A STUDY OF THE IMPACT OF KNOWLEDGE MANAGEMENT ON SUPPLY CHAIN CAPABILITY

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1 A STUDY OF THE IMPACT OF KNOWLEDGE MANAGEMENT ON SUPPLY CHAIN CAPABILITY ABSTRACT HODA EBRAHIMZADE CHAMAZKOTI*; HESAM NAMADCHIAN**; SEYED MEHDI MOUSAVI DAVOUDI*** *Faculty of Industrial Engineering, Mazandaran University of Science & Technology, Babol, Iran. **Faculty of Industrial Engineering, Mazandaran University of Science & Technology, Babol, Iran. ***Faculty of Management & Economics, Semnan University, Semnan, Iran. The aim of the present study is to investigate the relationship between knowledge management and supply chain capability of 40 manufacturing companies in Raje industrial township of Mazandaran. Senior managers, middle managers, and supply chain managers of the companies were chose as appropriate respondents of the study. We distributed 3 questionnaires in each company (120 questionnaires) and finally 90 usable questionnaires were returned. Factor analysis and the findings show that knowledge sharing has a significant positive influence on supply chain capability of the selected companies. The results of the current study provide further insight for managers of organization, on improving knowledge sharing and management of their companies to provide competitive advantages. INTRODUCTION Pinnacle Research Journals 1 In today s competitive environment, all organization should pay attention to factors that facilitate their coordination with their partners. In today s market place, only organizations will survive who have rapid flow of information inside their organizations (among several departments: financial and accounting, marketing, production, and human resource management), and also outside their organizations and with their supply chain partners (component/raw material suppliers, manufacturers, wholesalers/distributors, retailers, and customers). In the recent global economy, the increasingly rapid flow of information, knowledge is increasingly considered as an important resource of competitive advantage for organizations. Thus, the idea of knowledge management has enjoyed widespread popularity in today s studies. Moreover, it has been established that organizations will achieve competitive advantages by improving their supply chain capability. Thus, researches focused on factors positively impact supply chain capability of companies.

2 There is little attention given to research on the relationship between knowledge management and supply chain management. Thus, the present study attempts to propose a framework on the mentioned topic among 40 manufacturing companies in Raje industrial township of Mazandaran. KNOWLEDGE MANAGEMENT It has been confirmed that the value of a firm s products and services is based not only on its physical resources but also on intangible knowledge assets. Some firms perform better than others because they have better knowledge about how to create, produce, and deliver products and services. This firm knowledge is difficult to imitate, unique, and can be leveraged into longterm strategic benefit (Laudon and Laudon, 2007, p. 114). Knowledge management is one of the new topics of academic and professional discourse in many fields, such as cognitive sciences, sociology, management science, information science, knowledge engineering, artificial intelligence, and economics (Sinotte, 2004; Dalkir, 2005; Rowley, 2007; Martin, 2008; Wild & Griggs, 2008). According to Laurie (1997), knowledge management is defined as the creation, acquisition, sharing, and utilization of knowledge for the promotion of organizational performance. In this study, we consider four dimensions for measuring knowledge management of companies as follows: (1) Knowledge Creation, (2) Knowledge Retention, (3) Knowledge Sharing, and (4) Knowledge innovation. SUPPLY CHAIN CAPABILITY Pinnacle Research Journals 2 According to Amit & Schoemaker (1993), Bharadwaj (2000), and Collis (1994), supply chain capability is defined as the organization s ability to identify, utilize, and assimilate both internal and external resources/information to facilitate the entire supply chain activities. We base our study of supply chain capability on Wu et al. (2006), and Maleki et al. (2011) who conceptualized them as the second-order construct, encompassing (1) information exchange, (2) coordination, (3) inter-firm activity integration, and (4) supply chain responsiveness.

