Portfolio effects of knowledge management strategies on firm performance: Complementarity or substitutability?

Abstract

To investigate the mutual effects of knowledge management (KM) strategies on firm performance, we categorize the portfolios of KM strategies into four patterns: unrelated (scope- and type-based), related, extended, and high diversity portfolios. An inverted U-shaped relationship of KM diversity and firm performance is proposed across the portfolios based on the underlying cost?benefit tradeoffs. Supermodularity test results indicate that strategies of unrelated diversity portfolios show substitutable effects, whereas strategies of related diversity portfolios have complementary effects on firm performance. While strategies of extended diversity portfolios exhibit mixed results with complementary and substitutable effects, strategies of high diversity portfolio exhibit a substitutable effect. Our findings indicate that multiple KM strategies, as a firm?s portfolio, mutually generate complementarities or cause substitutabilities in improving firm performance. We also discuss practical implications for managerial decisions on successful KM.