Resource-Based View of Knowledge Management for Competitive Advantage in an organization

Table of Contents

1- Introduction

2- Problem statement

3- Purpose statement

4- Research Questions

5- Literature review
Knowledge Management (KM)
OKMS (Organizational knowledge management systems)
RBV view of the firm (Resource-based view)
KM (Knowledge Management) in practice
The RBV (resource-based) model of Knowledge Management for competitive advantage

6- Discussion and Analysis

7- Conclusion and Recommendations

8- Reference List

1- Introduction

We are living in the Knowledge era, a new age which is presumably to have a different perspective or point of view and which will involve a new route for doing businesses. (Van Buren, 1999). Smart and speedy is vital to the success of organizations in increasingly changing set of the knowledge age. The expansion and practice of KM (knowledge management) is dramatically and continuously growing in firms.

For reason of development in knowledge management, the speed for acquiring a competitive advantage by means of knowledge grows at faster rate as compared to the past. KM has also been demonstrated for its prospective contribution in creating SCA (sustained competitive advantages) for firms (Grant, 1996). The accusation that knowledge management might be able to generate SCA (sustained competitive advantage) for organizations is provoking; working in this field is relatively underdeveloped, both theoretically and empirically. The recent studies on competitive advantage and knowledge management have stressed description, rather than empirical research knowledge management could achieve to such an advantage.

A possible or potential infrastructure for expanding the conceptual analysis of knowledge management’s impacts on firm's CA (competitive advantage) is the RBV (resource-based view) of the organization which relates the CA of firms with capabilities and resources that are difficult to imitate and firm-specific. The RBV is recently the commanding theoretical view in strategic management published literature, and it concerns with expensive attributes of an organization which are viewed as the basic pillars of SA (competitive advantage).

In RBV (resource-based view), knowledge is viewed as a strategic benefit or asset with the outcome potential to be a source of SCA (sustainable competitive advantage) for a company. The RBV of the organization extends and builds upon the resource-based theory of the organization. It originally developed by Penrose (1959) and enlarged by others (Alavi and Leidner 2001). It encircles the aspects and features to knowledge combination or integration and the four initial method by which knowledge is arranged.

2- Problem statement

In new age of economy now a days it is distinguished by properties such as globalization, interconnectivity, intangibility and business firms are desired to tackle new confrontations and challenges, especially the changing behavior of rivalry combined with the increased complexity and dynamism of the atmosphere in which they work.

One of the latest issues with the organizations is to build strategic capabilities operating with suspicion or uncertainty is KM. In today’s interconnected and global economy, success leaps by efficient and fast exchange of information. SCA (Sustainable competitive advantage) is no longer embedded in financial capitals and physical assets.

Appearing as a strong means for maintaining firm's competitiveness, knowledge management has been widely explored and investigated from various point of view. But, only a confined number of studies have adopted the RBV(resource based view) of the organization to empirically determine the relationships between competitive advantage and KM infrastructure.

Additionally, an evaluation of the literature demonstrates that most empirical evidence has been acquired in the context of industrialized Asian countries or modern Western countries. The probability that such models might require to be modified or customized to suitable specificities of less emerging economies or developed has experienced very little attention to date.

3- Purpose statement

The concept of KM as a strong competitive weapon has been immensely highlighted in the current strategic management literature review, still the sustainability of the CA (competitive advantage) offered by knowledge management capability is not well demonstrated.

In order to fill this gap, this research paper builds the concept of knowledge management as a firm's capability and determines the relationship between knowledge management resources or capabilities and CA (competitive advantage). To offer a better presentation or performance of vital association, through RBV (resource-based view) of the organization explicitly identifies significant of knowledge management capabilities and resources.

Studies on knowledge management and CA (competitive advantage) have emphasized explaining how rather than systematically why knowledge management could lead to such a benefit by means of case specifications. Consequently, the purpose of this paper is to build and apply a model that identifies the conditions under which knowledge management could or could not, be a source of CA (competitive advantage). The RBV (resource-based view of the firm) would be discussed in this research paper.

4- Research Questions

This research paper objects to answer the following questions:

1. Do KMS (Knowledge Management Systems) create competitive advantage?
2. If this is the case, what is the nature or behavior of relationship between KM and competitive advantage?

5- Literature review

For this research, we have directed an organized literature review as a documented evidence-based tool for theory construction. The rest of this study is structured as follows. First of all, the introduction of KM is identified and along with its knowledge management systems. In second stage, the resource-based theory for an organization is established. In the final phase of this literature review, the applicable literature on KM in practice and competitive advantage is observed.

