Knowledge Creation Capability and Innovation in Global Consulting Firms

Abstract

Knowledge creation has been recognized as a core competence for competitive advantage in knowledge intensive organizations. The purpose of this study is to identify the relationships between knowledge creation capability, intellectual capital and innovation in multinational consulting organizations. Survey data of 172 professional consultants from Korean subsidiaries of multinational management consulting firms was collected and empirically analyzed against our hypothesis. The key findings are as follows. Firstly, knowledge creation capability has a significant positive influence on subsidiaries’ innovation. Specifically, tacit knowledge creation has a significant influence on subsidiaries’ innovation, while explicit knowledge creation does not have substantial effects on innovation. Secondly, human capital as intellectual stock has negative moderating effects on how tacit knowledge creation influences innovation, but plays a positive moderating role on the relationship between explicit knowledge creation and innovation. This negative mediating effect of human capital appears stronger in the senior group of employees. On the other hand, social capital has no moderating effects between knowledge creation capability and innovation. This study confirms the importance of knowledge creation capability, particularly the effect of the creation of tacit knowledge creation on innovations by multinational subsidiaries’ in professional service firms. This study also suggests that human capital has adverse effects on the impacts of tacit knowledge creation capability on innovation. These results provide managerial implications for subsidiaries’ knowledge creating capabilities as a driver for successful, innovative change.