The Relationship Between Knowledge Management and Innovation in Large Companies: A Structured Literature Review Fábio Ferreira Batista1,2, Maurizio Massaro3, Francesca Dal Mas3 and Andrea Garlatti3 1Instituto de Pesquisa Econômica Aplicada – Ipea, Brasilia, Brazil 2University of Venice Ca´ Foscari, Italy 3Università degli Studi di Udine, Italy
[email protected] [email protected] [email protected] [email protected] Abstract: This paper aims to review and critique the literature about knowledge management (KM) and innovation in large companies from a KM and intellectual capital perspectives, offering an overview of the state of the literature and outlining a future research agenda. Articles published in business journals are analyzed using a Structured Literature Review Methodology (SLR). The study analyses 33 papers published in 21 journals specialized in the field of KM, innovation and technology management, management development, R&D management and strategic management among others. Although empirical and theoretical studies have shown a positive relationship between KM and innovation in large companies, this is a research area of growing importance as a result of the “innovation imperative” and the importance of the theme for KM as a discipline. Findings show that no authors have an explicit specialization on the topic, while all but two authors contribute just once to the body of knowledge. Few practitioners are doing research on the field, and there is a limited international cooperation among writers. Also, several areas in the world seem underinvestigated while other are over-analyzed, and none but one firm elected among world's top innovative companies are not investigated. Literature has identified a positive relationship between organizational factors, KM practices, processes and strategies, intellectual capital and absorptive capacity and innovation capacity and innovation performance. However, the focus on the kind of innovation seems not clear in a significant number of papers; and there is a lack of interdisciplinary approach in the research. Keywords: large companies, knowledge management, innovation, structured literature review
1. Introduction The evolution of competition leads is resulting in the so-called “knowledge economy,” where innovation assumes a central role and becomes and imperative (Aramburu et al., 2013). Therefore, understanding the sources of successful innovation has become one of the main challenges for academic researchers in the business world. Although the importance of the topic, scholars, and practitioners show a multitude of approaches and aims. This paper aims to present a Structured Literature Review (SRL – Massaro et al., 2015a, 2015b, 2016) to provide insights on the main topics and aims discussed by the literature and to offer some critiques and if possible putting the basis for defining some implications for research.
2. Methodology This paper employs an SLR approach, as described in Massaro et al. (2016). Massaro et al. (2016) state that SLM can “contribute to developing research paths and questions by providing a foundation” for future studies. The study establishes three main research questions: RQ1 “How is the KM literature of KM and innovation in large companies developing?” RQ2 “What is the focus of the KM and innovation in large companies literature?” RQ3 “What are the implications for the KM research?” Following Massaro et al. (2015a, 2015b, 2016) we employed a keyword search on Scopus selecting 33 main articles, which are analyzed to answer the three research questions.
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3. Results and discussion The following sub-sections present results to answer RQ1 “How is the KM literature of KM and innovation in large companies developing?” and RQ2 “What is the focus of the KM and innovation in large companies literature?”.
