Knowledge Creation and Innovation Performance: An Exploration of Competing Perspectives on Organizational Systems

This study is an effort towards understanding the role of organizational systems in innovation performance. We consider two distinct perspectives of organizational systems in terms of knowledge creation and innovation performance. One perspective considers organizational systems as serving to recombine existing knowledge to create new knowledge and thus value, while the other views organizational systems as a tool for implementing knowledge created by individual members in a value-adding way. The study develops a model in which organizational systems mediate the relationship between knowledge and organizational innovation performance in order to better understand how organizations themselves, as distinct from the individuals which make up the organization, contribute to innovation. The study applies Structural Equation Modeling (SEM) to plant level data to explore the importance of organizational systems on knowledge transfer and performance. The findings suggest that organizational systems mediate the relationship between knowledge transfer and innovation performance, supporting the idea of the organization as a central actor in knowledge creation. Also, internal knowledge sources were found to contribute more to the knowledge transfer within the firm when compared to external knowledge sources.