Value-Added Knowledge Management for Financial Performance: The Case of an East Asian Conglomerate

Abstract

Purpose - This paper aims to study the economic significance of using a blended business and knowledge strategy through the lens of conventional financial management before and after the implementation of KM initiatives in a knowledge-intensive, high-growth firm that had gone through business diversification through organic developments as well as mergers and acquisitions for over a decade.

Design/methodology/approach - The economic value added (EVA) method is proposed as a measure of the effective usage of capital funding in the firm before and after its KM program. The extent of the economic impact due to the contributions of various KM strategies was analyzed singstandard financial management reporting. This enabled the derivation of follow-on KM initiatives that were consistent with the target objectives.

Findings - The EVA method was found to be valid and credible in determining the net impact of various KM initiatives. This was in a form that was comprehensible to top management and KM decision-makers.

Research limitations/implications - Knowledge management as a strategic imperative has gained significance over the past decade for its ability to handle the complexity of information to further create, transfer and reuse intellectual capital. More importantly, KM is seen as the key business enabler across different enterprises for its ability to enhance competitiveness and shareholder value. The EVA method used in this paper has allowed the valuation of KM initiatives.

Practical implications - The emergence of KM as a blended business strategy has hence proved o be vital for the sustainability of the knowledge-driven business model that looks beyond the physical and financial into intellectual and social capital.

Originality/value - The paper presents a longitudinal case study of a fairly large East Asian onglomerate.

(Chosen as Outstanding Paper Award Win)

Keywords: Knowledge management, Intellectual capital, Financial management, Economic value added