can be defined from a dynamic, constructivist, and holistic perspective in terms of an
ongoing process of identity building/re-building and meaning-making in and around an
organization, which enables its social integration as well as its sub
the other hand many authors have also identified culture as the most significant barrier to the

the intra-organizational, organizational, trans-organizational and supraorganizational level

may act simultaneously and thus result in cultural complexity (Sackmann and Friesl, 2007).
Therefore, a pertinent culture should be established to encourage people to create and share
their knowledge within an organization as well as among business partners (Rivera-Vazquez,
Ortiz-Fournier and Flores, 2009). Since the right organizational culture and infrastructure is
important for knowledge creation and dissemination, it is a critical step to develop strategies

The cultural dimensions also deal with concepts such as employee resistance to change,
motivation to share knowledge and leadership commitment (Davenport and Prusak, 1998;
Rollo, 2002). Hurley and Hult (1998) proposed that learning and development, support and
collaboration, power sharing and participative decision making affect organizational
innovativeness. Although there are various characteristics of culture that affect knowledge
sharing, this study focuses on three characteristics: Support & Collaboration, Learning &
Development and Leadership Commitment.

2.3 Organizational Structure

The conceptualization of the firm as a knowledge integrating institution implies the

importance of the internal structure of the firm, especially in terms of hierarchical design of
the organization to authorize the decision-making power, standardize the rules and
procedures, and integrate members and work (Capellen, Koppius and Dittrich, 2011; Chen,
Huang and Hsiao, 2010). According to Willem and Buelensa (2009) the impact of
coordination on knowledge sharing depends on the kind of coordination mechanisms used in
the organization, and this is closely related to other structural dimensions such as
centralization, formalization and specialization. Borgatti and Foster (2003) explained that the
n the literature by the term

social structures but can also be considered as resources for conducting social affairs and
exchange. Inkpen and Tsang (2005) defined social aspect through social network which
configure the network by assembling hierarchy, density, and connectivity that affect the
flexibility and ease of knowledge exchange through their impact on the extent of contact and
accessibility among network members in a way that the social network perspective can be
utilized to explain how organizational structure influences the way knowledge flows and
accumulates (Chen, Huang and Hsiao, 2010; Autio et al., 2004). The structure can be
classified using various taxonomies, namely simple, team structure, bureaucratic, mechanistic,
organic and matrix. Mechanistic and organic structures are at the two extremes that
mechanistic organization has relatively low decentralization and complexity in which it
operates under specific rules and regulations with predefined functional roles whereas

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organic structures are characterized by informal control mechanisms, adaptability and open
communication (Burns and Stalker, 1961). The underlying characteristics that differentiate
these two extremes are degrees of formalization and centralization. This study also focuses
on these two issues to examine the knowledge sharing process in Malaysian MNCs.

3.0 Research Model

Based on the literature review, this study aims to examine the relationship between
organizational culture, structure and knowledge sharing. Researchers took a modest attempt
to design a model by considering five independent variables, namely support and
collaboration, learning and development, leadership commitment, formalization, and
centralization and a dependent variable, knowledge sharing. Figure 1 shows the research
model and the next section provides the justification for hypothesis.

Figure 1: Research Model

Organizational Culture
Support and Collaboration
Learning and Development
Leadership and Commitment
Knowledge Sharing
H1- H5
Structure
Formalization
Centralization

3.1 Support and Collaboration

The role of collaborative tools to support social construction and accumulation of knowledge
is evident in organizations around the world (Ryan et al., 2010) and the inclusion of
e is meant to ensure that
collaboration is institutionalized that knowledge sharing occurs (Rivera-Vazquez, Ortiz-
Fournier and Flores, 2009). Support and collaboration refers to how people in an organization
actively assist and support in work related issues as it is thought that it is the key ways in
which knowledge is transmitted and created within the organization (Ryan et al., 2010).
Studies by Parker and Price, (1994); Hurley and Hult (1998); Nahapiet and Ghoshal (1998)
also found significant relationship between support and collaboration, and knowledge sharing.
Hence, we hypothesized that:

H1: Support and collaboration has positive relationship with knowledge sharing.

