Tacit Knowledge Management Mechanism and Innovation Performance

Abstract

As competition in knowledge economy of developing countries intensifies, local corporations not only have to face local competitions but also competitions from extremely aggressive foreign corporations. In order to survive the fierce competition, they must innovate. Innovative performance depends on enterprises ability to re-integrate massive resources inside and outside to adapt to volatile surroundings (Laursen and Salter, 2006). In the first part, we take a detailed look on prior researches on corporate innovation. We also study the fundamentals of knowledge management theory and mechanism management as well as creation, sharing and transfer of internal tacit knowledge. In the process of analyzing prior researches on corporate innovation in developing countries, we find that many researchers did not pay as much attention to the knowledge management mechanism within firms as they did to the cooperating mechanism between firms. As we study the effects of different factors, such as technology, marketing, organization, strategy, system, culture, etc., on innovation, we find that what matters most is human resource management, network formation and knowledge acquisition. In the past decades, there has been an increasing interest in the tacit dimension of knowledge. However, the tacit knowledge management mechanism, which constitutes of communication, cooperation and knowledge sharing as the key factors, has suffered from lack of research. We intend to fill in some gap through this paper. The second part is a case study of Haier Group from China. Through in-depth interviews, we explore various factors that affect Haier Groups innovation performance. Haier Group is China's top household electrical appliance corporation and one of the global leaders in white goods market in the last 4 years. Although China is a big producer of manufactured goods, its competitiveness can only be sustained by innovation. Established in 1984, Haier has experienced rapid growth since then. By studying the history of its development and conducting an in-depth analysis, we come to the conclusion that the tacit knowledge management mechanism, together with transformational leadership, decentralized structure, and environmental uncertainty coherently acted as ingredients of Haiers innovative success. The third part concerns an empirical study on Chinese enterprises. Based on Study I and Study II, we design a research model to detect the relationships between different factors. We discover that transformational leadership is becoming more prominent than transactional leadership in Chinas corporate scene. Under the trend, transformational leadership, combined with a forward-looking vision, is likely to substitute traditional corporate leadership in upcoming years as it has definitive advantage in exploiting the mechanism of tacit knowledge management through decentralized power structure. The trend is verified by the data collected from workers at Chinese corporations. The mediating effect of tacit knowledge management on the relationship between transformational leadership, decentralized structure, environmental uncertainty and innovation performance is partially verified. However, the relationships between environmental uncertainty, the tacit knowledge management mechanism, and innovation performance were ambiguous.