knowledge ment perf index

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Knowledge management system performance measure index

Shu-Mei Tseng *

Department of Information Management, I-Shou University, 1, Section 1, Hsueh-Cheng Road, Kaohsiung 840, Taiwan, ROC

Abstract

For years, the evaluation of knowledge management (KM) performance has become increasingly important since it directly provides

the reference for directing the strategic organization learning and, by which the capabilities are generated to match the requirement to

enhance enterprise competitiveness. It implies that company has strived to manage knowledge more effectively and efficiently to improve

its performance. Nevertheless, it is not yet fully understands how enterprise can successfully implement KM. In addition, despite the

growing body of theory, there are relatively few KM studies which make an explicit connection between knowledge management system

(KMS) and KMS itself performance. By partitioned the activities of KMS into three processes: KM strategic, the plan of KM, and

implementation of KM plan, the study explores the KMS performance indicators which are useful to assess the KMS performance

for firms.

2006 Elsevier Ltd. All rights reserved.

Keywords: Knowledge management strategic; Plan; Implementation; Performance

1. Introduction

Recent years, many scholars have attempted to measure

the contribution of the KM by different methods (Malho-

tra & Segars, 2001; Maltz, Shenhar, & Reilly, 2003; Ngai

& Chan, 2005). Because knowledge is rapidly becoming a

critical asset for promoting the companys future perfor-

mance, it is therefore vital that indictors and measure are

developed in order to allow top management to make deci-

sion regarding KM activities (Carrillo & Gaimon, 2004;

Pfeffer & Sutton, 1999; Ribiere & Sitar, 2003). Further-

more, how to leverage knowledge in management activities

and what advantage the KM can provide for the corpora-tion is still unclear (Choi & Lee, 2003; Ford & Chan, 2003).

Thus, managers usually confront with the difficulty of the

decisions of what and how to implement KM for attaining

the required performance in a turbulent world and are in

double about KM roles of being in the firms management

infrastructure (Ruiz-Mercader, Merono-Cerdan, & Saba-ter-Sanchez, 2006).

Several studies have proposed the concept of KM per-

formance to describe the performance improve between

the enterprises current capability and the capabilities

improve by KM. Choi and Lee (2002, 2003) have been ver-

ified that human strategy is more likely to be effective for

socialization while system strategy is more likely to be effec-

tive for combination; and the dynamic style results in a

higher performance than that the passive style while there

is no difference of performance between human and system

oriented styles. Kalling (2003) suggests that the concept

of KM is divided into three instances; development,utilization and capitalization, based on the assumption that

knowledge is not always utilized, and that utilized knowl-

edge does not always result in improved performance.

Yim, Kim, Kim, and Kwahkc (2004) develop a method of

knowledge-based decision making (KBDM) to understand

which decision factor has a higher impact on performance,

and to discern decision alternatives. Carrillo and Gaimon

(2004) defined three repositories of knowledge that drive

performance for the manufacturing plant level: technical

systems, workforce knowledge, and the managerial systems.

0957-4174/$ - see front matter 2006 Elsevier Ltd. All rights reserved.

doi:10.1016/j.eswa.2006.10.008

* Tel.: +886 7 6577711x6552; fax: +886 7 6577056.

E-mail address: [email protected]

www.elsevier.com/locate/eswa

Expert Systems with Applications 34 (2008) 734745

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They found that different characterizations of the manage-

rial systems have a profound effect on managerial behavior

and plant performance. Lee, Lee, and Kang (2005) provides

a new metric, knowledge management performance index

(KMPI), for assessing the performance of a firm in its

KM. They defined five components that can be used to

determine the knowledge circulation process (KCP). WhenKCP efficiency increases, KMPI will also expand, enabling

firms to become knowledge-intensive. Lin and Tseng

(2005a) categorize the five management gaps in implemen-

tation of KM activities and illustrate the links between

KM activities and corporate performance. The results

reveal that corporate performance is significantly influenced

by these management gaps.

For years, companies have strived to manage knowledge

more effectively, the primary motivation being improved

corporate performance (Choi & Lee, 2003). Germain,

Droge, and Christensen (2001) stated performance control

can be of two types: formulate performance-related issues

such as costs, product quality, and profit levels; and com-pare its cost, quality, customer satisfaction, and operations

to the benchmark of the industry or leaders. Furthermore,

Teece (2000) argues superior performance depends on the

ability of firms to innovate, to protect knowledge assets

and to use these knowledge assets. Fliaster (2004) claimed

the strong orientation of the executive culture towards

short-term financial performance measures and the igno-

rance of people issues is massively supported by the current

remuneration systems. Therefore, performance measure-

ment should be judged not only on financial information

(ROE or stock prices), as this is no longer sufficient for

understanding the dynamic environment. It is evident thatnon-financial measures are becoming important to organi-

zation, which likes the level of trust perceived by the

employees (Edvinsson, 1997; Robinson, Anumba, Carrillo,

& Al-Ghassani, 2005; Robinson, Carrillo, Anumba, & Al-

Ghassani, 2005).