3.2 Learning and Development

Learning and development refers to the extent to which an organization is willing to

encourage its members to learn and develop themselves for long-term success.
Organizational learning is also described as the way the organizations build, supplement and
organize knowledge and routines around their business activities and business cultures, as
well as the way they adopt and develop organizational efficiency by improving the use of
broad skills of their workforces (Kumaraswamy and Chitale, 2012; Fiol and Lyles, 1985).
This is due to the fact that organization

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in order to produce breakthrough in its products and services (Tidd, Bessant and Pavitt, 1998)
with competitive advantage (Islam, Mahtab and Ahmad, 2008). Hence, we hypothesized that:
H2: Learning and development has positive relationship with knowledge sharing.

3.3 Leadership Commitment

The term leadership acts as a role model for the manner in which knowledge sharing occurs
with the use of non-coercive influences to direct and coordinate the activities of group
members toward goal attainment as well as making the incentives for that achievement (Islam
et al., 2011; Ke and Wei, 2008; Kerr and Clegg, 2007). The study by Islam et al. (2011)
found that leaders play an important role in organizational knowledge sharing because they
are the appointed authority to provide guidance and translate business strategies (business

Delbridge (2012), Capellen, Koppius

and Dittrich, (2011); Abdullah, (1994), Kennedy and Mansor, (2000) also found that
leadership commitment has positive impact over knowledge sharing. We, therefore,
hypothesized that:

H3: Leadership commitment has positive relationship with knowledge sharing.

3.4 Formalization

that the obedience to the rules and procedures may constrain the employees in combining the
various sources of knowledge for developing new products or services. Less formal structure
in organizational boundary exposes less formal rules and regulations, therefore necessary for
effective knowledge management as it provides opportunities for employees to communicate
with each other by sharing knowledge which creates greater flexibility and creativity, is
conducive for knowledge sharing. Studies by Capellen, et al. (2011); Islam et al. (2010);
Chen et al. (2010) found that less formal structure produces more organizational knowledge.
Thus we hypothesized that:

H4: Formalization has negative relationship with knowledge sharing.

3.5 Centralization

Centralization refers to the hierarchical level of authority and extent that individuals may
participate in the decision-making within the organization (Andrews and Kacmar, 2001).
According to Damanpour (1991) centralization generates a non-participatory environment
that lessens communication, commitment, and involvement among participants. Confirming
this spectrum it also ensures inefficiency in creation and sharing of knowledge as employee
has no discretion in their working environment (Chen et al., 2010; Janz and Prasarnphanich,
2003). Ryan et al. (2010) defines centralization as a hierarchical arrangement where
coordination is inadequate because the knowledge which is tacit and sensitive is best
communicated directly through individual specialists. According to Grant (1996, p. 118),

Capellen et al., (2011); Willem and Buelensa, (2009) and Tsai, (2002) also found that higher

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degree of centralization in organizations tend to hinder knowledge sharing and creation. Thus,
we hypothesized that:

H5: Centralization has negative relationship with knowledge sharing.

4.0 Research Methodology

This is a quantitative research by nature. The population for this study was managerial staff
staffs were selected in this study as
respondents because they are appropriate in terms of sharing of knowledge and are associated
with decision-making process by playing the roles of moderators, mentors, leaders which are
essential for knowledge sharing. A draft questionnaire was developed in earlier stage of the
study and pilot tests were conducted by getting responses from a few academics and
professors to validate these measures prior to finalizing the questionnaire to clear,
understandable that both content and wording of the questionnaire were problem free. The
primary source of data collection was through questionnaire survey. The questionnaire
consists of seven sections with measurement scales for Support and Collaboration, Learning
and Development, Leadership and Commitment, Formalization, Centralization and
Knowledge Sharing. The primary means of distributing the survey questionnaire was through
e-mail with a cover letter to explain to the participant the objectives of the study.

4.1 Scale Development and Statistical Analysis

To ensure content validity, items were selected from previous research and the questionnaires
were mainly adapted from Gold et al. (2001), Yang (2007), Hedlund (1999), Hurley and Hult
(1998), Siegel and Kaemerer (1978). Where appropriate, the items were modified for the
present study. All questionnaire items were measured on a five-point Likert- type scale that

were implemented to test the hypotheses by using statistical software SPPS version 15 for
nal consistency of the items, and
regression analysis was used to test the hypotheses.