3.1 Evolution of the literature of KM and innovation in large companies This section presents the results related to RQ1 providing insights on how the KM literature and innovation in large companies is evolving. The number of papers, leading journals, and most cited authors will be used to answer RQ1. The following sections analyze the scholarly impact of the selected articles using CPY. Articles, years and CPY analysis. Analyzing the evolution of articles about KM and innovation in large companies, results show an increase regarding the number of published papers (Figure 1). The search identified 33 relevant articles, 20 of which were published from 2009 to 2016, suggesting a growing trend compared to the previous period (2002 to 2008) with only 13 works. Following the recommendation of previous studies (Dumay, 2014, p. 22 and Massaro, Dumay and Garlatti, 2015), the Citation-Per-Year (CPY) analysis does not consider the period 2014 – 2016, as there was not enough time to gather citations. The five papers with the highest CPY (Donate and Guadamillas, 2011; Hall and Andriani, 2002; Ayuso et. al, 2011; Storey and Kahn; Garetti et. al, 2010; and Iacono, Martinez and Galdiero, 2012) show values that are four times above the average. Additionally, within the six most cited articles, five of them are both in the list of the papers with highest CPY and CI. These papers can be recognized as “citation classics” (Garfield, 1989, p. 5). Five of them (83%) analyze the European and UK contexts (Donate, M.J., Guadamillas, F., 2011; Hall, R., Andriani, P., 2002; Storey, C., Kahn, K. B., 2010 and Garetti, M., Terzi, S., Bertacci, N., Brianza, M., 2005). Topics of “citation classics” include the organizational aspects of innovation capability (two papers) and strategy and innovation (four papers). 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 0
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Figure 1: Number of publication and trend Note: Data from 2016 not included
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3.2 Research method Several authors are claiming that KM is evolving to the standard scientific stage since it was born by practitioners (e.g. Serenko and Dumay, 2016). Standard academic papers feature research questions (RQs) or research hypothesis (RHs). Analyzing RQs and RHs, results show that half of the works (16) do not use any of them. Six papers use RQs, while eleven articles develop RHs. Therefore, results do not confirm what is stated by authors about KM evolution toward a standard scientific stage. Analyzing the papers´ focus, findings show that 39% of the works focus on product innovation. Interestingly, 25% of the papers do not specify what kind of innovation they refer to. Additionally, the two categories with the highest percentage are organizational innovation (11%) and process innovation (11%). Table 1: Papers’ focus: Types of innovation Type of innovation Product innovation Not specified Organizational innovation Process innovation Strategic innovation Sustainable innovation orientation Innovation project management Market innovation
% 39 25 11 11 5 3 3 3
3.3 Research framework. Major literature and practical implications of research on KM and innovation in large companies. The findings of empirical studies about KM and innovation in large companies analyzed in this literature review offer an important contribution to the literature as well as to managers. In this section, we identify the primary variables pointed out by authors as determinants for innovation. We also describe the organizational settings, as well as authors' conclusions about the relationship between these variables and innovation based on analyzed data. Additionally, recommended management actions are presented. Technological acquisitions help companies to access technical knowledge that can support innovation. One paper analyses the relationship among exploratory technological acquisitions, technical knowledge, knowledge creation from firm´s experience and the experience of others and innovation. Amir-Aslani (2009) argues that technological acquisitions help biotechnology companies to access technical expertise that can support innovation. Moreover, technological acquisitions will bring asset accumulation and the generation of new capabilities about firm´s absorptive capacity. Therefore, because to innovate firms need to create knowledge from its experience as well as from the experience of others, companies should develop competencies that allow efficient use of information and knowledge available and combine “core” capabilities with externally complementary ones (Amir-Aslani, 2009). Intellectual capital is a key issue to promote innovation capability. The impact of different organizational conditions on innovation capability and innovation performance in technology-based Colombian firms from an Intellectual Capital perspective is analyzed by Aramburu, Sáenz, and Blanco (2015). The findings show that IC is a critical issue to promote innovation capability. Structural capital proves to be relevant to reinforce innovation capability. Also, innovation strategy, hiring, professional development policies and external structure are the most important enablers both of new idea generation and innovation project management. Although generating new ideas is a necessary pre-condition for innovating, effective setting in motion of innovation projects is the key to transforming innovation into profits. Therefore, managers should set out an explicit and organizational-wide shared innovative strategy; promote hiring and professional development policies and develop external innovation network (Aramburu, Sáenz, and Blanco, 2015, p. 56-58)
