Entrepreneurship, knowledge integration capability,and firm performance: An empirical study

Yong Jin Kim & Seokwoo Song & V. Sambamurthy &

Young Lyoul Lee

Published online: 26 October 2011# Springer Science+Business Media, LLC 2011

Abstract From the knowledge-based view, an organizationis considered an entity that integrates and distributesknowledge to produce products and services. Knowledgeis acknowledged as a sustainable basis of competitiveadvantage that many organizations possess. Entrepreneurialactivity also has been viewed as an essential feature fororganizations to survive and prosper in today’s turbulentenvironment. In this study, we explore the effect ofentrepreneurship on organizational performance throughknowledge integration capability. Our research modeldepicts the firm as a knowledge integration institution thatproduces its offerings through specialized knowledgeintegration capability that consists of learning culture,

knowledge management process, and information technol-ogy capability. The results show a strong support for therelationship between entrepreneurship and knowledgeintegration capability. We also found that the effect ofentrepreneurial activities on firm performance was mediatedby knowledge integration capability.

Keywords Corporate entrepreneurship . Knowledge-basedview . Knowledge management . Organizationalperformance

1 Introduction

From the perspective of resource-based view, the firm isregarded as a unit of resources and capabilities so that a firm’scompetitive advantage is determined by its ability to obtainand defend resources and capabilities (Wernerfelt 1984). Inthis view, knowledge is considered to be one of keyresources to obtain and transform other resources. Research-ers from knowledge-based view have criticized the weaknessof resource-based view in explaining how knowledge istreated and the distinction between resources andknowledge-based capabilities (Grant 1996b; Nelson andWinter 1982). Knowledge-based view considers the firm anentity that integrates and distributes knowledge to produceproducts and services (Grant 1996b). However, the tradi-tional knowledge-based view is essentially static in nature,because it doesn’t fully explicate why a firm’s knowledgestructure or configuration differs from that of other firms andhow the different structure of knowledge affects firmperformance (Hoskisson et al. 1999).

Previous studies on strategic management and entrepre-neurship, on the other hand, have examined the relationship

Y. J. Kim (*)Service Systems Management and Engineering Department,School of Business, Sogang University,Seoul, Korea 121-742e-mail: yongjkim@sogang.ac.kr

S. SongDepartment of Information Systems & Technologies,Weber State University,Layton, UT 84041, USAe-mail: seokwoosong@weber.edu

V. SambamurthyCenter for Leadership of the Digital Enterprise,Eli Broad Graduate School of Management,Michigan State University,East Lancing, MI 48824, USAe-mail: sambamurthy@bus.msu.edu

Y. L. LeeHead of Olleh TV BU, Korea Telecommunication,Seoul, Koreae-mail: younglee@kt.com

Inf Syst Front (2012) 14:1047–1060DOI 10.1007/s10796-011-9331-z

between firm-level entrepreneurship and firm performance(Covin and Slevin 1991; Dess et al. 1997; Miller 1983;Naman and Slevin 1993; Zahra 1993). Researchers haveexamined the various aspects of firm-level entrepreneur-ship, such as diversification (Burgelman 1991), strategicrenewal (Singh 1990), and product, process, and adminis-trative innovations (Covin and Miles 1999). While muchattention has been given to the relationship between firm-level entrepreneurship and its antecedents and outcomes,few studies have paid a systematic attention to investigatethe relationship via knowledge-based perspectives (Zahraet al. 1999; Dess et al. 2003). Further, many priorknowledge management (KM) studies have addressed thevarious aspects of firm-level knowledge integration, includ-ing the influence of different types of knowledge (Brownand Duguid 2001; Spender 1996), the configuration ofknowledge functions through combinative capabilities(Kogut and Zander 1992), and the organizational processcharacteristics (Grant 1996a). In particular, Tanriverdi(2005) well studied the relationship between informationtechnology (IT) relatedness and knowledge management(KM) capability and their impact on firm performance. Hetreated IT relatedness as a separate construct from KMcapability which consists of product KM, customer KM,and managerial KM capability. Cepeda and Vera (2007)found that firm's intended strategy affects knowledgeconfiguration, the source of dynamic capability, which in turnresults in operational capability. Most research, however, hasoverlooked the prospect that the integration of organizationalknowledge activities can play a mediating role in therelationship between firm-level entrepreneurship and firmperformance (Lumpkin and Dess 1996).

This study proposes an integrative model for exploringthe effect of firm-level entrepreneurship on performancethrough knowledge integration capabilities that encompasslearning culture, knowledge management process, andinformation technology capability. Different from theprevious studies, in this study, we view knowledgeintegration capability as the combination of three capabil-ities. This is primarily because KM process alone cannotexplain knowledge integration capability. To make knowl-edge integration take place, learning culture and ITcapability are necessary (Ryu et al. 2005). Learning culturemakes knowledge management process effective andefficient by leading associates to the active participation inknowledge activities, while IT capability allows user toaccess knowledge and people pertinent to their problem athand. Moreover, information systems incorporate knowl-edge processes to support knowledge user activities (Kimet al. 2008). The basic assumption underlying the proposedmodel is that firm-level entrepreneurship as a metastructuring activity affects strategic context, where all the

resources are arranged and allocated toward the strategicdirection, which in turn influences firm performance(Purvis et al. 2001). This assumption draws on theknowledge-based view that firms exist to produce productsand services through knowledge integration and application(Grant 1996b), as well as on the perspective that combina-tion and exchange are the generic processes to create allnew resources including knowledge (Schumpeter 1934;Kogut and Zander 1992). Accordingly, the main purposesof this study are 1) to disclose the major components ofknowledge integration capability within firms as knowledgeintegration entity, and 2) to investigate the effect of firm-level entrepreneurship (in this study, named as entrepre-neurial intensity) on the knowledge integration capability, and3) to examine the causal relationship between entrepreneurialintensity, knowledge integration capability, and firm perfor-mance in a nomological network.

