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Impact of Knowledge Management Capabilities on Performance of Star Hotels

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 International Journal of Advanced Science and Technology
Vol. 29, No. 4, (2020), pp. 1102-1112

Impact of Knowledge Management Capabilities on Performance of

Star Hotels in Sri Lanka
Mubarak Kaldeen1 and Samsudeen Sabraz Nawaz2
1
Department of Marketing Management
South Eastern University of Sri Lanka
2
Department of Management and Information Technology
South Eastern University of Sri Lanka

Abstract
The concept of knowledge management has been widely examined from different perspectives. The aim
of this study was to analyze the impact of Knowledge Management Capabilities on Organizational
Performance of Star rated Hotels in Sri Lanka. Empirical examination of the hypothesized relationships
among variables was conducted by means of questionnaire surveys in Sri Lanka. The data collected
from the main survey were initially assessed for missing values, sample descriptive and normality
testing using SPSS version 23.0 with the 233 responses received from respondents serving as managers
in star hotels. Structural equation modeling (SEM) was then applied using AMOS version 23.0.
Confirmatory factor analysis was conducted to assess the proposed measurement model fit, validity and
structural model was developed for testing the significance of theoretical relationships. According to
the findings the information technology and human resource capabilities are correlated and they are
both enablers of knowledge management process capability while culture has no impact on it. In
addition to theoretical contributions, the study also attempts to provide a variety of practical
recommendations for hotel managers, to be successful in applying knowledge management to the
attainment of better organizational performances.

Keywords: Knowledge Management, Hotel Sector, Organizational Performance

1. Introduction
Today, the organizational environment is changing rapidly and the competitive environment is
very volatile, as a result, business firms face new challenges, especially, the competition increased with
the changes environment in which they operate. One of the strategic philosophies assisting firms at this
juncture to develop strategic capabilities dealing with uncertainty is knowledge management (KM)
capabilities. Through the systematic implementation of knowledge management process (KMP),
organizations able to develop strategies that enable them to be proactive and adaptable to external
changes and achieve better organizational performances (OP). The KM capabilities of a firm is a multi-
dimensional construct composed of KM infrastructure capability and KMP capability. Within the
context of this study, KM infrastructure capability is identified by knowledge culture, information
technology and human resource. KMP capability is identified by knowledge acquisition, knowledge
creation, knowledge storage and knowledge protection processes. Knowledge is an important asset that
determines ability of an organisation to achieve a sustainable competitive advantage, making it
important for organisations to preserve and expand their core competencies by tapping into the
knowledge base of skills and experiences held by their people, finding ways to access existing
knowledge and create new knowledge (Heisig et al., 2016). Lack of a clear understanding of the
performance implications of KM can potentially pose a threat to the legitimacy and continuity of the
field as a whole. Established themes like strategy, decision-making, organizational learning,
productivity and competitive advantage warrant new attention from a KM perspective (Heisig et al.,
2016). KM is a key strategic tool needed to make decisions in the organization and helps to improve
performance through more productive, efficient, innovative, and quality processes (Abdel et, al., 2012).

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Sri Lanka tourism suffers from poor planning and management and value addition. This strategic failure
needs a transformation through improved KM capabilities. The challenge for tourism sector is in
formulating KM implementation strategy and decide on which type of inputs to invest in to improve
firm performance. The problem is that the tendency of poor performance of hotels that fail to facilitate
organizational efficiency by ignoring the importance of managing knowledge issues.
Previous studies revealed that the both KM infrastructure and process capabilities impact in
combination on firm performance. Developing the KM capabilities will helps drive strategy, solves
problems quickly, diffuses best practices, improves knowledge embedded in products and services,
cross-fertilizes ideas and increases opportunities for innovation, enables organizations to stay ahead of
the competition better (Heisig et al., 2016). Therefore, there is a gap in practice and in the current
literature, hence, this research intended to fill these gaps by examine the impact of KM capabilities on
OP of star hotels in Sri Lanka. Hence, the main objective of the study is to analyse the impact of
Knowledge Management Capabilities on Organizational Performance of star rated Hotels in Sri Lanka.

