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Literature On Knowledge Management Essay

2.0 Introduction

The previous chapter has underlined the significance of this study. This chapter will cover the literature of the study. Literature reviews are secondary sources get from available work such as journals, books, thesis, and other reports.

This chapter consists of five sections. Section 2.1 is the review of the literature. Section 2.2 reviews the relevant theoretical models. Section 2.3 shows the proposed theoretical conceptual framework. Section 2.4 is the hypotheses development. Lastly, section 2.5 summarizes this chapter.

2.1 Review of the Literature

2.1.1 Knowledge

Over the years, the knowledge has become more and more accounted in business world. It has become a trend that, a shift to knowledge economy has occurred in all highly developed countries (Abbasi, Belhadjali, Hollman, 2009). In Malaysia, there are 107,324 applications of patent for both domestic and foreign usage in year 2010, which has increased 17.2% compared to 10 years ago (Intellectual Property Statistics). This shows that knowledge has become the concern of different businesses. By having knowledge, companies are able to coordinate and combine their traditional resources and capabilities in new and distinctive ways to provide more value for their customers than what their competitors can provide.

In the unified model of dynamic knowledge creation proposed by Nonaka, Reinmoeller & Senoo (2000), knowledge is described as dynamic, since it is created in social interactions amongst individuals and organizations. Information becomes knowledge when it is interpreted by individuals and given a context and anchored in the beliefs and commitments of individuals (Nonaka et al., 2000). Without being put into context, it is just information, not knowledge. According to Badruddin (2004), knowledge is the insights, understanding and practical know-how that the individuals possess has two basic definitions of interest. The first is about the body of information, which might consist of facts, opinion, ideas, theories, principles and models. This could be referred to a person’s state of being with respect to somebody of information. The second is about knowledge as a major factor that make personal, organization and societal intelligent behavior possible. Knowledge is regarding the full utilization of information and data, combined with people’s and the ability and wisdom to use a pool of information in a way that achieve the objective of the individual and organization (Tan, 2000).

Based on the extant literature, knowledge can be classified into explicit knowledge and tacit knowledge (Polanyi, 1966; Nonaka, 1994; Augier, Shariq & Vendelo, 2001; Bock, 2001) - and both of them work interdependently and in turn lead the organization to the path of success. Explicit knowledge as what can be embodied in a code or a language and as a result it can be verbalized and communicated, processed, transmitted and stored relatively easily (Nonaka et al., 2000; Augier et al.,2001; Kikoski and Kikoski; 2004). It is public and most widely known and the conventional form of knowledge which can be found in books, journals, and mass media. It can be shared in the form of data, scientific formulas, manuals and such like. Patents are an example of explicit in business context. Whereas, tacit knowledge is something gained through experience so it is difficult to be documented or categorized and is non-financially tangible that is highly personal, hard to formalize, difficult to communicate or share with others. Besides, according to Polanyi (1969), founding father who identified the significance of the concept of tacit knowledge, tacit knowledge is something that “we know more than we can tell”. It is something rooted in an individual’s actions that are not easily visible and expressible, like experiences, ideas or values (Nonaka, 1994).

Furthermore, many researchers (Allee, 1997; Bellinger, Castro & Mills, 1997; Tuomi, 1999; Barquin, 2000; Beller, 2001) have addresses the distinction among data, information and knowledge. According to Suurla, Markkula and Mustajarvi (2002), “data refers to codes, signs and signals that do not necessarily have any significance as such”. Furthermore, Dreske 1981; Machlup 1983; Vance 1997 indicated that data is raw number and facts, information are processed data, and knowledge is authenticated information. However, there is a different view who thinks that knowledge must exist before information can be formulated and before data can be measured to form information. Tuomi (1999) argues that knowledge exists which, when articulated, verbalized, and structured, becomes information which, when assigned a fixed representation and standard interpretation, becomes data.

2.1.2 Knowledge Management

Since years ago, the field of knowledge management has emerged as an area of interest in the academic and organizational practice. There are quite a number of definitions which carry similar characteristics to certain extent.

Knowledge management consists of activities of identifying, acquiring, creating, storing, sharing and utilization of knowledge by individuals and groups in the organization (Heisig, 2009; Soliman and Spooner, 2000; Zheng, Yang & McLean, 2009). Meanwhile, Snowden has an identical view on knowledge management. He described it as the identification, optimization and active management of intellectual assets, either in explicit knowledge held in artifacts or as tacit knowledge possessed by individuals or communities (Snowden, 1998). Thus, knowledge management is largely regarded as a process involving various activities despite of different researcher uses different terms to define it.

However, broadly speaking, Robinson, Carrillo, Anumba & Al-Ghassani, (2005) and Lytras, Pouloudi & Poulymenakou (2002) depict knowledge management as method or mean rather than process or activity. Robinson et al. (2005) defined knowledge management as a method of exploiting, or transforming knowledge as an asset for organizational use to facilitate continuous improvement. Lytras et al. (2002), in addition, described knowledge management as “the mean of formalization and access to experience, knowledge and expertise that create new capabilities, enable superior performance, encourage innovation and enhance customer value”.