This study contributes to the literature in three ways.First, this study provides a model that integrates theconcepts of entrepreneurial intensity, knowledge integra-tion mechanism, and firm performance. This modelfacilitates the understanding of the knowledge-basedtheory of the firm by suggesting the antecedent toknowledge structure and the outcome of it. Second, thisstudy identifies the primary components of knowledgeintegration mechanism that is the catalyst of knowledge-based view of the firm and the key bridge betweenentrepreneurship and firm performance in this study.Third, this study provides a way in furthering the empiricaltest on knowledge-based view of the firm, by providing a setof measurement items for the constructs that have beenseparately studied.

2 Knowledge-based view and knowledge integrationcapability

According to Grant (1996a; b), the firm is a knowledgeapplication institution that produces products and servicesthrough specialized knowledge integration mechanismssuch as rules, directives, and routines. The integrationmechanisms enable firms to take unique advantages forgoverning economic activities and make them differentfrom the others (Ghoshal and Moran 1996). Thus, theintegration of specialized knowledge residing in individualsand directorates within an organization allows firms tomaximize their efficiency by reducing redundancy andenhancing consistent representation (Davenport and Klahr1998; Grant and Baden-Fuller 1995; Grant 1996b). In thissense, well established knowledge integration mechanismsare embedded in an organization and constitute a corecapability that helps firms conduct their business proac-

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tively which is referred to as knowledge integration capability(KIC).

KIC refers to an organization’s combinative capability(Kogut and Zander 1992) of analyzing and synthesizingknowledge that comes from outside or is accumulatedwithin the organization by utilizing its experiences. Theprinciple mechanisms of integrating knowledge, repre-sented by direction and routine (Grant 1996a), involveorganizational learning and selection process, which ena-bles an organization to generate knowledge that is in turnaccumulated, stored, and embedded in organizationalpractices and rules (Levitt and March 1988). Organizationallearning is characterized by learning culture that promotesinquiry and dialogue, and encourages collaboration andteam learning (Garvin 1993). Learning culture is theprevailing culture in a learning organization that is skilledat knowledge generation, acquisition, and transfer, and thatmodifies its behavior to reflect new knowledge and insights(Garvin 1993). KM process is required in conjunction withlearning culture in order to boost up knowledge integration.KM process can be interpreted as an organizationalselection process in the sense that it helps an organizationto identify a set of knowledge valuable to the organization.Finally, while learning culture and KM process contributeto knowledge integration activities, IT capability for properIT support is necessary to maximize the effect of the rulesand directives as the integration mechanism (Kim et al.2002; Ray et al. 2004).

In our perspective, to be effective, KM process as a partof knowledge integration capability needs to come alongwith learning culture that facilitates the embeddednessof knowledge within an organization, as well as withtechnological capability that supports and incorporates KMprocess into the system. The harmonious combination ofthree components represents the effective configuration offirm resources and knowledge to enhance firm performance(Burgelman 1994).

2.1 Learning culture

Culture as the outcome of social interactions and thusembedded in organizations is argued to be a major sourceof competitive advantage (Gold et al. 2001; Lee and Choi2003; Starbuck 1992). Culture defines the value ofknowledge, the types of knowledge maintained in organ-izations, and knowledge activities acceptable in organiza-tions (Gold et al. 2001; Lee and Choi 2003). In particular,learning culture is defined as a set of norms and valuesabout individual and organizational behaviors in theprocess of the development of new knowledge (Škerlavajet al. 2007). It bears openness, trust, and cooperation andhelps improve organizational efficiency and effectiveness in

the ways that; 1) it promotes the development of socialcapital through which it can reduces the probability ofindividual opportunism and thus needs for monitoring(Starbuck 1992), and 2) it facilitates work process throughembedded actions (Granovetter 1985). Learning culture thatencourages cooperation and teamwork also can constructinnovative organizations (Putnam 1993; Fukuyama 1995;Zucker et al. 1996).

2.2 Knowledge management process capability

As discussed in the earlier section, the primary mechanismsfor knowledge integration consist of direction and routine(Grant 1996a). Direction refers to an integration mechanismthrough which each specialist establishes rules, guidelines,and directives for other organizational members when thereis lack of structured work procedures. Organizationalroutines refer to setting up interaction patterns amongemployees and achieving the integration of knowledgeusing the patterns of signals and responses, even withoutdirectives (Ryu et al. 2005). The directions and routines asshared knowledge become social tacit knowledge that isembedded in organizations in the form of social andinstitutional practice (Nelson and Winter 1982; Berger andLuckmann 1989). The shared knowledge, departing fromindividual employees, is accessible and sustained throughsocial interaction (Brown and Duguid 2001). Much ofvaluable organizational knowledge may exist in the form ofdirectives and routines (Nahapiet and Ghoshal 1998),because collectively shared tacit knowledge is the mostsecure and critical organizational knowledge (Spender1996). In this sense, KM process including creation,codification, transfer, and sharing of organizational knowl-edge is the selection process through which knowledgevaluable to an organization is identified, developed, andaccumulated to enhance organization performance (Burgelman1994). Thus, KM process capability, a firm's ability to create,share, transfer, and apply knowledge explicit or tacit issignificantly related to organizational effectiveness (Goldet al. 2001; Lee and Choi 2003).