5.0 Results

Out of the 150 questionnaires distributed, 90 were returned, showing a response rate of 60%.
Demographic data of the respondents show that 56.7% were male respondents and 43.3%
were female. In terms of the age groups of respondents, 63.3% respondents were between
the ages of 21 to 30 years old. The respondents were educated at post graduate (14.4%),
degree (76.7%), diploma (5.6%) and secondary education (3.3%). Most of the respondents
were at their job in current position for 3 to 5 years (33.3%), and between 11 to 20 years
(4.4%). The type of industry that the respondents represented were mainly Electrical and
Electronics companies (83.3%) followed by Logistics companies at 2.2%, and 14.4% of them
belong to other industries. In terms of organizational annual revenue, 15.6% of the
respondents responded that their organizations annual revenue is between RM501 million to
RM1000 millions where only 1.1% have below RM10 Millions of revenue. Out of 90
respondents, 95.6% responded that the number of employees in their organization was more
than 1,000 employees where only 4.4% have 501 and 1,000 employees. In terms of years of
operation in Malaysia, 63.3% of the respondents responded that their organization has been
operating in Malaysia for more than 20 years where other shows 3.3% for 16 to 20 years,
28.9% for 11 to 15 years and only 4.4% for 5 to 10 years.

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Table 1 shows the reliability assessments for the independent variables, moderating variable
-item consistency.

Table 1: Summary of Reliability Analysis

Variables Number of Number of
items items deleted
Support and Collaboration 5 None 0.86
Learning and Development 5 None 0.70
Leadership Commitment 6 None 0.67
Formalization 5 None 0.73
Centralization 5 None 0.70
Knowledge Sharing 6 None 0.74

Regression analysis was carried out to test the relationships between the dimensions of
organizational culture, structure and knowledge sharing. A significance level of 0.05 or 5%
significance was used as the basis for accepting or rejecting the hypotheses. The first
regression models involved organizational culture and organizational structure as
independent variables and knowledge sharing as the dependent variable. This is shown in
Table 2. This regression analysis was conducted to test Hypotheses 1 to 5. The coefficient of
R2 is 0.578 indicating that the independent variables of organizational context explain about
57.8% of the variance in the dependent variable, knowledge sharing. Durbin Watson statistic
of 2.078 indicates there is no auto-correlation problem. Tolerance and VIF values are within
the acceptable range for all independent variables, indicating that there are no multi-
collinearity problems.

Table 2: Regression Summary

Variable Sig.
Support and Collaboration 0.190 0.07
Learning and Development 0.373 0.00
Leadership Commitment 0.483 0.00
Formalization 0.367 0.00
Centralization 0.141 0.06
R² = 0.578
Sig. = 0.000
Durbin Watson = 2.078
F-value = 22.453

The results of the regression analysis led to the rejection of Hypotheses 1 & 5 and acceptance
of Hypotheses 2, 3 & 4. It shows that Support and Collaboration (p = 0.07) and
Centralization (p = 0.06) do not demonstrate significant relationships with knowledge sharing.
On the other hand, the relationships between learning and development, leadership
commitment and formalization, and knowledge sharing are significant (p < 0.001).

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6.0 Discussions and Implications

6.1 Support and Collaboration

Support and collaboration was found to be having a positive but insignificant factor
contributing to knowledge sharing process in this study. This result contradicts with the
findings of Ryan et al. (2010) and Rivera-Vazquez, Ortiz-Fournier and Flores, (2009) which
found the role of collaborative tools to support social construction of knowledge sharing to be
significant in organizations around the world. Support and collaboration can play an
important role in organizational knowledge management process but there is a problem in the
inclusion of practices. Support and collaboration is thought to be a system that actively assist
and support issues which are related to work and ensure a technical infrastructure that
knowledge can gather from different units of the organization and strengthen its
dissemination process that manger can take the advantage to formulate strategies (Ryan et al.,
2010). This surprising outcome of multinational companies in Penang indicate another issue
that support and collaboration has no effect on knowledge sharing because of knowledge
hoarding that people are considering their knowledge more important that they may not be
interested to share which pursue the normally tendency on an individual, in fact employees
feel most empowered when they perceive that their superiors or managers are supportive
(Parker and Price, 1994). Therefore, management of the MNCs should be aware of the
support and collaboration issues that knowledge sharing must be confirmed in the internal
environment since it is the source for new idea generation.

6.2 Learning and Development

Learning and development shows significant relationship with knowledge sharing and results
are also consistent with the previous studies by Islam et al. (2008) and Yang (2007). Since
the organizational point of view holds that learning and development is also obtained via
prior work experiences in order to get long-term success in knowledge cultivation. Yang
(2007) and Jones et al. (2003) state that learning through sharing information and knowledge
among organizational members, enables individuals and organizations to reflect on the
consequences of their behaviors and actions, to obtain insights from an environment where
they operate, to understand the environment, and hence to interpret the meaning and react to

knowledge in order to produce breakthrough in its products and services through its
continued learning (Tidd et al., 1998). Therefore, considering these findings, we can come
to the conclusion that MNCs in Penang do actually believe in the benefits of learning and
development to the organization within the issue and the context of knowledge sharing.

