The mediating role of operations knowledge in the relationship of context with performance

Abstract Design knowledge intensity and throughput variance are both aspects of knowledge, the former relating to organizational management knowledge and the latter characteristic of operational process knowledge. We model and test their relationships to each other and to financial performance. We also examine two context variables as antecedent to knowledge: they are demand unpredictability (a dimension of environmental uncertainty) and mass output orientation (a measure of production technology type). The results show that knowledge completely mediates the effects of context on financial performance; i.e. the context variables impact knowledge and knowledge impacts financial performance, but the context variables have no direct effect on financial performance. Thus, knowledge appears to shield the firm from demand unpredictability, while mass output orientation type affects financial performance only through its impact on knowledge.