Some definitions are predicated to information technology (IT). It emphasizes the integral importance of technology for knowledge management. For instance, according to Malhotra (2000), knowledge management embodies organizational processes that seek combination of data and information processing capacity of IT, as well as the creative and innovative capacity of human beings in manipulating knowledge. Additionally, Malhotra also mentioned that knowledge management requires re-consideration of everything in the organization and caters to the critical issues of organizational adaptation, survival and competence.

There is also researcher that emphasizes the importance of intellectual capital and views knowledge management as management of the intellectual capital controlled by the company (Martensson, 2000). Gottschalk (2000) has further expanded it to provide clearer picture by added that knowledge management is “unlocking and leveraging the knowledge of individuals so that this knowledge becomes available as an organizational resource that is not dependent on those same individuals”. Moreover, Beijerse (1999) focuses on the value of intangible assets and defines knowledge management as “the art of creating value from an organization’s intangible assets”.

Clarke and Rollo (2001) touches about ‘‘knowledge management initiatives’’, which involves a company’s commitment to developing the production and flow of knowledge, and the dissemination and use of knowledge to create economic value. A knowledge management ‘‘initiative’’ denotes a holistic approach to managing knowledge. ‘‘Knowledge management initiative’’ is being view as an organization’s approach to managing its knowledge that includes both human (soft) and system (hard) components.

All in all, despite the differences in knowledge management definitions, it seems that there is one common parameter: knowledge management is seen as the “tool” for organizational effectiveness and competitiveness.

2.1.3 Leadership

According to Robbins & Judge (2007), leadership is the ability to influence a group toward the achievement of a vision or set of goals. Researches show that top management leadership and their commitment are the most critical factor for successful knowledge management initiatives, particularly in knowledge creating and culture sharing activities (Parag Sanghani, 2009; Chong, 2005; Salleh & Goh, 2002; Ryan & Prybutok, 2001; Civi, 2000; Davenport and Prusak, 1998). It has been reported that more than 40 percent of Fortune 1000 companies (Chong, 2005) and 25 percent of Fortune 500 companies (Nick, 2002) have chief knowledge officers that responsible for managing intellectual capital and the knowledge management practices in an organization.

According to Kautto- Koivula (1998) and Jarrar (2002), leaders’ supports towards knowledge management strategy are critical to ensure that knowledge is viewed as a critical resource rather than merely a fad. The type of supports needed including encourage trust and sharing atmosphere in an organization (Sallis & Jones, 2002), provide adequate fund and facilities for knowledge management implementation and sending messages on knowledge management, which is critical to the organization’s success.

Kermally (2002) mentioned that leadership ought to be looked at as a holistic concept. Leadership’s attribute such as values, credibility, power, integrity, ability to see the whole picture and ability to motivate staffs must be focused. An effective leader must be able to share the same values, belief and expectation and build a strong relationship with their subordinates so that they can freely communicate in order to transfer knowledge that reside on them. According to Peter Druker (1994), the collective knowledge residing in the minds of the people within the organization is the most vital resource to the organization’s economic growth. Moreover, leaders should motivate their subordinates to take leadership roles, so that important knowledge can be transmitted from multiple sources (Debowski, 2006).

In addition, according to Jarrar (2002) and Sallis and Jones (2002), the leadership style that creates culture that supports innovation, learning and knowledge is required to ensure the successful implementation of knowledge management. Bollinger & Smith (2001), Martensson (2000) and Stonehouse & Pemberton (1999) echoed the same sentiments when suggesting that leaders need to focus on creating and maintaining an organizational culture of learning in which leaders must attach a high value to knowledge, encourage questioning and experimentation through empowerment and facilitate experiential learning of tacit knowledge.

In addition, according to Skyrme & Amidon (1997) and Debowski (2006), successful knowledge leaders are someone who are challenging, visionary and inspiring, clear communicators, involved, leader by example and learners. They help to achieve organizational succeed by exploiting both tacit and explicit knowledge. Thus, in present era, successful organizations need knowledge leader throughout the organization and it should operate at all hierarchical levels. In other words, the general beliefs of the 1980s and 1990s that organizations need only one knowledge leader to make the process works successfully is erroneous in the context of present business world.

Top management leadership is important in knowledge management implementation and must be sustained throughout the entire knowledge management project. In fact, poor leadership quality has been identified as a threat to successful implementation of knowledge management and any lack of support from top management can hinder the success of knowledge management implementation.

2.1.4 Knowledge Processes

According to Johannssen (2000), knowledge processes refer to an interconnected and intertwined set of activities that can be done with the knowledge in the organization and thus are used to facilitate the knowledge flows. These processes should lead to changes in behavior, practices and policies and the development of new ideas, practices, processes and policies (Bender and Fish, 2000). The basic processes of knowledge management are shown at Figure 2.1 below.

