An Empirical Study of Knowledge Management Effectiveness and Organizational Innovation in Malaysian Manufacturing Firms

Today, the world is entering a knowledge-based era. The manufacturing firms in Southeast Asia countries, including Malaysia, are shifting their economies model from labor-intensive to knowledge-intensive, where firms are expected to immerse themselves in high value added activities such as developing and adopting new products, processes, and services, to continually sustain in this global competitive environment. The introduction of new ways usually leads to the development of new products or services, the changes in managerial practices and the emergence of new organizational structures, which is usually referred to as organizational innovation. There are two regular types of organizational innovation within the manufacturing environment relates to technological innovation and administrative innovation. Both technological innovation and administrative innovation depend to the highest degree on knowledge. Hence, knowledge management has been viewed as an instrument to assist an organization in identifying gaps in knowledge and providing process to fill up gaps to aid organizational innovation. Hence, the purpose of this research is to examine the influence of knowledge management effectiveness (knowledge acquisition effectiveness, knowledge sharing effectiveness and knowledge application effectiveness) on organizational innovation (technological innovation and administrative innovation). Survey data was rendered from a sample of 171 large manufacturing firms in Malaysia. The regression results indicated that among three dimensions of knowledge management effectiveness, knowledge acquisition effectiveness has a significant positive influence on both technological innovation and administrative innovation. The results offer several suggestions to manufacturing firms in Malaysia. In particular, organization can manage knowledge effectively in order to increase organizational innovation. This paper also wrap up with discussion, limitations and implications, and also the suggestions for future study.