2.3 Information technology capability

Previous studies on KM have found the significantinfluence of IT infrastructure and infrastructure capabilityon organizational effectiveness (Gold et al. 2001; Sabherwaland Chan 2001; Tanriverdi, 2005). IT capability refers tothe capability to effectively manage hardware and soft-ware that possess different types and levels of knowledge(Armour 2001) and skills and knowledge about a varietyof business processes and organization routines (Nicholsonand Sahay 2004). IT capability facilitates the process of

Inf Syst Front (2012) 14:1047–1060 1049

transforming knowledge into action and thus allowsthe effective exploitation of the rules and directives(Armour 2000; Armour 2001). Hence, it enhancesorganizational effectiveness through machine-invokedand worker-initiating interactions, which enable people toget the filtered information that is focused on their interestand tasks.

3 Entrepreneurial intensity

Entrepreneurship has been recognized as a major determi-nant of organizational performance (Kuratko et al. 1990;Lumpkin and Dess 1996; Zahra et al. 1998). Researchers(Burgelman 1983; Covin and Slevin 1991; Jones and Butler1992; Stopford and Baden-Fuller 1994; Zahra 1993) haveidentified many perspectives of entrepreneurship, such ascorporate entrepreneurship, intrapreneurship, internationalentrepreneurship, and new ventures. Despite the differencein the terms used, the most common properties of firm-levelentrepreneurship may be summarized as proactiveness,risk-taking, and innovativeness (Covin and Slevin 1991;Miles and Arnold 1991; Miller 1983; Morris and Paul1987). Researchers (Miller and Friesen 1982; Naman andSlevin 1993) confirm that entrepreneurial style representsthe degree of the willingness of risk-taking, the proactive-ness when competing with other firms, and the innovative-ness. In this study, we follow Miller and Friesen (1982) andNaman and Slevin (1993)’s concept to define entrepreneurialintensity.

Entrepreneurial intensity is characterized by frequen-cy and degree of entrepreneurship and makes the key tosolving management problems through the strategicdecision making process where entrepreneurs are willingto take risks, innovative, and proactive (Miller andFriesen 1982; Barringer and Bluedorn 1999; Lumpkin andDess 1996). Some of previous studies regard entrepre-neurial intensity as the antecedent to firm performance.We, however, argue that entrepreneurial intensity affectsfirm performance through KIC, because it facilitates theprocess of creative destruction through which new

innovations are introduced to obtain competitive advantage(Schumpeter 1934).

4 Research model and hypotheses

Figure 1 illustrates the proposed research model. In themodel, entrepreneurial intensity refers to the degree ofstrategic orientation that top management in a companyholds to affect organizational principles and practice(Barringer and Bluedorn 1999). Knowledge integrationcapability is viewed as the combinative total of learningculture, KM process, and IT capability through whichstrategic orientation of top management is made feasible(Burgelman 1994; Gold et al. 2001; Sabherwal and Chan2001).

The basic assumption underlying this model is thatentrepreneurship is the major driving force to arrange andstructure KIC, which in turn determines firm performance(Purvis et al. 2001). This assumption is similar to themediating effects model proposed by Lumpkin and Dess(1996) where entrepreneurial orientation affects integrationof activities which in turn influences firm performance. Wetend to fill the gap between KM studies and theentrepreneurial literature by including the mediating roleof KIC between entrepreneurship intensity and firmperformance (Naman and Slevin 1993; Covin and Slevin1988).

Based on the above argument of the mediation role of KIC,we in the remainder of this section elaborate on the relation-ships between entrepreneurial intensity, KIC, and firmperformance to develop a set of testable hypotheses.

4.1 Research hypotheses

Knowledge integration capability is a combinative capabil-ity that is a heterogeneous and hard-to–imitate resource(Spender 1996). As discussed in the previous section, KICis represented in the form of the combination of learningculture, KM process, and technological capability. KMprocess incorporates directives and rules in them (Ryu et al.

Knowledge Management Process

CapabilityLearning Culture

Performance

ITCapability

Entrepreneurial intensityKnowledge

Integration CapabilityH1H2

Fig. 1 The proposedresearch model

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2005) and is embedded in organization culture andtechnological infrastructure in the form of social andinstitutional practice (Nelson and Winter 1982; Berger andLuckmann 1989). KM process capability makes sharedknowledge is accessible and sustained through socialinteraction (Brown and Duguid 2001) and affects firmperformance (Gold et al. 2001).

Learning culture facilitates work processes throughembedded actions to improve effectiveness in workperformance (Granovetter 1985). Cooperative and innova-tive learning culture within an organization providesincentives for constructive knowledge activities (Janz andPrasarnphanich 2003). Further, learning culture influencesfirm performance by determining what kind of knowledgeshould be kept, how the knowledge is used for organiza-tional work, and how it comes along with businessactivities (Gold et al. 2001; Lee and Choi 2003). Learningculture as a KIC in turn affects firm performance byimproving organizational abilities to innovate and torespond to the changes in market environments (Alaviet al. 2005–2006).

