Title: Antecedents and consequences of knowledge management strategy: the case of Chinese high technology firms
Author: Jie Yang
Subject: Knowledge management
Publish: 2008
Status: full text
Source: Production Planning & Control; Jan2008, Vol. 19 Issue 1, p67-77
Preparation: Scientific Database Management Journal Articles www.SYSTEM.parsiblog.com
Abstract: Built on the knowledge management and corporate growth literatures, this paper examines the antecedents of knowledge management strategy (KMS) and its consequences. Grounded by a resource-based view and corporate growth theory, results reveal that a firm"s knowledge management strategy and strategic performance relate to long-term corporate growth. Technological turbulence also relates to the firm"s use of knowledge management strategy. Environmental turbulence and learning orientation do not exert significant effects on knowledge management strategy. Learning orientation has an interacting effect on long term corporate growth, while environmental and technological turbulences do not. Implications for knowledge management practitioners are discussed.
Keywords: knowledge management strategy; corporate growth; strategic performance. --Download Article

Introduction: Knowledge management has been considered a critical strategy for competitive advantage in recent years
(Ndlela and du Toit 2001, King 2001). In the context of knowledge management, strategy refers to the organizational intention and enabling condition for organizational knowledge creation (Nonaka and Takeuchi, 1995). King (2001) observed that knowledge management strategy focuses on the acquisition, explication, and communication of mission-specific professional expertise that is largely tacit in nature to organizational participants and contexts in a manner that is focused, relevant, and timely. Krogh et al. (2001) defined knowledge management strategy as the employment of knowledge processes to an existing or new knowledge domain in order to achieve strategic goals. They developed four strategies for managing knowledge:
leveraging, expanding, appropriating, and probing based on knowledge domain and process. However, the current research on the knowledge management strategy-corporate growth performance connection seems far from maturity. Hasan and Al-hawari (2003) stressed the importance of knowledge management strategy by stating that a firm’s innovative capacity and performance may be dependent upon its ability to take advantage of its knowledge assets. Capitalisation is one of three instances into which the concept of knowledge management is divided by Kalling (2003), and knowledge management strategy is aimed at helping the firm achieve such capitalisation.
Strategic interventions in intellectual asset flows carry implications for firm performance (McGaughey 2002). Kim and Mauborgne (1999) emphasised the role of strategic knowledge management in value innovation. McNamara et al. (2002) found a significant relationship between the complexity of a firm’s strategic group knowledge structure and firm performance. Process-oriented knowledge management strategy proposed by Maier and Remus (2003) seeks to ensure the success of knowledge management initiatives. Hitt et al. (2000) considered technological knowledge a main source of growth. Despite a growing interest in the role of knowledge management strategy in achieving corporate growth, there is a lack of credible empirical evidence for high technology firms, which are characterised by their high level of intellectual work (Kelley and Caplan 1993). Little research offers a detailed understanding about the role of knowledge management strategy in achieving corporate growth in high technology firms. The study aims at filling this gap.
This study offers three additions to the literature on knowledge management strategy. First, Eisenhardt and Schoonhoven (1990) elaborated that high technology firms, compared with
others, are facing severe problems of limited managerial and financial resources. Since knowledge manage- ment is characterised as innovative and resource consuming, knowledge management strategy may not be beneficial to high technology firms with limited resources, and may not result in high growth performance.
Thus, identifying crucial antecedents of knowledge management strategy becomes an important issue. This study is among the first to develop and test hypotheses on the mediating effects of knowledge management strategy by employing a resource-based view (Amit and Schoemaker 1993, Barney 1991) and growth theory (Penrose 1995) as the theoretical basis. Second, a high technology industry in China is our research . Xin and Pearce (1996) suggested that firms face challenges in terms of resource and management in transitional economies. Thus, a Chinese high technology industry presents an interesting setting for investigating the link between knowledge management strategy and growth performance.
Third, the relationship between knowledge management strategy and competitive strategy has been explored deeply. This study analyses the link between knowledge management strategy and growth performance, while considering knowledge management as a dynamic firm capability.

2. Theoretical framework and hypotheses
There are two major research streams on knowledge management in the literature. The first stream focuses on the increase of knowledge stock and the reuse of knowledge repositories (Barney 1991), based on the delivery of technological solutions (Carrillo et al. 2000). In this stream, knowledge management refers to the developing body of methods, tools, techniques and values through which organisations can acquire, develop, measure, distribute and provide a return on their intellectual assets (Snowden 1999). The second research stream evaluates the processes, organizational structure, and IT applications that enable individuals to leverage their creativity and capabilities to deliver business value, sense and then seize opportunities promptly and effectively (e.g. Teece 2000). In this research stream, knowledge management is defined asa transformation process of tacit knowledge into explicit knowledge in order to  facilitate flows of organisational knowledge (Schulz and Jobe 2001, Lubit 2001).