Despite the growing body of theory, there are relatively

few KM texts that make an explicit connection between

KM activities and KM itself performance (Kalling, 2003;

Lee et al., 2005). In other word, much KM research has

focused on identifying, storing, and disseminating process

related knowledge in an organized manner, little empirical

work has been undertaken (Alavi & Leidner, 2001; Yim

et al., 2004). Furthermore, although the unexpected num-

ber of failures of KM, there are some evidences of its posi-

tive influence on organisational performance (Choi and

Lee, 2002; Carrillo & Gaimon, 2004; Choi & Lee, 2003;

Kalling, 2003; Lee et al., 2005; Lin & Tseng, 2005a). So,

it can be expected that successful KM initiatives could

transform the business into a sustainable higher perfor-

mance. Thus, it is valuable to investigate how managers

can implement KMS effectively in order to enhance KMS

itself performance. Our research objective was therefore

to explore the relationship between KMS and KMS itself

performance. And, we combined both financial and non-

financial measures methods, proposed a more useful and

rigorous method to assess KMS itself performance with

the ability to illustrate and suggest future business actions

that the firms should take to improve KMS itself per-

formance.

2. Conceptual framework

A conceptual framework of KMS, referenced to the KM

gaps (Lin & Tseng, 2005b), is used as the basis of this

study. It has four components, which are depicted in

Fig. 1. The first component of KMS is KM strategic. Many

firms cannot identify knowledge of where to go in their

organization to obtain the relevant information and

resources that are required to develop an appropriate stra-

tegic direction (Kim, Yu, & Lee, 2003). Therefore, the role

for top managers in implementing KM is to review the

internal and external environments of the enterprise in

order to understand its strength, weakness, opportunities,

and threats in conducting KM activities (Ndlela & Toit,2001; Wakefield, 2005). External analysis is crucial from

the strategy aspect of KM, because it ensures that the

enterprise can appropriately implement the KM program

to achieve a sustainable competitive advantage (Krogh,

Nonaka, & Aben, 2001; Moorman, 1995). In this process,

the weaknesses in competitors must be exploited and their

strengths must be bypassed or neutralized. Also, depending

on the outcome of the analysis of the enterprises current

position and capability with regard to the aspect of KM,

the enterprise can address opportunities and threats to for-

mulate a suitable KM strategy (Dess, Lumpkin, & Covin,

1997; Hendriks & Vriens, 1999; Teece, 2000).

The plan of KM is the second component. Under the

realization of the positions for the enterprises internal

and external environments, top management are able to

enact a proper plan to guide the enterprise in implementing

KMS deployment

Financial measure Non-financial measure

KM strategic

The plan of KM

Implemen

KM performance

tation of KM plan

Fig. 1. Conceptual model.

S.-M. Tseng / Expert Systems with Applications 34 (2008) 734745 735


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KM (Robinson, Carrillo, et al., 2005; Rubenstein-Mont-

ano et al., 2001). Effective KM, based on knowledge,

should be able to support the core tasks of business man-

agement, namely that of decision making and strategic

planning (Yim et al., 2004). Although there are many ways

in which KM can be practiced, but what method may be

more suitable depending on the specific organization suchas business object, nature of products and services, organi-

zational culture, company size, availability of resources,

etc. which will act as moderating factors which affect that

how KM should be implemented (Wong & Aspinwall,

2006). Thus, in establishing the KM plan, it is crucial to

diagnose and understand its value, and how suitable the

plan to build the KMS for the enterprise. The action plan

should include schedule, people involved and resources

required (Goold, 2005). Furthermore, KM plans should

also include of the design of the businesss workflow and

its functions (Chow, Choy, Lee, & Chan, 2005).

Implementation of KM plan is the third component of

KMS. Employees are often afraid that their personal valuemight be negatively affected after sharing their knowledge,

especially, so they unwilling to share their own knowledge.

And, there was a tendency to keep knowledge in their per-

sonal computers, rather than to share and disseminate it to

other employees (Wong & Aspinwall, 2006). Hence, the

main stimulus for the company to implement KM was to

improve this situation. Therefore, when implementing

KM, the top management must keep in mind that change

is usually not accepted by employees, and it will take time

before these changes become effective (Lin & Tseng, 2005b;

Shaw & Edwards, 2005). Furthermore, effective implemen-

tation of KM strategy includes a clear definition of whatknowledge needs to be achieved and what motivations

must be created (Campbell & Luchs, 1997). If different

opinions exist within the organization about the definition

of core knowledge, the value of knowledge, and the

introduction procedures of the KMS, the enterprise will

certainly be confronted with many obstacles when imple-

menting KM.

