Human Systems Management 25 (2006) 227236 IOS Press

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A learning organization perspective on knowledge-sharing behavior and rm innovation

Li-Fen Liao
Ching Yun University, Department of Information Management, No. 229, Chien-Hsin Rd., Jung-Li, Taoyuan 320, Taiwan R.O.C. Tel.: +886 3 4581196 #7311; Fax: +886 3 4683904; E-mail: judy@cyu.edu.tw

Abstract. Sharing knowledge and rm innovation are the crucial ways to sustain competitive advantage. This study builds a nested model to test the relationship between learning organization, knowledge-sharing behavior, and rm innovation. Data gathered from 254 employees were used to examine the relationship of the learning organization to employees knowledge-sharing behavior and rm innovation. The results indicate that open-mindedness, shared vision and trust have positive effects on both knowledge-sharing behavior and rm innovation. While commitment to learning does not shows signicant relationship on knowledge-sharing behavior and rm innovation. Communication has signicance on rm innovation but not signicance on knowledge-sharing behavior. Keywords: Commitment to learning, rm innovation, knowledge-sharing, openmindedness, shared vision

Li-Fen Liao earned her PhD degree at the University of Chengchi in Taiwan; she is an assistant professor of information and management at Ching Yun University in Taiwan. Her current research interests include knowledge sharing, rm innovation and business management.

1. Introduction Nowadays knowledge is one of the key successful factors for sustaining competitive advantage, especially in high knowledge-intensive company. Knowledge has become the most precious property of company. However, sharing knowledge in company is not an ofcial task. How to encourage employee especially knowledge-intensive workers to share their experiences and knowledge is a crucial way to keep the company in the competitive position.

Learning organization embodies the degree to which rm are committed to systematically challenging the fundamental beliefs and practices. A learning culture encourages organizations to question not only the information they process but also whether their particular approach to innovation is applicable [4]. The objectives of this study are: (1) Does employees knowledge-sharing behavior impact on rm innovation; (2) Does learning organization has inuence on employees knowledge-sharing behavior; and (3) Do learning organization have direct impact on rm innovation. This paper is organized into six sections. Following this introduction is a literature review of the knowledge-sharing, learning organization, and rm innovation. Then, we describe the research model and formulate an empirical model for testing. In Section 4, we present the analysis and ndings obtained by the structural equation modeling method. In Section 5, we discuss the signicance of the ndings and implications. Finally, we conclude the paper with a discussion of this papers contributions and suggestions for future research.

0167-2533/06/$17.00 2006 IOS Press and the authors. All rights reserved

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L.-F. Liao / A learning organization perspective on knowledge-sharing behavior and rm innovation

2. Literature review 2.1. Knowledge-sharing The competitive advantage of a corporate lies in its knowledge, the knowledge within its employees, the knowledge built into its structure and systems [25]. Knowledge that resides within an individual is referred to as tacit knowledge, which is hard to verbalize and codify. And knowledge that can be articulated and put into print is explicit knowledge. In an organization, rules and guidelines expressed in codied form is one kind of explicit knowledge [31]. Knowledge sharing is the activity dependent on the interaction and communication between individuals and business units. The success of knowledge sharing depends on the amount and quality of interaction between the employees, and the willingness and ability of using knowledge [25]. Organization can encourage employees interaction and future to share their knowledge by policy [18]. Managers should seriously concern their objectives with organizations goal, then translate these objectives into technical and research goals and promote to employees [16]. 2.2. Learning organization Learning organization refers to organization-wide activity of creating and using knowledge to enhance competitive advantage [8]. Organizational learning means the process of improving actions through better knowledge and understanding [14]. Learning capability involve the development of the capacity to assimilate existing and problem-solving skills representing a capacity to create new knowledge [10]. Learning orientation is an organizational characteristic which reects the value that a rm places not only quickly response to the environmental change but constantly challenges the assumptions that frame the organizations relationship with the environment [4]. The values of organizational learning capabilities revolve around its (1) commitment to learning, (2) openmindedness, and (3) shared vision [4,8]. In addition to these three dimensions, to encourage learning, organization must provide good communication channel and the feel of trust. Organizational learning is not simply the sum of each employees learning, although organizational learning occurs though individuals. Organizations do not possess a brain, but they have cognitive systems and memories. Learning enables organizations to build understanding and interpretation of their environment and to assess viable strategy [14].

