Impact of Knowledge Management Processes on Competitive Advantage: Analytical Essay

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1. Introduction

1.1 Background of the study

In the recent years, the global economy has evolved to an economy of knowledge. All OECD (The Organisation for Economic Co-operation and Development) countries have moved from models based on labour, raw materials, and physical capital to economies of knowledge and intangible capital. In an ever-changing global marketplace, companies are looking for every opportunity to gain competitive advantage. Advances in technology, increasingly informed customers, information overload, new regulatory requirements, and liberalization of the world economy have created a common playing ground for all organizations making it more difficult for any organization to gain sustainable competitive advantage (DeGroote, 2012). Reacting to the changes in the organization, some studies (Ganguly, Nilchiani, & Farr, 2009; Overby, Haradwaj, & Sambammurthy, 2006) have suggested that an advanced competitive strategy that organizations should possess is their capability to sense any unanticipated change in the marketplace or customers’ preferences and then readily respond to them. This capability is termed Organizational agility, which is considered to be an important survival strategy for modern organizations in the current turbulent business environments. In 1992, Concept of Organizational agility was introduced by Robert Nagel and Rick Dove in IACCOCA institute. Organizational agility is the capacity of a company to adapt itself to the changes, often unforeseen, in its environment, and to exploit changes as opportunities of development and growth through fast and innovative answers.it helps the company to deal witch rapidly changing environment (Marhraoui & Manouar, 2017). It is fundamentally necessary for organizations facing changing conditions to use production factors to achieve the objectives of the organization, employees, and shareholders (Shahrabi, 2012). To address these issues, organizational agility requires firms to quickly manage their knowledge when responding to a changing environment, and the market environment in particular (Kodish, Gibson, & Amos, 1995). The knowledge management (KM) phenomenon has a strategic importance in developing unique capacities of organizations and in providing them with sustainable competitive advantage (Shannak, 2010). KM processes (KMPs) is getting more importance as a subject researching due to the potential role of KMPs in contributing to the success of organizations in general and educational institutes in particular. KM also assists in achieving organizational goals by allowing know-how and expertise to be easily shared and accessed (Mishra and Bhaskar, 2011) as well as it also helps the companies in identifying, creating, and developing in order to gain competitive advantage.

1.2 Research Gap and Rationale

Previous research studies that have been conducted by research scholars in different countries have research gaps, which are mentioned. First research gap of this study is clearly reflected by a study which has been conducted by Al-Qatawneh et al., (2019), the relationships among organizational agility, knowledge management, and competitive advantage were not pointed out and discussed in the previous research works fundamentally but in this research relationship among KM processes, organizational agility and competitive advantage will be stated clearly. Second gap of this study is contextual, there is not a single study has found more specifically on the educational/health care sector of X country regarding the relationship between KM, Organizational agility, and competitive advantage. Our research is further different from the old research works. Only few research works directly showed the relationship of Knowledge Management (KM) and Competitive advantage; the present research will connect the competitive advantage and knowledge management with the help of organizational agility as mediation.

1.3 Problem Statement

To address the prevalent gap, this research seeks to address number of the weaknesses of existing studies in number of methods, and thereby amplify, as well as make a range of new contributions to the extant literature. First, we are searching to make a contribution to the extant literature by examining the effect of KM on Competitive advantage in the context of the Educational/health care sector of X country. In addition, this study also checks the indirect effect of KM on competitive advantage through Organizational agility. This departs from most past studies that have investigated how KM systems effect on Organizational performance. Second, this first study offer new empirical evidence on the effect of KM and Competitive advantage via organizational agility. Finally, this study is conducted to provide recommendations to the organizations that lack of understanding regarding the strategies that can be used to improve the performance of the firm in today’s rapid and ever-changing globalized world.

1.4 Research Questions:

Based on the problem statement and gap, the current research designed to answer following questions.

Does Knowledge Management Processes impact on Competitive Advantage?
Does Knowledge Management Processes impact on Organizational Agility?
Does Organizational Agility impact on Competitive Advantage?
Does Organizational Agility mediate the relationship between Knowledge Management Processes and Competitive Advantage?

1.5 Research Goals:

The general objectives of the current study include:

To fulfill the requirement of degree
To know how to conduct the research
To gain practical experience of the research
To know about the technicalities of the research

The current study also has some specific objectives which are following:

To determine the impact of Knowledge Management Processes on Competitive Advantage.
To determine the impact of Knowledge Management Processes on Organizational Agility.
To determine the impact of Organizational Agility on Competitive Advantage
To check the mediating role of Organizational Agility between Knowledge Management Processes and Competitive Advantage.