Figure 2.1: The basic processes of knowledge management

Knowledge Creation

Knowledge Application

Knowledge Sharing/Transfer

Knowledge Storing

Source: Martensson, M. (2000). A Critical Review of Knowledge Management as a Management Tools. Journal of Knowledge Management, 204.

Based on the framework above, knowledge management consists of four sets of knowledge processes which include (1) creation, (2) storage and (3) sharing and (4) application of the knowledge (Holzner and Marx, 1979; Pentland, 1995; Alavi & Leidner, 2001; Martensson, 2002).

2.1.4.1 Knowledge Creation

Knowledge creation process has become the most important source of sustainable competitive advantage in the knowledge economy (Barney, 1991; Boisot, 1995; Spender, 1996; Boisot, 1999; Shapiro and Varian, 1999; Teece, 2000; Barney & Hesterly, 2006). According to Vlatka Hlupic (2000), knowledge creation involves the process of generating new ideas, recognition of new patterns, the synthesis of separate disciplines and the development of new processes in the organization. In addition, Nonaka conceptualize organizational knowledge creation as the process of converting individual knowledge to a socially constructed understanding (Nonaka, 1994; Nonaka and Takeuchi, 1995; Nonaka and Konno, 1998; Nonaka et al., 2000). They further elaborated tacit and explicit knowledge expands in both quality and quantity through knowledge creation process.

According to the knowledge creation model proposed by Ikujiro Nonaka, Ryoko Toyama and Noboru Konno in year 2000, knowledge creation consists of three elements including (i) the SECI process, knowledge creation through the conversion of tacit and explicit knowledge (also known as knowledge conversion process); (ii) `ba', the shared context for knowledge creation; and (iii) knowledge assets, the inputs, outputs and of the knowledge-creating process. This model indicates that an organization creates new knowledge through the SECI process in ‘ba’ by using its existing knowledge assets.

According to Nonaka and Takeuchi (1995) and Nonaka et al. (2000), there are four modes of knowledge conversion which are socialization, externalization, internalization and combination. They further indicated that these four modes of knowledge conversion form a spiral, the SECI process (see Figure 2.2).

Figure 2.2: SECI Process

Source: Skyrme, D.J. (1999). Knowledge Networking: Creating the Collaborative Enterprise. Butterworth- Heinemann: Oxford

Socialization refers to conversion of tacit knowledge to a new tacit knowledge by sharing the knowledge with others. This can be done by social interactions and experience sharing among organizational members (Nonaka, 1994). Combination mode refers to the creation of new explicit knowledge by combining, merging, categorizing existing explicit knowledge into a new one (Nonaka, 1994; Nonaka, 1991).

Externalization mode refers to the conversion of tacit knowledge into new explicit knowledge so that we can share the tacit knowledge with others. It is easier to keep, replicate and transmit the tacit knowledge through knowledge repositories by using the externalization conversion process (Nonaka, 1994; Nonaka and Takeuchi, 1995).Internalization mode refers to the use of explicit knowledge to broaden, extend and re-frame the existing tacit knowledge (Nonaka, 1991).

‘Ba’ refers to the place or environment for creating new knowledge and it serves as the provider of energy, quality and place to perform the conversion of knowledge. There are four types of ‘ba’ used in the conversion of tacit knowledge and explicit knowledge: (1) originating ba, (2) interacting ba, (3) cyber ba and (4) exercising ba (Ikujiro Nonaka, 2000).

Originating ba involves the conversion of tacit knowledge to a new tacit knowledge through socialization process and it serves as the ba from which the knowledge creation process begins. It is the place where individuals share their experiences, feelings, emotions and mental models through face- to- face interactions. Interacting ba corresponds to the externalization mode of knowledge creation. It is a common place where individual’s tacit knowledge are shared, and articulated as concepts through the interaction among organizational members (Ikujiro Nonaka, 2000).

Cyber ba is associated with the combination mode of knowledge creation and refers to a place where existing explicit knowledge is converted to a new explicit knowledge. Exercising ba offers a context for the conversion of explicit knowledge to tacit knowledge through internalization mode of knowledge creation.

2.1.4.2 Knowledge Storing

Empirical studies have shown that while organizations create knowledge and learn, they also forget (Argote, Beckman & Epple, 1990; Darr, Argote, & Epple, 1995). In addition, there is memory loss problem when the knowledge is stored in an individual’s memory such as the knowledge is gone once they retire or fired. "The memory loss problem is compound by another deficiency in the organizational brain- the brain drain wherein valuable knowledge resources are lost with employees leaving the organization. It happens when management frills to capture the tacit knowledge of its employees by transferring it to explicit knowledge”. The points above indicate that knowledge storing is a vital aspect in knowledge management process.

Thus, the storage, organization, and retrieval of knowledge in organizational level are referred as organizational memory (Stein, & Zwass, 1995; Walsh & Ungson, 1991). According to Robson Quinello (2006), organizational memory is a generic concept that describes storage, representation and sharing of knowledge, culture, power, practices and policy within an organization.

