Impact of Organizational Knowledge Management on Innovative Behavior: A Study in a Logistic Sector

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1 Online Access: International Journal of Operations and Logistics Management Volume 4, Issue 2 Pages: June 2015 e-issn: p-issn: Impact of Organizational Knowledge Management on Innovative Behavior: A Study in a Logistic Sector Seyed Hossein Siadat 1 *, M. Javad Naeiji 2, and Camelia Maleki 3 1. Assistant Professor, Department of Information Technology Management, Faculty of Management and Accounting, Shahid Beheshti University Tehran, Iran. 2. Assistant Professor, Department of Entrepreneurship, Faculty of Management and Accounting, Shahid Beheshti University, Tehran, Iran. 3. MSc. in Information Technology Management, Shahid Beheshti University, Tehran, Iran. Nowadays with the economic development, increasing global competition and incremental rate of changes, the need for creating and distributing organizational knowledge and achieving competitive advantage is dramatically increased. The purpose of this study is to assess the influence of the knowledge management on innovative behavior in logistic sector. Four dimensions of organizational knowledge creation namely socialization, externalization, combination and internalization are used to define the knowledge management. Data is gathered from members of a logistic control center in a military unit and is tested by Pearson correlation. The results showed that the socialization and combination dimensions were not in proper condition within intended organization. Moreover, there were significant correlation between the externalization and internalization with the innovative behavior in logistic sector. Keywords: Knowledge management, Behavior, Externalization, Internalization INTRODUCTION The rapid changes of competitive setting and demands of customers have led to consideration of knowledge creation process as one of the necessities of business organizations (Sicilia 2020). However, it does not mean that the governmental organizations do not need to pay attention to this problem. Previous studies on governmental organizations showed that the process of organizational knowledge creation results in flattening of organizational structure through promotion of group work and encouragement of employees to involve in decision-making (Davenport and Prusak, 2000). The emphases on knowledge creation in governmental organizations help them to better recognize their surrounding environments and understand the requirements and priorities of their visitors. This enables an organization to learn the new methods and characterize their methods and procedures (Siadat et al., 2015). The necessity of attention to creation *Corresponding author: Dr. Seyed Hossein Siadat Group of Information Technology Management, Department of Management and Accounting, Shahid Beheshti University, Tehran, Iran. [email protected] 152

2 Int. j. oper. logist. manag. p-issn: ; e-issn: Volume: 4, Issue: 2, Pages: of knowledge and technology in the governmental organizations should be sought within the new expectations of the society from such organizations. During the recent past decades, traditional methods of management in the public sector have been challenged by the new public management paradigm (Chakravorti, Daniels et al. 2015). The emphasis on the process of knowledge creation process in governmental organization leads to significant results such as improvement of decisions, creation of generally intangible assets and development of employees general knowledge in public sector (Wiig, 2002). In the desired organization, provision of suitable basis and development of proper solutions encourages the individuals to use the available knowledge to a higher degree. Knowledge management can contribute to successful execution of research projects, group-based surveys and intra-discipline projects and improve the application of obtained results. Each one of the business units can also use these achievements in their domain of activity so as to improve the quality and pace of executing different activities. Knowledge management seems to improve performance of operations and logistics especially in terms of innovative behavior. The current challenge in logistic sector of military organizations realized when the skilled individuals leave an organization without registration of their expertise and transferring their experiences to other employees. As a result, the need to organize and systematize this knowledge to create and develop organizational knowledge is deeply felt (Valmohammadi, Ahmadi et al. 2015). On the other hand, lack of efficient knowledge management systems leads to overlapping and repetitious processes and absence of value-added in an organization which are gradually resolved. For instance, the official letter system in this organization was completely manual not long ago but implementation of a database made this system completely automated and the previously manual system was completely outdated by using specialized application. Weaknesses of processes, waste of resources and lack of dynamism are the problems which involve many public and private organizations. The resolution of above problems demands the access of organizations to competencies which help them to better use existing resources and facilities. It seems that these competencies should be sought in modern knowledge derived from the process of organizational knowledge creation (Siadat et al., 2014; Siadat and Garshasbi, 2014). As mentioned in numerous studies, knowledge creation has been iteratively regarded as more significant than innovation. In the associated literature, knowledge management is regarded as a method of improving innovation and efficiency (Serenko, Bontis et al. 2015). Most of the previous studies on knowledge management reported it as more important than innovation without studying the association between these two constructs. In a study by Darroch (2005), it was concluded that knowledge management process exerts a positive effect on innovation. Therefore, it is reasonable to state that the association between these two concepts is significant. Therefore, the objective this study is to verify this hypothesis that knowledge management has a significantly positive effect upon organizational innovation. LITERATURE REVIEW Knowledge Management Knowledge management is the ability of an organization to generate new knowledge, distribute it through the organization and transformthis knowledge into products, services and systems (Nonaka & Takeuchi, 1995). The review of literature shows that attainment and creation of knowledge by members of an organization can lead to development of knowledge assets and gaining of maximum profit. It should however be noted that creation of new knowledge in an organization is not limited to those entities with knowledge management systems. All efficient organizations create and use knowledge. These organizations interact with their surrounding environment to obtain Information and change it into knowledge. Then, it combines the resulting knowledge with internal experiences, values and principles to provide the basis for its own activities (Davenport and Prusak, 2000). 153

