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Knowledge management and organizational performance: a decomposed view

Annette M. Mills and Trevor A. Smith

Abstract Purpose The purpose of this paper is to evaluate the impact of specic knowledge management resources (i.e. knowledge management enablers and processes) on organizational performance. Design/methodology/approach The study uses survey data from 189 managers and structural equation modeling to assess the links between specic knowledge management resources and organizational performance. Annette M. Mills is a Senior Lecturer in the Department of Accounting and Information Systems, at the University of Canterbury, Christchurch, New Zealand. Trevor A. Smith is a Lecturer in the Department of Management Studies at the University of the West Indies, Jamaica, West Indies. Findings The results show that some knowledge resources (e.g. organizational structure, knowledge application) are directly related to organizational performance, while others (e.g. technology, knowledge conversion), though important preconditions for knowledge management, are not directly related to organizational performance. Research limitations/implications The survey ndings were based on a single dataset, so the same observations may not apply to other settings. The survey also did not provide in-depth insight into the key capabilities of individual rms and the circumstances under which some resources are directly related to organizational performance. Practical implications The study provides evidence linking particular knowledge resources to organizational performance. Such insights can help rms better target their investments and enhance the success of their knowledge management initiatives. Originality/value Prior research often utilizes composite measures when examining the knowledge management-organizational performance link. This bundling of the dimensions of knowledge management allows managers and researchers to focus on main effects but leaves little room for understanding how particular resources relate to organizational performance. This study addresses this gap by assessing the links between specic knowledge management resources and organizational performance. The results show that some resources are directly related to organizational performance, while others are not. Keywords Knowledge management, Organizational performance, Surveys Paper type Research paper

1. Introduction
For many organizations achieving improved performance is not only dependent on the successful deployment of tangible assets and natural resources but also on the effective management of knowledge (Lee and Sukoco, 2007). As such, investments in knowledge management continue to increase dramatically from year to year. According to AMR Research, US rms would have invested $73 billion on knowledge management software in 2007, increasing by almost 16 percent in 2008 (McGreevy, 2007). Forrester Research Inc. (2010) also reports that 20 percent of small and medium-businesses in North America and Europe plan to implement CRM or information and knowledge management tools in 2010 or later, representing the fastest growing software segment among small and medium-businesses. Much of the overall spending by rms on knowledge management initiatives is driven by strategic imperatives that depend on the effective management of the knowledge resource (Lee and Sukoco, 2007). As such, one of the main reasons rms invest

Received: 6 May 2010 Accepted: 1 September 2010

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JOURNAL OF KNOWLEDGE MANAGEMENT

VOL. 15 NO. 1 2011, pp. 156-171, Q Emerald Group Publishing Limited, ISSN 1367-3270

DOI 10.1108/13673271111108756

in knowledge management is to build a knowledge capability that facilitates the effective management and ow of information and knowledge within the rm. Different resources make up the knowledge capability of a rm. These include technology infrastructure, organizational structure and organizational culture which are linked to a rms knowledge infrastructure capability; and knowledge acquisition, knowledge conversion, knowledge application and knowledge protection which are linked to the rms knowledge process capability (Alavi and Leidner, 2001; Gold et al., 2001). Taken together, these resources determine the knowledge management capability of a rm, which in turn has been linked to various measures of organizational performance (Grant, 1996; Gold et al., 2001; Lee and Sukoco, 2007; Zack et al., 2009). Given the composite nature of knowledge capabilities, most rms will possess different levels and combinations of resources (i.e. knowledge enablers and processes) that collectively make up their knowledge capability. The contribution that each resource makes to organizational performance is therefore likely to vary across rms; it is this unique makeup that enables benets such as competitive advantage and improved performance. Although research suggests that a rms knowledge management capabilities in combination, impact organizational performance (Gold et al., 2001; Zaim et al., 2007) it is likely that only some of the resources that make up these capabilities will contribute to organizational performance on their own (Grant, 1991). However, prior research has tended to bundle the dimensions that make up knowledge capabilities. This approach has the advantage of enabling managers and researchers to focus on main effects, but leaves little room for understanding how particular resources relate to organizational performance. For example, rms that decide to enhance their overall capabilities may start with a decision about the applications they need, then move to decisions about the infrastructure and other processes needed to support the application (e.g. how knowledge will be acquired, converted and protected). Focusing on individual knowledge enablers and processes can therefore provide a more fundamental understanding of a rms knowledge capability and enhance management decision-making at the resource level. A more detailed evaluation of the links between the individual dimensions of knowledge management capabilities and organizational performance can address this gap. Using survey data from 189 senior- and middle-level managers in the service and manufacturing sectors and structural equation modeling techniques, it is expected that this study will provide insights into the links between individual knowledge enablers and processes, and organizational performance. The outcomes will not only provide managers and researchers with quantitative evidence linking particular knowledge resources to organizational performance but will also shed light on how rms can enhance the success of their knowledge management initiatives through a more targeted and direct approach to implementation. The outcomes will also address gaps in the literature regarding the lack of large-scale empirical evidence linking knowledge management to organizational performance (Zack et al., 2009).

