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KNOWLEDGE MANAGEMENT PROCESSES AND FIRM PERFORMANCE: A CONTINGENCY PERSPECTIVE DERRICK MCIVER Department of Management University of Texas at San Antonio San Antonio, TX 78249-0634 CYNTHIA A. LENGNICK-HALL University of Texas at San Antonio INTRODUCTION During the past few decades, knowledge management (KM), a set of management activities aimed at designing and influencing processes of knowledge creation and integration (including knowledge sharing processes) has emerged as a particularly influential organizational practice (Foss & Mahnke, 2002). Organizations and researchers have paid considerable attention to enriching their understanding of the activities surrounding the management of knowledge. It is widely asserted that knowledge management can yield important strategic outcomes including providing a means to gain a competitive advantage (Argote & Ingram, 2000; Grant, 1996). However the nature of the connection between KM and performance has been elusive and is not well understood. In this research stream, there is an implicit message that because knowledge is key to competitive advantage, the more knowledge the better (Reus, Ranft, Lamont, & Adams, 2009). This premise leads firms to implement an increasing array of knowledge management processes in an effort to efficiently manage their knowledge assets without knowing what types of knowledge needs to be developed and managed or which knowledge management processes might be hindering rather than helping to achieve their strategic objectives (Zack, 1999). In short, we still lack a clear and compelling understanding of exactly how effective KM is accomplished. As the range of alternative ways for structuring work and workplaces around knowledge and knowledge workers grows, the number of subtle variations in conditions and knowledge characteristics that must be accommodated become apparent. An important challenge, then, is to understand the multidimensionality of knowledge and the corresponding contingent appropriateness of various knowledge management processes. The purpose of our paper is to address this gap and explain how activities and/or embedded procedures undertaken by an organization to manage knowledgewhat we refer to here as knowledge management processeslead to different performance consequences depending on the nature of the work being done. CONCEPTUAL BACKGROUND The idea of knowledge management (or managing knowledge) has intrigued practitioners and scholars alike. However, managing knowledge and knowledge workers effectively is not a trivial task and not all methods are equally effective. In fact, many of the solutions for managing knowledge, when combined or used together, have conflicting objectives and many different knowledge management activities may be used to achieve the same outcome in different situations (Argote, 2005). Moreover, many of these activities require the commitment of

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valuable resources for proper implementation and integration within an organization, and often need additional investment to sustain them over time. Researchers seeking to understand the ways in which organizations benefit from knowledge management processes have increasingly focused on the different types of processes that can be or have been adopted. Some have focused on different approaches including processes of knowledge acquisition, dissemination, and responsiveness (Darroch, 2005). Others have suggested such things as KM cycles that include processes such as creation, capture and storage, refining, distributing, using and monitoring knowledge (Davenport & Volpel, 2001). The implicit assumption driving each of these studies is that KM processes are critical for the smooth and successful operation of organizations (Davenport, Delong, & Beers, 1998). More recently, however, scholars have started to examine a contingency approach to knowledge management and have argued that the success of knowledge management activities hinges on a number of factors (Haas & Hansen, 2005; Reus et al., 2009). While there is general agreement that firms need to make knowledge investments and undertake activities to manage knowledge, little guidance is provided regarding the criteria distinguishing different knowledge management processes (KMP), how they might work together, the contingencies that influence effectiveness, whether particular KMP are equally successful in all situations or with different types of knowledge, or how KMP should be designed and combined to lead to the smooth and successful operation of organizations. Our model addresses several of these unresolved issues. A MODEL FOR KNOWLEDGE MANAGEMENT IN ORGANIZATIONS We begin with a distinction between different types of knowledge involved in work across units. These differences are important to consider because they provide a contextual basis for distinguishing one type of organizational work from another. Our framework is built from considering the different KM processes needed for different types of work in organizations. The key assumption in our framework is that within and across organizations there is variation in types of units and the type of work these units undertake. A useful way to characterize organizational units is to distinguish them from each other based on the underlying knowledge characteristics required for the activities or practices the unit performs. Practice refers to the way in which work gets done and knowing how to do it (Brown and Duguid, 2001: 200). Thus, we view practice as a unit level construct that captures the underlying characteristics of knowledge involved in work activities performed by a subset within an organization and use the term knowledge-in-practice (KIP) to refer to this phenomenon. We define knowledge-inpractice as the information and know-how involved the sequences, routines, capabilities, or activity systems needed to do work within an organization (McIver, 2010). Following McIver and colleagues (2010) we consider knowledge to be comprised of both information and know-how and use the dimensions of tacitness and learnability of the knowledge that a unit uses in its work to distinguish between unit practice types. These dimensions enable us to understand how the underlying knowledge characteristics of organizational units differ. The tacitness of a practice is know-how needed to accomplish the sequences, routines, capabilities, or activity systems in an organization that is unobservable (Winter, 1987), difficult to teach (Zander & Kogut, 1995), difficult to articulate (Nelson & Winter, 1982) and highly embedded and codependent on unidentified aspects of the local (i.e., firm-specific, unit-specific) environment or setting (Galunic & Rodan, 1998). The learnability of a practice is the type and amount of effort, study, accumulated comprehension, and expertise that is required to understand the information and know-how involved in work activities in a unit (McIver, et al., 2010).

