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Evolution Of Knowledge Management

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幾十年來,知識管理是一個不斷發展的話題。了解客戶,產品,流程,創新和競爭對手的秘密是資產,可以幫助公司保持長期的競爭優勢。知識轉移被廣泛強調為企業競爭的戰略問題。許多研究人員已經提供了一些因素,影響企業的知識轉移水平。其中一個因素被稱為吸收能力。
當今世界是知識經濟。全球市場的玩家需要能夠產生自己的知識,才能在市場上變得有競爭力。在這種情況下,企業可能產生的技術知識,以促進創新的產品和制造或業務流程。不幸的是企業的創新能力是不同的不同公司之間也取決于他們的員工能力。公司需要認識新的外部知識,吸收它,并將其應用于商業應用。這被稱為吸收能力的吸收能力(ACAP)一個公司在組織學習和創新方面的重要作用以及公司的業績一般。
For a few decades Knowledge Management is a continuously growing topic. Knowledge about customers, products, processes, innovations and competitor’s secret are asset that can facilitate a firm to have a sustain a highly competitive advantage in a long run. (Anne et al,2005) Knowledge transfer is widely emphasized as a strategic issue for firm competition. (Albino et al, 1998) and many researchers already provided a few factors that affect the Level of knowledge transfer of the firm. One of the factors is called Absorptive Capacity (Tsai, 2001)
Nowadays the world is knowledge-based economy. The players the global market needs to be able to give birth to their own knowledge in order to become competitive in the market. In this scenario firms likely to generate the technological knowledge to facilitates the innovative products and manufacturing or business processes. Unfortunately firms ability to innovate are varies between the different firms and also depending on their employee ability. Companies need to recognize new external knowledge, assimilate it, and apply it to commercial use. This is called as the absorptive capacity (Cohen and Levinthal, 1990) The absorptive capacity (ACAP) of a firm plays an important role in terms of organizational learning and innovation (Tsai, 2001) as well as for firm performance in general (Lane et al., 2001).
At first many of the researchers mainly focus on the relationship of absorptive capacity and R&D perspective. And use the R&D as measurement of the absorptive capacity of the firms. (Cohen and Levinthal, 1990 ; Zahra and George, 2002) However that approach will have the implication when we want to measure the absorptive capacity of the firm that has low R&D emphasis such as the SME service provider in Thailand. Some researchers propose a new set of inner firm determinant of absorptive capacity in the firm level. (Vega-Jurado et al, 2008)
The supply chain management (SCM) and knowledge management (KM) are famous topic of the researchers in this era. They have many things in common such as the focus on knowledge and information sharing among the supply chain members. Even though the relationship of SCM and other disciplines are widely explored, the evidence of SCM practices on KM and firm performance are limited and not so conclusive. As business practices today no longer evaluate the performance of a business enterprise at a unit level, but rather from a value chain (supply chain) perspective, it is therefore important to examine the management of knowledge in the supply chain context. The same philosophy of KM at the firm level cannot be applied directly to the supply chain level. This is because, probably, the roles that knowledge plays in both levels are different and therefore, the impact of KM will differ from a firm perspective to a supply chain perspective (Wai and Kuan, 2011)
1.1 Problem Statement
The absorptive capacity is considered to be an important factor with a promising benefit for the firm innovation and competitiveness but the evidence of the effect of absorptive capacity and SCM practices interaction are very little and need to be exploring more.
1.2 Objectives of the Thesis
This research aim to gives two-dimensional contributions. First, it explored linkages between Absorptive Capacity, SCM practices and firm performance; the results should help us to understand how to better manage knowledge absorptive capacity in a supply chain context. Second, this research addresses the gap in the literature by analyzing the roles of absorptive capability and SCM practices on firm performance. This in turn will provide valuable clues on how to improve organizational effectiveness which is the goal of management practices.
1.3 Organization of the Report
This proposal consists of 3 chapters as follows:
Chapter 1 is the introduction of the research. It provides the background of the ACAP, problem statement of the research, objectives and scope of this thesis.
Chapter 2 is the literature review. The previous research works, i.e., method approaches for measuring ACAP, are discussed.
Chapter 3 is Theoretical background and conceptual framework section. It discuss about the hypothesis construction and theoretical back ground of the work.
Chapter 4 introduces the proposed methodology. The approaches, data source, variables and questionnaire are discussed.
Chapter 2.
Literature Review
This chapter provides the theoretical perspectives on which this study is founded. It is divided into three main sections.
The first section deals with the explanation of Knowledge Management framework providing details including definition, characteristics and a review of previous studies of Knowledge Management
The second section explains absorptive capacity framework, providing details such as definition and characteristics, including a review of previous studies of absorptive capacity.
Third section contains the related literature of the Supply Chain Management Practices such as the definition and previous studies.
In the fourth section, the literature of firm performance is explained.
In the final section, the conceptual framework is defined.
Knowledge Management
In this section, the study elaborates on Knowledge Management with details such as definition, dimension and so on. Included are reviews of relevant literature on Knowledge Management. First the study takes a close look at the overview of Knowledge Management, definition and history. Then finally present the review of Knowledge Management in SME literature.
Definition
Knowledge management (KM) is an emerging, interdisciplinary business model dealing with all aspects of knowledge within the context of the firm, including knowledge creation, codification, and sharing, and using these activities to promote learning and innovation. It encompasses both technological tools and organizational routines of which there are a number of components. These include generating new knowledge; acquiring valuable knowledge from outside sources; using this knowledge in decision making; embedding knowledge in processes, products, and/or services; coding information into documents, databases, and software; facilitating knowledge growth;Â transferring knowledge to other parts of the organization; and measuring the value of knowledge assets and/or the impact of knowledge management.(Gupta et al., 2004)
Evolution of knowledge management
The history and evolution of knowledge management has not always been clear or straight forward. The field has rooted of evolved from many disciplines and domains. In 1989, the knowledge management related literature began to appearing in famous journal such as Harvard Business Review and others. A year later, the knowledge management activities are occurred in several well-known companies in U.S.m European and Japanese. In 1995, the most widely cited up till now are published, Ikujiro Nonaka’s and Hirotaka Takeuchi’s “The Knowledge-Creating Company: How Japanese Companies Create the Dynamics of Innovation”. It was a time ware knowledge management literature are flourishing, the major km-related group and publications are established and on the internet accessing, there are an increasing in the conferences and seminars on knowledge management basis together with the growing of organizational focus on managing and leveraging explicit and tacit knowledge resources to achieve competitive advantage. Due to a publication of a result of knowledge management studies in European firms, the European Community began the funding of Knowledge Management-related projects via the ESPRIT program since 1995. Until now, knowledge management (KM) has received much more attention both in academic and practitioner community. Majority of the knowledge management research focuses on topics such as knowledge typology (Polanyi, 1962; Nonaka, 1994; Spender, 1996; Blackler, 1995; Jasimuddin, 2005), knowledge transfer (Argote and Ingram, 2000; Jasimuddin et al, 2006), knowledge creation (Nonaka and Takeuchi, 1995; Nonaka and Kanno, 1998; Jenkins and Balogun, 2003), and knowledge storage and retrieval (Walsh and Ungson, 1991; Stein and Zwass, 1995; Sherif, 2002; Jasimuddin et aL, 2005a, b). However, there are many other issues surrounding knowledge management that are yet to explore.
