The impact of knowledge management strategies on the relationship between intellectual capital and innovation: evidence from SMEs
| DOI | https://doi.org/10.1108/JIC-07-2020-0240 |
| Published date | 15 February 2021 |
| Date | 15 February 2021 |
| Pages | 765-798 |
| Subject Matter | Information & knowledge management,Knowledge management,HR & organizational behaviour,Organizational structure/dynamics,Accounting & finance,Accounting/accountancy,Behavioural accounting |
| Author | Sahar Hayaeian,Reza Hesarzadeh,Mohammad Reza Abbaszadeh |
The impact of knowledge
management strategies on
the relationship between
intellectual capital and innovation:
evidence from SMEs
Sahar Hayaeian, Reza Hesarzadeh and Mohammad Reza Abbaszadeh
Ferdowsi University of Mashhad, Mashhad, Iran
Abstract
Purpose –The purpose of this study is to investigate the moderating role of knowledge management (KM)
strategies in developing the effect of intellectual capital (IC) on innovation for small- and medium-sized
enterprises (SMEs). Specifically, the current study explores how different interactions between IC and KM
strategies lead to more powerful innovation in SMEs.
Design/methodology/approach –This study analyzes survey responses from 170 owners/managers of
SMEs in Iran. The study uses partial least square structural equation modeling methods within Smart PLS
software.
Findings –This study reveals that first IC has an excellent level of engagement with both incremental and
radical types of innovation, but its engagement level with radical innovation is higher than that for incremental
innovation. Second, the human capital component of IC has a direct positive impact on radical innovation
although it has no significant impact on incremental innovation. Third, the personalization strategy of KM
positively moderates the impact of human capital on both incremental and radical innovation.
Originality/value –This paper is an empirical attempt in SMEs to combine IC and KM strategies to
strengthen innovation. It presents research community for SMEs of a developing country that has been
investigated in a limited way compared to large firms of developed nations and provides valuable insights into
further research.
Keywords Codification strategy, Personalization strategy, Intellectual capital, Innovation, SMEs
Paper type Research paper
1. Introduction
Prior literature revealed that the importance of intellectual capital (IC) increased because it
had a positive impact on obtaining competitive advantages and enhancing innovation
(Jord~
ao and Novas, 2017;Obeidat et al., 2017). However, focusing exclusively on sources of
knowledge could not guarantee sustain competitive advantages in rapidly changing markets
since changes are unpredictable and disruptive (Eisenhardt and Martin, 2000). Respect to this
issue, some previous studies focused on how IC is used more effectively to take advantage of
the firms’innovation. For example, Wu et al. (2007) analyzed dynamic capabilities as a
moderator of IC in to achieve higher innovation; Li et al. (2019) investigated the effect of
knowledge sharing as an intervention mechanism that mediates the link between IC and
innovation.
Particularly, IC literature focuses on intangible knowledge assets consisting human
capital (HC), structural capital (SC) and relational capital (RC) components in general terms
(Guthrie, 2001;Bontis, 2001) though knowledge management (KM) strategies relate to the
processes allowing companies, in order to manage their IC and gain competitive advantages,
created on knowledge (Nonaka and Takeuchi, 1995;Alavi and Leidner, 2001;Heisig, 2009).
The previous literature is extremely interested in ways that IC converts to excellence
innovation and the role-playing of KM strategies in this process (Ling, 2013;Hsu and
How KM
affects IC –
innovation
relationship
765
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1469-1930.htm
Received 28 July 2020
Revised 11 November 2020
Accepted 6 January 2021
Journal of Intellectual Capital
Vol. 23 No. 4, 2022
pp. 765-798
© Emerald Publishing Limited
1469-1930
DOI 10.1108/JIC-07-2020-0240
Sabherwal, 2011;Obeidat et al., 2017;Hussinki et al., 2017;Cabrilo and Dahms, 2018;Kianto
et al., 2014). For instance, Hsu and Sabherwal (2011) investigated KM mediates the impact of
IC on innovation. In addition, Ling (2013) and Cabrilo and Dahms (2018) indicated that KM
moderates IC efficiently to promote innovation. Therefore, this study aims to examine how
KM strategies effectively manage the impact of IC resource on innovation.
According to Kianto et al.’s (2014) study, the knowledge-based subjects analyze
theoretically in aspects of mediation and moderation, and four possible alternative models
offer how potential interaction effects between IC and KM strategies influence organizational
value creation. The authors suggested perhaps the best intuitive ideal possibility is that KM
strategies moderate the impact of IC resources on innovation performance. Consequently, due
to effort for closing this research gap, this paper model does not only include the direct effects
of IC and KM strategies to reveal better ways of accessing innovation separately but also
coincidence IC with KM strategies in exploring specific ideal combinations, which lead to
excellent innovation. To this end, this study aims to investigate how KM strategies (e.g.
codification and personalization strategies) moderate the impacts of IC resources on
innovation (e.g. incremental and radical innovation), intending to discover the best particular
combinations of IC and KM strategies that can enhance innovation specifically for Iranian
small- and medium-sized enterprises (SMEs).
The motivation for this study comes from these facts that, first, most of the prior studies
that investigate the connection between IC–KM strategy interactions and innovation takes
the aspect of developed nations (Ling, 2013;Hsu and Sabherwal, 2011), and there is a limited
number of studies those have produced empirical evidence regarding developing country
perspective, particularly Iran country. Focusing on the context of developed countries only
decreases our knowledge of developing nations and how they differ from developed markets.
