The Relationship Between Knowledge Management and Innovation Performance

This study examines the quantitative relationship between knowledge management, innovation, and performance. We aim to shed some light on the consequences of Knowledge Management (KM) activities on firm's innovation and performance. Organizations are unaware of real implications of KM. According to the literature review, we develop a research model showing a positive relationship between knowledge management, and performance as well as its impact on innovation, which in turn contributes to the firm's performance. Using data from 120 firms that are members of the Iranian Power Syndicate, this model was tested empirically. Based on the Structural Equation Model (SEM) results by Partial Least Square (PLS) method, research hypotheses were supported. Results show that KM activities impact innovation and organizational performance directly, and indirectly through an increase in innovation capability. It is found that knowledge creation, knowledge integration, and knowledge application facilitate innovation and performance. Knowledge creation has more significant effects on innovation speed, innovation quality, and innovation quantity, whereas innovation quality, knowledge creation, and knowledge integration has more significant effects on performance. Findings presented in this paper may help academics and managers in designing KM programs to achieve higher innovation, effectiveness, efficiency, and profitability.