Knowledge Management in SME context
Knowledge management (KM), like other management practices, was invented and developed in large organizations to be applied later on in small and medium-sized enterprises (SMEs). (McAdam and Read, 2001)
Many smaller firms face resource constraints (Jarillo, 1989), and existing resources must
Be carefully used with care, as erroneous decisions will have more serious complications than would be the case in large businesses (Amelingmeyer and Amelingmeyer, 2005). For example, small firms have a flat structure and an organic, free-floating management style that encourages entrepreneurship and innovation. They tend to be informal, non-bureaucratic and there are few rules. Control tends to be based on the owner’s personal supervision and formal policies tend to be absent in SMEs (Daft, 2007). In addition, in many smaller firms the owner-managers take on a central position (Bridge et al., 2003). In such an environment it is not uncommon that the processes of business planning and decision-making are limited to only one person (Culkin and Smith, 2000). This centrality also signifies that those people in particular are responsible for recognizing the benefits of knowledge management to support the firm’s operations. However, SMEs’ day-to-day business operations specifically require close attention (Hofer and Charan, 1984). This very often results in situations where insufficient time is available for strategic issues. This in conjunction with a lack of financial resources and expertise (Bridge et al., 2003) frequently results in most knowledge being kept in the minds of the owner and some key employees rather than physically stored or shared through substitution arrangements (Wong and Aspinwall, 2004). Thus knowledge sharing in SMEs may happen in corridor conversations
(Wong and Aspinwall, 2004) or at organization members´s birthday parties (Durst and Wilhelm, in press). With a view to the above, SMEs face unique KM challenges which are distinct from those of their larger business counterparts. Reviewing the literature related to small businesses suggests that scholars tend to apply approaches originally developed for larger firms rather than SMEs. This procedure involves the risk that smaller firms may lose their distinct characteristics and thus their capability to act. Previous research on KM in SMEs has shown many differences compared to larger firms. Most SMEs have no explicit policy targeted at strategic KM, and they tend to treat KM on an operational level – at the level of systems and instruments. SMEs tend to place more emphasis on management of tacit knowledge than larger firms, and communication channels in SMEs are more likely to be between firms, rather than internal to the organisation. The SME sector appears to be less advanced in terms of knowledge construction, having a more mechanistic approach to this concept and relying less on social interaction. Also, the SME sector is weaker than larger firms on formal and systematic discussion in order to share tacit knowledge, since larger firms are stronger in the implementation of formal KM strategy. Most SMEs adopt short-term unstructured ways towards organisational learning, and managers in smaller firms tend to prevent the outflow of knowledge from the company and thereby block knowledge sharing (Beijerse, 2000; Matlay, 2000; McAdam and Reid, 2001; Corso et al., 2003; Bozbura, 2007; Hutchinson and Quintas, 2008).
Activities related to knowledge management, such as knowledge sharing, are time-consuming and require a certain level of trust. Slow staff turnover, as found in many SMEs (Durst and Wilhelm, 2011), can positively contribute to those efforts.
What is often overlooked when researching SMEs is the issue of heterogeneity (Curran and Blackburn, 2001). SMEs are difficult to compare, making the notion of one single knowledge management approach almost impossible.
In this paper it is asserted, as others have (e.g. Wiig, 1997; McAdam and Reid, 2001; Wong and Aspinwall, 2004), that approaches to knowledge identification, knowledge creation, knowledge storage, knowledge dissemination, and knowledge application have a profound impact on the firm´s ability to address current and future business challenges and therefore its survival. Figure 1 depicts this situation in relation to SME characteristics.
Figure 1. Size and KM process factors influencing SME survival
Knowledge identification focuses on activities that help to identify the knowledge necessary for the company, as well as sources to acquire this knowledge. This activity also comprises the identification of already existing knowledge (Egbu et al., 2005). Knowledge creation refers to ways which focus on the construction of new knowledge. Knowledge creation in companies can be supported by, for instance, giving organizational members time to experiment (Gupta and Govindarajan, 2000). Knowledge is not only internally produced, external knowledge sources need to be considered as well. Given their natural limitations, SMEs are often forced to make use of the latter (Egbu et al., 2005). Knowledge storage / retention embraces processes such as the documentation and codification of knowledge to build up an organizational knowledge base and to reduce any forms of knowledge loss due to retirement, departures of organization members and so forth. This KM task might pose a real challenge for SMEs, as most knowledge is kept in the minds of the owner and some key employees rather than physically stored or shared through substitution arrangements (Wong and Aspinwall 2004).
Knowledge transfer comprises measures relating to knowledge transfer and knowledge sharing (Egbu et al., 2005). The distinction between tacit and explicit knowledge (Nonaka and Takeuchi, 1995) is useful regarding this KM process, as the nature of the two types of knowledge is likely to influence the ease of the transfer process. Lack of absorptive capacity and low quality relationships between the individuals concerned represent other possible hindrances of knowledge transfer (Szulanski, 1996) that need to be considered. Finally, the usage or application of knowledge (knowledge utilisation) has to follow, as it is the only way to create value within the company (Comité Européen de Normalisation, 2004).
Knowledge Transfer
Absorptive Capacity
In this section, the study elaborates on absorptive capacity with details such
as characteristics, antecedents and so on. Included are reviews of relevant literature
on absorptive capacity. First the study takes a close look at the definitions of
absorptive capacity, focusing in particular on two main components of absorptive
capacity: potential absorptive capacity (consisting of acquisition and assimilation
capability), and realized absorptive capacity (consisting of transformation and
exploitation capability). Following this, the study focuses on the antecedents of
absorptive capacity found in previous literature. And lastly, it discusses direct
measurement and the mediating role of absorptive capacity. The entire review is
restricted to the application of the absorptive capacity concept at firm level.
Definition
The term Absorptive Capacity is clearly defined to be an ability of a firm to “recognize the value of new information, assimilate it, and apply it to commercial ends” (Cohen and Levinthal, 1990). The concept has been a popular topic since then, and was studied by hundreds of researcher (Lane et al, 2006; Lim, 2009). Then  Zahra and George (2002) reconceptualized and extended the definition into the ability of the firm “acquire, assimilate, transform and exploit knowledge in order to create new practices, processes and products”, and they divide the absorptive capacity into two components that both are needed to enhance performance: potential absorptive capacity, and realized absorptive capacity.
At first, Cohen and Levinthal(1990) stated that the Absorptive Capacity of the firm are purely relied on the firm prior related knowledge and diversity of background. Therefore, they’ve put the investments a firm makes in its R&D central to their model of development of absorptive capacity. However many studies invoked another related literatures fields that could be a good measurement of Absorptive Capacity and led to a reconceptualization of the concept by Zahra and George (2002). The studies discovered many fields that related to the Absorptive Capacity included research and development ,organizational structures (Lin et al, 2002) ,knowledge management (Corso et al, 2006) ,human resources , social capital (Caloghirou et al, 2004) ,supply chain integration (Malhotra, 2005). It is still nowadays question that how exactly the effects of the knowledge Absorptive Capacity combination with other factors e.g. supply chain management practices will contribute to the firm competitiveness. (Wai and Kuan, 2011)
Absorptive Capacity in Supply Chain Management perspective
Many researchers find an evidence that firms realizes that their competitiveness is derived from knowledge resources embedded in their relationships with other firms (Koka and Prescott 2002; Uzzi and Lancaster 2003). To effectively utilize these resources, firms have to develop the ability to absorb beneficial information (Cohen and Levinthal 1990) and combine it with internal information to develop new knowledge (Henderson and Cockburn 1994).
Several studies have examined absorptive capacity as a predictor of organizational learning outcomes (e.g., Mowery et al. 1996; Szulanski 1996). And many have provided the evidence that some management technique can affect the firm’s ACAP. For example the international joint venture (IJV) needed to develop shared language, cognitive schema, relational ties driving coupling, modular design of inter linked processes and use of standardized inter faces.(Malhotra et al, 2005; Steensma and Lyles, 2000)
Research, initially focused on an organization’s internal determinants of absorptive capacity (Pennings and Harianto 1992), then expanded to interorganizational settings (Lane and Lubatkin 1998). However, these studies have focused on issues such as R&D expenditures and innovation related to managerial and organizing practices. The process and IT infrastructure that influence absorptive capacity have been examined later by some researchers. Some studies discovered that ACAP affect the firm responds to its supply chain partner’s day-to-day needs in an efficient manner. And working with a supply chain partner also allows a firm to develop a better understanding of and response to the market in competitive Creation environment.(Malhotra et al, 2005) Many researchers still studying this literature nowadays.