2. Literature review
Gold et al. (2001) proposed a model of knowledge management capabilities that has since become one of the most widely cited in the knowledge management literature. In this model, Gold et al. theorized knowledge management capabilities as multidimensional concepts that incorporate: a process perspective which focuses on a set of activities, that is, knowledge process capabilities and an infrastructure perspective which focuses on enablers, that is, knowledge infrastructure capabilities (Alavi and Leidner, 2001; Lee and Choi, 2003). These in turn are composed of multiple dimensions: knowledge infrastructural capability comprises technology, organizational culture and organizational structure while knowledge process capability is made up of knowledge acquisition, knowledge conversion, knowledge application, and knowledge protection (Gold et al., 2001).

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Prior research suggests these enablers and processes are necessary preconditions for effective knowledge management (Alavi and Leidner, 2001; Davenport et al., 1998). Thus most researchers using the Gold et al. framework will model the knowledge infrastructure and knowledge process capabilities as composite constructs, when examining the links between knowledge capabilities and outcomes such as organizational performance, knowledge management success, and strategy implementation (Chan and Chao, 2008; Jennex and Olfman, 2005; Laframboise et al., 2007; Paisittanand et al., 2007). For example, Gold et al. (2001) found that both knowledge infrastructure capability and knowledge process capability are positively related to organizational performance. This approach has the benet of allowing researchers to focus on the main effects and enhancing parsimony. However, what is not well known is whether there are differential relationships (including null or cancelling effects) between the individual dimensions of knowledge process capability and knowledge infrastructure capability, and organizational performance and the nature of these relationships (Law et al., 1998; Petter et al., 2006). To address this gap, this study examines a decomposed Gold et al. (2001) model, analyzing the structural model at the ` level of the individual resource vis-a-vis organizational performance. The outcomes are expected to provide specic insights into the knowledge management organizational performance link by identifying those knowledge resources (i.e. enablers and processes) that are directly related to organizational performance. 2.1 The theoretical model When it comes to the relationship between IT resources and organizational performance the resource-based view (RBV) offers a useful lens for understanding this link. In essence, the RBV argues that rms possess resources, a subset of which enables them to achieve competitive advantage, and a further subset which leads to superior long-term performance (Wernerfelt, 1984, p.108). However, the RBV is void of a single denition of the term resource (Wade and Hulland, 2004) with many researchers using the terms resources and capabilities interchangeably (Christensen and Overdorf, 2000; Gold et al., 2001; Sanchez et al., 1996). However, Grant (1991) suggests that a rms resource is the basic unit of analysis and provides direct input to the production process while the rms capability represents an aggregation of resources or the capacity for a team of resources to perform some task or activity (Grant, 1991, p. 119). Thus resources are the source of a rms capabilities, [and] capabilities are the main source of its competitive advantage (Grant, 1991, p. 119). Consequently, both resources and capabilities can contribute to a rms bottom-line (Grant, 1991). However, few resources are productive on their own and, it is the overall capabilities that are considered the true drivers of the rms productivity (Grant, 1991). The RBV also recognizes that while some resources may lead to performance enhancements, others do not, and that the combination may differ across industries and rms. As such, a key challenge for rms is to identify and leverage those resources that directly impact organizational performance (Wade and Hulland, 2004; Zack et al., 2009). Based on this understanding of the relationship between resources, capabilities and organizational performance, the next section examines knowledge management capabilities, the resources that make up these capabilities, and the theorized links between these resources and organizational performance. A decomposed model of ` knowledge management capabilities is then assessed vis-a-vis organizational performance, and the results compared with a composite model of knowledge management capabilities. Implications for future research and practice follow. 2.2 Knowledge management capabilities Knowledge management supports the aggregation of resources into capabilities (Maier and Remus, 2002). Knowledge management capabilities can be categorized into two broad

