Relationship between organizational cultural enablers of knowledge creation and firm performance

Knowledge and the ability of organizations learn and create new knowledge faster than competitors are recognized as a primary source of competitive advantage in the 21st Century. Organizations have invested heavily in IT based knowledge management systems along with initiatives to facilitate organizational learning and knowledge creation and observed improved operating performance. There is growing realization that current systems and initiatives have failed to meet expectations primarily due to elements of organizational culture that act to facilitate or inhibit knowledge sharing. The organizational culture element of trust has been identified as a key if not the primary precondition for effective knowledge sharing. It may seem intrinsically logical that without trust, people will not share what they know degrading the effectiveness of knowledge processes and negatively impact operating results. Despite this apparent obvious relationship, there is a lack of empirical research linking organizational culture (primarily trust) with firm value, operating efficiencies, and growth. The purpose of this study is to identify quantifiable relationships between organizational culture (trust) with firm performance. This match sample comparison group (MSCG) study compares financial results of matched pairs of publically traded companies. Firms in the benchmark group demonstrate high levels of trust relative to matched firms in the same industry of similar size comprising the control group. Results supported the hypotheses that firms with higher levels of trust outperform similarly sized firms in the same industry. The conclusion is that firms with high levels of trust create a culture that encourages knowledge sharing resulting in a firm that is more adaptable, innovative, and effective due to efficient use of knowledge processes