LITERATURE REVIEW - The Effect of Leadership Behavior, Knowledge Management Practice, Corporate

In this chapter, researchers provide literatures relevant to the focus of this research. With these relevant literatures researchers are able to address knowledge management sources of systemic influence. Besides, this study’s conceptual framework is according to Debowski’s (2006) research of knowledge management source of systemic influence.

Organizational Performance

Ruekert, Walker and Roering (1985) they divide organizational performance into three categories: effectiveness, efficiency and adaption. Elenkov (2002) define organization is the degree of organization achieve their business. Generally speaking, the measurement of organizational performance divided into financial and non-financial indicators. Organizational Performance will be measured using a 10 item scaled from Kaplan and Norton (1992) and, Lee and Choi (2002). These 10 items are divided into Innovativeness, Customer Satisfaction and Financial Performance.

According to Richard et al. (2009) organizational performance encompasses three specific areas of firm outcomes: (a) financial performance (profits, return on assets, return on investment, etc.) (b) product market performance (sales, market share, etc.) and (c) shareholder return (total shareholder return, economic value added, etc.). Specialists in many fields are concerned with organizational performance including strategic planners, operations, finance, legal, and organizational development In recent years, many organizations have attempted to manage organizational performance using the balance score card methodology where performance is tracked and measured in multiple dimensions such as: financial performance (e.g. shareholder return), customer service, social responsibility (e.g. corporate citizenship, community outreach), employee stewardship.

Organizational performance is combine with two items one is tangible asset other is intangible asset. Actually, market leadership is intangible asset and financial performance is tangible asset.

Table 2.1

Organizational Performance Evaluation Indicator

Author Year Organizational Performance Evaluation Indicator Venkartrama & Ramanujam 1986 1.Finance performance

2.Industry performance 3.Organizational effectiveness

Nkomo 1987 1.Traditional finance performance indicator 2.Human resource management performance indicator

Demirag 1987 1.Standard of marketing. market share, EPS , cost control , whole performance

2.Technology development, product design, employee’s productivity, marketing , reputation and customer service

Bird & Beechler 1995 1.Human resource management performance 2. Company’s performance.

Delaney & Huselid 1996 1. Cognition management performance 2. Cognition marketing performance Liu 1997 1.Financail indicator

2.Human resource management performance indicator

Su 1998 1. Financial indicator 2. Marketing Indicator 3. Compatibility indicator

4.Human resource management performance indicator

5. Company’s whole performance.

Knowledge and Knowledge Management

Definition of Knowledge Management

As the matter of fact, there has been confusion about what is knowledge management.

Until some paper begin to define the term. (Wilson, 2002) .This term became popular around 1996 and 1997. In1996, World Bank made a commitment to become a global knowledge bank;

from that time it has taken many steps to improve its information systems and develop its knowledge-sharing activities. Also, foster broader global knowledge-sharing projects, in order to enhance the Bank’s, their partners’ and their clients’ access to and sharing of ideas (Wolfensohn, 1996).

Wiig (1995) pointed out knowledge management is a series of acquiring self or other’s knowledge. Through coordinate and determine with knowledge to help organization achieve its goal. Knowledge creation, acquiring and the process of using knowledge can help organization to improve performance (Laurie, 1997). Spek & Spijkervet (1997) they think knowledge management is an ability which organization can help their employee to control and manage their knowledge. But execution of knowledge management is not easy, organization need to come out strategy to develop and apply knowledge management. There are five basic activity of knowledge management: knowledge development, knowledge contribution, knowledge transfer, knowledge security and knowledge combination.

Another author Debowski (2006) states that Knowledge Management is the process of indentifying, capturing, organizing, and disseminating the intellectual assets. These activities are critical to the organization’s long-term performance. Although there are many definitions of KM (Table 2.2) one feature is common. That is the ability for an organization to share knowledge effectively in order to maintain a competitive advantage.

