The role of product innovation and customer centricity in transforming tacit and explicit knowledge into profitability

Abstract

Purpose By fusing knowledge-based theory, organizational learning theory and dynamics capability theory, this study aims to explore, on the one hand, the linkage between exploration, sensing and tacit knowledge, and on the other hand, exploitation, seizing and explicit knowledge. Thereby, it argues that not only tacit knowledge but also explicit knowledge contributes to competitive advantage for firms. This study also investigates how knowledge transforms into profitability. Design/methodology/approach The conceptual model is tested with a study sample of 153 industrial organizations using structural equation modelling. Findings Results confirm the importance of both tacit and explicit knowledge for achieving sustainable competitive advantages. Furthermore, both tacit and explicit knowledge transform into profitability, both directly and through product innovation and customer centricity which play partial mediating roles. Practical implications Explicit knowledge strategies can be easier to manage, implement and institutionalize than tacit knowledge strategies, which require human component and intervention to succeed. Managers should hence first implement explicit knowledge strategies to gain expeditious results. Further, with the advent of digital technologies and algorithms that can extract deep customer insights and organizational experiences which are highly tacit in nature and codifying the same into explicit knowledge, the importance of explicit knowledge is further enlarged. Originality/value By fusing three adjacent theories to establish a robust model specification, this study is able to demonstrate the contribution of explicit knowledge in the firm’s competitive advantages.

Dispersed knowledge management in ecosystems

“…In the formative years, scholars defined KM as “the art of creating value by leveraging intangible assets” (Salojärvi et al , 2005, p. 1). At that time, the scholarship explored the nature of knowledge (tacit and explicit) (López-Cabarcos et al , 2020; Hadjimichael and Tsoukas, 2019; Nonaka et al , 1996) and the role of the individual (Wiig, 1997). Wiig proposed that KM refers to “activities related to fostering individual behaviors that lead to innovation and discovery, knowledge creation and improved knowledge use” (1997, p. 402).…”

“…Zack (1999) viewed knowledge strategy as the general approach that an organization takes to align its knowledge resources and capabilities with its business strategy. López-Cabarcos et al (2020) explored the difference between explicit knowledge strategies and tacit knowledge strategies, while Bierly and Chakrabarti (1996) defined knowledge strategy as a set of choices and plans that consider the company’s knowledge base and its links with competitiveness. Greiner et al (2007) focused on the relationship between business and KM strategy and the success of the KM initiatives.…”

An Exploratory Study of How Latecomers Transform Strategic Path in Catch-Up Cycle

“…The transformation relates to the technological innovation capability, which is closely concerned with competitive advantage [35], affects the entire organization [36], and is essential for breaking the path of dependence and ensuring long-term survival [37]. In the learning view, the strategic path is composed of different processes or describes the trajectory of potential action patterns [38], which will lead to the transformation as the company learns [39].…”

Successful replication of knowledge in the growth of service organizations: evidence from Spanish hotel chains

“…The most recognized typology of knowledge in the management literature is the distinction between explicit and tacit knowledge (Polanyi, 1962; Ranucci and Souder, 2015). Explicit knowledge includes knowledge that can be transmitted through a systematic language, and it is generally captured, structured, codified and institutionalized in the form of procedures, manuals, policies, production schedules and forecast data; tacit knowledge is related to the kind of knowledge that can hardly be formalized or expressed, and it consists of mental models and schemas, apart from being difficult to express in language (García-Almeida and Ballesteros-Rodríguez, 2018; Hadjimichael and Tsoukas, 2019; López-Cabarcos, Srinivasan and Vázquez-Rodríguez, 2020). When replicating knowledge to a new unit, it is frequently necessary to transfer both explicit and tacit knowledge.…”