Effect of Knowledge Management Activities and Dynamic Capabilities on Employee Performance in the Banking Sector: Empirical Evidence From Pakistan

Open access


The banking sector is facing constant change and fierce competition. In this scenario, banks need to align themselves with the ever-changing environment by enhancing employee knowledge base to create capabilities. The basic objective of the current study is to examine the effect of knowledge management activities and dynamic capabilities on employee performance in the banking sector of Pakistan. This research employed a quantitative method to analyse the data. The sample was taken from employees who are working in public and private banks in Pakistan. A self-administered questionnaire was distributed among employees of public and private banks adopting stratified random sampling technique. Ordinary Least Square (OLS) method is used to testify the hypothesis and factor analysis to examine the validity and reduction of the items. This research finds that both knowledge management activities and dynamic capabilities have significant effect on employee performance in the banking sector of Pakistan.

Akram, K., Siddiqui, S. H., Nawaz, M. A., Ghauri, T. A., & Cheema, A. K. H. (2011). The role of knowledge management to bring innovation: an integrated approach. Cell, 92(333), 6183035.

Alavi, M., and Leidner, D. (2001). Review: knowledge management and knowledge management systems: conceptual foundations and research issues. MIS Quarterly, 25 (1), 107-36.

Ali, H. M., & Ahmad, N. H. (2006). Knowledge management in Malaysian banks: a new paradigm. Journal of Knowledge Management Practice, 7(3), 1-13.

Ambrosini, V., & Bowman, C. (2009). What are dynamic capabilities and are they a useful construct in strategic management?. International journal of management reviews, 11(1), 29-49.

Ambrosini, V., Bowman, C., & Collier, N. (2009). Dynamic capabilities: an exploration of how firms renew their resource base. British Journal of Management, 20(s1), S9-S24.

Anderson, J. C., & Gerbing, D. W. (1988). Structural equation modeling in practice: A review and recommended two-step approach. Psychological bulletin, 103(3), 411.

Anitha, J. (2014). Determinants of employee engagement and their impact on employee performance. International Journal of Productivity and Performance Management.

Augier, M., & Teece, D. J. (2009). Dynamic capabilities and the role of managers in business strategy and economic performance. Organization Science, 20(2), 410-421.

Bagozzi, R. P., & Yi, Y. (1988). On the evaluation of structural equation models. Journal of the academy of marketing science, 16(1), 74-94.

Borman, W. C. (2004). The concept of organizational citizenship. Current directions in psychological science, 13(6), 238-241.

Borman, W. C., & Motowidlo, S. M. (1993). Expanding the criterion domain to include elements of contextual performance. Personnel Selection in Organizations; San Francisco: Jossey-Bass, 71.

Bouthillier, F., & Shearer, K. (2002). Understanding knowledge management and information management: the need for an empirical perspective. Information research, 8(1), 8-1.

Cabrera, A., & Cabrera, E. F. (2002). Knowledge-sharing dilemmas. Organization studies, 23(5), 687-710.

Chien, S. Y., & Tsai, C. H. (2012). Dynamic capability, knowledge, learning, and firm performance. Journal of Organizational Change Management, 25(3), 434-444.

Cole, R. (1998). Introduction. California Management Review, 40(3), 15-21.

Davenport, T. H., & Prusak, L. (1998). Working knowledge: How organizations manage what they know. Harvard Business Press.

Din, N., & Haron, S. (2012). Knowledge sharing as a culture among Malaysian online social networking users. Procedia-Social and Behavioral Sciences, 50, 1043-1050.

Du Plessis, M. (2007). The role of knowledge management in innovation. Journal of knowledge management, 11(4), 20-29.

Dzinkowski, R. (2001). Knowledge management in the financial services. Financial Times, available at: www.ftmastering.com/mmo/mmo10_2.htm 9/8/2018 3:05:26 PM (accessed 15 December 2004).

Easterby-Smith, M., & Prieto, I. M. (2008). Dynamic capabilities and knowledge management: an integrative role for learning?. British Journal of Management, 19(3), 235-249.

Easterby-Smith, M., Lyles, M. A., & Peteraf, M. A. (2009). Dynamic capabilities: Current debates and future directions. British Journal of Management, 20(s1), S1-S8.

Egan, M., & Kim, J. (2000). Knowledge-sharing at the World Bank. Knowledge Management Review, 3, 24-27.

