Knowledge Creation in Small and Medium-sized Firms
Douwe Jan Kooistra
University of Groningen
Faculty of Economics and Business
MSc Business Administration: Small Business and Entrepreneurship
Supervisor: dr. C.K. Streb
Second supervisor: dr. ir. H. Zhou
PREFACE
This research project is part of the Master course Small Business and Entrepreneurship at the University of Groningen. It aims to contribute to the current field of literature on knowledge creation, by exploring the relevant factors that influence the process of knowledge creation in small and medium-sized firms.
INDEX
ABSTRACT 5
1. INTRODUCTION 6
2. SYSTEMATIC LITERATURE REVIEW 9
2.1 Phase 1: Planning the review 9
2.2 Phase 2: Conducting the review 10
2.3 Phase 3: Reporting the results 15
2.3.1 Networking 15
2.3.2 Organizational learning 17
2.3.3 Organizational characteristics 17 2.3.4 Relationships between the themes 18
3. RESEARCH DESIGN 20
3.1 Discussion of the theoretical model 20
3.2 Research gap 21
3.3 Research question and sub-questions 22
4. METHODOLOGY 24 4.1 Research approach 24 4.2 Data sources 25 4.3 Questionnaire 26 4.4 Data collection 27 4.5 Data analysis 27 5. RESULTS 29
5.1 Part 1: New themes brought up by the experts 29
5.1.1 Necessity 31 5.1.2 Purpose 31 5.1.3 Branch specificity 32 5.1.4 Time management 33 5.1.5 Vision 33 5.1.6 Level of education 34
5.1.7 Leadership by the entrepreneur 34 5.2 Part 2: Consensus with regard to the theoretical model 35
5.2.1 The themes in the model 36
5.2.2 The relationships in the model 38 5.2.3 Missing factors in the model 38
6. DISCUSSION 40
7. CONCLUSION 49
8. RESEARCH LIMITATIONS 51
9. RECOMMENDATIONS FOR FUTURE RESEARCH 53
Appendices:
ABSTRACT
Last 5-years research on knowledge creation in small and medium-sized firms is dominated by three main themes: networking, organizational characteristics and organizational learning. These themes and the relationships between them are used as input for a theoretical model. When testing this model in practice, a number of other factors that influence knowledge creation in the SME sector are identified. These factors include necessity, purpose, branch specificity, time management, vision, level of education and leadership by the entrepreneur. Although at first sight the factors seem contradictory to the findings of the literature review, the interviewed experts regard these factors as a supplement to the theoretical model rather than a substitute. Necessity and purpose, influenced by the branch specific circumstances in which a firm operates, are considered to be the major determinants of knowledge creation efforts, whereas time management, vision, level of education and leadership by the entrepreneur are regarded to be important organizational characteristics. Overall, the adoption of knowledge creation in the SME sector is considered to be very company and branch specific. The management of attention is a critical issue in the process of knowledge creation in small and medium-sized firms.
1.
INTRODUCTION
Knowledge is seen as one of the critical driving forces for business success. Already in 1959, Penrose purposed that organizational growth is dependent on the application of entrepreneurial and managerial knowledge configured as resources. In her view, expansion of firms was intimately associated with the processes through which knowledge is acquired and applied. Ultimately, this led to the notion that the possession of knowledge defines the shape and trajectory of a firm’s growth (Scott and Bruce, 1987).
After a period of relative little attention for knowledge in scientific literature, Drucker (1988, 1992) delivered an important contribution to the evolution of knowledge management with his articles The Coming of the New Organization and The New Society of Organizations. In these articles, the information-based organization was introduced. Drucker (1988) forecasted that the typical business would be knowledge-based, an organization composed largely of specialists who direct and discipline their own performance through organized feedback from colleagues, customers and headquarters. He predicted a new society, in which knowledge is the primary resource for individuals and for the economy overall (Drucker, 1992).
Short after the publication of Drucker’s articles, Nonaka (1991, 1994) introduced the concept of The Knowledge Creating Company. According to Nonaka (1991), in an economy characterized by uncertainty, the one sure source of lasting competitive advantage is knowledge. In his work of 1994, A Dynamic Theory of Organizational Knowledge Creation, Nonaka proposed that any organization that dynamically deals with a changing environment should not only try to process information efficiently but also create information and knowledge.
Central to the work of Nonaka is the recognition that knowledge creation is not simply a matter of processing objective information. Rather, it depends on tapping the tacit knowledge and often highly subjective insights of individual employees and making this knowledge and insights available for use by the company as a whole. Whereas prior works in the field of knowledge management neglected a clear distinction between explicit and tacit knowledge, Nonaka (1994) explained knowledge creation as a continuous dialogue between tacit and explicit knowledge. To illustrate this paradigm, he introduced the ‘spiral’ of knowledge creation.
The concept of knowledge creation is used as a starting point for this study. Streb (2005) proposed the following working definition for knowledge creation, which is used as guideline:
knowledge, but also to engage in a process of knowledge socialization, combination, externalization, and internalisation. Efforts related to knowledge creation usually refer to implicit or tacit knowledge.’’
Initially, knowledge management and knowledge creation practices appeared to be adopted only in large companies and research on knowledge creation largely centred on these large firms. Different studies show that large firms’ ability to create, use and develop its knowledge-based assets is a major source of sustained competitive advantage (Nonaka et al., 2002). Ultimately, the ability to create and use knowledge has a positive effect on corporate performance of large firms (Hill et al., 2002; Teece, 2000).
More recent research does also show the increasing importance for small and medium-sized firms to correctly manage their collective intellect (Frey, 2001), and its effect on organizational performance (Salojarvi et al., 2005). However, despite empirical evidence that knowledge management and creation contribute to performance, there is still a notable lack of research into the knowledge practices of small and medium-sized enterprises (Egbu et al., 2005).
This study is motivated by the fact that knowledge creation is relatively new to the field of small and medium-sized firms, but also takes into consideration the important economic role played by small and medium-sized firms in many countries. It is widely recognized that small firms make a significant contribution to economies (Wong, 2005). Small and medium-sized firms play a crucial role in the development of employment, innovation, and social and economic growth (Kitching & Blackburn, 1999; Kuratko et al., 2001). For example, statistics of MKB Nederland (2007) show a total number of 786.000 small and medium-sized enterprises (up to 250 employees) in The Netherlands, with a total of 7,4 million employees. Overall, small and medium-sized firms represent 99,7% of business establishments in The Netherlands.
