Competitive Advantage of Knowledge Management

Knowledge management has been proposed as a fundamental strategic process and the only sustainable competitive advantage for firms (Grant, 1996; Davenport, 1998). A key to understanding the success and failure of knowledge management efforts within organizations is the ability to identify the relevant knowledge to manage and to extract value out of this knowledge. In the last decade past research has focused heavily on defining what knowledge is and on using different typologies (e.g., tacit vs. explicit knowledge, individual vs. collective) to characterize the different types of knowledge available to firms (e.g., Polanyi, 1967; Spender, 1996). In addition, researchers have described the processes through which knowledge is created, developed, retained, and transferred in firms (e.g., Argote, 1999; Nonaka & Takeuchi, 1995), and the role played by leadership (Bryant, 2003; Vera & Crossan, 2004) and decision-making styles (Kalling, 2003) in influencing these processes. Unfortunately, despite the growing interest in knowledge management, little specific has been said about the mechanisms firms use to identify key knowledge areas and to gain competitive advantage out of knowledge management investments. The recognition of the important knowledge resources for a firm is critical, because the effectiveness of knowledge and learning can only be assessed on the basis of its utility in guiding behavior relative to the firm’s relevant domain (Crossan, Lane, & White, 1999; Cepeda, Galán, & Leal, 2004; Zack, 1999). Knowledge for the sake of knowledge is not useful to firms.