The Impact of Knowledge Management Capabilities on Organizational Performance: A Survey of the Service Sector

Transcription

1 The Impact of Knowledge Management Capabilities on Organizational Performance: A Survey of the Service Sector Kenneth Chukwujioke Agbim, Business Administration Department, College of Management Sciences, University of Agriculture, Makurdi, Nigeria Godday Orziemgbe Oriarewo, Business Administration Department, College of Management Sciences, University of Agriculture, Makurdi, Nigeria Zechariahs Benapugha Owutuamor, Department of Agricultural Economics and Extension, Federal Polytechnic Ekowe, Bayelsa State, Nigeria Abstract The impact of Knowledge Management (KM) practices on organizational performance has been emphasized in the strategic management literature. However, the nature and forms of the enabling KM capabilities with respect to the service sector have not been sufficiently brought to the fore. Thus, owing to the advancements in service-oriented technology infrastructure, the unprecedented increase in the demand for knowledge workers, and the commonplaceness of service firms, this study investigated the impact of KM capabilities such as technical KM resource, structural KM resource, cultural KM resource and human KM resource on organizational performance. The study adopted a cross-sectional research method and purposive sampling technique. The generated data from directors/managers and other stakeholders of service firms were analysed using multiple regression. It was found that technical KM resource, structural KM resource, cultural KM resource and human KM resource impacts organizational performance positively and significantly. We conclude that technical and human KM capabilities will facilitate the conception and birth of new knowledge, while the structure and cultural KM capabilities will facilitate the implementation and multiplication of the new knowledge. Consequently, service firms can achieve enhanced organizational performance by: acquiring and using technologies that facilitates knowledge discovery, creation and sharing; adopting cultures that facilitates interaction, exploration and experimentation among employees; and encouraging employees to properly master their tasks and that of others, and communicate freely with employees of different areas of specialization. Keywords: KM, KM capabilities, KM resources, Organizational performance, Service sector Introduction Capabilities consist of the ability to adequately manage resources to perform a task within an enterprise (Barba-Sanchez and Atienza-Sahuquillo, 2010). The capability to manage knowledge is becoming progressively more crucial in today s knowledge economy. Knowledge is being considered as a valuable commodity that is implanted in products (especially high-technology goods) (Sundiman et al., 2013) and in employees minds (Kovacic et al., 2006). More so, knowledge is gradually being viewed as a commodity or an intellectual asset (Sundiman et al., 2013). It is obvious that knowledge is slowly becoming the most important factor of production, next to labour, land and capital (Sher and Lee, 2004). Even though some forms of intellectual capital are transferable, internal knowledge is not easily copied. This means that the knowledge anchored in employees minds can get lost if they decide to leave the organization. Therefore, the key objective of management is to transform individual knowledge into organizational knowledge (Kovacic et al., 2006; Rasula et al., 2012). To effectively and efficiently transform individual knowledge, management requires Knowledge Management (KM) capabilities. According to Chuang (2004) KM capability is the ability to mobilize and deploy KM-based resources in combination with other resources and capabilities. One of the key benefits of introducing KM practices in organizations is its positive impact on organizational performance (Kiessling et al., 2009). Researchers often imply this positive effect of KM on organizational performance (Rasula et al., 2012). However, it is how firms leverage their KM resources to create unique KM capabilities that determine a firm s overall effectiveness (Gold et al., 2001). More so, since firms with high KM capabilities in a key area can respond very quickly to strategic moves by competitors (Gold et al., 2001), the aim of this study is summed up in a question: does KM capabilities (technical, structural, cultural and human KM resources) have positive and significant effects on organizational performance? Owing to the advancement in service-oriented technology infrastructure and the unprecedented increase in the demand for Blue Ocean Research Journals 61