3 Impact of organizational knowledge management on innovative behavior Siadat et al. ORGANIZATIONAL INNOVATION Innovation in application of mental abilities is creating a new thought or concept. Innovation refers to the ability of unique combination of ideas or integrating them (Manhart and Thalmann 2015). It denotes the application of novel creativityoriented ideas which might lead to development of a new product, service or solution to do challenging jobs. In all over the world, there are different types of innovations. The rise of literature on innovation covers numerous secondary concepts and models. An innovation might be a new product or service, manufacturing technology, executive structure or system, plan or schedule for organizational members. Therefore, organizational innovation is generally measured through the level of utilization of existing innovations. However, some quantitative studies have used other measures (Davenport and Lawrence, 1998). Knowledge Management andorganizational Innovation TABLE 1 HERE The above table summarizes the studies on knowledge management and organizational innovation. DEVELOPMENT OF KNOWLEDGE CYCLE IN ORGANIZATION In qualitative assessment to achieve a general understanding of knowledge management processes in the intended organization, it became clear that managers have recently become interested in developments in knowledge management of organization. Numerous conferences and seminars to internalize the culture of knowledge creation in the intended organization have been held and some individuals have been appointed as the executive actors of knowledge management in this organization with a pilot design. They regularly create knowledge packages based on their expertise and introduce them to a center called Knowledge Management Center for further assessment. Due to the fact that in the intended organization, the discussions on knowledge management are rather new and there is a high level of hidden knowledge in the prevailing system, there is no pre-determined mechanism to efficiently use this hidden knowledge to generate progress in realization of organizational objectives. In the present study, the term knowledge management is regarded as an equivalent of knowledge creation and acquisition and because there is no precedent assessment of this subject in the intended organization, a qualitative assessment through questionnaire is applied to determine the level of an organization in the field of organizational knowledge. Development of Knowledge Management Model and Dimensions of Knowledge Management In regard to knowledge management, more than 26 models have been developed which consists of two to eight steps and most of them have relatively similar content but different terms and steps. In these models, it is hypothesized that the stages and activities are often simultaneous, sometimes consecutive and rarely linear. Among these models, the one developed by Nonaka and Takeuch (1995) is the best model in its explanation of knowledge creation. Therefore, this model was selected to study the organization. This model is the only one which covers different types of knowledge and clearly state knowledge levels and their level of transmission. In fact, the model developed by Nonaka and Takeuch (1995) can be localized to generate a process of knowledge management. Nonaka (1994) introduced a general theoretical framework of organizational knowledge and termed it as Theory of Knowledge Creation. Due to the fact that the focus of this model is on knowledge creation in an organization, it can be used for the present study. As Nonaka (1995) believed, the interactions of implicit and explicit knowledge generate four cases of socialization, combination, externalization and internalization of knowledge all of which drive the process of knowledge creation. In the present study, the authors use these four dimensions to investigate the scale of knowledge creation. 154