2.3. Firm innovation Innovation is dened as the generation, acceptance, and implementation of new ideas, processes, products, or services [35]. Amabile et al. dened innovation as the successful implementation of creative ideas within organization [1]. The process of rm innovation involves the acquisition, dissemination, and use of new knowledge [8]. Innovation is a means of changing an organization, whether the change to the response is in its internal or external environment or as a preemptive action taken to inuence an environment [12]. Successful innovation requires an active and highly sophisticated coordination of the efforts of a number of key members [13]. Hurley and Hult [20] indicated that organizational innovativeness can be conceptualized as an aspect of organizational culture that precedes innovation. If the members of an organization are willing to adopt new ideas and actions in the organization, the organization is openness to the innovation.

3. Research model Figure 1 illustrates the research model. In this study, learning organization contains ve dimensions including commitment to learning, open-mindedness, shared vision, communication, and trust. The models were described in Table 1. Knowledge sharing is the behavior of diffusing ones owned knowledge with other members within ones organization. How to share knowledge to create valueadded benets is the main focus of an organization [26,34]. Knowledge is often critical to the innovation process. The ability to exploit external knowledge is a critical component of innovative capabilities. Thus, prior related knowledge gives the ability to recognize the value of new information, assimilate it and apply it [10]. Sharing information and knowledge about customer needs, market changes, competitor actions, and technology evolution could superior to competitors. Innovation seems to have become a major determinant for long-term success. Innovative rm create unique products, structures, or operations. To realize the unique functions, a diversity of knowledge and ability is required [29]. Therefore, the rst hypothesis is, H1: Employees knowledge-sharing behavior is positive to rm innovation.

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Fig. 1. Research model. Table 1 Summary of theoretical models Model 1: Path from Learning Organization to Knowledge-Sharing and Knowledge-Sharing to Firm Innovation Model 2: Path from Learning Organization to Firm Innovation

Huber [19] dened organizational learning is the development of new knowledge or insights that have the potential to inuence behavior [19]. Innovation is the implementation of new ideas, products or processes [35]. Being oriented toward learning indicates an appreciation for and desire to assimilate new ideas. Consequently, organization learning is conceptualized as the antecedents to knowledge-sharing and innovation [20]. Commitment to learning is likely to foster a learning climate. It is the degree that company values and promote learning [8]. Companies that committed to learning pay much attention to the cause and effects of their actions and detect and correct errors in use [4]. Companies though learning is an important investment and crucial for survival [8]. Open-mindedness is linked to unlearn. Unlearn is the heart of change. Firms proactively question longheld routines, assumptions, and beliefs [4]. Therefore, open-mindedness is the willingness to critically evaluate the organizations operational routine, assumption, beliefs and accept new ideas [8]. Shared vision is that it is universally known, understood, and used in a manner that gives the organization a sense of purpose and direction [4]. Without a shared vision, learning by individual of a company is less to be meaningful. With shared vision, individuals are much likely to shared dominant logics (business goal or mis-

sion) or desire outcome (e.g., sales, R&D capability, high production rate). Therefore, a clear direction of learning is to form a rms strength or competence [8]. Communication plays an important role to overcome the resistance to innovation and to reduce uncertainty. Enhanced communication quality is positively related to innovation because members with a broader awareness of the consequences and implications of an innovation are more likely to facilitate it. Communication can break down barriers to innovation caused by fear or lack of knowledge [22]. If employees have higher degree of interdependence to cooperate with others, then they are more likely to share information because of self-interest and reciprocity [11]. Trust is dened as the willingness of a party to be vulnerable to the actions of another party, with the expectation that the other will perform a particular action important to the trustor, irrespective of the ability to monitor or control that other party [5,28]. In social relationships, trust reduces complexity and Blau [6] considers trust essential for stable social relationships. When employees trust their supervisors, they may have condence in that they can achieve better long-run outcomes with cooperative behavior [32]. Interpersonal trust is fundamental to all social situations that demand cooperation and interdependence [23]. Successful cooperation requires the existence of a climate in which employee feel safe in displaying proactive behavior.