Table 2.2

Definitions of Knowledge Management

Author Year Definition

Wiig 1995 Knowledge management is a series of acquiring self or other’s knowledge. Through coordinate and determine with knowledge to help organization achieve its goal.

Laurie 1997 Knowledge creation, acquiring and the process of using knowledge can help organization to improve performance

Spek &

Spijkervet

1997 Knowledge management is an ability which organization can help their employee to control and manage their knowledge. There are five basic activity of knowledge management: knowledge

development, knowledge contribution, knowledge transfer, knowledge security and knowledge combination.

Bonifacio et.al.

2002 Knowledge Management is the process of creating, codifying and disseminating knowledge within complex organizations.

Huysman and de Wit

2000 Knowledge management is about the support of knowledge sharing.

Debowski 2006 Knowledge Management is the process of indentifying, capturing, organizing, and disseminating the intellectual assets that are critical to the organization’s long-term performance.

Taxonomies of knowledge

The concept of classifying knowledge into different types is important because it can guide theoretical developments in the knowledge management area (Alavi & Leidner, 2001).

Generally speaking, knowledge can divide into two types: explicit knowledge and tacit knowledge. Polanyi (1967) pointed out tacit knowledge is root in personal’s experience and it link with situation. Tacit knowledge is hard to express and formalize. However, Explicit knowledge can express by formal systematic language.

Another author Nonaka & Takeuchi (1995) classify knowledge according to its ability to be transmitted. They state that there are two types of knowledge: Tacit knowledge which is invisible and expressible, hard to formalize and communicate with others. Alsom tacit knowledge is rooted in an individual’s actions and experiences. Explicit knowledgecan be expressed in words and can be transmitted through formal systematic language.

Leonard-Barton (1995) classifies knowledge according to the domain in which it is used.

He states that knowledge can be Scientific, Industry Specific or Firm Specific.

Harem et al. (1996) classify knowledge into four categories on the process of knowledge transfer.1) Scare knowledge which can know what of knowledge in sufficient. 2) Knowledge about other’s knowledge which can know what kind of people who have enough knowledge. If someone needs help, the knowledge-lack person can find appropriate people for help. 3) Behavioral knowledge which means knowledge can influence behavior. Knowledge includes formal knowledge and informal behavior knowledge. 4) Task-oriented knowledge which is mainly about how to use knowledge to complete the mission.

Some author classifying knowledge from the view of knowledge transfer in transnational company. 1) Technologic knowledge, such as the knowledge about product development and manufacturing process. 2) Sales and marketing knowledge, such as the knowledge about marketing and customer. 3) Strategy knowledge, such as the knowledge about competitor and strategic alliance (Schulz, 2001).

Table 2.3 below gives some of the more common classifications of knowledge including the ones mentioned above. This list is not exhaustive but gives a good picture of the taxonomies of knowledge.

Table 2.3

Classification of Knowledge

Author(s) Classification Purser &

Pasmore(1992)

Fact, Mode, Schema, Intuition, Tacit knowledge

Collins(1993) Symbolic type, Embodied, Embrained, Encultured Nonaka & Takeuchi

(1995)

Tacit, Explicit

Quinn(1996) Know how, Know what, Know why , Care why.

Harem (1996) Scare knowledge, Knowledge about other’s knowledge, Behavioral knowledge, Task-oriented knowledge

Schulz (2001) Technologic knowledge, Strategic knowledge, Sales and marketing knowledge

Bock (2001) Generality and Analyticity: Pattern, Theory, Case, Know-how Representativeness: Tacit, Implicit, Explicit

Housel & Bell (2001) Label, Process, Skill, and people knowledge Tiwana (2002) Tacit, Explicit

Knowledge Management Process

Definition of Knowledge Management Process

Knowledge Management Process is including of acquiring, collaborating, integrate and experiment. An examination of these characteristics can help us to group them into four dimensions of process capability- acquire knowledge, converting it into useful form, applying or using it, and protecting it (Gold, 2001).