2. Literature Review and Conceptual Framework

KM has been measured with two key variables of KM Infrastructure and KM Processes.
According to the researchers many have emphasized on two major factors for KM that is KM enablers
and KM processes (Mukthar et al.,2015; Huda et al.,2014). The theoretical framework of this research
incorporates only three elements as a KM infrastructure; knowledge culture, information technology
and human resource that are adapted from Maha et al., (2018); Fraihat et al., (2017); Islam, (2014);
Mohamed (2014); Nikolaous et al. (2011); Tan & Fakrul, (2011); and Lee et, al., (2012) and dependent
variable recognized as organizational performance as shown in the Figure 1.

Figure 1. Conceptual Framework

Knowledge Culture and OP
Every organization has its own unique culture, infrastructure, processes, values, skills,
predefined solutions and knowledge that can be transformed into the market which in turn may increase
the productivity, market value and affect the competitive advantage (Patrick et al., 2013; Muhammad,
2014). When an organization develops constructive culture that raises levels of member cooperation,
coordination between organizational units and performance of each unit. The knowledge culture has a
deep impact on employees’ performance that can lead to improve the productivity and in-turn that
enhance the OP (Fraihat et al., 2017) and culture leads to increased organizational performance (Maha
et, al., 2018). Knowledge culture found to be positively related to OP in the previous studies showing a
strong to moderate positive relationship (Maha et, al., 2018). Therefore, there is a significant
relationship between culture on OP. Hence,
H1a: There is a positive relationship between knowledge culture and organizational performance.

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Information Technology and OP

Technology has the core position in the integrated KM framework to travel the new knowledge
and repository of existing knowledge for easy retrieval and protection from misuse (Lee et al., 2012).
In fact, electronic integration, complemented by human IT resources and complementary organizational
resources, can reinforce and restructure specific business processes and structures including
coordination, absorptive capacity, monitoring and asset specificities. This in turn can lead to greater
firm operational and strategic performance (Noorliza, 2018). IT is considered a valuable organizational
resource that can enhance organizational capabilities and eventually lead to higher performance (Lee et
al., 2012) and IT is one of the main antecedents of stable sales growth and increased market share and
customer satisfaction was significantly affected by using IT throughout the firm (Abdul et al., 2012).
Therefore, technological KM infrastructure capabilities have significant positive impact on
organizational performance (Muhammad, 2014). Hence,
H1b: There is a positive relationship between organizational technology and organizational
performance.

Human resource and OP

People with T-shaped skills are extremely valuable for creating knowledge because they can
integrate diverse knowledge assets. They have the ability both to combine theoretical and practical
knowledge and to see how their branch of knowledge interacts with other branches. Therefore, they can
expand their competence across several functional branch areas, and thus create new knowledge (Lee
et, al., 2012). Human resource of organisations is one of the key successful KM enablers. Since tacit
knowledge resides in in the minds of employees, organizational employees are at the heart of creating
knowledge in an organisation (Lee et, al., 2012). Moreover, employee interaction in an organisation is
an important source of intangible value in the intellectual assets (Abdel et al., 2012). According to
Christine et al. (2013) organisations should capitalize on their intellectual assets, specifically the
employees’ intellectual capacity of the organisation in order to remain competitive. Hence, it is very
important to manage people who are willing to create and share knowledge. Lee et, al., (2012) concluded
that motivating employees to increase their involvement in knowledge sharing became a real challenge
for organisations and their involvement lead to increased performance. Hence,
H1c: There is a positive relationship between human resource and organizational performance.