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L.-F. Liao / A learning organization perspective on knowledge-sharing behavior and rm innovation Table 2 Descriptive statistics of subjects count Gender Education Background Male Female High School University Master PhD Less 29 years 3039 years 4049 years 5059 years None Manager Low Level Manager Middle Level Manager High Level Manager General Management Sales/Marketing R&D Finance Information System Human Resource Manufacturing Others 149 105 7 177 68 2 103 136 13 2 180 46 26 2 28 39 83 15 46 3 22 18 Percentage 58.7% 41.3% 2.7% 69.7% 26.7% 0.8% 40.5% 53.5% 5.2% 0.8% 70.9% 18.1% 10.2% 0.8% 11.0% 15.4% 32.7% 5.9% 18.1% 1.2% 8.7% 7.1%

Accordingly, a climate of trust and support has been linked to rm innovation [3]. Organizational learning is associated with the development of new knowledge, which is crucial for rm innovation capability and rm performance [8]. Therefore, the second and third hypotheses are, H2: Learning Organization is positively related with knowledge-sharing behavior H2a: Organizations commitment to learning is positive to knowledge-sharing behavior. H2b: Organizations open-mindedness is positive to knowledge-sharing behavior. H2c: Organizations shared vision is positive to knowledge-sharing behavior. H2d: Communication is positive to knowledgesharing behavior. H2e: Trust is positive to knowledge-sharing behavior. H3: Learning Organization is positively related with rm innovation. H3a: Organizations commitment to learning is positive to rm innovation. H3b: Organizations open-mindedness is positive to rm innovation. H3c: Organizations shared vision is positive to rm innovation. H3d: Communication is positive to rm innovation. H3e: Trust is positive to rm innovation.

Age

Manager

Responsibility

seventeen responses were eliminated due to incomplete data or in regular answers. Consequently, there were the adjusted 254 responses obtained for use in the nal analysis of the study. Table 2 depicted the basic background of subjects. The subjects are 58.7% of male and 41.3% of female. 4.3. Measures

4. Research methodology 4.1. Procedure The survey is distributed in eight computer related manufacturing companies in Taiwan. Questionnaires were mailed to the eight companies. Then each department dispatches to their employees. 4.2. Sample The subjects are the employees in the eight computer manufacturing companies. Since this study examines the organizational learning, knowledge-sharing behavior, and rm innovation, the subjects would be anyone working in the companies. With 400 questionnaires distributed, there were 271 responses received, the response rate is 67.75%. Out of the 271 responses, Learning organization. Learning orientation refers to enhance organizational competitive advantage by creating and using knowledge through organization-wide activity [8]. Values that are associated with the organizations learning capabilities include the three dimensions: commitment to learning, open-mindedness, and shared vision [4,8]. Besides, the supporting environment for learning is important. Therefore, this study added two dimensions for learning organization: communication and trust. Commitment to learning considers learning is an important investment that is crucial for survival. Openmindedness is the willingness to critically evaluate the organizations operational routine to accept new ideas, and shared vision refers to an organization-wide focus on learning. Items for commitment to learning, open-mindedness, and shared vision are adopted from

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Calantone et al. [8] and which items are revised from Baker and Sinkula [4]. Items for communication and trust are adopted from [36]. Knowledge-sharing behavior. Knowledge-sharing behavior is regarded as the degree to which employees actually share their knowledge with their colleagues for professional tasks. The test items for knowledgesharing behavior are revised from Bock and Kim [7]. Firm Innovativeness. Firm innovation was measured by a four-item scale which adopted from Calantone et al. [8]. The items developed by Calantone et al. [8] were drawn from prior researches and it was well validate by many studies. The items are listed in the Appendix.

