Impact Of Knowledge Management On Organizational Performance

Project and Seminar Material for Human Resource Management (HRM)

Impact Of Knowledge Management On Organizational Performance


This study was intended to evaluate the impact of knowledge management on organizational performance. This study was guided by the following objectives; To determine the impact of knowledge management on organizational performance of information technology companies in Nigeria. To access the effect of knowledge management in enhancing organizational structure of IT companies. To determine the effect of IT application on knowledge management adoption through organizational elements. To find out the correlation between elements of knowledge management capabilities and leadership styles of IT firms.

The study employed the descriptive and explanatory design; questionnaires in addition to library research were applied in order to collect data. Primary and secondary data sources were used and data was analyzed using the chi square and correlation statistical tool at 5% level of significance which was presented in frequency tables and percentage.. The study findings revealed that knowledge management significantly impacts on organizational performance

Chapter One


1.1 Background of the Study

Knowledge has become a corporate asset that may be the principal competitive advantage in the global economy. The potential for success of the companies is closely tied to their ability to innovate and to develop their ways of production; all this is based on the knowledge assets possessed by the company [Davenport &Prusak, 1998]. The current focus and study of knowledge management is not for the sake academics only, but a realization that knowing about knowledge is critical to business growth and business survival.

Knowledge, if properly utilized and leveraged, can drive organizations to become more competitive, innovative and sustainable. The interest in organizational sustainability and growth has created much disclosure on the methods of improving and developing organizational performance, for example process reengineering, innovation, and providing and superior customer service. Furthermore, several strategies appeared to tackle these improvement, among them was the concept of downsizing, a prevalent strategy in the 80’s, and was created under the pressure to reduce expenditure and to increase profitability. The effect of this strategy was the loss of vital knowledge workers, who had accumulated years of experience and knowledge, and who were forced to leave the organization because of the downsizing policy. By leaving the organization, they took valuable knowledge with them. Knowledge dispersed across organizations is an important source of organizational advantage (Teece 1998; Tsai and Ghoshal 1999).

Knowledge is often defined in relation to action, e.g. information transformed into capability for effective action. However, together with ability to act, knowledge is also just what we know. Consequences of knowledge include, for example, a capacity to perform a particular task, or a productive resource or factor in providing competitive advantage. Experience, intuition and judgement belong to knowledge, which is hence a product of information, experience, skills and attitude. All knowledge is local and belief related. It may be defined as patterns of meaning that can promote a theoretical or practical understanding that enables the recognition of variety in complexity. These patterns are often developed through a coalescing of information. If information is seen as a set of coded events, then consistency occurs with the definition that explicit knowledge is codified (Wise, 2002).

Knowledge management is complex and multifaceted; it encompasses everything the organisation does to make knowledge available to the business, such as embedding key information in systems and processes, applying incentives to motivate employees and forging alliances to infuse the business with new knowledge. Effective knowledge management requires a combination of many organisational elements- technology, human resource practices, organisational structure and culture- in order to ensure that the right knowledge is brought to bear at the right time. Knowledge management initiatives in organization are consequently increasingly becoming important and firms are making significant information technology investments in deploying knowledge management systems (KMS).

Weber (2007) agree that in order for organizations to stay in the competitive race knowledge has to be up dated continuously. Knowledge management attempts to secure and replenish the learning experiences, as well as the work products, of the individuals who comprise an organization. Today’s volatile business demands a new attitude and approach within organizations actions must be anticipatory, adaptive, and based on a faster cycle of knowledge creation.

Knowledge management can play an important role to make companies compete productively. Knowledge is a fluid mix of framed experience, value, contextual information, and expert insight that provides a framework for evaluating and incorporating new experiences and information. In organizations, it often becomes embedded not only in documents or repositories but also in organizational routines, processes, practices, and norms.

An emerging knowledge-centric view of the firm describes firms as organizations that know how to do things. This implies that a firm can best be seen as a coordinated collection of capabilities, somewhat bound by its own history, and limited in effectiveness by its current cognitive and social skills. The main building block of these capabilities (or unit of analysis, if you prefer) is tacit and specific to the firm (Winter, 1993).

