Imacs 2016 imecs 2016 Proceedings (Preliminary version) of the 4
EMPIRICAL RESEARCH ON THE RELATIONSHIP BETWEEN KNOWLEDGE MANAGEMENT, MARKET ORIENTATION AND SMALL AND MEDIUM-SIZED ENTERPRISES PERFORMANCE – SELECTED PRELIMINARY RESULTS
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- 35.Introduction
- 36.1 Specification of the sector of small and medium-sized enterprises
- 37.2 Characteristic of conducted empirical research
- 39.Conclusion
- 40.References
EMPIRICAL RESEARCH ON THE RELATIONSHIP BETWEEN KNOWLEDGE MANAGEMENT, MARKET ORIENTATION AND SMALL AND MEDIUM-SIZED ENTERPRISES PERFORMANCE – SELECTED PRELIMINARY RESULTS34.Krzysztof BrzostekAbstract
The article presents preliminary results of empirical research on the relationship between knowledge management, market orientation and the performance of small and medium-sized enterprises (SME). The literature analysis allowed designing a research tool /survey questionnaire/ for two groups – the SME owners/managers and SME employees. Both market orientation and knowledge management focus on the knowledge, both conceptions are considered to be determinants of the present-day enterprises increase. Both conceptions are considered to be required for effective performance of enterprises (Brzostek, Michna, 2014). The literature does not indicate unambiguously as regards the direction of the relationship between knowledge management and market orientation. Effective knowledge management creates conditions for processing, interpreting and using the knowledge on market trends. Integration of knowledge management and market orientation may be the key element of competence and improvement of competitive company position (Wang, Hult, Ahmed, 2009). The research will allow elaborating the practical guidance for owners/managers of SME, and thus increasing the effective performance and the possibility of development. Key words: knowledge management, market orientation, SME JEL Code: M14, O31 35.IntroductionThis article is to present selected results of empirical research on the relationship between knowledge management, market orientation and effective performance of small and medium-sized enterprises. The research was conducted in enterprises located within the region of Lower Silesia in Poland. The applied research tool was a survey questionnaire addressed to the SME owners/managers and employees. The research methods included statistical analysis and structural equation modelling. This article consists of three parts. The first part includes specification of the sector of small and medium-sized enterprises. The second part of this article contains the characteristic of conducted empirical research. The third part of this article presents selected empirical dimensions of the relationship between knowledge management, market orientation and effective performance within the SME sector. 36.1 Specification of the sector of small and medium-sized enterprisesIn the majority of developed and developing world economies the small and medium-sized enterprises prevail, whilst within the European Union about 20 million enterprises operate, from among of which 99.8% belong to SME sector (Katua, 2014). This group is definitely predominated by microenterprises, which in the amount of approx. 18 million constitute 91.8% of entities. According to the report of the Polish Agency for Enterprise Development, the SME sector enterprises correspond to nearly 3/4 of the Polish GDP, the contribution of small and medium-sized enterprises is at the level of 48.5% (Polish Agency for Enterprise Development, 2014). The report published by the World Bank entitled „SME Exchange in emerging market economies. A stocktaking of development practices” (Harwood, Konidaris, 2015) indicates an important role of the SME sector enterprises in the economic life of particular countries. The specificity of small firms affects their better ability to adapt to new market conditions and better flexibility, i.e. the ability to find and exploit the appearing opportunities to enter into activity of better profitability (Bartlett, Popa, Popovski, 2013). The flexibility results, to a large degree, from a simplified structure of a small enterprise as compared to a big one and often less complicated decision-making process. The performance of small and medium-sized enterprises to a high degree depends on reacting to the expectations of the changing market. SME have to equally analyse both external and internal changes in the dynamic environment. Gaining and subsequently maintaining advantage over the competition is determined by implementing innovativeness by particular entities, the use of technology, especially IT and by building the processes and resources of knowledge targeted at the market environment. The reaction to ongoing changes is establishing organizational activities within the scope of knowledge. The knowledge management is perceived as an important factor which enables to adjust to the market requirements, the improvement of effectiveness and innovativeness (Bosua, Venkitachalam, 2013). The SME sector enterprises are characterized by deficiency of human and financial resources, insufficient awareness of managers (Dotsika, Keith, 2013) and insufficient knowledge, which in combination with ambiguity of the knowledge management conception – determines problems related to the implementation of knowledge management solutions (Cerchione, Esposito, Spadaro, 2015). The research provided in the literature indicates that in case of small and medium-sized enterprises the knowledge management initiatives are of major importance, since knowledge is the key resource for those entities (Lin, 2013). The market orientation application is not determined by enterprise size. Market orientation is realized in both SME entities and big corporations. An important element of market orientation is the coordination of market information flow inside the organization and the engagement of all organizational units in building the strategy, forming prospective opinions and determining the needs and problems of customers. On the basis of the literature analysis one may formulate a thesis that no complex research has been conducted so far on the relationship between knowledge management, market orientation and effective performance of small and medium-sized enterprises. Thus, it is justified to conduct complex research on the impact of knowledge management and market orientation of small and medium-sized enterprises on their performance.