As argued previously, there is still a notable lack of research into the knowledge related practices of small and medium-sized firms. This study aims to contribute to the current field of research on knowledge creation in small and medium-sized firms by inventorying the relevant factors that influence the process of knowledge creation in small and medium-sized firms. It is important to highlight that this study has an exploratory nature. The following research question is addressed:
Which factors influence the process of knowledge creation in small and medium-sized firms?
In order to answer this research question, this study starts by applying the systematic literature review to explore current research on knowledge creation in small and medium-sized firms. The aim of the literature review is to investigate last 5-years empirical evidence on knowledge creation in small and medium-sized firms. The review process and the protocols used are described in the following section, as well as the reasoning behind the choices made during the review process.
2.
SYSTEMATIC LITERATURE REVIEW
In order to locate and identify relevant literature on the topic of knowledge creation in small and medium-sized firms, the systematic literature review process described by Brereton et al. (2007) is applied. According to them, performing a systematic review involves several discrete activities, which can be grouped into three main phases: planning the review; conducting the review; and reporting the results. These phases serve as the basis for this literature review. Figure 1 illustrates the overall 10-stage literature review process.
FIGURE 1
Systematic literature review process
Source: Brereton et al., Lessons from applying the systematic literature review process within the software engineering domain, 2007.
2.1 Phase 1: Planning the review
The first step in planning the review is to the specify the research question. According to Brereton et al. (2007), this step is the most critical element of a systematic review. The research question is the part of the protocol that should not be changed after the protocol is accepted. As already explained in the previous section, this literature review aims to answer the following question:
What main themes can be identified in the current field of research on knowledge creation in small and medium-sized firms?
Phase 1: Plan Review Phase 2: Conduct Review Phase 3: Document Review
1. Specify Research Questions 2. Develop Review Protocol 3. Validate Review Protocol
4. Identify Relevant Research 5. Select Primary Studies 6. Assess Study Quality 7. Extract Required Data 8. Synthesise Data
This review was restricted to articles in scholarly (peer reviewed) journals held within the EBSCOhost interface (Appendix A). The EBSCOhost interface itself consists of multiple databases, of which Business Source Premier provided most results. Because this study wants to focus on recent publications in order to overlook current streams of research, a temporal parameter was added to the search: the search was limited to the period January 2005 till November 2009. This decision was also made in the light of resource constraints caused by the fact that there was only one person to conduct the review.
Using the concept of knowledge creation as a research topic is beset with definitional problems that complicated the search process. A first pilot search using the search string ‘small business AND knowledge creation’ led to only 9 results. After conducting an additional search using the search string ‘small business AND knowledge management’, it turned out that in some studies the term ‘knowledge management’ was used, whereas this studies actually dealt with the process of knowledge creation. Thus, it became evident that in scientific literature, there is a significant overlap between the concepts of knowledge management and knowledge creation.
In order to deal with this ambiguity and to prevent that valuable studies were missed, both search strings were used. The search through the EBSCOhost interface resulted, after removing duplicate studies, in an overall sample of 91 potentially relevant articles published between January 2005 and November 2009. Table 1 provides an overview of the search results. This preliminary sample was further processed during the second phase of the review process.
TABLE 1
Search results EBSCOhost
Query Date of search Date range Total results
small business AND knowledge creation
January 28, 2010 Jan. 2005 – Nov. 2009 9 small business AND
knowledge management
January 28, 2010 Jan. 2005 – Nov. 2009 82
2.2 Phase 2: Conducting the review
TABLE 2
Inclusion and exclusion criteria
Inclusion criteria Exclusion criteria
1. Articles that contribute to the theory on knowledge creation (see working definition Streb, 2005)
2. All SMEs
3. All business sectors
4. Qualitative and quantitative studies 5. Empirical (primary) studies and case
studies
1. Articles about knowledge management and information management with no direct contribution to theory on knowledge creation
2. Articles about medical and education institutions
3. Individual behaviour studies 4. Foreign languages
5. Conceptual or review articles with no (new) empirical evidence
The first criteria in selecting relevant research, was to assess which articles were related to knowledge creation in small and medium-sized businesses. As explained previously, there is a significant overlap between the concepts of knowledge management and knowledge creation. In order to determine whether the study dealt with the topic knowledge creation, the working definition proposed by Streb (2005) was used as a guideline. Studies that focused only on explicit knowledge and had an information-based view on knowledge management, were excluded. Also articles about medical and education institutions were removed, as well as individual behaviour studies and studies written in foreign languages. Only articles that contributed to the theory of knowledge creation and dealt with actual interventions in small and medium-sized businesses, were included for further processing. This reduced the number of potentially relevant articles to 26.
The next step was to check for articles that had a conceptual or review character and did not contain new empirical data. Because not all abstracts provided this information, all 26 articles were printed out and manually processed. It turned out that a number of articles were conceptual/ explanatory (8) or had a review character (2), reducing the number of relevant articles to 16. These articles were labelled as primary. The refined sample represents 17,6% of the original sample.
restricting the search to peer reviewed archival journals held in the EBSCOhost database, an acceptable quality of the articles was already ensured. Therefore, this study does not make a selection purely based on journal impact rankings. Although most primary articles are in high impact journals (Appendix B), there are also a number of relevant articles identified within less established journals.
After identifying primary studies, all articles were thoroughly read and reviewed. All relevant articles were summarized, using the structured abstract headings Introduction, Objectives, Methods, Results and Conclusions. The summaries of the articles are in Appendix C. Next, in order to map the field, data was extracted from the articles. This data includes: research methods, sample size, response rate, longitudinal study (Y/N), business sector(s), country of origin, relationship with performance (Y/N) and identified themes. The results are summarized using a tabular format (Table 3). This overview provides some interesting information on last 5-years research in the field of knowledge creation in small and medium-sized firms.