Knowledge is a philosophical concept defined by Plato as a belief that is supported by an account or explanation (Blair, 2002). In this context of view of an organization’s knowledge, the definition indicates the knowledge that comes from increasing the company’s ability to utilize and a sense of information available to create values for shareholders (Leiponen, 2006). There has been much significant growth in knowledge-based school of thought, which shows that the yield and retention of knowledge can have a positive effect on a firm’s performance (Maltia& Scott, 1999). To manage the company’s intangible assets with leverage for the benefits are considered a core capability. Knowledge management (KM) has aimed at capturing, integrating and using existing organization knowledge and subsequently creating a knowledge asset that can be source of sustainable competitive advantage in the long run (Brooking, 1999; Havens & Knapp, 1999).

Knowledge management has been recognized as an essential component of a proactively managed organization. The key concepts include converting data, organizational insight, experience and expertise into reusable and useful knowledge that is distributed and shared within the people who need it. Knowledge management addresses business challenges and enhances customer responsiveness by creating and delivering innovative products or services, managing or enhancing relationships with existing and new customers, partners and suppliers, and administering or improving more efficient and effective work practices and processes. Knowledge management is about getting knowledge from those who have it to those who need it in order to improve organizational effectiveness (Armstrong, 2005). Knowledge management has become a direct competitive advantage for companies selling ideas and relationship (Ulrich, 1998).

Knowledge management (KM) refers to range of practices used by organizations to identify, create, represent, and distribute knowledge for reuse, awareness, and learning across the organization. Knowledge management programs are typically tied to organizational objectives and are intended to lead to the achievement of specific business outcomes such as shared business intelligence, improved performance, competitive advantage, or high levels of innovation.

Knowledge management is popularized and has been spread across the industrial and information research world. Organizations understand the significance of intellectual capital that is managed efficiently in order to improve the entire organizational performance by aligning the ability of employees in accordance with the overall business strategy. The knowledge management focuses on merging people, processes, and technology together by combining the ability with the objective of providing corporate knowledge at an organizational standard. Knowledge management is also about identifying and compiling business information within the business with a competitive advantage over other companies. The information that is gathered will be comprised of employee knowledge that makes up their experience in the field, as well as technological knowledge that various people may have. Knowledge management is about ensuring that this information is accessible to anyone within the company who needs it.

An organization that wants to create a knowledge sharing culture needs to encourage its staff to work together more effectively, to collaborate and to share lastly to make organizational knowledge more productive. Davenport and Prusak (1998, 2000) explain that sharing must be initiated at a human level and once it is working its application on technology will produce positive results. The responsibility of effective management is to ensure that prompt and effective decisions are taken. Management and employees are not only to increase their knowledge, but share it for the benefit of the organization and themselves as well. Without motivation, sense of security, healthy reward system, this cannot be achieved. However, direct and indirect rewards must be put in place to encourage knowledge sharing.

1.2 Statement of the Problem

Due to the rapid changes in a business environment, sustainability of an organization is possible only if the knowledge management trademark is utilized. As a result of this fact the foundation of industrialized economies has shifted from natural resources to intellectual assets. Executives have been compelled to examine the knowledge underlying their business and how that knowledge is used. Many organizations are not aware of this. The issue of ignoring knowledge management is mostly seen in organizations that are not concerned with influencing the ways in which people store and share their wisdom and understanding; and organizations that do not get involved in increasing the capabilities and potential of employees by providing learning and continuous development opportunities for enhancing knowledge sharing. Notably public sector organizations usually undermine the act of training and developing their personnel. They are also not able to identify the driving forces of knowledge management which influence the way knowledge is shared in these organizations. These organizations do not motivate their employees commensurately in order to share their knowledge and improve productivity and competitiveness. This however presents negative impact on such organizations and such organization ends up performing poorly.

The capacity to manage human intellect and transform intellectual output into a service or a group of services embodied in a product is fast becoming the critical executive skill of this era. Despite its importance, knowledge management in organizations has remained a black box for both scholars and practitioners.