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types knowledge infrastructure capability and knowledge process capability (Gold et al., 2001). 2.2.1 Knowledge infrastructure capability. Prior research recognizes the importance of having a supportive and effective knowledge infrastructure to underpin a rms knowledge management initiatives (Davenport and Volpel, 2001; Paisittanand et al., 2007). Different elements make up a rms knowledge infrastructure capability. This study adopts the Gold et al. (2001) typology which views technology, organizational culture and organizational structure as key components of a rms knowledge infrastructure capability (Davenport and Volpel, 2001; Paisittanand et al., 2007). Technology. The technology element of knowledge infrastructure comprises the information technology (IT) systems that enable the integration of information and knowledge in the organization as well as the creation, transfer, storage and safe-keeping of the rms knowledge resource. Although an appropriate technology infrastructure is essential for effective knowledge management, studies that examine the link between information technologies and measures of organizational performance are often inconclusive, and fail to demonstrate whether IT is directly related to performance (Powell and Dent-Micallef, 1997; Webb and Schlemmer, 2006). For example, Powell and Dent-Micallef (1997) in their study of US rms, found that IT in and of itself did not enhance organizational performance, but could increase organizational performance when combined with other human and business assets. Teece et al. (1997) further suggested that the absence of an association between technology and performance could be because technology (e.g. IS resources) is easily copied, making it a fragile source of competitive advantage. Although technology is not always linked directly to organizational performance, research shows that when combined with other resources IT can enhance performance and lead to sustained advantage (Clemons and Row, 1991; Powell and Dent-Micallef, 1997). So although the technology infrastructure may not contribute directly to organizational performance, it is an essential enabler of other knowledge resources such as knowledge acquisition and knowledge application processes, which may themselves enhance organizational performance (Seleim and Khalil, 2007). Organizational culture. In the context of knowledge management is considered a complex collection of values, beliefs, behaviors and symbols that inuences knowledge management in organizations (Ho, 2009). Hence, a knowledge-friendly culture is regarded as one of the most important factors impacting knowledge management and the outcomes from its use (Alavi et al., 2005-2006; Davenport et al., 1998; Ho, 2009). Sin and Tse (2000) found that organizational cultural values such as consumer orientation, service quality, informality and innovation were signicantly associated with marketing effectiveness (Sin and Tse, 2000, p. 305). More recently, Aydin and Ceylan (2009) also showed that cultural dimensions were related to organizational performance. Changes in corporate culture are also regarded as necessary for implementing knowledge management programs (Bhatt, 2001): the ability of an organization to learn, develop memory, and share knowledge is [therefore] dependent on its culture (Turban et al., 2005, p. 496). Thus, positive changes in culture are expected to impact organizational performance and add momentum to other improvements taking place elsewhere in the organization (Richert, 1999). Organizational structure comprises the organizational hierarchy, rules and regulations, and reporting relationships (Herath, 2007) and is considered a means of co-ordination and control whereby organizational actors can be directed towards organizational effectiveness. Knowledge management theorists largely conclude that changes in an organizations structure, such as moving from hierarchical to atter networked forms, are essential for the effective transfer and creation of knowledge in the organization (Beveren, 2003; Gold et al., 2001; Grant, 1996; Nonaka and Takeuchi, 1995). Such changes by extension have been positively associated with improved outputs in both service and nancial terms (Richert, 1999). Thus it is expected that:

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H1. H2. H3.

Technology is not (directly) related to organizational performance. Organizational culture is positively related to organizational performance. Organization structure is positively related to organizational performance.