SCM practices
SCM practices are defined as a set of activities undertaken in an organization to promote the effective management of its supply chain, e.g. supplier partnership and information technology (IT) sharing (Donlon, 1996); supply chain integration, delivery and response time improvement, and quality (Tan et al., 1998); communication, vision, goals, and long-term relationship with suppliers and customers (Chen and Paulraj, 2004; Min and Mentzer, 2004). In addition, lean capabilities, logistics, and leadership also promote the effective management of the supply chain (Tan, 2002; Min and Mentzer, 2004). For the parsimony of the measurement instrument, we consolidate the items into five distinctive dimensions, i.e. information sharing, integration, on-time delivery, response time and communication of strategic needs. SCM practices constitute the strategy used by a firm to relate to its external environment (Porter, 1985).
Firm Performance
Firm performance refers to the extent of which an organization achievements in its market-oriented objective as well as its financial goals (Li et al., 2006). A number of prior studies have measured firm performance using both financial and market criteria, including return on investment (ROI), market share, profit margin on sales, growth of ROI, growth of sales, and growth of market share (Tan et al., 1998). Some studies use strategic performance including the operation improvement benefit from partnership (Koufteros et al, (2007) ; Sanders, (2008); Dahlstrom et al,(1996); Malhotra et al, (2005))
Chapter 3
Theoretical background and conceptual framework
Influenced by many papers, we believe that the firm’s absorptive capacity should have a benefit to many dimension firm performances. Not only R&D output such as the new product or patents invented, absorptive capacity should have affect the other dimensions of firm performance such as organizational, Strategic and financial performance.
Hypothesis Development
Firm Absorptive Capacity and Firm Performance
The widely cited theory of absorptive capacity suggests that ACAP have the association with firm performance in the innovation perspective. (Cohen and Levinthal, 1990; Nonaka and Takeuchi, 1995)
Knowledge can be a positive contribution to a firm performance as the abilities to improve productivity and competitiveness, decision making, responsiveness, innovation, product or service quality, learning curve, flexibility and cost efficiency(Chong et al., 2006; Sharmillah et al., 2007; Bixler, 2000; Stewart, 1997; Skyrme and Amidon, 1997).
Many researchers provided empirical evidence that supplier absorptive capacity is related to operational performance. (Haithem & Claudia 2012)We believe that all both types of the absorptive capacity should be positively related to firm performance too.
H1: Absorptive capacity positively affects firm performance
H1a: Realize absorptive capacity positively affects firm performance
H1b: Potential absorptive capacity positively affects firm performance
Firm Absorptive Capacity, Supply Chain Management and Firm Performance
Several researchers had examined the relationship between SCM practices and firm performance. Some studies discover that SCM practice improve financial and business performance(Tan et al., 1998) Some literature discovered the significant positive relationship of SCM practices and SCM performance. These SCM practices including strategic partnership, contract outsourcing, 3pl. (Wisner, 2003; Tan, 2002; Ragatz et al., 2002)
Some studies suggested that ACAP cannot affect the firm without the interruption of the SCM practices. As the knowledge or information of the firm can be influenced by the SCM practices such as SCM partnership or International joint Venture (IVJ) (Wai and Kuan, 2011; Cavusgil et al., 2003)
Combining all of the literature above, we expressed the hypothesis in this perspective as following.
H2: The relationship between firm’s absorptive capacity and firm performance is mediated by supply chain management (SCM) practices.
H2a: The relationship between firm’s Realize absorptive capacity and firm performance is mediated by supply chain management (SCM) practices.
H2b: The relationship between firm’s Potential absorptive capacity and firm performance is mediated by supply chain management (SCM) practices.
H3: SCM practices positively affect firm performance.
Chapter 4
RESEARCH METHODOLOGY
This chapter describes the procedure used to conduct the research and provides the details of research methodology, including research design, sample selection criteria, scale/measurement development, population and sampling plan, data collection, and data analysis for hypotheses testing. The details are arranged into the steps shown in Table 4.1.
Table 4.1 Stages of research methodology
4.1 Research design
Descriptive research
4.2 Research scope
Industry selection: Automobile part industry
4.3 Research method
quantitative research methods
4.4 Scale and measurement
development
Absorptive capacity
SCM Practices
Firm Performance
4.5 Questionnaire development
Five sections of questionnaire
4.6 Sampling
Population (Target sample)
Sampling technique
Sample size
4.7 Data collection
Field Survey
4.8 Data analysis
AMOS
Principle component factor analysis
Structural Equation Modeling analysis (SEM)
Measurement model (Confirmatory Factor Analysis: CFA)
The assessment of model fit
4.1 Research design
To explore the relationship among the main indicator (absorptive capacity), the mediator (SCM practices), and the outcome (Firm Performance), this study employs descriptive research to describe the characteristics of population or phenomena. This type of research design is appropriate to specify the type of problems such as the relationship between variables and is guided by an initial hypothesis (Churchill and Iacobucci, 2002). This research is also designed as a cross-sectional survey that relies on a sample from the population of interest measured at a single point in time.
4.2 Research scope
Since the study aims at investigating the importance and strategy of managing absorptive capacity, it is related to a knowledge-based industry. The scope of the study is thus the Automobile part manufacturer industry, as it is the major knowledge-based industry providing a significant contribution to Thailand’s economic development. The study singles out the Automobile part industry because it is a high growth-oriented and high technology-based industry. It is an important sector in emerging countries, especially Thailand. This industry is discussed in brief below.
4.2.1 Industry selection: The Automobile part industry
The Automobile part industry is selected for this study for the following reasons.
This industry is important to the Thai economy, as the third-largest sector in the country, it employs more than 400,000 workers and accounts for 12% of GDP. Automobile production in Thailand is split almost equally for domestic sales and exports.
As carmakers launch new models to meet rising demand in Thailand, local auto parts producers are expanding capacity and innovation capability to accommodate the big upswing. Currently, Thailand has approximately 690 Tier 1 auto parts suppliers and 1,700 Tier 2 and 3 suppliers. The breakdown of the sector is 70% small companies, 20% medium-sized ones and 10% large companies. Major foreign parts manufacturers in Thailand include France’s Valeo, Germany’s Bosch, U.S.-based TRW, Britain’s GKN, and Japan’s Denso, Mitsuba and Mitsubishi. The Japan Automobile Manufacturers Association describes the quality of Thailand-made automotive parts as the highest of any ASEAN nation.
Auto parts and components represent a 400 billion baht enterprise in Thailand. Local parts manufacturers supply virtually 100% of the requirement used in the assembly of motorcycles, about 85% of parts for pickup truck assembly, and nearly 70% of those for passenger cars. To enhance development, the Thai Auto-Parts Manufacturers Association is working on a blueprint for boosting the technology, automation, innovation and human resources of local parts and components suppliers through 2020.
4.3 Research Method
The study uses qualitative research method, the study uses self-administered mail questionnaires for its survey. According to Hair et al. (2000), this method has both advantages and disadvantages. The advantage is that it can cover a broader respondent base and does not require any field staff and is free from interviewer bias.
The cost of mailing questionnaires is also low when compared to personal or telephone interviews. Importantly, this method can be used effectively for industrial surveys where the respondents are highly knowledgeable and the topic of the survey is very specific (Kumar, 2000).
The primary disadvantage of a mail survey is a very high non-response rate. This may cause other related problems, such as a higher cost per survey or a significant bias occurring from the low response rate. Taking these factors into consider, this study did employ a mail survey.
In order to overcome some of the disadvantage, the mailing list used comprised Automobile parts manufacturers member listed in the Thai Autoparts Manufacturers Association directory.