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Fábio Ferreira Batista et al. Knowledge sourced from engagement with stakeholders and KM practices contributes to a firm´s sustainable innovation orientation. Ayuso et. al (2011) analyze the contribution of stakeholder engagement to firm´s innovation orientation within the context of sustainable development. They investigate whether engagement with different stakeholders promotes sustainable innovation. The empirical analysis is based on an international sample of 656 large companies. The paper bridges the gap in the literature concerning how engagement with the multiple stakeholders affects the level of firm´s innovativeness. The findings show that engaging with the key players has a positive impact on a company sustainable innovation orientation. In the meantime, organizations that adopt KM practices are more likely to be oriented towards sustainable innovation. Thus, findings confirm previous research about the link between KM and innovation (Darroch and McNaughton, 2003; Gloet and Terziovski, 2004). Authors recommend that firms should connect business functions of stakeholder engagement and innovation, and find flexible mechanisms to combine access and transformation of relevant stakeholder information as active stakeholder dialogue with successful innovation strategies. The authors argue that organizations capable of combining access and transformation of relevant stakeholder information through specific routines will be able to obtain a sustained competitive advantage. Therefore, authors agree with the “open innovation” paradigm, that is, the locus of knowledge generation, innovation and value creation will increasingly be located outside the firm (Ayuso et. al, 2011). Knowledge creation and absorptive capacity mediate the relationship between knowledge acquisition and innovation. Costa and Monteiro (2016) explore the role of knowledge creation and absorptive capacity as mediating variables among knowledge acquisition, knowledge sharing, and companies´ organizational innovation. Firms that represent some of the most mature and leading industries in Portugal from several sectors are analyzed. The article follows recent approaches to mediation analysis and covers advanced topics in partial least squares structural equation modeling literature. The paper is an attempt to contribute to the increasing body of research that relates knowledge processes to absorptive capacity, to understand their critical role in innovation The results show that knowledge creation influences innovation and partially mediates the relationship between intra-firm knowledge sharing and innovation. Besides, knowledge acquisition from external partners is not enough to promote innovation results but significantly reinforces absorptive capacity as well as knowledge sharing. Companies´ absorptive capacity fosters the creation of knowledge, but it does not significantly influence organizational innovation. When knowledge is shared within organizations, innovation is meaningfully reinforced, thanks to the creation of new knowledge. This finding is consistent with previous results on the mediating effect of knowledge creation between knowledge sharing and innovation (Andreeva and Kianto, 2011). Therefore, authors recommend that knowledge management practitioners should facilitate a knowledge sharing environment, where new ideas and solutions can be developed, and consequently innovation outcomes are likely to occur. Organizational factors and KM practices are mutually reinforced thus improving innovation performance. Donate and Guadamillas (2011) analyze how organizational factors (cultural values, leadership, and human resources (HR) practices) influence knowledge exploration and exploitation practices and innovation using an empirical study. Authors analyzed data from 111 Spanish companies belonging to innovative industries. The paper provides empirical evidence on the relationship between KM, organizational elements, and innovation in a large sample of firms. The study also contributes to the theoretical development of a conceptual model for explaining the relationship among KM practices, human-based factors, and innovation performance. Findings highlight that there is a moderating effect of knowledge-centered culture, knowledge-oriented leadership, and knowledge-centered HR practices in the relationship between knowledge exploration and exploitation and innovation outcomes of companies. Although KM practices are essential on their own for innovation purposes, the innovation capacity can be more successfully exploited. As a result of the findings, authors recommend that managers should pay attention to knowledge exploration and exploitation practices along with several organizational enablers to achieve high levels of innovation results. Successful implementation of KM-oriented to innovation requires specific tools and practices for enhancing knowledge exploration and exploitation, but this also needs coherent cultural values and HR practices while leadership should be considered as a key enabler
