Enhancing the Knowledge Management Capability Using a Holistic Model: Evidence from Mexico

Abstract

Knowledge management has become an increasingly important strategic resource as firms implement processes to acquire, analyze, and implement knowledge to meet the needs of current and future customers. This research collected data from firms in Mexico, an emerging economy, to understand how Mexican firms employ knowledge management for the effective use of exploration and exploitation strategies to enhance business performance. While previous research has examined ambidextrous business strategies, there is a lack of research that examines the role that a knowledge management process has in the business strategies of firms in emerging economies. Overall, the results indicate that Mexican firms that have holistic knowledge management processes in place optimizing business performance by meeting the needs of new and existing customers through use of exploration and exploitation strategies.

1. Introduction

Knowledge management (KM), defined as a series of practices and techniques that organizations adopt to create, share, and explore knowledge to achieve organizational goals, is an important method to organize and manage information systematically and continuously [1, 2, 3]. Many studies have considered knowledge management as a market resource of high prominence and relevance to firms as they become competitive in today’s information intensive environment [4, 5, 6]. In fact, this increasing importance has led KM to reach a level considered as a strategic resource for organizations. In this research, we focus on the process through which firms manage knowledge and utilize knowledge to enhance the effectiveness of explorative and exploitative marketing strategies. Previous research has examined the importance of these processes for innovation [7, 8]; however, there is a lack of research that integrates these processes and the use of exploitative vs. explorative marketing strategies in emerging markets. Thus, the purpose of this research is to study the integration of KM processes through which firms manage knowledge and the implications that this has for their use of explorative and exploitative strategies in an emerging economy with developing socioeconomic realities. We provide a holistic interpretation of KM that encompasses knowledge acquisition, knowledge conversion, and knowledge application within the firm.

Researchers conceptualized KM capability as a multidimensional construct with dimensions related to processes that allow for the acquisition, conversion, and application of knowledge [3, 9]. Knowledge acquisition includes the processes that a firm must acquire and/or create knowledge, knowledge conversion is the processes through which a firm makes knowledge useful, and knowledge application includes the processes in which a firm utilizes the knowledge acquired and converted [3]. Following this stream of KM research, we take a holistic approach towards the KM process. In fact, KM is an umbrella term for a variety of terms including knowledge creation, knowledge valuation, knowledge sharing, knowledge mapping, knowledge storage, transport, and distribution [10]. The accumulation of new knowledge helps to update the existing knowledge, and even change the structure of knowledge, enhancing new capabilities that encourage organizational learning and growth [11]. Particularly, extant research has identified the importance of the competitor and customer orientation via the market orientation in the effective development of exploitative and explorative strategies [12]. While this is indeed important, there is a need to consider the holistic process through which knowledge is obtained and ultimately implemented throughout the firm to fully understand the effect of knowledge capabilities [2]. Indeed, extant literature has identified the importance of the KM process for innovation [7, 13]. Thus, in this research our first contribution is that we measure KM as the accumulation of three processes—acquiring, converting, and applying knowledge—to meet the needs of current and future customers through exploitative and explorative strategies, respectively. It is our expectation that marketing performance will improve after KM is implemented mediated by both explorative and exploitative processes. Explorative processes represent a high degree of novelty or originality that produces more value than existing means. New technological ideas about how to shape new product development enhances the firm’s awareness and understanding of relevant technological know-how [6].

As our second contribution, we seek to address the lack of KM studies in emerging markets by analyzing the data collected from mid- to upper-level managers from Mexico, an underrepresented country and emerging economy not thoroughly investigated in marketing research on knowledge management. Moreover, while research tends to focus on firms in developed economies, we examine the country level trends in an emerging/developing market to determine the level of sophistication and particularities of KM structures within the country of Mexico. KM practices can be measured within a continuum with some companies having little/no processes in place, some having continuously improving and advanced processes, and those that lie in between [1]. Recent studies have been done in Mexico have been limited to industry sectors such as small to medium size manufacturing plants in the state of Aguascalientes [14] and in higher education institutions [15]. With limited and regional research on the use of KM processes in Mexico, this research focuses on the knowledge management processes within various industries throughout different regions of Mexico. Firms can learn from their own successful and failed experiences to accumulate local knowledge in emerging markets. Over time, firms can adjust their operations and become more capable of applying their marketing capability to enhance new product performance [16]. The aim of this study is to reveal the current state of knowledge-based view (KBV) of firms in one emerging economy, Mexico. Discovering what knowledge processes, knowledge types and knowledge creation form part of the dynamic KM capability in Mexico.