There are 528 firms listed in that directory. It was hoped to receive a response from not less than 145 firms, sufficient on which to base statistical methodology.(Yamane 1967)
4.4 Scale and Measurement Development
Ever since Churchill (1979) published his seminal paper on scale development, the use of multi-item measures and the investigation of the psychometric properties of the latter has become the rule rather than the exception in many disciplines (Bruner and Hensel, 1993; Diamantopoulos, 1999). Based on literature reviews, different scales and measurement are developed to measure all the proposed constructs in this study: 1) absorptive capacity, (2) SCM practice, and (3) Firm Performance
4.4.1 Absorptive capacity
Instead of using a proxy, this study modifies a measure for absorptive capacity on the basis of identification of the principal factors having an influence, whether positive or negative, over accumulation of this capacity. All items are six point Likert scale, derived from literature and modified (e.g. Jaworski and Kohli, 1993; Jansen et al., 2005; Nieto and Quevedo, 2005), measuring both potential absorptive capacity and realized absorptive capacity. Table 4.11 and Table 4.12 show the measurement items of potential absorptive capacity and realized absorptive capacity, respectively.
Table 4.11 Measurement items for Potential absorptive capacity
Dimension
Measurement items
Modified and derived
from
Potential absorptive
capacity
Your firm acquires new knowledge by having frequent interaction with your main customer
Jansen et al.(2005)
Your firm collects industry information through informal means (e.g. lunch with industry friends, talks with trade partners)
Jansen et al.(2005)
Your firm acquires new knowledge by periodically organizing special meetings with your main customer.
Jansen et al.(2005)
Your firm is fast to recognize shifts in your market (e.g. competition, regulation)
Jansen et al.(2005); Nieto
and Quevedo(2005)
Your firm quickly analyzes and interprets for changing market demands.
Jansen et al.(2005)
Your firm quickly understands the new opportunities to serve the customers.
Jansen et al.(2005); Nieto
and Quevedo(2005)
Table 4.12 Measurement items for Realized absorptive capacity
Dimension
Measurement items
Modified and derived
from
Realized Absorptive capacity
Your firm regularly considers the consequences of changing market demands in terms of new products and services.
Jansen et al.(2005); Nieto
and Quevedo(2005),
Jaworski and Kohli(1993)
Your firm quickly recognizes the usefulness of new external knowledge to existing knowledge.
Jansen et al.(2005)
Your firm periodically meets with your customer to discuss consequences of market trends and new product development.
Jansen et al.(2005); Nieto
and Quevedo(2005)
Your firm easily implements new products and services.
Jansen et al.(2005)
Your firm constantly considers how to better exploit knowledge.
Jansen et al.(2005)
Your firm clearly knows how activities between firms should be performed.
Jansen et al.(2005)
4.4.2 SCM practices
Table 4.2
Dimension
Measurement items
Modified and derived
from
SCM practices
We use formal information sharing with suppliers and customers
Wai and Kuan (2011)
We seek new ways to improve integration of activities across the supply chain
Wai and Kuan (2011)
We deliver customers’ orders on time
Wai and Kuan (2011)
We always aim to reduce response time across the supply chain
Wai and Kuan (2011)
We communicate customers’ future strategic needs throughout the supply chain
Wai and Kuan (2011)
4.4.3 Firm Performance
Table 4.31Operational performance
Dimension
Measurement items
Modified and derived
from
Operational performance
In regard to supply orders our relationship with the buyer has allowed us to considerably lower production costs
(Dahlstrom et al.(1996); Malhotra et al. (2005))
In regard to supply orders our relationship with the buyer has allowed us to considerably lower indirect costs
(Dahlstrom et al.(1996); Malhotra et al. (2005))
In regard to supply orders our relationship with the buyer has allowed us to considerably lower labor costs
(Dahlstrom et al.(1996); Malhotra et al. (2005))
In regard to supply orders our relationship with the buyer has allowed us to a lower total costs
(Dahlstrom et al.(1996); Malhotra et al. (2005))
In regard to supply orders our relationship with the buyer has allowed us to more efficient use of the financial resources
(Dahlstrom et al.(1996); Malhotra et al. (2005))
Table 4.32 Strategic Performance
Dimension
Measurement items
Modified and derived
from
Strategic Performance
Our relationship with the buyer has helped us to develop new strategies to compete in the market
(Koufteros et al (2007)
and Sanders (2008))
Our relationship with the buyer has helped us to develop new products for our markets
(Koufteros et al. (2007)
and Sanders (2008))
Our relationship with the buyer has helped us to introduce improvements in the existing products
(Koufteros et al. (2007)
and Sanders (2008))
4.5 Questionnaire development
An important component of survey research is the development of the survey instrument-questionnaire which is a set of questions designed to evoke useful answers (Kumar, 2000). Designing a good questionnaire is considered an art and not merely a bunch of questions thrown in with the intention of eliciting some information from the respondent. Following the steps of questionnaire design, the study starts with planning what to measure. This involves going back to the research problem and the research questions. Also, the study has to check back on the data collected during the course of secondary research and the hypotheses formulated when descriptive research is conducted. Then, formatting of each question is necessary to work out the wording and layout. As previously mentioned, this study designed and developed the questionnaire using suggestions from experts throughout the process and during a pretest. The sequence of questions is checked for logical continuity. The pretest of the questionnaire can be helpful to rectify any problems that may show up.
In addition, this study needed to be sure the language, context and topics being investigated were familiar to the respondents. Then, a willingness to participate in the survey without external pressure was another focus, to ensure unbiased responses that reflected the true feeling of the respondents (Kumar, 2000). The questionnaire used in this study can be divided into five sections. Table 4.16 illustrates the structure of the questionnaire used in this study.
Table 4.5 Questionnaire structure
Section
Content
Question
1
Respondents’ profile
2
Firm’s absorptive capacity
3
SCM Practices
4
Firm Performance
5
Suggestion
4.6 Sampling
4.6.1 Population (Target sample)
The group of interest is defined as a target population consisting of the complete group of elements (people or objects) typically identified for investigation according to the objectives of the research study (Churchill and Iacobucci, 2002). The precise definition of the target population is vital. In this study, the target population is local firms in the Automobile part manufacturing industry. According to the information from Thai Autoparts Manufacturers Association, the 2012 directory consists of various types of automobile part firms such as OEM, OBM, ODB and so on. These firms are recognized as E&E firms, not taking ownership into consideration.
Since the study aims to investigate the role and effect of absorptive capacity combining with SCM practices, a group of local firms whether or not wholly Thai, is acceptable and reasonable to use for this study.
4.6.2 Sampling technique
This study employs the probability technique by simple random sampling. This technique has several advantages. It permits demonstrating the representatives of the sample, helps to state the variation introduced by using a sample instead of a census, and helps to identify possible biases introduced due to sampling (Kumar, 2000). In addition, the study obtains a sampling frame that works best with the probability method.
4.6.3 Sample size
This study employed a few methods to calculate an appropriate sample size based on the requirement of Structural Equation Modeling (SEM) which is the statistical tool used for quantitative data analysis and hypotheses testing in this study. Since SEM relies on tests that are sensitive to sample size as well as to the magnitude of differences in covariance matrices, according to Kline (1998), sample size under 100 is considered as ‘untenable’ in SEM.
Meanwhile, Loehlin (1992) recommends at least 100 cases but preferably at 200 cases.
The sample sizes we need are determined by a published table, which provide the sample size for a given set of criteria. Table 4.61 and Table 4.62 present sample sizes that would be necessary for given combinations of precision, confidence levels, and variability. These sample sizes reflect the number of obtained responses and not necessarily the number of surveys mailed or interviews planned (this number is often increased to compensate for nonresponse). The sample sizes in Table 2 presume that the attributes being measured are distributed normally or nearly so. If this assumption cannot be met, then the entire population may need to be surveyed. According to the population size of 528 firms in Automobile Part industry, the sample size we need is to be at least 145.

