How Knowledge Creation Capabilities Lead to Competitive Advantage

This chapter examines the roles of organizational creativity and organizational learning effectiveness in explaining the processes through which knowledge creation capabilities help firms to obtain and sustain competitive advantage. The proposed model specifies that organizational learning effectiveness plays a pivotal role in the relationship between knowledge creation and creativity. New knowledge develops better routines that make operations more efficient and effective. As organizations learn from newly generated knowledge, not only do they improve existing processes, but dynamic capabilities also develop to integrate knowledge into creative ideas, novel solutions, and new products and services. This theoretical examination leads to the proposition that organizational learning effectiveness mediates the relationship between knowledge creation capabilities and organizational creativity. This chapter also examines whether the effect of knowledge creation processes on organizational creativity exists in all organizations or is contingent on the nature of the organization’s knowledge. Based on the common understanding that tacit and explicit knowledge differ substantially in their codifiability and transferability, the authors specify the moderating role of knowledge characteristics in the process of using knowledge management to foster organizational creativity. The theoretical examination leads to the proposition that the degree of tacitness of the organization’s critical knowledge moderates the effect of knowledge creation capabilities on organizational creativity mediated by organizational learning effectiveness. Finally, the authors argue that the degree of institutionalization of the organization’s critical knowledge moderates the effect of knowledge creation capabilities on organizational creativity, which is in turn mediated by organizational learning effectiveness. Implications for research and managerial practices are discussed.