1.6 Research Hypotheses

H1: Knowledge management has a direct impact on Competitive Advantage
H2: Knowledge management has a direct impact on Organizational agility
H3: Organizational agility has a direct impact on Competitive Advantage
H4: Organizational agility mediates the relationship between Knowledge management and Competitive Advantage

1.7 Importance of the Study

First, this research will be helpful to know how the KM processes affects the Competitive advantage of a business and how the Organizational agility plays mediating role between KM processes and Competitive advantage. Thus this research helps in the part of literature of KM, Competitive advantage as well as in the position of Organizational agility as a mediating variable. Second, understanding and knowing the KM processes as well as Organizational agility will be helpful for the employees to meet the organizational objectives. Third, Managers will also get benefits from this research by encouraging the knowledge sharing and agility into the organization they can enhance the overall organizational performance. Finally, Future researchers will get benefit by exploring more on other organizational variables as well as they can extend the study size in order to make generalizability and contribution into the existing literature. Finally, this research will also be helpful for the policy makers to consider the KM and Organizational agility while making organizational policies.

2. Literature Review

2.1 Knowledge Management process (KMP)

KMPs was represented by its 3 constituting components, namely, knowledge Transfer, knowledge Acquisition, and knowledge use. Many researchers mentioned this 3 main processes of KM (e.g. Pérez-López, & Alegre, 2012; Lin et al., 2012; Liao et al., 2011; Singh & Soltani 2010; Alavi & Leidner, 2001)

KM is a tool used by the management along with the set of practices, principles, and techniques for the purpose to utilize, create, transfer, and disseminate knowledge (Obeidat et al., 2016).

2.2 Organizational Agility

Organizational agility is the ability to sense, perceive and predict the changes in the environment of the organization. So, the organizations should be able to identify the changes and tackle with those changes for the prosperity and growth of the organization (Sharif & Zhang, 1999).

According to Holsapple and Li (2008), Organizational agility is considered as the result of integrated attentiveness to changes (opportunities and threats) in an environment (both internal and external) along with a capacity to utilize the resources proactively to that changes in a most suitable way.

2.3 Competitive Advantage

Competitive Advantage is providing a superior value than competitors in a market in any terms like product, price, product, after-sale services, etc.

According to Thatte (2007), Competitive advantage consists of unique capacities that set an organization apart from its competitors, therefore, such organizations have a competitive edge in the market (Thatte, 2007).

2.4 Knowledge management and Competitive Advantage

The debate among academicians and practitioners on sustainable competitive advantage and perceived organizational performance appears to have reached a crucial point. In contrast to the traditional organizational systems, modern workplaces are advocating the importance of organizational capabilities and knowledge-based systems. In current times, where there is active consideration of competitive advantage among organizations, generally at the same time, the traditional models of organizational dynamics are criticized by those who uphold theories that regard the resources and competencies of a firm as its principal source of competitive advantage. Knowledge is the core competence required to face business challenges of firms. Therefore, companies should not only acquire critical knowledge from both the external market and from their own internal organizations (Lee & Sukoco, 2007), but should also effectively and efficiently manage the knowledge stored within both the organization and individuals in order to enable the firm to generate, communicate, and leverage its intellectual properties (Gao et al., 2008). Knowledge management is the process of identifying, creating and developing knowledge in the company in order to gain competitive advantage (Alavi & Leidner, 2001). KM systems enhance the ability of an organization to sustain competitive advantage (Egbu, Hari & Renukappa, 2005).In the presence of hypercompetitive, complex, uncertain, and rapidly changing environment, KM becomes one of the most interesting and important concepts in management. Previous research studies (Al-Qatawneh, Al-Tarawneh, Al-Qatawneh, & Al-Adaileh, 2019; Cegarra-Navarro, Soto-Acosta, & Wensley, 2016; Obeidat et al., 2014; Andreeva & Kianto, 2011; Shannak et al., 2010) showed that knowledge’s importance as part of the organizational assets is increasing, as it has a positive effect on gaining competitive advantage and improving innovation that lead the organization to a superior performance.

Therefore, Following Hypothesis is formed

H1: Knowledge management processes has a direct impact on Competitive Advantage

2.5 Knowledge management and Organizational Agility

The changing conditions in which business enterprises operate today have created new challenges for contemporary organizations. One of the competitive strategies that firms possess is their capability to detect external unanticipated changes and opportunities or threats, and then reconfigure, assemble, and exploit its own resources, processes, knowledge, and relationships in order to respond quickly to external changes. To address the changing issues Kodish, Gibson, and Amos (1995) states organizational agility requires firms to quickly manage their knowledge when responding to a changing environment, and the market environment in particular. Van Oosterhout et al., (2006) indicate that the process involving the application of knowledge is essential for organizational agility because this knowledge process is essential to cope with market or demand changes that are unpredictable and uncertain. It is expected from knowledge sharing methods in the organizational departments that promote the organization’s ability for active and creative responding to the variable environment. Knowledge-sharing methods help to decrease costs, respond the customers’ needs, deliver the products and services, and improve business processes and market share (Law and Angi, 2008). Several researchers have found a positive relationship between KM and Organizational agility (Al-Qatawneh et al., 2019; Marhraoui & Manouar, 2017; Saha, Gregar & Saha, 2017; Salajeghe & Nasrollahpoor, 2016). Consequently, firms need to find ways not only to adequately manage the knowledge but also to ensure the development and subsequent sustaining of the organization’s agility in order to perform better in a competitive business world.