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Evolution Of Knowledge Management

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幾十年來,知識管理是一個不斷發展的話題。了解客戶,產品,流程,創新和競爭對手的秘密是資產,可以幫助公司保持長期的競爭優勢。知識轉移被廣泛強調為企業競爭的戰略問題。許多研究人員已經提供了一些因素,影響企業的知識轉移水平。其中一個因素被稱為吸收能力。
當今世界是知識經濟。全球市場的玩家需要能夠產生自己的知識,才能在市場上變得有競爭力。在這種情況下,企業可能產生的技術知識,以促進創新的產品和制造或業務流程。不幸的是企業的創新能力是不同的不同公司之間也取決于他們的員工能力。公司需要認識新的外部知識,吸收它,并將其應用于商業應用。這被稱為吸收能力的吸收能力(ACAP)一個公司在組織學習和創新方面的重要作用以及公司的業績一般。
For a few decades Knowledge Management is a continuously growing topic. Knowledge about customers, products, processes, innovations and competitor’s secret are asset that can facilitate a firm to have a sustain a highly competitive advantage in a long run. (Anne et al,2005) Knowledge transfer is widely emphasized as a strategic issue for firm competition. (Albino et al, 1998) and many researchers already provided a few factors that affect the Level of knowledge transfer of the firm. One of the factors is called Absorptive Capacity (Tsai, 2001)
Nowadays the world is knowledge-based economy. The players the global market needs to be able to give birth to their own knowledge in order to become competitive in the market. In this scenario firms likely to generate the technological knowledge to facilitates the innovative products and manufacturing or business processes. Unfortunately firms ability to innovate are varies between the different firms and also depending on their employee ability. Companies need to recognize new external knowledge, assimilate it, and apply it to commercial use. This is called as the absorptive capacity (Cohen and Levinthal, 1990) The absorptive capacity (ACAP) of a firm plays an important role in terms of organizational learning and innovation (Tsai, 2001) as well as for firm performance in general (Lane et al., 2001).
At first many of the researchers mainly focus on the relationship of absorptive capacity and R&D perspective. And use the R&D as measurement of the absorptive capacity of the firms. (Cohen and Levinthal, 1990 ; Zahra and George, 2002) However that approach will have the implication when we want to measure the absorptive capacity of the firm that has low R&D emphasis such as the SME service provider in Thailand. Some researchers propose a new set of inner firm determinant of absorptive capacity in the firm level. (Vega-Jurado et al, 2008)
The supply chain management (SCM) and knowledge management (KM) are famous topic of the researchers in this era. They have many things in common such as the focus on knowledge and information sharing among the supply chain members. Even though the relationship of SCM and other disciplines are widely explored, the evidence of SCM practices on KM and firm performance are limited and not so conclusive. As business practices today no longer evaluate the performance of a business enterprise at a unit level, but rather from a value chain (supply chain) perspective, it is therefore important to examine the management of knowledge in the supply chain context. The same philosophy of KM at the firm level cannot be applied directly to the supply chain level. This is because, probably, the roles that knowledge plays in both levels are different and therefore, the impact of KM will differ from a firm perspective to a supply chain perspective (Wai and Kuan, 2011)
1.1 Problem Statement
The absorptive capacity is considered to be an important factor with a promising benefit for the firm innovation and competitiveness but the evidence of the effect of absorptive capacity and SCM practices interaction are very little and need to be exploring more.
1.2 Objectives of the Thesis
This research aim to gives two-dimensional contributions. First, it explored linkages between Absorptive Capacity, SCM practices and firm performance; the results should help us to understand how to better manage knowledge absorptive capacity in a supply chain context. Second, this research addresses the gap in the literature by analyzing the roles of absorptive capability and SCM practices on firm performance. This in turn will provide valuable clues on how to improve organizational effectiveness which is the goal of management practices.
1.3 Organization of the Report
This proposal consists of 3 chapters as follows:
Chapter 1 is the introduction of the research. It provides the background of the ACAP, problem statement of the research, objectives and scope of this thesis.
Chapter 2 is the literature review. The previous research works, i.e., method approaches for measuring ACAP, are discussed.
Chapter 3 is Theoretical background and conceptual framework section. It discuss about the hypothesis construction and theoretical back ground of the work.
Chapter 4 introduces the proposed methodology. The approaches, data source, variables and questionnaire are discussed.
Chapter 2.
Literature Review
This chapter provides the theoretical perspectives on which this study is founded. It is divided into three main sections.
The first section deals with the explanation of Knowledge Management framework providing details including definition, characteristics and a review of previous studies of Knowledge Management
The second section explains absorptive capacity framework, providing details such as definition and characteristics, including a review of previous studies of absorptive capacity.
Third section contains the related literature of the Supply Chain Management Practices such as the definition and previous studies.
In the fourth section, the literature of firm performance is explained.
In the final section, the conceptual framework is defined.
Knowledge Management
In this section, the study elaborates on Knowledge Management with details such as definition, dimension and so on. Included are reviews of relevant literature on Knowledge Management. First the study takes a close look at the overview of Knowledge Management, definition and history. Then finally present the review of Knowledge Management in SME literature.
Definition
Knowledge management (KM) is an emerging, interdisciplinary business model dealing with all aspects of knowledge within the context of the firm, including knowledge creation, codification, and sharing, and using these activities to promote learning and innovation. It encompasses both technological tools and organizational routines of which there are a number of components. These include generating new knowledge; acquiring valuable knowledge from outside sources; using this knowledge in decision making; embedding knowledge in processes, products, and/or services; coding information into documents, databases, and software; facilitating knowledge growth;Â transferring knowledge to other parts of the organization; and measuring the value of knowledge assets and/or the impact of knowledge management.(Gupta et al., 2004)
Evolution of knowledge management
The history and evolution of knowledge management has not always been clear or straight forward. The field has rooted of evolved from many disciplines and domains. In 1989, the knowledge management related literature began to appearing in famous journal such as Harvard Business Review and others. A year later, the knowledge management activities are occurred in several well-known companies in U.S.m European and Japanese. In 1995, the most widely cited up till now are published, Ikujiro Nonaka’s and Hirotaka Takeuchi’s “The Knowledge-Creating Company: How Japanese Companies Create the Dynamics of Innovation”. It was a time ware knowledge management literature are flourishing, the major km-related group and publications are established and on the internet accessing, there are an increasing in the conferences and seminars on knowledge management basis together with the growing of organizational focus on managing and leveraging explicit and tacit knowledge resources to achieve competitive advantage. Due to a publication of a result of knowledge management studies in European firms, the European Community began the funding of Knowledge Management-related projects via the ESPRIT program since 1995. Until now, knowledge management (KM) has received much more attention both in academic and practitioner community. Majority of the knowledge management research focuses on topics such as knowledge typology (Polanyi, 1962; Nonaka, 1994; Spender, 1996; Blackler, 1995; Jasimuddin, 2005), knowledge transfer (Argote and Ingram, 2000; Jasimuddin et al, 2006), knowledge creation (Nonaka and Takeuchi, 1995; Nonaka and Kanno, 1998; Jenkins and Balogun, 2003), and knowledge storage and retrieval (Walsh and Ungson, 1991; Stein and Zwass, 1995; Sherif, 2002; Jasimuddin et aL, 2005a, b). However, there are many other issues surrounding knowledge management that are yet to explore.
