The Impact of Leadership Behaviours and Organisational Culture on Knowledge Management Practices in Small and Medium Enterprises

Abstract

An increasing number of organisations are turning to knowledge management (KM) as a key to leverage their distinctive core competencies in their pursuit of competitive advantage. Organisations are interested in KM to boost the efficiency of their processes, increase their productivity and quality of their services, and to achieve innovative solutions and products for their customers. Consequently, the contributions of KM to the overall success of an organisation have been widely acknowledged. Prior research studies have demonstrated that both organisational culture and leadership behaviours are widely held to be major barriers to creating and leveraging knowledge. The literature suggests that for KM implementation to be effective there is a need to diagnose the fit between an organisation and its KM objectives. Thus, it is essential to articulate how organisational culture and leadership styles affect the organisation’s ability to create and apply knowledge. It is only then that appropriate strategies can be designed to either adapt the organisational culture or reshape it to support KM objectives. A critical evaluation of research studies in the fields of leadership, organisational culture, and knowledge management indicated that, while some evidence exists supporting the links between leadership and KM and between organisational culture and KM, the combined study of all three of these concepts has been hitherto lacking. This study, therefore, examines this research gap. More specifically, the study investigates the relationship between leadership behaviours and KM practices, and the moderating effects of organisational culture on that relationship. To investigate such a relationship, a conceptual model comprising four constructs, namely transformational leadership, transactional leadership, organisational culture, and KM practices, was developed. The model and its related four hypotheses were empirically examined using a questionnaire-based survey targeting Australian small and medium-sized enterprises (SMEs). The rationale for selecting SMEs was two-fold. First, one of the main characteristics of SMEs is that management structures are often minimal, and decision making is centralised at the owner/manager level. Hence, the leader’s personality and behaviours would be expected to have a significant influence on supporting organisational KM practices. Second, individual SMEs are more likely to have a single organisational culture. Thus, culture and cultural fit are more profound in SMEs than in large organisations where several cultures may be present. Data related to the four constructs of the study were collected from 157 SMEs using three previously validated instruments. For the measurement of leadership behaviours, the study used the Multifactor Leadership Questionnaire (MLQ-5X), which is one of the most widely tested measures of transformational and transactional leadership. For the construct of KM practices, a 17-item assessment questionnaire developed by Becerra-Fernandez and Sabherwal (2001) was used to allow participants to indicate how frequently each of the identified KM processes and tools is currently being used within their respective organisations. Finally, Denison’s Organisational Cultural Survey (DOCS), adapted from Fey & Denison (2003), was selected to measure the dimensions of organisational culture. Exploratory Factor Analysis (EFA), Confirmatory Factor Analysis (CFA) and Regression Analysis (RA) were employed to examine the relationships among the research constructs. The results shed light on how leadership behaviours and organisational culture influence KM practices. First, both transformational and transactional leadership behaviours appear to be positively related to KM practices. More specifically, charismatic leadership (focusing on envisioning, empathy, and empowerment) and contingent reward leadership behaviours (focusing on transactions, rewards, and punishment) have a greater impact on facilitating knowledge socialisation and exchange within organisations. Second, the results of moderated regression analyses reveal that the effectiveness of leadership behaviours is contingent upon the type of organisational culture. To illustrate, cultures with strong emphasis on hierarchy (i.e. highly centralised and formalised) and/or mission (i.e. being competitive and goal-oriented) would attenuate the contribution of transactional leadership behaviours to KM. These findings, hence, suggest that the most effective leaders for successful KM implementation are those who are best able to display and use both transformational and transactional leadership behaviours upon different organisational contexts and cultures. For example, transactional leadership might work better in reinforcing existing norms, values and procedures, whereas transformational leadership behaviours would allow the adaptation of organisational culture to and its realignment with, a new vision when needed. Third, and perhaps of most interest, the evidence provided by the study indicated that leadership behaviours (in their own right) are significant contributors to organisational culture, and that leaders can influence KM practices either directly or indirectly through organisational culture. These findings confirm the crucial role of leadership in building and maintaining a supportive organisational culture for KM, thus providing further evidence for the need to develop a comprehensive investigation into the potential role that organisational culture could play as an effective mechanism by which leaders could enact KM within their organisations. Finally, although the use of well-tested questionnaires indicated a strong conceptualisation of the transactional leadership model, this could not be extended to the transformational leadership and organisational constructs where a relatively moderate representation was obtained for these two constructs. While this finding is somewhat disappointing, it enhances the existing body of knowledge by suggesting that perceptions of transformational leadership and organisational culture might be contingent upon other contextual conditions such as national culture, organisational history and performance – all of which are outside the scope of this research study. In conclusion, this study provides empirical evidence on the connection among leadership behaviours, organisational culture, and knowledge management, thereby addressing the need for research that incorporates cultural context in leadership and KM studies. Furthermore, it provides practical implications for managers/leaders by identifying the leadership behaviours and organisational mechanism required to enhance KM practices.