KM performance measures is deeply concerned on

fourth component, in which several argumentations in-

volved in why financial measure and non-financial measure

should be included in KM measurement system (Maltz

et al., 2003). It reveals that firm confront with difficulty

in determining which specific measures are critical to their

firm. Chakravarthy (1986) found that classic financial mea-

sures (ROE, ROC, ROS) are incapable of distinguishing

differences in performance between these firms. Kaplan

and Norton (1996) also asserted that traditional financial

accounting measures (e.g., ROI, EPS) can give misleading

signals for continuous improvement and innovation. It

implies that the financial measures which are based on tra-

ditional accounting practices with emphasis on short-term

indicators such as profit, turnover, cash flow and share

prices, are not a fully set to measure the organization per-

formance, while non-financial measures becoming impor-

tant to organizations such as their customers, investors,

and stakeholders (Robinson, Anumba, et al., 2005). It is

performance measures not only on financial information,

that non-financial measures are becoming important to

organization (Fliaster, 2004). Based on the discussion men-

tioned above, our researches will combination financial

measure and non-financial measure to evaluate KMS

performance.

3. Methods

This study involves two-phased design and each is with

distinct methodology. First, volumes of literature review

and in-depth interviews with senior managers from four

companies were used to collect data. Interviews are one

of the most intensively used methods of data collection

(Bryman & Burgess, 1999). The individual in-depth inter-

views that we will conduct are face-to-face and semi-struc-

tured nature, which is one of the most common approaches

to interviewing in qualitative research (Bryman & Burgess,

1999). This type of interview involves the implementationof a number of predetermined questions or special topics.

That allows the respondents to determine the direction

and content of the interview within a broader framework

provided by the interviewer. After each companys inter-

views were completed, the results were assembled, tran-

scribed and e-mailed to the respondents for their review

and approval eliminating any misinterpretation. It is expect

to provide a richer and more holistic appreciation of the

problems regarding KMS. Second, a questionnaire (devel-

oped through literature review and in-depth interviews)

that quantified the constructs was mailed to the 500 largest

corporations list in Taiwan compiled by the China CreditInformation Service (2005). After three weeks, respondents

were reminded by e-mail to submit the completed question-

naires. This measurement technique was used as a prelimin-

ary assessment of our understanding of the KMS and to

verify whether the qualitative data from the interviews

matched the quantitative responses. Final, we used the

metric (Lee et al., 2005), knowledge management perfor-

mance index (KMPI) to assess KMS performance. Fur-

thermore, we adopted two specific measures: financial

and non-financial factors to test and verify whether KMS

performance index will results in higher KMS perfor-

mance. The following sections will illustrate the main ques-

tions associated with the three KM deployment and the

constructs of KMS performance.

3.1. KM strategic

If KM is to be successfully directed, there must be an

indisputable link between companys business strategic

and its KM strategic (Tiwana, 2001). Managers need to

capture what they learn both from the soft insights and

experiences and from hard market data, and then synthe-

size that learning into a vision of the direction that business

should pursue. Such strategic orientation requires knowl-

edge of the external environment in which your company

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confronts and comprehension of the internal process that it

undertakes. Therefore, to measure KM strategic, two con-

structs were needs: external analysis and internal analysis.

The first was measured by assessing the responses to four

questions and internal analysis was measured by answers

to three items, which are depicted in Table 1.

3.2. The plan of KM

First of the core tasks of management is to define goals

so as to give direction to the companys basic process. The

processes involved in defining goals are the starting point

of KM (Probst, Raub, & Romhardt, 2000). The ultimate

goal of KM is to create value through knowledge usage.

A strong emphasis on KM in the firms business plan indi-

cates the importance of well-developed strategies to let

employees perceive the managers strategic visions and

their leadership style for establishing a program to achieve

the firms overall objective (John, Chimay, & Patricia,

2002). Second of the core tasks of management is to iden-

tify employee orientation. KM problems often occur

because employees are not well suited for their positions.

Managers commonly do not give enough attention or

devote sufficient resources to hiring and selection processes

(Robinson, Carrillo, et al., 2005; Zeithaml, Berry, & Para-

suraman, 1988). They usually do not know what the

employees, especially the experts, are thinking about the

market developments and technological trends (Fliaster,

2004). Thirdly, many of the technologies that support the

management of knowledge have been around for long time.To analyze these extant technologies, we can make judg-

ments about what can be take as is, and what more needs

to be added to leverage existing infrastructure (Desouza,

2003; Quintas, Lefrere, & Jones, 1997; Spender, 1996; Tiw-

ana, 2001). Thus, the degree of KM plan depends on con-

structs such as goal setting, employee orientation, and

KMS infrastructure. Goal setting was measured by two

items; employee orientation was operationalized by three

items, and KMS infrastructure was measured by five items,

which are depicted in Table 2.

3.3. The implementation of KM plan

It is well known that the top management support and

senior levels understanding is crucial to a successful KM

implementation (Fliaster, 2004). Unless all employees

Table 1

KM strategy items

Constructs Items Remark

External

analysis

Q1. Does the core knowledge own by firm dominated in the industry? Ndlela and Toit (2001)

Q2. Which industries have been developing knowledge that could pose a threat to you? Holsapple and Joshi (2002)

Q3. Can employees screen out the useful KM for the firm from external environment? Maltz et al. (2003)

Q4. Can employees communicate the knowledge obtaining from external environment with

their managers?

