Introduction
Every day, organizations strive to find new ways to increase their competitive edge and put themselves a step ahead of other organizations while also boosting their sustainability. Change is paramount at every level, including business, with the ever-evolving world we currently live in. Innovation has been a central topic discussed by various scholars who agree that innovation is paramount for sustainable development to be witnessed (Dasgupta et al. (2009). Often, businesses try to find ways to formulate new products and services in their quest to improve their sustainability but some fail which leads to their premature closure. Additionally, crises like the recent Covid-19 pandemic also pose threats to businesses’ sustainability, especially those whose innovative capabilities are below standard. That proves that innovation is central to ensuring an organization’s success through increased profits and increased target market reach. According to Momaya et al. (2019), the rapid economic growth witnessed globally is majorly attributed to the surge in the competitiveness of most companies. Through innovations witnessed in recent decades, companies have grown and adapted to change, which has positively impacted the economies of most countries. However, Momaya et al. (2019) add that some countries perform better compared to others in matters of competitiveness due to various factors, including the availability of resources, and education, among others.
Despite globalization bearing immense positive impacts worldwide, it has also intensified the need for increased innovations as companies in different countries with similar products have to now compete for similar markets despite possible existing country-specific disadvantages. On the upside, globalization has enabled faster and more reliable communication which has helped companies hire professionals who work remotely from different countries, especially in matters of technology or IT. Most companies that utilize this advantage have been in a better position in creating, sharing, and utilizing knowledge as they have information from a global perspective which helps them become more innovative and thus capture bigger markets. In this paper, I discuss the extent to which the creation, sharing, and utilization of knowledge are central to the resource-based view of competitive advantage with major reference from Dasgupta et al. (2009). Through this, I hope to educate and inform on the importance of knowledge management for innovation and boosting any organization’s competitive edge.
Resource-Based View of Competitive Edge
The resource-based view of competitive edge is a theory describing needs that must be met to ensure a company’s success. According to Holdford (2019), the theory argues that innovations play a core role in the achievement of long-term competitive advantage. Through accumulation and utilization of resources to serve consumers’ needs in hard-to-copy or substitute ways, companies get to stay a step ahead of others, thus boosting their profitability and sustainability. This theory views innovation as an evolutionary process that depends on various factors, including shifts in demand, consumer and company knowledge, available resources, and consumers’ self-interests. Also, this theory suggests that the success rate of specific innovations is not solely dependent on the innovation but on the people supporting it, financial incentives or investments made, and the availability of resources. The theory has been reviewed extensively and has proven to be beneficial when appropriately implemented in organizations. Dasgupta et al. (2009) agree with the theory and add that knowledge management is one of the core resources any organization could utilize to gain a competitive advantage over other enterprises. They describe knowledge management as a system put in place in companies that promotes a cohesive environment in which the capturing and sharing of knowledge is enabled. Through that, opportunities for innovations and the creation of new knowledge emerge, and necessary resources are availed to ensure the utilization of the newly discovered information.
Knowledge may be information about consumers, services or products, specific processes/ workflow, and past successes or mistakes. Knowledge is essential in informing decisions and innovations; thus, it is important as a resource to ensure the success of any company. Dasgupta et al. (2009) also add that knowledge management strategies may be classified into two, personalization and codification strategies. However, in both strategies, knowledge sharing is paramount, either with anyone or specific parties, and continuous learning is witnessed to give room for more knowledge sharing, creation, and utilization. Various factors affect the knowledge management system and implementation of knowledge sharing or creation in companies. These factors include organizational culture, organizational structure, technology, and leadership.
Organizational Culture
Organizational culture is defined as the practices and values that a company’s employees follow or use to guide their day-to-day actions. Organizational culture could be process-oriented, results-oriented, or people-oriented, among other different types. A specific organizational culture in a company influences the establishment of knowledge management and the creation of innovative environments as it affects how people interact or share knowledge, Bibi et al. (2020). An organizational culture that promotes collaborations with individuals from different departments and ranks is likely to be more successful in coming up with innovations compared to hierarchical corporate cultures that limit interactions between workers and managers. According to Dasgupta et al. (2009), knowledge management can be enhanced through better organizational cultures in various ways, including management and development of intellectual capital, creation of a safe learning or creative environment, inculcating trust in individuals, effective communication, and organizational memory.
Management and Development of Intellectual Capital
Intellectual capital is an intangible asset that plays a key role in ensuring a company’s success. Intellectual capital is influenced by the employees’ educational backgrounds, experiences, and training in the field, innovativeness, and level of motivation. A human resource that meets that criteria contributes toward good intellectual capital for the company, which is necessary for key decision-making processes and problem-solving. According to Dasgupta et al. (2009), good intellectual capital puts any organization in a better position to beat existential crises as they are better equipped to adapt to change quickly. Also, they add that the knowledge base of a company’s human resources has to be constantly improved, for example, through focused training programs to stimulate more innovations. Also, intellectual capital can be developed through the encouragement of knowledge sharing. This develops a sense of self-efficacy among employees, and they become more willing to share knowledge. Additionally, it builds confidence and competence in employees through the knowledge-sharing process. In the process, everyone learns and builds on their previously acquired knowledge on specific issues. Dasgupta et al. (2009) add that having a reward system present in an organization during knowledge sharing also motivates employees to share more as they feel heard, thus increasing the company’s knowledge base and encouraging collaboration among team members. Lastly, it is important to practice or implement the shared and newly acquired knowledge to ensure that the intellectual capital keeps improving and also boost the organizational memory.