IT capability allows users to communicate each other,facilitate knowledge acquisition and integration, easilyreach experts in specialized areas, and foster boundaryspanning activities (Dewett and Jones 2001). Theseactivities can be referred to as knowledge integrationprocess. Thus, IT capability has been recognized as a majorcomponent of influencing organizational efficiency andeffectiveness by reducing the bounded rationality ofdecision-making (Bakos and Treacy 1986; Kim and Sanders2002).

In sum, KIC comprised of well interwoven learningculture, KM process, and technological capability influencesfirm performance by facilitating knowledge integration andapplication process that is built on cooperative and innovativeculture. Therefore, we hypothesize,

H1: Knowledge integration capability positively influencesfirm performance.

Zahra et al. (1999) argued that entrepreneurship activi-ties may enhance organizational performance by creatingnew knowledge, because knowledge is a critical resource

for entrepreneurial firms seeking to establish competitiveadvantage (Ireland et al. 2003). Through effective entre-preneurship, firms are able to create a new knowledgeand exploit it as a continuous source of innovation tooutperform competitors (Dess et al. 2003; Kazanjian et al.2001). Thus, entrepreneurial intensity affects knowledgeintegration process by facilitating the creation of mecha-nisms for exchanging new ideas and information (Kanter1983; Purvis et al. 2001). Entrepreneurial intensity alsopromotes the use of structural integration devices includingcommittees and task forces (Miller 1983) as well as the useof rules and directives (Lumpkin and Dess 1996). Theactive use of structural integration devices in turn helpbuilding shared tacit knowledge about social and institutionalpractice within organizations (Nelson and Winter 1982;Berger and Luckmann 1989).

In its relationship with learning culture, entrepreneurialintensity is regarded as an influential and proactive meansof developing a learning culture (Hult et al. 2003).Entrepreneurial intensity creates the types of team environ-ments in that collaboration, team learning, and thusinnovative activities are encouraged (Lumpkin and Dess1996). Through the team environments, the organizationscan reduce conflicts and integrate the functional silos toreduce organizational isolations between departments (Kanter1983). Therefore, proactive and innovative entrepreneursboost up the learning culture where inquiry and dialogue areactively exchanged and collaboration and team learning areencouraged (Garvin 1993).

As per the relationship with knowledge managementprocess capability, entrepreneurial intensity tends to facilitatethe exchange of new ideas and information which results in thecreation of new routines and mechanisms (Kanter 1983). Thenewly created routines and mechanisms for knowledgeexchange by the work of entrepreneurial intensity areembedded in knowledge management processes to contributeto rebuilding operational capabilities (Cepeda and Vera 2007).

With regard to IT capability, entrepreneurial intensity asthe shared belief across an organization may determine thedeployment of technologies and their structure (Barringerand Bluedorn 1999). In particular, given the recentincreasing role of IT, top management is more likely to

Table 1 Descriptive, CFRs, correlations, and AVE values

CFR AVE 1 2 3 CFR: Composite Factor ReliabilityAVE: Average Variance Extracted

1. Performance 0.856 0.669 0.818

2. Knowledge Integration capability 0.806 0.583 0.556 0.764

3. Entrepreneurial Intensity 0.798 0.570 0.350 0.673 0.755

Boldface numbers on the diagonal are the square roots of the AVE values

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recognize the value of information technology in the strategiccontext, and the effective coordination between businessstrategy and IT strategy becomes a major responsibility ofchief information executives (Applegate and Elam 1992;Chan et al. 1997; Sabherwal and Chan 2001). Accordingly,we can assume that entrepreneurial intensity shapes theinformation systems in ways of supporting strategic decisionmaking activities, marketing initiatives, and knowledgesharing (Sabherwal and Chan 2001). The above discussionleads to the following hypothesis.

H2: Entrepreneurial intensity positively affects knowledgeintegration capability.

5 Method and data analysis

5.1 Data collection

The survey method was used to empirically test thehypotheses. The measurement items were developed byadapting items validated by previous studies. The sampleframe consists of managers, senior managers, and CEOs. Thequestionnaire was developed in English and then translatedinto Korean. To reduce semantic discrepancy, the question-naire was translated back into English and carefully revised. A

pilot test was undertaken with 20 managers and seniormanagers who were taking Executive MBA program at amajor research university in Korea, which resulted in somerefinement to the questionnaire.

The company list of Korea Chamber of Commerce andIndustry (KCCI) was used as the source of sampling for thefield test. We randomly selected 600 companies anddistributed the survey by mail and/or interview, andfollowed up with e-mail and telephone calls. A total of163 responses were returned (27.1% response rate). Out ofthe 163 responses, 17 have incomplete data and wereeliminated from further analysis. As a result, 146 responseswere used for data analysis. The respondents were asked toindicate the name of the department he/she belonged to andalso briefly described its activities. The questionnaire alsoasked for basic demographic information of the respondents.The age of the respondents ranges from 30 to 55, and theaverage is 39.84 (S.D. = 6.53). 88% of the sample is male and12% female. About a half (53.3%) of the respondents classifythemselves as senior managers or CEOs, and the remaindersconsist of project managers, team leaders, and other managerswho are generally able to understand the characteristics of theoverall organizations. About one third (34.9%) of firms are inthe manufacturing industry. 86 firms have 1000 or moreemployees, and 55 firms have annual total sales revenues ofUS$ 1 billion or more.

