The Negative Performance Implications of Industry Dynamism on Organizational Knowledge

The Negative Performance Implications of Industry Dynamism on Organizational Knowledge

James M. Bloodgood (Department of Management, College of Business Administration, Kansas State University, Manhattan, KS, USA)
Copyright: © 2015 |Pages: 14
DOI: 10.4018/IJKM.2015010103
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Abstract

Organizational knowledge is a key component of organizational efficiency and effectiveness, and ultimately success. The use of organizational knowledge is not always a conscious endeavor, and this can lead to the use of knowledge at inappropriate times or in inappropriate ways, particularly under changing conditions. To investigate the potential for ineffectual knowledge use, this study examines how organizational knowledge influences organizational performance when there is a high degree of industry dynamism. Using a sample of 105 U.S. firms from 46 industries, this study finds that industry dynamism moderates the relationship between organizational knowledge and organizational performance. Specifically, higher levels of dynamism weaken the positive effect of organizational knowledge on organizational performance. Implications for researchers and practitioners of this finding are discussed.
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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.

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