First, in terms of research methods employed in the research, only one case study was identified. All other fifteen studies were based on interviews or questionnaires, or a combination of both methods. The sample sizes vary considerably amongst the studies, with survey respondents as low as 7 (Balestrin et al., 2008) and as high as 1064 (Fukugawa, 2006). Also, response rates differ strongly between the studies. Tolstoy (2009) achieved a response rate of 81%, whereas the response rate in the study of Pillania (2008) was only 9,8%. Another notable point is that the sample contains no longitudinal studies. This means that all identified studies provide a ‘snapshot’ in time, but lack a longitudinal component. For example, changes over the life cycle is not a subject of study in one of the studies.
TABLE 3
Overview of reviewed articles
Article Research methods Sample size Response rate Longitudinal study (Y/N) Business sector(s) Country of origin Relationship with performance (Y/N) Identified themes
Balestrin, A., Vargas, L.M. & Fayard, P. (2008)
Interviews 7 NA N Clothing industry
Brazil Y Networking:
- physical and virtual spaces
Chan, I. & Chao, K.C. (2008)
Questionnaire 68 Unknown N Multiple sectors Hong Kong N Organizational characteristics:
- infrastructure capability (technology, structure, culture) - process capability
(acquisition, conversion, application, protection) Fukugawa, N. (2006) Questionnaire 1064 36% N Multiple sectors Japan N Networking:
- contingency approach Hughes, T., O’Regan,
N. & Sims, M.A. (2009) Postal questionnaire 194 27% N Manufacturing United Kingdom Y Networking: - sources of knowledge - degree of closeness Hutchinson, V. & Quintas, P. (2008) Semi-structured interviews
13 Unknown N Multiple sectors United Kingdom
N Formal and informal knowledge management Martinez-Costa, M. & Jimenez-Jimenez, D. (2009) Personal interview, structured questionnaire
706 45,4% N Multiple sectors Spain (south-east region)
Y Organizational learning:
- Total Quality Management - mediating role for culture and technology
Migdadi, M. (2009) Questionnaire 418 69,67% N Multiple sectors Saudi Arabia
Y Organizational characteristics:
- critical success factors (CSFs) - KM performance outcomes Omerzel, D.G. &
Antoncic, B. (2008)
Questionnaire 173 12,8% N Multiple sectors Slovenia Y Organizational characteristics:
TABLE 3
Overview of reviewed articles (continuation)
Article Research Methods Sample size Response rate Longitudinal study (Y/N) Business sector(s) Country of origin Relationship with performance Y/N) Identified themes
Palacios, D., Gil, I., & Garrigos, F. (2009) Mail questionnaire 222 45,1/14.2 (biotech. Ind./tel. com. Ind.) N Biotechnology and tele- communications (high-tech)
Spain N Organizational characteristics:
- continues improvement - Schumpeterian competences Pillania, R.K. (2008) Structured
questionnaires (for experts and manufacturers) 98: 3 samples 9,6% (Manu-facturers)
N Manufacturing India N Org. learning/Networking:
- government - importance of customer knowledge Ruiz-Mercader, J., Merono-Cerdan, A.L. & Sabater-Sanchez, R. (2006) Questionnaire, face-to-face survey 151 59,9% N IT sector Spain (Murcia)
Y Org. learning/Org. characteristics:
- individual/organizational learning - human aspects and information technology
Salojarvi, S., Furu, P. & Sveiby, K.E. (2005)
Standardised questionnaire and semi-structured interviews
108 20% N Multiple sectors Finland Y Relation knowledge
management/creation and growth
Spicer, D.P. & Sadler-Smith, E. (2006) Postal questionnaire 285: 4 samples Between 20,2% & 30,7% N Manufacturing United Kingdom (south-west region) Y Organizational learning:
- lower-order learning vs. higher-order learning
- entrepreneur’s characteristics Tolstoy, D. (2009) Questionnaire 233 81% N Multiple sectors Sweden N Networking/Org. learning:
- knowledge combination
- customer network knowledge vs. supplier network knowledge Tunc Bozbura, F.
(2007)
Questionnaire 76 50,67% N Multiple sectors Turkey N Organizational characteristics:
- management support Van Geenhuizen, M.
(2008)
Case study 21 Unknown N Biotechnology The Netherlands
N Networking:
2.3 Phase 3: Reporting the results
The last step in the systematic literature review process is to report the results. The goal of the systematic literature review was to identify relevant themes in the current field of research on knowledge creation in small and medium-sized firms. The findings of the literature review will be used as input for the theoretical model presented in the next section.
The review helped to identify three main themes with regard to knowledge creation in small and medium-sized firms: networking; organizational learning; and organizational characteristics. Although most reviewed articles cover at least one of the identified themes, some studies apply a different perspective that does not fit one of the themes. Despite this, these studies do make an important contribution to the field of research on knowledge creation in small and medium-sized firms and should be taken into account when studying this concept..
For example, an important point to consider is the distinction between formal and informal knowledge practices, introduced by Hutchinson and Quintas (2008). Whereas formal knowledge practices concern policies, plans, structures and initiatives that are named and governed by the concepts of knowledge management, informal knowledge practices are not labelled or constituted. According to Hutchinson and Quintas (2008), small firms adopt informal, rather than formal, processes to manage their knowledge. Their study shows that activities directed towards knowledge creation were not governed by the terminology and formal concepts of knowledge management. Another study that has no direct fit with one of the themes is performed by Salojarvi et al. (2005). They conclude that knowledge management and creation is positively related to growth of small and medium-sized firms, but the study does not pay specific attention to the factors that influence the process of knowledge creation. However, despite this exceptions, almost all articles were found to be related to at least one of the themes: networking; organizational learning; and/or organizational characteristics. These themes are discussed below.
2.3.1 Networking
stresses the importance of establishing linkages with external sources of knowledge in the process of knowledge creation.
It is important to state that knowledge is created only by individuals and not by the network itself (Balestrin et al., 2008). Human interaction is considered critical, for example through the use of project groups or intranets. Although the network itself cannot create new knowledge, it can provide a space for positive and constructive relationships between actors. By providing the existence of an efficient interaction between people, groups and organizations, networks can facilitate the process of knowledge creation. According to Tolstoy (2009), the network can serve as a powerful and dynamic structure in providing input to processes of knowledge creation. Thus, networks represent the place where learning processes and knowledge creation can take place. Balestrin et al. (2008) provide evidence that there are several physical or virtual spaces that make the process of knowledge creation easier. These spaces include: meetings at firms, assemblies, social gatherings, trips and visits to fairs, courses and lectures, strategic planning and electronic spaces.