Emmerik, H., & Sanders, K. (2004). Social embeddedness and job performance of tenured and non-tenured professionals. Human Resource Management Journal, 14(1), 40-54.

Ericsson, K. A. (2014). The road to excellence: The acquisition of expert performance in the arts and sciences, sports, and games. Psychology Press.

Fornell, C., & Larcker, D. F. (1981). Structural equation models with unobservable variables and measurement error: Algebra and statistics. Journal of marketing research, 382-388.

Gold, A. H., & Arvind Malhotra, A. H. S. (2001). Knowledge management: An organizational capabilities perspective. Journal of management information systems, 18(1), 185-214.

Grant, R. M. (1996). Toward a knowledge-based theory of the firm. Strategic management journal, 17(S2), 109-122.

Hair Jr, J. F., Hult, G. T. M., Ringle, C., & Sarstedt, M. (2016). A primer on partial least squares structural equation modeling (PLS-SEM). Sage Publications.

Helfat, C., & Peteraf, M. (2009). Understanding dynamic capabilities: progress along a developmental path. Strategic organization, 7(1), 91.

Høyrup, S., Bonnafous-Boucher, M., Hasse, C., Møller, K., & Lotz, M. (Eds.). (2012). Employeedriven innovation: A new approach. Palgrave Macmillan.

Hsu, I. C. (2006). Enhancing employee tendencies to share knowledge—Case studies of nine companies in Taiwan. International Journal of information management, 26(4), 326-338.

Hsu, L. C., & Wang, C. H. (2012). Clarifying the effect of intellectual capital on performance: the mediating role of dynamic capability. British Journal of Management, 23(2), 179-205.

Hu, L. T., & Bentler, P. M. (1995). Evaluating model fit.

Islam, M. Z., Jasimuddin, S. M., & Hasan, I. (2015). Organizational culture, structure, technology infrastructure and knowledge sharing: Empirical evidence from MNCs based in Malaysia. Vine, 45(1), 67-88.

Jex, S. M., & Britt, T. W. (2008). Leadership and influence processes. Organizational Psychology: A Scientist-Practitioner Approach, 2, 303-338.

Johari, J., & Yahya, K. K. (2016). JOB CHARACTERISTICS, WORK INVOLVEMENT, AND JOB PERFORMANCE OF PUBLIC SERVANTS. European Journal of Training and Development, 40(7).

Kaur, H.V. (2010), “Analysis of banks in India – a CAMEL approach”, Global Business Review, Vol. 11 No. 2, pp. 257-280

Kianto, A., Vanhala, M., & Heilmann, P. (2016). The impact of knowledge management on job satisfaction. Journal of Knowledge Management, 20(4).

Kiessling, T. S., Richey, R. G., Meng, J., & Dabic, M. (2009). Exploring knowledge management to organizational performance outcomes in a transitional economy. Journal of world business, 44(4), 421-433.

Kim, M., Song, J., & Triche, J. (2015). Toward an integrated framework for innovation in service: A resource-based view and dynamic capabilities approach. Information Systems Frontiers, 17(3), 533-546

Kim, S., & Lee, H. (2010). Factors affecting employee knowledge acquisition and application capabilities. Asia-Pacific Journal of Business Administration,2(2), 133-152.

Kimberly, J. R. (1981). Managerial innovation. Handbook of organizational design, 1(84), 104.

King, A. A., & Tucci, C. L. (2002). Incumbent entry into new market niches: The role of experience and managerial choice in the creation of dynamic capabilities. Management science, 48(2), 171-186.

Koch, A. (2011). Firm-internal knowledge integration and the effects on innovation. Journal of Knowledge Management, 15(6), 984-996.

Koulopoulos, T. M., & Frappaolo, C. (1999). Smart things to know about knowledge management. Capstone US.

Kraimer, M. L., Wayne, S. J., Liden, R. C., & Sparrowe, R. T. (2005). The role of job security in understanding the relationship between employees’ perceptions of temporary workers and employees’ performance. Journal of Applied Psychology, 90(2), 389.

Kuzu, Ö. H., & Özilhan, D. (2014). The effect of employee relationships and knowledge sharing on employees’ performance: An empirical research on service industry. Procedia-Social and Behavioral Sciences, 109, 1370-1374.