Table 2 Goodness-of-fit measures for Alternative Models

Model χ2(df) χ2/df p RMSEA NFI TLI CFI

Null Model (M0) 1079.40(105) 10.28 0.00 0.253 0.00

One Factor Model (M1) 361.91(90) 4.02 0.00 0.144 0.67 0.67 0.72

Three First Order Factor Model (M2) 216.59(90) 2.41 0.00 0.098 0.80 0.85 0.87

Second Order Factor Model (M3) 116.03(87) 1.33 0.02 0.048 0.89 0.96 0.97

KICSKPC

LC

ITC

LC1

LC2

LC3

LC4

LC5

KPC1

Tech 1

KPC2

KPC3

KPC4

KPC5

Tech 2

Tech 3

Tech 4

Tech 5

0.80

0.70

0.72

0.62

0.65

0.75

0.73

0.73

0.77

0.77

0.73

0.72

0.75

0.77

0.78

0.65

0.89

0.74

Chi -Square = 116.03d.f . = 87RMSEA = 0.048

0.17

0.09

0.28

0.39

0.44

0.44

0.43

0.26

0.27

0.29

0.34

0.40

0.35

0.39

0.38

0.30

0.34

0.34

Fig. 2 Results ofconfirmatory factoranalysis

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5.2 Measurement of research variables

The items for corporate performance were adapted fromperformance measures given by Deshpande et al. (1993).This encompasses sales and profit growth, and overallsuccess compared with key competitors. To make sure thatthese measures well represent the objective performance,we collected the secondary data such as sales volume, assetsize, and profit. We checked the correlation between thesubjective and objective measures to find that they have asignificant correlation with each other. The 5 point Likertscale was used, anchored by “strongly disagree” and “stronglyagree” (for more details, see Table 7 in Appendix). Table 1reports the descriptive statistics and correlations for indepen-dent and dependent variables. We also checked the cross-loading of measurement items based on the exploratoryfactor analysis to verify the internal and discriminant validityof the research variables (for more details, see Table 8 inAppendix).

5.3 Testing the second order structure

As discussed in the earlier section, we assume KIC is a secondorder factor consisting of KM process, learning culture, andtechnological capability. To verify the assumption, weperformed a confirmatory factor analysis (CFA). Justificationfor our second order factor was made using an extension ofWidaman’s (1985) comparison models. Table 2 presents theresults of comparing models with various fit indices. Theresults indicate that Model 3 (M3) was consistently betterthan any other comparing models.

Further, all item loadings for the first order factors andthe second order factors are greater than the cut-off of 0.6and normed Chi-square value is less than 2 (illustrated inFig. 2). These results suggest the relative efficacy of usingthe second order factor.

5.4 Model assessment

Reliability for each construct was measured by usingcomposite factor reliability (CFR). If CFR values are lessthan 0.70, the items may be unrelated or measuring morethan one construct. The values of both reliability measuresare above 0.70 (see Table 1; ranging from 0.87 to 0.91), andthus deemed acceptable (Bagozzi and Yi 1988; Fornell andLarcker 1981).

To ascertain convergent validity, we carried out anexploratory factor analysis. The results reveal that all theconstructs were clearly delineated and that there was nocross loading above 0.40. We also examined the t-statisticsfor confirmatory factor loadings of the measurement items.All the t-values were well above 2.0, which indicatesatisfactory convergent validity for all five constructs(Anderson and Gerbing 1988). To assess the fit of themeasurement model to the data, we checked several fitindices (Bentler 1990; Hair et al. 1995; Tucker and Lewis1973). As shown in Table 3, all fit indices of the SEMestimation (normed Chi-square, RMSEA, CFI, TLI, andNFI) are desirably at or well above the recommendedthreshold values except NFI value which is slightly lowerthan the desired level.

Discriminant validity was assessed in two differentways. First, we examined the average variance extracted(AVE) to exceed 0.50, or the square root of AVE to begreater than the correlation between a construct and anyother construct (Fornell and Larcker 1981). As can beseen in Table 1, the square root of the AVEs (on thediagonal) is indeed greater than the corresponding corre-lations. In addition, we examined pair-wise discriminantvalidity with latent constructs (see Table 4). We con-strained the correlation between each pair of constructsto be equal to 1 (Anderson and Gerbing 1988), andperformed a χ2 test. For all cases, the χ2 difference wassignificant at p<0.001 level, which indicate discriminantvalidities.

