Managing in the Knowledge Economy


Major social and economic transformations that occurred at the end of the twentieth century contributed to knowledge becoming a critical asset for organizations that provides a source of competitive advantage. Thus, it is important that firms focus on how they should manage knowledge of their workforce. This paper discusses the main concepts, practices, and approaches of knowledge management and critically evaluates knowledge management and learning practices for organizational effectiveness.

Key Concepts, Practices, and Approaches of Knowledge Management

Key Concepts

Knowledge management is a broad term that can be viewed from organizational, behavioral, and socio-cultural perspectives. According to the framework developed by Alavi and Leidner, knowledge management involves the “creation, storage, retrieval, transfer, and application of knowledge” (Easterby-Smith & Lyles, 2011, p. 106). Being a fundamental organizational capability, these processes help companies develop and deliver products and services (Becerra-Fernandez & Sabherwal, 2014). Among other key concepts of knowledge management are knowledge selection and knowledge internalization. There are three sources of knowledge in organizations, which are tacit, explicit, and implicit knowledge (Syed, Murray, Hislop, & Mouzughi, 2018). Explicit knowledge is easy to articulate and share, whereas tacit knowledge is difficult to codify and transfer. Implicit knowledge is information that has been converted from tacit knowledge.

Knowledge creation refers to the invention and innovation of new approaches and methods. Knowledge storage is associated with knowledge identification, codification, and indexing for further retrieval (Hislop, Bosua, & Helms, 2018). Depending on the type of organizational memory, organizational knowledge can be retrieved either from external or internal memory. Knowledge transfer and knowledge sharing have much in common, yet the former applies to the source-and-recipient context, while the latter focuses on the collective character of knowledge.

Key Practices

The key practices of knowledge management should be viewed in relation to its key processes defined above. Practices of knowledge creation are aimed at stimulating firm-specific learning and include high-powered incentives, the elaboration of promotion rules, and the provision of access to critical knowledge resources. Knowledge storage concerns the development of a central knowledge repository by the engineering team. Among knowledge sharing practices that are widely used are regular staff meetings, mentoring to support new workers, and interactive role-plays where experienced employees are paired with new ones (Syed et al., 2018).

Research has shown that interpersonal relationships between workers have a significant impact on tacit knowledge sharing (Analoui, Sambrook, & Doloriert, 2014). Thus, it is important that management engage workers in group work to increase their willingness to share knowledge. Other common practices that are relevant to knowledge management are the establishment of a culture of knowledge sharing and collaboration, the development of the organization-specific knowledge management tools (such as internal repositories), the creation of knowledge sharing programs, and the integration of the best knowledge management methods into routine practice.

Key Approaches

There are different perspectives on the creation, transfer, and application of knowledge. Knowledge is considered to be one of the most important resources of a company because its accumulation and dissemination drive a company’s growth (Haq, 2016). A communities of practice approach is commonly used by firms to strengthen knowledge management systems and facilitate tacit knowledge. Social capital in communities of practice can create tacit knowledge and convert it in such a way that a company will gain a competitive advantage due to its know-how (Rahman & Muktar, 2014).

In contrast to traditional structures that are present in many organizations, communities of practice rely on the existing knowledge, yet the skills of groups of workers are constantly improved. By sharing their knowledge, peer networks of practitioners help each other perform better (Ramchand & Pan, 2012). However, it is worth mentioning that under this approach, workers can decide whether to retain or share their tacit knowledge, compared to organizational structures where management can put pressure on employees to share their tacit information.

A cross-functional team is an approach that is extensively utilized in knowledge sharing processes. This team consists of people from different disciplines and departments who work together on a project within the boundaries of an organization. As a particular source of new knowledge, cross-functional teams may facilitate the integration of a wider knowledge base into the project. It is also worth mentioning that this approach supports the creation of communities of practice.

Methods for the application of knowledge include packaging (converting the information to make it accessible), decision support (using knowledge for decision-making), as well as case-based reasoning (solving new issues by relying on the solutions to similar problems in the past). Among approaches that are used to evaluate the efficiency of knowledge management practices are an assessment of activities within a knowledge management program, benchmarking, and intellectual capital measurement. Therefore, there is a number of ways in which knowledge management can manifest itself within a company.

Critical Evaluation of Knowledge Management and Learning Practices for Individuals and Organizations

Being directly related to knowledge transactions, high-powered incentives are established to enhance employee performance. On the one hand, many companies find this approach beneficial as it can help strengthen the innovative behaviour of the staff and facilitate knowledge creation. The personnel may also enjoy the advantages of high-powered incentives, such as stock options and performance pay. On the other hand, though, it can be difficult to ensure that related expenses are incurred by those for whom such incentives have been created (Easterby-Smith & Lyles, 2011).

Also, if employees are offered stock options, it does not mean that they will benefit from such a reward since stocks may be highly volatile. If stocks depreciate, employees may be exposed to certain risks and even lose money. Some workers might be afraid of providing incentives if they are highly dependent on their job. Besides, some issues associated with the evaluation of output for tasks often arise. If a company does not have a clear system for the evaluation of the effectiveness of incentives and corresponding compensation, high-powered incentives will become less effective.