2.1.4.3 Knowledge Sharing/ Transfer

Figure 2.3 Sharing Cycle

Collect

Share

Access

Exploit

Organize/Store

Knowledge

Repository

Source: Skyrme, D.J. (1999). Knowledge Networking: Creating the Collaborative Enterprise. Butterworth- Heinemann: Oxford

Knowledge sharing is one of the critical elements of knowledge management and it is particularly crucial for the successful leveraging of knowledge resources. According to Dobni (2006), “Knowledge only becomes powerful if it is shared among those who possess common goals. Organizations are comprised of individuals who accumulate knowledge, and the degree to which this knowledge is shared determines the outcomes of decisions.”

The knowledge sharing cycle shown on figure 2.4 shows the processes associated with gathering and disseminating existing knowledge, having knowledge repositories as its focal point and it is developed based on the idea “knowing what you know” which means better awareness, sharing and application of existing knowledge (Skyrme, 1999).

The whole sharing cycle consists of five processes: (1) gather the existing knowledge, (2) organize, classify and store the knowledge by using organization or industry specific classification outline to make the subsequent retrieval easier, (3) share the information to those users who need it, (4) people who are known to be interested in the information can access to the database to get the information needed, and lastly (5) knowledge is applied to the work process. The cycle repeats itself when there is additional knowledge created through the use of the existing knowledge.

Knowledge transfer means forwarding of knowledge between individuals, departments and organizations (Vlatka Hlupic, 2002). It is an important knowledge management process where useful knowledge can be transferred to the locations where it is needed. According to Berryman (2005), knowledge transfer (KT), can be viewed as a communications model consists of four major components: message (knowledge), source (source of knowledge), receiver (recipient of knowledge), and channel (organizational context).

2.1.4.4 Knowledge Application

Knowledge application is the last stage of knowledge management process where the source of competitive advantage resides in. According to Bhatt (2001), knowledge application means making knowledge more attractive and relevant for the firm in creating value. In other words, organizations need to apply the knowledge obtained effectively and efficiently to their products and services in order to create value and competitive advantages.

Basically, there are three primary mechanisms for the integration of knowledge to create organizational capability: (1) directives, (2) organizational routines and (3) self- contained task teams (Grant, 1996).

Directives refer to the specific set of rules, standards, procedures, and instructions developed through the conversion of specialists’ tacit knowledge to explicit and integrated knowledge for efficient communication to non-specialists (Demsetz, 1991).

However, organizational routines refer to the development of task performance and coordination patterns, interaction protocols, and process specifications that allow individuals to apply and integrate their specialized knowledge without the need to articulate and communicate what they know to others.

On the other hand, the third knowledge integration mechanism is the creation of self- contained task teams. Self- contained task teams are used in situations such as task uncertainties and complexity to prevent the specification of directives and organizational routines.

2.1.5 Technology Infrastructure

Technology infrastructure is an important enabler knowledge management implementation. Although information technology does not address all of the issues about knowledge management, it can support knowledge management in various ways.

According to Laudon & Laudon (1999), knowledge management technology infrastructure can be divided into four groups including (1) tools that support knowledge sharing (e.g. groupware, intranets and the internet); (2) tools that support knowledge distribution (e.g. electronic calendars, desktop databases and desktop publishing); (3) tools that support knowledge capture and codification (e.g. expert systems, neural networks and intelligent agents); and (4) tools that support knowledge creation (e.g. investment workstation, CAD and virtual reality).

According to Luan & Serban (2002) technology infrastructure can be grouped into following categories such as business intelligence, knowledge base, collaboration, content and document management, portals, customer relationship management, data mining, workflow, search, and e-learning. Important factors that need to be considered in the development of a knowledge management system include simplicity of technology, ease of use, suitability to users’ needs, and relevancy of knowledge content.

Information technology (IT) is often mentioned as one of the anchors for knowledge management activities. (Alavi and Leidner, 2001; Nonaka & Takeuchi, 1995). Theories of information systems state that technology infrastructure within organizations can, on the one hand serve to “automate” organizational tasks such as transaction, storing and processing of data and information. On the other hand, IT can serve to “informate”; provide information to support organizational decision making and the exchange of ideas (Sanders, 2008). Based on Van Den Brink (2003), an effective technology infrastructure is considered to demand a combination of two related dimensions: the convergent dimension and the divergent dimension. Both dimensions are described in Table 2.1.

Table 2.1: Dimensions of Technology Infrastructure

IT Dimensions

Role and Importance

Tools

Convergent IT

Connect people to people

Improve coordination communication and collaboration between people

Point people to special expertise

Create collaboration platforms

Groupware

E-mail

Collaborative virtual environments

Video conferencing systems

Electronic discussion systems

Divergent IT

Connect people to explicit knowledge

Have information and explicit knowledge components online

Easy access and retrieval of knowledge

Point people to documents that describe or store knowledge

Create knowledge repositories

Office applications

Integrated document management

Decision support systems

Data warehouse

Internet, intranet

Electronic librariesSource: Van Den Brink, P. (2003). Social, organizational and technological conditions that enable knowledge sharing. Unpublished doctoral thesis, Technische Universiteit Delft, Amsterdam.

