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Home / Journal of Knowledge Management, Volume 16, Number 3

Disentangling value-enhancing and cost-increasing effects of knowledge management

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Purpose ‐ The main purpose of this paper is to provide large-scale empirical evidence on the value-enhancing and cost-increasing effects of knowledge management (KM) techniques. Design/methodology/approach ‐ The authors conduct structural equation analyses, using data from the Community Innovation Survey 2007 and from annual accounts of 705 innovative Belgian firms. Findings ‐ Results confirm that the use of KM techniques has an indirect positive impact on financial performance via increased innovation performance. In addition, a direct cost-increasing effect of KM practices on financial performance is observed. In the short term, this direct cost-increasing effect exceeds the indirect value-generating effect of KM techniques. Research limitations/implications ‐ This study investigates the short-term effects of KM techniques. Future research should study the long-term costs and benefits. Data were collected in Belgium and may not reflect the impact of KM practices in other geographic, economic or cultural settings. Practical implications ‐ The findings clearly indicate that the implementation of KM techniques entails significant costs. Within a two-year time frame, the financial costs of KM techniques are more visible than their potential benefits. An exclusive focus on the short-term implications of the use of KM techniques is hence likely to give a too pessimistic view on their potential financial contribution. Originality/value ‐ This article is the first large-scale study that disentangles both the value-enhancing and cost-increasing effects of KM techniques on financial performance and that uses time lags and accounting data (as opposed to self-reported performance measures) to do so.

Keywords: Belgium; Cost effectiveness; Financial performance; Innovation performance; Knowledge management; Value analysis

Document Type: Research Article

Publication date: 25 May 2012

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