2.2.2 Knowledge process capability. Gold et al. (2001) suggested that knowledge process capabilities (required for storing, transforming and transporting of knowledge throughout the organization) are needed for leveraging the infrastructure capability. Four broad dimensions are identied acquiring knowledge, converting it into useful form, applying or using it, and protecting it (Gold et al., 2001, p. 190). Knowledge acquisition. The term acquisition refers to a rms capability to identify, acquire and accumulate knowledge (whether internal or external) that is essential to its operations (Gold et al., 2001; Zahra and George, 2002). Acquiring knowledge can involve several aspects including creation, sharing and dissemination. Knowledge acquisition reects in part, a subset of a rms absorptive capacity more specically, it can be viewed as a potential capacity that reects a rms ability to use its knowledge to create advantage, but does not guarantee that knowledge will be used effectively (Cohen and Levinthal, 1990). Research suggests strong and positive links between knowledge acquisition and performance measures. For example, Song (2008) showed that knowledge creation practices were signicantly related to organizational improvement. Further, when acquired knowledge is used appropriately, a signicant and positive link is observed between knowledge acquisition and organizational performance (Lyles and Salk, 1996; Seleim and Khalil, 2007). Knowledge conversion. Knowledge that is captured from various sources (both internal and external to the business) needs to be converted to organizational knowledge for effective utilization within the business (Lee and Suh, 2003). This conversion process, which takes place along the supply chain of data, information and knowledge, is transient in nature and so organizations must speedily convert data into information and information into organizational knowledge to maximize benets from the conversion process (Bhatt, 2001). Thus, it is expected that the knowledge conversion process could inuence performance outcomes. Knowledge application. Bhatt (2001, pp. 72-73) stated that: knowledge application means making knowledge more active and relevant for the rm in creating value. For organizations to create value they need to apply knowledge to their products and services by various means such as repackaging available knowledge, training and motivating its people to think creatively, and utilizing peoples understanding of the companys processes, products and services. For example, many organizations encourage organizational learning in which individuals and teams can apply the knowledge gained to initiatives such as new product development with the ultimate aim of improved performance in areas such as speed to market and innovation (Sarin and McDermott, 2003). Droge et al. (2003, p.544) also argues that in the long run, rms that create new knowledge at a lower cost and more speedily that competitors, and then apply that knowledge effectively and efciently, will be successful at creating competitive advantage. For knowledge to impact organizational performance it has to be used to support the rms processes. Hence, it is through knowledge utilization that acquired knowledge can be transformed from being a potential capability into a realized and dynamic capability that impacts organizational performance (Cohen and Levinthal, 1990; Seleim and Khalil, 2007; Zahra and George, 2002). Knowledge protection. Knowledge protection is necessary for effective functioning and control within organizations. This would typically include the use of copyright and patents along with information technology systems that allow knowledge to be secured by lename, user name, password and le-sharing protocols that ascribe rights to authorized users (Lee and Yang, 2000). However, knowledge protection is often challenging in part because the

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copyright laws that are intended to protect knowledge are limited in their treatment of the knowledge environment (Everard, 2001). Notwithstanding such limitations, the knowledge protection process should not be abandoned or marginalized (Gold et al., 2001) and protecting knowledge from illegal and inappropriate use is essential for a rm to establish and maintain a competitive advantage (Liebeskind, 1996). Moreover, since knowledge is crucial for competitive advantage, storing and protecting knowledge is expected to create value for the organization (Lee and Sukoco, 2007). Taken altogether, it is expected that: H4. H5. H6. H7. Knowledge acquisition is positively related to organizational performance. Knowledge conversion is positively related to organizational performance. Knowledge application is positively related to organizational performance. Knowledge protection is positively related to organizational performance.

2.2.3 A composite model of knowledge management capabilities. There is a general consensus in the literature that knowledge management is linked to organizational performance (Gold et al., 2001; Gosh and Scott, 2007; Lee and Sukoco, 2007; Liu et al., 2005; Zaim et al., 2007). For example, Gold et al. (2001) and Zaim et al. (2007) showed that both knowledge infrastructure capability and knowledge process capability have a signicant and positive impact on organizational effectiveness. Lee and Sukoco (2007) found that knowledge management capabilities affect innovation and organizational effectiveness. Gosh and Scott (2007) also argued that knowledge infrastructural capabilities such as technology, organizational culture and organizational structure, need to correspond with knowledge process capabilities (e.g. actual ow and use of knowledge) in order to achieve considerable improvements in effectiveness. In assessing the relationship between knowledge management practices and performance outcomes, Zack et al. (2009) found that knowledge management practices are related to measures of organizational performance. Thus, it is expected that: H8. H9. Knowledge infrastructural capability is positively related to organizational performance. Knowledge process capability is positively related to organizational performance.

