Knowledge Creation and Firm Performance: Is Innovation the Missing Link?

Abstract

This research analyzes the interrelationship among knowledge creation, innovation and firm performance using 350 surveys distributed to middle managers of three Pakistani telecommunication companies. The statistical results confirm the direct association between both knowledge creation and firm performance, and innovation and firm performance. Furthermore, results highlight a potential mechanism for the impact of knowledge creation on firm performance: the partial mediating role of innovation. Results not only present insights to address the question of what drives firm performance, but also contribute to integrate the literature on knowledge management and innovation management. The study advises practitioners to focus on learning-conducive cultures, flexible structures and learning-supportive leadership as strategies to effectively leverage organizational innovation and knowledge creation capacity.