How Important Is Knowledge Management For Businesses?

Under the context of knowledge-view of an organization, the definition suggests that knowledge comes from firm’s increased ability to make use and sense of available information to create value for the shareholders (Leiponen, 2006). There has been a significant growth in the knowledge-based school of thought, which suggests that generating and retention of knowledge can have positive effects on the firm’s performance (Di Mattia & Scott, 1999). To manage this intangible asset to leverage firms for benefits is considered to be its core capability. Knowledge management (KM) has been aimed at capturing, integrating and using existing organizational knowledge and consequently creating a knowledge asset that can be a source of sustained competitive advantage in the long run (Brooking, 1999; Havens & Knapp, 1999). The revolution in the KM came with the rise of technology and there has been a misconception of linking IT with KM although it just facilitates the process (, 2006).

The literature has divided knowledge into two major categories depending upon its nature to be codified for the use in a KM system. The structured and systematic knowledge that can be described in formal language and easily communicated and shared through formal means qualify for the explicit knowledge type (Elizabeth, 2001). It has been established that such knowledge is easy to codify in the form of databases and is seen as a base resource because of its inherent nature of easy imitation by other organizations. The other form of knowledge which has gained tremendous importance is the automatic collective behavior and is called tacit knowledge (Richard et al, 2001). Tacit knowledge, according to Sajjad et al (2005), comprises of mental models, values, beliefs, assumptions and perceptions which are deeply entranced into the intellectual capital of an organization. It has been suggested that tacit knowledge is faced with an apparent dichotomy i.e. the feature of inimitability that make it a source of sustained competitive advantage also makes it hard to capture and share within the organization to gain the potential benefits.

Therefore it can be concluded that the elusive asset of knowledge, where provides an organization with capability to undermine competition also proves to be a challenge to leverage itself (, 2006). Any organization should not only look at the ‘best practices’ in the field but should customize each approach to its own unique culture and requirements to be able to successfully use KM.


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