3. Methodology
Decomposed models are used in research to examine complex structures at lower-levels of detail. Decomposed models stem from the notion that the constructs under investigation represent complex concepts that are often best represented as multidimensional in nature. These multidimensional constructs take different forms when it comes to theorizing the relationships between the construct and its sub-dimensions. One form is the aggregate construct, which typically consists of an algebraic composite of its dimensions (Law et al., 1998). Under these conditions changes in the dimensions lead to changes in the constructs; this is similar to the relationship between a formative (causal) construct and its indicators where changes in the indicators lead to changes in the construct (Petter et al., 2007). The knowledge infrastructure capability and knowledge process capability (Gold et al., 2001) are examples of aggregate constructs. Since the overall construct is formed from its underlying dimensions, the dimensions need not be correlated; thus inferences drawn at higher-levels of analysis may not apply at the dimensional level (Law et al., 1998). For example, if there are opposing effects or null effects at the lower-level these may be overlooked if the analysis focuses on the higher-level. Decomposed models address this problem by removing the causal structures from the aggregate construct and directly relating the individual dimensions to other constructs in the research model (Petter et al., 2007).

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Since the aim of this research was to better understand the relationships between the individual factors that make up the rms knowledge management capabilities and organizational performance, two levels of analysis were conducted. First, a decomposed model of knowledge management capabilities was examined this looked at the links between organizational performance and particular resources (i.e. enablers and processes) that make up a rms knowledge infrastructural capability and knowledge process capability. The composite model was also evaluated and the results compared with the ndings from the decomposed model. 3.1 The sample To evaluate the research hypotheses, a survey was developed to capture measures of knowledge management capabilities and organizational performance. The measures consisted of multi-item constructs (with four to six items each) adapted from Gold et al., 2001:
B

knowledge infrastructure capability which comprised technology, organizational structure, and organizational culture; knowledge process capability which comprised knowledge acquisition, knowledge conversion, knowledge application, and knowledge protection; and organizational performance.

All items were assessed using seven-point Likert-type scales, anchored with Strongly agree and Strongly disagree. Approximately 500 surveys were distributed to students enrolled in graduate MBA and MSc programs in Jamaica. Like Gold et al. (2001), respondents at a management-level in their rms were considered the most suitable for this study, as they were more likely to be aware of the rms knowledge management capabilities. Responses were returned by 265 (53 percent) persons, of which 189 (37.8 percent) from management-level staff were usable. Of these, 164 (86.8 percent) responses were from the service sector and 25 (13.2 percent) from manufacturing. Of the rms, 80.4 percent employed 50 persons or more; 65.6 percent employed 100 or more persons. 3.2 Data analysis and results PLS-Graph 3.0 (Build 1130) and SPSS version 17.0 were used to assess the links between knowledge management capabilities and organization effectiveness, and bootstrapping (using PLS-Graph with 200 samples) used to evaluate the signicance of the model paths. First, the measurement model was assessed. Ideally, item loadings should exceed 0.707; loadings of 0.60 are also acceptable if there are additional indicators (Chin, 1998). The results showed one item measuring knowledge acquisition returned a loading of 0.40; this item was therefore excluded. Item loadings for all other constructs ranged from 0.668 to 0.926 exceeding minimum thresholds (Table I). Descriptive statistics (i.e. mean and standard deviation (SD)) for each construct are shown in Table II. Table II also shows that composite reliabilities ranged from 0.918 to 0.963 and average variance extracted (AVE) from 0.635 to 0.789 exceeding recommended cut-offs (Chin, 1998). Construct AVEs were also greater than the variance shared between the constructs (Table III) satisfying the criteria for discriminant validity (Chin, 1998). Decomposed model of KM capabilities. Turning to the structural model, the results showed the decomposed model accounted for 0.754 of the variance observed for organizational performance (Figure 1). Of the knowledge infrastructural capabilities, only organizational ` structure (b 0.209; p # 0.05) was signicant vis-a-vis organizational performance; technology infrastructure (b 2 0.003) was not expected to be signicant. Hypotheses H1 and H3 were supported. Contrary to expectation, organizational culture was not signicant (b 0.055); H2 was therefore not supported.

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Table I Item loadings


Constructs Technology (TC) TC05 TC06 TC07 TC09 Organizational culture (CU) CU01 CU02 CU04 CU09 CU10 CU13 Organizational structure (ST) ST03 ST04 ST05 ST06 ST07 ST10 ST11 Knowledge acquisition (AQ) AQ01 AQ03 AQ05 AQ08 AQ12 Knowledge conversion (CN) CN03 CN04 CN05 CN08 CN09 CN10 Knowledge application (AP) AP03 AP04 AP05 AP06 AP07 AP08 AP10 Knowledge protection (PT) PR01 PR02 PR03 PR04 PR07 PR08 PR10 Organizational performance (OP) OP01 OP07 OP08 OP12 OP13 OP14 Item loadings