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Underlying knowledge characteristics of a practice that are difficult to learn include activities that are complex (Kogut & Zander, 1992), causally ambiguous (Szulanski, 1996), inconsistent (Ansari, Fiss, & Zajac, 2010) or require the understanding of a massive amount of information or having a depth of experience. Thus, the learnability and tacitness of a units knowledge-in-practice allows us to distinguish the underlying knowledge characteristics of work practices. When, these dimensions of practices are combined, we can distinguish one work unit from another and identify four practice types: (1) enacted information (high learnability, low tacitness), (2) apprenticed knowhow (high learnability, high tacitness), (3) accumulated information (low learnability, low tacitness), and (4) talent and intuitive know-how (low learnability, high tacitness). A Contingency Approach to Managing Knowledge To build a contingency framework for managing knowledge based on the underlying unit KIP, our framework separates KM processes into categories first by making a distinction between KM activities that cluster to form processes for managing information and KM activities that cluster to form processes for managing know-how. This distinction is important since adopting KM processes for handling facts and data are quite different from KM processes for handling action-based expertise. Second, we distinguish between KMPs designed to manage what is known from those designed to manage how knowing takes place. This distinction separates KMPs for managing requirements for gathering new information or learning new skills from processes for organizing and using what is already available and known. These two distinctions (separating information from know-how and separating managing how knowing takes place from managing what is known) provide the basis for designing an organizations KMP. We suggest eight activity sets that comprise the spectrum of organizational KM processes. As shown in Table 1, the processes are developed hierarchically by first making a clear distinction between knowledge management activities that cluster to form processes for managing what is known and knowledge management activities that cluster to form processes for managing how knowing takes place. A further distinction is made between processes for managing information and processes for managing know-how. The purpose of these distinctions is to disentangle knowledge management process constructs from one another in order to separate and subsequently assess the relationship to different phenomena implied within the literature (Alvesson & Karreman, 2001; Newell, Roberts, Scarbrough, & Swan, 2002). With these distinctions we assume that organizations use particular knowledge management activities to achieve specific desired outcomes (Fong & Choi, 2009; Ruggles, 1998). In the framework that follows, we propose that matching knowledge management processes to unit level practice types based on the tacitness and learnability of the underlying knowledge requirements will lead to increased performance of the unit. Our fundamental assumption is that contingent selection and deployment of knowledge management processes will allow an organization to improve and/or utilize its knowledge resources in a more effective and efficient manner. Table 1 illustrates the proposed contingency associations between KMP, knowledge-in-practice types, and performance. Two assumptions are necessary to point out. First, we assume that a knowledge management process may be appropriate for more than one type of practice. Second, we assume that multiple knowledge management processes can be positively related to performance for each practice type. As a result, some knowledge-inpractice types benefit from the use of more knowledge management processes than others.

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----------------------------------------------------------------------------------------Insert Table 1 about here ----------------------------------------------------------------------------------------Knowledge management processes for enacted information knowledge-in-practice. In contexts in which practices have a low level of tacitness and are easy to learn, it is particularly important for units to adopt processes for managing relevant information that emphasize what is known and can be codified and easily captured. The driving motivation is economics of reuse. The focus, therefore, is on consistent repetition of established practices as opposed to the development of new solutions (Hansen, 1999). In these settings, organizations have both strategic and financial incentives to develop structured and rigid routines and to standardize most work procedures. Standardization and simplification of practices is assisted through the use of information storage and information use processes which involve activities such as codifying relevant information, using formalized manuals, developing information systems, and providing templates though the use of operation manuals and other forms of information documentation (Alvesson & Karreman, 2001). Proposition 1: The use of information storage processes and information use processes will contribute to high performance in units with value creating practices that have a low proportion of tacitness and are highly learnable. Knowledge management processes for accumulated information knowledge-in-practice. In contexts in which practices have a low level of tacitness, but remain hard to learn it is important for organizations to adopt processes for managing the relevant information to match these conditions. KM processes important to accumulated information KIP typically focus on information rather than know-how, however in contrast to enacted information KIP; the underlying information is large in volume, complex, constantly changing, interdependent, and needs to be renewed on a regular basis. Consequently, processes for managing how knowing takes place become increasingly important. For example, activities such as the use of advanced search systems for large databases, rich channel communication tools, and allowing time for research or collecting real time data highlight the importance of information gathering and information transfer processes. In addition to managing information it is important to manage expertise development since many of these practices require the mastery of a large volume of information as well as technical, professional, or specialist expertise to understand, interpret, and see connections among the data. Proposition 2: The use of information gathering, information transfer, know-how organizing, and know-how application will contribute to high performance in units with value creating practices that have a low proportion of tacitness and are difficult to learn. Knowledge management processes for apprenticed know-how knowledge-in-practice. Knowledge management processes important for managing knowledge in contexts with apprenticed know-how based work practices typically focus on experiential learning and include activities such as extended apprenticeships, on-the-job training, and face-to face mentoring. Know-how learning processes that allow employees new to the unit or unfamiliar with valuecreating unit practices to learn by doing are crucial because although this type of knowledge