Knowledge Management (KM)

Knowledge Management is the method of acquiring shared skills and excellence in a business and expending them to raise innovation through sustained organizational learning. According to Nonaka, there are two kinds of knowledge exist in any business tacit and explicit knowledge. He explains that Tacit knowledge comprises of conceptual models, views and beliefs of each single worker that are so embedded as to be taken for established. It lives within the individual and is problematic to explain verbally.

According to the research, every worker has immense of tacit knowledge genuinely embedded in their movements and daily activities. It involves commitment to a specific expertise, a specific technology, a product marketplace, or the actions of a team (Nonaka, 1991).

Generally, in businesses or organizations, tacit knowledge is seldom transferred or conversed. Consequently, it is habitually vanished when an employee owning it leaves the company. This can also be perceived as that knowledge which exist in the values and beliefs of the company. For instance it is self-motivated inspiration, which rises to the determination, enthusiasm, and compliance for achievement presented by workers working within specific corporate cultures. Its hard to recognize the exact reason of care-why. However, literature on Knowledge Management admits that great ranks of care-why meaningfully improve the general performance of an organization (Davenport et al., 1998).

There are plenty of examples contain organizational tacit knowledge, which includes such knowledge as fundamental uncertainty plus curious chemistry of resources that delivers sustainable competitive edge to an organization (Michalisn et al., 1997). It is also documented that cultural tacit, which is the incomprehensible knowledge inhabitant in the corporate culture.

On the other hand, explicit knowledge is a data that can be organized, classified or codified since it is simply united and transferred; most of the companies have apprehended this knowledge in well-arranged sources, structures, or functioning tools of the organization, hence building it accessible to all the employees of the companies.

Explicit knowledge is of three types, advanced systems skills, systems understanding and cognitive knowledge. It exists in any firm in the business world The Cognitive knowledge, which also referred as know-what, is a fundamental expertise of a well-organized and disciplined individual that specialists attain through wide-ranging preparation and certification (Quinn et al., 1996).

The second type, advanced skills or ``know-how'' state to the capability to relate procedures or rules of a discipline to challenging practical issues'' (Quinn et al., 1996). The third type of Explicit knowledge is systems understanding, also named as “know-why”. It is a profound consideration of the web of cause-and-effect interactions essentially a chastisement (Quinn etal., 1996; Nonaka, 1991).

It is documented that organizational learning culture or wisdom is the procedure of sustained modernization and innovation by formation of new knowledge (Quinn et al., 1996; Nonaka, 1991). It would be true to say that it is a continuing progression that emerges as workers or employees involve in knowledge effort (Davenport et al., 1998).

According to Nonaka (1991), culture of an organizational learning originates from the iterative development of internalization within the organization and articulation. When a worker's tacit knowledge is apprehended as explicit knowledge, articulation occurs.

The internalization process happens when this apprehended explicit knowledge is then transformed into another worker's tacit knowledge. Consequently, culture of organizational learning arises at the junction of tacit and explicit knowledge through the communication of the numerous workers, divisions or groups in an organization (Nonaka, 1991).

Innovative knowledge is shaped in the progression of organizational learning culture. Hence, Knowledge Management can be observed as the formation of maintainable competitive advantage by constant organizational learning culture (Refer to figure below).

Abbildung in dieser Leseprobe nicht enthalten

Source: Peter Meso Robert Smith, (2000).

Knowledge Management has two key purposes, first to build the business perform as excellently as imaginable in order to protect its feasibility and entire accomplishment. The second objective is to then understand the finest significance of its knowledge possessions.

KM’s objective, therefore, is to influence a company’s intelligent assets in maintaining competitive value or advantage. When it comes to knowledge, they must care of both subjective and objective features, they are extremely reliant on Internet-based tools, and they allow the allocation of knowledge throughout the company.

OKMS (Organizational knowledge management systems)

Organizational knowledge management systems state to the usage of recent data technologies, for instance (extranets, intranets, the Internet, software filters, combined computing, agents, information warehouses) to organize, systemize, improve and accelerate inter and intra organizational knowledge management.

Organizational knowledge management systems state to information systems practically functioned to deal organizational information and knowledge. These are Information Technology-structured methods advanced to maintain and improve the organizational procedures of knowledge formation, storing/recovery, transmission and submission.

Knowledge based systems deals with both the history and the future subsequently they emphasis on issue resolving, they back-up both explicit knowledge and tacit knowledge, they must obviously back-up both subjective and objective features, as they are extremely reliant on IT-based or Internet-based technologies. They support the allocation of knowledge through the company.