Organisation, strategy, and people have become central issues in knowledge management, but IT implementation alone does not result in the success of knowledge management (Brown and Druid 1998). In prior research, there are two approaches in the latter research stream based on the angle of analysis. Some focus on the project level and investigate knowledge sharing among project teams, marketing and R&D. Knowledge sharing is then investigated relative to improved project performance (shortened cycle time, improved new product quality and successful market launches; e.g. Lee et al. 2001). Other studies emphasise the firm level and examine knowledge management as a dimension of the inimitable competitive strategy of firms (Lubit 2001, Holsapple and Singh 2001), a key to long-term organisational success (Lloyd 1996) or a source of competitive advantage (Ndlela and du Toit 2001).
A firm’s strategic posture as it relates to knowledge management may differ based on these two broad viewpoints. First, when knowledge is viewed as a resource by itself, the emphasis is on the variety of knowledge management tools, and efficiency and effectiveness in knowledge sharing (Holsapple and Singh 2001, Krogh et al. 2001). Second, the competence viewpoint focuses on knowledge as one of the crucial inputs in innovation and value creation (Lloyd 1996, Ndlela and du Toit 2001). It stresses a firm’s dynamic capability, which is an integration of the firm’s ability to turn tacit knowledge into core competences (Lubit 2001), organisational learning orientation (Calantone et al. 2002), and the consistency of knowledge management strategy and the firm’s strategy (Hansen et al. 1999). In line with the competence viewpoint, the author defines knowledge management strategy as the reflection of a firm’s competitive strategy to foster the firm’s dynamic capability and create and transfer knowledge by delivering superior value and meeting the evolving expectations of its clients. This study’s perspective is that knowledge management is a framework within which the organisation views all its processes as knowledge processes. The key point of knowledge management is to harvest the tacit knowledge residing in individuals and to make it a firm asset, rather than leaving it in the heads of the particular individuals.
Therefore, for a high technology firm in China, allocation of substantial resources to knowledge management, development of a variety of knowledge management tools, effective knowledge creation and transfer, timely knowledge acquisition, contribution to organisation’s knowledge base, knowledge-oriented environment creation, and support for and encouragement of innovation represent effective knowledge management strategies. The model in this study is grounded in the theories of resource-based view and firm growth. The resource-based view and corporate growth theory offer interesting insights on knowledge management strategy and growth performance. Penrose (1995) suggests that resources are valuable only to the extent that they can deliver valuable services. The most critical resources are no longer the traditional tangible assets, but an intangible dynamic capability to achieve superior performance (Teece 2000).
Consequently, profits come primarily from a core competence that is strictly idiosyncratic (Dierickx and Cool 1989). Knowledge has been the most important strategic resource for high technology firms. Professional knowledge from skilled employees is a major determinant of growth performance, thus the absorption of such production capacity is important for growth (Packer 1964). Growth is an evolutionary process and based on the cumulative growth of collective knowledge (Penrose 1995).
Grant (1997) stated that the core competence aims at exploring, co-ordinating, and applying different resources within the firm, which is considered as a collection of productive resources. The existence of these unused productive resources and special knowledge, all of which will always be found within a firm, has been regarded as the internal inducement to expand, and expansion has been discussed as one of the ways to achieve growth by Penrose (1995). According to the resource-based view, using this unused knowledge for expansion can increase growth performance through strategic knowledge management. The resource based view stresses that a firm’s resource endowment can be a source of profits as long as these resources are heterogeneous in the same industry (Amit and Schoemaker 1993, Barney 1991), as heterogeneity of resources is of great importance for the productive opportunity of a firm (Penrose 1995). Firm growth theory indicates that growth is limited by a firm’s productive opportunity. To some extent, the implementation of knowledge management strategy enables a firm to explore more such ‘productive opportunities’. As a result, the link between knowledge management strategy and growth performance is informed by both resource based view and growth theory.
The purpose of this study is to propose and test a model that identifies the antecedents of use of knowledge management strategy and its impact on long term corporate growth based on the resource based view and firm growth theory. The conceptual framework is presented in Figure 1. Prior literature suggests a link between knowledge management strategy and firm performance, which is theoretically and conceptually plausible. However, there is little empirical evidence, particularly from high technology firms in developing economies such as China, in support of this view. This study aims at filling this research gap.