Gray and Meister (2006)

Internal

analysis

Q1. Do you know about the knowledge that is critical to your firms success? Ndlela and Toit (2001)

Q2. What the infrastructure of information technology owning by firm can support the

implementation of KM?

Kim et al. (2003) and Woo et al.

(2004)

Q3. Are barriers to implementing a KM program clearly understand by the firms upper

management?

Table 2

The plan of KM items


Goal setting Q1. Do the goals of KM alignment with the firms goals? Probst et al. (2000), John et al. (2002) and

Robinson, Carrillo, et al. (2005)

Q2. Are the goals of KM consistent with the individual goals?

Employee

orientation

Q3. Do top managers and employees truly understand what KM to be? Zeithaml et al. (1988)

Q4. Do employees have the good skills to apply use the information

technology for successful implementing the KM?

Fliaster (2004)

Q5. Does firm commit to provide abundant resources to support KM?

KMS

infrastructure

Q6. Can firms KMS flexible support the formulation of KM strategic? Spender (1996), Quintas et al. (1997), Wiig et al.

(1997), Hendriks and Vriens (1999), Tiwana (2001)

and Desouza (2003)

Q7. Can the KMS provides multiple channels to satisfy the requirement for

sharing of heterogeneous knowledge and preference?

Q8. Can the employees satisfied with KMS when the size of knowledge

communities has continuous growled?

Q9. Does the firm provide friendly hardware to standardize the knowledge?

Q10. Does the firm provide friendly software to standardize the knowledge?



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accept the whole notion of the KMS that company is build-

ing, they will have neither the inclination to use it nor sup-

port it. As a consequence, employees trust in senior

leadership is one of the key drivers of employee commit-

ment and willingness to share knowledge (Levin & Cross,

2004; Ribiere & Sitar, 2003). Furthermore, due to the tacit

and dynamic nature of knowledge, it is difficult to measureknowledge assets with existing accounting systems (Claes-

sen, 2005). Many companies fail to evaluate the results of

KM to determine whether or not it meets expectations,

therefore, a complete measurement system needs to be

developed to evaluate whether the KM activities will enable

the enterprise to enhance its competitiveness after imple-

mentation (Kreng & Tsai, 2003). Thus, an instrument to

assess the degree of KM implementation used two con-

structs: employee commitment and measurement system.

Based on relevant reference, we propose eight issues for

the employee commitment and five issues for measurement

system, which are depicted in Table 3.

3.4. KM performance

Lee et al. (2005) proposed a new metric, knowledge

management performance index (KMPI) for assessing

KM performance. They defined five components to illus-

trate knowledge circulation process (KCP): knowledge cre-

ation, knowledge accumulation, knowledge sharing,

knowledge utilization, and knowledge internalization.

When KCP efficiency increases, KMPI will also expand,

enabling firms to become knowledge-intensive. The KMPI

function was basically on a logistic function in which the

contribution of KCP for years starts slowly but then

increases rapidly, slowing down at a mature level. Because

the KCP is based on Nonaka, Toyama, and Konno (2000)

proposed knowledge conversion model (SECI): socializa-

tion, externalization, combination, and internalization, it

is too intangible and abstract to evaluative KM activities.

Therefore, it will be useful to develop a holistic framework

to describe the fundamental steps of the implementation ofthe KMS. As a consequence, our research defined three

components to illustrate the process of the KMS (Lin &

Tseng, 2005b). A similar rational can be applied in the con-

text of the processes of the KMS, which are KM strategic,

the plan of KM, and implementation of KM plan, because

the rate of KMS benefits increase will be small while users

unwillingness to share their own knowledge or their inabil-

ity to understand exactly what KMS in the initial stage

(Ford & Chan, 2003; Wong & Aspinwall, 2006). The rate

then increases, as users become accept with it. The rate,

however, slows as the benefits approach the limit that can

be gained from the system, or when competitors also imple-

ment the KMS. In this sense, we followed the logic of Leeet al. (2005) in developing knowledge management system

performance index (KMSPI)

KMSPIt 1

1 eKMSt 1

The KMS term in (Eq. (1)) is a function of the relative

weight of the eigenvalue (RWE) of each component multi-

plied by the average factor value (AFV) of the correspond-

ing KMS.

KMS RWESAVES RWEPAVEP RWEIAVEI 2

where S is KM strategic, P is the plan of KM, and I is the

implementation of KM plan.

Table 3

The implementation of KM plan items


Employee

commitment

Q1. Do top managers support the knowledge communities? Nonaka (1991, 1994)

Q2. Do employees support the knowledge communities?

Q3. Can knowledge communities mapped on to the existing organizational structure? Ribiere and Sitar (2003)

Q4. Are top managers and employees both committed to implement KM? Cummings (2004) and Ditillo (2004)

Q5. Do employees conceive that top mangers genuinely care about providing enough

resources to them?

