The knowledge-based view has identified innovative knowledge as what companies require to dominate in an industry. Past studies have dealt with knowledge management too broadly without considering specific aspects of knowledge management which has led to a limited level of understanding on the extent to which the comprehensive nature of knowledge management has influenced firms’ performance. Even though some companies have implemented knowledge management, there is no conclusive empirical evidence on the influence of knowledge management on performance. It has been noted that performance of Commercial Banks suffer because knowledge is hoarded in scattered silos, fragmented by division, department, region and a host of other organizational factors such as culture, processes and management style. It is against this background that this study sought to investigate the relationship between knowledge management and performance of Commercial Banks in Kenya. The specific objectives of the study sought to determine the relationship between knowledge conversion and performance; to establish the relationship between knowledge transfer and performance; to determine the relationship between knowledge application and performance; to establish the mediating effect of human capital repository on the relationship between knowledge management and performance; and to determine the moderating effect of firm’s culture on the relationship between knowledge management and performance of Commercial Banks in Kenya.
To achieve these objectives, the study adopted explanatory and cross-sectional survey design. The target population of this study comprised of all the forty three Commercial Banks in Kenya. The unit of observation was the functional area in each bank, whereas the unit of analysis was Commercial Bank. Five functional areas were identified in each bank comprising human resource, finance, marketing, information communication technology, and operations. This study used primary and secondary data. Primary data was collected using a semi-structured questionnaire. The questionnaire was administered using drop-and-pick later method. Secondary data was collected using document review and was used to validate information collected through the questionnaire. The response rate in this study was approximately seventy three percent which was considered sufficient for making inferences and drawing conclusions. Descriptive statistics was used to summarise the survey data and included percentages, frequencies, means, and standard deviations. However, inferential statistics involved regression analysis and was used for testing hypotheses and drawing conclusion. Results from quantitative data analysis were presented using figures and tables. Qualitative data was analysed on the basis of common themes and presented in narrative form. The findings of the study established that knowledge management positively influence performance. Moreover, knowledge conversion, knowledge transfer and knowledge application were found to be statistically significant. Human capital repository was found to partially mediate the relationship between knowledge management and performance. Furthermore, the findings also revealed that firm’s culture moderates the relationship between knowledge management and performance. Management of Commercial Banks can use these findings to enhance utilization of organization’s knowledge base and firm’s absorptive capacity. Moreover, management of other knowledge-intensive organizations can use these findings to formulate knowledge management policies and promote knowledge management practices.
CHAPTER ONE: INTRODUCTION
Background of the Study
A key ingredient of the theory of the firm is its attempt to explain performance heterogeneity among firms, an issue that has been in the focus of strategic management research over the years (Hughes & Morgan, 2007). The resource-based view (RBV) holds that companies gain sustainable competitive advantages by deploying valuable resources and capabilities that are inelastic in supply (Grunert & Hildebrandt, 2004). RBV focuses on characteristics of firm’s resources that contribute to performance in form of competitive advantage. It assumes resource heterogeneity between competing firms, and further contends that these resources are not mobile, which makes long term, sustainable competitive advantage possible based on internal configuration of strategically relevant resources.
American Management Association (AMA) observes that there are five major drivers of organizational performance (AMA, 2007). These drivers are shown in Figure 1.1 and include strategic approach, leadership approach, values and beliefs, processes and structures, and customer approach. Each of these factors interacts with and influences the others, creating a whole system. A change in one factor creates changes in the others. Subsequently, the system tends to be in continual flux. High-performance organizations tend to establish clear visions with clearly articulated philosophies, and have leaders, managers and employees who behave consistently with the strategic plan and company’s philosophy.
Source: Overholt, Granell, Vicere and Jargon (2006)
These organizations also tend to have clear customers’ approach, and build the necessary infrastructure and processes to support their customers’ approach. Moreover, such organizations tend to be clear about what behaviors employees must exhibit to execute organizational and departmental strategies. Furthermore, these organizations have processes that reinforce strategy, setting up work flows and tasks that most effectively enable employees to meet internal and external customers’ needs within the limits of their strategy. In addition, high-performance organizations typically have a set of well-established values that are the deep drivers of employee behavior and are well understood by the vast majority of employees. The values and beliefs are embedded in the organization and are consistent with the company’s approach to leadership (AMA, 2007).