Innovation Strategies as Outcomes of KM Practices and Antecedents of Firm Performance: Evidence from European Economies

Abstract

Abstract: An organisation ability to successfully operate in a competitive environment hinges to a large extent on innovation performance. In the paper, knowledge management (KM) practices, including methods stimulating new ideas and creativity, are viewed as antecedents of innovation strategies, and variance in organisational performance is presented as a consequence of implementation of different innovation strategies. Which KM practices contribute to the emergence of the most and least sophisticated innovation strategies? Which methods stimulating new ideas and creativity have the greatest potential in producing innovation? How is KM, via innovation strategies, related to firm performance? Where do the differences in innovation strategies and KM practices lie across countries? The paper is aimed at answering these questions and identifying KM practices typical of innovation strategies with varied levels of sophistication. Here, the sophistication depends on coherence (e.g. positive or negative, strong or weak) between the extent of an innovation strategy of an enterprise and the enterpriseâ s performance indicators. For the identification of innovation strategies, CIS8 database was used. It covers 60 innovation variables across 127,674 organizations from 12 core and 19 additional sectors and from 16 European economies. The innovation variables include different KM practices as well. Two firm performance indicators were also used in the research. For the identification of methods stimulating new ideas or creativity, CIS10 data were used. It covers six such methods; the sample includes enterprises from 24 European economies within innovation core sectors. The methods included exploratory factor analysis, correlation analysis, hierarchical cluster analysis and k‑means cluster analysis. At each stage, the analyses were accompanied by rigorous validity and reliability tests. The originality of the paper lies in its attempt to interrelate different KM practices with not only innovation strategies and firm performance, but national economic‑instit