Knowledge Management Practices as a Source of Absorptive Capacity of Emerging Market Firms: Evidence from Russia
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Introduction 6
Research Background 7
Research Gap 8
Research Problem, Objectives and Delimitation 8
Research Strategy and Organization of the Study 9
1 Knowledge Management Practices and Absorptive Capacity Theoretical Framework 11
1.1 Absorptive Capacity and its Antecedents 11
1.2 Knowledge Management Practices 20
1.3 Relationships between Knowledge Management Practices and Absorptive Capacity . 28
Summary of Chapter 1 35
2 Empirical Study of Relationships Between Knowledge Management Practices and Absorptive
Capacity 36
2.1 Research Strategy 36
2.2 Measurement of Variables 38
2.3 Results Analysis 41
2.4 Descriptives 44
Summary of Chapter 2 49
3 Discussion and Conclusions 50
3.1 Findings 50
3.2 Theoretical Contributions 58
3.3 Managerial Implications 60
3.4 Limitations and Directions for Future Research 62
3.5 Conclusions 62
References 64
Appendix 1 Survey 70
LIST OF TABLES
Table 1 Classifications of Knowledge Management Practices 27
Table 2 Connection between knowledge management practices and absorptive capacity antecedents 32
Table 3 Absorptive Capacity Measurement Scale 39
Table 4 Knowledge Management Practices Measurement Scale 41
Table 5 Organizational Performance Measurement Scale 41
Table 6 Variables Description 44
Table 7 Descriptives of variables 48
Table 8 KM practices and PAC model description 51
Table 9 RAC and KM practices model description 55
Table 10 Estimates of the KM practices, AC and performance model indirect effects 58
LIST OF FIGURES
Figure 1 Absorptive Capacity Operationalization (based on Volberda et al (2011)) 19
Figure 2 Theoretical Framework of the Research 34
Figure 3 Model of relationships between KM practices, AC and performance 43
Figure 4 Distribution of responses by industry 45
Figure 5 Distribution of response by firms' age 46
Figure 6 Distribution of responses by number of employees 46
Research Background 7
Research Gap 8
Research Problem, Objectives and Delimitation 8
Research Strategy and Organization of the Study 9
1 Knowledge Management Practices and Absorptive Capacity Theoretical Framework 11
1.1 Absorptive Capacity and its Antecedents 11
1.2 Knowledge Management Practices 20
1.3 Relationships between Knowledge Management Practices and Absorptive Capacity . 28
Summary of Chapter 1 35
2 Empirical Study of Relationships Between Knowledge Management Practices and Absorptive
Capacity 36
2.1 Research Strategy 36
2.2 Measurement of Variables 38
2.3 Results Analysis 41
2.4 Descriptives 44
Summary of Chapter 2 49
3 Discussion and Conclusions 50
3.1 Findings 50
3.2 Theoretical Contributions 58
3.3 Managerial Implications 60
3.4 Limitations and Directions for Future Research 62
3.5 Conclusions 62
References 64
Appendix 1 Survey 70
LIST OF TABLES
Table 1 Classifications of Knowledge Management Practices 27
Table 2 Connection between knowledge management practices and absorptive capacity antecedents 32
Table 3 Absorptive Capacity Measurement Scale 39
Table 4 Knowledge Management Practices Measurement Scale 41
Table 5 Organizational Performance Measurement Scale 41
Table 6 Variables Description 44
Table 7 Descriptives of variables 48
Table 8 KM practices and PAC model description 51
Table 9 RAC and KM practices model description 55
Table 10 Estimates of the KM practices, AC and performance model indirect effects 58
LIST OF FIGURES
Figure 1 Absorptive Capacity Operationalization (based on Volberda et al (2011)) 19
Figure 2 Theoretical Framework of the Research 34
Figure 3 Model of relationships between KM practices, AC and performance 43
Figure 4 Distribution of responses by industry 45
Figure 5 Distribution of response by firms' age 46
Figure 6 Distribution of responses by number of employees 46
Research Background
Knowledge today is considered as a key strategic asset for any kind of firm (Bollinger and Smith 2001). It does not appear sufficient to have superior market share or vast production capabilities in order to dominate market in the period other than short-term. The increasing complexity of customer demand enforced with the more fierce competition and strengthened with the ever-faster product or service improvement requirement (Sargut and McGrath 2011) made organizations reconsider the old ways of doing business and invest in flexibility development (Reeves and Deimler 2011). What can leverage this flexibility? How can a firm be susceptive to the changes of the external environment?