Table 3 Goodness-of-fit indices for the measurement model

Measurement Model Desired Levels

χ2 223.19 Smaller

d.f. 183

χ2/d.f. 1.220 < 3.0

P 0.023

RMSEA 0.039 < 0.06

NFI 0.86 > 0.90

TLI 0.97 > 0.90

CFI 0.97 > 0.90

Table 4 Pair-wise discriminantanalysis paired constructs

*** statistically significantat p<0.001

Models χ2 χ2 Difference

Measurement Model 223.19 –

Performance and KIC paired 286.70 63.51***

Performance and Entrepreneurial Intensity paired 339.25 116.06***

Entrepreneurial Intensity and KIC paired 260.73 35.74***

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We investigated common method variance that may causeany potential inflation problem, since all data for fiveconstructs in the hypothesized model were collected through

the survey method. Common method variance refers tovariance resulting from the use of a common method ratherthan from the construct itself (Podsakoff et al. 2003). For thetest, we computed delta, the degree of the improvement in theChi-square goodness of fit statistic between the null modeland a superior model (Straub et al. 1995). The analysis beginswith a series of measurement models: the null model (MM0)that has no underlying factor, a common-factor measurementmodel (MM1) in which all items have one underlying factor,and our measurement model (MM2). Further, delta wascomputed by using the following equation:

Delta ¼ ½#2MM0 � #2MMi�=#2MM0; where #2MMi is chi� square value of MMi i ¼ 1 or 2ð Þ:

As shown in Table 5, the results indicated that ourmeasurement model is the model which best fits the data andcommon method variance was not a major problem in thisstudy (Scott and Bruce 1994; Sabherwal and Becerra-Fernandez 2003).

5.5 Testing research model

We used AMOS 5 (Arbuckle 2003) to examine the researchmodel through structural equation modeling. To assess the fitof the hypothesized model and check the improvement of thehypothesized model compared to null model, used wereseveral fit indices (Bentler 1990; Hair et al. 1995; Tucker andLewis 1973).

As shown in Table 6, all fit indices of the SEM estimation(normed Chi-square, RMSEA, CFI, TLI, and NFI) aredesirably at or well above the recommended threshold valuesexcept NFI value. The estimation results of the researchmodel are shown in Fig. 3 below. Hypothesis 1 in Fig. 1posited that knowledge integration capability significantlyaffects firm performance. The estimation results support H1(b=0.551, t=4.15, p<0.001).

Hypotheses 2 posited that entrepreneurial intensity posi-tively influences KIC that consists of learning culture, KMprocess, and technological capability. The estimation resultslend support for H2 (b=0.668, t=4.50, p<0.001). In sum, theresults indicate that entrepreneurial intensity has significanteffects on KIC which in turn influences firm performance.

There is an argument in that knowledge integrationcapability may affect entrepreneurial intensity which in turninfluences performance. This argument is based on theknowledge management literature where knowledge manage-ment capability positively influences innovativeness. Weexamined this argument with the same data and found thatthe original research model is better than the alternative modelin every aspect of the fit (χ2, p value, RMSEA, CFI, NFI, andTLI). In fact, it is reasonable to assume that capabilityinfluences performance (Agarwal and Selen 2009). Chen andHuang (2009) found that knowledge management capabilitypositively affected innovation performance. Therefore, weconclude that the proposed model is better in explaining thefirm performance from a knowledge integration perspective.

5.6 Test of the mediating effect of knowledge integrationcapability

In the research model and hypothesis section, we arguedthat the proposed model is similar to the mediating effectsmodel of Lumpkin and Dess (1996) where KIC mediatesthe effect of entrepreneurial intensity to firm performance.To verify this argument, we conducted a mediation test.Figures 4 and 5 show the results of the test.

Figure 4 illustrates that entrepreneurial intensity directlyaffects firm performance. This result is congruent with that ofthe previous studies. However, when we include KIC as amediating variable between entrepreneurial intensity and firmperformance, the direct effect of entrepreneurial intensity onperformance fades away. Figure 5 shows this effect clearly.

Table 6 Goodness-of-fit indices for the research model

Research Model Desired Levels

χ2 223.29 Smaller

d.f. 184

χ2/d.f. 1.214 < 3.0

P 0.025

RMSEA 0.038 < 0.06

NFI 0.86 > 0.90

TLI 0.97 > 0.90

CFI 0.97 > 0.90

Table 5 Measurement model findings

Model χ2 d.f. Delta

Null Model (MM0) 1609.95 210

One Factor Model (MM1) 703.55 189 0.56

Measurment Model (MM2) 223.19 183 0.86

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The test result of the mediating effect of KIC betweenentrepreneurial intensity and firm performance clearly indi-cates that entrepreneurship determines the structural property,i.e., KIC, to influence firm performance.

6 Discussion and implications

In this study, we set out to identify the components of KIC andto examine its impact on firm performance. The proposedmodel provides an integrated view of entrepreneurship,knowledge-based view, and firm performance which has notbeen investigated by previous studies. Our results show astrong support for the relationship between entrepreneurialintensity and knowledge integration mechanism. Our findingsalso indicate that firm performance is primarily determined byKIC which is affected by entrepreneurial intensity and that theeffect of entrepreneurial activities on firm performance wasmediated by KIC (illustrated in Figs. 3 and 5).

Thus, the proposed model can give rise to a precise logicabout how the firmworks as a knowledge integration institutionand to the configuration of knowledge integration capability.This study also clearly shows that successful companies put alot of efforts on building KIC to improve firm performance andenhance the possibility of successfully execution of topmanagement agenda. These include learning culture, ITcapability, and KM process capability as the integrated whole.

