Study: The role of knowledge and knowledge management in
sustaining competitive advantage within organizations (review)

Study: The role of knowledge and knowledge management in sustaining competitive advantage within organizations (review)

Keywords:

Knowledge, knowledge management, sustainable competitive advantage (SCA), review.

Author(s):

Omar Mahdi, Mahmoud Khalid Almsafir, and Liu Yao

Date: 2011

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Abstract

The utilization of knowledge and knowledge management (KM) is being highly considered as an organizational capability and a potential source of sustainable competitive advantage (SCA). This paper aims at figuring out the roles of knowledge and knowledge management in achieving SCA within organizations. Assuming knowledge and KM practice as strategic and tactical element respectively, a systematic literature review is carried out from definitions, derivations to interrelations, covering both traditional and contemporary theoretical studies. Through comparison and summarization, it is found that knowledge and knowledge management potentially affects the process of SCA from different aspects. And it suggests that firms re-bundle strategic knowledge from various types and transform it by using knowledge management in order to sustain competitive advantage under today’s new business environment characterized by dynamic, discontinuous and radical pace of change.

Introduction

Due to the current pace of change, knowledge and knowledge management (KM) have become so important for business organizations (Tyler et al., 2007). As Ruggles (2000) stated, when change occurs, whether external or internal to an organization, people need new knowledge to do their work. What they know before becomes obsolete. When change comes rapidly, the organization cannot rely on its old, informal ways of gaining and transferring knowledge. They simply will not keep pace with the leading edge. ...The benefit and strategic importance of knowledge management is in the ability of an organization to correctly identify which knowledge resources they can improve to gain sustainable competitive advantage... another task of knowledge management is not to manage all knowledge, but to manage the knowledge that is most essential to the development of the organization.

Keywords

Highlights

Barney (1991) stated that not all firm resources hold the potential of sustainable competitive advantages; instead, they must possess four attributes: 1. rareness 2. value 3. inability to be imitated 4. inability to be substituted.
the process of sustaining competitive advantages is to transform resources and skills into competencies or capabilities.
Coplin (2002) point out that to sustain a competitive advantage, a company’s own resources and capabilities must therefore be difficult to imitate, not easily substituted by other resources or capabilities, incapable of being rapidly developed elsewhere, and firmly attached to the company that deploys or uses them. Barney (2008) defines competitive advantage as being sustainable if competitors are unable to imitate the source of advantage or if no one conceives of a better offering.

Schools Of Research ON Competitive Advantage

Resource-Based View (RBV)

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This is regarded as one of the most influential theories in the history of management research, especially in the strategic management deployment (Wernerfelt, 1984; Rumelt, 1984; Barney, 1986, 1991; Mahoney and Pandian, 1992; Amit and Schoemaker, 1993). The essential idea of RBV is to leverage the companies’ resources, particularly the internal sources (Kraaijenbrink et al., 2010), and core competencies to generate a sustainable competitive advantage which, in turn, translates into better performance. RBV emphasizes the unique assets and capabilities that make the difference in creating competitive advantage for an organization. Therefore, it indicates that management efforts should be focused toward collecting (Wernerfelt, 1984; Barney, 1991), developing and exploiting these strategic resources (Hafeez et al., 2002) for the sustainability of competitive advantage. Lynch (2006) has identified seven main elements that comprise the resource-based view (RBV) to obtain sustainable competitive advantage (SCA) as shown in Figure 2.
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Claudia (2006) distinguished organizations’ strategic capabilities to sustain competitive advantage, including valuable to buyers, rare, robust and non-substitutable (Johnson et al., 2005). It assumed that the organization’s ability to create valuable, in the sense that it exploit opportunities and/ or neutralizes threats in a firm’s environment, and rare among a firm’s current and potential competition, organization resources makes those resource difficult to imitate, or there cannot be strategically equivalent substitutes for it by other firms which leads higher organizational performance and sustainable competitive advantage. Dess et al. (2007) summarized these criteria as shown in Table 2, with strategic implications presented in Table 3. It shows that when all four criteria are satisfied, the competitive advantage can be sustained over time (Dess et al., 2007).

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To sum up, RBV, standing in the strategic level, sees organization as a set of resources, from which a sustainable competitive advantage can be obtained if the organization effectively deploys these resources featured with being scarce, low interchangeability, and being hard to imitate (Alipour et al., 2010), in its product-markets. It can be concluded that RBV provides a good starting point for SCA from how to identify the potential subjects or sources of SCA within organizations from a strategic aspect. However, hardly any external sources have been touched. Let alone how to tactically transform the identified resources into SCA.

https://sci-hub.st/https://link.springer.com/article/10.1007/s10490-006-9023-2

The organization must possess the ability to effectively and efficiently exploit the full potential of its resources, in order to develop and maintain any potential competitive advantages (Barney, 1997; Adams and Lamont, 2003).a

Three Generic Approaches: cost leadership, differentiation and focus

Each of these three strategic options represents an area that every business and many not-for-profit organizations can usefully explore and every business needs to choose one of these in order to compete in the market place and gain sustainable competitive advantage (Lynch, 2006). The three options can be explained by considering two aspects of the competitive environment. The first aspect is the source of competitive advantage. There are fundamentally only two sources of competitive advantage. These are differentiation of products from competitors and low costs. The second one is the competitive scope of the target customers. It is possible to target the organization’s products as a broad target covering most of the market place or to pick a narrow target and focus on a niche within the market.

