Academic journal article Asian Social Science

Effects of Knowledge Management and Strategic Improvisation on SME Performance in Malaysia

Academic journal article Asian Social Science

Effects of Knowledge Management and Strategic Improvisation on SME Performance in Malaysia

Article excerpt


This research aims to determine the relationship between knowledge management (KM) and strategic improvisation with performance of small-medium enterprises (SMEs). The research employs a quantitative mail survey method and data were collected randomly from the owner/managers of registered SMEs. A total of 131 usable responses were received. Partial Least Square (PLS) modelling was used to estimate the hypothesized research model. Significant relationship was found to exist between KM and performance, and also between strategic improvisation and performance.

Keywords: small and medium enterprises, knowledge management, strategic improvisation, performance

1. Introduction

Small and medium enterprises (SMEs) are crucial to the economic development of most nations. A strong SME sector stimulates an upward mobility of an economy with the creation of job opportunities and innovation promotions (Herath & Mahmood, 2014). However, SMEs also face many constraints such as technological backwardness, shortage of entrepreneurial competencies, capabilities and skills among the key management, insufficient use of information technology and poor product quality (Emine, 2012). In Malaysia SMEs constitute 99 percent of the total business establishments, contribute 32.5 percent of gross domestic product (GDP), and 59 percent of employment (Singh & Mahmood, 2014). However, low level of performance is one of the key issues affecting the sector. Thus SMEs need to be more resilient in this globalized business environment where competitive rivalry has multiplied in its magnitude. These include the need for SMEs to refigure their strategic orientation in the form of knowledge management and strategic improvisation in order to benefit from the rapid change and to gain and maintain competitive advantage. Therefore the objective of this study is to investigate the effects of knowledge management and strategic improvisation on the performance of SMEs.

2. Literature Review

2.1 Knowledge Management and Firm Performance

Knowledge management (KM) has been increasingly recognized as an important tool for sustaining competitive advantage and improving performance. According to Rastogi (2000) and Lawson (2003), KM is a process in integrating and coordinating systematically the acquisition, creation, and deployment of knowledge, experience and expertise in an organization. The process involves systematic analyses, planning, acquisition, creation, development, storage and use of knowledge to achieve organisational goals (Omerzel, 2010; Suzana & Kasim, 2010). An effective KM strategy will lead to lesser time in the process of information and reuse of knowledge because it enhances the creation, transfer and utilisation of knowledge in the organisation (Alavi, 2000). The process of creating, sustaining and renewing in KM usually results in value creation and improvement in organisational performance (Allee, 2003).

Past studies have examined the relationship between knowledge management and firm performance. McKeen et al (2006) found significant positive links between high adoption of KM practices and high performance while Liao and Chuang (2006) concluded that KM resources have positive influence on KM process capabilities which, in turn positively influences firm performance. Chuang (2004) who empirically examined the association between KM capabilities and competitive advantage found evidence that KM has a significant impact on competitive advantage. Hsu (2006) also established that KM process capability lead to superior firm performance. Kridan and Goulding (2006) found the significance of KM for enhancing the organizations' performance and that led them to better position, and the study by Lee, Kim and Kim (2012) demonstrated the relevance of KM infrastructure for organizational performance.

Gloet and Terziovsky (2004) who explored the relationship between KM practices and innovation performance found that the humanistic approach to KM was significantly and positively related to innovation performance whereas the technology based KM and innovation performance was negatively related. …

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