According to Nonaka, knowledge formation leads to the classification of an Organizational knowledge management system as it backs organizational learning culture by improving the interchange and allocation of explicit knowledge and tacit knowledge.

According to Quinn (1996), meaning of intelligent or intellectual capital is an Organizational knowledge management system that can be perceived as that which systematizes an organization, know-how, know-what and know-why into explicit knowledge inhabitant in the organization’s catalogues and operational machineries.

Abbildung in dieser Leseprobe nicht enthalten

Source: Peter Meso Robert Smith, (2000).

Figure above shows how knowledge relates to organizational learning and sustainable competitive advantage

It is documented that technology structure includes, software, hardware, middle-ware and procedures that permit for the encrypting and electric interchange of knowledge. There are three kinds of technology structure are originate in an organizational knowledge management system: function oriented technologies, knowledge oriented technologies, and specialty oriented technologies.

First, function oriented technologies such as workplace mechanization, desk-top computing technologies and robotics which enhance operational actions such as data handling, service delivery and production, while gathering the data that finally get distinguished into info and additional into knowledge for usage in an organizational learning culture. The second technology structure is Knowledge oriented technologies such as Web browsers and group-ware openly procedure knowledge effort and the allocation of knowledge within the company. The last structure is Specialty oriented technologies; those enhance significantly expert tasks within the organization.

Abbildung in dieser Leseprobe nicht enthalten

Source: Peter Meso Robert Smith, (2000).

Above figure shows Organizational knowledge infrastructure and its relation to SCA (sustainable competitive advantage)

RBV view of the firm (Resource-based view)

The important element for business prosperity in this competitive atmosphere is defining how to maintain competitive advantage. According to current literature, we can build competitive advantage as we build difficult options about what we will be able to perform and what not. The term competitive advantage is usually demonstrated as the capability to gain interest or returns on investment persistently above the expected criteria for the business (Porter, 1985).

It is documented that a business is tend to have a competitive advantage when it applies a worth producing plan not being executed at the same time by any recent or prospective rivals. Maintained competitive advantage is monitored as the level of excellent implementation that an organization gains when it conceives and executes a value-making strategy that is not occurring at the same time being followed by potential rivals and when these organizations are either incompetent or unwilling to recreate the advantages of this strategy.

Continuous competitive advantage reveals only from strategic assets. According to recent literature, competitive advantage is a role of organizational governance, industry analysis, and the company effects in the shape of resource strategies and advantages.

The RBV (resource-based view) of the organization prevails the strategic management literature and it is also equipped with management MIS (Management Information System) literature (Priem and Butler, 2001). Basically, It was specified to demonstrate how firms attain continuous competitive advantages. Promoter of RBV has illustrated why organizations contradict and how significant it is.

When it comes to RBV, Resource-based theory behaves businesses as potential maker of value-added abilities, and the underlying firm’s expertise includes looking at the resources and assets of the organization from a KBP (knowledge-based perspective). This perspective focuses on the idea of costly-to-copy features of the organization as origins of investment returns and the means to attain competitive advantage and quality performance.

An organization’s resources composed of all assets both tangible and intangible. It also consists of human and nonhuman that are controlled or possessed by the organization and that allow it to conceive and execute value-making strategies. Distinctive capabilities and resources are explained under a series of names, like distinctive competences, invisible assets, internal capabilities, core capabilities, corporate culture, embedded knowledge and special integration of business experience.

Valuable capabilities and resources that are poorly imitable, non-substitutable and uncommon, (Barney, 1991) incorporates the organizational core or unique competencies and hence proves in long lasting competitive advantage.

When it comes to resources, intangible resources are more likely than tangible resources to create competitive advantage force in the organization. Actually, intangible organizational-specific resources such as knowledge allow organizations to boost the value to incoming aspects of manufacturing process.

It illustrates competitive advantage for an organization. This kind of advantage is built over time and cannot simply be copied. Recent literature shows that resources are those possessed by an organization that permit the company to create and executes strategies that develop its effectiveness and efficiency. VRIO framework is used for measuring what kinds of resources would present continuous competitive advantage in the organization. Those were worth carrying for the consumers and organization.

Pizzo and Graham (1996) established structure to assist firms position and control knowledge for competitive advantage. The procedure of executing the structure“Configuring for Knowledge” has four dynamic aspects developed in a closed loop system and is centralized on the balance between institutional and fluid domains that will build operating strategic flexibility and efficiencies.

Knowledge originates and develops from improvisation, individual intuition and personal networks in the fluid domain, .On the other hand, in the institutional domain, work is controlled, measured and structured. The elements were:

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