2 knowledge workers, which has become of the key bases for competition in the service industry. And, above all the commonplaceness of service firms. The aforementioned research question shall be answered through the empirical investigation of the service sector. 2. Literature Review 2.1 Knowledge Management Capabilities Knowledge is a potentially significant resource to the firm as it may possess valuable, rare, inimitable and non-substitutable characteristics particularly if it has a tacit dimension (Polanyi, 1966; Hall and Sapsed, 2005). Knowledge is described as dynamic, since it is created in social interactions amongst individuals and organizations (Nonaka et al., 2000). Knowledge which is new to an organization has to either be invented internally or acquired from external sources (Alwis and Hartmann, 2008). The benefits claimed by organizations, as derived from applying KM, are many and relate to most areas of organization performance and employee emancipation (McAdam and McCreedy, 2008). The integrated KM system can offer organization the following three most important benefits: (1) help organizations to capture, organize, store, transfer, distribute and use the internal and external knowledge in business line implementation; (2) make valuable knowledge of individual understanding decompose, externalize and accumulate into organization knowledge; and (3) make employees able to share organizational knowledge in business implementation process (Li et al., 2006). Thus, organizations manage knowledge to achieve these benefits. KM is the vehicle for organizational effectiveness and competitiveness (Hupic et al., 2002). KM is also the process that transforms individual knowledge into organizational knowledge (Rasula., 2012). In order to maximize the value of knowledge, a change in strategies, processes, organizational structures and technologies needs to be made (Kovacic et al., 2006; Greniner et al., 2007). This change connotes KM using KM resources. KM is a construct of four elements knowledge accumulation, knowledge utilization, knowledge sharing and knowledge ownership (Koufteros, 1999; Almashari et al., 2002). Knowledge accumulation can be internal or external, occasional or intended. Knowledge can be accumulated through externalization or internalization. The term knowledge utilization covers individual and group knowledge, learning from experience or innovative solutions. Knowledge sharing can also be both formal and informal. The ownership of knowledge, as the last element of this construct, can be used to describe knowledge as an individual or group identity and to point at specialist or general sources of knowledge in a given organization (Rasula et al., 2012). According to Johannessen and Olsen (2003) KM resources further offer the type of capabilities which is difficult to imitate. The key KM resources are; technical KM resource, structural KM resource, cultural KM resource and human KM resource (Pan and Scarbrouth, 1998; Gold et al., 2001; Lee and Choi, 2003). Technical KM resource is the KM infrastructure that determines the business degrees of freedom a firm enjoys in its business plans (Gold et al., 2001). A non-integrated KM infrastructure dominated by system incompatibilities severely restricts a firm s knowledge sharing and new knowledge creation (Stonehouse and Pemberton, 1999). Therefore, the assistance of technical KM resource is essential for initiating and carrying out KM (Chuang, 2004). The technical KM resource includes Information Technology (IT) assets and KM capability that are a shared knowledge delivery base, the business functionality of which has been defined in terms of its business intelligence, collaboration, distributed learning, knowledge discovery, knowledge mapping, and knowledge generation (Gold et al., 2001). The technical business intelligence enables a firm to generate new knowledge. The technical collaboration and distributed learning allow individuals within the firm to collaborate. The technical knowledge discovery allows the firm to find new knowledge. The technical knowledge mapping allows the firm to effectively track the source of knowledge (Chuang, 2004). The structural KM resource, such as the organogram may encourage or inhibit KM (Hedlund, 1994; Nonaka and Takeuchi, 1995). The cultural KM resource, such as appropriate culture encourages employees to create and share knowledge within an organization (Barney, 1986; Holsaple and Jushi, 2001). Human KM resource such as employees knowledge of a discipline and how their discipline interacts with other disciplines (Iansiti, 1993) is often tacit, and dependent on other interpersonal relationships which may take years to develop (Mata et al., 1995) and tend to be highly local or organization specific (Sambamurthy and Zmud, 1992; Choi and Lee, 2002). Knowledge and competence can be acquired by admitting new human with desirable capabilities as KM capabilities embodied in human are most often associated with structural KM resource or cultural KM resource capabilities (Chuang, 2004). Structural, cultural and human KM resource evolves over long period of time through the Blue Ocean Research Journals 62

