How to Improve Organizational Performance Through Learning and Knowledge? Essay Example

Economic Cooperation and Development (OECD, 1996) indicates that contemporary economies are increasingly based on knowledge and information. OECD analysis is increasingly directed to understanding the dynamics of the knowledge-based economy and its relationship to traditional economics!

According to OECD, knowledge-based economy is directly based on the production, distribution and use of knowledge and information, and it is considered: . an innovative economy, in terms of knowledge content; . a networked economy, in terms of knowledge presentation; . a learning economy, in terms of knowledge social type; and . a green economy, in terms of organization sustainability. This is also re ected in the trend in OECD economies towards growth in high-technology investments, high-technology industries, more highly-skilled labor and associated productivity gains.

This study aims to propose a model to explore the relationships among human resource management, organizational learning, organizational innovation, knowledge management capability and organizational performance using structural equation modeling. The research participants are from 208 electronic manufacturing companies. The study particularly targets management-level personnel (e. g. line managers, knowledge management of? cers, human resource management or training department directors) and explores their complete perception of the implementation of knowledge management.

The following sections present the theoretical development of the ten hypotheses (to achieve the research objective mentioned above), its method, analysis and result, followed by discussions, conclusions, and managerial implications.

Theoretical development and hypotheses

Human resource management and organizational learning

Tichy et al. (1982) de ne human resource management (HRM) as the process by which individuals are recruited into the organization to perform a speci? c task whereby performance is monitored and rewards given to keep the individuals productivity.

Many studies have indicated that HRM plays a critical

role in facilitating  organizational learning For instance, Lopez et al. (2006) discover that selective hiring, strategic training and employee participation in decision-making positively in? uence organizational learning. It is generally accepted that adult learning is the foundation to HRM functions, which aims to support continuous quality and performance improvement, knowledge management, organizational learning, change management as well as learning organizations (McLean, 2006).

Bhatnagar (2007) links the relationship between the OL with strategic HR roles as well as the organization commitment.

Ulrich and Lake (1990) propose that HRM facilitates the formation and development of organizational capability, consequently effective HRM could enhance an organization’s innovation ability through employee empowerment.

Similarly, Zanko et al. (2008) conduct a detailed exploration of the relationship of innovation with HRM regarding absenteeism and internal politics. The study discovers product innovation is related to HRD practice. It has also been recommended to implement HRM in order to improve or renew employees’ knowledge, skills, abilities and motivation, which are drivers for execution of organizational strategic plans (MacDuf e, 1995). Moreover, based on data collected from 35 European manufacturing companies, Shipton et al. (2005)  nd HRM  enhances organizations’ OI ability.

Human resource management and knowledge management capability

Narasimha (2000) suggests that effectively HRM is the key to amplifying the effect of knowledge management. In fact, HRM strategies can in? uence employees’ beliefs How to improve organizational performance 583 IJM 32,5/6 584 and values, which consequently affect organizational culture (Marshall et al. , 1996).

It is concluded that HRM has signi cant in uence on organizational knowledge repository and management. Thus, HRM policies in selection, training, performance appraisal, etc, must be aligned with knowledge management strategies to enhance organizational functioning (Svetlik and

Stavrou-Costea, 2007). The work done by Ikeno et al. (2007) leads to the conclusion that appropriate human resource management is one of the critical factors for effective knowledge management.

Human resource management and organizational performance

Collins and Smith (2006) state that HR practices are positively related to the organization’s social climate of trust, cooperation, and shared codes and language. It is also found that HRM activities applied in combination have a greater effect on organizational performance than the sum of the individual effects of each activity alone (Wright and Boswell, 2002). Meanwhile, other research considered HRM practices have a major impact on a  rm’s productivity and facilitate the success of an organization  (e. g. Jimenez-Jimenez and Sanz-Valle, 2008). The above studies highly indicate that HRM is expected to help businesses to achieve greater results.

Organizational learning and organizational innovation Duncan and Weiss (1979) de ne organizational learning (OL) as the development of knowledge related to the relationships among actions, consequences and the work environment. In organizations, innovation activities are in? uenced by the learning environment.

As the result, organizational learning is one of the critical factors that sustain an organization’s innovative ability. According to Argyris and Schon (1978), organizational learning will enhance a  rm’s innovativeness, especially in knowledge-intensive industries. Moreover, Stata (1989) discovers organizational learning can facilitate a  rm’s innovation activities, which becomes the source of substantial competitive competence. A number of studies have presented a positive correlation between organizational knowledge and organizational innovation (e. g. Shipton et al. , 2005).

Organizational learning and knowledge management capability

Ju et al. (2006) argue that levels of OL have a signi cant impact on knowledge integration, knowledge management capability, and 

rm innovation ability. The interaction effects of human-oriented knowledge management strategies, OL, system-oriented KM strategies and knowledge integration were found to signi? cantly impact knowledge management capability. Recent studies have indicated the positive relationship between OL and knowledge management capability (e. g. Lemon and Sahota, 2004). Therefore, we construct the sixth hypothesis as follows: H6. Organizational learning positively in uences knowledge management capability.

Organizational learning and organizational performance

Milliman et al. (2002) propose that in order to improve the performance of cross-cultural enterprises, four principles for OL can be applied:

• goal setting;
• exibility with HR requirement;
• providing clear guideline;
• creating cross-culture interaction or teams.

In fact, Zellmer-Bruhn and Gibson (2006) state that team learning positively in uences both task performance and the quality of interpersonal relations.

While Hanvanich et al. (2006) demonstrate how learning orientation and organizational memory are related to important organizational outcomes; Ruiz-Mercader et al. (2006) contend that individual and organizational learning show signi? cant and positive effects on organizational performance.

Organizational innovation and knowledge management capability

Innovation is an idea, practice, or object that is perceived as new to an individual or another unit of adoption (Fruhling and Siau, 2007). It is widely accepted that the uniqueness of continuous organizational innovativeness in Japanese companies lies in the integration of internal as well as external knowledge (Nonaka and Takeuchi, 1995). Davenport and Prusak (1998) suggest appropriately applying existing knowledge or creating new ideas can enhance organizational productivity. In fact, past research consistently demonstrates knowledge management as one of the key factors that in? uence an organization’s innovative (OI) ability (e. g. Bonifacio and Molani, 2003).

Organizational innovation and organizational performance

Reviewing the existing studies, Aragon-Correa et al.

(2007) showed the positive effect of organizational innovation on organizational performance. Kim and Mauborgne (1997) suggest that organizational innovation facilitates the formation of organizational values and differentiates an organization from its competitors. The study conducted by Damanpour and Evan (1984) proves that administrative and ? technological innovations improve business outcomes.

Knowledge management capability and organizational performance

Knowledge management capacity (KMC) has been recognized as a key factor for gaining and sustaining a competitive advantage (Rezgui, 2007). In his statement, Jantunen (2005) believed that knowledge-based assets and organizational learning capabilities are critical for organizational innovation ability.

In addition, Bogner and Bansal (2007) suggest that there are three components in the KM systems that in? uence ? rm performance: the ? rm’s ability to produce new knowledge, its ability to build on that knowledge, and its effectiveness in capturing a high proportion of subsequent spin-offs.