In addition, entrepreneurial intensity is found to shape KICin three ways. Firstly, it can create collaborative, team-learningoriented, and innovative team environments (Lumpkin andDess 1996) that represent the learning culture whereknowledge exchange, collaboration, and team learning areencouraged (Garvin 1993). Secondly, entrepreneurial intensi-ty affects KIC by facilitating the use of structural integrationdevices such as committees and task forces (Miller 1983) aswell as the use of rules and directives (Lumpkin and Dess

1996). Finally, it is clear that the deployment of technologiesand organizational structure within a firm is determined byentrepreneurial intensity as the shared belief about desiredoutcomes given by top management (Barringer and Bluedorn1999). Accordingly, it may be concluded that the organiza-tions with high entrepreneurial intensity pursue open andcollaborative learning culture, active knowledge sharing andtransfer, and extensive use of information systems thatsupport strategic decision making, marketing initiatives,interorganizational activities (Sabherwal and Chan 2001)and the acquisition, integration and organization, and sharingof organizational knowledge (Alavi and Leidner 1999;Sensiper 1997).

This study confirms the ‘firm as a knowledge integrationinstitution’ hypothesis (Grant 1996b) and the mediation effectmodel of integration capability (Lumpkin and Dess 1996). Inaddition, the study lays a foundation to further investigateother potential mediating variables such as the investment inresearch and development as well as moderating variablessuch as structure, size, and technology. Future studies aredesired to check the impacts of various control variables onthe relationship between knowledge integration capability andfirm performance.

Our study has important implications for KM at theorganization level. The managers may improve the scope andeffectiveness of KM practices within an organization bypromoting learning culture and exploiting its technologicalcapability. The understanding of the three component structureof KIC gives some sort of practical tools to build and manageKIC to enhance firm performance. Further, system managersand developersmay gain valuable insights regarding the ways toenhance KM and its systems effectiveness. The manifestvariables used in this study to measure the research constructsmay give detailed ideas about what kind of activities need to bedone tomake the system effective. For example, to improve firmperformance, technological capability needs to be built to

* p<0.05, ** p<0.01, *** p<0.001

Knowledge managementProcess Capability

Learning Culture

Performance

ITCapability

Entrepreneurial intensity0.668***

0.653***

0.551***

0.765***

Knowledge Integration Capability

0.862***

Fig. 3 The estimated model

Firm PerformanceEntrepreneurial intensity

0.358***

** p<0.01, ***p<0.001

Fig. 4 The direct effect model

Inf Syst Front (2012) 14:1047–1060 1055

facilitate strategic business planning, help monitor changes inthe market, and enhance the ability to negotiate with customers,while KM needs to allow acquiring knowledge about bestpractices within the industry, absorbing knowledge frombusiness partners into the organization, and transferring organi-zational knowledge to individuals. In addition, top managementneed to motivate employees to build trust with each other, workas team/groups, share their lessons learned with all employees.

6.1 Limitations

We have obtained interesting and insightful results. Ouranalysis, however, is based on cross sectional survey designand we need to exercise caution in making causal inferences.First, we made use of perception measures for firm perfor-mance. This is reasonable when it is very hard to collect dataabout the performance in the major market and overallperformance. In addition, we checked the correlation betweensubjective versus objective measures to find out theircorrelations are statistically significant. However, the directuse of objective measures of firm performance may reducemethod variance and allow more generalizability. For thisreason, future research may utilize objective measures for firmperformance. Second, data was collected in the survey/questionnaire form. The standard limitations of self-reportdata including self-selecting bias and low response rate mayapply to this research. The results of this study do not,however, seem to be contaminated by the single source bias, asindicated in the earlier results of the common method bias test.Third, in this exploratory study, we draw a single subject fromeach organization. Our results are limited by the extent thateach respondent can accurately assess his/her organization.Future studies may incorporate measures taken from multiplemembers of an organization and convert them to organizationlevel measures. Finally, the measurement items of this studyare drawn from previous studies. Although the items turn outto be reliable and valid based on the statistical test, they are notexhaustive and may lack some face validity. Future studies aredesired to develop more items to reflect each construct better.

6.2 Summary and conclusions

We explored the relationship between KIC and firmperformance. The results show that entrepreneurial intensitymay be a strong indicator of developing KIC within anorganization which in turn becomes the key determinant forfirm performance. This study contributes to the literature inseveral ways. This study provides an integrative researchmodel based on entrepreneurship and knowledge-basedview literature. The proposed model facilitates the under-standing of how the firm as a knowledge integrationinstitution functions to affect firm performance. Thisconcept of the knowledge integration institution is the keyfoundation of knowledge-based theory of the firm. There-fore, the understanding of the nomological network fromthe very force of shaping knowledge integration structure tofirm performance provides the starting point to furtherresearch of knowledge-based theory of the firm. Futurestudies are desired to develop other antecedents to KICsuch as social capital and social network structure in a firm.Further, our results suggest the three component structurewell represents KIC. The structure explicates the majorunderstanding of the knowledge structure from the previousstudies. Future studies need to develop additional constructsthat may capture other aspects of knowledge integration.

This study is just one of the many steps necessary forunderstanding the firm as a knowledge integration institu-tion and its working mechanism. The long range goal ofresearchers in this area is to identify a portfolio of thevariables of antecedents to, the components of, and theoutcome of KIC that can be used as diagnostic tools for thefirm performance and the role of information systems andas valid and reliable measures for conducting academicresearch.