2.1.6 Culture and Structure

In the context of knowledge management, culture is considered a complex collection of values, beliefs, behaviors and symbols that influences knowledge management in organizations (Ho, 2009). Therefore, a knowledge-friendly culture is regarded as one of the most important factors impacting knowledge management and the outcomes from its use (Alavi, Kayworth & Leidner, 2005-2006; Davenport, Long & Beers, 1998; Ho, 2009). Many published papers and people in the field, believe organizational culture is the key influence on KM or the effectiveness of knowledge sharing (Holsapple, and Joshi, 2000). Goh (2002) asserted that a collaborative culture is an important condition for knowledge transfer to happen between individuals and groups. The implementation of knowledge management requires individuals to interact, share ideas and knowledge.

According to Hofstede (1991, 1997), culture is the “software of the mind”. He defined culture as “mental coding”, which every member of a society, organization or group experiences and according to which everyone can act coherently. There are four different impact depths in the research of Hofstede, which are symbols, heroes, rituals, and values (Hofstede & Hofstede, 2005) which shown in figure 2.4 – the cultural onion. The centre of the onion is formed by values. They are learnt from the beginning of life and they are the most stable element – resistant against changes over time. Hofstede’s cultural onion model sinks from the core to the periphery of the onion. New rituals can be learnt over time, heroes established quickly and symbols installed in organizations. Hofstede also emphasizes that practices are concerned with all part of the model.

Figure 2.4: Hofstede’s Cultural Onion Model

Source: Hofstede, G. and Hofstede, G.J. (2005). Cultures and Organizations. Intercultural Cooperation and Its Importance for Survival, 2nd ed., McGraw- Hill Publishers, New York, NY.

Changes in corporate culture are regarded as necessary for implementing knowledge management programs (Bhatt, 2001). Positive changes in culture are expected to impact organizational performance and add momentum to other improvements taking place elsewhere in the organization (Richert, 1999). “A major problem is how to convince, coerce, direct, or otherwise get people within organizations to share their information” (Gupta, Lyer & Aronson, 2000). The changes of culture include getting senior management commitment, knowledge owner’s participation, employees to use system, and technology support. Managers are required to create an atmosphere of trust, team spirit, and learning environment for improving contributor’s productivity. One of the ways to encourage this behavior is an implementation of a fair and equitable reward system (Smith, 2001). By understanding the Hofstede cultural onion model, an organization can modify organization culture more efficiently and effectively.

Organizational structure comprises the organizational hierarchy, rules and regulations, and reporting relationships (Herath, 2007). Knowledge management theorists largely conclude that changes in an organization’s structure, such as moving from hierarchical to flatter networked forms, are essential for the effective transfer and creation of knowledge in the organization (Beveren, 2003; Gold, Malhotra & Segars, 2001; Grant, 1996; Nonaka and Takeuchi, 1995). Successful organizations of the future will be characterized by their simple and flexible design, the successful balance of organizing work and behavior around processes instead of tasks or functions, and emphasis on teams as their key performance units (Beveren, 2003). A modern company must be ready for permanent change, putting knowledge to work, which requires a high decentralization level so that decisions can be made quickly (Enrique, Patrocino & Eva, 2007). Organization constraints that create barriers to successful KM implementation should be removed either. Apart from that, sharing knowledge should be made from the top until the bottom, and across the organization structure. Getting senior management commitment to KM is critical, without this commitment, employees will not see KM as a business necessary and not contribute to it (Ray, 2008).

2.1.8 Human Capital

Human capital refers to skills of an employee that help meet the task at hand. It is the combined knowledge, skill, innovativeness and ability of the company's individuals (Bontis, 2001). The involvement and commitment of employees is crucial toward the knowledge management. It is people who create and share the knowledge, and therefore, it is crucial to manage those who are willing to create and share their knowledge (O'Dell and Grayson, 1999). Another study by Hatch & Dyer (2004) also stated that effective management of certain human capital has direct and significant impact on organizational learning and knowledge management capability.

Base on the study of (Becker, 1964), training and education is important in managing human capital that might enhance individual and organizational knowledge. In the Human Capital Theory concept that proposed by (Becker, 1964), education or training raises the productivity of workers by imparting useful knowledge and skill. The skills and competences of knowledge workers need to be continuously developed in order for them to produce valuable contributions to a company for effective knowledge management implementation (Migdadi, 2009). David J. Skyme, 1999 also suggested that continuous learning is a key component of a knowledge-based organization. Through learning processes employees tend to acquired new knowledge for personal development and organizational needs. Besides, through proper training and learning process, employees will have a better understanding of the concept of Knowledge Management and frame of a common language and perception of how they define and think about knowledge (Migdadi, 2009).

