As described in Chapter X, fundamental to the company’s innovation capabilities is the level of collaboration and knowledge management capabilities available to support the innovation process. The ability of an organization to identify, acquire, and utilize external knowledge, known as knowledge absorption, can be critical to the firm’s operational success (Adams, Bessant, & Phelps, 2006). A survey by Adams et al. (2006) shows that three areas of knowledge management are critical for innovation management: idea generation, knowledge repository (including the management of tacit and explicit knowledge), and information flows (including information gathering and networking). Further they note that several researchers have found that the firm’s ability to “absorb and put to use new knowledge,” known as knowledge “absorptive capacity,” has direct impact on the firm’s innovation and performance (Chen, 2004; Tsai, 2001). Popadiuk and Choo (2006) have further shown that innovation and knowledge creation are related. Innovation is a result of knowledge creation. Innovation is related to the firm’s ability to combine new knowledge with existing knowledge to create new knowledge that is unique to the firm. It is also related to the firm’s ability to diffuse knowledge throughout the organization so that the organization as a whole increases its absorptive capacity. Knowledge diffusion can be facilitated by IT infrastructure and knowledge management system. Knowledge management is aimed at leveraging internal and external knowledge to create value from the firm’s intangible assets. According to Metaxiotis and Psarras (2006), knowledge management contributes to value creation by enhancing: intellectual asset management, operational efficiency, customer and competitor intelligence, continuous improvement, organizational learning, innovation in products and services, and time to market. They report of findings from American Productivity and Quality Center that greater emphasis should be made by firms on “using knowledge management to become more efficient innovators.” To leverage knowledge management for business innovation, IT managers must first understand the basic principles, theories, and practices of knowledge management. Next, they must understand how knowledge management will contribute to innovation. This chapter aims to address both topics to help make IT managers become the IT innovators.
The Role of Venture Capital Investment in Startups’ Sustainable Growth and Performance: Focusing on Absorptive Capacity and Venture Capitalists’ Reputation