Scholars found that many innovations that helped firm to capture abnormal profits for prolonged time period were not developed in house, but rather adopted from the sources beyond the firm (Cohen and Levinthal 1990). This ability to capture outside knowledge was called absorptive capacity. Many argues that absorptive capacity is one of the key determinants of the firm’s future success, as it enhances its degree of flexibility and innovativeness (Zahra and George 2002).
However, though the importance of the concept is widely recognized, it still remains a kind of black box (Lewin, Massini, and Peeters 2011). Nobody knows what inside is and how to enhance it. Though there are various streams of literature describing the antecedents of absorptive capacity, there are not many studies that tell in a detailed way what a manager should do to enhance it.
Having in mind this lack of clarity, we introduce knowledge management practices as a mean to shed light onto practical side of absorptive capacity development. Building on the current stream of antecedents of absorptive capacity, we investigate the intentional and conscious knowledge management practices one could apply and test their effect on the said concept.
Another particular relationship deserves attention from our side: what is the relationship between absorptive capacity and a firm’s performance? And what role does knowledge management practices play in it?
Giving answers to the above stated questions is tightly connected with day-to-day activities of business.
Research Gap
The concept of absorptive capacity received enormous attention in few last decades since its emergence (Volberda et al. 2010). Its significance for practice was proven through empirical studies indicating the positive relationship between it and firm’s performance indicators (Kostopoulos et al. 2011; Chen, Lin, and Chang 2009). The concept is claimed to have gone through reification and rejuvenation (Lane, Koka, and Pathak 2006). Numerous studies have drawn attention to its outcomes as well as antecedents (Bosch, Wijk, and Volberda 2003). Notwithstanding the great attention received, there are few gaps that still remain.
Firstly, though the antecedents of the model were broadly studied, the general lack of research onto how managerial actions and individual agents influence AC was noticed (Volberda, Foss, and Lyles 2010) . What is more, the investigation of routines able to enhance absorptive capacity through these antecedents was limited (Lewin, Massini, and Peeters 2011). In addition, the strong need to explain how an individual can affects absorptive capacity process is determined (Lane, Koka, and Pathak 2006).
Secondly, there were few studies that concentrated on general performance rather than innovative one and there is a strong need to provide examination of it (Lane, Koka, and Pathak 2006). Bearing in mind, that even AAC definition itself explicitly implies that its main goal is to apply knowledge to commercial ends (Cohen and Levinthal 1990). Connecting AC with financial performance would increase understanding of it (Kostopoulos et al. 2011).
Thirdly, there has been few studies concentrating on AC investigation in the context of the developed markets, while emerging markets context remains of limited attention (Liao, Welsch, and Stoica 2003).
To conclude, though the field received a broad attention, there are still areas for the development that requires research.
Research Problem, Objectives and Delimitation
The increasing complexity of customer demand makes the companies seek more and more effective ways to be competitive. Enhancing absorptive capacity has proven to be a way to operate more efficiently.
Though previous scholars have investigated various antecedents of absorptive capacity, no clear management practices from the side of knowledge management aimed at their enhancement 8
were elaborated. Recognizing the relative complexity of absorptive capacity development with this study we aim to provide a manager with a clear indication of what knowledge management practices he or she should apply in order to build it. From the various knowledge management practices, we would distinguish the most important ones. Additionally, we would show how application of these practices would affect company’s financial performance mediated by absorptive capacity.
The thesis aims to answer the following research question: How can knowledge management practices be a source of absorptive capacity?
The research question can be split into few sub-questions:
1. How do specific knowledge management practices influence the particular dimension of absorptive capacity?
2. Does absorptive capacity serve a mediator in the relationship between knowledge management practices and organizational performance?
The scope of the study is limited by knowledge management practices and its connection to absorptive capacity antecedents that we have found during the literature analysis. Absorptive capacity is measured indirectly using the already wide-used scale. The organizational performance of the firm is measured subjectively and mostly restricted to financial indicators that may also provide certain limitations.
Research Strategy and Organization of the Study
The deductive approach was applied to the study. The study is grounded into theoretical research of absorptive capacity and knowledge management practices with a subsequent formulation of proposed relationships between concepts. The relationships presented are mostly concerned with the effect particular knowledge management practice has over particular dimension of absorptive capacity and the effect absorptive capacity plays as a mediator between those practices and the firm’s performance.
We deployed survey research strategy, using snowball sampling to overcome low response rates. Survey allows to gather vast amounts of standardized data for bigger sample thus allowing to make more meaningful implications. The survey was presented in the form of online questionnaire link to which was sent over via e-mail.