Knowledge Culture and KMP

Culture is the most important infrastructure variable for successful knowledge management.
Communication between individuals or teams is often the basis for the creation of new ideas and can
therefore be considered as having the potential for creating knowledge (Abdi et al, 2018).
Organizational culture plays a pivotal role in knowledge creation and KM in organizations because it
effects how members learn, acquire, and share knowledge. Building and supporting a culture which
rewards and encourages employees for seeking, sharing and creating knowledge attributes will most
probably lead to the successful implementation of knowledge management (Nikolaos et al., 2011). It is
proved that various approaches and tools used for knowledge sharing among employees failed without
the supportive knowledge culture (Hsieh et, al., 2019). Based on the above literature the following
hypothesis has been developed
H2a: There is a positive relationship between culture and knowledge management process.

Information Technology and KMP

Technology capabilities can affect KM process effectiveness through two paths. First, an
appropriate technology must be in place for effective KM process. Second, technology can enable the
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flatter organizational structures that increase the effectiveness of KM process. Advanced technological
infrastructures in the form of communications networks allow structures that are more appropriate for
effective KM process (Henri et al., 2015). Technology infrastructure is an essential enabler of other
knowledge resources such as knowledge acquisition and knowledge application processes. Technology
facilities encourage the knowledge sharing and provide the employees with the knowledge they required
(Huda et al., 2014). The development of information technology has made it possible to codify, store,
share, and disseminate certain kinds of knowledge beyond physical and time barriers more easily and
cheaply than ever before. It alleviates the temporal, physical, and social distances, and closely ties
persons who develop knowledge to those who want the knowledge through virtual person-to-person
knowledge sharing (Henri et al., 2015). Hence,
H2b: There is a positive relationship between information technology and knowledge management
processes.

Human resource and KMP

The experience of existing employees with the company’s processes and the way the things are
handled by these employees can contribute to creating and application of knowledge within a company
more than hiring a new employee who is unfamiliar with the company’s environment (Chen & Liang,
2011). Skills of employees are both deep and broad, that is, their possessors can explore particular
knowledge domains and their various applications in particular products. People with multiple skills are
extremely valuable for knowledge creation because they can integrate diverse knowledge assets and
these people have the ability to combine theoretical and practical knowledge and to see how their
knowledge interacts with functional issues of organisations. Therefore, they can expand their
competence across several functional areas, and thus create new knowledge (Lee et, al., 2012). Hence,
H2c: There is a positive relationship between human capital and knowledge management processes.

KMP and OP
The critical elements of KM process are: knowledge creation, acquisition, storage, application
and protection. Knowledge creation is significantly and positively influencing OP by increasing staff
performance, work relationships, innovation, productivity, customer satisfaction, and financial
performance. (Shu-Mei, 2016). Hsieh et,al., (2019) found that employees with rich knowledge creation
experience help to improve the OP while Mukhtar et al., (2015) found knowledge creation and OP have
significant and positive relationship between them. Further, Wasim et al., (2015) said knowledge
creation practices significantly and positively contribute to overall performance of firms. Knowledge
acquisition component of KM need to be developed managed and integrated into organisational
processes and practices to improve OP. Wasim et al., (2015) too found that knowledge acquisition
practices contribute to overall performance of firms positively. Knowledge storage and knowledge
application also an important element for promoting the performance of organisations. The knowledge
application practices represent the improved performance (Shu-Mei, 2016). The rich knowledge storage
experience may improve the organizational performance on devotion to learning, open-mindedness and
joint vision. Knowledge utilization and organizational performances have positive relationship
(Mukhtar et al., 2015). Overall performance of firms is a combination of operational excellence,
customer intimation, product leadership and financial achievements and knowledge application are
positively correlated (Wasim et al., 2015). Hence,
H3: There is a positive relationship between Knowledge Management Process and Organisational
Performance.