6.3 Leadership Commitment

An important finding of this paper is to confirm the positive and significant relationship
between leadership commitment and knowledge sharing. This finding supports the
affirmation made by Capellen et al. (2011); Islam et al. (2011); Kerr and Clegg (2007) that
leaders are important in organizational knowledge sharing by playing role as a role model
who influences others in guiding and translating business strategies towards activities. It is
also complied with the findings of Capellen et al. (2011) that commitment from leaders in
organization produces belief in individuals that one has rights to donate knowledge as well as
collect knowledge from others. Leadership commitment is an important factor to the success
of knowledge sharing. Therefore, a possible explanation of this finding can be urged that

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leaders of the MNCs contributing in the development of intellectually and motivationally that
subordinates can contribute their ideas by tapping on some fundamental cultural values that
are meaningful to the organizational activities.

6.4 Formalization

Formalization has a significant negative relationship with the knowledge sharing process.
The finding is in agreement with prior studies by Capellen et al. (2011) and Islam et al.
(2010). One of the reasons is illustrated from literature that an organization with a formal
structure cannot exercise its knowledge contents with a full flow; as this has been proven by
previous research that institutions with target set goals may tend to dampen the knowledge
sharing process. Since employees of the target specific environment did not want to express
his or her self fully in any discussion of new ideas that would be essential for effective
Knowledge Management (Capellen, et al., 2011; Islam et. al., 2008). Hence informal
structures within organizations with fewer formal rules and regulations would need to draw
up a set of necessary steps to establish and cultivate the effective knowledge management
process. Opportunities where employees can get the chance to communicate with each other
and share knowledge in respect of their work as well as discuss personal matters which
creates greater flexibility and creativity should be encouraged and maximised. Therefore, it
Penang that a informal environment
where employee could feel free to react, interact and consider the organization and work
colleagues as members family and share knowledge among themselves can go
a long way to eradicate any problems of sharing knowledge with in an organizational
structure.

6.5 Centralization

In this study, centralization was found to have an insignificant relationship with knowledge
sharing. In fact this dimension of organizational structure is negatively related to knowledge
sharing. That finding is different from the findings of Capellen et al. (2011); Ryan et al.
(2010) and Kim and Lee, (2006). Centralization represents that organization is with
these structures
according to the findings. Capellen et al. (2011) and Tsai, (2002) stated that motivational
factor should be considered as an important aspects of the organizational structure, affecting
knowledge sharing that more hierarchical organizations as more centralized organizations
tend to hinder knowledge sharing and creation. Since it is proven in previous research that
centralized decision structure causes distortion, filtering, or reduction of the contents based
on perceptions of what is desirable or, conversely, unacceptable to pass to higher levels of
authority (Capellen et al., 2011; Ryan et al., 2010; Kim and Lee, 2006). Therefore, to ensure
knowledge as an organizational asset, MNCs in Penang must exercise horizontal knowledge
sharing approach rather than a vertical system to allow employees to share their knowledge
with each other to make a decision rather than looking at the hierarchical paradigm.

7.0 Conclusion

a very familiar operating context and its effects

are recognized in all spheres of the business world. The market incursion rate is constantly
shifting in the day to day transactions in every economy of the world. To cope with these
trends companies must be prepared with knowledge related issues on how to remain
competitive. As knowledge sharing is thought to be a powerful source of competitive

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advantage with the assurance of most desirable idea that can make an effective decision, it is
important to become accustomed to an environment where right knowledge flow can be
assured. Conclusions from this study indicate that organizational cultural and structural
factors are vital for knowledge sharing.

This research has limitations; the main limitation of the study was the sample size due to time
and resource constraints. Another limitation lies in the use of convenience sampling which
limits generalization of the results. Nonetheless, this technique has been widely used in
knowledge management research (Islam et al., 2011). This research did not cover all types of
organizations in Penang, therefore the findings are limited to multinational companies only.
Also, there was also limitation due to the difficulty of getting responses. This could be due to
the lack of understanding of knowledge sharing among the respondents from multinational
companies operating in Penang, resulting in non-response from many of the organizations.
Therefore, we suggest that future research should include other factors e.g. decentralization
and different industries in different countries.

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