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requires practical experience to master, it is relatively easy to learn and does not require extensive background information. Despite the emphasis on tacit know-how, the strategic and financial motivation for this type of unit remains focused on exploiting easy to learn tacit knowhow available within the organization rather than on new knowledge creation. Therefore, activities such as sharing best practices and the use of procedures to create consistency which are categorized as information use processes remain important. Proposition 3: The use of know-how learning and information use processes will contribute to high performance in units with value creating practices that have a high proportion of tacitness and are easy to learn. Knowledge management processes for talent and intuitive know-how knowledge-inpractice. Knowledge management processes important for attaining talent and intuitive knowhow typically focus on tacit knowledge and expertise, however, this type of tacit knowledge is very difficult to learn. These practices typically involve relentless knowledge creation, and require structures and processes that nurture innovation and creativity as opposed to the exploitation of efficient and standardized routines or the application of current know-how. Thus, know-how organizing, know-how assimilation and know-how application processes are crucial for this type of knowledge-in-practice. For example, activities such as brainstorming sessions, hiring uniquely talented experts from external sources, and external employee development which contribute to assimilating know-how are important since these processes stimulate knowledge creation within units. Understanding the organization and knowing who the experts are within it are also helpful as a basis for identifying and capitalizing on expert resources. Finally, the experience-based expertise of the human capital involved and/or social capital needed to employ this human capital is often extremely difficult to learn. Therefore activities involved in know-how application such as utilizing and leveraging individuals with specialized abilities, caring for them by creating a flexible and supportive work atmosphere, and providing assistants so these individuals can be leveraged are particularly important. Proposition 4: The use of know-how organizing, know-how assimilation and know-how application processes will contribute to high performance in units with value creating practices that have a high proportion of tacitness and are difficult to learn. DISCUSSION Our intent is to develop a contingency theory of KM in order to provide a better understanding of how activities and/or embedded procedures undertaken by an organization to manage knowledge lead to value creation. In doing so we aim to explain how performance consequences resulting from the adoption of KM processes depend on the nature of the work being done within a unit. We present a contingency framework that suggests an important element of knowledge management is developing an understanding of the context in terms of the underlying knowledge characteristics of organizational work. We also argue that the unit is the most appropriate level of analysis for understanding contexts and for targeting knowledge management activities. Our framework identifies tacitness and learnability as two dimensions of a units context that capture the underlying knowledge characteristics of the units work activities. We propose that the adoption of KM processes will lead to performance improvements

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only if the selected KM processes match the underlying knowledge management dimensions (i.e., tacitness and learnability) of the work contexts in which they are applied.

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Table 1: Appropriateness of Knowledge Management Processes for Knowledge-in-Practice Types Knowledge-in-Practice Types KM Processes for What is known Information storage Information Use Know-How Organizing Objective of Process Codified available relevant information Economical reuse of tested routines An understanding of the unit and the players involved to align efforts Utilization of intuitive insight and talent Objective of Process Integration of new information Streaming and making information available Sharing and synthesis among experts Attainment of action based activities and sharing
Enacted Information Accumulated Information Apprenticed know-how Talent & intuitive know-how

Yes Yes No

No No Yes

No Yes No

No No Yes

Know-how Application KM Processes for How knowing takes place Information Gathering Information Transfer Know-how Assimilation Know-How Learning

No
Enacted Information

Yes
Accumulated Information

No
Apprenticed know-how

Yes
Talent & intuitive know-how

No No No No

Yes Yes No No

No No No Yes

No No Yes No

REFERENCES AVAILABLE FROM THE AUTHORS

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