In response to the concern regarding the evaluation of knowledge management initiatives, this study introduces the concept of 'knowledge creating capabilities'. This concept refers to the balance of the four knowledge creation modes proposed in the SECI Model by Nonaka and Takeuchi (1995). The relationship of this concept with corporate financial performance is explored using two financial indicators on small and medium Japanese enterprises from the manufacturing sector. The empirical evidence shows the positive association of knowledge creation capabilities with financial performance.

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