4 Int. j. oper. logist. manag. p-issn: ; e-issn: Volume: 4, Issue: 2, Pages: DETERMINATION OF INNOVATION IN ORGANIZATION Innovation is basically the improvement of current processes of an organization or creation of new processes (Liao and Wu, 2010). As Davenport (1995) stated, fundamental improvement of process is the equivalent of reengineering process. He explained that: Reengineering as the process of redesign of a process of a procedural innovation refers to innovations to achieve through redesign and modified occupational procedure in a definite time frame (Davenport, 1995, p.58). In the present study, the authors selected a scale of radical process improvement as a scale of measuring organizational innovation. DEVELOPMENT OF CONCEPTUAL MODEL According to the literature review, the hypotheses of present study are formulated as in the following: H1: Socialization has a positive influence upon innovative behavior. H2: Externalization has a positive influence upon innovative behavior. H3: Combination has a positive influence upon innovative behavior. H4: Internalization has a positive influence upon innovative behavior. The conceptual model of present study is shown in FIGURE 1 HERE VARIABLES OF THE RESEARCH MODEL Knowledge Management For the objective of applicability of methods of knowledge creation, the present study was based on factor analysis of Nonaka (1994). The factors were codified in the following ten variables. Socialization: To make the socialization structure applicable, three sub-variables were considered. These sub-variables were accumulation of implicit knowledge, acquisition of inter-organizational social information and transfer of implicit knowledge. Externalization: To make the externalization structure applicable, two sub-variables were considered. The first sub-variable is the prevalence of innovative discourse facilitation and necessity of using metaphors in speech to create concept while the second one is using the thought of employees literally called Thought Theft. Combination: To make the combination structure applicable, three sub-variables were considered. These sub-variable were acquisition and integration, synthesis and processing and distribution. Internalization: To make the internalization structure applicable, two sub-variables wereconsidered. The first sub-variable waspersonal experience while the second one was simulation and testing. The items investigating each one of the above variables based on Nonaka s paper (1994) on theory of organizational knowledge creation were included in the following table after some minor modifications to localize and integrate the items with the environmental conditions of the intended organization. Organizational Innovation We adopted and refined the developed scale by Liao and Wu (2010) for applicability of innovation network (INN). Three items make this network practical. The first item measures the prevalence and spread of what is created in company with innovative processes (radical improvements) so as to outdate the current processes. The other item is the extent of what is created in a company with innovative processes which basically form a present process. Yet, another item measures the extent and prevalence of what innovative processes create to outdate the expertise of current processes. Therefore, the following variables are deemed significant for the scale of procedural innovation in the intended organization. Outdating Current Processes: By this topic, the creation of innovation processes which outdate the common ones is intended. Fundamental Change in Current Processes: Creation of innovative processes outdates our expertise in the common processes (i.e. expertise or 155