Fliaster (2004) and Ruiz-Mercader

et al. (2006)

Q6. Do employees feel they are cooperating rather than competing with each other infulfilling the goals of KM?

Q7. Do employees feel personally involved in the implementation and committee to

devote themselves?

Q8. Does the number of layers of the hierarchy of the organization structure is suitable

for KM implementation?

Measurement

system

Q1. Does the firm realize what contribute of the assets and liabilities in knowledge

balance sheet?

Probst et al. (2000)

Q2. Can the firm provide to build an appropriate knowledge repository? Kreng and Tsai (2003) and Chang,

Choi and Lee (2004)

Q3. Have the firms to period update knowledge repository? Ford and Chan (2003)

Q4. Does the firm have an explicitly quantitative and financial monitoring system and

culture?

Q5. Can which function or department of the firm be a successful prototype or

benchmark?

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3.5. Test of KMS performance index

Because there are many results reveal that corporate per-

formance is significantly influenced by the KM activities

(Pfeffer & Sutton, 1999; Ribiere & Sitar, 2003). Therefore,

we hypothesize that firms with good KM strategic, plan,

and implementation will obtain high degree of their KMSperformance index, and that those with a greater KMS per-

formance index will results in higher KM performance. In

order to test and verify this idea, we adopted two specific

measures: financial and non-financial factors. The financial

one is measured by the average change in sale of the recent

three years (20022004) (Lee et al., 2005). The non-financial

is measured by competitiveness and innovativeness (Lin,

Yeh, & Tseng, 2005). Thus, our research hypotheses were:

Hypothesis 1. If KMS performance index is greater, then

the average change in financial measure is significantly

better.

Hypothesis 2. If KMS performance index is greater, then

the non-financial measure is significantly better.

4. Samples and measures

Taiwan has long been an active player in the world econ-

omy and an important trader in the global market (Wang,

2003). Taiwan is an exportingas well as an importing nation.

Around 80% of the machines, tools and accessories it pro-

duces are purchased by other countries (Koepfer, 2001).

Moreover, Taiwan is the worlds biggest manufacturer for

dozens of computer-related products such as notebook com-puters, palm scanners, motherboards, andmodems. In terms

of production value, it ranks third in the world in computer

manufacturing and fourth in semiconductors (Ministry of

Economic Affairs, Republic of China homepage, MOEA,

2005). Taiwan is also home to one of Asias most open and

well-developed Internet communities (Trappey & Trappey,

2000). All of the evidence above points to Taiwans industry

as being a suitable sample for exploring the issues concerned

with KM performance.

Therefore, the model empirically investigates Taiwan

firms to find the method to accessing KMS performance

of a firm. The draft questionnaire was examined by inter-

viewing four companies for content and validity, and

minor modifications of the wordings of some survey items

were made. The initial sample consisted of 500 divisions of

firms noted in the largest corporations in Taiwan China

Credit Information Service Top 5000 (2005). The senior

managers or the directors of KM department were used

as informants because they tend to play key roles in orga-

nizational activities (James, Stoner, Freeman, Daniel, &

Gilbert, 1995). Informants were mailed a questionnaire

and a cover letter that explained the purpose of this study

and promised a summary of the results if they completed

questionnaire and were interested in this study result.

Three weeks following the first mailing, non-respondents

were telephoned, reminded of the questionnaire, and

encouraged to complete and return it. Research constructs

were operationalized through related studies and a pilot

test. Multi-item scales were used for measuring the research

variables using a seven-point Likert-type scale.

5. Sample analysis

5.1. Sample characteristics

There were 65 responses, of which 57 were complete and

usable for analysis, yield an effective response rate of

11.4%. In this study the response rate of the questionnaire

is lower that may be they were too busy to full out this

questionnaire. In addition, we think that may be they do

not understood about the topic in this respect of KM or

they have not pursued KM yet, so they unable to answer

this questionnaire (Lin & Tseng, 2005a). To verify this

argumentation, we call to the respondent firm to check itowns the independent unit of KM. It shows that there is

only 79 firms own the independent unit of KM and the unit

is usually directed by the department of information man-

agement, research and development as well as human

resource management. This implies that the 65 respondent

seems to be reasonable in the study. Table 4 shows the

demographics of the sample. Careful non-response analy-

ses were applied to ensure the absence of non-response

biases. Comparing the responding and non-responding

firms in terms of total assets and annual sales, no signifi-

cant differences were found based on independent sample

t-test (p > 0.05). Thus, there appeared to be no non-

response bias. The test results are provided in Table 5.