5. Results To assess the two Models this study followed a twostep procedure using conrmatory factor analysis and structural equation modeling [2]. LISREL 8.52 and SPSS 10.0 were used to perform these analyses. Because the research model having large numbers of variables often result in t difculties and neither the sample was large, this study combined respective scale items. For purposes of uniformity, items were combined so that there were three indicators for each latent variable. 5.1. Data analysis To assess the relationships between learning organization, knowledge-sharing and rm innovation, a twostep procedure was used to test the nested model [2]. The test of the measurement model includes internal consistency and the convergent and discriminate validity of the instrument items. Convergent validity is assessed by Conrmatory Factor Analysis (CFA) and Maximum Likelihood (ML) Estimation. Table 3

presents the results of descriptive statistics and conrmatory factor analysis. Composite reliability and variance extraction are the tests for unidimensionality of a construct. The composite alpha is 0.81120.93642, which is higher than 0.7, thus satisfying Nunnalys criteria. For variance extraction, the acceptance level is 50% [15]. The estimations of variance extracted range from 58.51% to 83.975%, which exceeds the recommended value. The test of discriminate validity is used to check on multicollinearity. Thus, a measure should correlate with all measures of the same construct more highly than any measures in other constructs [9]. Table 4 displays the highest correlation 0.7344 is between commitment to learning and shared vision, while the other correlations range from 0.2416 to 0.7195. Although several variables showed signicant correlations, their tolerance values ranged from 0.621 to 0.957, indicating that multicollinearity is not a likely threat to the parameter estimates [17]. Before assessing the structural or measurement model, we examine the overall t of the model to ensure model adequacy. There are three types of goodness-of-t measurement: absolute t measures, incremental t measures and parsimonious t measures [17,33]. Absolute t measures assess the overall model t with no adjustment for overtting. Incremental t measures compare the proposed model to a NULL model. Parsimonious t measures adjust the measures of t to compare models with different numbers of coefcients and determine the t achieved by each coefcient [17]. Table 5 represents the results of goodness-of-t measurements. Goodness-of-t index (GFI) and root mean square error of approximation (RMSEA) are absolute t measures. The GFI value is 0.86 in Model 1 which is higher than 0.8. The GFI value is 0.79 in Model 2 which is less than 0.8, but still at a marginal acceptance level. The value of RMSEA for Model 1 is

Table 3 Descriptive statistics and conrmatory factor analysis Variables Commitment to learning Open mindedness Shared vision Communication Trust Knowledge Sharing Firm innovation Mean 2.26 2.65 2.45 2.68 2.37 2.42 2.57 SD 0.72 0.71 0.79 0.720 0.78 0.528 0.80 Composite reliability 0.8937 0.8611 0.9364 0.8797 0.8389 0.8112 0.9137 Variance extraction % 76.231% 70.848% 83.975% 69.536% 73.584% 58.510% 79.826%

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L.-F. Liao / A learning organization perspective on knowledge-sharing behavior and rm innovation Table 4 Interrelation among variables 1. 1. Commitment to learning 2. Open-mindedness 3. Shared Vision 4. Communication 5. Trust 6. Knowledge-sharing 7. Firm innovation Table 5 Goodness-of-t measurement table 1.000 0.5742 0.7344 0.5422 0.4473 0.3268 0.5298 2. 1.000 0.6462 0.5739 0.3312 0.3711 0.6096 3. 4. 5. 6. 7.

1.000 0.6772 0.5542 0.3616 0.7195

1.000 0.5678 0.2434 0.5712

1.000 0.2705 0.3894

1.000 0.2416 Table 6

1.000

Sequential chi-square difference test table CFI 0.93 0.94 IFI 0.93 0.94 Model Model 1 Model 2 NULL 2 462.92 342.69 5203.69 Df 173 169 210 2 120.23 df 4