Many organizations are reasonably good at acquiring knowledge but end up wasting this resource by not effectively disseminating it. Recent studies report that knowledge sharing is usually the weakest link in knowledge management. How do organizations share knowledge? Many corporate executives believe that training is the main element of knowledge management. Formal training is useful, but most knowledge sharing occurs through communication processes that quickly and fluidly share meaningful information across organization boundaries. All these problems which hinder the performance of organizations in manufacturing sector have necessitated studying the impact of knowledge management in the Nigerian manufacturing sector.

1.3 Objectives of the Study

The specific objectives of the study are as follows:

  1. To determine the relationship between knowledge management and organizational performance.
  2. To evaluate the effect of training gathered through knowledge management on performance of Nigerian manufacturing firms.
  3. To ascertain the impact of motivation on employees’ level of commitment in knowledge sharing.
  4. To evaluate how e-learning tools affect knowledge sharing in the Nigerian manufacturing sector.

1.4 Research Questions

To enable the researcher assume a better ground on the topic of discussion; this work seeks to answer the following questions.

  1. To what extent is there a relationship between knowledge management and organizational performance?
  2. How far does training gathered through knowledge management affect the performance of Nigerian manufacturing firms?
  3. To what extent does motivation of employees’ enhances the level of commitment in knowledge sharing?
  4. To what extent do e-learning tools affect knowledge sharing in the Nigerian manufacturing sector?

1.5 Research Hypotheses

To guide this study in achieving its objectives; the following research hypotheses are formulated:

Ho1: There is no positive relationship between knowledge management and organizational performance in Nigerian Manufacturing firms

Ho2: Training gathered through knowledge management does not enhance the performance of Nigerian manufacturing firms

Ho3: Motivation of employees’ does not enhance level of commitment in knowledge sharing in Nigerian Manufacturing firms

Ho4: E-learning tools do not have positive effect on knowledge sharing in the Nigerian manufacturing sector

1.6 Significance of the Study

This research work is significant to manufacturing organizations because as goods and services become more sophisticated in content and production, the foundation of competition becomes intensively knowledge based, the focus on developing valuable and hard-to-imitate knowledge that yields sustainable competitive advantage.

This research work is beneficial to managers who are interested in leveraging the knowledge of their organizations in order to improve innovative output and also financial performance. Not only does it provide solid information against which to benchmark a firm’s performance, it also guides managers towards the key factors that affect the process of knowledge creation and innovation.

This study is relevant to business organization, scholars and research fellows in such areas as strategic management, human resource management, business strategy, computer science, information technology, general management, and other related areas. This is because of the fact that strategic management level scans environment and reports from within the organization in making decision and adapting to change. The environmental scanning and quality decision making are enhanced by knowledge management. This study is significant because it seeks to improve the performance of individuals and organizations by maintain and leveraging the present and future value of knowledge assets. The findings of this study will contribute will contribute to the enrichment of the literature on the impact of knowledge management in the Nigerian manufacturing sector. This study will serve as a body of reserved knowledge to be referred to researchers.

1.7 Scope of the Study

This study is designed to analyse the impact of knowledge management on the selected IT organisations. The selected organisations are located in lagos state.

1.8 Limitations of the Study

The main limitations of the study are uncooperative attitude of some of the staff of the organisations under study, inadequacy of time, financial constraints and inadequate power supply. Some of those approached for information declined and refused to cooperate. This affected the volume of information available for the study. However, the researcher used persuasiveness to obtain some information from them.

1.9 Definition of Terms

For the purpose of clarity, it is important to provide operational definitions of some of the terms used in this study.

Competitive Advantage:

Competitive advantage is an advantage that a firm has over its competitors, it enables a firm generate greater sales or margins and / or retain more customers than its competitors.

Knowledge Sharing:

Knowledge sharing is an activity through which knowledge (i.e. information, skills, or expertise) is exchanged among people, friends, or members of a family, a community (e.g. wikipedia) or an organisation.


Grafting is the process of acquiring knowledge by hiring individuals or by buying entire company because of new ideas.


Knowledge is expertise, and skills acquired by a person through experience or education; the theoretical or practical understanding of a subject, it is what is known in a particular field or in total; facts and information or the awareness or familiarity gained by experience of a fact or situation.