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Industry Structure

According to Porter (1998), the state of competition in an industry depends on five basic competitive forces, including the bargaining power of suppliers, the bargaining power of buyers, the threat of potential new entrants, the threat of substitutes and the extent of competitive rivalry (Figure 4)
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Value Chain

The last approach to be introduced here is the value chain approach which describes the activities within and around an organization which together, create a product or service. It is the cost of these value activities and the value that they deliver that determines whether or not best value products or services are developed (Johnson et al., 2005). The concept was used and developed in relation to competitive strategy by Porter and Kramer (2006). The value chain is composed of primary business activities and support business activities as displayed in Figure 5. Primary business activities are directly concerned with the creation or delivery of a product or service and can be grouped into five main areas including: 1) inbound logistics 2) operations 3) outbound logistics 4) marketing and sales 5) after sales service Each of these groups of primary activities is linked to support activities. Support activities help to improve the effectiveness or efficiency of primary activities. They can be divided into four areas including: 1) firm infrastructure 2) human resources management 2) technology development and procurement The value chain is entrenched in a firm's value system which includes: suppliers, buyers, and distribution channels. Competitive advantage, thus, depends on how well a firm coordinates the entire value system. The activities inside the value chain are interlinked and this linkage creates interdependencies between the firm and its external environment.
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Knowledge As A Source Of Sustainable Competitive Advantage

E2E Model

Pyramid

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Bellinger et al. (2004) modified a hierarchy of knowledge, which also transits from data to information, knowledge, and wisdom through an increase of connectedness and understanding. The model uses an interesting framework: it is through understanding that data is transformed into information, then into knowledge, and finally into wisdom to create a result at a higher level. Faucher et al. (2008) redefined the scope of the hierarchy by describing it as a pyramid with two clear boundaries of existence and enlightenment. Existence describes the inclusive environment that humans can capture and create data, as data are a very basic processed result of human watching of existence; while enlightenment is the highest form of understanding (Figure 8). Thus, distinguishing the knowledge from data and information and considering the functions or importance of data, information, knowledge and wisdom, the source of SCA lies on the knowledge and wisdom which is unique, valuable and inimitable for achieving sustainable competitive advantage.

Levels

Following the classifications of Zack (1999), Maier and Remus (2001), Haggie and Kingston (2003), and Gottschalk (2002), Schwartz (2006) further classified knowledge into core knowledge, advanced knowledge and innovative knowledge.

Core knowledge is minimum span and level of knowledge required just to play the game. Having that level of knowledge and capability will not assure the long-term competitive viability of a firm, but does present a basic industry knowledge barrier to entry. Core knowledge tends to be commonly held by members of an industry and therefore provides little advantage other than over non members. Advanced knowledge enables a firm to be competitively viable. The organization may generally have the same level, span, or quality of knowledge as its competitors although the specific knowledge content will often vary among competitors, enabling knowledge differentiation. Organizations may choose to compete on knowledge head-on in the same strategic position, hoping to know more than a competitor. They may instead, choose to compete for that position by differentiating their knowledge. Innovative knowledge is that knowledge that enables an organization to lead its industry and competitors and to significantly differentiate itself from its competitors. Innovative knowledge often enables a firm to change the rules of the game itself. This means each organization’s general awareness of and orientation to the link between knowledge and strategy tends to be somewhat unique and may, itself, represent an advantage. Regardless of how knowledge is categorized based on content, every organization’s strategic knowledge can be categorized by its ability to support a competitive position. Thus, it is the strategic knowledge consisting of core, advanced and innovative knowledge that constructs the source of sustainable competitive advantage.

Knowledge Management

The first task that knowledge management can do for SCA is to transform or create knowledge from tacit to explicit and from individual to organizational.

SECI Process

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Conclusion

This study, after comparing previous researches, summarized two main issues that always bother the scholars and practitioners in their efforts of sustaining competitive advantages: 1) which resources or skills can be identified as the source of SCA? 2) How can one transform the identified source into the capability or competency of the organization? Since the source of SCA should be convertible, inimitable and valuable, knowledge is proposed as similarly as other researchers to be resource and skills of SCA. But more deeply, by reviewing researches about knowledge, the study explored knowledge into more specific scope as strategic knowledge which contains three different levels of core, advanced and innovative knowledge. In this way, it specified to some extent the strategic idea of SCA to be more feasible. Then, after reviewing researches about knowledge management, the study adding tactical analysis from knowledge management perspective, managed to answer the second question mentioned through the major four processes of KM including: 1) knowledge collection 2) creation 3) development 4) distribution. Finally, by holistically and dynamically integrating the two systems, the expected sustainable competitive advantage is supposed to be achieved. To conclude, this study provided a mechanism that knowledge and knowledge management could potentially impact the process of sustaining competitive advantage but only from a theoretical point of view. Thus, to support it in an empirical way is one direction for our future work.