Does Professional Knowledge Management Improve Innovation Performance at the Firm Level?

The resource-based view of the firm is characterized by the idea that capital, labor and natural resources are the factors influencing the economic growth of a company. In the last decades, the awareness of knowledge as an important driver of economic growth has increased, and led to the development of a knowledge-based theory of the firm stating that a firm has to create value through the generation, application and capitalization of knowledge. Our objective is to investigate how knowledge management influences the innovation performance of a firm. While former studies mainly focused on knowledge management cycles in the firm, we investigate knowledge management from another perspective, i.e. different knowledge management techniques. a) A firm can codify its explicit knowledge facilitating the use and distribution of this knowledge. Due to the rise of networked computers, codification, storage and sharing of knowledge becomes easier and cheaper. b) Not all knowledge embedded in a firm's staff is codifiable a-priori, therefore it is often referred to as tacit knowledge. For exchanging tacit knowledge, interpersonal contact is needed. It is important to stimulate employees to share knowledge e.g. via pecuniary reward systems or the creation of a collaborative knowledge-sharing environment. c) Not all knowledge can be generated internally and therefore external sources of knowledge need to be generated. This external knowledge generation can be done by specific resources to detect and gather external knowledge or to attract external experts to cooperate with project groups. External experts can be universities and research institutions on the one hand or other companies on the other hand. This study conducts an analysis based on the Belgian CIS survey. It shows the heterogeneous influence of three knowledge management techniques on product and process innovation. More specifically, if a firm wants to reduce costs, it is more valuable to invest in stimuli for employees to share knowledge and to implement a codified knowledge management policy. If a firm, however, aims at introducing new products, it appears to be more beneficial to source external knowledge. In conclusion, it is important for a firm to carefully select the techniques of knowledge management depending on the goals in its innovation strategy.

Czarnitzki, Dirk and Annelies Wastyn (2009), Does Professional Knowledge Management Improve Innovation Performance at the Firm Level?, ZEW Discussion Paper No. 09-067, Mannheim.