5 Impact of organizational knowledge management on innovative behavior Siadat et al. knowledge of previous processes is no more applicable). Outdating Existing Expertise in Current Processes: The creation of innovative processes which fundamentally modify our processes (i.e. innovative process as a part of a larger process significantly changes the larger process). It should be noted that every item is measured in a five-point range from zero (nothing) to five (very much). The respondents also can choose the choice I do not know! for each measurement item. RESEARCH METHODOLOGY We used a questionnaire to measure knowledge management and innovative behavior. To ensure validity, Items used for the variables were extracted from prior studies.the number of questions in the questionnaire was 13 of which 10 questions were related to creation of organizational knowledge and the rest 3 ones were associated with innovation in an organization in which the questions of innovation and improvement processes are operationally codified. SPSS Software is used to provide the data of descriptive statistics and test the hypotheses.the level of analysis is the output of material control operation in the intended organization.the employees will be aware of processes of improvement and innovative behaviors of the center. The individuals in this center have the highest level of knowledge of aspects of the research. 42 questionnaireswere distributed in organizational level of which were returned. RESULTS AND FINDINGS After distribution and collection of questionnaires, the obtained data were inserted in SPSS Software. To examine the current and proper situation of each one of these scales, t-test was used. Due to the fact that five-point Likert scale was used in the present study, the values of higher than 3 are regarded as proper and t-test is used to examine the suitability of scales. In sum, 13 variables were defined for each of which, the mean and standard deviation is calculated as shown in table5. TABLE 5 HERE The propriety of each question on the intended variable is discussed. The zero hypothesis (H0) presumes that the intended question is proper. If the P-value (Sig) is less than reason to confirm H0 and as a result, the difference is significant. Otherwise, the question is properly developed and the difference with ideal situation is insignificant. Based on the data of the following table, none of the questions of distributed questionnaire is in proper level. In general, t-test of the intended dimensions was used to distinctively define the present conditions of factors of knowledge creation. Due to the fact that the values of Sig for socialization and combination factors are less that these dimensions are not in proper conditions while the dimensions of internalization and externalization in the organization are in proper level because their values of Sig is higher than 0.05 (i.e. Sig>0.05). Due to the fact that socialization and combination dimensions of knowledge creation in the organization are not in proper conditions, these two dimensions are excluded. In the following table, the values of correlation among internalization and externalization dimensions of knowledge creation and innovative behavior are analyzed through Pearson correlation test. TABLE 7 HERE the correlation coefficient of externalization with innovation and internalization with innovation is 1. It means that externalization and internalization reinforce the innovative behaviors in the organization. CONCLUSION Following statistical analysis on questionnaire data, it became evident that the dimensions of knowledge socialization and knowledge combination are not in proper level within the intended organization (Cohen and Olsen 2015). 156

6 Int. j. oper. logist. manag. p-issn: ; e-issn: Volume: 4, Issue: 2, Pages: The improper status of socialization in the organization is probably due to the fact that there is a hierarchical relationship between managers and their employees or it might be because of the bureaucratic setting of the organization which inhibits the transfer of clear and direct transfer of information and experience between different layers of the organization. On the other hand, the number of seminars and conferences on facilitation of sharing experience among the organizational members is insignificant which implies that the managers are not highly committed to release of managerial reports and provision of technical data for the personnel (Cazzaniga and Fischer 2015). Therefore, the first and third hypotheses regarding the positive effect of knowledge socialization and combination are denied while the second and forth hypotheses regarding the positive effects of externalization and internalization of knowledge on organizational innovation are supported. REFERENCES Chakravorti, S., et al. (2015). Enhancing Inter- Firm Performance Through Internet Driven Management of Inter- Organizational Knowledge and Resources. Creating and Delivering Value in Marketing, Springer: Cohen, J. F. and K. Olsen (2015). "Knowledge management capabilities and firm performance: A test of universalistic, contingency and complementarity perspectives." Expert Systems with Applications 42(3): Darroch, J. (2005). Knowledge management, innovation and firm performance. Journal of Knowledge Management. 9(3), Darroch, J., McNaughton, R. (2002). Examining the link between knowledge management practices and types of innovation, Journal of intellectual capital, 3(3), Davenport, T. H., andprusak, L. (2000). Working knowledge: How organizations manage what they know. Boston, MA: Harvard Business School Press. Davenport, T.H., and Lawrence, P. (1998). Working Knowledge: How Organizations Manage What They Know. Cambridge. MA: Harvard Business School Press. Lai, Y. L., Lin, F. J. (2012). The Effects of Knowledge Management and Technology Innovation on New Product Development Performancean Empirical Study of Taiwanese Machine Tools Industry. Social and Behavioral Sciences, 40, Liao, S., Wu, C. (2010). System perspective of knowledge management, organizational learning, and organizational innovation. Expert Systems with Applications, 37(2), Malhotra, Y. (2000). Knowledge Management & New Organization Forms: A Framework for Business Model Innovation. Information resources Management Journal, 13(1), Nonaka, I. (1994). Organizational Knowledge Creation Theory: A First Comprehensive Test. International Business Review, 3(4), Nonaka, I., and Takeuchi, H. (1995). The knowledge creating company: How Japanese companies create the dynamics of innovation. New York: Oxford University Press. Siadat, S. H., Aryan, S., Mohammadi, F. (2014). Establishment and Implementation of Knowledge Management (Case Study of Saipa Sales and After Sales Organization, 157