Knowledge Management in SME context
Knowledge management (KM), like other management practices, was invented and developed in large organizations to be applied later on in small and medium-sized enterprises (SMEs). (McAdam and Read, 2001)
Many smaller firms face resource constraints (Jarillo, 1989), and existing resources must
Be carefully used with care, as erroneous decisions will have more serious complications than would be the case in large businesses (Amelingmeyer and Amelingmeyer, 2005). For example, small firms have a flat structure and an organic, free-floating management style that encourages entrepreneurship and innovation. They tend to be informal, non-bureaucratic and there are few rules. Control tends to be based on the owner’s personal supervision and formal policies tend to be absent in SMEs (Daft, 2007). In addition, in many smaller firms the owner-managers take on a central position (Bridge et al., 2003). In such an environment it is not uncommon that the processes of business planning and decision-making are limited to only one person (Culkin and Smith, 2000). This centrality also signifies that those people in particular are responsible for recognizing the benefits of knowledge management to support the firm’s operations. However, SMEs’ day-to-day business operations specifically require close attention (Hofer and Charan, 1984). This very often results in situations where insufficient time is available for strategic issues. This in conjunction with a lack of financial resources and expertise (Bridge et al., 2003) frequently results in most knowledge being kept in the minds of the owner and some key employees rather than physically stored or shared through substitution arrangements (Wong and Aspinwall, 2004). Thus knowledge sharing in SMEs may happen in corridor conversations
(Wong and Aspinwall, 2004) or at organization members´s birthday parties (Durst and Wilhelm, in press). With a view to the above, SMEs face unique KM challenges which are distinct from those of their larger business counterparts. Reviewing the literature related to small businesses suggests that scholars tend to apply approaches originally developed for larger firms rather than SMEs. This procedure involves the risk that smaller firms may lose their distinct characteristics and thus their capability to act. Previous research on KM in SMEs has shown many differences compared to larger firms. Most SMEs have no explicit policy targeted at strategic KM, and they tend to treat KM on an operational level – at the level of systems and instruments. SMEs tend to place more emphasis on management of tacit knowledge than larger firms, and communication channels in SMEs are more likely to be between firms, rather than internal to the organisation. The SME sector appears to be less advanced in terms of knowledge construction, having a more mechanistic approach to this concept and relying less on social interaction. Also, the SME sector is weaker than larger firms on formal and systematic discussion in order to share tacit knowledge, since larger firms are stronger in the implementation of formal KM strategy. Most SMEs adopt short-term unstructured ways towards organisational learning, and managers in smaller firms tend to prevent the outflow of knowledge from the company and thereby block knowledge sharing (Beijerse, 2000; Matlay, 2000; McAdam and Reid, 2001; Corso et al., 2003; Bozbura, 2007; Hutchinson and Quintas, 2008).
Activities related to knowledge management, such as knowledge sharing, are time-consuming and require a certain level of trust. Slow staff turnover, as found in many SMEs (Durst and Wilhelm, 2011), can positively contribute to those efforts.
What is often overlooked when researching SMEs is the issue of heterogeneity (Curran and Blackburn, 2001). SMEs are difficult to compare, making the notion of one single knowledge management approach almost impossible.
In this paper it is asserted, as others have (e.g. Wiig, 1997; McAdam and Reid, 2001; Wong and Aspinwall, 2004), that approaches to knowledge identification, knowledge creation, knowledge storage, knowledge dissemination, and knowledge application have a profound impact on the firm´s ability to address current and future business challenges and therefore its survival. Figure 1 depicts this situation in relation to SME characteristics.
Figure 1. Size and KM process factors influencing SME survival
Knowledge identification focuses on activities that help to identify the knowledge necessary for the company, as well as sources to acquire this knowledge. This activity also comprises the identification of already existing knowledge (Egbu et al., 2005). Knowledge creation refers to ways which focus on the construction of new knowledge. Knowledge creation in companies can be supported by, for instance, giving organizational members time to experiment (Gupta and Govindarajan, 2000). Knowledge is not only internally produced, external knowledge sources need to be considered as well. Given their natural limitations, SMEs are often forced to make use of the latter (Egbu et al., 2005). Knowledge storage / retention embraces processes such as the documentation and codification of knowledge to build up an organizational knowledge base and to reduce any forms of knowledge loss due to retirement, departures of organization members and so forth. This KM task might pose a real challenge for SMEs, as most knowledge is kept in the minds of the owner and some key employees rather than physically stored or shared through substitution arrangements (Wong and Aspinwall 2004).
Knowledge transfer comprises measures relating to knowledge transfer and knowledge sharing (Egbu et al., 2005). The distinction between tacit and explicit knowledge (Nonaka and Takeuchi, 1995) is useful regarding this KM process, as the nature of the two types of knowledge is likely to influence the ease of the transfer process. Lack of absorptive capacity and low quality relationships between the individuals concerned represent other possible hindrances of knowledge transfer (Szulanski, 1996) that need to be considered. Finally, the usage or application of knowledge (knowledge utilisation) has to follow, as it is the only way to create value within the company (Comité Européen de Normalisation, 2004).
Knowledge Transfer
Absorptive Capacity
In this section, the study elaborates on absorptive capacity with details such
as characteristics, antecedents and so on. Included are reviews of relevant literature
on absorptive capacity. First the study takes a close look at the definitions of
absorptive capacity, focusing in particular on two main components of absorptive
capacity: potential absorptive capacity (consisting of acquisition and assimilation
capability), and realized absorptive capacity (consisting of transformation and
exploitation capability). Following this, the study focuses on the antecedents of
absorptive capacity found in previous literature. And lastly, it discusses direct
measurement and the mediating role of absorptive capacity. The entire review is
restricted to the application of the absorptive capacity concept at firm level.
Definition
The term Absorptive Capacity is clearly defined to be an ability of a firm to “recognize the value of new information, assimilate it, and apply it to commercial ends” (Cohen and Levinthal, 1990). The concept has been a popular topic since then, and was studied by hundreds of researcher (Lane et al, 2006; Lim, 2009). Then  Zahra and George (2002) reconceptualized and extended the definition into the ability of the firm “acquire, assimilate, transform and exploit knowledge in order to create new practices, processes and products”, and they divide the absorptive capacity into two components that both are needed to enhance performance: potential absorptive capacity, and realized absorptive capacity.
At first, Cohen and Levinthal(1990) stated that the Absorptive Capacity of the firm are purely relied on the firm prior related knowledge and diversity of background. Therefore, they’ve put the investments a firm makes in its R&D central to their model of development of absorptive capacity. However many studies invoked another related literatures fields that could be a good measurement of Absorptive Capacity and led to a reconceptualization of the concept by Zahra and George (2002). The studies discovered many fields that related to the Absorptive Capacity included research and development ,organizational structures (Lin et al, 2002) ,knowledge management (Corso et al, 2006) ,human resources , social capital (Caloghirou et al, 2004) ,supply chain integration (Malhotra, 2005). It is still nowadays question that how exactly the effects of the knowledge Absorptive Capacity combination with other factors e.g. supply chain management practices will contribute to the firm competitiveness. (Wai and Kuan, 2011)
Absorptive Capacity in Supply Chain Management perspective
Many researchers find an evidence that firms realizes that their competitiveness is derived from knowledge resources embedded in their relationships with other firms (Koka and Prescott 2002; Uzzi and Lancaster 2003). To effectively utilize these resources, firms have to develop the ability to absorb beneficial information (Cohen and Levinthal 1990) and combine it with internal information to develop new knowledge (Henderson and Cockburn 1994).
Several studies have examined absorptive capacity as a predictor of organizational learning outcomes (e.g., Mowery et al. 1996; Szulanski 1996). And many have provided the evidence that some management technique can affect the firm’s ACAP. For example the international joint venture (IJV) needed to develop shared language, cognitive schema, relational ties driving coupling, modular design of inter linked processes and use of standardized inter faces.(Malhotra et al, 2005; Steensma and Lyles, 2000)
Research, initially focused on an organization’s internal determinants of absorptive capacity (Pennings and Harianto 1992), then expanded to interorganizational settings (Lane and Lubatkin 1998). However, these studies have focused on issues such as R&D expenditures and innovation related to managerial and organizing practices. The process and IT infrastructure that influence absorptive capacity have been examined later by some researchers. Some studies discovered that ACAP affect the firm responds to its supply chain partner’s day-to-day needs in an efficient manner. And working with a supply chain partner also allows a firm to develop a better understanding of and response to the market in competitive Creation environment.(Malhotra et al, 2005) Many researchers still studying this literature nowadays.