2. Conceptual framework

2.1 Knowledge informs ambidextrous business strategies

Within a competitive environment, market changes are captured through KM capabilities that include an advanced information gathering capacity. Firms struggle to implement such technologies and reach the levels of exploitation, efficiency, and effectiveness they had envisioned. As organizations invest considerable capital and R&D in exploring technological innovation, companies have simultaneously produced improvements in design, training of users, and project management techniques to exploit these technologies. Thus, enhancing their technological capability. The question of how the KM capability supports the marketing capability remains essential [4]. To answer this question, we turn to the resource-based view (RBV) of the firm which has been a paradigm in the strategy field for decades [5]. Within this paradigm, market-based resources are necessary components of firm performance, and play a significant role in market learning, creating brands, and making marketing connections [5]; however, there is an absence of evidence that links its immediate impact on the enhancement of firm performance, evidenced in a lack of research investigating the connection among marketing resources and marketing performance [17]. Marketing resources and marketing capabilities which ensure the generation, dissemination, and responsiveness of marketing intelligence, are significant drivers of firm performance. In other words, a successful market-oriented organization should integrate its competencies to gather marketing intelligence, to enable proper strategic response to market demands [18, 19].

The administration of knowledge, or knowledge-based view (KBV), in organizations involves a series of activities encompassing general processes, such as knowledge acquisition, knowledge storing, knowledge conversion or transfer, and knowledge application [20]. Knowledge acquisition is defined as the development of new content or replacement of existing content within the organization’s explicit and tacit knowledge [21]. Explicit knowledge is discrete and can be captured in records and storage for future use in entities such as libraries, archives, and databases. It is knowledge that can be codified and transmittable in formal, systematic language. Tacit knowledge is personal and is embedded in action, commitment, and involvement in a specific context [21]. It is deeply rooted in an individual’s mind, and therefore, hard to codify and communicate and can be expressed only in a specific context. Tacit knowledge is the core of a firm’s prior knowledge base [22]. Organizational learning takes place through the interaction of these two dimensions of knowledge presenting four combinations [20, 23, 24] following what is known as the SECI model of knowledge creation theory [25, 26, 27] as follows:

1. Tacit to tacit- Socialization or training interaction where one individual shares information with another individual [25, 26, 27].

2. Tacit to explicit- or Externalization of tacit knowledge in the form of a new approach [25, 26, 27].

3. Explicit to explicit- Combination or the gathering and synthesizing information from many sources, creating one new whole document such as a financial report [25, 26, 27].

4. Explicit to tacit- or Internalization of explicit knowledge as it is shared throughout the firm to other individual members. It is used to broaden and reframe an individual’s own tacit knowledge until the new approach is taken for granted [25, 26, 27].

Knowledge storage attempts to capture an understanding of the organization through the development of information processing mechanisms that detect trends, events, competitors, markets, and technological developments [28]. An organization has within its structure cognitive systems and memories [19]. Organizations preserve knowledge over time and as people come and go by the sharing of knowledge. Knowledge transfer is the perception of a shared understanding among managers who constitute the interpretive system otherwise known as knowledge conversion [1, 3] and forms part of knowledge-based theory [29, 30]. Organizations can be conceptualized as a series of nested systems of continuous interpretative activity. Individual members within an organization are socialized to these organizational interpretations [28]. The key for a functional and valuable knowledge transfer is to distribute knowledge to locations where it is needed and can be used. When information is widely distributed within an organization, more sources are available and retrieval efforts are more likely to succeed [31]. The accomplishment of this process is determined by the likelihood a firm will structure communication procedures and information flows within the organization. Moreover, IT can increase knowledge transfer by amplifying the individual’s reach beyond the formal communication lines [19]. Finally, knowledge by itself does not create value for an organization; it is the application of knowledge which potentially generates a source of competitive advantage [32]. Knowledge application initiatives seek to achieve superior organizational performance through improved efficiency and effectiveness.

To remain competitive in our knowledge-based society, firms must offer innovative products and services made possible through effective KM practices. Knowledge is a valuable resource whose integration in the firm is a fundamental antecedent to the development of a sustainable competitive advantage [33]. This is because the KM capability efficiently collects information and makes it available for future use and for future benefit to the firm. These formal processes and structures through which firms capture, interpret, and integrate knowledge antecede the success of product innovation performance [7]; thus, our research focuses on the process of KM and includes the acquisition, conversion, and application of knowledge, as shown in Figure 1.