For the needs of the research carried out by the author it was assumed that knowledge management is an integrated set of activities aiming at the creation and use of knowledge resources conducive to the increase of effective performance of an enterprise. The sample characteristic was carried out in respect of duration of an enterprise, the rate of employment, the change in the number of employees in relation to the previous year, the gender distribution within the group of managers, the annual revenue and the profitability of an enterprise. Selected elements are presented below. Five-year brackets were applied when analysing the enterprises in respect of duration. The biggest group of surveyed enterprises was formed by enterprises with duration ranging from 6 to 10 years, i.e. 35.8 %. Only 7 enterprises existed more than 50 years. The changes in effective performance of surveyed enterprises, as compared to the previous year, show that 38.3% of enterprises reported an increase in relation to the previous year with concurrent drop of profitability (40%).
Source: author’s study From among the surveyed enterprises, 42 demonstrated that the value of their assets in total was less than 2 million, whilst the second biggest category was formed by entities, whose value of assets ranged from 2 to 10 million Euro (45 of all surveyed enterprises). None of the surveyed enterprises declared the ownership of assets worth over 43 million Euro. Tab. 2: Sample structure in respect of rate of employment and annual revenue
Source: Author’s study Tab. 3: Sample structure in respect of rate of employment and assets total value
Source: Author’s study 38.3 Empirical dimensions of the relationship between knowledge management, market orientation and effective performance of SME enterprisesThe analysis of the relationship between knowledge management, market orientation and enterprise performance became the ground for designing the models, which were verified via the structural equation analysis. Structural equation models may be illustrated as path diagrams. The models being analysed differ by adopted latent and manifest variables, as well as by the structure of mutual cause and effect relationships. On the basis of the analysis of constructed models, a researcher may describe the reality aspect being the subject of interest. The analysis results allow determining the areas important for the surveyed phenomenon. The models contained silent knowledge, which may significantly affect the performance of an organization. The silent knowledge was indicated by the author as knowledge that constitutes the context in which particular knowledge management processes take place. By exogenous variables the author indicated in the research effectiveness of an enterprise and market orientation. The models were designed for the group of managers and for the group of employees. The method of ML estimation was applied in the research; after selecting this option, the program performs Wishart maximum likelihood estimation for correlation or covariance analysis and the normal maximum likelihood estimation in the case of the torque analysis. The models presented below constitute an element of broader analyses of the relationship between knowledge management, market orientation and effective performance of SME enterprises. The analysis of empirical dimensions of the relationship between knowledge management, market orientation and effective performance in small and medium-sized enterprises was carried out among the group of managers: Fig. 1: Knowledge management, market orientation, effective performance of an enterprise– managerial model 
Source: Author’s study The model presented above (managerial model) indicates 2 components of knowledge management process with the highest correlation coefficient. The employee model obtained convergence in the 14th iteration step with discrepancy function amounting to 1.43. High values of path parameters obtained the relationship from "knowledge use” to „silent knowledge” (3.978) and from "knowledge dissemination" to "silent knowledge" (5.568). Concurrently, between „silent knowledge" and „effective performance of an organisation” and "market orientation" we record the parameter value at the level of 1.806. The calculated model adjustment coefficients indicate good model adjustment to the data.
