The Negative Performance Implications of Industry Dynamism on Organizational Knowledge

Literature Review And Hypothesis Development

Organizations have had to deal with a significantly increasing amount of new knowledge which must be integrated with existing knowledge in order to achieve high levels of performance. As an organization learns, its differentiated parts need to be able to work together to process and transfer knowledge to where it is needed in order to enhance its performance (Lawrence & Lorsch, 1967). Learning systems that organizations utilize to help them achieve competitive advantage work best when they are fully integrated with the organization’s primary systems (Yoon & Ardichvili, 2010). This integration has escalated the complexity of organizational operations (du Plessis, 2007), and made knowledge exploration and knowledge exploitation efforts challenging but beneficial when performed effectively (Uotila et al., 2009).

We know that knowledge is useful to organizations because it facilitates the creation of capabilities that help an organization compete (Grant & Baden-Fuller, 1995; Itami & Numagami, 1992). Through exploration and exploitation these knowledge-based competencies can enhance organizational performance (March, 1991; von Krogh & Roos, 1996), but the precise methods by which this occurs is not always discernable (Subramaniam & Youndt, 2005). In response to the growing importance and complexity of knowledge, knowledge management researchers have focused on a wide variety of perspectives that include both scientific and social positions (Tzortzaki & Mihiotis, 2014) in order to identify important elements of knowledge management practices as well as identify critical antecedents and outcomes.

Even though knowledge is valuable in enhancing organizational performance, the positive outcomes it creates can be negated for a variety of reasons. This is particularly evident when environmental changes occur. Knowledge-based actions represent the learning that stems from prior actions (Singley & Anderson, 1989) such that knowledge and action have a reciprocal relationship (Smith, McKeen & Singh, 2006). When conditions change, the utilization of existing knowledge bases can result in knowledge application that is of little use or is even detrimental. In addition, it can cause the disruption or deleterious guidance of new knowledge acquisition and absorption. Thus, organizational actions may be based on obsolete knowledge and/or without the use of relevant new knowledge.