Many companies use promotion rules to facilitate specific learning investments. However, this practice often leads to tension between a worker and an employer. On the one hand, a worker can invest in their skills only if the difference between the future cost and the cost of learning is greater than the current wage. On the other hand, an employer will be ready to pay more to an employee if their productivity will increase, and the difference between the new and current productivity will exceed the difference between new and current wages. One should note that firms that use up-or-out promotion rules are going to lose money when the productivity of an employee does not improve after he or she made firm-specific learning investment (Easterby-Smith & Lyles, 2011).

Moreover, it is important to mention that once a worker made such an investment, a company needs to retain this individual long enough in order to recoup investments in human capital. If a company has too high performance standards for promotion, employee turnover rates may increase.

Many corporations give their workers access to learning resources in order to improve the skills of the personnel related to those assets. Despite the obvious benefits of this practice, a hold-up problem may occur. Since employees specialize in a particular critical asset, they have bargaining power because they can leave an organization anytime. Thus, a company will lose its human capital if an executive refuses to increase an employee’s wage. This drawback of providing access to critical resources becomes especially palpable in the case with complementary investments that are common in team-based firms. Under such circumstances, an employee influences an organization not only directly by withdrawing human capital but also indirectly since his or her human capital investments are complementary to those of other workers.

Communities of practice represent additional opportunities for improving organizational performance. The benefits associated with this practice include enhanced problem-solving, the promotion of the spread of new practices, and the development of professional skills of the staff (Newman & Newman, 2015; Wenger & Snyder, 2000). At the same time, despite the fact that communities of practice are expected to be effective, they are not prevalent in the business environment (Schofield, Analoui, Brooks, & Hussain, 2018).

Firstly, the creation and nurturing of such teams, as well as their integration in the organizational structure, are somewhat difficult and time-consuming tasks that require a professional manager to find the right people and provide them with appropriate infrastructure. Secondly, due to the informal and spontaneous nature of these networks, it may be impossible to supervise them or interfere in their work.

Knowledge Management Practices for Organizational Effectiveness: Critical Evaluation and Recommendations

The process of managing knowledge in organizations remains a complex task due to many interwoven factors. It is the tacit knowledge of work groups from which companies can derive strategic value, yet there are many challenges associated with capturing this type of information (Boon, Eckardt, Lepak, & Boselie, 2017). The issue that is central to knowledge management is the tension between the need for organizations to access tacit knowledge of workers and the need for workers to retain it to safeguard their employment (Akbari & Ghaffari, 2017). By sharing their tacit knowledge, employees lose their work autonomy and even retard their career progression.

The willingness of individuals to share tacit knowledge which they possess is key to knowledge transfer. However, interpersonal trust and the reputation of knowledge recipients are also important factors that impact knowledge sharing (Holste & Fields, 2010). Thus, it is recommended that organizational leaders form affect-based and cognitive-based trust in workers by encouraging collaborative processes to enable people to show their individual competencies. It is important that management should consider sources of affect-based trust and stimulate appropriate types of collaborative behaviours (Sparrow & Cooper, 2018).

Apart from that, the desire to share one’s tacit knowledge may depend on the attitude to a leader (Jabbar, Analoui, Kong, & Mirza, 2017). For example, workers are more eager to share knowledge with knowledge-oriented transformational leaders compared to transactional and laissez-faire leaders (Donate & Pablo, 2015; Palmer, Dunford, & Buchanan, 2017; Stafford, n.d.). Therefore, one may recommend that managers follow the transformational leadership style that concentrates not only on organizational development but also on the personal development of workers.

Other knowledge management practices that may increase organizational effectiveness include the creation and utilization of organizational learning-based resources. Among them are external scanning, benchmarking, the creation of new organizational structures, and the elaboration of databases (Edmondson & Harvey, 2018). Each of these systems can make a positive impact on the creation, storage, and dissemination of knowledge. However, it is worth mentioning that online systems with difficult navigation may lead to workers being unwilling to input their information or any insights. It is also possible that workers may not know which information they need to input in the case when they think that the information is not valid or trustworthy enough (Manhart & Thalmann, 2015).

The issues discussed above will adversely affect the dynamic systems of organizational information. Thus, one may recommend that companies should focus on the ability to share technical data and ensure their safety. For example, workers need to be taught how to use dynamic knowledge repositories to input and extract data. They also should be instructed about the type of information they have to input in order to avoid any uncertainties.

The presence of a knowledge management champion can enhance organizational effectiveness by facilitating the transfer of new knowledge. That is why it is recommended that the HR manager should appoint a Knowledge Officer to improve the process of knowledge creation, storage, dissemination, and application (Hussinki et al., 2017; Martinez-Conesa, Soto-Acosta, & Carayannis, 2017). This will also contribute to the capacity of knowledge systems to foster innovations.

Despite the risk and disadvantages to which the communities of practice are not immune, such as the impossibility of management to mandate how the work should be done, this approach has several advantages. In particular, it can provide meaningful insights regarding the creation and transfer of tacit knowledge and bridge the gap between tacit and explicit knowledge (Efrat, 2014; Khodaee, Omrani, Kazemi, Tamar, & Piri, 2016). It may be recommended that companies invest their time and money to support communities with resources and coordination.


Given that changes have become an ever-present feature of a business environment, it is essential that organizations utilize knowledge management practices to solve critical problems related to the adaptation to these changes and retain a competitive advantage. In the given report, the key concepts, practices, and approaches to knowledge management have been discussed. Then, the appropriateness of knowledge management practices has been critically evaluated and recommendations to increase organizational effectiveness have been given.


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