0.693 0.926 0.919 0.898 0.781 0.770 0.804 0.841 0.844 0.798 0.811 0.855 0.782 0.668 0.846 0.736 0.860 0.820 0.806 0.866 0.854 0.857 0.836 0.881 0.849 0.885 0.905 0.870 0.848 0.923 0.895 0.896 0.901 0.907 0.844 0.895 0.876 0.888 0.853 0.860 0.753 0.825 0.781 0.898 0.896 0.906 0.865 0.890

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Table II Descriptive statistics, composite reliabilities (CR) and average variance extracted (AVE)
Constructs Knowledge infrastructure capabilities Organizational structure (ST) Organizational culture (CU) Technology (TC) Knowledge process capabilities Knowledge acquisition (AQ) Knowledge conversion (CN) Knowledge application (AP) Knowledge protection (PT) Organizational performance (OP) Mean SD CR AVE

4.414 5.215 4.569 5.309 4.929 5.140 4.930 4.810

1.446 1.378 1.646 1.268 1.384 1.447 1.473 1.478

0.924 0.918 0.921 0.923 0.950 0.963 0.948 0.951

0.635 0.651 0.747 0.707 0.759 0.789 0.725 0.763

Table III Inter-construct correlations and discriminant validity


Constructs Knowledge infrastructure capabilities Organizational structure (ST) Organizational culture (CU) Technology (TC) Knowledge process capabilities Knowledge acquisition (AQ) Knowledge conversion (CN) Knowledge application (AP) Knowledge protection (PT) Organizational performance (OP) ST CU TC AQ CN AP PT OP

0.797 0.745 0.557 0.639 0.720 0.715 0.595 0.742

0.807 0.481 0.666 0.748 0.754 0.591 0.723

0.864 0.565 0.636 0.604 0.600 0.576 0.841 0.737 0.724 0.588 0.718

0.871 0.813 0.641 0.752

0.888 0.642 0.822

0.851 0.669

0.873

Note: Italicized items represent the square-root of the variance shared between the constructs and their measures; the off-diagonal elements are the correlations among the constructs

` For knowledge process capability, three processes were signicant vis-a-vis organizational performance: knowledge acquisition (b 0.146; p # 0.05), knowledge application (b 0.412; p # 0.001), and knowledge protection (b 0.148; p # 0.05); H4, H6 and H7 were supported. Knowledge conversion capability was not signicant (b 0.025); H5 was not supported. Assessment of the composite model. Next, latent variable scores representing the dimensions of knowledge process capability and knowledge infrastructural capability were extracted and used to assess the composite model. Consistent with recommended guidelines, indicator weights for all seven dimensions were examined (Table IV); all except ` knowledge conversion were signicant vis-a-vis their respective constructs at p # 0.05 (Chin, 1998; Petter et al., 2007). However, this does not mean knowledge conversion was unimportant. Further examination of the item loadings showed the construct demonstrated absolute importance when assessed independently of other indicators (Cenfetelli and Basellier, 2009). The results also showed that, knowledge application was the most important of the dimensions in terms of relative importance. The results of the structural model tests showed that the composite (second-order) model accounted for 0.748 of the variance observed for organizational performance (Table V). Consistent with expectations, knowledge infrastructural capability (b 0.251; p # 0.05) ` and knowledge process capability (b 2 0.639; p # 0.001) were both signicant vis-a-vis organizational performance, supporting hypotheses H8 and H9. Finally, a summary of the results of the model tests for the decomposed model and the composite model are shown in Table V.

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Figure 1 The results at the dimensional level

Knowledge Infrastructure Capability

Technology Infrastructure -0.003

Organizational Culture

0.055

Organizational Structure

0.209** Organizational Performance 0.146** R2 = 0.754

Knowledge Acquisition

0.025 Knowledge Conversion 0.148** 0.412


***

Knowledge Process Capability

Knowledge Application

Knowledge Protection

Note: * p 0.01; ** p 0.05; *** p 0.001

Table IV Indicator weights and signicance levels


Construct Organizational structure Organizational culture Technology Knowledge acquisition Knowledge conversion Knowledge application Knowledge protection Weight 0.457 0.440 0.252 0.210 0.122 0.572 0.213 t-statistic 3.991 3.966 3.455 2.222 1.105 6.464 2.792 Signicance p # 0.001 p # 0.001 p # 0.001 p # 0.05 ns p # 0.001 p # 0.05