According to Hughes et al. (2009) and Van Geenhuizen (2008), the degree of closeness of parties within the network has an impact on the effectiveness of the way knowledge is used and created. Van Geenhuizen (2008) suggests a coexistence of companies employing a predominantly local/regional network and companies employing a predominantly global network. However, proximity is not just about geography, it is above all about mutual understanding and trust (Hughes et al., 2009). The development of relationships between parties and establishing trust and commitment is found a key factor in the process of knowledge creation. This conclusion is similar with the findings of Balestrin et al. (2008), who also recognize the importance of trust and strong social relationships between parties in the process of knowledge creation through networks. According to Fukugawa (2006), strong ties and close-knit networks promote intense transfer of not-codified knowledge.
2.3.2 Organizational learning
The capability to create knowledge through organizational learning is considered critical by a number of studies. Spicer and Sadler-Smith (2006) define organizational learning as the development or acquisition of new knowledge or skills in response to internal or external stimuli that leads to a more or less permanent change in collective behaviour and that enhances organizational efficiency and/or effectiveness. Ruiz-Mercader et al. (2006) state that organizational learning increases the actionable knowledge of the organization and its members through interpretation, comprehension and assimilation of tacit and explicit knowledge.
The popularity of organizational learning in scientific literature has lead to the term The Learning Organization. According to Martinez-Costa and Jimenez-Jimenez (2009), learning organizations can be seen as organizations being skilled at creating, acquiring and transferring knowledge and then being able to modify behaviour to reflect this new knowledge and insight.
Spicer and Sadler-Smith (2006) make a distinction between two contrasting forms or organizational learning: lower-order learning and higher-order learning. Lower-order learning is defined as engaging with the demands of the internal and external environment by using or modifying current organizational practices, but leaving basic assumptions about the organization and its environment intact. Higher-order learning is learning that goes beyond adaptation by questioning current assumptions and developing new insights that may lead to the overhauling of long-held organizational routines. It is concluded by Spicer and Sadler-Smith (2006) that an active higher-order learning orientation creates the right conditions for generation and creation of new knowledge. In contrast to the positive effect of a higher-order learning orientation on knowledge creation, a lower-order learning orientation does not reinforce the process of knowledge creation. A higher-order learning orientation might comprise a number of underlying principles, such as systems and processes that facilitate the free flow of knowledge, a supporting culture and an entrepreneurial management style (Spicer and Sadler-Smith, 2006).
2.3.3 Organizational characteristics
Migdadi (2009) adopts eleven critical success factors, based on Wong (2005), that stimulate the creation of knowledge within small and medium-sized firms. These critical success factors include: management leadership and support; culture; IT; strategy and purpose; measurement; organizational infrastructure; processes and activities; motivational aids; resources; training and education; and HRM. His study shows that all critical success factors have a substantial impact on knowledge management and knowledge creation efforts.
Chan and Chao (2008) state that the mere presence of knowledge management plans are no guarantee that knowledge related efforts will be successful. According to them, organizations must harness a balanced deployment of infrastructure capabilities (technology, structure and culture) and process capabilities (knowledge acquisition, conversion, application and protection) in order to stimulate the process of knowledge management and creation. Small firms should strengthen their technological capability and create a structure that facilitates the process of knowledge creation, while at the same time creating an open and supporting culture. This conclusion is in line with Salojarvi et al. (2005), who also plead for a balanced strategic approach to knowledge management and creation, with equal attention to personnel, systems, networks and customers.
Two studies focus explicitly on the role of management style and support in the process of knowledge creation. Tunc Bozbura (2007) states that the openness of managers with regard to knowledge sharing is critical for knowledge creation in small and medium-sized firms. Also, the knowledge of managers and entrepreneurs themselves is found a key factor (Omerzel and Antoncic, 2008). Managers should understand the culture and values of the firm, and should keep what is good and change all that does not lead towards knowledge creation.
2.3.4 Relationships between the themes
Besides the identification of three main themes, the systematic literature review provides insight in the relationships between these themes. Two relationships were explicitly addressed. First, the reviewed articles provide evidence for a relationship between organizational characteristics and organizational learning. Also, the positive effect of networking on organizational learning is addressed in some studies. Both relationships will be discussed below.
comprise a number of underlying organizational characteristics. First, systems and processes should facilitate the free flow of information and knowledge. Second, the learning orientation of a firm should be characterized by a culture in which organizational procedures, routines, scripts and norms are open to challenge and reinterpretation. Finally, the approach adopted by the owner-manager is critical in modelling the behaviour that is required for an active higher-order learning orientation. The presence of this principles reveals a clear link between the organizational characteristics of a firm and its learning orientation. The evidence for this relationship is strengthened by Ruiz-Mercader et al. (2006), who acknowledge the importance of information technology and a culture that supports individual and organizational learning. According to them, organizational learning can be boosted through investing in information technology as well as encouraging individual learning. However, without attention to human or organizational aspects, information technology has no positive effect on organizational learning or firm performance. This is in line with the findings of Martinez-Costa and Jimenez-Jimenez (2009), who argument for an important mediating role for cultural and technological dimensions.
3.
RESEARCH DESIGN
In the previous section, a systematic literature review was conducted in order to identify relevant themes with regard to knowledge creation in small and medium-sized firms. These themes and the relationships between them are used as input for the theoretical model that is presented in this section. After the discussion of the theoretical model, this section will continue by identifying the research gap and describing the further direction of this study.
3.1 Discussion of the theoretical model
The results of the literature review show the presence of three main themes that dominate last 5-years scientific research in the field of knowledge creation in small and medium-sized firms, namely networking, organizational learning and organizational characteristics. All themes seem to influence the process of knowledge creation in small and medium-sized firms. The key findings of the literature review are summarized in the theoretical model below (Figure 2). This model will be used as the starting point for the remainder of this study.