The thesis is structured the following way. Firstly, we present theoretical framework where we connect knowledge management practices and absorptive capacity antecedents also proposing the relationship it should have over performance. In the second section, we describe in details the research strategy, data gathered and their analysis. In the last section we present the discussion of our main findings, theoretical and practical contributions, as well as the limitations of the research.
Knowledge today is considered as a key strategic asset for any kind of firm (Bollinger and Smith 2001). It does not appear sufficient to have superior market share or vast production capabilities in order to dominate market in the period other than short-term. The increasing complexity of customer demand enforced with the more fierce competition and strengthened with the ever-faster product or service improvement requirement (Sargut and McGrath 2011) made organizations reconsider the old ways of doing business and invest in flexibility development (Reeves and Deimler 2011). What can leverage this flexibility? How can a firm be susceptive to the changes of the external environment?
Scholars found that many innovations that helped firm to capture abnormal profits for prolonged time period were not developed in house, but rather adopted from the sources beyond the firm (Cohen and Levinthal 1990). This ability to capture outside knowledge was called absorptive capacity. Many argues that absorptive capacity is one of the key determinants of the firm’s future success, as it enhances its degree of flexibility and innovativeness (Zahra and George 2002).
However, though the importance of the concept is widely recognized, it still remains a kind of black box (Lewin, Massini, and Peeters 2011). Nobody knows what inside is and how to enhance it. Though there are various streams of literature describing the antecedents of absorptive capacity, there are not many studies that tell in a detailed way what a manager should do to enhance it.
Having in mind this lack of clarity, we introduce knowledge management practices as a mean to shed light onto practical side of absorptive capacity development. Building on the current stream of antecedents of absorptive capacity, we investigate the intentional and conscious knowledge management practices one could apply and test their effect on the said concept.
Another particular relationship deserves attention from our side: what is the relationship between absorptive capacity and a firm’s performance? And what role does knowledge management practices play in it?
Giving answers to the above stated questions is tightly connected with day-to-day activities of business.
Research Gap
The concept of absorptive capacity received enormous attention in few last decades since its emergence (Volberda et al. 2010). Its significance for practice was proven through empirical studies indicating the positive relationship between it and firm’s performance indicators (Kostopoulos et al. 2011; Chen, Lin, and Chang 2009). The concept is claimed to have gone through reification and rejuvenation (Lane, Koka, and Pathak 2006). Numerous studies have drawn attention to its outcomes as well as antecedents (Bosch, Wijk, and Volberda 2003). Notwithstanding the great attention received, there are few gaps that still remain.
Firstly, though the antecedents of the model were broadly studied, the general lack of research onto how managerial actions and individual agents influence AC was noticed (Volberda, Foss, and Lyles 2010) . What is more, the investigation of routines able to enhance absorptive capacity through these antecedents was limited (Lewin, Massini, and Peeters 2011). In addition, the strong need to explain how an individual can affects absorptive capacity process is determined (Lane, Koka, and Pathak 2006).
Secondly, there were few studies that concentrated on general performance rather than innovative one and there is a strong need to provide examination of it (Lane, Koka, and Pathak 2006). Bearing in mind, that even AAC definition itself explicitly implies that its main goal is to apply knowledge to commercial ends (Cohen and Levinthal 1990). Connecting AC with financial performance would increase understanding of it (Kostopoulos et al. 2011).
Thirdly, there has been few studies concentrating on AC investigation in the context of the developed markets, while emerging markets context remains of limited attention (Liao, Welsch, and Stoica 2003).
To conclude, though the field received a broad attention, there are still areas for the development that requires research.
Research Problem, Objectives and Delimitation
The increasing complexity of customer demand makes the companies seek more and more effective ways to be competitive. Enhancing absorptive capacity has proven to be a way to operate more efficiently.
Though previous scholars have investigated various antecedents of absorptive capacity, no clear management practices from the side of knowledge management aimed at their enhancement 8
were elaborated. Recognizing the relative complexity of absorptive capacity development with this study we aim to provide a manager with a clear indication of what knowledge management practices he or she should apply in order to build it. From the various knowledge management practices, we would distinguish the most important ones. Additionally, we would show how application of these practices would affect company’s financial performance mediated by absorptive capacity.
The thesis aims to answer the following research question: How can knowledge management practices be a source of absorptive capacity?
The research question can be split into few sub-questions:
1. How do specific knowledge management practices influence the particular dimension of absorptive capacity?
2. Does absorptive capacity serve a mediator in the relationship between knowledge management practices and organizational performance?
The scope of the study is limited by knowledge management practices and its connection to absorptive capacity antecedents that we have found during the literature analysis. Absorptive capacity is measured indirectly using the already wide-used scale. The organizational performance of the firm is measured subjectively and mostly restricted to financial indicators that may also provide certain limitations.