4. Discussion and Implications


Consistent with expectations, the study results provided strong empirical support for the decomposed model, accounting for 0.754 of the variance observed for organizational performance. For the composite model (Table V), the amount of variance explained was 0.748, and was similar to the decomposed model. The links between organizational performance and knowledge process capability and knowledge infrastructure capability returned path weights of 0.251 and 0.639 respectively. Altogether, these ndings are consistent with prior research that has observed similar orders of magnitude for the path weights and variance explained in respect of knowledge management and organizational performance (Gold et al., 2001; Zaim et al., 2007). The results for the decomposed model (Table V) showed that of the three infrastructural capabilities, only organizational structure had a signicant impact on organizational

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Table V Summary of results for the model tests


Hypotheses Decomposed model Knowledge infrastructural capability H1. Technology is not (directly) related to organizational performance H2. Organizational culture is positively related to organizational performance H3. Organizational structure is positively related to organizational performance Knowledge process capability H4. Knowledge acquisition is positively related to organizational performance H5. Knowledge conversion is positively related to organizational performance H6. Knowledge application is positively related to organizational performance H7. Knowledge protection is positively related to organizational performance R-Squared (R 2) Composite model H8. Knowledge infrastructural capability is positively related to organizational performance H9. Knowledge process capability is positively related to organizational performance R-Squared (R 2) Path Signicance

0.003 0.055 0.209

ns ns p # 0.05

0.146 0.025 0.412 0.148 0.754

p # 0.05 ns p # 0.001 p # 0.05

0.251 0.639 0.748

p#0.05 p # 0.001

performance; neither technology nor organizational culture had a signicant impact on organizational performance. For knowledge process capability, knowledge acquisition, knowledge application and knowledge protection also impacted organizational performance, but not knowledge conversion. Altogether, these results suggest that although the individual resources collectively determine the knowledge management capabilities construct, not all are directly linked to organizational performance. This is consistent with the resource-based view which suggests that only a subset of a rms capabilities when leveraged appropriately reect direct contributions to performance measures (Grant, 1991). For example, Seleim and Khalil (2007) found that of ve knowledge processes studied (e.g. acquisition, creation, application) only knowledge application was directly linked to organizational performance. So although, knowledge management capabilities may contribute directly to organizational performance and each resource signicant in respect of its construct (Zaim et al., 2007), in some cases the contribution of particular resources may be more indirect through their impact on other factors linked to organizational performance. For example, while Seleim and Khalil (2007) did not uncover a positive link between organizational performance, and knowledge acquisition and knowledge creation, their study showed both processes were directly related to knowledge application which in turn was related to organizational performance. The study results have several implications for knowledge management in rms. For example, research suggests appropriate investments in knowledge management initiatives can enhance organizational performance. However, this study shows that not all of the resources are direct contributors. Although resources such as technology, culture and knowledge conversion are necessary for effective knowledge management (Gold et al., 2001) they did not impact organizational performance directly. However, rms can ill afford to neglect these dimensions as they work in combination with and support other resources, such as knowledge acquisition and knowledge application that may contribute directly to organizational success (Van den Bosch et al., 1999; Seleim and Khalil, 2007).

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Second, this research showed that inferences about an overall capability do not necessarily apply when it comes to individual resources. For example, the current ndings are consistent with research which suggests that particular knowledge resources (e.g. technology, organizational structure, knowledge acquisition, etc) are directly related to knowledge management capabilities (Gold et al., 2001; Zack et al., 2009; Zaim et al., 2007) and are therefore important in forming a rms overall knowledge capability. However, for studies that use composite models, it is difcult to identify which resources directly impact organizational performance. Although some studies shed light on this gap (Zack et al., 2009), there remains a gap in the literature regarding empirical evidence linking particular knowledge resources to performance. The current study addresses this gap by identifying specic enablers and processes that are directly related to organizational performance. The combination of resources that is most effective for an organization is also likely to differ across rms. Since there are no silver-bullet combinations when it comes to enhancing organizational performance, it is incumbent on managers not only to recognize that all the resources are important, but also to identify which resources and consequently which capabilities are most salient to organizational performance. Such insights can help managers identify appropriate strategies aimed at deploying combinations of knowledge management resources that better support the rms goals. Furthermore, since the combinations may be unique across rms, this provides an opportunity for competitive advantage and sustained performance. Although this study offers insights into the dynamic nature of the knowledge management resource, there are some constraints. For example, since a rms knowledge capability is a composite of the individual resources that make up the knowledge capability, different rms and industries may have different combinations that yield similar outcomes. As such, while the outcomes of this study suggest, for example that organizational structure was linked to organizational performance and culture was not for the study sample, the same may not apply to other settings. This can be expected as performance indicators such as competitive advantage are created and maintained by such differences. It is therefore important that rms recognize the variableness of knowledge capabilities and the need to deploy strategies that lead to the acquisition and deployment of those capabilities that are most relevant to the rms goals. As with other survey-based research, this study is subject to the possibility of response bias such that managers for reasons such as poor recall or role characteristics may under-report or over-report the knowledge management activities of their rm. Having two or more respondents for each rm can help minimize this effect, but may limit how many data can be collected (Gold et al., 2001). Finally, this study also does not provide in-depth insight into the capabilities of individual rms. Such insights would enable a better understanding of the individual capabilities that make up a rms knowledge capability, why differences may occur, and under what circumstances do some resources impact organizational performance and others do not. Future research is therefore needed to examine in greater detail the links between the individual capabilities that make up knowledge resources, and organizational performance.

