Abstract
In response to the concern regarding the evaluation of Knowledge Management (KM) initiatives, we introduce the concept of 'Knowledge Creating Capabilities'. This concept refers to the balance of the four knowledge creation modes proposed in the SECI Model by Nonaka and Takeuchi (1995). The relationship of this concept with corporate financial performance is explored using two financial indicators. This framework is tested on SME from Japanese manufacturing sector. The empirical evidence shows the positive association of knowledge creation capabilities with financial performance. We found that higher levels of financial performance are reached when knowledge creating modes are balanced.
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