FIGURE 2 Theoretical model
A number of organizational characteristics were identified that influence knowledge creation in small and medium-sized firms. The remainder of this study focuses on the following constructs: structure,
Organizational learning
The type of learning orientation (lower-order vs. higher-order)
Networking
The degree to which networking is used (for knowledge combination)
Organizational characteristics
Structure, culture, technology and management style
Knowledge creation in
culture, technology and management style. These organizational characteristics were all recognized as key factors in the process of knowledge management and creation by both Chan and Chao (2008) and Migdadi (2009). Moreover, according to Spicer and Sadler-Smith (2006) and Ruiz-Mercader et al. (2006), these constructs also have an impact on the learning orientation of a firm.
The systematic literature review provided also indications for a link between organizational learning and knowledge creation. In order to measure the effect of organizational learning on the process of knowledge creation, the construct of learning orientation is applied. As explained in the previous section, firms can adopt a lower-order learning orientation or a higher-order learning orientation. This two types of learning are best seen as opposite ends of the same dimension, with an organization’s approach being a combination of the two, yet in which either one may dominate (Sadler-Smith et al., 2001). Appendix D provides an overview of the main differences between a lower-level and higher-level learning orientation.
Several reviewed articles provide evidence for a relationship between networking and knowledge creation. Networking is measured by the degree to which firms participate in networking for knowledge combination. It is important to stress that for the purpose of this study, networking is not considered from the perspective of gaining economic profit through market transactions. The combination of knowledge through the exchange of experiences, ideas and knowledge should be the main driving force behind the choice to participate in networking. For this study, networks are understood as the organizational and human actors in a firm’s business environment. They comprise inter-organizational contacts and involve a range of sources of knowledge ranging from other organizations to external advisors and universities. Based on Tolstoy (2009), networks are viewed as the arena in which knowledge creation can take place.
Finally, it is important to note that the themes in the theoretical model are not free-standing and independent, but also influence each other. The reviewed articles provided evidence for a relationship between organizational characteristics and organizational learning. Also, the positive effect of networking on organizational learning is addressed in some studies. These links were discussed in the section 2.3.4 and are illustrated by the arrows in the theoretical model.
3.2 Research gap
First, the relationship between organizational characteristics and networking is not addressed in one of the studies. Therefore, it is not clear if and to what degree organizational characteristics and networking directly influence each other. Second, various studies provide indications that networking has a positive effect on organizational learning, but the reverse effect is not discussed in any of the reviewed articles. Therefore, it is not clear if and to what extent the learning orientation of a firm (lower-order vs. higher-order) influences the degree to which firms participate in networking for knowledge creation.
Although it would be interesting, both from a theoretical and practical point of view, to study these relationships, they are left outside the scope of this research. The reason for this decision is that this study is focused on describing the ‘overall picture’ of knowledge creation in small and medium-sized firms. Although almost all reviewed articles are concentrated around one of the identified themes, the current field of research lacks an holistic and integrative view on the process of knowledge creation in small and medium-sized firms. This study believes that it is important, both for small business owners and for the current field of scientific research, to inventorise all relevant factors with respect to knowledge creation in small and medium-sized firms and describe how these factors relate to each other. The systematic literature review already showed a variety of factors that are related to knowledge creation in small and medium-sized firms, as summarized in the theoretical model. However, not one of the reviewed articles attempts to provide an integrative picture of the process of knowledge creation. The purpose of the remainder of this study is to fill this research gap, by gaining more insight in how knowledge creation in small and medium-sized firms is adopted in practice and what are considered to be the critical factors in this process. The theoretical model presented in section 3.1 will be used as a starting point for the remainder of this exploratory study, by examining if the factors and relationships in the model are indeed the main influencers of the process of knowledge creation in small and medium-sized firms.
3.3 Research question and sub-questions
To what degree do networking, organizational learning and organizational characteristics effect the process of knowledge creation in small and medium-sized firms in practice, and/or are there other relevant factors that influence this process?
In order to answer the research question, experts in the field of knowledge creation in the SME sector will be interviewed. The purpose of the expert interviews is to answer the following sub-questions:
1. What do the experts regard as the most important factors with respect to the process knowledge creation in small and medium-sized firms?
2. To what degree do experts think the theoretical model is a good reflection of practice? 2a. Does networking influence the process of knowledge creation in SMEs?
2b. Does organizational learning influence the process of knowledge creation in SMEs? 2c. Do organizational characteristics influence the process of knowledge creation in SMEs? 2d. Are the relationships between the themes also reflected in practice?
2e. Does the model lack any important factors that (also) influence knowledge creation in SMEs?
4.
METHODOLOGY
In order to answer the research question and sub-questions that were introduced in the previous section, this study adopts a qualitative research approach. Miles and Huberman (1984) state that the qualitative research approach is concerned with data that appears in words rather than in numbers. It can be performed in a variety of ways, for example through observations, extracts from documents or interviews. According to Pratt (2009), qualitative research is great for addressing ‘how’ questions rather than ‘how many’ questions, in order to understand the world from the perspective of those studied. The tips of Pratt (2009) on performing and writing up qualitative research are used as a guideline for the remainder of this study. This section describes the methodology that is used to perform the qualitative research.
4.1 Research approach
In order to provide an integrative picture of the process of knowledge creation in small and medium-sized firms, this study adopts a qualitative research approach. This decision is in line with Miles and Huberman (1984) and Pratt (2009), since the goal of this study is to understand the nature of knowledge creation in small and medium-sized firms. This study is particularly interested in data in words and answering a ‘how’ question. The decision is also in line with Eisenhardt (1989) and Yin (2009), who both argument for a qualitative research approach for the development of theory.
4.2 Data sources
The experts that were approached for the interviews are selected based on their experience in the field of knowledge creation and/or knowledge management. The sample comprises nine experts in the fields of consultancy/company advising and academics. All consultants and advisors are closely connected to the Dutch SME sector. This decision was deliberately made, in order to ensure a clear distinction between knowledge practices in small and medium-sized firms and large firms. In this way, the results were protected from being biased. Table 4 provides an overview of the names and occupations/fields of expertise of the experts.
TABLE 4 Overview of experts
Name expert Occupation/field of expertise
R. Boelsma Director of RBC Consultancy, a consultancy firm specialized in the field of management and organization. The interviewee is also chairman of ‘Netwerk Friesland’ for MKB Noord.
A.L. Everts Owner and director of Everts advies in bedrijf, an advisory firm specialized in the SME sector. Before starting his own business, the interviewee worked several years as SME advisor for a medium-sized auditing firm.
