Competitive Advantage of Knowledge Management

IntroductIon Knowledge management has been proposed as a fundamental strategic process and the only sustainable competitive advantage for firms (Grant, 1996; Davenport, 1998). A key to understanding the success and failure of knowledge management efforts within organizations is the ability to identify the relevant knowledge to manage and to extract value out of this knowledge. In the last decade past research has focused heavily on defining what knowledge is and on using different typologies (e.g., tacit vs. explicit knowledge, individual vs. collective) to characterize the different types of knowledge available to firms and decision-making styles (Kalling, 2003) in influencing these processes. Unfortunately, despite the growing interest in knowledge management, little specific has been said about the mechanisms firms use to identify key knowledge areas and to gain competitive advantage out of knowledge management investments. The recognition of the important knowledge resources for a firm is critical, because the effectiveness of knowledge and learning can only be assessed on the basis of its utility in guiding behavior relative to the Knowledge for the sake of knowledge is not useful to firms. We define knowledge management as the formalized, integrated approach of managing an enterprise's articulated and tacit knowledge assets. Knowledge assets include systems, documents, policies, and procedures, as well as unarticulated expertise and experience across the individuals, 2647 Competitive Advantage of Knowledge Management groups, organizational, and inter-organizational domains. We discuss how a knowledge management infrastructure enables the generation, acquisition, use, and transfer of knowledge, and most importantly, the identification of the critical knowledge areas for a firm. Moreover, we argue that competitive advantage consists of two dimensions: the value created to the customer and the ability to differentiate (through cost, innovation, or both) from competitors. The framework describes specific mechanisms through which knowledge management contributes to these two processes., we develop a framework to address how critical knowledge areas can enable competitive advantage sources through customer approach and competitor approach. This article integrates knowledge management and strategic management fields by taking a fine-grained look at the connection between knowledge resources and competitive advantage. We are explicit about how firms can identify key knowledge areas that impact competitive advantage, and how they can implement market (value creation) and competitor (differential capabilities) mechanisms that are instrumental in obtaining competitive advantage. Our integrative approach provides a fresh perspective on knowledge management from which we generate important insights for management practice. Only relevant and available …