7 Impact of organizational knowledge management on innovative behavior Siadat et al. International Journal of Education and Research, 2(7), Siadat, S. H., Garshasbi, L. (2014). Assessing the Impact of IT in Creating Organizational Knowledge - Case Study: Iran Central Bank, Management and Administrative Sciences Review, 3(7), Siadat, S. H.,Matinvafa, A., Saeednia, A.,Moghadasi, F.(2015). Effective Factors on Successful Implementation of Knowledge Wiig, K. M. (1993). Knowledge Management Foundations: Thinking About Thinking - How People and Organizations Represent, Create and Use Knowledge. Arlington, Texas: Schema Press. Cazzaniga, S. and S. Fischer (2015). How ICH Uses Organizational Innovations to Meet Challenges in Healthcare Management: A Hospital Case Study. Challenges and Opportunities in Health Care Management, Springer: Manhart, M. and S. Thalmann (2015). Protecting organizational knowledge: a structured literature review. Journal of Knowledge Management 19(2): Serenko, A., et al. (2015). An application of the knowledge management maturity model: the case of credit unions.knowledge Management Research & Practice. Sicilia, M.-A. (2020). Ontology-based competency management: infrastructures for the knowledge intensive learning organization. Europe 2014: 17. Valmohammadi, C., et al. (2015). The impact of knowledge management practices on organizational performance: A balanced scorecard approach. Journal of Enterprise Information Management 28(1). 158

8 Int. j. oper. logist. manag. p-issn: ; e-issn: Volume: 4, Issue: 2, Pages: APPENDIX Table 1: Summary of Previous Studies on Knowledge Management and Organizational Innovation Authors Subject Focus of Knowledge Management Focus of Innovation 1 Lai and Lin (2012) The effects of knowledge management and technology Innovation on new product development performance Knowledge Management and Creation (KMC), Knowledge Management Integration (KMI) and Knowledge Management Storage (KMS) Procedural Innovation, Product Innovation and Production Innovation 2 Liao and Wu (2010) System perspective of knowledge Management, organizational learning, and organizational innovation Obtaining Knowledge, Transmission of Knowledge and Application of Knowledge Behavioral Innovation, Production Innovation, Market Innovation, procedural Innovation, Strategic Innovation 3 Darroch & MaNaughton (2002) Examining the link between knowledge management practices and types of innovation Obtaining Knowledge, Distribution of Knowledge and Response of Knowledge Gradual Innovation, Innovation in Modification of Customer s Behavior, Innovation of Outdating Business Qualifications 4 Darroch (2005) Knowledge management, innovation and firm performance Obtaining Knowledge, Distribution of Knowledge and Knowledge Response Radical Innovation (New to the World) Table 2: dimensions and Descriptions of Knowledge Management Dimensions Socialization Accumulation of Implicit Knowledge Collection of Inter-organizational Social Information Transfer of Implicit Knowledge Descriptions -The spread of information which managers collect from different operations in the center and sharing experiences with other units. -The frequency of cases in which managers wander in a center to provide solutions and make decisions. -The frequency of creating a job setting by managers to permit the colleagues to learn skills 159

