Effect of Knowledge Management on Firm Performance in Commercial Banks in Nakuru, Eldoret And Kisumu

Abstract

The study is set out to assess the effect of knowledge management on firm performance, Resource-based view will inform the study. The study will employ explanatory research design. Target population will be a census 133 bank branch managers within the three towns; Nakuru, Eldoret and Kisumu. Five point Likert scale structured questionnaire will be formulated for data collection. Data collected will be analyzed quantitatively through the use of descriptive statistics and multiple regression models. We found that knowledge acquisition knowledge conversion knowledge application and knowledge protection had a positive and significant effect on firm performance. The study occludes that knowledge management very crucial for firm performance. There is also need for firms to have processes for exchanging knowledge between individuals, business partners and supplier. There is also need for the firms to have a process for distributing knowledge throughout the organization so as to enhance the design of new products/services. There is need for a process that matches sources of knowledge to problems and challenges so as to enhance the development of new products/services. Firms need to have processes that protect knowledge from theft within the organization need to be implemented. Keywords: Knowledge Acquisition Knowledge Conversion Knowledge Application and Knowledge Protection 1.0 Introduction Many firms consider that to act with efficacy in today's economy, it is imperative for them to become a knowledge-based organization. In this global economy knowledge is the King (Garud and Kumaraswamy, 2002), and maybe that is the biggest competitive advantage of them all (Davenport and Prusak, 2000). The " new economy " is driven by knowledge (UKDTI, 1998a; UKDTI, 1998b), based upon knowledge (Sirois, 1999), and it is moved by knowledge (Wenger and Snyder, 2001). Its main output knowledge is intangible (Wenger and Snyder, 2001); it is the economy of the intangibles (Stewart, 1997). A firm's performance and survival are determined by the speed at which the firm develops knowledge-based competencies. Knowledge and intellectual capital are considered among the firm's knowledge-based competencies and, according to Bell (1973) and Nonaka (1994), the major competitive advantage of a firm lies in its knowledge. Firms competing in the knowledge-based economy can sustain their competitive advantage by harnessing their own unique knowledge and building their capability to learn faster than their competitors (Grant, 1996b; Prusak, 2001Competitive capacity of organization can be increased by building strong people and effectively managing and developing people (Cabrera & Banache, 1999) which is in essence performance management. Organizations develop knowledge management capabilities to help support a range of vital operational and innovative activities. The interest in organizational capabilities has created a focus on the development and implementation of knowledge management processes and infrastructure required to support daily work practices. Different resources make up the knowledge capability of a firm. These include technology infrastructure, organizational structure and organizational culture which are linked to a firm's knowledge infrastructure capability; and knowledge acquisition, knowledge conversion, knowledge application and knowledge protection which are linked to the firm's knowledge process capability (