G. van Heijst Founder and director of Oryon KMD BV, a consultancy firm specialized in the fields of organizational learning and knowledge management. The interviewee has a psychological background and has over 20 years experience in the field of knowledge management.
M. Hennink Project manager at HanzeConnect, an organization that is involved in training/education, market research and advising. One of the main activities of HanzeConnect is to stimulate innovation in small firms.
G. Hiemstra Founder of SKINN (Stichting Kennistransfer & Innovatie Noord-Nederland). SKINN is a foundation that aims to stimulate knowledge transfer and innovation in the SME-sector in the northern region of The Netherlands. The interviewee is also company-advisor at Van der Meer & Van Tilburg, a consultancy firm specialized in the field of (technical) innovation.
J. Holtrop Co-founder of UniMatch, an advisory firm specialized in the field of small and medium-sized enterprises. The interviewee has more than 15 years experience in this business.
TABLE 4
Overview of experts (continuation)
4.3 Questionnaire
In order to guide the interviews with the experts, a questionnaire was constructed. The questionnaire consists of open questions, aiming to receive as much information and feedback from the experts as possible. Therefore, based on the answers of the experts, there is also space for additional questioning. The questionnaire consists of three sections, which are summarized in Table 5. As outlined in the table, part 1 of the questionnaire is concentrated around the first sub-question, whilst part 2 of the questionnaire is focused on answering the second sub-question.
TABLE 5
Contents of questionnaire for expert interviews
Each interview begins with a number of questions about the background of the expert. Next, the experts are asked to describe their own perspective on knowledge creation in the first section. What do they regard as the critical factors in this process? Only after finishing the first part of the interview, the theoretical model is shown to the experts. This model is discussed during the second part of the interview. Keeping order to the different parts when conducting the interviews is critical.
Name expert Occupation/field of expertise
R.J.J.M. Jorna Professor of knowledge management and cognition at the Faculty of Management and Organization, University of Groningen.
M. Rooij Owner of Rooij Consultancy, a consultancy firm specialized in the fields of process-, quality-, and knowledge management. The interviewee also developed a knowledge management system and a knowledge management brochure for his former employer (1992-1996).
Section Content
Introduction: General questions
(question 1-3)
Questions with regard to the background and experience of the expert.
Part 1: The expert’s view on knowledge creation
(sub-question 1: question 4-8)
Questions with regard to the expert’s view on knowledge creation in small and medium-sized firms and the factors that influence this process in practice.
Part 2: Discussion of the theoretical model
(sub-question 2: question 9-11)
The questionnaire itself and the guidelines used, based on Emans (2004), are in Appendix E. In the questionnaire is also stated to which sub-question certain questions are related. It is important to stress that the questionnaire is purely constructed to be used as a guideline for the researcher. During the interviews, their was no obligation to keep strict order to the questions. Especially during the first part of the interview, it was important that the experts had space to freely express their thoughts and opinion.
4.4 Data collection
Data collection took place through personal visits. The experts were approached by e-mail or phone. After the experts agreed to co-operate in the interview, an appointment was made. In most cases it was possible to visit the experts within two weeks after they were approached. The interviews took place in the period from May 21st 2010 till November 5th 2010.
During the interview, notes were taken by the interviewer. These notes were fully written up directly after the interview. Also, in order to develop an overall summary of the main points in the contact, a contact summary form was used. Miles and Huberman (1984) state that, after an intensive field contact has been completed and field notes are written up, there is often a need to pause and to consider what were the main themes, issues and problems during this contact. A contact summary form is a single sheet containing a series of focusing and summarizing questions about a particular field contact. To make sure no important information was missed, the contact summary forms were filled out immediately after an interview was completed and the field notes were written up. The contact summary forms are in Appendix F.
4.5 Data analysis
FIGURE 3 Process of data analysis
Source: Green et al., Generating best evidence from qualitative
research: the role of data analysis, 2007.
The first stage in the analysis process is immersion in the data. Especially important during this step, was the context in which the experts worked. For example, the experts R. Boelsma and G. Hiemstra own/work for a highly technology orientated consultancy firm, what had to be taken into account when interpreting the interview outcomes. Two other experts (M. Hennink and J. Holtrop) mainly deal with very small firms (up to 10 employees), which was also expected to influence the interview outcomes. In contrast to differences in the work environment, it is important to note that all experts in the sample share similar demographic characteristics. All experts are between 35 and 60 years old. Most experts in the sample are male (8). Because both age and gender were not expected to influence the interview outcomes, these variables were deliberately left aside during the analysis process.
After the stage of data immersion, the collected data was coded. During the stage of coding, the information collected in each interview was examined and organized. This process was manually performed by the interviewer and resulted in the identification of a number of factors. Alongside and after the stage of coding, the data was revisited in order to examine if the identified codes (factors) could be linked (step 3). According to Green et al. (2007), this stage of creating categories is concerned with looking for a ‘good fit’ between codes that share a relationship.
The fourth and final step in analyzing the interview data is the identification of one or more themes. According to Green et al. (2007), the generation of themes requires moving beyond a description of a range of categories: it involves shifting to an explanation or, even better, an interpretation of the issue under investigation. Although this study has an exploratory nature and is mainly concerned with identifying (and categorizing) relevant factors that influence the process of knowledge creation in small and medium-sized firms, it is also important to identify any relevant themes that underlie these factors and relationships.
5.
RESULTS
In this section, the results of the expert interviews are reported. With regard to the first sub-question, the interviews helped to identify a number of new factors that are not in the theoretical model. These factors will be discussed in sub-section 5.1. The results with respect to the practical applicability of the theoretical model vary from relatively low to relatively high and will be reported in sub-section 5.2. Also, the contact summary forms in Appendix F provide a more elaborated summary of the interviews.
5.1 Part 1: New themes brought up by the experts
The interviews with experts helped to identify seven new factors that seem to influence the process of knowledge creation in small and medium-sized firms. These factors include necessity, purpose, branch specificity, time management, vision, level of education and leadership by the entrepreneur. All factors were mentioned by at least three (33%) of the experts during the first part of the interview. The findings with regard to the identified factors are summarized in Table 6 and will be discussed next.