3 accumulation of organizational operation (Gold et al., 2001). Organizations that have accumulated these KM resources are able to: (1) integrate the KM and business planning processes more effectively; (2) develop reliable and innovative applications that support the business needs of the firm faster than competitors; and (3) predict future business needs of the firm and innovate valuable new product features before competitors (Lee and Choi, 2003). 2.2 Organizational Performance Performance is a measure of how well a firm has achieved its goals (financial and non-financial goals). Thus, performance is generally associated with expectation for success (Penrose, 1959). When assessing the relationship between KM and organizational performance, it is important to note that the results will depend on the research methodology used (Sherif et al., 2006). The methods of measuring organizational performance include financial, customer, internal process and innovation, learning and supplier perspectives. According to Robinson et al. (2006) the financial perspective examines if company s implementation and execution of its strategy contributes to bottomline improvement. The commonly used financial measures are economic value added, revenue growth, costs, profit margins, cashflow and operating income. The customer perspective defines the value proposition that an organization will apply to satisfy customers and generate more sales from the most desired customer groups (Robinson et al., 2006; Chen et al., 2009). The measures cover both the value that is delivered to the customer which may involve time, quality, performance and service, and the outcomes that arise as a result of this value proposition, such as customer satisfaction and market share. The internal process perspective focuses on all the activities and key processes required in order for the company to excel at providing the value expected by the customers (Robinson et al., 2006). The clusters for the internal process perspective are operations management (by improving asset utilization, supply chain management), customer management (by expanding and deepening relations), innovation (by new products and services) and regulatory and social (by establishing good relations with external stakeholders). The innovation and learning perspective focuses on the intangible assets of an organization, mainly on the internal skills and capabilities that are required to support the value creating internal processes (Robinson et al., 2006). The supplier perspective is also important in assessing non-financial performance (Skrinjar et al., 2008; Rasula et al., 2012). 2.3 The service sector The study of the service sector always poses the question: how should a service be defined? From a conceptual standpoint, there are a variety of views. Crepsi et al. (2006) viewed services as intermediation activities, such as transport, that arises because consumers want to separate production and consumption or contact services, such as hair cuts or medical services, where production involves the consumer directly and where the output of the activity is embodied in the consumer. An important aspect of a service is the jointness of production and consumption that is goods can be produced meaningfully without consumers (think of a firm producing a car), whereas services require jointness (a haircut or repairing a car). The description by Craspi et al. (2006) hints at the considerable heterogeneity of services with respect to knowledge and capital intensity. Miles (2005) argued that the contrasts within the sector are as significant as those differentiating the sector from manufacturing. The sector includes the most concentrated, knowledgeintensive and Information Technology (IT) intensive sectors in modern industrial economies (banking, professional services), as well as the least (retail, cleaning). Numerous classifications of services exist in the literature (Zeithaml and Bitner, 2000; Gronroos, 2000). There are categorizations of industries within which services exist (Zeithaml and Bitner, 2000). There could be high touch/high-tech services of discretely/continuously rendered services (Gronroos, 2000), professional services often rendered within the health care, IT consultancy, banking/finance units among others. In fact, it is relevant today to ask if manufacturing has become the add-on which services once was. Service competition is partly customer-driven, competition-driven and partly technology-driven. Services are no longer add-ons to products provided by certain types of firms. Services have become an inherent part of all goods manufactured and can occur before and during manufacturing, as part of selling, during consumption and after consumption, and usage. More importantly, service can be a critical part of the value capture process within a functioning business model. By adopting a service perspective to Research and Development (R and D) emphasis is made on relations as R and D services (Gronroos, 2000). 3. Research Methodology The study adopted a cross-sectional survey and purposive sampling technique to collect data from 328 respondents in Makurdi. The survey data were collected from the respondents through Blue Ocean Research Journals 63

4 questionnaire. The respondents were made up of directors/managers, employees, suppliers and customers/clients of firms such as law chambers, hotels, restaurants, laundry and dry cleaning, schools, automobile/electronics mechanics, beauty/barbing saloons and ICT. The questionnaire items were derived from previous questionnaire and literature. Organizational performance scale was made up of 23 items, while KM capabilities scale was made up of 20 items. These items were adopted from the works of Gold et al. (2000), and Lee and Choi (2003). The KM capabilities scale was divided into technical KM resource (6 items), structural KM resource (5 items), cultural KM resource (5 items) and human KM resource (4 items). The questionnaire utilized a response set of strongly disagree (1) to strongly agree (5). The internal consistency test showed that all the scales exhibited coefficient of Cronbach s alpha that exceeded the minimum threshold of 0.70 as suggested by Nunnally and Bernstein (1994) and Neuman (2006). Multiple regression statistical method was employed for data analysis with the aid of SPSS version Survey data analysis was based on 288 properly completed questionnaire. This implies a response rate of 87.8%. 4. Results, Discussion And Conclusion The ages of majority (68.4%) of the respondents ranged from years. The statistics of the respondents demographics also showed that 58.2% were male, while 41.8% were female. Concerning the respondents educational attainment, majority (56.4%) had secondary school education. Furthermore, to answer the research question: does KM capabilities (technical, structural, cultural and human KM resources) have positive and significant effects on organizational performance?, a multiple regression analysis was conducted to determine the effects of the technical, structural, cultural and human KM resources (independent or predictor variables) on organizational performance (dependent variable). The multiple regression model is given as equation (1): OGP = 0+ 1 TKR+ 2 SKR+ 3 CKR+ 4 HKR+e. (1) Where OGP = organizational performance 0 = OGP intercept. It estimates the rate of change in OGP for a unit change in KM resources TKR = technical KM resource SKR = structural KM resource CKR = cultural KM resource HKR = human KM resource 1, 2, 3, 4 = the regression plane of the independent variables TKR, SKR, CKR and HKR e = random error The statistical results of the multiple regression analysis is shown in Table 1. Table 1: Coefficients in the multiple regression analysis of KM capabilities and organizational performance Predictor variable B Std. Error Beta t Sig. (Constant) TKR ** SKR * CKR * HKR ** *P<0.05; **P<0.01 Dependent Variable: Organizational performance Source: Survey data, 2013/SPSS output The results in Table 1 showed that KM capabilities are related to organizational performance. That is, technical KM resource (TKR) (t = 4.203, P = 0.021) affects organizational performance positively and significantly, structural KM resource (SKR) (t = 3.721, P = 0.000) is positively and significantly related to organizational performance, cultural KM resource (CKR) (t = 2.522, P = 0.001) is positively and significantly related to organizational performance, and human KM resource (HKR) (t = 2.649, P = 0.033) is positively and significantly related to organizational performance. This implies that service organizations can enhance their performance by: acquiring and using technologies that facilitates knowledge discovery, creation and sharing; adopting cultures that facilitates interaction, exploration and experimentation among employees; and encouraging employees to properly master their task and that of others, and communicate freely with employees of different areas of specialization. The results of this study are similar to the findings of previous studies. Rasula et al. (2012) found that KM practices that are measured by IT, organization and knowledge affects organizational performance positively. Blue Ocean Research Journals 64