Lavie, D. (2006). Capability reconfiguration: An analysis of incumbent responses to technological change. Academy of management review, 31(1), 153-174.

Lin, Y., & Wu, L. Y. (2014). Exploring the role of dynamic capabilities in firm performance under the resource-based view framework. Journal of Business Research, 67(3), 407-413.

Macher, J. T., & Mowery, D. C. (2009). Measuring dynamic capabilities: practices and performance in semiconductor manufacturing. British Journal of Management, 20(s1), S41-S62.

McKelvie, A., & Davidsson, P. (2009). From resource base to dynamic capabilities: an investigation of new firms. British Journal of Management, 20(s1), S63-S80.

Mensah, J. K. (2015). A “coalesced framework” of talent management and employee performance: For further research and practice. International Journal of Productivity and Performance Management, 64(4), 544-566.

Mohrman, S. A. (2003). Designing work for knowledge-based competition.Managing knowledge for sustained competitive advantage: Designing strategies for effective human resource management, 94-123.

Mohrman, S. A., Finegold, D., & Klein, J. A. (2002). Designing the knowledge enterprise: Beyond programs and tools. Organizational Dynamics,31(2), 134-150.

Morgenson Frederick, P. (2006). The Work Design Questionnaire (WDQ): Developing and Validating a Comprehensive Measure for Assessing Job Design and the Nature of Work/Frederick P. Morgenson, Stephen E. Humphrey. Journal of Applied Psychology, (6).

Motowidlo, S. J. (2003). Job performance. Handbook of psychology.

Motowidlo, S. J., & Borman, W. C. (1997). Organizational Citizenship Behavior and Contextual Performance. Lawrence Erlbaum Associates.

Muhammad Awan, H., Shahzad Bukhari, K., & Iqbal, A. (2011). Service quality and customer satisfaction in the banking sector: A comparative study of conventional and Islamic banks in Pakistan. Journal of Islamic Marketing, 2(3), 203-224.

Nasurdin, A. M., & Lay Khuan, S. (2011). Organizational justice, age, and performance connection in Malaysia. International Journal of Commerce and Management, 21(3), 273-290.

Nieves, J., & Haller, S. (2014). Building dynamic capabilities through knowledge resources. Tourism Management, 40, 224-232.

Nonaka, I., & Takeuchi, H. (1995). The knowledge-creating company: How Japanese companies create the dynamics of innovation. Oxford university press.

O’dell, C., & Grayson, C. J. (1998). If only we knew what we know: Identification and transfer of internal best practices. California management review, 40(3), 154-174.

Oliver, R. L., Rust, R. T., & Varki, S. (1997). Customer delight: foundations, findings, and managerial insight. Journal of retailing, 73(3), 311-336.

Organ, D. W. (1997). Organizational citizenship behavior: It’s construct clean-up time. Human performance, 10(2), 85-97.

Paarup Nielsen, A. (2006). Understanding dynamic capabilities through knowledge management. Journal of knowledge management, 10(4), 59-71.

Papadopoulos, T., Stamati, T., & Nopparuch, P. (2013). Exploring the determinants of knowledge sharing via employee weblogs. International Journal of Information Management, 33(1), 133-146.

Penrose, E. (1959). The theory of the firm. NY: John Wiley & Sons.

Pettigrew, A., & Whipp, R. (1991). Managing for competitive success. Managing Change, 2nd Ed, C. Mabey, C., and B. Mayon-White, Paul Chapman Publishing Ltd, 1-19.

Prahalad, C. K., & Ramaswamy, V. (2004). Co-creation experiences: The next practice in value creation. Journal of interactive marketing, 18(3), 5-14.

Pritchard, K. (2010). Becoming an HR strategic partner: tales of transition. Human Resource Management Journal, 20(2), 175-188.

Rabbanee, F. K., Burford, O., & Ramaseshan, B. (2015). Does employee performance affect customer loyalty in pharmacy services?. Journal of Service Theory and Practice, 25(6), 725-743.

Rotundo, M., & Sackett, P. R. (2002). The relative importance of task, citizenship, and counterproductive performance to global ratings of job performance: a policy-capturing approach. Journal of applied psychology, 87(1), 66.

Saputra, R. S., Akram, K., & Aliyan, M. P. (2012). Impact of Participative Decision Making and Demographic Characteristics on Job Performance of University Academic Staff: Evidence from Universiti Utara Malaysia. Journal of Marketing and Consumer Research,14(1), 29-38.

