Knowledge Management and Competitive Advantage

In the current digital era, knowledge is one of the most critical factors for an organizations survival. Sound knowledge management is critical for an organization’s sustained competitive advantage in the ever-changing business world. Sustainable competitive advantage relies on building and exploiting an organization’s key competencies. The resource-based view of knowledge management in an organization can be viewed as a key asset with the potential of providing a competitive advantage to firms that use it. Competitive advantage is attributed directly to an organization’s continuous technical innovation. However, these organizations are not able to innovate in isolation and need external relationships with other firms in order to complement their knowledge and develop better and faster. In this sense, this paper seeks to examine how the resource-based view model of knowledge management is used in the creation of competitive advantage to an organization.

Key Words: Knowledge management, Resource-Based View, Competitive Advantage

Introduction

Over the past decade, the business environment has changed rapidly due to technological developments in how business is done. It is difficult to predict how the future will be. However, the new technological era is likely to provide a different business outlook in future. Firms seeking to better their services have to embrace these changes. Technological advancements and changes are occurring rapidly and it is crucial that firms that seek to have a competitive advantage over their peers innovate well and quickly.

Many organizations are increasingly adopting and incorporating the practice of knowledge management to spearhead their competitive advantage strategies. The race to achieving competitive advantage through knowledge has been increasing rapidly. Many organizations have realized that managing their intangible assets such as culture, brand and stakeholder relationships, and the organization’s reputation is key to providing a sustainable business advantage. The ability to develop the value of intangible assets in an organization provides core competencies required in providing a competitive edge to organizations. In such organizations, knowledge management is crucial to business success. It is generally agreed that in the future, knowledge management will provide one of the most important factors for competitive advantage in organizations (Dasguta & Gupta, 2009).

In today’s interconnected and global economy, fast and sufficient exchange of information is a factor that contributes to business success. Competitive advantage is currently no longer limited to financial muscle and physical assets but in the efficient utilization of intellectual capital. A firm’s knowledge is at the center of its ability to create competitive advantage. The resource-based view of this knowledge management seeks to understand how organizations and firms are able to create and sustain competitive advantages. In the resource-based perspective, researchers assume that firms have discrepancies in resources and capabilities (Torres, Ferraz & Rodrigues, 2018). The discrepancies play a big role to determine the competitiveness of a firm. This is because competitiveness is determined by the ability of an organization to build and organize their key resources and capabilities in a way that provides a competitive advantage.

Knowledge management has been highlighted for its conceptual role in developing sustained competitive advantages for organizations. The assertion that knowledge management may be able to develop key competitive advantages to organizations is still conceptual and research in this area is relatively still in the development phase. Research in the resource-based view of knowledge management in relation to competitive advantage emphasizes on the how rather than why knowledge management is critical in creating competencies that enhance competitive advantage. Thus the purpose of this research is to develop a framework that shows the scenarios under which knowledge management can be used or cannot be used as a means of achieving competitive advantage. In this paper, the resource-based view of the firm (Dasguta & Gupta, 2009) is applied in developing the model of implementing knowledge management.

A systematic literature review is conducted as a tool for gathering the relevant evidence and theory building. The paper is organized by first defining knowledge management and knowledge management systems in the context of providing competitive advantages to firms. The resource-based perspective of the firms is reviewed followed by an examination of the literature on knowledge management in relation to competitive advantage. A proposed model for knowledge management is then conceptualized and implications are drawn up.

Knowledge Management

It is generally agreed upon that sustainable competitive advantage can be achieved through the strategic use of knowledge management. There is an increased awareness in organizations of the potential and significance of the use of knowledge to enhance efficiencies and promote competitiveness. The governing principle behind this line of thinking is that knowledge management and its application in the operation of a firm is a means through which creativity can be created and developed (Dasguta & Gupta, 2009). Knowledge management in this sense means that competencies are organized in a way that enhances the overall performance of an organization. Knowledge management can thus be said to be key to a firm’s survival. Sound application of knowledge management strategies is a complex process involving significant outflows of resources in an organization. Knowledge management has therefore gotten attention in the business world and has become a common topic in the business world (Meihami & Meihami, 2014).