Alavi and Leinder (2001) developed a systematic framework which can used to analyze and discuss the role of information technologies in organization’s knowledge management activity. Actually, knowledge system consists of four activities to conduct “knowledge process:

(1) Creation, (2) storage, (3) transfer, and (4) application. Knowledge system represents both the cognitive and social nature of organizational knowledge.

Knowledge Acquisition

When organization found out they lack some specific knowledge, it will generating knowledge gap. Therefore, they need to acquit new knowledge. Usually, there are two paths to acquit knowledge- internal acquisition and external acquisition (Beckett et al, 2000).Organization can build innovative corporate culture and climate, let employee to develop their ability which they need. Knowledge is recognized as a key source for sustaining competitive advantage (Grant, 1996). Besides, companies can cooperate with each other, using merger and acquisition to get new knowledge or technology to help organization to integrate its resource and knowledge transfer. An Organization has three strategies to acquit knowledge (1) mock (2) copy the experience on the same situation (3) searching for replacement (Bhatt, 2000).

Knowledge Creation

“Organizational knowledge creation is the process of making available and amplifying knowledge created by individuals as well as crystallizing and connecting it to an organization’s knowledge system “(Nonaka et al., 2006).

Nonaka and Takeuchi (1995) developed knowledge conversion model which can helped us to know how to connect the processes of transferring and creating knowledge. The ideal knowledge creation in organizations is a process which can enforce the creation of knowledge by individuals. Also, adding its results to the knowledge network of the organization. The basis of knowledge creation in organizations is continuous interaction among individuals, and continuous conversion from tacit into explicit knowledge.

The knowledge conversion process is represented by Nonaka and Takeuchi (1995) as a spiral, the conversion modes succeeding indefinitely, creating new knowledge in the organizational environment. See Figure 2.1

Figure 2.1. The knowledge spiral as described by Nonaka & Takeuchi (1995)

Knowledge Storage

Bonora and Revang (1991) classify the knowledge storage into “mechanic storage .Mechanic storage means the storage of propositional and objects knowledge. Also, organic storage means the storage of individual and subjective knowledge. Corporate-level knowledge can be stored by employee. The knowledge and activities which exist in company allows knowledge to become stored in the routines of company.

Knowledge Transfer

When knowledge begins to diffusion from individual to other place, it can be knowledge transfer (Roberts, 2000). Other author pointed out knowledge transfer is the exchange relationship among people (Bresman et al, 1999). Davenport and Prusk (1998) define there are two activities within knowledge transfer. 1) Transmission which means express or deliver knowledge to receptor. 2) Absorption means the knowledge can be absorb by individual or group.

Davenport and Prusk (1998) also mention knowledge transfer’s purpose is that improve organization’s process and add organization’s value. Zander (1991) pointed out a successful knowledge transfer is knowledge accepted unit can absorb new knowledge. Lin (2003) argues knowledge transfer is control by organization. This transfer is more formal, and there has clear supplier and receptor. Besides, it has more clear direction of where knowledge can be transfer to.

Knowledge Sharing

Tan & Margret (1994) define knowledge sharing is kind of exchange. Through effective communication and understand each other’s mind which can help organization to achieve the goal.Knowledge sharing is an activity that knowledge is exchange among people, team member, an organization or a community. Knowledge builds a valuable intangible asset for company’s creating and sustaining competitive advantages (Miller & Shamsie, 1996). Senge (1997) define knowledge sharing by the view of leaning. He thinks knowledge sharing is one of process of learning. This learning process can help others to development effective action.

Hendrinks (1999) define knowledge sharing by the view of communication. He thinks there are two issues about knowledge sharing. 1) Knowledge owner who can through speech, write and other ways to communicate with others, that is externalization. 2) Knowledge re-constructor who can acquire, understand knowledge by mock, reading and listening. That is internalization.