2.1. Model components and hypotheses
Knowledge management strategy is a firm’s approach to managing the intellectual, or human, capital in such a manner as to facilitate the gathering, storage, and exchange of information within the organisation (Greenberg and Baron 2003). The ability to capture the knowledge and experience of a firm’s employees and share that same knowledge and experience among other employees within the firm will obviously spark innovation and improvement in existing processes (Soo et al. 2002). Numerous firm performance studies emphasise knowledge management from a strategic stance (e.g. Holsapple and Singh 2001, McNamara et al. 2002). Ndlela and du Toit (2001) pointed out that knowledge management affects the firm performance through its efficiency in developing the intellectual assets that are a source of competitive advantage. Developing a knowledge management strategy for a firm directly increases the innovative performance of the firm and ultimately filters through to the bottom line (Soo et al. 2002). H1: A firm’s strategic performance is positively influenced by the knowledge management strategy. Knowledge is now universally acknowledged as the prime driving force for economic progress, the access to and use of knowledge for innovation and growth is a prequisite for sustainable success (Ganguly 2000).
A firm’s success is largely dependent on its ability to capture and exchange critical information in order to sustain or grow its competitive advantage. Organisational knowledge tends to reside at the individual level, which results in poor feedback systems and very little production of new knowledge (Brown and Woodland 1999). As a result, the use of a knowledge management strategy increases the firm’s long-term corporate growth through new product innovations. H2: A firm’s long-term corporate growth is positively influenced by the knowledge management strategy.
Packer (1964) portrayed the impacts of production and professional resources on growth performance and defined professional effort as one resource derived from managerial and engineering talent. For high technology firms, innovation capability is the reflection of such efforts, which has been a driver of strategic performance. Corporate growth accelerates through innovation and the identification of external opportunities (Canals 2001). High strategic performance enables an organisation to grow and enrich its corporate growth performance. A firm’s long-term corporate growth is directly and positively related to how successful it is in developing and implementing its strategy (Kotha and Nair 1995).
H3: A firm’s long-term corporate growth is positively related to its strategic performance.
A firm’s learning orientation is the degree of commitment the organisation has to ‘developing and using its information and knowledge capabilities in order to create higher-valued information and knowledge, to change behaviours, and to improve bottom-line results’ (King 2001). A learning orientation facilitates learning through organisational processes such as formal training and practice in effective teamwork (King 2001), the employment of organisational development (Albrecht 1983), change management (Connor and Lake 1994), case management, empowerment, and continuous improvement techniques and programs (Davenport 1993). Learning orientation affects the extent to which a firm is likely to promote generative learning as a long-lasting core competency (Hunt and Morgan 1996).
Since the effectiveness of knowledge management strategy is directly related to the effectiveness of an organisation’s ability to gather, organise, and share knowledge, a learning orientation motivates the firm to manage its intellectual assets strategically. H4: The knowledge management strategy is positively influenced by a firm’s learning orientation. Learning orientation has been acknowledged as important to firm performance (Slater and Narver 1994). A firm with a strong learning orientation will exhibit organizational learning as well as individual learning. Individuals in a firm with a strong learning orientation can and will seek opportunities to grow their knowledge and skills. Consequently, the level of commitment a firm has to organisational and individual learning will positively influence the knowledge management strategy of the firm.
H4a: The greater the level of learning orientation, the greater is the likelihood that knowledge management strategy will lead to greater strategic performance. Environmental turbulence is defined as the degree of perceived hostility in the environment stemming from competition (Pelham and Wilson 1996). As external environmental pressures continue to mount against firms at an increasing rate and increase in complexity, the need to develop quality effective knowledge management strategies grows in importance for firms in developing economies. As functional differences in similar product offerings diminish at an increasing rate, there is less and less time allowed forproduct concept, design, production, and offering in order to sustain the firm’s competitive advantage. Thisincreasing complexity and environmental turbulence
results in growing demand for effectively processing information and making quick decisions.
H5: The knowledge management strategy is positively
influenced by a firm’s environmental turbulence. Knowledge management strategy is positively
influenced by a firm’s environmental turbulence in  that these pressures will continue to accentuate the
importance of knowledge management, creating more focus on effectively managing a firm’s knowledge
and expertise. With the absence of environmental turbulence, the implementation of knowledge management
strategy is more successful in achieving high strategic performance. This is because environmental
turbulence may result in the reduction of the value of knowledge acquired in prior experiences, which forces
the firm to collect more information and acquire ore knowledge (Weiss and Heide 1993) to fit the
firm’s existing knowledge management strategy for performance.