9 Impact of organizational knowledge management on innovative behavior Siadat et al. and obtain expertise through exercise and descriptions of administrator. Externalization Facilitation of Innovation Discourse The frequency of facilitation of innovation and essential discourses for employees by managers and using expressions and metaphors to create concepts. Utilization of Employees Thoughts The frequency which managers improve the utilization and applications of thoughts of employees. Combination Acquisition and Integration of Data -The frequency of manager s inclination to design working procedures and collect operational data through print documents, simulation and computer equipment. Synthesis and Processing of Information Distribution of Concepts -The frequency of cases in which the manager create guidelines, documents and databases for service provision and create information through collection of diagrams and technical data for the whole company. -The frequency of cases which the managers are willing to introduce and transfer the recently generated concepts. Personal Experience Simulation and Testing Internalization -The frequency of the cases in which the managers are willing to form relationships with executive units through teams composed of members from different departments, search for beliefs and values and share them -The frequency of cased in which the managers are included to resolve the problems arising from mental challenges inside an organization. Some teams are made as models which transfer the experiences and share the results through the organization. Point: Each item is measured in a five-point scale from 1 (very low) to 5 (very high). 160

10 Int. j. oper. logist. manag. p-issn: ; e-issn: Volume: 4, Issue: 2, Pages: Table 3: Mean and Standard Deviation Values of Variables Number Mean Standard Deviation Accumulation of Implicit Knowledge Collection of Inter-Organizational Social Information Transfer of Implicit Knowledge Facilitation of Innovative Discourse Using the Employees Thoughts Acquisition and Integration of Data Synthesis and Processing of Data Distribution of Concepts Personal Experience Stimulation and Testing Outdating Existing Expertise in Current Processes Fundamental Change in Current Processes Outdating Current Processes Table 4: Mean and Standard Deviation Values of Variables of Knowledge Management Mean SD Number Socialization Externalization Combination Internalization Innovation Table 5: Inferential Statistics of Variables of Knowledge Management Test-Value=3 Scale in Current Situation t-statistic (df) Sig Difference from Mean Confidence Interval (95%) Result of Hypothesis (H 0) Bottom Limit Top Limit 161

11 Impact of organizational knowledge management on innovative behavior Siadat et al. Accumulation of Implicit Knowledge Collection of Interorganizational Social Information Transfer of Implicit Knowledge Facilitation of Innovative Discourse Using Employee s Thoughts Acquisition and Integration Data Synthesis and Processing of Data Distribution of Concepts Personal Experience Stimulation and Testing Outdating Existing Expertise in Current Processes Fundamental Change in Current Processes Outdating Current Processes Denied Denied Denied Denied Denied Denied Denied Denied Denied Denied Denied Denied Denied Scale in Current Situation Table 6: results of t-student for knowledge management dimensions t-statistic (df) Sig Difference from Mean Confidence (95%) Bottom Limit Interval Top Limit Result of Hypothesis (H 0) Socialization Denied 162

12 Int. j. oper. logist. manag. p-issn: ; e-issn: Volume: 4, Issue: 2, Pages: Combination Denied Externalization Denied Internalization ` Denied Table 7: Pearson Correlation Test of Internalization and Externalization dimensions Externalization Internalization Innovation Externalization Pearson Correlation ** ** Sig. (2-tailed).. N Internalization Pearson Correlation ** ** Sig. (2-tailed).. N Innovation Pearson Correlation ** ** 1 Sig. (2-tailed).. N **. Correlation is significant at the 0.01 level (2-tailed). 163

13 Impact of organizational knowledge management on innovative behavior Siadat et al. Figure 1: Conceptual Model of Organizational Knowledge Creation and Innovative Behavior 164