Knowledge Compatibility

Compatibility is that user considering knowledge management system is suited for their value, experience and level of need. Compatibility can influence user’s willingness about using IT directly or indirectly (Rogers, 1995). Sultan and Chan (2000) point out compatibility including new system can operate with existing system, software and past experienced. When user using knowledge community to search knowledge and using their similar way to operate, also linking to experienced. These can help positive knowledge searching attitude.

Knowledge Management and Human Resource Practice

It is important for firms to use the employee’s participation and involvement when they develop knowledge management activities. HR practices are the main approaches used to reinforce employees’ skills, attitudes, and behaviors which the company requires (Youndt et al., 1996).

HR practices like recruiting, trainings, participation, performance evaluation, and compensation and benefit are related to increase commitment, reduce turnover rate. Also, it can increase performance through their impact on employee development and motivation (Huselid, 1995). Organization can use HR practices to provide employees with skills, resources which they need to execute knowledge management. Employee’s selection and recruitment with skill and attitude can help organizations to knowledge. Knowledge can come from diverse sources and idea generation(Scarbrough, 2003).

Firms need to offer internal and external training opportunities to develop and nurture required skills and capabilities of employees (Nonaka & Takeuchi, 1995). Each member of the organization should be evaluated the effectiveness of their actions and realize how much they have achieved in knowledge management activities.

The compensation structure should takes into account both extrinsic and intrinsic rewards (Scarbrough, 2003) and reward creativity, risk taking attitude, problem solving ability in order to promote knowledge diffusion and sharing (Argote et al., 2003). Individuals may put more effort into knowledge management activities if compensation systems reward the contribution to knowledge and the acquisition and exchange of knowledge (Scarbrough, 2003).

Knowledge Management and Organizational Performance

In the current competitive environment, many organizational have realized that the only source of sustainable competitive advantage they can use in knowledge management including internal and external (Carlucci, 2004). Also, Tecce (1998) pointed out that the competitive advantage of organization in today’s economy stems from the difficult to replicate knowledge asset and the manner in which they are deployed. Carlucci (2004) claim that knowledge asset are as important for company’s advantage and survival. It’s more important than physical and financial asset.

In fact, KM is for support the economic goal of continuous innovative as a decisive factor of competitive advantages. As noted by the observers in strategic management, effective KM through the development of capabilities should contribute to key aspect of organizational performance (Gold-Malhortra & Segars, 2001).

In summary, KM is at the heart of organizational performance improvement and value creation (Carlucci, 2004). And the ability to continuous exploring knowledge related to the organization’s goal of sustaining survival through growth and profitability.

Corporate Culture

There are several popular meanings attributed to the term “culture”, it is generally agreed in organizational research that culture is reflected in the practice, value, beliefs and underlying assumption of formal and informal groups(Schein, 1985).

Corporate culture is the pattern of basic assumption that a given group has invented, discovered, or developed in learning to cope with its problems of external adaption and internal integration-that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems. Schein (1985) goes on to express his view that culture is a learned product of group experience. Culture is found, therefore, where there is a deﬁnable group with a signiﬁcant history, regardless of the structural level of analysis. An organization’s culture is initially formed as a result of early experiences and the inﬂuence of early leaders. The decision of high manager will make great impact on corporate culture (Hambrick & Mason, 1984).

Wang (2001) also pointed out corporate culture can help organization to build vision, team work and integrate resource. Thus, corporate culture can motivate group member and develop into organizational core competency. Denison (1984) also point out corporate culture and behavior’s characteristic affect company’s financial performance. Then, he think that decision making participation culture have better financial performance. Therefore, corporate culture and financial performance exists cause and effect relationship.

