Knowledge Management, Innovation, and Firm Performance: Evidence from Dutch SMEs

Topics: Knowledge management, Knowledge, Research Pages: 30 (10215 words) Published: August 14, 2013
H200704 H200704

The relationship between knowledge management, innovation and firm performance: evidence from Dutch SMEs

Lorraine Uhlaner André van Stel Joris Meijaard Mickey Folkeringa

Zoetermeer, January, 2007

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This report is published under the SCALES-initiative (SCientific AnaLysis of Entrepreneurship and SMEs), as part of the 'SMEs and Entrepreneurship programme' financed by the Netherlands Ministry of Economic Affairs.

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The relationship between knowledge management, innovation and firm performance: evidence from Dutch SMEs

Lorraine Uhlaner A, B, C André van Stel B, D, A, C Joris Meijaard B, A Mickey Folkeringa B

A B C D

Erasmus University Rotterdam, The Netherlands EIM Business and Policy Research, Zoetermeer, The Netherlands Max Planck Institute of Economics, Jena, Germany Cranfield University School of Management, Cranfield, UK

Abstract: This article investigates the relationship between knowledge management (KM), innovation and firm performance of smaller firms (less than 100 employees), based on a panel of more than 400 Dutch firms. Regression analyses explain the variations in sales turnover growth from various measures of KM strategies. We distinguish between KM input, throughput and output (or innovation) strategies. We find that KM input strategies related to knowledge acquisition are positively related to sales turnover growth. In contrast, we do not find a relation between KM throughput and KM output (innovation) measures and firm performance. The results emphasize the importance of both knowledge absorption and knowledge creation to the success of innovative efforts in small firms. Keywords: knowledge management, growth of small firms, entrepreneurship, innovation, micro data Acknowledgement: The paper has been written in the framework of the research programme SCALES (SCientific AnaLysis of Entrepreneurship and SMEs), carried out by EIM and financed by the Dutch Ministry of Economic Affairs. An early version of the paper was read in 2003 at the RENT XVII conference in Lodz, Poland. Correspondence: Joris Meijaard, EIM Business and Policy Research, P.O. Box 7001, 2701 AA Zoetermeer, The Netherlands, tel. +31 79 343 02 00, e-mail: jom@eim.nl

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1. Introduction Policy-makers and analysts alike have come to the growing consensus that the future strength of “developed” Western economies depends increasingly upon an effective knowledge-based economy. In the initial decades of the Information and Communication Technology (ICT) revolution (i.e., in the 1970’s and 1980’s) its major impact was to stimulate entrepreneurship; scale and largeness were no longer required in many sectors to deliver complex products and services (Audretsch, 1995; Van Stel and Carree, 2004). However, in the second wave of ICT development, with its proliferation into less developed economies, entrepreneurs themselves, especially those located in geographic regions with high labour and operating costs, are under pressure to shift production to lower-cost regions and/or to change focus to more knowledgebased activities (Audretsch and Thurik, 2004). Both these related trends, i.e., internationalization of competition, and proliferation of explicit knowledge via ICT innovations, make conscious and top-quality...
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