TABLE 6
Overview of results sub-question 1
Name expert Identified factors Interesting quotes
R. Boelsma - the entrepreneur - culture
- branch specificity
- differences between regions - networking
- time/money
‘’Many business owners are to proud to attract new knowledge workers. They do not want to take the risk of looking stupid.’’
‘’In the long term, knowledge creation is beneficial for every organization.’’
A.L. Everts - the entrepreneur (level of education) - awareness
- culture - structure
- market demand (branch specificity) - commercialization of ideas
‘’Knowledge creation is a common practice in the SME sector, but happens almost always implicit.’’
‘’The entrepreneur plays a crucial role in the process of knowledge creation. The smaller a firm, the more important the role of the entrepreneur.’’
G. van Heijst - necessity - purpose
- differences between branches/markets - lack of time
- structure - vision
TABLE 6
Overview of results sub-question 1 (continuation)
Name expert Identified factors Interesting quotes
M. Hennink - financial resources - time issues - culture - structure - economic conditions - the entrepreneur - necessity
‘’Most small and medium-sized firms lack the financial resources that are necessary for knowledge creation. ‘’ Also, lack of time is a major problem for SMEs.’’
‘’Changing economic conditions force a firm to create new knowledge.’’
G. Hiemstra - necessity/presence of a problem - purpose
- characteristics/nature of a firm - the personality of the entrepreneur - vision
- lack of time
- culture and structure - networking
‘’Knowledge is the essential fuel for organizational creativity and growth.’’
‘’The owner of a firm has to grasp hold of the fact that knowledge creation can lead to a sustainable competitive advantage. This in turn leads to an increase in turnover and a higher profit. Without this insight and without the prospect of increasing profits, nothing will happen.’’
J. Holtrop - leadership by the entrepreneur - education/ practical experience - differences between branches - vision
- necessity - purpose
- pressure of external parties
‘’Leadership is crucial in the process of knowledge creation. Especially in small and medium-sized firms, the entrepreneur plays a key role in determining the future path of an organization and its attention towards knowledge creation.’’
J. Horvath - level of education - vagueness - lack of time
- character of the entrepreneur - differences between branches - size of firms
- the presence of an immediate cause - purpose
‘’Firms should know where they want to be in five years. Only if firms realize where they are heading for, they know which knowledge is necessary to accomplish this vision of the future. A clear vision can serve as the pillars for knowledge creation. Unfortunately, a lot of small and medium-sized firms have no idea where they are heading for.’’
‘’The entrepreneur determines a firm’s attitude towards knowledge creation.’’
‘’Every project with respect to knowledge creation needs a champion.’’
R.J.J.M. Jorna - lack of time - level of education - awareness
- differences between branches
‘’Most small and medium-sized firms have a time-horizon of maximal a month. They are worried more about bringing in new orders and being able to survive than spending their time on something vague like knowledge creation.’’ M. Rooij - awareness
- competence - IT technology - culture - structure
5.1.1 Necessity
Five of the interviewed experts mentioned necessity as a key factor in the process of knowledge creation in small and medium-sized firms. According to these experts, there should be a certain degree of necessity for firms in order to undertake action in the field of knowledge creation. The presence of an immediate cause or problem triggers firms to create new knowledge. This immediate cause or problem can arise both from the internal and the external environment of the firm. For example, changing market conditions or decreasing customer demand can force a firm a to create new knowledge. Without a, by one of the experts called ‘magnet’, it is very unlikely that small and medium-sized firms engage in knowledge creating activities.
Multiple experts stressed that it is important to take into consideration the fact that in most small and medium-sized firms, there is no necessity to create new knowledge. A large part of these firms is simply to small, whilst other firms make a deliberate choice to operate in a way that does not require the creation of new knowledge. The last group contains for example jobbers: firms that are involved in producing a one-off product for specific customers. For these firms it is not necessary to create new knowledge. One expert illustrated the differences between firms by using the Categories of Innovativeness, introduced by Rogers (1995). This classification distinguishes between innovators, early adopters, early majority, late majority and laggards. According to the expert, for innovators and early adopters it is critical to be involved in the process of knowledge creation, whereas the importance of knowledge creation for the early and late majority is much less.
5.1.2 Purpose
The factor purpose was mentioned by four of the interviewed experts. Although many small and medium-sized firms are ‘pushed’ into the process of knowledge creation, due to an immediate cause or internal/external problem, this is not true for all firms. Instead of necessity, the prospect of increasing profits can ‘pull’ a firm into the process of knowledge creation. For this to happen, it is critical that the entrepreneur and employees realize what the advantages of knowledge creation are. In other words, there has to be a purpose. This is best illustrated by a quote by one of the experts:
‘’The owner of a firm has to grasp hold of the fact that knowledge creation can lead to a sustainable competitive advantage. This in turn leads to an increase in turnover and a higher profit. Without this insight and without the prospect of increasing profits, nothing will happen.’’
and growth’’. Despite its potential, the experts indicated that many small and medium-sized business owners are not aware of the advantages of knowledge creation. This lack of awareness was mentioned several times during the interviews.
5.1.3 Branch specificity
Closely related to necessity and purpose is the factor branch specificity. The differences between branches was mentioned as an important factor by six experts. Multiple experts stated that in high knowledge intensive markets, like for example the medical and software industry, knowledge creation is critical to be competitive. In these markets there are often close relationships between small and medium-sized firms and external parties, for example universities and research institutes. In other branches, small and medium-sized firms pay relatively little attention to knowledge creation. In these branches, (radical) innovation takes place only in large firms and is not part of the strategy of smaller firms.
According to one expert, it is important to distinguish between firms that deliver material services and firms that offer immaterial services. Both groups require different activities with respect to knowledge creation and knowledge management. In branches that are characterized by the delivery of immaterial services, firms pay mainly attention to (formal) knowledge management, whereas in the material service sector the focus is relatively more on knowledge creation.
According to another experts, the degree to which knowledge creation takes place in small and medium-sized firms also depends on the degree of competition in a certain branch. Some branches are characterized by a high level of competition, both within and between firms. An example of a branch with a high degree of (internal) competition between co-workers is the legal branch. This internal competition impedes the sharing of knowledge and has therefore a destructive effect on knowledge creation. Besides the internal competition within firms, some branches are also characterized by intensive competition between firms. Although rivalry with other firms can stimulate firms to create new knowledge, it has a negative impact on knowledge sharing and networking. Multiple experts stated that in many branches, small and medium-sized firms are afraid to share their knowledge because they do not want to take the risk of being out-competed by their rivals.