H5a: The greater the level of environmental turbulence, the greater is the likelihood that knowledge management
strategy will lead to greater strategic performance. Technological turbulence refers to the degree of
change associated with new product technologies (Weiss and Heide 1993, Jaworski and Kohli 1993).
Technology-based innovation sparking the rapid change or turbulence in technology brings the firm
opportunities in that the capacity, mobility, and general usefulness of the newer emerging technology grants
more control for firms which are attempting to capture the knowledge that will help the firm sustain its
competitive advantage. Five grades of firm, from grade zero to grade four, have been distinguished by
Alain (1988) based on different levels of the role played by technology in the decision-making process of a firm.
Among them, firms categorised in grades three and four are representative of high technology firms in developing
economies. Both of these firms highly integrate technology and knowledge management in their
strategies. Advances in technology over the last decade have made it possible for firms to capture vast
data; furthermore, these firms have been enabled through technological advances to share this information throughout the organisation effectively (Sharp 2003). H6: The knowledge management strategy is positively
influenced by technological turbulence. Moorman and Miner (1997) suggested that a firm
might be better off under turbulent conditions because the firm can draw on its competences, which are
creative engines in times of high turbulence. Technology on its own has been regarded a tool that
captures the source of competitive advantage (Webber 1993). Given that knowledge management strategy is
positively influenced by the rapid advances in technology available to firms, this suggests that, in the
presence of technological turbulence, the firm can be triggered to aptly implement effective knowledge
management strategy to achieve high strategic performance through the increased heterogeneity in
resources, which may bring the firm value under turbulent conditions (Miner 1994).
H6a: The greater the level of technological turbulence,
the greater is the likelihood that knowledge management strategy will lead to greater strategic performance.

3. Methods
3.1. Sample and data collection
This study examined a sample of 500 high technology firms in Shanghai, the biggest city in China.  High technology firms were chosen because they are  knowledge-intensive firms and provide an appropriate  setting for research on knowledge management.  Knowledge intensity refers to the extent that knowledge  is a key factor of production (Coff 2003). Firms  investing heavily in R&D or drawing heavily on  educated or skilled employees can be considered as  knowledge-intensive. Data were collected from the  senior manager as the key informant. The key  informant approach has been widely used in empirical  studies (e.g. Stump and Heide 1996) because of  the key informant’s knowledge of the firm, access to  strategic information, and familiarity with the   environment of the firms (Aguilar 1967). They were  mailed a questionnaire and a letter explaining the  purpose of this study and promised to offer the  research results if respondents returned the completed  questionnaire.
A limited pilot study was undertaken to ensure that  respondents had no difficulties in completing the  questionnaire. The instrument was pre-tested in 15 firms out of the population of 500 firms in the Chinese  high technology industry. The responding firms represented  a good cross-section of the high technology  industry in terms of size, products, and processes. It is  helpful to focus on a single industry (Dess et al. 1990) in    dentifying key firm resources leading to core competence.
The high technology industry was chosen where
the competitive advantage comes from intellectual
assets such as knowledge and management strategy.
In this study, an attempt is made to understand the
dynamics of knowledge management, strategy, and
competences in high technology firms. Study on
traditional firms offers a more limited insight than
knowledge-based firms (Starbuck 1993), which are
represented typically by high technology firms. High
technology firms mainly rely on their dynamic capability
to transform the knowledge residing in the
organisations into value for their customers. Value
creation is a knowledge intensive process; it requires a
firm to adopt a knowledge management strategy
to foster the value creation of its core competences.
In addition, high technology firms are noted for
their effect on regional development (Shefer and
Frenkel 1998).
Follow-up phone calls were made to all potential
respondents who had not returned the surveys after
four weeks. A comparison of the early-responding
firms with the late-responding firms showed that these
groups did not differ in terms of number of employees,
sales revenue, years in business, or any of the key
variables in this study. As a result, 190 usable
questionnaires were returned, resulting in an effective
response rate of 38%. All multi-item variables were
measured on a seven-point scale to ensure uniform
scale width.
3.2. Measures and validation
All scales used a seven-point scoring format ranging
from ‘Strongly Disagree’ to ‘Strongly Agree,’ unless
otherwise specified. Some items were adapted and
reworded to fit the present context. The measures in
this study were drawn from several sources. For
learning orientation, the measure was adapted from
the work of Sujan et al. (1994), reflecting the extent to
which people are orientated to improve their abilities
and master the tasks they perform by acquiring
knowledge. For environmental and technological
turbulence, the measures were adopted from
Jaworski and Kohli (1993), greatly emphasising the
various aspects of environmental dynamics by measuring
the degree of competitive intensity and
unpredictable changes in technology… --Download Article