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Fábio Ferreira Batista et al. in the process. Managers should care about knowledge strategy formulation but also help to develop organizational aspects based on human factors for encouraging the optimal utilization of KM practices. The role of managers in promoting knowledge-centered cultural values, driving knowledge-oriented HR practices and leading by example to promote knowledge creation, codification, transfer, and application is, therefore, essential for organizations. Integration of Corporate Social Responsibility (CSR) into company strategy affects innovations results. Guadamillas-Gomes and Donate-Manzanares (2011) analyze how firms could integrate ethical values and corporate social responsibility (CSR) initiatives into corporate and business strategies, and especially about knowledge management (KM) strategy, technological innovation and human development using a case study of an innovative Spanish company, Indra. The case study´s results show that Indra is making efforts to connect CSR initiatives with a competitive advantage through the development of intangible assets such as human capital and innovation capacity. Based on the evidence offered by the study, authors recommend firms to promote organization’s ethical principles through their corporate culture and human resources practices. The aim is to encourage access and transfer of knowledge to allow the creation of knowledge, innovation and human development. Knowledge Management (KM) successful programs help global software firms to create KM-enabled value, including innovation. Mehta (2008) develops and evaluate a concise framework to examine how global software companies with successful KM programs create KM-enabled value. The proposed framework (KM-enabled value creation cycle – VCC) combines two key theoretical streams – knowledge-based view and KM. This combination provides opportunities for interdisciplinary research, mainly in developing KM theory. The results highlight that there are several strategic, technological and cultural issues influencing the success of KM programs. Firms with successful KM programs develop the following capabilities: articulating KM Strategic Intent; facilitating the Knowledge flows to enable innovation and assessing KM value. These capabilities help organizations to create KM-enabled value. Based on the research´s results, the author recommends that software firms develop specific skills to build KM-enabled value. Additionally, the author provides a KM implementation worksheet for practitioners to conduct benchmarks for developing these capabilities. Strategic Communities (SCs) are a key element to producing innovation in a knowledge-based society. Kodama (2005) identifies key factors for generating new knowledge creation in the high-tech sector. The organizational setting analyzed is Japan´s largest mobiles communications carrier: NTT DoCoMo. The case study findings show that in a short period a strategic team built strategic communities (SCs) outside the organization including customers, and then created a network that went beyond the SCs borders. Knowledge created became a new source of competitive advantage. Based on the results of NTT DoCoMo case study, Kodama recommends that companies should create ongoing innovation through the building of Strategic Communities – SCs. Management principles that generate creativity and innovation in organizations. Rosa, Qualls and Fuentes (2008) study three companies from different sectors to identify four management principles that foster creativity and innovation. The first principle is about managing organizations so that their knowledge base is more varied than what would occur naturally. The second principle is about promoting collaborative and non-satisfied attitudes toward work and the organization among employees. The third principle is about making it possible for employees to get involved in testing of ideas and solutions. The last principle is about rewarding employees´ and supervisor´s behaviors that foster these attitude as well as punishing resistance to their application. Authors argue that creativity and innovation can be mobilized by organizations that are willing to apply the principles frequently. Creativity and innovation are natural results of human efforts and can be fostered through management practices. The development of the R&D resource requires changes in innovation exploration.
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Fábio Ferreira Batista et al. Zarzewska-Bielawska (2012) presents a model and a matrix for the classification of high-tech enterprise´s development strategies. The sample includes 61 medium and large high-tech organizations based in Poland or the global marketplace. Findings highlight that high-tech firms have the fundamental objective of developing R&D activity as a resource rather than product/market goals. Companies endeavor above all for leadership in innovation, creating new technologies based on their R&D resources, while also using outside sources and mostly applying the personalisation approach in KM. Firms take different pathways for product and market development, based on opportunities found in the environment, and on their ability to identify and benefit from them. The author argues that to develop the R&D resource, the processes and structures in the field of innovation exploration must be as flexible as possible and a pro-innovation organizational culture must be developed. R&D is essential to high-tech firms strategies and to define their technology and innovation and knowledge strategies. Therefore, companies should promote R&D as a resource and not as a product/marketrelated goals. Temporary Project Network (TPN): a practice directed to innovation. Iacono et. al (2012) explore the relationship between the design of inter-organizational connections, the processes of knowledge creation and transfer and innovation. The case study analyzes the partnership between Firema, a medium-large Italian company in the rail industry sector, and TEST, a research consortium. The research´s findings state that TEST, acting as a meta-organizer, had the important role of organizing, governing, and tuning the network of university departments, in cooperation with Firema. Temporary project network (TPN) were installed in “latent networks” in which inter-organizational links were routinely activated to accomplish a specific project. Managers, as well as policy makers that want to know about the practices in organizing networks directed to