Therefore, the Following Hypothesis is formed.

H2: Knowledge management processes has a direct impact on Organizational agility

2.6 Organization Agility and Competitive Advantage

The changing conditions in which business enterprises operate today have created new challenges for contemporary organizations. One of the competitive strategies that firms possess is their capability to detect external unanticipated changes and opportunities or threats, and then reconfigure, assemble, and exploit its own resources, processes, knowledge, and relationships in order to respond quickly to external changes. This capability is known as an Agility of the organization that is described as an organization’s ability to discover new opportunities for competitive advantage, harness the existing knowledge, assets, and relationships to seize these opportunities, and to adapt to sudden changes in business conditions (Setia, Sambamurthy & Closs, 2008). Organizational agility is considered to be an important factor for organizational competitiveness in the current turbulent business environments (Overby, Bharadwaj & Sambamurthy, 2006). Competitive advantage can be established through the attributes of agility, which enable an organization to skillfully, rapidly, and efficiently respond and exploit environmental changes. For many organizations, their competitive advantage may depend on their ability to react to frequent unexpected changes. Success in this respect can be achieved through adopting agile practices and competencies. In turbulent times, the power of an organization depends on its proactive attitude, adaptability flexibility, quick responses, competence, and the capability to ensure strategic and effective actions (Meredith, & Francis, 2000). An agile organization, therefore, can gain competitive advantage by providing lower operating costs, satisfy customer requirements, rapid introduction of new products, and eliminating non-value-added activities. Only few studies have been conducted to check the effect of Organizational agility on Competitive advantage.

According to study conducted by Swafford, Ghosh, and Murthy (2006) state that business agility provides capability for an organization to contain changes in the marketplace, and exploit market opportunities with speed and dexterity in order to gain competitive advantage. Another study suggests that business agility is that unique capability that assures competitive advantage in a continuously changing and unpredictable environment (Nzewi & Moneme 2016). Other researchers also found a positive relationship of organizational agility on firm performance (Alegre & Sard, 2015; Shahrabi, 2012; Tallon & Pinsonneault, 2011). In addition, organizations can gain competitive advantage by leveraging on agility capabilities to sense and swiftly react to unpredictable changes, synergize all detected information to understand rivals’ competitive strategies and changing customers’ preferences and requirements.

Therefore, the following hypothesis is formed.

H3: Organizational agility has a direct impact on Competitive Advantage

2.7 Mediating role of Organizational Agility

Organizational Agility has been used as a mediating variable in many studies. In a study conducted by Mashkani and khodadadi (2016) suggested that Organizational agility is significant mediator between Organizational learning and Organizational performance. Cegarra-Navarro et al., (2016) indicated that organizational agility significantly mediates the relationship between KM and firm performance. Another study suggested that firm’s IT agility significantly and partially mediates the relationship between KM and Operational performance (Al-Qatawneh et al., 2019). In addition, researchers propose that organizations lacking in agility will be less able to adapt existing process and routines to reflect changes in the environment that new knowledge signals. Given that such adaptation influences directly firm performance, the study proposes the following hypothesis:

H4: Organizational agility mediates the relationship between Knowledge management processes and Competitive Advantage

2.8 Research Framework

Knowledge Management Processes

Acquisition
Transfer
Use
Organizational Agility
Competitive Advantage

3. Research Methodology

This section includes detail on how the research will be carried out. This Section includes the approach, target population, sample size, sampling techniques, and data collection tools.

3.1 Sample and data collection

Data will be collected from 300 employees through self-administered questionnaires and using convenience sampling technique. According to; Rule- of -10 participants per item in the instrument being used makes a sufficient sample size. Number of items that will be utilized in the instrument will be 24. Consistent with the rule of -10 sample size of the research will be 240 (24 X 10) minimum, but to test above-mentioned mediating-regression model author kept the sample size up to 300 Whereby unit of analysis would be employee. Population will be comprises of education/healthcare sector employees. The target sample will be X-country companies or institutions.

4. Data analysis and Measure

SPSS version 20 will be used for the data analysis. Correlation will be used to explain the correlation among all the variables of the research. Cronbach Alpha technique will be used to measure the reliabilities of all the variables. Regression analysis will be conducted to examine the impact of knowledge management processes on competitive advantage, the impact of knowledge management processes on organizational agility and the impact of organizational agility on competitive advantage. The mediation regression analysis will be conducted to examine the mediation impact of organizational agility in the relationship between knowledge management processes and business competitive advantage.

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