title: Linking Knowledge Management to Organisational Business Performance in Construction
Creators: name: Chen, Le
Publisher: name: Griffith University
Year: 2007
Subjects: subject: knowledge management
subject: construction industry
subject: knowledge economy
subject: innovation
subject: KM
subject: Hong Kong
subject: organisational performance

description: The construction industry is characterised as a highly turbulent, rapidly changing, very complex, and extremely competitive environment, with construction activities often being highly knowledge-intensive. Specialised expert knowledge and problem-solving know-how are the real products of knowledge-intensive services, such as design, architecture, surveying and construction. Although construction organisations have been managing knowledge informally for years, their informal approaches are no longer sufficient to cope with the challenges associated with a knowledge economy. New issues attributed to the changes caused by technology, communication, and market advances are emerging, and need to be addressed strategically through effective management of knowledge and innovation. Within the construction industry, there is a growing awareness of the need for managing these challenges through a structured approach to knowledge management (KM), and the alignment of KM with business strategy and existing performance measures. The intention of KM is to link and develop internal capabilities to meet both current and future needs of an organisation. KM is perceived as a process, where KM activities interact with each other and form a process that receives input from its context (i.e. the business environment), and produces output that should be justified by business performance. Therefore, it has been conceptually suggested that through manipulating certain elements of the internal business environment (e.g. structure, strategy, policies, technology), organisations are able to facilitate KM and ultimately improve business performance. However, to date, apart from recent efforts in conceptual model propositions and exploratory studies, empirical understanding of such an input-process output relationship and the interactions among different KM activities in the context of construction is limited. Moreover, a systematic means of assessing the contribution of KM initiatives towards achieving organisational business objectives is lacking hitherto. This research study aims to empirically investigate the issues outlined above. The main objective of the study, therefore, is to empirically develop a strategic KM process framework for linking implemented KM activities to the strategic objectives of construction organisations. In addition, the study intends to provide empirical evidence for the argument that KM activities interact with each other in a cycle pattern; and, through manipulating business environment factors (i.e. the ‘forces’), construction organisations are able to inject ‘power’ into such a KM cycle, and consequently increase the intensity of KM activities, which ultimately improve their capacity to achieve economic gain in the long term. In an effort to achieve the research objective, this study employed both empirical and qualitative approaches to investigate: KM activities applied by construction organisations; the interactions of these activities; the main business environment challenges associated with their implementation; and the strategic contribution of these activities to the overall business performance, particularly within the context of Hong Kong construction organisations. In doing so, a theoretical framework of a strategic KM process was proposed and statistically tested. The measurement scales of the constructs of the framework were developed through both exploratory and confirmatory factor analyses. The relationships between the constructs were identified through correlation, regression and structural equation modelling analyses. In addition, a qualitative study approach was used to provide a better understanding of the processes attached to the phenomena under investigation.The findings of this study provide both empirical and qualitative evidence for some essential arguments in the KM literature, in particular, within the construction-specific context. These arguments are firstly, context-specific, tacit knowledge embedded in complex organisational routines and developed from experience, tends to be unique and difficult to imitate, hence is important in developing and preserving rents, or in the protection of an organisation’s core capabilities from competitors’ covetousness (Baumard, 1999). Therefore managing tacit knowledge within an organisation is essential for developing organisational competence (Sveiby, 1997). Secondly, the knowledge related activities help to create knowledge based asset (Argyris and Schön, 1978; Nonaka and Takeuchi, 2004), and the validity of this knowledge asset is reflected by the business performance indicators (Kaplan and Norton, 1996). KM process hence is capable of leveraging organisations’ intellectual capital to achieve organisational objectives (Cavaleri, 2004; Sveiby, 1997). Thirdly, through modifying organisational culture and climate an internal business environment can be cultivated where the activities that create the knowledge asset are encouraged and facilitated (Dalkir, 2005; Debowski, 2006; Stacey, 2001). Key research outcomes are described below. Firstly, the study found KM activities positively contribute to the organisational performance from learning and processes perspective, which serve as the foundation for future economic success; it, therefore, supports the claim of the literature that KM is capable of leveraging intellectual assets to realise desired organisational objectives. In other words, this study finding establishes a link between KM and desired business performance, which previously was empirically unclear, and yet was taken for granted in the KM literature. Secondly, this study established that KM activities interact with each other forming a strategic KM cycle, which implies that increasing the intensity of one type of strategic KM activity helps to push those of the others into a higher level. This means that if ‘power’ can be injected into this KM cycle, through any type of KM activities, the intensity of all other KM activities, along the cycle, can be increased. Moreover, the magnitude of this increase is enlarged with each cycle, forming a spiral pattern. Hence this study provides a unique insight into the interactions between the various KM activities. Further, previous KM studies neglected to consider the dynamic nature of the KM process. This study provided some evidence that organisations need to view KM activities from a strategic perspective, especially since the initial effort may not translate immediately into improved performance. Thirdly, this study revealed the elements of organisational culture and climate that affect the intensity of implemented KM activities. More specifically, the study findings indicate that strategic planing for KM and policies encouraging innovations are the two main ‘forces’ which can be manipulated to create the ‘energy’ that ‘powers-up’ the intensity of KM activities, in particular market knowledge acquisition and tacit knowledge dissemination. Through strengthening the strategic guidance and leadership to KM, as well as encouraging innovation and open communication, this finding suggests that organisations are more able to create a KM friendly internal business environment that helps to increase the intensity of the KM activities. Such effort will undoubtedly ‘power up’ the KM cycle, ultimately contributing to the long term economic success of the organisation. Finally, this study found that, compared to managing explicit knowledge, tacit knowledge management activities are impacted upon by the ‘forces’ of the internal business environment to a much larger degree. In addition, tacit knowledge management activities also form more active interactions; and have stronger predicting powers on the leading business indicators that drive future economic success. The finding reveals the more essential strategic role that tacit knowledge management plays in serving the long-term organisational development objectives. It thus provides evidence for the argument in the literature that much knowledge in the construction industry is both experience-based and tacit, due to the orientation toward unique projects; and as a consequence the tacit knowledge strategy seems more appropriate for the industry. The study also pointed out that medium and large contracting organisations, operating in Hong Kong, focus on KM activities that mainly serve short-term business objectives. This was especially so during the past economic down-turn. The findings revealed a potential for these organisations to derive value from KM implementation. The study also suggested that, through strengthening strategic planning and modifying organisational policies and values for KM, these organisations can push the intensity of the long-term oriented KM activities to a higher level. Ultimately, such actions will help them to achieve better business performance over the long term. Furthermore, KM should be programmed as an integral part of the holistic business management process of the organisation. KM activities should thus be managed in a similar manner to traditional business processes, whereby objectives and aligned measures are developed and continuously evaluated to ascertain their contribution to the organisational performance.