innovation, can benefit from the description of TPN-related innovation activities. The main contribution of this articles is the attempt to bridge the fields of inter-organizational relations with that of temporary organizations and knowledge sharing through a study of TPN. Few studies have adopted the TPN framework to analyze the inter-organizational coordination mechanisms among firms and a research center. Moreover, this paper´s findings contradict the frequently held idea that temporary projects are short-termed and focused on non-routine tasks. The collaboration model set up by this study represents one more contribution to managers. The relationship between structural variables and enablers is highly relevant for knowledge creation in organizations. Lloria and Peris-Ortiz (2014) analyze how changes in structural design variables affect the creation of new knowledge in organizations. Enablers used as intermediate variables were taken from Nonaka framework, namely: intention, autonomy, fluctuation, and creative chaos, redundancy, variety, trust, and commitment. The authors test a general relational model in 167 large Spanish companies. The research´s findings highlight that the relationship between structural variables and enablers is highly relevant for knowledge creation in organizations. The relationship of enablers with knowledge creation is highly relevant for knowledge creation in organizations. This article provides a deeper understanding of the context and tools that aid knowledge creation, and it adopts a new approach to verify if certain variables related to organizational design have a significant influence on knowledge creation. The paper helps to understand changes that may occur in organizational design variables that affect knowledge creation. This research shows that knowledge creation can foster innovation, and may consequently drive change within the firm. Companies employing the KM strategies of codification and personalization reflect higher levels of new service development (NSD) knowledge. Storey and Kahn (2010) verify if service firms that execute strategies to manage their NSD knowledge can generate a sustainable competitive advantage (SCA). Their findings show that companies employing KM strategies of codification and personalization reflect higher levels of NSD knowledge. Codification promotes NSD proficiency, and customization fosters greater NSD innovativeness. Combining codification and personalization magnify NSD knowledge, which, together with NSD proficiency and NSD innovativeness, help SCA. Therefore, the authors argue that companies should plan to invest in a KM system based on the desired outcomes from their NSD process A KM system that blends the two strategies appear to be the most beneficial for service companies´ NSD efforts to build a long-term sustainable competitive advantage.
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Fábio Ferreira Batista et al. External knowledge can have a positive effect on innovation generation depending on individual’s position in the internal social structure of organizations. Based on absorptive capacity and social network research, Tortoriello (2013) investigates how individuals inside the organization use external knowledge to generate innovations. The study was conducted in an R&D division of a large multinational high-tech company. The findings highlight that effects of external knowledge on individuals´ innovativeness depend on individual’s position in the internal social structure. Tortoriello recommends that firms should encourage the formation of internal networks that span distinct parts of the organization. This could systematically enlarge collective ability to leverage external knowledge by favoring the creative recombination of different viewpoints and perspectives. Moreover, he argues that not only investment in R&D matters to encourage organizational absorptive capacity. The development and sustenance of internal networks that promote diversity and the access to different parts of the organization are also important to raise the benefits of R&D investment. According to the study, individuals should be encouraged to build network connections that allow access to external sources of knowledge, and they should also invest in developing internal relationships with colleagues who have distinct learning backgrounds and work in different parts of the organization. Tortoriello stresses that it is the particular combination of internal network connections that external knowledge can more efficiently be converted into organizational innovations. This paper contributes to the absorptive capacity research by arguing that the ability to leverage external knowledge toward the generation of innovation depends on the opportunities organizations provide for employees. Institutional forces and organizational context play important roles in innovation. Kalling (2007) identifies and discuss obstacles to innovation based on organizational learning and KM theories. Findings of a case study of a large multinational corporation in the paper packaging sector show that understanding innovation requires an understanding of roles of institutional forces and organizational context – not just cognitive explanations. Significant organizational factors that explain the lack of innovation are the degree of decentralization, short-term oriented control mechanisms, lack of attention to innovation, poor communication and knowledge sharing channels in the vertical and horizontal dimensions.
4. Implication and conclusion This section discusses the primary results to answer RQ3: what is the future of KM research concerning KM and innovation in large companies? In responding this questions, several implications are addressed in the following sub-sections.