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3. Methodology
The questionnaire was developed to measure the variables and the questions were adapted from various
literature. Culture (Christine & Shuhaida, 2013; Abdi et al., 2018; Hsieh et, al., 2019); Technology
(Henri et al., 2015; Tseng & Lee 2014; Christine & Shuhaida, 2013); Human Resource (Islam, 2014;
Chen & Liang, 2011); KMP (Shu-Mei Tseng , 2016; Hsieh et, al., 2019; Lee et,al., 2012); OP (Hsieh
et, al., 2019; Henri et al., 2015). The population of the study is the star rated tourist hotels in Sri Lanka
and the element was the Managers of star hotels. The questionnaire was issued for 250 respondents
whom were drawn based on the probability sampling techniques of simple random sampling. In Sri
Lanka, the star grade classification of hotels was initiated in 1967 and has been continued to date. The
regulations deal with regard to the classification of tourist hotels from 1star to 5star provisions are given
in the Extraordinary Gazette No. 1963/28 dated 20-04-2016 under the Tourism Act No. 38 of 2005. The
classification reflects the standard of the hotel’s service, facilities and of the overall product.
The data collected from the main survey were initially assessed for missing values, sample
descriptive and normality testing using SPSS version 23.0 with the 233 usable responses. Structural
equation modeling (SEM) was then applied using AMOS version 23.0. The measurement model was
examined using the rules of thumbs in SEM in order to test the goodness-of-fit to the data using CFA
and the measurement model that has been tested with CFA was then transformed into a full structural
model based on the nature of the causal relationships among the latent constructs in order to test the
hypotheses. SEM techniques were then used to test the goodness-of-fit of the model to the data,

4. Results
The Results of Reliability Analysis showed that Culture (α = 0.904), Technology (α = 0.924),
Human Resource (α = 0.942), KMP (α = 0.959). Meanwhile, OP (α = 0.916). This study assessed the
reliability with Cronbach’s alpha against the alpha coefficient that exceeds the values of 0.70
suggested by (Hair et al., 2012).

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Figure 2. Measurement model

The initial measurement model was developed with the combination of all the items related to
the final CFA results and is presented in Figure 2, Then the measurement model was tested as indicated
by the significant chi-square fit, CMIN/ df = 1.480. By observing the absolute fit indices and
incremental fit indices, the RMR and RMSEA values are 0.054 < 0.08 and 0.042 < 0.06 respectively;
on the other hand GFI=0.829, TLI=.958 and CFI= 0.961, except GFI value, other indices are greater
than the standard cutoff values. Thus, the initial measurement model is valid measurement model.

Structural Model and Hypotheses Testing

The results of the structural model that was derived through the SEM and the results of
hypotheses testing. The exploratory power of the regression model with the result obtained using
structural equation modelling (SEM). The result in the table 1, demonstrates the relationship between
exogenous and endogenous variables.

Table 1. Summary of Structural Model

Unstd. Std.
Path S.E. C.R. P
Estimate Estimate
KMP. <--- KIHR .245 .072 3.385 *** .245
KMP. <--- KIT. .462 .135 3.427 *** .258
KMP. <--- KIC. .020 .090 .219 .827 .018

OrPe <--- KMP. .148 .043 3.424 *** .198

OrPe <--- KIT. .613 .095 6.432 *** .459

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Unstd. Std.
Path S.E. C.R. P
Estimate Estimate
OrPe <--- KIC. .205 .057 3.614 *** .246

OrPe <--- KIHR .014 .045 .311 .756 .019

As per the table 1, except Human Resource, all other variables have significant effect as
follows: culture, technology and KMP have significant effect OP, and human resource and technology
have, significant effect on KMP. Further the structural equation model has been used to measure the
effects of the independent variables on OP.

Table 2. Hypothesis Testing - Direct Effect

Standard Regression Weight Hypothesis Beta P-Value Conclusion
Culture ➔ Organisational Supported
Performance H1a .249 ***
Technology ➔ Organisational Supported
Performance H1b .510 ***
Human Resource ➔
Organisational Performance H1c .067 .267 Not Supported
Culture ➔ Knowledge
Management Process H2a .017 .831 Not Supported
Technology ➔ Knowledge
Management Process H2b .258 *** Supported
Human Resource➔ Knowledge
Management Process H2c .245 *** Supported

Knowledge Management
Process ➔ Organisational H3 .419 *** Supported
Performance

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Figure 3. Structural Equation Modelling Direct Effect