Knowledge management has found applications in a wide range of activities that seek to create, manage and enhance intellectual competencies in an organization. There is no exact agreement as to what knowledge management is but it is generally agreed that knowledge management can be described as a convergence of ideas and resource-based theories of an organization. The ideas and resources include intangible assets of the firm, business process optimization and re-engineering, and organizational learning (Dasguta & Gupta, 2009). Knowledge management can also be described as a discipline that integrates technology, culture, organizational learning, business strategy and business processes (Torres, Ferraz & Rodrigues, 2018).

Knowledge management can be thought of as an intentional way or strategy of combining the right knowledge with the right people in ways that will enhance the overall performance of the firm. In this sense, knowledge management is used as a way of encouraging individuals to share their knowledge by creating scenarios and systems in which an organization can be directed to perform as innovatively as possible and to realize the value of its intellectual assets. The purpose of knowledge management is, therefore, to align an organization’s intellectual assets in a way that enables the development of sustainable competitive advantage.

Knowledge Management Systems

Knowledge management systems are grounded in both theory and practice. Knowledge management systems employ an extensive array of specific knowledge to solve problems in an organization and support key decisions in the organization. It involves the use of modern technology such as computing and the internet to enhance the firms internal and external knowledge management. Processes in such systems include the creation, storage, transfer, and application of knowledge with an aim of enhancing organizational knowledge (North & Kumta, 2018). Knowledge management systems address both the future and present problems. They focus on problem-solving and support the development of knowledge in objective and subjective perspectives.

Knowledge management systems can be understood as a framework of activities that are designed to produce decisions with an aim of ultimately creating value and producing gains in income and market share. Knowledge management seeks to achieve the goal of differentiation from competitors in such a way that sustainable competitive advantages can be achieved.

Competitive advantage is achieved by firms that use their knowledge in the best ways as opposed to firms that have the best knowledge and don’t use it well (Schilke, 2014). Schilke argues that unless the knowledge is implemented in the real business environment appropriately, then all other phases of the knowledge management process will be deemed to have failed. Organizational learning from the knowledge management is key in developing a firms competencies. Such evaluations indicate whether the firm’s knowledge initiatives returned tangible results. This kind of organizational learning is complex and often ignored by various firms. Knowledge implementation and review helps to link the gap between the possession of knowledge and its implementation in the business environment.

Resource-Based View of the Organization

The best way for firms to be successful in the very competitive business environment is finding ways to achieve sustainable competitive growth. Competitive advantage is created by making tough decisions on what a firm will or will not do (Dasguta & Gupta, 2009). A firm is said to have a competitive advantage when it implements a good value creation strategy that is not employed by its competitors. The sustained competitive advantage is observed in organizations having a certain degree of consistent exceptional performance and this strategy is not implemented by other competitors (Osman & Ngah, 2016).

The resource-based view of the organization seeks to explain how organizations are able to achieve sustainable competitive advantages. The resource-based model considers various organizations as potential creators of value and key competencies that enable an organization to achieve competitive advantage by viewing its intangible assets from a knowledge-based perspective. An organization’s resources consist of all its tangible and intangible assets that are directly controlled or owned by the organization. An organization’s resources that are unique, valuable and non-substitutable form the organization’s core competencies that may give it a lasting competitive advantage (North & Kumta, 2018). According to (Omotayo, 2015), Intangible assets in an organization are better placed at providing competitive advantages than tangible resources. Specifically, intangible assets such as knowledge enable firms to create value and hence competitive advantage. Such competitive advantage is achieved over a long period of time and cannot be easily copied (Omotayo, 2015).

Knowledge Management for Competitive Advantage-A Resource-Based Approach

Knowledge management is a critical ingredient in an organization’s desire to solve problems, innovate and create value. This section addresses how and why competitive advantage is achieved through the appropriate implementation of knowledge management. Traditionally, competitive advantage can be created in various ways such as location, size, or even through luck. To create a lasting competitive advantage, knowledge management systems are employed to support key assets, what an organization does well, and optimize what the organization doesn’t do well. In order to create value and competitive advantage, an organization’s intellectual assets should be valuable, rare, not easy to imitate and non-substitutable. The prerequisite of implementing knowledge management is an understanding of the basic elements that are required in the management and use of organizational knowledge.