5 Also, Chuang (2004) found that technical KM resource is negatively related to competitive advantage, while structural, cultural and human KM resources are positively related to competitive advantage. New knowledge in the context of a workplace always begins with an individual employee. This employee needs an appropriate work environment (technology, structure, culture and cordial/interactive relationship with others) to do this. Thus, knowledge can be a huge source of potentials and opportunities for new and/or greater performance for the organization. According to Kankanhalli and Tan (2004), this individual spends time and efforts to create explicit knowledge, share and store it on a knowledge repository (organizational memory) for future organizational reuse. However, as a behaviour, knowledge sharing may be deterred by several social inhibitors. The main social inhibitors of knowledge sharing are fear of losing value (power), losing work time (cost) and misinterpretation of the shared knowledge (Davenport and Prusak, 1998; O Dell and Grayson, 1998; Husted and Michailova, 2002). The effects of the inhibitors can be mitigated by establishing an appropriate culture that facilitates knowledge sharing. This is owing to the fact that certain cultural factors are crucial for a firm s ability to manage its organization effectively (Chase, 1997; Gold et al., 2001; Lee and Choi, 2003). Of course, an appropriate culture will encourage the employees who play very crucial role in creating the right KM resources (Ndlela and Toit, 2001). The KM resources are the building blocks upon which organizations KM capabilities are sited. The technical and human KM capabilities facilitates the conception and birth of a new knowledge, while the structural and cultural KM capabilities facilitates the growth and multiplication of new knowledge. References [1] Almashari, M., Zairi, M. and Alathari, A. (2002). An empirical study of the impact of knowledge management on organizational performance. Journal of Computer Information Systems, 42(5), [2] Alwis, R.S. and Hartmann, E. (2008). The use of tacit knowledge within innovative companies: Knowledge management in innovative enterprises. Journal of Knowledge Management, 12(1), [3] Barba-Sanchez, V. and Atienza- Sahuquillo, C. (2010). Integration of the environment in managerial strategy: Application of the resource-based theory of competitive advantage, dynamic capabilities and corporate social responsibilities. African Journal of Business Management, 4(6), [4] Barney, J.B. (1986). Organizational culture: Can it be a source of sustained competitive advantage? Academy of Management Review, 2, [5] Chase, R. (1997). The knowledge-based organization: An international survey. Journal of Knowledge Management, 1(1), [6] Chen, M., Huang, M. and Cheng, Y. (2009). Measuring knowledge management performance using a competitive perspective: An empirical study. Expert Systems with Application, 36, [7] Choi, B. and Lee, H. (2002). Knowledge management strategy and its link to knowledge creation process. Expert Systems with Application, 23, [8] Chuang, S.H. (2004). A resource-based perspective on knowledge management capability and competitive advantage: An empirical investigation. Expert System with Applications, 27, [9] Crespi, G., Criscuio, C., Haskel, J. and Howkes, D. (2006). Measuring and understanding productivity in UK market services. Oxford Review of Economics Policy, 22(4), [10] Davenport, T.H. and Prusak, I. (1998). Working knowledge. Boston, MA: Harvard Business School Press. [11] Gold, A.H., Malhotra, A. and Segars, A.H. (2001). Knowledge management: An organizational capabilities perspective. Journal of Knowledge Information Systems, 18(1), [12] Greniner, M.E., Bohmann, T. and Kremar, H. (2007). A strategy for knowledge management. Journal of Knowledge Management, 2(6), [13] Gronroos, C. (2000). Service management and marketing: A customer relationship management approach. Chichester: Willey and Sons. [14] Hall, J. and Sapsed, J. (2005). Influences of knowledge sharing and hoarding in project-based firms. In P. Love., Z. Irani and P. Fong (Eds.), Management of Knowledge in project environment (Pp ). Oxford: Butterworth-Heinernann. [15] Hedlund, G. (1994). A model of knowledge management and the N-form corporation. Strategic Management Journal, 15(5), Blue Ocean Research Journals 65

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