Academic journal article International Journal of Management

Effect of Knowledge Management Systems on Operating Performance: An Empirical Study of Hi-Tech Companies Using the Balanced Scorecard Approach

Academic journal article International Journal of Management

Effect of Knowledge Management Systems on Operating Performance: An Empirical Study of Hi-Tech Companies Using the Balanced Scorecard Approach

Article excerpt

Since the development of information technology and the use of web-based information systems by firms, business management methods have become more sophisticated, leading to significant changes in high-tech business models. To deal with globalization, Taiwan's hi-tech enterprises have gradually adopted information technology to shorten manufacturing processes, reduce cost, increase flexibility, and improve product quality and service quality to increase their overall international competitiveness. Many of them, in consequence, have integrated their internal and external resources, and introduced knowledge management (KM) systems to improve their operating performance. In the present study, which utilized the balanced scorecard (BSC) approach to investigate the effects of the introduction of a knowledge management system on operating performance, 560 managers from major Taiwanese hi-tech companies competed a specially-designed questionnaire. The results showed that after introducing knowledge management there was a 5% to 10% improvement in performance in the customer, financial, and internal business process areas and a 10% to 15% improvement in performance in the learning and growth area, suggesting that the knowledge management systems that were introduced had a positive effect on operating performance.

1. Introduction

Since 1990 hi-tech enterprises in Taiwan have become of the world's main production centers, with an good understanding of the importance of knowledge management systems for their operations. Many of them have in fact made effective use of their knowledge management (KM) systems to win orders from leading international suppliers. They found that among the advantages of such systems were: (1) significantly shortened delivery time (2) dramatically reduced time spent on information searching (3) more flexible production, and (4) smoother coordination and integration of tasks. With this as background, the two major objectives of this study were to use the balanced scorecard (BSC) approach to understand the operating performance of Taiwan hi-tech companies, and to investigate the effects on operating performance among these companies of knowledge management systems.

According to Davenport et al. (1996, 1998), knowledge management treats knowledge as an extremely important asset that deserves to be carefully looked after. Anything related to knowledge assets, their acquisition, organizing, sharing and use are knowledge management activities. Nonaka et al. (2000) regarded knowledge as the application of information and its output. Knowledge stems from experience and learning, and comes from analyzing data in the form of reports, tables, and figures. Armbrecht et al. (2001) argued that the acquisition, storage and application of knowledge creates value for an organization and directly influences its performance. Gold et al. (2001) claimed that knowledge infrastructure capability and knowledge process capability will have a significant effect on the efficiency of an organization. Knowledge infrastructure capability consists of technology, infrastructure and culture, whereas knowledge process capability consists of knowledge acquisition, modification, application, and the capability to protect knowledge. Wiig (1995) argued that Knowledge Management (KM)is a group of well-defined procedures and methods used to excavate key knowledge from various operations to assist in product development and strategies and to improve human resource management practice. Holtshouse (1998) regarded knowledge as a 'kind of flow' that can be exchanged between supplier and demanden Nonaka et al. (2000) argued that, although the creation of knowledge is important, it is knowledge sharing that is really critical to an organizatin's success. The main goal of KM is to create knowledge so that organization members can learn from each other through the 'screw processes' of socialization, externalization and combination-to enhance the competitiveness of an organization. …

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