Knowledge management capabilities and organizational agility as liaisons of business performance

Purpose The aim of this current study is to investigate the effects of knowledge management capabilities – knowledge infrastructure capability and knowledge processing capability – on organizational agility and business performance. This study also examines organizational agility as an underlying mechanism between knowledge management capabilities and business performance relationship. Design/methodology/approach The data were collected from one hundred and sixty-nine organizations. Partial least squared (PLS)–based structural equation modeling (SEM) technique was employed to test the study hypotheses. The analysis was performed in WarpPLS 6.0 software. Findings Results revealed that both dimensions of knowledge management capabilities positively influence organizational agility and business performance. In addition to the direct effect, knowledge management capabilities also have an indirect effect on business performance mediated through organizational agility. Research limitations/implications This study attempts to develop an integrated framework to conceptualize a capability–capacity–performance relationship, where it suggests that knowledge management capabilities are important organization-level capabilities which facilitate organizations to develop necessary capacities i.e. organizational agility to successfully perform business activities. Practical implications The findings help the managers to understand the contribution of knowledge management capabilities towards business performance. The findings imply that business performance can be enhanced by development of a culture - enabled by a knowledge-oriented structure and technology – that encourages knowledge sharing among employees because when employees are not sharing information, they are prone to repeating the same mistakes which they and other people have already committed. Likewise, strategies such as mentoring cross training, business process empowerment and technical training programs allow employees to gain business knowledge and foster organizational agility. Originality/value Novelty of this study is to develop and empirically test an integrated framework of a capability–capacity–performance relationship. It suggests that knowledge management capabilities (firm capability) enable organizations to develop organizational agility (firm capacity) which in turn enhances performance.