The most important elements that form part of organizational knowledge are its people, processes, and its technologies. Innovations that are able to exploit an organization’s tangible and intangible assets are likely to create or add to the value of such resources and hence competitive advantage.

When the application of knowledge management does not add value to the firm, it can be seen as simply counterproductive and wasteful (Omotayo, 2015). Knowledge generally assumed to be positive. Assuming that knowledge is always positive, is not good for any organization. As has been discussed, knowledge is a critical ingredient in an organization and provides these firms with sustainable growth. However, knowledge alone will not add value to an organizations’ competencies unless it is relevant to what the organization seeks to achieve.

Knowledge management systems have been demonstrated in the technical literature to have significant impacts on competitiveness to organizations that employ it appropriately (Sakas & Vlachos & Nasiopuolos, 2014). Literature in resource-based view of organizations suggests that competitive advantages can be created and sustained through knowledge. The resource-based model is an appropriate theory that explains how knowledge management systems are able to create advantages for organizations employing them in their strategies.

Conclusion

The importance of sound knowledge management practices to organizations has been discussed from a resource-based perspective. The effective management of knowledge has also been described as a key factor in firms seeking to create value and achieve competitive advantages over their competitors. The resource-based view establishes that the appropriate utilization of an organization’s resources will help it to achieve competitive advantages. As such, processes and technology in isolation are not sufficient to take a firm to new heights, but its people and the knowledge they possess play a vital role in ensuring a firm’s success. Therefore, for a firm to be successful and achieve competitive advantage over its competitors, attention must be paid not only to the firm’s tangible assets but also the firm’s intangible assets such as its people and the knowledge the people possess.

Knowledge management in this paper has been described as a critical tool that is related to the objectives of an organization and the strategies employed by the organization. It is thus a very useful tool in management. Knowledge management may be used in reducing an organization’s operational costs or in adding value to products to improve customer satisfaction. Therefore, the effective management of knowledge using a resource-based perspective has the ability to significantly influence how an organization does its business in minor operations such as daily tasks and the more complex strategic decision-making activities.

References

Dasgupta, M., & Gupta, R. K. (2009). Innovation in organizations: A review of the role of organizational learning and knowledge management. Global Business Review, 10(2), 203-224.

 Kaveh, D., Bamipour, E. M., Far, M. S., & Far, M. S. (2015). The relationship between knowledge management and competitive advantage: A case study in small and medium-sized companies in the packaging industry of Khorasan Razavi. European Online Journal of Natural and Social Sciences, 4(1), 650.

North, K., & Kumta, G. (2018). Knowledge management: Value creation through organizational learning. Springer.

Meihami, B., & Meihami, H. (2014). Knowledge Management a way to gain a competitive advantage in firms (evidence of manufacturing companies). International letters of social and humanistic sciences, 3, 80-91.

Omotayo, F. O. (2015). Knowledge Management as an important tool in Organisational Management: A Review of Literature. Library Philosophy and Practice, 1.

Osman, C. A., & Ngah, R. (2016). Assessing sustainable competitive advantage in relation with intellectual capital, knowledge management and innovativeness in women-owned SMEs in Malaysia. Journal of International Business, Economics, and Entrepreneurship, 1(1), 1-15.

Sakas, D., Vlachos, D., & Nasiopoulos, D. (2014). Modeling strategic management for the development of competitive advantage, based on technology. Journal of Systems and Information Technology, 16(3), 187-209.

Schilke, O. (2014). On the contingent value of dynamic capabilities for competitive advantage: The nonlinear moderating effect of environmental dynamism. Strategic management journal, 35(2), 179-203.

Torres, A. I., Ferraz, S. S., & Santos-Rodrigues, H. (2018). The impact of knowledge management factors in organizational sustainable competitive advantage. Journal of Intellectual Capital, 19(2), 453-472.