Research Strategy and Organization of the Study
The deductive approach was applied to the study. The study is grounded into theoretical research of absorptive capacity and knowledge management practices with a subsequent formulation of proposed relationships between concepts. The relationships presented are mostly concerned with the effect particular knowledge management practice has over particular dimension of absorptive capacity and the effect absorptive capacity plays as a mediator between those practices and the firm’s performance.
We deployed survey research strategy, using snowball sampling to overcome low response rates. Survey allows to gather vast amounts of standardized data for bigger sample thus allowing to make more meaningful implications. The survey was presented in the form of online questionnaire link to which was sent over via e-mail.
The thesis is structured the following way. Firstly, we present theoretical framework where we connect knowledge management practices and absorptive capacity antecedents also proposing the relationship it should have over performance. In the second section, we describe in details the research strategy, data gathered and their analysis. In the last section we present the discussion of our main findings, theoretical and practical contributions, as well as the limitations of the research.
Within this study we tried to elaborate on the answers to the two research sub-questions: how specific KM practices influence particular dimensions of AC and whether AC serves a mediator in the relationship between KM practices and organizational performance.
Having conducted literature review, we provided the integrative model of antecedents of AC based on that of Volberda et al (2010) that combines the relevant up-to-date researches. In addition, we brought the recent definition of KM practices to historical researches and came up with the justified choice of the most appropriate classification based on the comparison of different views, that includes ten knowledge management practices. Lastly, we developed a theoretical connection between KM practices and AC with the following logic: KM practices might influence the antecedents of AC and AC subsequently. Within this relationship, we split AC into two dimensions, PAC and RAC, and traced the influence of a particular KM practice to each.
To reveal the answers for the research questions stated, survey strategy was deployed, the survey that was sent out measures the three said components (AC, KM practices and organizational performance). Having collected the responses, we analyzed them quantitatively and came up with 62
the following results. As proposed KM practices connected with work organization and learning mechanisms influence PAC through development of knowledge-friendly environment and employees’ learning skills and knowledge base respectively. As for RAC, we have found that it could be influenced by four KM practices. Transformation and exploitation of knowledge, two main components of RAC, are affected with learning mechanisms that might increase ability to transform knowledge; work organization that might improve the working environment, IT that might foster knowledge transfer, and training and development that might increase employees’ ability to transform and exploit knowledge as well as their motivation to do so. However, we have not found the evidences that AC serves a mediator in the relationship between KM practices and organizational performance, and suggest that in the future researches both organizational and innovative performance should be measured in order to understand the reasons behind it.
What is more, we provided managers with the connection between conscious and intentional actions and AC. Having diagnosed the level of AC within his or her firm, a manager can address particular dimension of it, PAC or RAC, with the set of specific practices. If he or she understands, that, for example, PAC of the firm is relatively low, KM practices connected with learnings mechanisms or work organizations can be applied.
Having conducted literature review, we provided the integrative model of antecedents of AC based on that of Volberda et al (2010) that combines the relevant up-to-date researches. In addition, we brought the recent definition of KM practices to historical researches and came up with the justified choice of the most appropriate classification based on the comparison of different views, that includes ten knowledge management practices. Lastly, we developed a theoretical connection between KM practices and AC with the following logic: KM practices might influence the antecedents of AC and AC subsequently. Within this relationship, we split AC into two dimensions, PAC and RAC, and traced the influence of a particular KM practice to each.
To reveal the answers for the research questions stated, survey strategy was deployed, the survey that was sent out measures the three said components (AC, KM practices and organizational performance). Having collected the responses, we analyzed them quantitatively and came up with 62
the following results. As proposed KM practices connected with work organization and learning mechanisms influence PAC through development of knowledge-friendly environment and employees’ learning skills and knowledge base respectively. As for RAC, we have found that it could be influenced by four KM practices. Transformation and exploitation of knowledge, two main components of RAC, are affected with learning mechanisms that might increase ability to transform knowledge; work organization that might improve the working environment, IT that might foster knowledge transfer, and training and development that might increase employees’ ability to transform and exploit knowledge as well as their motivation to do so. However, we have not found the evidences that AC serves a mediator in the relationship between KM practices and organizational performance, and suggest that in the future researches both organizational and innovative performance should be measured in order to understand the reasons behind it.
What is more, we provided managers with the connection between conscious and intentional actions and AC. Having diagnosed the level of AC within his or her firm, a manager can address particular dimension of it, PAC or RAC, with the set of specific practices. If he or she understands, that, for example, PAC of the firm is relatively low, KM practices connected with learnings mechanisms or work organizations can be applied.
