The Role of Knowledge Creation and Innovation in the Relationship between Learning Organization Practices and Nonfinancial Performance of Pakistan’s Telecommunication Firms

Abstract

This study examines the direct impact of learning organization practices on non-financial firm performance, and the individual mediating roles of knowledge creation and innovation in the learning organization–firm performance relationship. In addition, the study analyzes the indirect impact of learning organization practices on non-financial firm performance through the sequential mediation effect of both knowledge creation and innovation in the context of Pakistan’s telecommunication sector. The research model consists of nine testable hypotheses, and is based on the premises established in the four well-established management theories, namely resource based view theory, knowledge-based view theory, dynamic capabilities theory, and input-process output model. To collect data, 600 questionnaires that consisted of four self-constructed scales were randomly distributed to lower and middle managers of the five Pakistani telecommunication companies. The data generated from the 410 useable questionnaires was used to test the nine hypotheses through Structural Equation Modelling approach. The results derived from data analysis suggest that individually, both knowledge creation and innovation partially mediate the direct effect of learning organization practices on non-financial firm performance. Moreover, findings illustrate that knowledge creation and innovation sequentially mediate the learning organization–firm performance relationship. The study recommends that managers should adopt learning-supportive leadership styles, foster a learning-conducive culture, conduct appropriate training programs, decentralize and informalize organizational systems, and establish sound technological systems if they want to their company to survive, compete, lead, grow and evolve in today’s increasingly volatile, turbulent and hypercompetitive business environment.