4.1 No authors have specialization on the topic while all but two authors contribute just once to the body of knowledge The findings previously presented do not confirm the superstar (Matthew) effect, which commonly identifies a small number of authors who produce most papers (Serenko et al., 2011, p. 334). Only two authors have written more than one article, and all the rest (76 authors) contribute only once to the body of knowledge. These findings back previous results within the KM literature (Dumay and Serenko, 2015, p. 20; Serenko et al., 2010, p. 18, 2011, p. 340; Massaro, Dumay and Garlatti, 2015, p. 542). Serenko et al. (2010, p. 18) argue that the Matthew effect phenomenon can be explained by the high number of practitioners who contributed only once. However, within the samples analyzed, most of the authors (84%) are academic, and only 16% are non-academic or practitioners. Therefore, practitioners cannot be considered the cause of the sporadic contribution of authors to the topic. Finally, results show that the two authors who have written more than on paper are among those who wrote the six articles with the highest CPY. The analysis confirms previous studies that show that barriers to entry to the academic discourse are small and, because of that, authors not specialized can move from the general topic of KM or even from other research fields. Authors who are more consistent can quickly obtain a higher specialization and visibility (Massaro, Dumay and Garlatti, 2015, p. 542-543). Finally, the results also reflect the youth of KM field as pointed out in previous studies (Serenko et al., 2011; Massaro, Dumay and Garlatti, 2015, p. 543).
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4.2 Almost all most innovative companies in 2016 according to business magazines have not been investigated so far All but one of the 50 most innovative companies in 2016 according to business magazines (Fortune and Fast Company Magazine) have not been investigated in the literature so far (Statistic Times, 2016; exame.com, 2016 and fastcompany.com, 2016). Huawei Technologies Co., Ltd. (Huawei) is the only top ranked company that is analyzed in the sample (Xing, 2006, p. 121). The study of the most innovative firms would provide interesting insights about innovation drivers in these companies (KM practices and organizational factors) in comparison with other organizations investigated by articles studied in this literature review.
4.3 There are some conflicting results in the literature review One significant contribution of the KM and innovation in large companies´ literature is that the positive relationship between organizational factors and KM practices and strategies and innovation is confirmed. Findings generally show a positive correlation between the following organizational factors and innovation: cultural values, leadership, and human resources (HR) practices (Donate and Guadamillas, 2011; Aramburu, Sáenz and Blanco, 2015, p. 56-58); Strategic Communities – SCs (Kodama, 2005); management principles (Rosa, Qualls and Fuentes, 2008); temporary project Network – TPN (Iacono et al., 2012); structural design variables such as liaison position, networked design, innovation teams and work teams (Lloria and Peris-Ortiz, 2014). Studies confirm also the importance of KM practices and strategies such as: KM strategies of codification and personalization (Storey and Kahn, 2010); institutional forces and organizational context (Kalling, 2007); capabilities developed by KM programs such as articulating KM strategic intent; facilitating the knowledge flows to enable innovation; assessing KM value (Mehta, 2008); and KM practices adoption and sustainable innovation (Ayuso et. al, 2011). Other relevant contributions of the investigated literature to companies and research are the confirmation of the positive relationship between structural capital and innovation capability; the positive impact of innovation strategy and hiring and professional development policies and external structure to new idea generation and innovation project management (Aramburu, Sáenz and Blanco, 2015, p. 56-58). Moreover, results generally show a positive relationship between knowledge creation and innovation and knowledge creation with intrafirm knowledge sharing and innovation; companies´ absorptive capacity and the creation of knowledge; knowledge sharing and organizational innovation via the creation of new knowledge (Costa and Monteiro, 2016). Finally, studies show the importance of external knowledge acquisition and innovation (Tortoriello, 2013; Kodama, 2005; Ayuso et. al, 2011) Most of the papers focus on product innovation followed by organizational innovation and process innovation. However, a significant number of articles does not point out clearly what kind of innovation they refer to when they analyze firm´s innovation drivers. Most of the papers do not offer a clear definition of innovation and authors are more concerned with the identification of the positive or negative relationship between variables and innovation than to describe the kind of innovation they are analyzing.
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