Second, SMEs of developing countries succeed in gaining competitive advantages without
promoting their core existing IC resource since they simplify the procedure of adjusting their
limited IC source to the right management strategies (Jardon and Martos, 2012). In other
words, successful management of IC involves managing potential shortages of resources and
possible organizational flexibility advantages in SMEs (Jord~
ao and Novas, 2017).
Nevertheless, there is no available practical understanding which enables SMEs for the
benefits of the functional or potential applicability of IC resources (Henry, 2013). In order to
overcome this limitation, Wang et al. (2016) suggested that practical guidance in which IC
should be adjusted and aligned with KM strategies due to making complete utilization of their
IC resources and successful business abilities. Therefore, KM strategies assist the acquisition
and improvement of IC and the knowledge expansion of IC supporting SMEs in developing
countries to generate innovation and maintain competitive advantages. In developing
nations, most of the companies are SMEs with insufficient resources and capital concerning
innovation that have led to growing importance among researchers in recognizing practical
solutions to increase the SMEs’innovation in these countries (Lei and Le, 2019). Similarly,
Iranian SMEs have restricted the IC resource (Ale Ebrahim et al., 2010), and Iran attempts to
shift from a central plan economy to a market-based economy; uncertain position and rapid
changes provide challenges for Iranian SMEs to improve their innovation (Madhoushi et al.,
2011). Accordingly, this study explores the ideal combination of IC and KM strategies in order
to find the right pattern to develop innovation in Iranian SMEs.
Briefly, using survey responses from 170 managers/owners of SMEs in Iran, this paper
presents diverse contributions and implications. First, it contributes to the literature by
presenting the IC features of SMEs in developing countries under that firms are likely to
pursue more radical innovation than incremental innovation, and particularly SMEs’HC is a
major factor in exploratory learning, which confirms earlier studies of developed economies.
Second, it contributes to finding an appropriate combination of IC resource with KM
strategies in SMEs. In other words, this study reveals that the personalization strategy of KM
JIC
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builds a collaborative and friendly working environment, group activities and sharing tacit
knowledge for exploratory learning that facilitates radical innovation promotion through the
HC component of IC and personalization strategy assists human resource in improving
incremental innovation within training programs, coaching and mentoring processes and
exploitative learning in SMEs. In this regard, SMEs can benefit from the right interactions
between the HC element of IC and personalization strategy of KM in developing their
incremental and radical innov ation, contributing to the pres entation of many new
opportunities for research related to SME field in developing nations. Finally, this paper
empirically examines Iranian SMEs and, therefore, currently extends limited research in the
field of IC and KM strategy interactions on innovation conducted in SMEs from developing
countries.
The article separates into five sections. Section 1 provides a related conceptual
background, recognizes a literature gap and concentrates on the paper purpose. Section 2
describes the theoretical IC and KM strategies and emphasizes their combination impact on
innovation. The research methodology and the data analyses have presented in section 3.
Section 4 analyzes the findings and discussion. Finally, Section 5 explains the conclusion,
research theoretical and managerial implications and investigates limitations and future
research routes.
2. Literature review
2.1 Intellectual capital
IC is the potential firm ability and self-renewing capability to become an expert and takes an
innovative approach in a changing environment (St
ahle and Hong, 2002). IC considers the
quantity of knowledge that helps organizations gain and sustain competitive advantages
(Wang et al., 2016) and innovating (Wu et al., 2007;Leitner, 2011). According to current
frameworks of IC (Ling, 2013;Wang et al., 2014;Cabrilo and Dahms, 2018), this paper chooses
three main components of IC: HC, SC and RC. HC refers to the experience, learning, education,
skill and striking features of an organization’s employees (Cuganesan, 2005). SC refers to
procedures, systems, internal structures and organizational culture (Lee, 2011). RC refers to
connections with stakeholders, for example, suppliers, clients, governments and society in
general. Moreover, it incorporates additional relational sources, such as firm image and
customer loyalty (Machorro et al., 2016).
2.2 KM strategies
Xie (2009) defined KM strategies as the procedures of collecting, sharing and codifying tacit
and explicit knowledge among employees at the best time and right place. KM could be
defined as a mechanism to generate innovation (Lee et al., 2013) and supports companies in
using knowledge sources (IC) effectively that provided innovative abilities (Sandhawalia and
Dalcher, 2011). In other words, KM presents approaches to formalize experience, expertise
and knowledge and generates innovative competencies (Gloet and Terziovski, 2004). The
current study is according to Hansen et al.’(1999) classification of KM strategies that
differentiates between the codification strategy and personalization strategy; this typology is
based on the different use of information technology (IT) and distinguishing between explicit
and tacit knowledge (Martini and Pellegrini, 2005).
A codification strategy (people to documents) defines as a systematic KM method for
storing, codifying and officially sharing knowledge within employing IT (Choi and Lee, 2003).
This strategy highlights the ability to use, share and store firms’explicit knowledge. It
emphasizes that the employees attempt to explicitly document their expertise and knowledge
more transferable and accessible through IT (Cheng, 2017) such as company policy templates,
user guides manuals, notes of communication, software programs and networks (Ling, 2013).
On the other hand, a personalization strategy (person to person) is defined as workers’mutual
How KM
affects IC –
innovation
relationship
767
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