SCM practices
SCM practices are defined as a set of activities undertaken in an organization to promote the effective management of its supply chain, e.g. supplier partnership and information technology (IT) sharing (Donlon, 1996); supply chain integration, delivery and response time improvement, and quality (Tan et al., 1998); communication, vision, goals, and long-term relationship with suppliers and customers (Chen and Paulraj, 2004; Min and Mentzer, 2004). In addition, lean capabilities, logistics, and leadership also promote the effective management of the supply chain (Tan, 2002; Min and Mentzer, 2004). For the parsimony of the measurement instrument, we consolidate the items into five distinctive dimensions, i.e. information sharing, integration, on-time delivery, response time and communication of strategic needs. SCM practices constitute the strategy used by a firm to relate to its external environment (Porter, 1985).
Firm Performance
Firm performance refers to the extent of which an organization achievements in its market-oriented objective as well as its financial goals (Li et al., 2006). A number of prior studies have measured firm performance using both financial and market criteria, including return on investment (ROI), market share, profit margin on sales, growth of ROI, growth of sales, and growth of market share (Tan et al., 1998). Some studies use strategic performance including the operation improvement benefit from partnership (Koufteros et al, (2007) ; Sanders, (2008); Dahlstrom et al,(1996); Malhotra et al, (2005))
Chapter 3
Theoretical background and conceptual framework
Influenced by many papers, we believe that the firm’s absorptive capacity should have a benefit to many dimension firm performances. Not only R&D output such as the new product or patents invented, absorptive capacity should have affect the other dimensions of firm performance such as organizational, Strategic and financial performance.
Hypothesis Development
Firm Absorptive Capacity and Firm Performance
The widely cited theory of absorptive capacity suggests that ACAP have the association with firm performance in the innovation perspective. (Cohen and Levinthal, 1990; Nonaka and Takeuchi, 1995)
Knowledge can be a positive contribution to a firm performance as the abilities to improve productivity and competitiveness, decision making, responsiveness, innovation, product or service quality, learning curve, flexibility and cost efficiency(Chong et al., 2006; Sharmillah et al., 2007; Bixler, 2000; Stewart, 1997; Skyrme and Amidon, 1997).
Many researchers provided empirical evidence that supplier absorptive capacity is related to operational performance. (Haithem & Claudia 2012)We believe that all both types of the absorptive capacity should be positively related to firm performance too.
H1: Absorptive capacity positively affects firm performance
H1a: Realize absorptive capacity positively affects firm performance
H1b: Potential absorptive capacity positively affects firm performance
Firm Absorptive Capacity, Supply Chain Management and Firm Performance
Several researchers had examined the relationship between SCM practices and firm performance. Some studies discover that SCM practice improve financial and business performance(Tan et al., 1998) Some literature discovered the significant positive relationship of SCM practices and SCM performance. These SCM practices including strategic partnership, contract outsourcing, 3pl. (Wisner, 2003; Tan, 2002; Ragatz et al., 2002)
Some studies suggested that ACAP cannot affect the firm without the interruption of the SCM practices. As the knowledge or information of the firm can be influenced by the SCM practices such as SCM partnership or International joint Venture (IVJ) (Wai and Kuan, 2011; Cavusgil et al., 2003)
Combining all of the literature above, we expressed the hypothesis in this perspective as following.
H2: The relationship between firm’s absorptive capacity and firm performance is mediated by supply chain management (SCM) practices.
H2a: The relationship between firm’s Realize absorptive capacity and firm performance is mediated by supply chain management (SCM) practices.
H2b: The relationship between firm’s Potential absorptive capacity and firm performance is mediated by supply chain management (SCM) practices.
H3: SCM practices positively affect firm performance.
Chapter 4
RESEARCH METHODOLOGY
This chapter describes the procedure used to conduct the research and provides the details of research methodology, including research design, sample selection criteria, scale/measurement development, population and sampling plan, data collection, and data analysis for hypotheses testing. The details are arranged into the steps shown in Table 4.1.
Table 4.1 Stages of research methodology
4.1 Research design
Descriptive research
4.2 Research scope
Industry selection: Automobile part industry
4.3 Research method
quantitative research methods
4.4 Scale and measurement
development
Absorptive capacity
SCM Practices
Firm Performance
4.5 Questionnaire development
Five sections of questionnaire
4.6 Sampling
Population (Target sample)
Sampling technique
Sample size
4.7 Data collection
Field Survey
4.8 Data analysis
AMOS
Principle component factor analysis
Structural Equation Modeling analysis (SEM)
Measurement model (Confirmatory Factor Analysis: CFA)
The assessment of model fit
4.1 Research design
To explore the relationship among the main indicator (absorptive capacity), the mediator (SCM practices), and the outcome (Firm Performance), this study employs descriptive research to describe the characteristics of population or phenomena. This type of research design is appropriate to specify the type of problems such as the relationship between variables and is guided by an initial hypothesis (Churchill and Iacobucci, 2002). This research is also designed as a cross-sectional survey that relies on a sample from the population of interest measured at a single point in time.
4.2 Research scope
Since the study aims at investigating the importance and strategy of managing absorptive capacity, it is related to a knowledge-based industry. The scope of the study is thus the Automobile part manufacturer industry, as it is the major knowledge-based industry providing a significant contribution to Thailand’s economic development. The study singles out the Automobile part industry because it is a high growth-oriented and high technology-based industry. It is an important sector in emerging countries, especially Thailand. This industry is discussed in brief below.
4.2.1 Industry selection: The Automobile part industry
The Automobile part industry is selected for this study for the following reasons.
This industry is important to the Thai economy, as the third-largest sector in the country, it employs more than 400,000 workers and accounts for 12% of GDP. Automobile production in Thailand is split almost equally for domestic sales and exports.
As carmakers launch new models to meet rising demand in Thailand, local auto parts producers are expanding capacity and innovation capability to accommodate the big upswing. Currently, Thailand has approximately 690 Tier 1 auto parts suppliers and 1,700 Tier 2 and 3 suppliers. The breakdown of the sector is 70% small companies, 20% medium-sized ones and 10% large companies. Major foreign parts manufacturers in Thailand include France’s Valeo, Germany’s Bosch, U.S.-based TRW, Britain’s GKN, and Japan’s Denso, Mitsuba and Mitsubishi. The Japan Automobile Manufacturers Association describes the quality of Thailand-made automotive parts as the highest of any ASEAN nation.
Auto parts and components represent a 400 billion baht enterprise in Thailand. Local parts manufacturers supply virtually 100% of the requirement used in the assembly of motorcycles, about 85% of parts for pickup truck assembly, and nearly 70% of those for passenger cars. To enhance development, the Thai Auto-Parts Manufacturers Association is working on a blueprint for boosting the technology, automation, innovation and human resources of local parts and components suppliers through 2020.
4.3 Research Method
The study uses qualitative research method, the study uses self-administered mail questionnaires for its survey. According to Hair et al. (2000), this method has both advantages and disadvantages. The advantage is that it can cover a broader respondent base and does not require any field staff and is free from interviewer bias.
The cost of mailing questionnaires is also low when compared to personal or telephone interviews. Importantly, this method can be used effectively for industrial surveys where the respondents are highly knowledgeable and the topic of the survey is very specific (Kumar, 2000).
The primary disadvantage of a mail survey is a very high non-response rate. This may cause other related problems, such as a higher cost per survey or a significant bias occurring from the low response rate. Taking these factors into consider, this study did employ a mail survey.
In order to overcome some of the disadvantage, the mailing list used comprised Automobile parts manufacturers member listed in the Thai Autoparts Manufacturers Association directory.