Acknowledgements The research of the first author was supportedby World Class University program funded by the Ministry ofEducation, Science, and Technology thought the National ResearchFoundation of Korea (R31-20002)

Knowledge ProcessCapability

Learning Culture

Firm Performance

ITCapability

Entrepreneurial intensity0.673***

0.652***

0.586***

0.765***

Knowledge Integration Capability

0.860***

-0.044ns

** p<0.01, ***p<0.001, ns: not significant

Fig. 5 The mediatingeffect model

1056 Inf Syst Front (2012) 14:1047–1060

Appendix

Table 7 Research instruments

Constructs Items

Corporate Performance(PFM) (Deshpande et al. 1993)

Comparing with major competitors, my organization performed better last year in …..

PFM1: Sales growth in our primary market

PFM2: Net profit growth

PFM3: Overall performance

KM Process Capability(KMP) (Gold et al. 2001)

My organization has processes for …..

KMP1: Acquiring knowledge about best practices within the industry

KMP2: Absorbing knowledge from business partners into the organization

KMP3: Transferring organizational knowledge to individuals

KMP4: Using knowledge in development of new products/services

KMP5: Using knowledge to improve efficiency

Information TechnologyCapability (ITC)(Chan et al. 1997)

In my organization, Information Systems (IS) ….

ITC1: Enhance our ability to negotiate with our suppliers.

ITC2: Enhance our ability to negotiate with our customers.

ITC3: Assist us in setting our prices relative to the competition.

ITC4: Help us monitor changes in our market share.

ITC5: Facilitate strategic business planning.

Learning Culture (LC)(Watkins and Marsick 1997).

LC1: In my organization, employees spend time building trust with each other.

LC2: In my organization, team/groups revise their thinking as a result ofgroupdiscussion or information collected.

LC3: My organization makes its lessons learned available to all employees.

LC4: My organization recognizes employees for taking initiatives.

LC5: My organization works together with the outside community to meet mutualneeds.

Entrepreneurial Intensity(CE) (Covin and Slevin 1988;Barringer and Bluedorn 1999)

Please indicate which response most closely matches the management style of your business key managers.

How many new lines of products or services has your firm marketed in the past 5 years?

CE1: No new lines of products or services. 1 2 3 4 5 Many new lines of products or services.

CE2: Changes in product or servicelines have been mostly of a minor nature.

1 2 3 4 5 Changes in product or servicelines have usually been quite dramatic.

In dealing with its competitors, my organization .…

CE3: Is very seldom the first firm to introducenew products/services, operatingtechnologies, etc.

1 2 3 4 5 Is very often the first firm tointroduce new products/servicesoperating technologies, etc.

Questionnaire items on a 5-point Likert scale, varying from Strongly disagree to Strongly agree

Inf Syst Front (2012) 14:1047–1060 1057

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CE1 .247 .787 .137 .121 .138

CE2 .031 .833 .004 .244 .133

CE3 .079 .695 .261 .257 .331

LC1 .066 .188 .722 .199 .265

LC2 −.014 −.069 .730 .140 .252

LC3 .070 .133 .584 .188 .388

LC4 −.021 .152 .775 −.032 .030

LC5 .214 .024 .760 .120 −.018ITC1 .043 .215 .019 .722 .236

ITC2 .074 −.048 .184 .769 .201

ITC3 .070 .159 .120 .795 .180

ITC4 .179 .274 .146 .759 .098

ITC5 .158 .154 .093 .731 .270

KMP1 .136 .116 .121 .233 .723

KMP2 .165 .168 .216 .106 .754

KMP3 .156 .041 .068 .318 .739

KMP4 .249 .287 .154 .134 .699

KMP5 .129 .123 .235 .361 .641

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Yong Jin Kim is Associate Professor of Management InformationSystems at the School of Business at Sogang University andSSME Department Chair. He holds a Ph.D. in MIS from the StateUniversity of New York at Buffalo. He participated in large ITprojects for BPR. online accounting systems development project,and business recovery planning project. His research interests arein service systems innovation, IS success, e-commerce, andinformation technology valuation, and knowledge management.He has published papers in outlets such as MIS Quarterly,Communications of the ACM, Decision Support Systems, Communi-cations of the AIS, International Journal of Information Manage-ment, Information Systems Frontiers, and Knowledge and ProcessManagement. He also has published books on service innovationand knowledge management.

Seokwoo Song Ph.D., is Associate Professor in the Department ofInformation Systems & Technologies at Weber State University.He holds a B.B.A. from Seoul National University, Korea, aMBA from Syracuse University, and a Ph.D. in InformationSystems from the University of Wisconsin at Milwaukee. He haspublished papers in journals such as DATA BASE for Advances inInformation Systems, CACM, and International Journal of Knowl-edge Management.

V. Sambamurthy Ph.D. is the Eli Broad Professor of InformationTechnology and the Executive Director of the Center for Leadership ofthe Digital Enterprise at the Eli Broad College of Business atMichigan State University. He has expertise in how firms leverageinformation technologies in their business strategies, products,services, and organizational processes. His work has been publishedin journals such as the MIS Quarterly, Information Systems Research,Decision Sciences, Management Science, Organization Science, andthe IEEE Transactions on Engineering Management. He has servedon the editorial boards of numerous jounals, including MIS Quarterly,Information Systems Research, IEEE Transactions on EngineeringManagement, and the Journal of Strategic Information Systems. He isthe editor-in-chief of Information Systems Research.

Young Lyoul Lee Ph.D. is Head of Olleh TV Business Unit at KTCorp., a telecommunication service provider in Korea. He worked asAssistant editor of Joongang Ilbo which is one of the highly regardednewspapers in Korea.

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