The Process of Knowledge Creation in Organizations

In their seminal work, Nonaka and Takeuchi (1995) highlighted the critical importance of knowledge creation to the long-term success of the organization. However, the scarcity of empirical work on knowledge creation has limited our understanding of the overall organizational process involved. To overcome this, we attempt a comprehensive analysis of knowledge creation within the organization, exploring the relationships between (1) knowledge acquisition, (2) problem-solving capability, (3) new knowledge creation, and (4) firm performance. We also investigate the environmental and organizational context within which knowledge creation occurs. Our study draws upon perspectives from the social capital, organizational learning, dynamic capabilities and innovation literatures. Based on a survey of 317 firms, our analyses suggest that the critical linkages in the knowledge creation process occur between the four components mentioned above and, most strikingly, that the effect of new knowledge creation on firm performance is entirely mediated by innovation. The implication for managers is that by focusing on simpler processes such as problem solving or innovation they can significantly reduce the complexity of managing knowledge creation and more effectively capitalize knowledge within the firm.