3 TABLE 1. LITERATURE USED FOR SUPPLY CHIN CAPABILITY (MALEKI ET AL., 2011) RESEARCH MODEL AND HYPOTHESIS Pinnacle Research Journals 3 Taking into account the above mentioned literature, the following figure shows the conceptual framework of the research which involved the relationship between knowledge management as independent variable, and supply chain capability as dependent variable. FIGURE 1. RESEARCH PROPOSED MODEL

4 H 1 : Knowledge management has a significant positive impact on supply chain capability. METHODOLOGY STATISTICAL POPULATION Statistical population of this study includes 40 manufacturing companies in Iran. Senior managers, middle managers, and supply chain managers were considered as appropriate respondents for this research. After distribution of 120 questionnaires among respondents, 90 usable questionnaires were returned. Table 2 shows the descriptive statistics of the respondents. TABLE 2. DESCRIPTION OF THE RESPONDENTS Pinnacle Research Journals 4 INSTRUMENT In order to collect the necessary data, a questionnaire was used to test the hypothesis of the study. To design the questionnaire for measuring research variables and scale development, we used Churchill (1979) scale development method. First, we defined the domain of each construct, deciding what would be included and excluded. Then, an extensive review of literature has been done in order to identify questions measuring each variable and relevant scale. To that end, it has been tried to adopt or adapt the most repetitive questions in the literature for increasing the questionnaire validity. We used five-point Likert type scale for all the items. Response categories range from 1 (strongly disagree) to 5 (strongly agree). After finalizing the questionnaire, 25 of them have been sent to respondents, resulted in changing and in some cases, eliminating some of the questions; this last version of the questionnaire has been used for data collection. The questionnaire consists of three parts; first part consisted of three questions which is shown in table 2; and the second part consisted of 40 questions measured the research variables; 20 questions used for measuring knowledge management, and 20 questions for measuring supply chain capability.

5 RELIABILITY AND VALIDITY The summary statistics of formal survey are shown in Table 3. For reliability evaluation we utilized Cronbach's alpha. The Cronbach's alpha reliability of all variables are more than 0.7 (α>0.7), which indicates all scales demonstrate good reliability. TABLE 3. THE SUMMARY STATISTICS OF FORMAL SURVEY Pinnacle Research Journals 5 For evaluating the validity of the questionnaires, we used content validity and construct validity. In order to test the content validity after devising a framework for the questionnaire, we asked 20 experts to modify it if needed. These experts evaluated all the implemented criteria in the questionnaire and modified it. Moreover, in this research we used factor analysis for considering the structure of research. Confirmatory factor analysis was used to investigate the construction of the questionnaire. Factor analysis depicted that all the mentioned criteria have been measured in these questionnaires. It is important to note that for our X model and our Y model the fitness indices were as follows: Chi-square/df < 3, RMSEA < 0.1, and P-value < 0.05 which show that the selected indicators are good representatives for each dimensions of research variables. RESULTS In this study, the relationship between knowledge management and supply chain capability were tested using the SEM technique. For testing our hypothesis, we performed our structural model applying four dimensions of knowledge management and four dimensions of supply chain capability. Figure 2 shows the results of the SEM analysis. Fitness's indices also show good fitness of the Structural model.

6 FIGURE 2. STRUCTURAL EQUATION MODEL Pinnacle Research Journals 6 FIGURE 3. T-VALUE TEST

7 Based on the results of SEM analysis, our hypothesis is confirmed. Table 4 summarizes the hypothesis test results in terms of path coefficients (standardized) and t-value as follows: TABLE 4. THE RESULTS OF THE HYPOTHESIS TEST No Hypothesis Path coefficient t-value Result H 1 Knowledge management Supply chain capability Accepted DISCUSSION The aim of the present study is to investigate the relationship among knowledge management and supply chain capability of manufacturing companies in Iran. Past studies examined the relationship between these two factors with other factors, but, lack of sufficient research examining these two factors with each other was the main reason this research was carry out. Further, because of the positive impact of supply chain capability, examining factors contribute to the improvement in supply chain capability have been of particular interest of researchers which was another reason this research was carry out. Results of the factor analysis shows that knowledge management has a significant positive impact on supply chain capability of companies. Thus, managers of organizations should pay attention to provide situation contribute to knowledge creation, knowledge retention, knowledge sharing, and knowledge innovation to affect their supply chain capability positively. Pinnacle Research Journals 7 Moreover, taking into account the results of the structural equation model, the index knowledge sharing has the greatest impact on supply chain capability. Thus, managers of organizations should apply some tools to improve knowledge sharing. For instance, they can invest on Information and communication technology to share appropriate knowledge with all employees and partners. REFERENCES 1. Amit, R., & Schoemaker, P. J. H. (1993), Strategic assets and organizational rent, Strategic Management Journal, 14(1), Bharadwaj, A. S. (2000),A resource-based perspective on information technology capability and firm performance: An empirical investigation, MIS Quarterly, 24(1), Bowersox, D.J., Closs, D.J., Stank, T.P., (1999), 21st century logistics: Making supply chain integration a reality. East Lansing: Michigan State University and Council of Logistics Management