Knowledge Acquisition:

Knowledge acquisition includes the organization’s ability to extract information and ideas from its environment as well as through insight.

Knowledge Creation:

Knowledge creation comprises activities associated with the entry of new knowledge into the system, and includes knowledge development, discovery and capture.

Knowledge Management:

Knowledge management is the process of critically managing knowledge to meet exiting needs, to identify and exploit existing and acquired knowledge assets and to develop new opportunities.

Tacit Knowledge:

Tacit knowledge is knowledge that is in people’s heads and it is hard to explain or communicate with other people.

Explicit Knowledge:

Explicit knowledge is codified knowledge, that is, knowledge written down like e.g. a handbook. It is knowledge that has been codified formally using a system of symbols, and can therefore be easily communicated or diffused.

Human Resource:

This represents the human factor in an organisation; the combined intelligence, skills and expertise that gives the organisation its distinctive character.

Knowledge Retention:

This includes all activities that preserve knowledge and allow it to remain in the system once introduced. It also includes those activities that maintain the viability of knowledge within the system.

Knowledge Transfer:

Knowledge transfer refers to activities associated with the flow of knowledge from one party to another. This includes communication, translation, conversion, filtering and rendering.

Knowledge Utilization:

This includes the activities and events connected with the application of knowledge to business processes

Chapter Five

Summary of Finding, Conclusion, Recommendations, Contribution to Knowledge and Suggestions For Further Studies.

5.1 Summary Of Findings

  1. Knowledge management had positive impact on performance of organization (x2t =39.912> x2t=1.98)
  2. Training and development affected employees performance positively (Zc = 7.448 >Zt = 1.96).
  3. Employees’ motivation had positive impact on their ability to share knowledge (r = 0.767).
  4. E-learning tools affect knowledge sharing positive in Nigeria manufacturing industry (Zc = 6.718 >Zt = 1.96).

5.2 Conclusion

There is a relationship between knowledge that exists in organization and organization performance. An organization that does not learn continuously and is not able to continuously list, develop, share, distribute, mobilize, cultivate, put to practice, review and spread knowledge will not be able to compete effectively in the global market. To this end, organizations need to improve existing skills and acquire now ones via knowledge management so as to have a competitive advantages over organizations that do not practice knowledge management.

The growth of firms are rarely possible if the knowledge base of an organization is not properly harnessed, stored in order to improve productivity and efficiency. Learning is a cycle and cumulative process of continuous acquisition of knowledge that will change the behaviours of staff and organization to function efficiently and effectively. An organization is indeed more successful if employees learn faster and their acquired knowledge is properly managed. Knowledge management provides the foundation for stronger learning capacity. Finally, knowledge management helps to protect, exploit intellectual properties to avoid brain drain and to build and sustain competitive advantage.

5.3 Recommendations

Based on the findings of this study, the following recommendations are made: Management of knowledge, as the course of this study, was discovered as an emergent discipline as well as management strategy. Therefore, it is not of place to taste that it is a virgin area of human endeavour that needs profound exploration. Consequently, management scholars, students and particularly researchers are implored to critically assess all its forms and ramifications, thus bringing to limelight information that would help enrich the knowledge of individuals on the knowledge management strategy. Emphasis could be made on its strengths, weaknesses, opportunities and threats (SWOT). Furthermore, researcher can also present the method for its empirical study, explore factors that could account for different between the subject and other areas like innovation management and then show how the strategy can be expanded in these other areas.

Training in knowledge management should be carried out from time to time in order to educate the management/senior staff of the organization on how they could respond to today’s dynamic work environment. Management of organizations should be such that can enhance the productivity of employees and by extension, profitability of the organization through the implementation of knowledge management. There is a need for organizations implementing knowledge to respond positively to high performance variables, in order to promote maximization of the objectives of organizations.

Due to cultural diversity and peculiar history of the major tribe in Nigeria, the members of each cultural group are known to have different disposition and attitude towards work and business activities. Therefore Nigerian managers should fashion out ways of implementing knowledge management that is most suitable for their organizations in order to enhance performance taking into consideration the nature of the organization, the culture of the community where the organization is located and the prevailing situations facing the organization at a time.

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