Figure 1.

Conceptual model.

2.2 Exploitation, exploration, and business performance

In general terms, exploration is referred to as risk-taking experimentation, searching, and innovation, while exploitation is defined as refinement activities that seek efficiency and execution [34]. In other words, one explanation could be summarized as exploration strategies utilize knowledge to meet the needs of potential new customers while exploitation strategies focus on the needs of existing customers. The ambidextrous marketing capability adds preemptive and experimental dimensions that orchestrates knowledge to discern and lessen the confusion created through the complexity of marketing information [35]. Companies have increasingly shifted towards meeting the needs of both new and existing customers by balancing the simultaneous use of explorative and exploitative strategies, also known as ambidexterity. Thus,

H1a: Knowledge management capability is positively associated with market exploitation.

H1b: Knowledge management capability is positively associated with market exploration.

The return on investment into developing and enhancing the knowledge management capability is measured by business performance with the expectation of increasing returns. Our study’s conceptual model (Figure 1) draws mediation constructs in between knowledge management and business performance. The constructs of exploitation and exploration have been placed in juxtapositions in the literature whereby there are trade-offs in seeking out the processes of exploitation come at the expense of exploration and vice-versa the processes of exploration will undermine the processes of exploitation. This is a classical point of view explained with the theory of rationality and the theory of limited rationality [34]. The theory of rationality assumes that there are alternatives in which to invest and investments are spread out and rational while the theory of limited rationality assumes that only one choice is affordable because resources are limited [34]. At this point, it becomes interesting to see how emerging economies with limited resources deal with the dilemma.

The literature calls for a balancing act into an ability known as ambidexterity. The effective utilization of exploitation and exploration strategies has positive downstream effects on firm performance. Both strategies are positively associated with firm performance when both are used concurrently and at their highest levels [36]. Similarly, exploitation and exploration strategies have been shown to be positively related to radical and incremental innovation, respectively [37]. In line with previous findings in emerging markets, we expect the ability of Mexican firms to effectively manage these two strategies to be positively associated with business performance [10, 11, 38]. The simultaneous pursuit of both exploitation and exploration is done by balancing tensions of differentiated subunits or individuals, each of which specializes in one of the strategies reducing the performance risk of over-emphasizing any capability as they conflict with one another [10, 11, 38].

The literature indicates that ambidexterity is difficult to achieve, and notwithstanding, desirable for improved performance in which firms dynamically confirm the old system and facilitate the learning of new ideas/methods and quality improvements, especially in emerging markets [10, 11]. In fact, firms only extend to new markets until they have sufficient capabilities within existing markets, or in other words firms turn to explorative capabilities once they have exploited the current ones [11]. In this case, they improve the opportunities of survival of firms [10, 11].

Though this shift is relatively new in specific industries (for instance, the mobile phone service industry has historically favored new customers with deal offers until recently), extant marketing research has looked at the tradeoffs between exploration and exploitation and has focused on how companies are able to balance the two for optimized performance. The capability-rigidity paradox has been identified in past marketing research as a tradeoff between satisfying existing customers versus obtaining new ones, a paradox that can be resolved through use of market orientation [12]. In this research, we seek to further understand how firms balance this tradeoff between exploration and exploitation through an analysis of the formal processes of KM in Mexican firms. Organizations balance the two to varying degrees at different points in time. Foregoing exploitation to exploration does not allow a company to benefit from their investments in exploration. On the other hand, organizations that do not engage in exploration find themselves outdone by companies with new technologies. This becomes particularly difficult when companies are called upon to abandon what has long been successful [21]. The balancing of exploitation and exploration becomes a challenge as one hinders the other. Exploration reduces the speed of exploitation while improvement in skills of an existing process or technology makes experimentation less attractive [34].

Mexico’s relatively high levels of uncertainty avoidance [39] coupled with the inherent riskier nature of market exploration [9] may suggest that Mexico may be better suited to improve marketing performance with exploitation strategies. The Global Leadership and Organizational Behavior Effectiveness Project (GLOBE) defines uncertainty avoidance as the extent to which members of an organization seek certainty in their environment by relying on social norms, rituals and bureaucratic practices [40]. The value score attained by Mexico, is 5.26 on a 7-point scale, which is certainly higher the average global score for this measure which encompassed more than 60 countries [40]. However, in addition to how much organizations within a country value a dimension, GLOBE also measures how organizations conduct business and thus creates a practice score that can be compared to the value score. The practice score for Mexico’s uncertainty avoidance is 4.18, which falls squarely as the average GLOBE score for all countries in this study [40]. This leaves us wondering what to expect from in terms of Mexico’s ability to eliminate uncertainty using exploitation and exploration strategies.