There are 528 firms listed in that directory. It was hoped to receive a response from not less than 145 firms, sufficient on which to base statistical methodology.(Yamane 1967)
4.4 Scale and Measurement Development
Ever since Churchill (1979) published his seminal paper on scale development, the use of multi-item measures and the investigation of the psychometric properties of the latter has become the rule rather than the exception in many disciplines (Bruner and Hensel, 1993; Diamantopoulos, 1999). Based on literature reviews, different scales and measurement are developed to measure all the proposed constructs in this study: 1) absorptive capacity, (2) SCM practice, and (3) Firm Performance
4.4.1 Absorptive capacity
Instead of using a proxy, this study modifies a measure for absorptive capacity on the basis of identification of the principal factors having an influence, whether positive or negative, over accumulation of this capacity. All items are six point Likert scale, derived from literature and modified (e.g. Jaworski and Kohli, 1993; Jansen et al., 2005; Nieto and Quevedo, 2005), measuring both potential absorptive capacity and realized absorptive capacity. Table 4.11 and Table 4.12 show the measurement items of potential absorptive capacity and realized absorptive capacity, respectively.
Table 4.11 Measurement items for Potential absorptive capacity
Dimension
Measurement items
Modified and derived
from
Potential absorptive
capacity
Your firm acquires new knowledge by having frequent interaction with your main customer
Jansen et al.(2005)
Your firm collects industry information through informal means (e.g. lunch with industry friends, talks with trade partners)
Jansen et al.(2005)
Your firm acquires new knowledge by periodically organizing special meetings with your main customer.
Jansen et al.(2005)
Your firm is fast to recognize shifts in your market (e.g. competition, regulation)
Jansen et al.(2005); Nieto
and Quevedo(2005)
Your firm quickly analyzes and interprets for changing market demands.
Jansen et al.(2005)
Your firm quickly understands the new opportunities to serve the customers.
Jansen et al.(2005); Nieto
and Quevedo(2005)
Table 4.12 Measurement items for Realized absorptive capacity
Dimension
Measurement items
Modified and derived
from
Realized Absorptive capacity
Your firm regularly considers the consequences of changing market demands in terms of new products and services.
Jansen et al.(2005); Nieto
and Quevedo(2005),
Jaworski and Kohli(1993)
Your firm quickly recognizes the usefulness of new external knowledge to existing knowledge.
Jansen et al.(2005)
Your firm periodically meets with your customer to discuss consequences of market trends and new product development.
Jansen et al.(2005); Nieto
and Quevedo(2005)
Your firm easily implements new products and services.
Jansen et al.(2005)
Your firm constantly considers how to better exploit knowledge.
Jansen et al.(2005)
Your firm clearly knows how activities between firms should be performed.
Jansen et al.(2005)
4.4.2 SCM practices
Table 4.2
Dimension
Measurement items
Modified and derived
from
SCM practices
We use formal information sharing with suppliers and customers
Wai and Kuan (2011)
We seek new ways to improve integration of activities across the supply chain
Wai and Kuan (2011)
We deliver customers’ orders on time
Wai and Kuan (2011)
We always aim to reduce response time across the supply chain
Wai and Kuan (2011)
We communicate customers’ future strategic needs throughout the supply chain
Wai and Kuan (2011)
4.4.3 Firm Performance
Table 4.31Operational performance
Dimension
Measurement items
Modified and derived
from
Operational performance
In regard to supply orders our relationship with the buyer has allowed us to considerably lower production costs
(Dahlstrom et al.(1996); Malhotra et al. (2005))
In regard to supply orders our relationship with the buyer has allowed us to considerably lower indirect costs
(Dahlstrom et al.(1996); Malhotra et al. (2005))
In regard to supply orders our relationship with the buyer has allowed us to considerably lower labor costs
(Dahlstrom et al.(1996); Malhotra et al. (2005))
In regard to supply orders our relationship with the buyer has allowed us to a lower total costs
(Dahlstrom et al.(1996); Malhotra et al. (2005))
In regard to supply orders our relationship with the buyer has allowed us to more efficient use of the financial resources
(Dahlstrom et al.(1996); Malhotra et al. (2005))
Table 4.32 Strategic Performance
Dimension
Measurement items
Modified and derived
from
Strategic Performance
Our relationship with the buyer has helped us to develop new strategies to compete in the market
(Koufteros et al (2007)
and Sanders (2008))
Our relationship with the buyer has helped us to develop new products for our markets
(Koufteros et al. (2007)
and Sanders (2008))
Our relationship with the buyer has helped us to introduce improvements in the existing products
(Koufteros et al. (2007)
and Sanders (2008))
4.5 Questionnaire development
An important component of survey research is the development of the survey instrument-questionnaire which is a set of questions designed to evoke useful answers (Kumar, 2000). Designing a good questionnaire is considered an art and not merely a bunch of questions thrown in with the intention of eliciting some information from the respondent. Following the steps of questionnaire design, the study starts with planning what to measure. This involves going back to the research problem and the research questions. Also, the study has to check back on the data collected during the course of secondary research and the hypotheses formulated when descriptive research is conducted. Then, formatting of each question is necessary to work out the wording and layout. As previously mentioned, this study designed and developed the questionnaire using suggestions from experts throughout the process and during a pretest. The sequence of questions is checked for logical continuity. The pretest of the questionnaire can be helpful to rectify any problems that may show up.
In addition, this study needed to be sure the language, context and topics being investigated were familiar to the respondents. Then, a willingness to participate in the survey without external pressure was another focus, to ensure unbiased responses that reflected the true feeling of the respondents (Kumar, 2000). The questionnaire used in this study can be divided into five sections. Table 4.16 illustrates the structure of the questionnaire used in this study.
Table 4.5 Questionnaire structure
Section
Content
Question
1
Respondents’ profile
2
Firm’s absorptive capacity
3
SCM Practices
4
Firm Performance
5
Suggestion
4.6 Sampling
4.6.1 Population (Target sample)
The group of interest is defined as a target population consisting of the complete group of elements (people or objects) typically identified for investigation according to the objectives of the research study (Churchill and Iacobucci, 2002). The precise definition of the target population is vital. In this study, the target population is local firms in the Automobile part manufacturing industry. According to the information from Thai Autoparts Manufacturers Association, the 2012 directory consists of various types of automobile part firms such as OEM, OBM, ODB and so on. These firms are recognized as E&E firms, not taking ownership into consideration.
Since the study aims to investigate the role and effect of absorptive capacity combining with SCM practices, a group of local firms whether or not wholly Thai, is acceptable and reasonable to use for this study.
4.6.2 Sampling technique
This study employs the probability technique by simple random sampling. This technique has several advantages. It permits demonstrating the representatives of the sample, helps to state the variation introduced by using a sample instead of a census, and helps to identify possible biases introduced due to sampling (Kumar, 2000). In addition, the study obtains a sampling frame that works best with the probability method.
4.6.3 Sample size
This study employed a few methods to calculate an appropriate sample size based on the requirement of Structural Equation Modeling (SEM) which is the statistical tool used for quantitative data analysis and hypotheses testing in this study. Since SEM relies on tests that are sensitive to sample size as well as to the magnitude of differences in covariance matrices, according to Kline (1998), sample size under 100 is considered as ‘untenable’ in SEM.
Meanwhile, Loehlin (1992) recommends at least 100 cases but preferably at 200 cases.
The sample sizes we need are determined by a published table, which provide the sample size for a given set of criteria. Table 4.61 and Table 4.62 present sample sizes that would be necessary for given combinations of precision, confidence levels, and variability. These sample sizes reflect the number of obtained responses and not necessarily the number of surveys mailed or interviews planned (this number is often increased to compensate for nonresponse). The sample sizes in Table 2 presume that the attributes being measured are distributed normally or nearly so. If this assumption cannot be met, then the entire population may need to be surveyed. According to the population size of 528 firms in Automobile Part industry, the sample size we need is to be at least 145.

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