Understanding the link between knowledge management and firm performance: articulating and codifying critical knowledge areas

The concept of dynamic capabilities is quantified in the context of strategic decision-making. Specifically, it is how business mission and value proposition formulation process, along with Knowledge Management (KM) infrastructure, help managers to create and develop dynamic capabilities by articulating and codifying relevant or critical knowledge configurations to the organisation's domain. Five constructs are proposed in a sequential way in order to capture the effectiveness of the key enabling processes that drive reconfiguration (sensing the environment, learning, coordinating, and integrating resources, respectively). A model that links reconfigurability in knowledge resource combinations and firm performance is developed, which is mediated by functional competencies (capability and value creation differentials). The model is tested in the information technology industry in Spain with 107 managers. The paper draws implications for understanding the nature and valuable role of dynamic capabilities, and how these may provide a missing link to the strategic role of knowledge.