Schiuma, G., & Lerro, A. (2008). Intellectual capital and company’s performance improvement. Measuring Business Excellence, 12(2), 3-9.

Sher, P. J., & Lee, V. C. (2004). Information technology as a facilitator for enhancing dynamic capabilities through knowledge management. Information & management, 41(8), 933-945.

Shih, K. H., Chang, C. J., & Lin, B. (2010). Assessing knowledge creation and intellectual capital in banking industry. Journal of intellectual capital,11(1), 74-89.

Siengthai, S., & Pila-Ngarm, P. (2016, August). The interaction effect of job redesign and job satisfaction on employee performance. In T. K. Lange, & F. Homberg (Eds.), Evidencebased HRM: a Global Forum for Empirical Scholarship (Vol. 4, No. 2). Emerald Group Publishing Limited.

Singh, B., & Rao, M. K. (2016). Effect of intellectual capital on dynamic capabilities. Journal of Organizational Change Management, 29(2), 129-149.

Smith, K. G., Collins, C. J., & Clark, K. D. (2005). Existing knowledge, knowledge creation capability, and the rate of new product introduction in high-technology firms. Academy of management Journal, 48(2), 346-357.

Srivastava, R. K., Fahey, L., & Christensen, H. K. (2001). The resource-based view and marketing: The role of market-based assets in gaining competitive advantage. Journal of management, 27(6), 777-802.

Stensaker, I. G., & Meyer, C. B. (2011). Change experience and employee reactions: developing capabilities for change. Personnel review, 41(1), 106-124.

Tan, N. L., Lye, Y. H., Ng, T. H., & Lim, Y. S. (2010). Motivational factors in influencing knowledge sharing among banks in Malaysia. International Research Journal of Finance and Economics, 44(August), 191-201.

Teece, D. J. (2007). Explicating dynamic capabilities: the nature and microfoundations of (sustainable) enterprise performance. Strategic management journal, 28(13), 1319-1350.

Teece, D. J. (2012). Dynamic capabilities: Routines versus entrepreneurial action. Journal of Management Studies, 49(8), 1395-1401.

Tseng, S. M., & Lee, P. S. (2014). The effect of knowledge management capability and dynamic capability on organizational performance. Journal of Enterprise Information Management, 27(2), 158-179.

Verma, P., & Rao, M. K. (2016). Organisational performance as a function of creativity components and innovation capability: an Indian perspective. International Journal of Business Performance Management, 17(1), 44-64.

Vogel, R., & Güttel, W. H. (2013). The dynamic capability view in strategic management: a bibliometric review. International Journal of Management Reviews, 15(4), 426-446.

Vosloban, R. I. (2012). The Influence of the Employee’s Performance on the company’s growth-a managerial perspective. Procedia economics and finance, 3, 660-665.

Wall, T. D., Michie, J., Patterson, M., Wood, S. J., Sheehan, M., Clegg, C. W., & West, M. (2004). On the validity of subjective measures of company performance. Personnel psychology, 57(1), 95-118.

Wang, D., Su, Z., & Yang, D. (2011). Organizational culture and knowledge creation capability. Journal of Knowledge Management, 15(3), 363-373.

Welbourne, T. M., Johnson, D. E., & Erez, A. (1998). The role-based performance scale: Validity analysis of a theory-based measure. Academy of management journal, 41(5), 540-555.

Wiig, K. M. (1999). Introducing knowledge management into the enterprise. Knowledge management handbook, 3-1.

Williams, R. S. (2002). Managing employee performance: Design and implementation in organizations. Cengage Learning EMEA.

Wu, L. Y. (2006). Resources, dynamic capabilities and performance in a dynamic environment: Perceptions in Taiwanese IT enterprises. Information & Management, 43(4), 447-454.

Youndt, M. A., & Snell, S. A. (2004). Human resource configurations, intellectual capital, and organizational performance. Journal of managerial issues, 337-360.

Zahra, S. A., Sapienza, H. J., & Davidsson, P. (2006). Entrepreneurship and dynamic capabilities: a review, model and research agenda. Journal of Management studies, 43(4), 917-955.

Zollo, M., & Winter, S. G. (2002). Deliberate learning and the evolution of dynamic capabilities. Organization science, 13(3), 339-351.