Source: Author’s study High values of particular parameters indicate that the use of silent knowledge is extremely important for an enterprise. The model reveals more complex structure of the relationship because it allows the differentiation of the relationship between adopted variables and knowledge management and the corresponding silent knowledge. The management of present-day enterprises requires to consider the matters related to the competition, innovations and ever shorter lifetime of particular products. Enterprises, in order to achieve or maintain their effective performance, must continuously modify the management systems and consider the progress of science in their activities. In the economy based on knowledge, human resources gained the meaning in both macro and microeconomic aspect. Knowledge management allows building the effective performance of an enterprise basing on effective use of knowledge. Effectively implemented and subsequently effectively used knowledge management should effectively let an enterprise build its market position, develop competitiveness of an enterprise. The next model examined the relationship between empirical dimensions of knowledge management, market orientation and effective performance of small and medium-sized enterprises among the group of employees:
In case of the (employee) model, which indicates the relationship between empirical dimensions of knowledge management, market orientation and effective performance of an organization, 3 components of knowledge management process were used with the highest correlation coefficient. The calculated model adjustment coefficients indicate good model adjustment to the data. Table 5. Structural equation modelling – employee model
Source: Author’s study The employee model obtained convergence in the 36th iteration step with discrepancy function amounting to 1.4. Three coefficients with highest correlations to market orientation and effective performance of an organization – create the space for revealing the silent knowledge in respect of market orientation and effective performance of an organization. High values of the parameters indicate that knowledge management and silent knowledge are fundamental in both effective performance of an organization and market orientation. The level of the relationship between knowledge management, market orientation and effective performance may be different, which depends on such elements as: size of an enterprise, the subject of activity of an enterprise, the industry in which an enterprise operates and its duration. The model confirms the standpoint expressed in the literature that developing the knowledge of employees through activities aiming at the development of social abilities is an important direction of research and development of knowledge management conception (Carleton, 2011). 39.ConclusionThe conducted research opens an interesting research perspective, which allows formulating further research directions. The research analyses concerning knowledge management and market orientation in building effective performance of an enterprise should focus on specified sector and specificity of enterprises within a given sector, so as to be able to specify in more details the needs within the area of effective management of processes in SME enterprises. Overall elaboration of the results of conducted analyses will allow presenting the practical guidance for SME owners/managers and thus increasing the effective performance and the possibility to develop. 40.ReferencesBartlett, W., Popa, A., Popovski, V. (2013). Business Culture, Social Networks and SME. London: London School of Economics and Political Science, 3-10. Bosua, R. Venkitachalam, K. (2013). Aligning strategies and processes in knowledge management: a framework. Journal of Knowledge Management, 17(3), 331-346. Brzostek, K., Michna A. (2014). Behavioral perspective of market orientation. Scientific Papers Of Silesian University Of Technology, 74, 471-482. Carleton, K. (2011). How to Motivate and Retain Knowledge Workers in Organizations. A Review of the Literature. International Journal of Management, 28(2), 459–469. Cerchione R., Esposito E., Spadaro, M.R. (2015). The Spread of Knowledge Management in SMEs: A Scenario in Evolution. Sustainability, 7, 10211-10231. Dotsika, F., Keith, P. (2013). Collaborative KM for SMEs: A framework evaluation study. Information Technology & People, 26(4), 368-382. Harwood, A., Konidaris, T. (2015). SME Exchange in emerging market economies. A stocktaking of development practices. World Bank, Finance and Markets Global Practice Group, 14-16. Katua, N.T. (2014). The Role of SMEs in Employment Creation and Economic Growth in Selected Countries. International Journal of Education and Research, 2(12), 461-472. Lin, H.F.(2013). Contextual factors affecting knowledge management diffusion in SMEs. Industrial Management & Data Systems, 114(9), 1415-1437. Report on the status of small and medium enterprises sector in Poland in the years 2013-2014. (2014). Warsaw, Polish Agency for Enterprise Development, 9. Wang, L. C., Hult, M. T. G., Ahmed, K. P. (2009). Knowledge Management Orientation, Market Orientation, and Firm Performance: An Integration and Empirical Examination. Journal of Strategic Marketing, 17(2), 99-122.
Krzysztof Brzostek Politechnika Śląska Zabrze, Poland kbrzostek@o2.pl
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