Knowledge management and organizational performance: an exploratory analysis

The purpose of this paper is to report the results of an exploratory investigation of the organizational impact of knowledge management (KM).

A search of the literature revealed 12 KM practices whose performance impact was assessed via a survey of business organizations.

KM practices were found to be directly related to organizational performance which, in turn, was directly related to financial performance. There was no direct relationship found between KM practices and financial performance. A different set of KM practices was associated with each value discipline (i.e. customer intimacy, product development and operational excellence). A gap exists between the KM practices that firms believe to be important and those that were directly related to organizational performance.

The majority of the research constructs were formative, thus improving the measurement of KM practices will prove vital for validating and extending these findings. The findings were based solely on organizations from North America and Australia and may not reflect KM practices in other geographic, economic or cultural settings.

This study encourages practitioners to focus their KM initiatives on specific intermediate performance outcomes.

The paper examines the relationship between KM practices and performance outcomes. It was expected that a direct relationship between KM practices and organizational performance would be observed. It was also expected that organizational performance would mediate the relationship between KM practices and financial performance. These expectations were supported. KM practices showed a direct relationship with intermediate measures of organizational performance, and organizational performance showed a significant and direct relationship to financial performance. There was no significant relationship found between KM practices and financial performance.