The Elements of Corporate Culture

Kono (1990) mention the element of corporate culture are shared value, the way of accepting goal , the way of collecting information , the way of making idea and the opinion of adventure. Deal & Kennedy (1982) were among the earliest authors to propose an integrated perspective of culture, identifying four distinct cultural patterns based on primary dimensions of risk-taking orientation and the speed/availability of feedback on actions. They proposed that the rituals, heroes, and practices of a dominant culture created a lack of legitimacy for alternative courses of action or cultural views. These early lessons learned about innovation and culture are

important, and they argued that unless an organization already possessed a risk-taking, innovative quality in its culture, it would be difﬁcult to engender it due to cultural resistance.

Table 2.4

The Elements of Corporate Culture

Author Year The element of consisting corporate culture

Deal & Kennedy 1982 1.organization’s environment 2.shared value 3.hero 4.heroes 5.

social net-work

Bettinger 1989 1.attitude of reforming organization 2.focusing 3.standard and shared value 4.rituals 5. care people 6.reward and punishment 7.

openness, communicate and instruction 8.conflict solving 9.maket and customer-oriented 10. stimulation and self-esteem 11.

commitment 12.team work

Kono 1990 1.shared value 2.infomation collecting 3.opinion 4.coporation 5.commitment 6. employee’s value

Grey & Gelfond 1990 1.clear direction 2. decision making 3.organizaion integration 4.management style 5.performance oriented 6. organization’s vitality 7.reward 8.management development 9. organizational image.

Fleissner & Arnulf 1990 1.value 2. morality 3. Employee’s attitude 4. Internal and external information of organization

Narayana & Nath 1993 1. belief 2.norm 3. shared value 4.commitment

Schien 1997 1.the same norm 2. shared value 3. the setting of organizational function

Types of Corporate Culture

According to the definition of corporate culture, scholars think that each organization have different types of culture due to their structure and environment. So, some scholar put corporate culture into different types of corporate culture.

Table 2.5

Types of Corporate Culture

Authors Year Types of Corporate Culture

Ansoff 1979 1.stable culture 2.reactive culture 3. anticipate culture 4.exploring culture

Deal & Kennedy 1982 1.macho culture 2.work hard/ play hard culture 3. bet your company 4.process culture

Ellen & Wallach 1983 1. bureaucratize culture 2. innovative culture 3 .supporting culture

Cameron 1985 1.supporting culture 2. innovative culture 3.bureaucratize culture 4.effective culture

Aaker 1986 1.series of shared value 2. Series of behavior norm 3.a symbol or symbolic activity

Quinn 1988 1.development culture 2.market oriented culture 3. clan culture 4. bureaucratize culture

Reimann & Weiner 1988 1.entrepreneur culture 2.strategic culture 3.blind loyalty culture 4. xenophobic culture

Petrock 1990 1.clan culture 2.level culture 3. developmental culture 4.

market oriented culture

Goffee & Jones 1998 1. networked culture 2.communal culture 3. fragmented culture 4.mercenary culture

Corporate Culture and Organizational Performance

A lot of culture-performance researcher has focused on a trait approach. A research for some traits, values which supposed to result in superior performance. Sihel and Martin (1990) referred to as the research on direct culture performance link.

An organization has strong culture which usually defined to be shared by all employees.

Well develop culture can be like rituals and organization stories are given to illustrate particular culture traits. The strength of culture values which held among employees can help to predict future organizational performance especially financial performance.

Gordon and DiTomaso (1992) pointed out a culture value of adaptability is also can help to predict performance. Both of string culture and appropriate culture from the standpoint of content will produce positive results.Besides, Chatman and Jehn (1994) found out that company in different industries develop different culture patterns to suit their business demands.

Leadership Behavior

Definition of Leadership

Leadership is the process of social influence which one person can support others in to complete certain task or achieve the goal (Chemers, 1997). Ting (2002) define leadership is that offer someone who has authority, and use appropriate attitude to teach team member basic skill and take care of employee. Then, employee can accept his or her command and easy to influence by leader. Besides, employees are willing to follow to achieve the goal. Yukl (2002) argues that leadership can be different depend on leader’s point of view and different situations. Robbins

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