KNOWLEDGE MANAGEMENT PRACTICES AND ORGANIZATIONAL PERFORMANCE

Abstract

Researchers, worldwide, have recognized that organizational performance is being increasingly related to knowledge-related factors. Knowledge and its management have become the focus of attention for organizations across the globe. The developed economies have long worked upon the generation, utilization and dissemination of organizational knowledge and have seemingly reaped benefits from it. For more than a decade now, organizations in the developing world have also woken up to this idea of knowledge management (KM) and are working hard on the generation of effective knowledge management processes and practices. Despite extensive research literature on both the issues and the relationship they share, some notable research gaps remain to be closed. In effect, within the knowledge management research is the lack of understanding related to its effects on specific measures of organizational performance (OP). Researchers have articulated a need to develop more fine-grained conceptual models to better gauge the key strategic value-creating resources of an organization. In this research dissertation, KM practices are defined as planned, deliberately initiated managerial and organizational activities that help the organization build its knowledge resources and leverage them to achieve sustained competitive advantage. The objective of this research is to answer the research question ‗What is the relationship between KM practices and organizational performance?‘ In order to meet this objective, KM literature was analyzed to identify the key KM practices and simultaneously establish how these concepts are linked to OP measures in the current set of papers. A decomposed model was developed to expound the effects of KM practices on the identified set of performance measures, where individual relationships between KM practices and performance measures were studied with the help of a survey of a sample of 477 middle and top-level executives drawn from ‗Fortune 500‘ Indian firms. Four international publications have addressed the research questions using different approaches. The first research paper was a systematic literature review to study the extant empirical KM and OP research, which helped to establish the current state of understanding regarding the relationship between the two. The second paper helped to develop a deeper understanding of organizational performance measures and approaches, while the third one helped develop a scale for research. The fourth paper was one amongst the first to develop and study a decomposed relationship between individual KM practices and organizational performance measures. Descriptive research design was employed and data was collected using nonrandom sampling techniques. Data was collected with the help of a self-administered questionnaire employing a seven-point Likert scale. A multi-staged analysis was conducted on the primary data beginning with Exploratory Factor Analysis (EFA), Confirmatory Factor Analysis and finally testing the hypothesis with the help of Structural Equation Modelling (SEM). EFA resulted in the establishment of 10 variable – six independent KM practices and four dependent OP measures. The factor structure was confirmed using CFA, reliability and validity was also put to check through Composite reliability (CR) and validity was established through SPSS and SEM and checking the model fit measures. The effect of six individual KM practices viz. Knowledge sharing culture (KSC), Knowledge-based leadership (KBL), Structure and Decentralization (SD), Knowledge management strategy (KMS), Knowledge-based human resource management (KBHR) and Information and Communication Technology for KM (ICT) was analysed on each of the four OP measures viz. Learning and Growth (LG), Internal Process (IP), Customer Satisfaction (CS) and financial performance (FP). The research results have thread bared individual relationships and shown that KM, when implemented in thought and spirit in organizations affects all the aspects of performance percolating down to FP also. An important understanding drawn from the decomposed model is that not all KM practices contribute directly to organizational performance measures. The two most significant KM practices that have emerged from this research are Knowledge sharing culture (KSC) and Knowledge-based human resource management (KBHR). These two KM practices have shown to have a direct positive and significant effect on learning and growth (LG) of an organization, internal process (IP), customer satisfaction (CS) and financial performance (FP) of an organization. KM literature has conceptualized their significance from time to time, the decomposed model has empirically proven the effect of these KM practices on performance measures. Knowledge Management Strategy (KMS) emerged as the next important KM practice directly affecting three out of four OP measures i.e. LG, IP and CS. This provides clarity on the significance KMS carries in an organization. The other important KM practices that have surfaced are Structure and decentralization (SD) and Knowledge-based leadership (KBL) followed by information and communication technology for KM (ICT). While KBL and SD both show a direct relationship with LG and IP, ICT does not affect any of the OP measures directly endorsing the view that technology acts a facilitator, a medium but the actual performance is a factor of other aspects, of which, culture and human resource are the most important.