It is important to stress that there is a narrow relationship between the branch specific circumstances and the presence of necessity. Multiple experts stated that the branch in which a firm operates is a major determinant for the need and importance to be involved in the process of knowledge creation.
5.1.4 Time management
Time management related issues were mentioned by six experts. According to these experts, lack of time is a critical issue in almost all small and medium-sized firms. Especially in small firms up to about 20 employees, a lot of functions are performed by the same persons. These persons have to decide what their priorities are. In most cases the focus is on daily operations, with little or no attention paid to activities related to knowledge creation. This is best illustrated by the following quote:
‘’Most small and medium-sized firms have a time-horizon of maximal a month. They are worried more about bringing in new orders and being able to survive then spending their time on something vague like knowledge creation.’’
As the quote suggests, experts consider time and priority as one of the key factors that hinder knowledge creation in small and medium-sized firms. Most small and medium-sized business owners have simply to little time to pay attention to (long-term) knowledge creation. Although all experts admit that this problem is difficult to solve, most of them think it is crucial for small and medium-sized firms to free up time for generating new ideas and knowledge.
5.1.5 Vision
Three of the interviewed experts mentioned the presence of a clear vision as a key factor in the process of knowledge creation. Two of these experts related vision directly to time management issues. They regarded the lack of a vision as an important reason for firms not to be successful in the field of knowledge creation. According to the experts, the largest part of small and medium-sized firms does not have a clear vision or strategy. If firms do have a vision, this vision is often developed for external purposes and is not used for guiding a firm’s behaviour with respect to knowledge creation.
‘’Firms should know where they want to be in five years. Only if firms realize where they are heading for, they know which knowledge is necessary to accomplish this vision of the future. A clear vision can serve as the pillars for knowledge creation. Unfortunately, a lot of small and medium-sized firms have no idea where they are heading for.’’
5.1.6 Level of education
Three experts mentioned the level of education of business owners and employees as one of the main factors that influence the process of knowledge creation in small and medium-sized firms. The level of education of small and medium-sized business owners and employees is considered to be lower than their counterparts in larger businesses. Also, in contrast to employees and especially management in most large firms, employees and owners of small and medium-sized firms have generally little or no practical experience in the fields of knowledge creation and knowledge management.
According to the experts, the relative low level of education and the lack of practical experience result in unawareness about the concept of knowledge creation. Most business owners and employees are not aware of the advantages of knowledge management and knowledge creation, for example the positive effects on quality, efficiency and flexibility. If business owners are aware of the advantages, they find it hard to implement knowledge creating activities within their daily operations. They lack specific knowledge about the concept and have difficulties to create structures that stimulate the creation and sharing of knowledge. The experts consider both the lack of awareness and the lack of competence to be a consequence of the relative low level of education in the SME sector.
5.1.7 Leadership by the entrepreneur
Six of the interviewed experts mentioned the role of the entrepreneur during the first part of the interview. Especially for smaller firms, the character of the entrepreneur is regarded to be a major determinant for the success of knowledge creation efforts. Entrepreneurs who have an open mind towards knowledge creation can influence the entire culture within a firm. Also, the entrepreneur can create the right structures that are necessary for knowledge creation.
In this context, several experts mentioned the role of leadership. This is best illustrated by a quote by one of the experts:
As this quote suggests, entrepreneurs have to show leadership when implementing knowledge creating activities within their firm. One expert typified the role of the entrepreneur as a ‘champion’. According to this expert, the entrepreneur has a leading role in guiding a firm’s efforts towards knowledge creation.
5.2 Part 2: Consensus with regard to the theoretical model
During the last part of the interview, the experts were asked to express their opinion about the practical applicability of the theoretical model. The level of overall consensus with regard to the model varied from relatively low to relatively high. Although it is hard to draw conclusions, the experts’ commentary on the model showed some interesting similarities. The findings with regard to the experts’ opinions about the theoretical model are summarized in Table 7 and will be discussed in the remainder of this section.
TABLE 7
Overview of results sub-question 2 Name expert Level of consensus towards
the theoretical model
Interesting quotes
R. Boelsma Relatively high ‘’Especially networking becomes increasingly important for small and medium-sized firms. In the long term, networking is beneficial for every firm. In the context of networking, organizations can also use benchmarking as a tool for knowledge creation.’’ A.L. Everts Relatively high ‘’I recognize the factors in the model. However, the
model is maybe to formal for the SME sector. Also I miss the crucial role of the entrepreneur.’’
G. van Heijst Relatively low ‘’I agree on the importance of organizational characteristics and learning orientation. However, the model is to broad and should be more company and branch specific. Also, networking is more suitable for larger and internationally operating firms.’’
M. Hennink Relatively high ‘’Organizational characteristics is by far the most important factor in the model and should have a more central position.’’
TABLE 7
Overview of results sub-question 2 (continuation) Name expert Level of consensus towards
the theoretical model
Interesting quotes
G. Hiemstra Relatively high ‘’The themes in the model are indeed related to knowledge creation. However, the model assumes that knowledge creation is important for all small and medium-sized firms to be competitive. This is not true.’’
J. Holtrop Relatively high ‘’I think especially the organizational characteristics and learning orientation of a firm are very important in the process of knowledge creation. In contrast, networking for knowledge combination happens only rarely in the SME sector.’’
J. Horvath Relatively high ‘’For most small and medium-sized firms, networking with the purpose of knowledge creation is a bridge to far. However, I think the exceptions that do deliberately use networking for knowledge creation, outshine other firms in terms of attitude and learning orientation.’’
‘’There has to be a certain magnet that triggers firms to create knowledge.’’
R.J.J.M. Jorna Relatively low ‘’The model is more suitable for large firms. Actual knowledge creation happens only occasionally in the SME sector and is very branch specific. Therefore it is almost impossible to capture this concept in a model.’’ M. Rooij Neutral ‘’I agree on the importance of organizational
characteristics. In my opinion, networking is only a tool for knowledge creation. Also, the model lacks a cause and purpose.’’
5.2.1 The themes in the model