5. Conclusion
The literature is replete with studies that suggest knowledge management impacts organizational performance. However, there has been little elaboration of the relationships at ` the dimensional level vis-a-vis organizational performance. Yet when it comes to making decisions about a rms knowledge capability, these are often made at the level of the individual resource. This study addresses this gap by assessing a decomposed model of knowledge management capabilities. The aim was to provide insights into the relationships between particular knowledge resources and organizational performance that can help rms identify appropriate strategies for investing in and effectively deploying the knowledge resource.

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The results showed that for the current study, organizational structure, knowledge acquisition, knowledge application and knowledge protection were signicantly related to organizational performance. However, technology, organizational culture and knowledge conversion did not have a signicant impact. Taken altogether, the ndings suggest that although the individual resources collectively determine a rms overall knowledge management capability which, as a composite is related to organizational performance, each resource is not directly linked to performance. The decomposed model therefore offers insights into relationships at the dimensional level that are not readily inferred from composite models. In the nal analysis, this study offers useful insights into the knowledge management performance link. First, there has been little research that decomposes the effects of knowledge management in relation to organizational performance. The results suggest the decomposed approach is useful for understanding the complex relationships embodied in the knowledge management performance link, which cannot be surmised from a composite model. Such an approach is useful for research aimed at acquiring an in-depth understanding of knowledge management, as opposed to achieving parsimony or focusing on main effects. The ndings also suggest a number of avenues for future work. First, the study outcomes suggest different relationships exist between particular resources, and organizational performance. At the same time, the literature also shows that for multifaceted concepts such as knowledge infrastructure capability and knowledge process capability there is no commonly agreed conceptualization of which components make up these capabilities (Alavi and Leidner, 2001; Gold et al., 2001; Lee and Yang, 2000). Thus it seems likely that different compositions of knowledge infrastructure and knowledge process capabilities may lead to different outcomes. Further research is therefore needed to understand the differences among the capabilities including rm-level differences and how this relates to organizational performance. Finally, the literature calls for further research into the links between knowledge capabilities and organizational performance, and for large-scale empirical evidence supporting these links (Zack et al., 2009). This study addresses this call by examining the links between the individual dimensions of knowledge capabilities and organizational performance. However, other success factors such as user satisfaction and perceived benets can also be explored.

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About the authors


Annette Mills is a Senior Lecturer at the University of Canterbury (New Zealand). Annette holds a PhD in Information Systems from the University of Waikato (New Zealand). She has published a number of refereed articles in edited books and journals including Information and Management, and Computers and Education. She currently serves on the editorial boards for the Journal of Cases on Information Technology as an Associate Editor, the Journal of Global Information Management, and the International Journal of e-Collaboration. Her research interests include social computing, technology adoption and diffusion, service expectations, and user sophistication. Annette Mills is the corresponding author and can be contacted at: annette.mills@canterbury.ac.nz Trevor Smith is the head of the units of Marketing, International Business, Entrepreneurship and Strategy in the Department of Management Studies at the University of the West Indies, Mona. He lectures in Marketing and Research Methods at both undergraduate and graduate Levels. His research interests include consumer marketing, tourism and hospitality management and business strategy. Another area of interest is knowledge management and its impact on rms performance. He is also a consultant in eld of marketing research and strategy.

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