5.2. Test results

Factor analysis is a mathematical tool which can be used

to examine a wide range of data sets. It is applied as a data

Table 4

Demographic characteristics of the responding firms (n = 57)

Percentage of firms

Industry

Manufacturing companies 37.0

Non-manufacturing companies 25.9

Government enterprises 10.2

Banking & financing 26.9

Annual sales

Less than $3 billion 7.4

3 billion to below 15 billion 40.7



100 billion and above 19.4

Number of employees

3000 26.4



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reduction or structure detection method. In this way, factor

analysis validated the measures used in the KMS perfor-

mance index calculation model. Exploratory factor analysis

was adopted using the orthogonal rotation method. Five

factors had Cronbachs alpha value greater than 0.7, indi-

cating that internal consistency is guaranteed for the mea-

surement instruments. Table 6 shows the factor structure of

variables, where reliability and convergent validity were

significant because Cronbachs alpha was greater than or

equal to 0.70, and all convergent validity was greater than

0.60 (Hair, Anderson, Tatham, & Black, 1998). Tables 7

and 8 summarize RWE and AFV, all of which wererequired to calculate KMS performance index as shown

in Table 9. Table 10 shows the correlation between KMS

performance index and the two measures. Hypotheses 1

was proved at the 0.1 significance level, while Hypotheses

2 was proved at the 0.05 significance level. This show that

the value of KMSPI by indicating the significance of corre-

lation between KMSPI and the two measures.

The empirical results, i.e. Tables 610 show that, as con-

ceptual framework, the three components of KMS signifi-

cantly impact KMS performance. The effectiveness and

efficiency KMS was executed will increase the KMS

performance.

6. Discussion

Based on the results of statistical analysis and discussion

mentioned above, we conclude that the quality of KM

regarding to three components of KMS will affect KMS

performance. It is imperative that the more effective and

efficiency that the three components can achieve, the better

the performance that KMS attains. Therefore, the detailed

discussions of the three components of the KMS are stated

as the follows.

6.1. KM strategy

Kim et al. (2003) define knowledge strategy planning asa process of creating an organizational knowledge vision,

designing KM architectures, and organizing a set of activ-

ities and resources to implement them. Because each enter-

prise has its own unique knowledge domain, as well as

certain specific problems that can be solved, the critical

task of top managers is to identify the core knowledge

which is necessary to achieve and maintain competitive

advantages (Ndlela & Toit, 2001). The business improve-

ment strategy is more advanced than the KM strategy

but it is recognized that there is a need for better alignment

or integration of KM into business improvement (Long &

Seemann, 2000; Maier & Remus, 2001). In other words, to

leverage the capability of the knowledge for the organiza-

tion, top management should ensure the consistency

between the enterprise mission and knowledge strategy by

clearly defining knowledge goals that are connected with

functional strategies (Kim et al., 2003).

It is supportive for providing a conceptual framework to

formulate the KM strategy as showed in Fig. 2, which con-

sists of external environmental scan and internal scrutiny

by Porters five forces model and knowledge value chain

(Holsapple & Singh, 2001), respectively; and initially to

result in so called SWOT. In the external environment

analysis, a current situation and characteristics of the

industry were examined with a focus on the market. In

Table 6

Factor structure of variables (N= 57)

Factor Eigenvalue Cronbachs

alpha

Items Factor

loadings

Convergent

validity

KM strategic

by external

analysis

2.843 0.8642 Q1 0.737 0.6626

Q2 0.739 0.6736

Q3 0.899 0.7813Q4 0.838 0.7540

KM strategic

by internal

analysis

2.151 0.7642 Q1 0.860 0.6750

Q2 0.648 0.5446

Q3 0.836 0.5972

Plan of KM 7.072 0.9537 Q1 0.793 0.7439

Q2 0.841 0.8026

Q3 0.779 0.7294

Q4 0.856 0.8177

Q5 0.830 0.7866

Q6 0.828 0.7832

Q7 0.904 0.8765

Q8 0.849 0.8101

Q9 0.872 0.8358

Q10 0.851 0.8124

Implementation

of KM by

employees

committee

5.270 0.9384 Q1 0.871 0.8057

Q2 0.825 0.8214

Q3 0.821 0.7707

Q4 0.747 0.8012

Q5 0.728 0.8514

Q6 0.708 0.8140

Q7 0.648 0.7687

Q8 0.630 0.6430

Implementation

of KM by

measurement

system

4.155 0.9093 Q1 0.707 0.6373

Q2 0.813 0.8549

Q3 0.848 0.8025

Q4 0.841 0.8417

Q5 0.631 0.7427

Table 7

Relative weight of eigenvalue (RWE)

Factor Eigenvalue RWE

KM strategic 4.994 0.23

Plan of KM 7.072 0.33

Implementation of KM 9.425 0.44

Total 21.491 1

Table 5

Homogeneity test between responding and non-responding

Characteristics Test Statistical

t-value

P-value*

Total assets Independent sample t-test 1.57 0.12

Annual sales Independent sample t-test 1.71 0.09

*

P> 0.05 indicates no non-response bias.



8/12

our study, we found whether employees can screen out the

useful KM for the firm from external environment and

employees can communicate the knowledge obtaining from

external environment with their managers are very impor-

tant (Gray & Meister, 2006; Holsapple & Joshi, 2002;

Maltz et al., 2003). The internal environment analysis iden-

tified a need for securing and protecting its core knowledge.