RBV fits better in low uncertainty markets, typically stable or mature industries often populated by established firms, because there is time to build resources in current markets, renew them, and leverage them into related markets [5]. In contrast, in high uncertainty markets, relevant resources may not yet exist, or are changing tumultuously. RBV in high uncertainty markets is more about learning, understanding, and formulating rather than retaining, monitoring, and distributing resources.

Despite the inherent differences, exploitation and exploration strategies and potential cultural issues, we expect that Mexican firms with effective knowledge management capability utilize both. Particularly, Mexican companies have knowledge management structures diffused within their organization, a practice that has improved their performance [2]. Literature from other emerging markets indicates that KM has been implemented successfully in other countries. For example, using a holistic approach to assess marketing competencies in Indian and Maldivian automobile sale centers, allocation of marketing resources should cover all marketing competencies of the firm, i.e., new product development, brand reputation, and firm image, as well as other components such as communication and distribution channels [17]. Research covering marketing competencies is necessary to have a more detailed understanding of their relative impact on firm performance [17]. We expect that the appropriate use of a holistic knowledge management process enables Mexican firms to utilize exploration and exploitation strategies effectively. Hence,

H2a: Market exploitation is positively associated with marketing performance.

H2b: Market exploration is positively associated with marketing performance.

3. Statistical results

3.1 Descriptive characteristics

To test this study’s hypotheses, we organized a data collection strategy to collect data from Mexico’s major cities and industrial sites. In northern Mexico, we contacted the Maquiladora Associations and distributed invitations to participate to manufacturing plant managers who are members of these associations. Data from Mexico City, Monterrey, Puebla and San Luis were obtained via other professional associations such as Rotary Clubs and academic advisory boards of various prominent Mexican universities. All the respondents were members of professional associations that served as a point of reference in sending recruitment emails. All the elements of the study including the questionnaire and recruitment emails were approved by the primary investigator’s university Institutional Review Board for Human Subjects that ensures that all research is conducted with the utmost ethical standards as mandated by the US government. The data collection phase was in place for 6 months. The survey was created and distributed using the Qualtrics Survey Platform. The data was analyzed using SPSS and Smart PLS structural equation modeling software.

The first step of analysis is to provide descriptive characteristics of the respondents. The population of the study were managers of a minimum of 5 employees in a corporation that had knowledge management software. After eliminating incomplete surveys, we obtained 93 useable responses from mid- to upper-level managers employed throughout Mexico. We used SPSS to get frequency data in percentages as shown in Table 1.

	% of total
Gender
Male	51.6
Female	43.0
Not available	5.4
Work experience
Less than 1 year	1.1
1–2 years	3.2
3–5 years	16.1
6–8 years	16.1
9 or more years	59.1
Not available	4.3
Supervisory experience
Less than 1 year	6.5
1–2 years	22.6
3–5 years	24.7
6–8 years	9.7
9 or more years	32.3
Not available	4.3
Industry
Retail	8.6
Telecommunication services	11.8
Financial & insurance services	17.3
Manufacturing	18.3
Not for profit	9.7
Other	30.1
Not available	4.3
Functional area
Research and development	14.0
Operations	15.1
Human resources management	8.6
Marketing	9.7
Finance/accounting	22.6
General management/strategy	19.4
Other	5.4
Not available	5.4
Hierarchal distance from CEO
0	1.1
1	19.4
2	18.3
3	20.4
4	11.8
5	14.0
6	3.2
7	1.1
8	1.1
10	3.2
Not available	6.5

Table 1.

Descriptive sample characteristics.

Regarding the respondent’s position in the managerial hierarchy, about 20% of respondents were one level below the CEO, 38% were 2–3 levels below the CEO, and 33% were 4 or more levels below the CEO (7% missing). In terms of supervisory experience, 20% have 1–5 years, while 75% of respondents have over five years of experience (5% missing). These managers are employed in various industries and are working in a complete range of functional areas as can be seen in Table 1. Forty of the respondents were women, forty-eight were male, and five did not indicate a gender. The number of subordinates under their own supervisor ranged from 1 to 5 employees (29%), 6–10 employees (30%), 11–49 employees (23%), and 50 or more employees (13%), with 5% missing.