8 4. Churchill Jr., G. A. (1979). A paradigm for developing better measures of marketing constructs. Journal of Marketing Research, 16(1), Clemons, E. K., & Row, M. C. (1991), Sustaining IT advantage: The role of structural differences, MIS Quarterly, 15(3), Collis, D. J. (1994), Research note: How valuable are organizational capabilities, Strategic Management Journal, 15, Collis, D. J. (1994), Research note: How valuable are organizational capabilities, Strategic Management Journal, 15, Dalkir, K. (2005). Knowledge management in theory and practice. Burlington: Elsevier Butterworth-Heinemann. 9. Laudon, K. C. and Laudon, J. P. (2007). MANAGEMENT INFORMATION SYSTEMS: Managing the Digital Firm - 9th edition. Pearson Prentice Hall, Pearson Education, Inc., Upper Saddle River, New Jersey Laurie, J. (1997). Harnessing the power of intellectual capital, Training and Development 27(4): Maleki, M., Davoudi, S. M. M., Moradi, H. (2011). Information technology impact on supply chain capabilities and firm performance: A survey in Iran s manufacturing companies, International Journal of Research in IT, Management and Engineering, 1(3), pp Malone, T. W., Yates, J., & Benjamin, R. I. (1987), Electronic markets and electronic hierarchies, Communications of the ACM, 30(6), Pinnacle Research Journals Martin, B. (2008). Knowledge management. In C. Blaise (Ed.), Annual review of information science and technology (ARIST), vol. 42 (pp ). Medford, NJ: Information Today, Inc. 14. Mohr, J., & Sohi, R. S. (1995), Communication flows in distribution channels: Impact on assessments of communication quality and satisfaction, Journal of Retailing, 71(4), Rogers, D. S., Daugherty, P. J., & Stank, T. P. (1993), Enhancing service responsiveness: The strategic potential of EDI, Logistics Information Management, 6(3), Rowley, J. (2007). The wisdom hierarchy: Representations of the DIKW hierarchy. Journal of Information Science, 33(2), Sahin, F., & Robinson, E. P. (2002), Flow coordination and information sharing in supply chains: Review, implications, and directions for future research, Decision Sciences, 33(4),

9 18. Shins, N. (1999), Does information technology improve coordination? An empirical analysis, Logistics Information Management, 12(1/2), Shore, B., & Venkatachalam, A. R. (2003), Evaluating the information sharing capabilities of supply chain partners: A fuzzy logic model, International Journal of Physical Distribution & Logistics Management, 33(9/10), Sinkula, J. M., Baker, W. E., & Noordewier, T. (1997),A framework for market-based organizational learning: Linking values, knowledge, and behavior, Journal of Academy of Marketing Science, 25(4), Sinotte, M. (2004). Exploration of the field of knowledge management for the library and information profession. Libri, 54, Teece, D. J., Pisano, G., & Shuen, A. (1997), Dynamic capabilities and strategic management, Strategic Management Journal, 18(7), Wild, R., & Griggs, K. (2008). A model of information technology opportunities for facilitating the practice of knowledge management. VINE, 38(4), Wu F., Yeniyurt, S, Kim, D., Cavusgil, S.D. (2006), The impact of information technology on supply chain capabilities and firm performance: A resource-based view, Industrial Marketing Management 35 (2006) Pinnacle Research Journals 9

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