Knowledge management capability and competitive advantage: an empirical study of Vietnamese enterprises

In the New Economy characterised by properties such as globalisation, intangibility and inter-connectivity, business organisations are required to face new challenges, especially the changing nature of competition coupled with the enhanced dynamism and complexity of the environment in which they operate. One of the current strategic philosophies assisting firms to develop strategic capabilities dealing with uncertainty is knowledge management (KM). Through the systematic acquisition, creation, sharing, and use of knowledge, organisations develop, renew and exploit their knowledge-based resources, thereby allowing them to be proactive and adaptable to external changes and attain competitive success. Emerging as a powerful means for sustaining organisational competitiveness, KM has been widely investigated from different perspectives. However, only a limited number of studies have adopted the resource based view (RBV) of the firm to empirically examine the relationships between KM infrastructure and competitive advantage (CA). Meanwhile, research on KM processes from a dynamic capability approach has been mostly conceptual in nature. It is proposed here that a failure to apply KM processes may hinder the potentially valuable integrated contribution to organisational CA of the two major components that constitute KM capability, namely infrastructure and process. In addition, a review of the literature shows that most empirical evidence has been obtained in the context of advanced Western countries, or newly industrialised Asian countries. The possibility that such models might need to be customised to fit the specificities of less developed or emerging economies has received very little attention to date. To fill the identified gaps emerging from a review of prior research, this study seeks to deal with the following three main research questions: Q1. What are the key dimensions of the KM capability of a firm? Q2. How do the key dimensions of the KM capability of a firm relate to each other? Q3. How do the key dimensions of the KM capability of a firm affect its CA? Relying on social capital theory and the RBV extended by the knowledge and dynamic capability based approaches, this study develops an integrative theoretical model of KM capability based CA of the firm. Empirical examination of the hypothesised relationships among variables is conducted by means of questionnaire surveys in Vietnam, an emerging Asian country. For the pilot study, 600 draft questionnaires were directly distributed to senior managers participating in a national exhibition of construction firms in Ho Chi Minh City. The 148 responses returned with complete data were assessed, using factor analysis and reliability testing, to refine and finalise the questionnaire administered in the main survey. Next, final questionnaires were posted to 1,000 senior managers selected from the Business Directory issued by the Vietnamese Chamber of Commerce and Industry, followed up by two reminders combined with telephone contacts to increase the response rate and speed of return. The processes of data collection for the pilot and main surveys were conducted by FKS Consulting and Research Company Ltd. The data collected from the main survey were initially assessed for missing values, sample descriptives and normality testing using SPSS version 15.0 with the final number of 362 responses. A two-step approach to structural equation modeling (SEM) was then applied using AMOS version 6.0. Step one was to conduct a confirmatory factor analysis to assess the proposed measurement model fit and construct validity. Step two aimed to develop and estimate the structural model for testing the significance of theoretical relationships. The results of SEM analyses indicated that the proposed measurement model and structural model satisfied the necessary fit conditions. Therefore, nine research hypotheses were tested to address the three research questions. The empirical evidence confirms that the model is workable in the context of Vietnam, an emerging Asian country with a Confucian culture and a socialist market economy in which a majority of enterprises are small and medium sized. The findings confirm that the KM capability of a firm is a multi-dimensional construct composed of social KM infrastructure capability, technical KM infrastructure capability, and KM process capability. Social KM capability is identified by three dimensions: organisational culture, organisational structure and people (or T-shaped skills). KM process capability is identified by four dimensions, namely knowledge acquisition, conversion, application and protection processes. While social and technical KM infrastructure capabilities are strongly correlated, they are both enablers for KM process capability with social elements having a dominant influence. KM processes as dynamic capabilities, in turn, take the central role with application process as the most important contributor to firm competitiveness. As a result, the indirect effects of social and technical infrastructure capabilities on organisational CA are fully mediated through KM process capability. In addition to theoretical contributions, the study also attempts to provide a variety of practical recommendations for business executives, especially those operating in Vietnam, to be successful in applying KM projects to the attainment of strategic business objectives. Two case studies were conducted to illustrate some of these implications. Management, on the one hand, should follow and develop a holistic approach by starting with the development of social and technical KM infrastructure which, in turn, will provide the platform necessary for increasing the effectiveness and efficiency of KM processes. The correlated and complementary factors of KM capability should not be considered in isolation but rather should be integrated and combined to leverage, exploit, improve and sustain firm competitiveness. On the other hand, practising managers need to keep in mind that while social aspects, especially cultural attributes, have the most influence on knowledge-oriented processes, the major source of firm competitiveness rests in its ability to effectively exploit and apply integrated knowledge based resources. Therefore, more effort should be applied to developing and utilising these factors. Within the context of Vietnam, the study also suggests a number of specific implications for a supportive infrastructure of KM activities. Some limitations of the study are also indicated, suggesting opportunities for future research