Furthermore, Human Resource Management function served as an important toolkit in managing human capital within organization. While Miller (1987) suggests that HRM include those decisions and actions which concern the management of employees at all levels in the business and which are related to the implementation of strategies directed towards creating and sustaining competitive advantage. A knowledge worker is view as an asset of the company as they are mastering the knowledge and competences that an organization need. Through effective recruitment, such knowledge worker is being identify and brought into the organization. Retention involves compensation and incentives to stimulate and reinforce the positive behaviors and culture needed for effective knowledge management practices (Davenport, Prusak & Wilson, 2003). Equally important, is by offering a conducive working environment that stimulate employees job performance and satisfaction.

2.1.9 Franchise Preschool Educational Institution

Nowadays, franchising has become a popular business strategy in many industries around the world (Inma, 2005; Sorenson and Sorensen, 2001; Dant & Kaufmann, 2003). According to Lawrence and Oakley (2005), franchising is a system for expanding a business and distributing goods or services and an opportunity to operate a business under a recognized brand name. A franchise occurs when franchisor (business) licenses its business idea or concept to franchisee (person or group who agrees to operate the business) according to the franchise agreement and pays loyalty to the franchisor (Inma, 2005).

For instance, there are two types of franchising: (1) business format and (2) product or trade name. According to Lawrence et al. (2005), business format franchises not only sell the franchisor’s product or service, with the franchisor’s trademark, but also run the business according to the system provided by the franchisor. However, according to Audhesh & Michael (2009), successful franchisors do not just sell products and services. They should perfect a business system and then sell their know-how (skills and procedures) and benefits of the business system to prospective franchisees and subsequently to customers.

One of the major challenges faced by franchisors in knowledge based economy is the effective implementation of knowledge management (Sorenson, 2001; Watson, Stanworth, Healeas, Purdyb & Stanworth, 2005; Paswan & Witmann, 2009). Knowledge is the most valuable resource to create and sustain competitive advantage (McFayden & Canella, 2004; Morgan & Hunt, 1997), to enable franchise units to become more efficient (Darr et al., 1995), and it is vital for new product development and success (Van der Bij, Song, & Weggeman, 2003).Moreover, according to Watson et al. (2005), a franchisor is no longer principally concerned with selling goods, but rather, information and knowledge. Thus, managing the knowledge effectively within and across the organization is important to ensure franchise system success.

In other words, to ensure its success, franchise preschool educational institutions should develop an environment which is suitable for knowledge management implementation. In this context, the environment should allow fostering knowledge creation, storage, transfer and application between franchisor and franchisees, across franchised units, franchisor and company-owned units, and among all members in the network such as suppliers, customers and other organizations (Augier et al., 2001).

2.2 Review of Relevant Theoretical Models

2.2.1 Article: KM Critical Success Factors- A Comparison of Perceived Importance versus Implementation in Malaysian ICT Companies

Author: Siong Choy Chong

Note:

FOC – Friendly Organizational Culture; SMLaC - Senior Management Leadership & Commitment; EI - Employee Involvement; ET- Employee Training; TT - Trustworthy Teamwork; EE - Employee Empowerment; ISI - Information Systems Infrastructure; PM - Performance Measurement; B – Benchmarking; KS – Knowledge Structure; EoOC - Elimination of Organization Constraint

FOC

SMLaC

EI

ET

Implementation

Of

Knowledge

Management

TT

EE

ISI

PM

B

KS

EoOC

Source: Chu Chee Howe, Lim Xi Shun, Lim Xtn Yi, See Chia Hui, Yeoh Boon Pien

The researcher, Chong S.C., adopted a comprehensive list of success factors for successful implementation of knowledge management presented by Chong and Choi (2005) after compared and reviewed several knowledge management models. The core objective of this study is to identify the enablers that would make knowledge management program works in an organization. This knowledge management model consists of 11 key components to successful knowledge management namely (1) a friendly organizational culture; (2) senior management leadership and commitment; (3) employee involvement; (4) employee training; (5) trustworthy teamwork; (6) employee empowerment; (7) information systems infrastructure; (8) performance measurement; (9) benchmarking ;(10) knowledge structure and (11) elimination of organization constraint. Such variables are the most common types of factor being studies by most of the researchers and the interrelationships of these variables and knowledge management have being comprehensively study and empirically tested by Chong and Choi (2005).

2.2.2 Article: Black and Decker – Towards a Knowledge- centric Organization

Authors: J. D. Pemberton, G. H. Stonehouse, M. S. Francis

Enablers

Foundations

Levers

Note:

L - Leadership; C&S- Culture & Structure; P - Process; EK - Explicit Knowledge; TK - Tacit Knowledge; KR - Knowledge Repositories; ML - Market Leverage; KM - Knowledge Measures; HI - Human Infrastructure; TI - Technology Infrastructure.