Creation of a Learning and Innovative Climate
An innovative climate is a core in any company as it ensures its forward progression through new products or services that gain the company a competitive edge. Bibi et al. (2020) state that an innovative climate affects a firm’s organizational learning and employees’ innovative behavior, which in turn affects a firm’s competitiveness and general performance. To foster an innovative climate, it is essential to create a learning environment that supports research, sharing, and implementation of new ideas or knowledge. Dasgupta et al. (2009) state that continuous organizational learning is vital to ensure the improvement of the effectiveness and efficiency of a company’s innovation. In an organizational culture that promotes learning, individuals gain new information and also get to question their existing knowledge or approaches, which promotes innovativeness. Continuous learning in firms can be achieved through training programs, changes in rotations in companies where it applies, like nurses in hospitals, and the creation of teams from different departments to handle similar projects. That promotes adaptive learning and creativity and also enforces teamwork, all of which serve to benefit the organization. Also, through continuous learning and the creation of a learning climate, the organization creates an innovative organizational culture where employees feel free to be creative and offer suggestions where possible. Teamwork also creates a participatory culture with open communication, which helps in sharing and utilization of knowledge.
Inculcating Trust
Inculcating trust among co-workers and their bosses is also vital in the creation of a knowledge management system as it promotes knowledge sharing. To achieve trust, especially in a diverse workforce, employees must respect individual differences, be it in cultures, ethnicity, social background, or status. This creates a sense of community that builds on trust among the teams that promotes knowledge sharing and creativity.
Effective Communication
For there to be effective communication in any organization, their organizational culture has to significantly come into play. A culture that promotes open communication and collaboration is often more likely to achieve effective communication through various channels. Through effective communication, shared suggestions or ideas get to be captured and implemented effectively, which promotes innovation in firms. Dasgupta et al. (2009) add that distance between employees is important to look into as it affects the effectiveness of communication. Interactions between workmates encourage innovations which necessitates the need for space management in companies. Also, effective communication is necessary among different stakeholders, Dasgupta et al. (2009). Maintaining effective communication with external stakeholders helps the company know their needs and also boosts innovativeness through sharing ideas. Also, effective communication between a company and its consumers helps the company know what the consumers need or expect from them, thus helping them to meet their needs better. This can be achieved through customer feedback or reviews channels where customers communicate on the effectiveness of a product or service and where a company could improve if necessary. That build on the company’s competencies as they get to deliver better products or services that satisfy their clientele’s needs. Lastly, effective communication between suppliers and the company is essential, especially in innovating new products. This helps in joint innovation, where both the suppliers and the company consult on better ways to come up with a particular product. Therefore, effective communication among various parties is essential as it promotes innovativeness which benefits the involved firms.
Organizational Memory
As stated earlier, organizational learning must be a continuous process to ensure more innovation in companies. However, continuous organizational learning is of no use if the organizational memory is poor. A good pre-existing knowledge base helps give room to innovativeness through its integration with new knowledge. Dasgupta et al. (2009) encourage the exploitation of existing knowledge and integration with new information as opposed to constant re-invention. They also argue that organizational memory may favor and also hinder innovation or problem-solving. In cases where a similar situation was not experienced in the past, an organization may find it difficult to solve the problem as they have no knowledge base to refer to. However, having a good organizational memory is essential as it comes in handy in key decision-making processes.
Organizational Structure
Dasgupta et al. (2009) describe an organizational structure as rules, policies, hierarchy or reporting, and boundaries, among other characteristics that exist in an organization. Organizational structures exist in different types and mostly define an organization’s workflow and chain of command. A company’s organizational structure affects knowledge creation, sharing, and utilization depending on the type of structure in play. Most companies have a defined chain of command; however, the difference comes in where some have boundaries and limited interactions among workers of different departments and ranks. The existence of a chain of command that limits interaction between managers and workers or employees of different ranks may affect organizational learning as interaction is limited. Also, in some cases, such a structure may limit the development of an innovative climate as workers of lower ranks are seldom consulted in decision-making or problem-solving processes. However, innovation is still feasible in such organizations depending on the knowledge management system in use. For instance, the personalization system is applicable in cases with a defined chain of command and limited worker interactions. Despite its feasibility, I still support the need for interactions among co-workers as that creates a learning environment that gives more room for innovations as workers get to communicate freely.