Model Model 1 Model 2

GFI 0.86 0.79

RMSEA 0.043 0.039

NFI 0.92 0.93

NNFI 0.92 0.93

0.043, and of Model 2 is 0.039, both of them are less than 0.08, satisfying the criteria of 0.08. Normed t index (NFI) and Non-normed t index (NNFI) are incremental t measures. Both NFI and NNFI indices for Model 1 are 0.92, and for Model 2 are 0.93 which are higher than 0.9, indicating that the incremental t measurement reaches an acceptable level. Comparative t index (CFI) and Incremental t index (IFI) are parsimonious t measures. Both CFI and IFI in Model 1 are 0.93, and Model 2 are 0.94, higher than 0.9. The overall model t tests indicate that Model 1 and Model 2 are relatively adequate to represent the proposed relationships. A model is said to be nested within another model when its set of freely estimated parameters is a subset of those estimated in the model [2]. To assess the nested models, rst is to assess the pseudo chi-square value for goodness-of-t of structural model. The chisquare value for most saturated model Ms (smallest possible value for any structural model, in our case is Model 2) is 342.69 with the degrees of freedom of NULL Model (largest number of degrees of freedom for any structural model) is 210. The pseudo-statistic is not signicant; therefore, the structural model is acceptable. The sequential chi-square difference test (SCDT) compares the relative t of the nested models. The tests needs to make a comparison of chi-square values and associated degrees of freedom of two models, one is more restricted than the other. If the chi-square difference test is not signicant, it would be interpreted as the more restricted model tting the data as well as the less restricted one [2,30]. The results of sequential chi-square difference test of the two nested models (Model 1 and Model 2) reach

statistical signicance (2 = 120.23, df = 4, P 0.05) and are listed in Table 6. These ndings indicate that Model 2 does not t the data as well as Model 1. 5.2. Hypothesis test The standardized path coefcients for Model 1 and Model 2 are depicted in Table 7. According to Model 1, Firm innovation is explained 64% of variance by knowledge-sharing. Knowledge-sharing behavior ( = 0.80; T = 4.64; P < 0.01) has positive inuence on rm innovation which support H1. Knowledge-sharing behavior is associated with the ve dimensions of learning organization, which together explain 92% of the variance. The learning organization of open-mindedness ( = 0.38; T = 3.10; P < 0.01), shared vision ( = 0.65; T = 3.40; P < 0.01), and trust ( = 0.58; T = 4.97; P < 0.01) have direct and positive effect on knowledge-sharing behavior which support H2b, H2c, and H2e. However, commitment to learning ( = 0.072; T = 0.74; P 0.05) and communication ( = 0.019; T = 0.22; P 0.05) have no signicant relationship with knowledgesharing behavior. In Model 2, rm innovation is associated with the ve dimensions of learning organization, which together explain 61% of the variance. Among the dimensions of learning organization, open-mindedness ( = 0.26; T = 3.05; P < 0.01), shared vision ( = 0.59; T = 4.87; P < 0.01), communication ( = 0.32; T = 2.64; P < 0.01), and trust ( = 0.19; T = 2.52; P < 0.01) have signicant inuence on rm innovation. However, commitment to learning ( = 0.090; T = 1.08; P 0.05) does

L.-F. Liao / A learning organization perspective on knowledge-sharing behavior and rm innovation Table 7 Standardized path coefcients for Model 1 and Model 2 Path Commitment to learning Open mindedness Shared vision Communication Trust Commitment to learning Open mindedness Shared vision Communication Trust K.S. K.S. K.S. K.S. K.S. K.S. Firm innovation Firm innovation Firm innovation Firm innovation Firm innovation Firm innovation Model 1 0.072 0.38 0.65 0.019 0.58 T 0.74 3.10 3.40 0.22 4.97 0.090 0.26 0.59 0.32 0.19 1.08 3.05 4.87 2.64 2.52 Model 2 T

233

0.80

4.64

Fig. 2. The SEM results for Model 1.

not show signicant relationship with rm innovation. Figure 2 illustrates the SEM results for Model 1 and Fig. 3 represents the results of Model 2, where the dotted line indicates no signicant relationship.

6. Discussion The results point out that knowledge-sharing behavior has positive relationship with rm innovation. The attitude towards information sharing is not only affected by an individuals rational self-interest, but also affected by organizational culture and policies [11].

Successful innovation requires an active and highly sophisticated coordination of the efforts of a number of key members [13]. The results of Model 1 indicated that open-mindedness, shared vision, and trust indeed have signicant impact on knowledge-sharing behavior. The results of Model 2 depicted that open-mindedness, shared vision, communication, and trust have signicant inuences on rm innovation. Therefore, open-mindedness, shared vision, and trust have direct effects on both knowledge-sharing behavior and rm innovation. Open-mindedness is the willingness to critically evaluate the organizations operational routine, assump-

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Fig. 3. The SEM result for Model 2.