As per the Table 2, H1a is accepted and this is in line with the findings that culture is affecting
organizational performance positively (Hsieh et, al., 2019). Similarly, Patrick et al (2013) found that
culture relates positively to cooperation, coordination, and organizational performance and culture
found to be the strongest predictor of organizational performance. H1b is supported by the finding that
technology is affecting organizational performance positively. This is in line with the finding of Abdi
et al., (2018). H1c is indicates that human resource has no significant influence on OP. This finding is
in contradict with Noorliza (2018). H2a is not accepted, this indicates that culture has no significant
influence on KMP. This is supported by the findings of Hsieh et, al., (2019). H2b is accepted and this
indicates that technology has significant influence on KMP. This result is supported by the findings
with H2b, H2c and H3 are accepted and this is in line the findings Shu-Mei Tseng, (2016); Lee et,al.,
(2012); Henri et al.,( 2015)
The explanatory power of the regression models with the results obtained using the structural
equation modelling (SEM), it is found that SEM models reasonably explained their power. As shown
in the Figure 3 total of 81% of the variance of KMP impact is explained by culture, technology, human
resource and KMP. Moreover, total of 26 % of the variance of OP is explained by culture, technology,
human resource and KMP.
5. Conclusion and Implications

This study was designed to investigate the impact of infrastructure capabilities (culture,
technology, human resource, KMP) on organizational performance. It was found that the culture and
technology have the strongest influence on OP while human resource not having significant relationship

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with OP. As predicted, results confirmed that organizational knowledge infrastructure constructs have
indirect influence on OP.
Hotels are beginning to feel that the knowledge of their employees has to be seen as their
valuable asset, but only a few hotels have begun to manage their knowledge assets actively. The status
of KM practices in hotels is that most respondents observe that much is still to be accomplished in order
to improve the KM practice and OP and recognise KM as a strategy and a formal scheme as a part-and-
parcel of everyday tasks and it should be blends seamlessly into the background of the organizations’
environment. The organisational culture in hotels is perpetuated by employing individuals who hold
shared understandings of the values, goals and practices of the organisation. The technology must be
infused and diffused into business processes to enhance OP. In the context of KM, where knowledge-
oriented processes play a decisive role, IT should become the enabler of these processes to exhibit and
improve their effect on OP. KMP emphasized the importance of each process, in particular: the
acquisition process: generating new knowledge from existing knowledge and acquiring knowledge
about customers, suppliers, and new products/services within the industry; the storage process: filtering
knowledge, absorbing knowledge from individuals into organisation and integrating different sources
and types of knowledge; the application process: taking advantage of new knowledge and using
knowledge to solve new problems, improve efficiency, and adapt to changing competitive conditions.
To remain sustainable and competitive, hotels are required to acquire strong dynamic
capabilities by implementing a variety of KM activities. Therefore, the most important concern of senior
management to deeply involve and effectively exploit such KM capabilities to improve the hotels’
performance which includes financial, HR performance, innovation and marketing performances. Lack
of KM practices might lead to high costs as a result of lost institutional memory, knowledge gaps and
uninformed decisions. Managing knowledge in a hotel can leverage efficiency across all its services to
customers through accessing the right information for making informed decisions and eliminating
duplication of efforts.
This study suggests that practicing managers should understand and develop a holistic approach
of implementing an overall KM strategy which is composed of the three perspectives of cultural,
technical infrastructure and human resource. In order to improve and strengthen the KM performance,
hotels need to place more effort into encouraging people to share their knowledge as this is one of their
main weaknesses. Although the hotels is equipped with advanced information technologies that provide
a formal knowledge sharing facility such as intranet, websites, online forums, electronic document
storage, the potential and benefits of these functions are not fully exploited. Hence, Sri Lankan hotels
should redesign its organisational structure and move towards a flatter and more flexible form that
facilitates sharing and transfer of knowledge across structural boundaries. A standardised reward
system is also needed to encourage employees to actively involved in a friendly knowledge sharing
environment by interacting with each other, discussing their work with and asking the opinion of people
within and in other groups, divisions, and exchanging their own experience in specific situations.

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