3.2 Measures

Following the descriptive analysis of our sample, the second step of analysis is to analyze the data for statistical reliability and validity of the constructs used in Figure 1. To measure knowledge management capability, we utilized a reflective second-order latent model adapted from the Turulja and Bajgorić [3] study. This model consists of three dimensions: knowledge acquisition (five items), knowledge conversion (four items), and knowledge application (three items). As shown in Table 2, managers were asked to indicate on a seven-point Likert scale.

Construct	Loading
Knowledge acquisition (adapted from Turulja and Bajgorić [3]; α = 0.877, CR = 0.924, AVE = 0.803, R2 = 0.752)
My supervisor
has processes for acquiring knowledge about suppliers	0.929
has processes for exchanging knowledge with our business partners	0.828
uses feedback from projects to improve subsequent projects	0.927
Knowledge conversion (adapted from Turulja and Bajgorić [3]; α = 0.949, CR = 0.967, AVE = 0.908, R2 = 0.900)
My supervisor
implements processes for absorbing knowledge from individuals into the organization.	0.960
implements processes for absorbing knowledge from business partners into the organization.	0.957
implements processes to integrate knowledge from different sources	0.942
Knowledge application (adapted from Turulja and Bajgorić [3]; α = 0.959, CR = 0.973, AVE = 0.924, R2 = 0.809)
My supervisor
implements processes for replacing outdated knowledge	0.967
uses knowledge to improve efficiency	0.969
is able to locate and apply knowledge to solve problems	0.948
Exploration (adapted from Lubatkin et al. [36]; α = 0.934, CR = 0.950, AVE = 0.793, R2 = 0.657)
My supervisor
looks for novel technological ideas by thinking “outside the box”?	0.889
bases its success on its ability to explore new technologies?	0.922
creates products or services that are innovative to the firm?	0.934
looks for creative ways to satisfy its customers’ needs?	0.909
actively targets new customers groups?	0.790
Exploitation (adapted from Lubatkin et al. [36]; α = 0.914, CR = 0.946, AVE = 0.854, R2 = 0.700)
My supervisor
commit to improve quality and lower cost?	0.917
constantly surveys existing customers’ satisfaction?	0.917
fine-tunes what it offers to keep its current customers satisfied?	0.938
Business performance (adapted from Lakshman and Parente [41]; α = 0.942, CR = 0.963, AVE = 0.896, R2 = 0.456)
Over the past 3 years what is the
relative return on investment for your business unit, in comparison to all your competitors?	0.938
relative market share for your business unit, in comparison to all your competitors?	0.952
performance of your products/services perform, in comparison to all your competitors?	0.949

Table 2.

Construct loadings and reliability.

Managers indicated the extent to which their company pursues exploitative strategies by responding to three items on a seven-point Likert scale (e.g., fine-tune what it offers to keep its current customers; adapted from Lubatkin et al. [36]). Additionally, managers specified the degree to which their company pursues explorative strategies by responding to six items on a seven-point Likert scale (e.g., look for creative ways to satisfy its customers’ needs; adapted from Lubatkin et al. [36]). To measure business performance, we asked managers to compare their business unit to competitors over the last three years using three items on a seven-point Likert scale: return on investment, market share, and product/service performance (adapted from Lakshman and Parente [41]).

3.3 Measurement model assessment

To assess internal consistency reliability, we examined Cronbach’s alpha and composite reliability, as shown in Table 2. For each of the constructs, Cronbach’s alpha was above 0.866 which exceeds the generally agreed upon threshold of 0.70 [42]. Composite reliability ranged between 0.931 and 0.963. In PLS-SEM, composite reliability is more appropriate compared to Cronbach’s alfa because it does not assume that all indicators are similarly consistent [43]. We examined factor loadings and average variance extracted (AVE) to assess convergent validity. Standardized loadings for all items in the model ranged from 0.761 and 0.952. This exceeds the 0.70 threshold indicating that the items loaded well on their respective constructs [43]. For each of the constructs, AVE ranged from 0.753 to 0.896 exceeding the recommended threshold of 0.50 [44, 45]. This indicates that convergent validity was attained. Additionally, AVE exceeded all squared correlations for all constructs indicating discriminant validity [44]. See Table 3.

	Variable	1	2	3	4	5	6
1	Knowledge acquisition	0.873
2	Knowledge conversion	0.862	0.928
3	Knowledge application	0.751	0.863	0.938
4	Exploration	0.747	0.772	0.783	0.867
5	Exploitation	0.841	0.800	0.778	0.756	0.905
6	Business performance	0.623	0.670	0.666	0.595	0.600	0.946

Table 3.