In our study, we found whether firms know about the knowl-

edge that is critical to their success and top management

clearly understand the barriers to implementing a KM pro-

gram are very important (Kim et al., 2003; Woo, Clayton,Johnson, Flores, & Ellis, 2004). Through the process of car-

rying out KM strategy, an organization becomes aware of its

weakness, strength, opportunities, and threats of KM for

achieving its goal (Akhter, 2003; Dess et al., 1997; Krogh

et al., 2001). Finally, according to the characteristic of avail-

able capacity, the firm could derive the appropriate measure

to evaluate the current KM strategic performance.

6.2. The action plan of KM

After exploring firms external and internal environ-

ments, they can understand the current position of an

Table 8

Average factor value

Company Strategy Plan Implement Company Strategy Plan Implement

Com1 0.6633 1.0456 1.0395 Com31 0.0416 0.248 0.214Com2 0.7636 0.6413 0.5454 Com32 0.093 0.5484 0.3020Com3 0.3497 0.6351 0.5477 Com33 0.523 1.043 0.067Com4 0.6053 0.8408 0.5712 Com34 0.7957 1.0517 0.7937

Com5 1.538 2.619 1.588 Com35 0.5477 0.7500 0.214Com6 0.8879 0.9441 0.7641 Com36 0.364 0.441 0.2088Com7 0.6769 0.5655 0.7830 Com37 0.4554 1.0517 0.5368

Com8 0.530 0.839 0.343 Com38 0.9300 2.0453 1.3362Com9 0.5056 0.335 0.458 Com39 0.0070 0.557 0.636Com10 0.0123 0.9583 0.6345 Com40 0.2201 0.944 0.176Com11 0.5604 0.6322 0.3514 Com41 0.4501 0.1550 0.2397

Com12 0.5161 1.0601 0.7623 Com42 0.302 1.037 0.847Com13 0.9645 1.1465 1.1074 Com43 0.364 1.238 0.706Com14 0.2338 0.337 0.328 Com44 0.010 0.142 0.2217Com15 0.539 0.1494 0.125 Com45 0.006 0.3564 0.037Com16 0.5049 0.4519 0.5065 Com46 0.8611 0.1585 0.3943

Com17 0.5588 1.3534 0.5843 Com47 0.683 0.539 0.690Com18 0.712 1.537 1.299 Com48 1.679 2.511 1.283Com19 0.623 0.029 0.577 Com49 0.913 0.1543 0.190

Com20 0.087 0.0578 0.2345 Com50 0.4506 0.735 0.624Com21 1.1039 1.8448 1.2884 Com51 0.988 0.144 0.446Com22 0.672 1.134 0.452 Com52 0.7006 0.4522 0.0246Com23 0.100 1.243 0.220 Com53 0.549 0.532 0.585Com24 0.3358 0.057 0.175 Com54 0.193 0.538 0.571Com25 1.2096 2.0453 1.3362 Com55 0.815 0.428 0.959Com26 0.5056 0.6523 0.8436 Com56 0.854 0.628 0.822Com27 0.5056 0.9448 1.0346 Com57 1.018 1.138 1.102Com28 1.145 0.935 0.565Com29 0.108 0.2586 0.155Com30 1.504 1.033 0.521

Table 9

KMSPI calculationCompany KMSPI Company KMSPI Company KMSPI

Com25 0.823624 Com52 0.579624 Com54 0.383753

Com38 0.814090 Com32 0.572589 Com33 0.378922

Com21 0.806838 Com35 0.569282 Com23 0.370408

Com13 0.747910 Com41 0.564685 Com8 0.365846

Com1 0.722125 Com20 0.525495 Com53 0.363549

Com27 0.707516 Com45 0.524912 Com47 0.345397

Com34 0.706695 Com44 0.512064 Com22 0.325604

Com6 0.700997 Com29 0.497920 Com55 0.320565

Com17 0.696838 Com24 0.495217 Com56 0.317356

Com12 0.690829 Com15 0.467520 Com42 0.313347

Com26 0.668807 Com36 0.465654 Com43 0.309269

Com37 0.665538 Com31 0.458317 Com28 0.305622

Com7 0.665270 C om9 0.451127 C om30 0.285644Com4 0.661069 Com14 0.449704 Com57 0.250664

Com2 0.651874 Com49 0.439533 Com18 0.223887

Com10 0.645267 Com40 0.416147 Com48 0.144308

Com3 0.629731 C om19 0.399543 C om5 0.128197

Com11 0.620623 Com50 0.397947

Com16 0.619676 Com39 0.386451

Com46 0.604419 Com51 0.384231

Table 10

Correlation between KMS performance index and financial and non-financial measures

Measures item Correlation with KMSPI

Financial 0.295*

Non-financial 0.608**

* P< 0.1.** P< 0.05.