tion, beliefs and accept new ideas [8]. It challenges the belief, assumption and routine that rooted in the organization. Therefore, it provides the changing environment for exchanging knowledge and the ideas of innovation. Shared vision is to establish the purpose and direction accepted by a whole company. With the same goal or direction, employees could move on the expected destination. Members would study the same topics or share their experience and knowledge in the same goal and could come out new ideas. Trust is fundamental for all social situations that demand cooperation and interdependence [21]. Owing to the lack of explicit rules and regulations, people have to rely on trust in the cooperative behaviors to justify their expected benets from the exchange [6,27]. Trust is a key element in the emergence and maintenance of social exchange relationships [24]. Therefore, trust is the prerequisite for knowledge-sharing and rm innovation. Communication is an important factor in rm innovation. Innovativeness is an aspect of a rms culture which is the notion of openness to new ideas [20]. However, communication does not show a signicant relationship on knowledge-sharing behavior. Prior study depicted that knowledge-sharing is the activity dependent on the interaction and communication between individuals and business units. The success of

knowledge sharing depends on the amount and quality of interaction between the employees, and the willingness and ability of using knowledge [25]. Therefore, interaction and communication with individuals and business unit may be just general talk, not sharing their experience or knowledge unless they are willingness and with the ability to share their knowledge. Commitment to learning is not signicant in both knowledge-sharing and rm innovation. Commitment to learning is trying to create a learning environment. Top manager though learning is a kind of investment instead of expense. However, in the result it does not show that commitment to learning has positive relation on knowledge-sharing behavior and rm innovation. The problem maybe that top managers commit learning is an important job but actually they do not really implement it in organization.

7. Conclusion There are some contributions of this study. The rst is that this study tries to nd out the dimensions of learning organization which possibly impact on rm innovation and knowledge-sharing behavior. The second is that this study examines the inuence of knowledge sharing behavior to rm innovation. The third is that this study nd out expect commitment to learn-

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ing, other four dimensions (open-mindedness, shared vision, communication, and trust) have signicant inuence on knowledge-sharing behavior; three dimensions (open-mindedness, shared vision, and trust) have signicant effects on rm innovation. Since this study has a number of limitations, further study is needed. First, this study is limited in the companies of computer industry in Taiwan. The characteristics of the companies in computer industry may different from other industry. Therefore, further research could replica this study in other eld. The second limitation is in the dimensions of learning organizational. There maybe have other dimensions to describe a learning organization. Using other variables may be good to probe the cause-and-effect of knowledge-sharing behavior and rm innovation. Third, the result shows that commitment to learning has no inuence on both knowledge-sharing behavior and rm innovation. This could be veried by other industry or location.

Shared Vision [8] 1. There is a commonality of purpose in my organization. 2. There is total agreement on our organizational vision across all levels, functions, and divisions. 3. All employees are committed to the goals of this organization. 4. Employees view themselves as partners in charting the direction of the organization. Communication [36] 1. Management here does a good job of communicating with employees. 2. This organization gives praise and recognition for outstanding performance. 3. There is good communication between departments in this organization. 4. Around here, conicts are resolved to the satisfaction of those concerned. Trust [36] 1. My supervisor shows complete trust in employees ability to perform their job well. 2. I feel free to discuss problems or negative feelings with my supervisor. 3. Within reason, people in this organization can say what they want without fear of punishment. Knowledge Sharing [7] 1. I often provide the knowledge from companys training program or further education to our team members. 2. I often provide my personal working experience and knowledge to our team members. 3. I often provide companys data, for example technical reports and manuals, to other team members. Firm Innovativeness [8] 1. Our company frequently tries out new ideas. 2. Our company seeks out new ways to do things. 3. Our company is creative in its methods of operation. 4. Our new product introduction has increased over the last 5 years.

Appendix. Commitment to Learning [8] 1. Managers basically agree that our business units ability to learn is the key to our competitive advantage. 2. The basic values of this organization include learning as key to improvement. 3. The sense around here is that employee learning is an investment, not expense. 4. Learning in my organization is seen as a key commodity. Open-Mindedness [8] 1. We are not afraid to reect critically on the shared assumptions we have made about our customers. 2. Personnel in this enterprise realize that the very way they perceive the marketplace must be continually questioned. 3. We always collectively question our own bias about the way we interpret customer information. 4. We continually judge the quality of our decisions and activities taken over time.

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