How Knowledge Creation Capabilities Lead to Competitive Advantage

How Knowledge Creation Capabilities Lead to Competitive Advantage

Tingting (Rachel) Chung (Chatham University, USA), Ting-Peng Liang (National Sun Yat-Sen University, Taiwan), Chih-Hung Peng (City University of Hong Kong, China) and Deng-Neng Chen (National Pingtung University of Science and Technology, Taiwan)
DOI: 10.4018/978-1-4666-4679-7.ch003
OnDemand PDF Download:
$30.00
List Price: $37.50

Abstract

This chapter examines the roles of organizational creativity and organizational learning effectiveness in explaining the processes through which knowledge creation capabilities help firms to obtain and sustain competitive advantage. The proposed model specifies that organizational learning effectiveness plays a pivotal role in the relationship between knowledge creation and creativity. New knowledge develops better routines that make operations more efficient and effective. As organizations learn from newly generated knowledge, not only do they improve existing processes, but dynamic capabilities also develop to integrate knowledge into creative ideas, novel solutions, and new products and services. This theoretical examination leads to the proposition that organizational learning effectiveness mediates the relationship between knowledge creation capabilities and organizational creativity. This chapter also examines whether the effect of knowledge creation processes on organizational creativity exists in all organizations or is contingent on the nature of the organization’s knowledge. Based on the common understanding that tacit and explicit knowledge differ substantially in their codifiability and transferability, the authors specify the moderating role of knowledge characteristics in the process of using knowledge management to foster organizational creativity. The theoretical examination leads to the proposition that the degree of tacitness of the organization’s critical knowledge moderates the effect of knowledge creation capabilities on organizational creativity mediated by organizational learning effectiveness. Finally, the authors argue that the degree of institutionalization of the organization’s critical knowledge moderates the effect of knowledge creation capabilities on organizational creativity, which is in turn mediated by organizational learning effectiveness. Implications for research and managerial practices are discussed.
Chapter Preview
Top

Introduction

Knowledge and information are the tools and materials of creativity. Innovation, whether in the form of a new technological artifact or a new business model or method, is its product.– Richard Florida (2002, p. 44).

In today’s knowledge-intensive economy, firms must be creative in order to remain competitive. As intangible knowledge replaces physical assets such as equipment and raw materials as the most important element in improving organizational productivity (Davenport & Prusak, 2000), how firms can turn their knowledge stock into creative ideas becomes a crucial topic (Nonaka & von Krogh, 2009; Nonaka et al., 2006). Firm performance is not only determined by tangible assets, but also dependent on the organization’s capabilities to create and utilize knowledge. Maintaining existing knowledge to implement known practices and produce predictable results, however, is insufficient in the dynamic, high-velocity market (Eisenhardt & Martin, 2000). The firm must constantly create new ideas in order to attain and sustain its competitive advantage over time (Parent et al., 2000). The knowledge-based theory of the firm suggests that knowledge generation offers one explanation for why firms are superior to markets (Spender, 1992; Spender, 1996). The establishment of firms not only enables the production of goods and services, it also creates conditions that allow multiple individuals to integrate expertise through coordination and social learning into potentially new and insightful intellectual products (Kogut & Zander 1996).

With this understanding, research in knowledge management and whether knowledge management enhances firm performance has increased substantially in the information systems area. A substantial amount of previous empirical studies has reported significant positive relationships between knowledge creation, creativity and organizational performance. For instance, Lee and Choi (2003) found Nonaka’s knowledge creation capabilities had a positive impact on organizational performance through creativity enhancement. The emphasis on the role of creativity in knowledge creation raises a few interesting research questions: Can an organization foster continuous creativity through knowledge creation capabilities and what is the underlying mechanism for knowledge creation capabilities to enhance organizational creativity?

The first purpose of this chapter is to build a model that extends the growing stream of work on organizational creativity (Amabile, 1983; Drazin, et al. 1999; Ford, 1996; Woodman et al., 1993) by incorporating the role of organizational learning effectiveness. Our theoretical exposition that organizational learning effectiveness plays a pivotal role in the relationship between knowledge creation and creativity is firmly based on existing theories. New knowledge develops better routines that make operations more efficient and effective. Other studies also indicate that, as organizations learn from newly generated knowledge, not only do they improve existing processes, dynamic capabilities also develop to integrate knowledge into creative ideas, novel solutions, and new products and services (Eisenhardt & Martin, 2000; Hargadon & Sutton, 1997).

Another goal of this research is to explore whether the effect of knowledge creation capabilities on organizational creativity exists in all organizations or is contingent on the nature of the organization’s knowledge. Based on the common understanding that tacit and explicit knowledge differ substantially in their codifiability and transferability, our goal is to examine the moderating role of knowledge characteristics in the process of using knowledge management to foster organizational creativity.

Complete Chapter List

Search this Book:
Reset