Concurringly, Dasgupta et al. (2009) agree that the traditional pyramid organizational structures hinder organizational growth and innovativeness. They encourage the formulation of learning networks among co-workers where knowledge can be shared and learning made possible, thus fostering innovativeness. Therefore, firms should look into incorporating more flexible organizational structures that look past boundaries and allow free communication and decentralization. This empowers workers, even those of lower ranks, to give input during key decision-making processes. In the process, a learning and innovative environment are created in the company, and workers become more motivated as their confidence is boosted when their leaders hear and implement their ideas.
Technology
Currently, the world has significantly evolved in matters of technology. The various technological advancements that have been made have made life easier, and even businesses have thrived through it. Dasgupta et al. (2009) expound on technology and its impact on knowledge creation, sharing, and utilization, and its use as a competitive advantage. In doing so, they explain that technology has become a huge part of organizational learning. Through it, individuals get to learn, share knowledge, and store it more efficiently. Additionally, its utilization in organizations has eased the achievement of effective communication as information is easily passed through various channels, including e-mails. To promote innovativeness and boost a company’s competitiveness, it is paramount to invest adequately in technological resources. This enables the company to keep at par with the technological advancements happening worldwide and also find new innovative ways to ease its workflow.
Also, investing in good technological systems in companies helps establish efficient information management systems. That improves innovativeness as sharing information and even accessing it when necessary becomes easier. Aside from intra-company communication, it also provides effective channels through which the firms can communicate with their consumers, suppliers, or stakeholders and get feedback. That gives room for continuous learning and changes which benefit the company. Therefore, technology is an aspect that should not be overlooked by organizations seeking to improve their innovativeness.
Leadership
Various leadership styles and theories exist, and all bear their pros and cons. As earlier explained, to foster innovativeness and knowledge sharing and utilization, organizations have to create innovative and learning climates and also encourage knowledge sharing through interactiveness and decentralization of roles. For this to be possible, the leadership style in use has to allow it. In cases of an authoritarian manager, interactions may be limited as every worker’s roles are defined, and centralization is present. However, in transformational leadership cases, workers interact freely with themselves and even share ideas with their bosses, promoting learning and creativity. Dasgupta et al. (2009) state that leaders must be supportive of their subordinates, provide rewards or motivation, and assign challenging tasks to them to help them learn. They add that it fosters a better relationship between the leader and their subordinates and even encourages more sharing of information of new ideas. Additionally, it encourages individual innovativeness by allowing and trusting the subordinates to accomplish their assigned tasks independently.
Also, leaders should be innovative and promote knowledge management and sharing in the organization. That way, they act as role models to their subordinates. According to Xie et al. (2018), leaders under the transformational leadership style are more attentive to their team members. They offer them guidance and rewards and encourage teamwork amongst them. Through this, the team’s performance improves as every team member effectively executes their roles and is free to share knowledge and develop new ideas. This leadership style positively impacts the formation of trust and autonomy among workers, which is vital for knowledge sharing and creativity. However, this is not to discredit other leadership styles or theories that may also boost innovativeness and increase a firm’s competitiveness. Scholars have proved that different styles like transactional leadership or a combination of different styles and theories can still be effective in achieving the same results. However, the bottom line is that a leadership style that promotes engagement and sharing of ideas is more effective in this aspect.
Conclusion
As seen, knowledge creation, sharing, and utilization are essential in ensuring the success of an organization through innovativeness. Knowledge serves as one of the most crucial resources in a company. MacManus (2020) states that currently, most enterprises are placing innovation and knowledge acquisition as the most important business strategy. That proves the importance of knowledge as a resource necessary for creating an organization’s competitive edge. However, as proven, the use of knowledge as a core resource in the resource-based theory is only possible if the organizational structure, culture, leadership, and technology favor its creation and sharing. Therefore, it is important for managers and involved company stakeholders to consider a change in the previously mentioned aspect to foster learning and innovativeness. That way, the company gets to be a step ahead of other companies, thus boosting their profit margins and their ability to survive existential crises.
References
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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. https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.843.7787&rep=rep1&type=pdf
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McManus, J. (2021). How Do Innovation, Technology, and Competitiveness Contribute to Business Growth?In Technological Innovation and International Competitiveness for Business Growth (pp. 41-61). Palgrave Macmillan, Cham. https://link.springer.com/chapter/10.1007/978-3-030-51995-7_3
Momaya, K. S. (2019). The past and the future of competitiveness research: A review in an emerging context of innovation and EMNEs. International Journal of Global Business and Competitiveness, 14(1), 1-10. https://link.springer.com/article/10.1007/s42943-019-00002-3
Xie, Y., Xue, W., Li, L., Wang, A., Chen, Y., Zheng, Q., … & Li, X. (2018). Leadership style and innovation atmosphere in enterprises: An empirical study. Technological Forecasting and Social Change, 135, 257-265. https://drive.google.com/file/d/1URKBN1mblP8GumlaHn4Rp4S3PCKIXRJj/view
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