L

C&S

P

EK

Knowledge

Management

Implementation

TK

KR

ML

KM

HI

TI

Source: Chu Chee Howe, Lim Xi Shun, Lim Xtn Yi, See Chia Hui, Yeoh Boon Pien

The approach adopted by J. D. Pemberton, G. H. Stonehouse, M. S. Francis (2002) in this research utilizes an action-focused framework by Skyrme (1999). The research has been conducted to investigating the environment factors for knowledge management, understanding barriers and gaps in current and desired performance, as well as identifies possible ways for improving future performance at its European Design Centre (EDC). Broadly speaking, this framework consists of ten themes classified under three layers. The highest level namely enablers is the essential prerequisites and is designed to encourage knowledge development and sharing. Such enablers relate directly to leadership and also culture & structure. Intermediate level namely amplifiers is a set of levers that increase the contribution of knowledge. In this level, processes that facilitate knowledge flows, and mechanisms that provide faster access to explicit knowledge and better ways of handling tacit knowledge, knowledge measure, market leverage and market repositories are indication of this level. Finally, a foundation layer provides the capacity and capability that embeds knowledge into the organization’s infrastructure. It includes two complementary strands – a “hard” information and communication infrastructure that supports knowledge collaboration and a “soft” human and organizational infrastructure that develops knowledge enhancing roles, skills and behaviors.

2.2.3 Article: Critical Success Factors for Implementing Knowledge Management in Small and Medium Enterprise

Authors: Kuan Yew Wong

Note:

ML&S - Management Leadership and Support; C - Culture; IT – Information Technology; S&P -Strategy and Purpose; M - Measurement; OI -Organizational Infrastructure; P&A - Processes and Activities; MA - Motivational Aids; R - Resources; T&E - Training and Education; HRM - Human Resource Management

ML&S

C

IT

S&P

Implementation

Of

Knowledge

Management

M

OI

P&A

MA

R

T&E

HRM

Source: Chu Chee Howe, Lim Xi Shun, Lim Xtn Yi, See Chia Hui, Yeoh Boon Pien

The researchers, Wong (2005) had compared and reviewed the existing critical success factors (CSFs) for knowledge management implementation proposed by various authors in the literature. After reviewing various research studies, the researchers had decided to adopt the a set of CSFs for knowledge management implementation proposed by Wong (2005) because the model is believed to be more appropriate for SMEs in implementation of knowledge management. The authors thus conduct research on CSFs for implementing Knowledge Management in UK SMEs The purpose of this study is to investigate the CSFs for adopting Knowledge Management in SMEs. The authors highlighted that, broad range of factors that can influence the success of KM implementation has been mentioned in their literature. These 11 CSFs proposed by Wong K.Y. in year 2005 including: (1) Management leadership and support; (2) Culture; (3) IT; (4) Strategy and purpose; (5) Measurement; (6) Organizational infrastructure; (7) Processes and activities; (8) Motivational aids; (9) Resources; (10) Training and education; and (11) Human resource management (HRM).

2.3 Proposed Theoretical/ Conceptual Framework

Figure 2.5: The Research Model

Leadership

Knowledge Process

Human Capital

Technology Infrastructure

Culture and Organizational Structure

Knowledge

Management

Implementation

Source: Developed for the research

Based on the literature review, a conceptual research model shown in Figure 2.5 has been developed. It comprises the organizational knowledge management enablers that are critical in supporting the implementation of knowledge management in franchised preschool institutions. In this study, the five independent variables are adopted from the study conducted by Chong, 2005; Wong, 2005 and Pemberton, Stonehouse & Francis, 2002.

The list below presents the five independents factors together with their sources:

Leadership (Chong, 2005; Wong, 2005 and Pemberton, Stonehouse & Francis, 2002)

Knowledge Process (Chong, 2005; Wong, 2005 and Pemberton, Stonehouse & Francis, 2002)

Technology Infrastructure (Chong, 2005; Wong, 2005 and Pemberton, Stonehouse & Francis, 2002)

Culture and Organizational Structure (Chong, 2005; Wong, 2005 and Pemberton, Stonehouse & Francis, 2002)

Human Capital (Chong, 2005; Wong, 2005 and Pemberton, Stonehouse & Francis, 2002)

2.4 Hypotheses Development

2.4.1 Leadership

Management leadership and support are vital for a successful knowledge management implementation (Sharp, 2003; Horak, 2001; Joshi, 2000). Hence, leaders must share same vision on knowledge management and provide ongoing support to initiate and sustain the knowledge management programs.

Leaders play an extremely important role in acting as role models and they set the example for others in the organization, thus they have direct impact on the organization culture besides determining the way their organization approach and deal with knowledge management (Migdadi, 2008; Wong, 2005). They must be willing to share their existing knowledge with their subordinates, engage in continuous learning and ideas creation process, creating and promoting a knowledge friendly culture and conveying the importance of knowledge management to their employees.

Hence, the following hypothesis is presented:

H0: There is no significant relationship between leadership and the implementation of knowledge management.

H1: There is significant relationship between leadership and the implementation of knowledge management.

