Knowledge sharing and technological capabilities: The moderating role of family involvement
Introduction
A firm's success in today's dynamic and fiercely competitive environment depends largely on the ability to use knowledge to develop new products, services and processes that outperform the products, services, and processes of rivals. Proponents of the knowledge-based view (KBV) propose a firm's competitive advantage lies in the ability to collect, accumulate, integrate, disseminate, and exploit knowledge (Kogut and Zander, 1992, Nickerson and Zenger, 2004, Szulanski, 1996) which is essential to the development of technological capabilities (Iansiti and Clark, 1994). Knowledge, while widely collected and held by individuals throughout the firm, is strategically valuable only when shared, synthesized, and used in unique ways. Despite the importance of this process, relatively little is known about the specific practices firms use to share, disseminate and harness their knowledge to build and strengthen their technological capabilities. Even less is known about how family firms successfully manage the crucial process of knowledge sharing. Consequently, this study asks whether the effectiveness of knowledge sharing practices in family firms is facilitated or hampered by the level of family involvement.
The knowledge management literature offers two key insights into how information is shared. The first view, called formalized knowledge sharing, considers knowledge as a collectable, storable and retrievable artifact (Alavi et al., 2005/2006, Leonard-Barton, 1995). Thus, organizational knowledge can be packaged and transferred through structured and formal knowledge sharing routines. The second view, called informal knowledge sharing, suggests knowledge is tacit, socially constructed and collectively held by the individuals throughout the organization (Lave, 1993, Lave and Wenger, 1991, Nonaka and Konno, 1998). Sharing tacit knowledge requires unstructured, face-to-face, and personalized exchange practices (Orlikowski, 2002). These complementary practices are important. However, their implications for the development of a family firm's technological capabilities remain unknown.
Family firms offer an interesting setting to examine the relationship between knowledge sharing practices and technological capabilities as knowledge sharing activities might be promoted or hindered by families' involvement in management. A family firm's strong sense of identity, unique social system, and “familiness” (Habbershon et al., 2003, Denison et al., 2004) can foster frequent informal discussions to expedite the transfer of experiences and knowledge (Miller and Le Breton-Miller, 2006). Yet, rivalries, jealousies and conflicts (Gomez-Mejia et al., 2001, Sharma et al., 1996) can stifle knowledge sharing needed to build technological capabilities.
This study examines two research questions: (1) Do formal and informal knowledge sharing practices strengthen the technological capabilities of family firms?; and (2) Are these relationships strengthened or weakened by family involvement in the top management team (TMT)? The study employs the family firm and the KBV literatures in answering these questions, by positing a firm's competitive advantage lies in how creatively the firm's knowledge base is exploited (Conner and Prahalad, 1996). Specifically, the formal and informal knowledge sharing practices of family firms are proposed to be positively associated with the strengths of their technological capabilities. Further, higher levels of family involvement (i.e., more generations involved in the management of the family firm or greater representation by family members on the TMT), increase the benefits of firms' knowledge sharing practices, strengthening the relationships between formal and informal knowledge sharing practices and firms' technological capabilities.
The study adds to the literature in three ways. First, the study examines the practice of knowledge sharing in family firms, which account for over 75% of all registered companies in most economies (Miller et al., 2003). Since the practice of knowledge sharing is usually embedded in the firm's social context (Nahapiet and Ghoshal, 1998), family firms offer an interesting setting for studying those factors affecting knowledge sharing. Yet, little research explores those issues within family firms, missing the opportunity to understand how they develop technological capabilities to create value.
Second, this study clarifies the effects of different knowledge sharing practices on the development of family firms' technological capabilities. Consequently, the results can promote these firms' awareness of their own context to use knowledge sharing to accelerate the creation of new capabilities. The results contribute to family firms' capacity to improve the use of knowledge to become technologically competitive by clarifying the relationship between knowledge sharing practices and technological capabilities.
Finally, the study explores the impact of two dimensions of family involvement (i.e., the number of generations represented on the TMT and the percentage of top management positions held by family members) on the relationship between knowledge sharing practices and the family firm's technological capabilities. Thus, as family involvement increases, the positive relationships between formal and informal knowledge sharing and technological capabilities will strengthen as a result of the beneficial and productive interactions and debates associated with increased participation. The results, therefore, clarify how family involvement may influence the relationship between knowledge sharing practices and technological capabilities.
The next section of the paper discusses the uniqueness of the knowledge sharing process in family firms. Hypotheses are then presented, followed by a discussion of the study's sample, measures and analyses. This is followed by the results. The paper concludes by discussing contributions to the literature and outlining promising future research directions.
Section snippets
Theory and hypotheses
The effective management of knowledge is a valuable source of competitive advantage in contemporary organizations (Kogut and Zander, 1992, Nahapiet and Ghoshal, 1998). KBV scholars believe firms should foster routines to effectively capture, store, analyze, retrieve, share, and disseminate knowledge held within their operations. Only by harnessing and exploiting the collective wisdom and knowledge of their employees can firms adapt and develop innovative processes, products, tactics and
Method
In this study, data was collected from 209 companies classified as family firms (see, Zahra, 2005). Initially, the 50 largest and the 50 smallest companies in 20 different manufacturing industries were identified from Compustat Research Insights (1999). Thus, 2000 companies were targeted in a mail survey, covering a wide range of industries, company sizes, and profitability. Two mailings yielded 497 replies for a response rate of 24.85%. The t and X2 tests were used to establish whether the
Results
Table 2 presents the results of the hierarchical regression analysis. The results for step 1 were significant (p < .001) and the overall model explained 24% of the variance in technological capabilities. Company size, industry knowledge intensity and formal knowledge sharing had significant and positive coefficients (p < .05).
In step 2 of the analysis, the regression was significant and explained 28% of variance, an increase of 4% from step 1. This improvement in R2 was significant (partial F = 2.71,
Discussion
This study set out to determine if formal and informal knowledge sharing practices were associated with the strength of family firms' technological capabilities. The results support the KBV proposition that both formal (H1) and informal (H2) knowledge sharing practices provide the mechanisms by which critical information is shared, a process that can strengthen family firms' technological capabilities. Thus, family firm managers need to develop the means to enhance the use of these critical
Acknowledgements
The supportive comments and sugggestions by Jim Christman are acknowledged. Patricia H. Zahra's assistance with earlier drafts of the paper is also appreciated. This paper is based on a larger database, as described in Zahra (2005). The financial support of Babson College in data collection is also acknowledged with gratitude.
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