9/12

organization and recognize where it should go in the

future. Knowledge related to business processes or individ-ual tasks are identified through decomposing business

processes. In other woods, strategies of KM should be

delineated in an organizational context. In this phase,

KM goal and strategies are set up based on the outputs

of previous phases (Green & Ryan, 2005). In other woods,

the goals of KM must be alignment with the firms goals.

Companies should aim to ensure the use and development

of skills and knowledge that are relevant to the organiza-

tions objectives (John et al., 2002; Probst et al., 2000; Rob-

inson, Carrillo, et al., 2005). In addition, KM problems

often occur because employees are not well suited for their

positions and managers commonly do not give enough

attention or devote sufficient resources to hiring and selec-

tion processes. Therefore, firms must train employee to

have good skill to apply use the information technology

for implementing the KM and provide abundant resource

to support KM (Fliaster, 2004; Zeithaml et al., 1988). If

there is an absence of total management commitment, then

KM cannot be implemented successful. Furthermore, due

to the rapidly of growing knowledge, the KMS should

provide multiple channels to satisfy the requirement for

sharing of heterogeneous knowledge and preference (Deso-

uza, 2003; Quintas et al., 1997). In conclusion, the action

plan or introduce KM map should be formulate and state

clearly, in which the connecting between KM strategic, firm

objectives and KM map are declared to provide a funda-

mental base for carefully selecting the implementing teamand platform appropriately with a initial diagnosis and

KM audit to provide the infrastructure and development

direction of the KM (Gravill, Compeau, & Marcolin,

2006).

6.3. Implementation of KM

Effective implementation of KM strategies includes a

clear definition of what knowledge needs to be achieved

and what motivations must be created (Campbell & Luchs,

1997). The different opinions may exist within the organiza-

tion about the definition of core knowledge, the value of

knowledge, and the introduction procedures of the KMS,

the enterprise should firstly carefully tackle the problems

in implementing the KM. More clearly, employees percep-

tions of what type of knowledge they will be appreciated

for firms support them to own or learn the knowledge

may be different depended on their positions and roles

(Nonaka, 1991). Therefore, to match the perceptions of

all employees in different positions, the goals and the plan

that should be committed by all levels of employees which

have been became critical issues in implementation KMS.

That is top managers and employees should fully support

knowledge communities, while knowledge communities

must map to the existing organizational structure (Cum-

Corporate

Internal Scrutiny

Knowledge ValueChain Analysis

Definition ofStrengths and

Weaknesses

Corporate

External Analysis

Knowledge FiveForces Analysis

Identification ofOpportunities and

Threats

KM Strategy posture of the Firm

Power ofSupplier's

Knowledge

Rivalry among

Established

Knowledge

Power ofCustomer's

Knowledge C

Risk of entry by new

potential knowledge

Threat of Substitutes

Knowledge

The Knowledge Five Force Model

Leadership

The Knowledge Chain Model

Coordination

Learning

ProjectionControl

Measurement

Acquisition Selection Generation Internalizatior Externalization

Central Focus of Corporate KM Strategy

Fig. 2. KM strategy.



10/12

mings, 2004; Ditillo, 2004; Ribiere & Sitar, 2003; Ruiz-

Mercader et al., 2006). In addition, we found the firm must

to period update knowledge repository to sure the knowl-

edge base quality and the complete measurement system

needs to be developed in order to evaluate whether the

company will enable the enterprise to enhance their com-

petitiveness after the implementation of KMS (Ford &

Chan, 2003; Kreng & Tsai, 2003; Chang et al., 2004).

Therefore, the result of study implicates that the success

to implement the KMS should be firstly to obtain all

employees committed and then appropriate measure sys-tem to evaluate the KM performance.

7. Conclusion

Proper management and leveraging of knowledge can

propel an organization to become more adaptive, innova-

tive and intelligent. Thus, KM has become an important

strategy for improving corporate competitiveness and per-

formance (Wong & Aspinwall, 2004, 2006). However, the

links between performance and the knowledge aspects of

the models are often ignored or not properly exploited

(Robinson, Carrillo, et al., 2005). Performance manage-

ment should be underpinned by a learning culture and

KM strategic to enhance an organizations ability to con-

tinuously improve its business performance (Garvin,

1993; Lee & Kim, 2001; Nevis, DiBella, & Gould, 1995).

Therefore, the purpose of this research was to provide a

management-oriented conceptual framework to describe

the influence KMS performance in implementing the

KMS. Meanwhile, we proposed a new metric for assessing

KMS performance. As the efficiency of the three compo-

nents of KMS increases, KMS performance is enhanced

based on a review of the literature and statistical analysis.

The power of KMS performance index to represent the

financial and non-financial performance of firms was

tested. We founded when KMS performance index

increases, KMS performance likewise improves. That mean

the quality of KMS will affect KMS performance. There-

fore, we address the critical factors about how to improve

the quality of KMS as Fig. 3. KMS designers can used the

processes of the KMS to leading the KMS performance.

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