2.4.2 Knowledge Process

Knowledge process is defined as something that can be done with the knowledge in the organization by Johannssen in year 2000. According to Skyrme (1999), there are three types of knowledge process: (1) knowledge conversion, (2) knowledge innovation and (3) knowledge sharing. Besides, according to Alavi et al. (2001) and Martensson (2000), knowledge process are divided into four main process which include knowledge creation, knowledge storage, knowledge transfer and knowledge application.

"Knowledge processes such as knowledge creation, knowledge storage, knowledge transfer and knowledge application are those that lie at the heart of creating a successful knowledge based enterprise (Wong, 2005)." The sentence above indicates the importance of knowledge process in the implementation of knowledge management in an organization. Through effective knowledge process, important knowledge can be utilized to create a new knowledge and enlarge the body of organization knowledge assets (Nonaka and Toyama, 2004), knowledge flows can be examined, and knowledge assets can be identified.

Thus, the following hypothesis is presented:

H0: There is no significant relationship between knowledge processes and the implementation of knowledge management.

H1: There is significant relationship between knowledge processes and the implementation of knowledge management.

2.4.3 Technology Infrastructure

According to Offsey (1997), technology infrastructure is defined as document managing systems, information retrieval engines, relational and object databases, groupware and work flow systems, push technologies and agents and data mining tools that can facilitate knowledge management.

Technology infrastructure is one of the key enablers in implementing knowledge management in an organization (Wong, 2003). According to Mahmoud Migdadi (2008), when knowledge is well managed with the proper use of technology infrastructure, an organization's administrative processes can be streamlined and improved, all the important knowledge necessary can be integrated and therefore the information contents of the organization will be enhanced. In addition, without technology infrastructure, knowledge sharing process cannot be fully applicable by employees in an organization.

Thus, the following hypothesis is presented:

H0: There is no significant relationship between technology infrastructures and the implementation of knowledge management.

H1: There is significant relationship between technology infrastructures and the implementation of knowledge management.

2.4.4 Culture and Structure

Wong (2005) defines organization culture as the core beliefs, values, social customs and norms that govern the way individuals act and behave in an organization. Many researchers (Hasanali, 2002; Martensson, 2000) indicate that culture is one of the key in implementation of knowledge management and many believes that it will influence the effectiveness of knowledge activities especially knowledge sharing process. In addition, Liebowitz (1999) affirmed that the success of knowledge management is 90% dependent on building a supportive culture.

Nowadays, the biggest obstacle faced by organizations in implementing knowledge management is to develop a supportive culture (knowledge friendly culture) that highly values knowledge and encourage knowledge creation, storing, sharing and application. Besides, according to Wong (2005), there is a need to foster an innovative culture in which individuals are constantly encouraged to generate new ideas, knowledge and solutions. In addition, collaborative culture that serves as an important condition for knowledge transfer and trust that serves as the fundamental aspect of knowledge friendly culture are crucial in knowledge management implementation.

Organizational structure refers to the pattern of relationships and linkages among units or people which is important in facilitating knowledge sharing and creation (Inkpen and Tsang, 2005). Structures that include formalization and centralization are likely to affect knowledge management. In organizations with high formalization, explicit rules and procedures are likely to reduce the flexibility needed for knowledge creation. Further, as jobs are preprogrammed by the organization, there is less need for employees to innovate their knowledge and skills (Willem and Buelens, 2009). Conversely, in organizations with low formalization, members would have greater willingness in knowledge creation and sharing (Chen and Huang, 2007). Therefore, the less formalized work process would stimulate knowledge management within the organization. Besides that, centralization may have disadvantages on knowledge management in organizations because of the control in centralized systems (Tsai, 2002). According to (Janz and Prasarnphanich, 2003), centralization prevents employees from making wise decision in their work and cause inefficiency in creation and sharing of knowledge.

Therefore, the following hypothesis is introduced:

H0: There is no significant relationship between culture and structure and the implementation of knowledge management.

H1: There is significant relationship between culture and structure and the implementation of knowledge management.

2.4.5 Human Capital

Human capitals are the critical driving force in making knowledge work for an organization since they play the role as knowledge providers and value creators in the organization. As stated by Holsapple and Joshi (2001), people are the core for creating organizational knowledge because it is people who create and share the knowledge, and therefore, it is crucial to manage those who are willing to create and share their knowledge (O’Dell and Grayson, 1999). Base on the study of (Becker, 1964), training and education is important in managing human capital that might enhance individual and organizational knowledge. Besides, Human Resource Management also serves as an important tool in managing human capital who mastering organizational knowledge. The statement above indicates the importance of human capital management in knowledge management implementation.

Thus, it can be hypothesized that:

H0: There is no significant relationship between human capital and the implementation of knowledge management.

H1: There is significant relationship between human capital and the implementation of knowledge management.

2.5 Conclusion

This chapter has highlighted on literature review and covers the theoretical framework and hypothesis development. There are five independent variables and a dependent variable. The next chapter presents the research methodology. This chapter will directly affect the research methodology. Different variables may need different measurement to ensure the reliability and accuracy of the information.

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