Correlations and discriminant validity.

Note: AVE for constructs presented diagonally in italics.

Common method variance can have a significant impact on the relationships between measures of different constructs [45]. Participants might feel fatigued towards the end of the survey’s questions which results in providing consistent answers regardless of what the questions are about. This phenomenon is known as common method variance, and it can have a significant impact on the relationships between measures of different constructs [45]. Common method variance was tested by using the Harman’s single factor test. This is a simple test that ensures that no one factor accounts for the majority of variance in a Factor Analysis with one factor. The eigenvalue of this factor was 44.043, below 50%, and therefore indicating no evidence was found that common method variance [45]. In addition, we applied the CFA marker technique (Williams and McGonagle, 2016), a recommended statistical technique to test this issue which when used with other measures indicating high reliability and validity raises no concern that common method bias affected the data. The marker used consisted of a related construct embedded in the questionnaire to which no significant correlations were found.

3.4 Control variables

Our model includes several control variables frequently used in the literature using both the respondent demographic data and the firm characteristics of where the respondent was employed. The respondent characteristics that proved statistically insignificant were gender, tenure, and years of supervisory experience. The variable that proved statistically significant with a weight of 0.045, was hierarchal distance in number of levels between the respondent and the CEO. This variable serves to verify that there were firms included of considerable size noted in the number of levels between the respondent and the CEO. Also noted is the respondent’s upper management level by the close distance to the CEO. Though this variable is statistically significant, the weight is extremely low to consider it having much influence on marketing performance.

3.5 Testing the structural equation model

In our third step of the analysis, we utilize partial least squares-based structural equation modeling (PLS-SEM) to estimate latent variable scores and paths between constructs as shown in Figure 1. Particularly, we utilize the statistical tool Smart PLS 3.0. PLS-SEM was selected as the method appropriate for our study as it accommodates relatively smaller sample sizes [43]. Additionally, it allows us to simultaneously conduct principal components analysis and model structural paths [43]. PLS-SEM is also utilized for predictive purposes and is particularly useful for understanding competitive advantage and drivers of success [43]. We analyze the PLS model by first evaluating validity and reliability and then evaluating the structural paths of the model. The Goodness of Fit (GoF) index is bounded between 0 and 1. Because of the descriptive nature of the Goodness of Fit index in Partial-Least Squares method, there is no inference-based criteria to assess its statistical significance. Different effect sizes of R-square [46] determine the cutoff points of the Goodness of Fit, depending on the R-square value. This study obtains a G-value of 0.406, which exceeds the cut-off value of 0.36 for large effect sizes of R-square [46]. It indicates that the model has better prediction power in comparison with the baseline values (GoF criteria). This finding adequately validates the complex PLS model globally [47].

As summarized in Table 4, knowledge management capabilities are a strong positive predictor of exploration (β = 0.813; p < .001) explaining about 66% of the variance and providing support for H1a. Knowledge management capabilities are also a strong positive predictor of exploitation strategies (β = 0.861; p < .001) explaining about 74% of the variance and providing support for H1b. Exploration strategies are positive predictor of marketing performance (β = 0.331; p < .05) and exploitation strategies are a strong positive predictor of marketing performance (β = 0.350; p < .01) in line with H2. Exploration and exploitation strategies, together, explain about 40% of the variance in marketing performance. The Goodness of Fit (GoF) index is bounded between 0 and 1. Because of the descriptive nature of the Goodness of Fit index in Partial-Least Squares method, there is no inference-based criteria to assess its statistical significance. Different effect sizes of R-square [46] determine the cutoff points of the Goodness of Fit, depending on the R-square value. This study obtains a G-value of 0.406, which exceeds the cut-off value of 0.36 for large effect sizes of R-square [46]. It indicates that the model has better prediction power in comparison with the baseline values (GoF criteria). This finding adequately validates the complex PLS model globally [47].

Hypothesis	Accept	Path coefficient	t-value	Significance level
Knowledge management → exploitation	√	0.861	31.662	p < .001
Knowledge management → exploration	√	0.813	18.603	p < .001
Exploitation → business performance	√	0.35	2.609	p < .01
Exploration → business performance	√	0.331	2.353	p < .05

Table 4.

Hypothesis results.

4. Discussion

In this study we have sought to test a conceptual model of KM capabilities that is holistic in nature, capturing the KM practices that act as antecedents of Business Performance. After all, improving business performance is the overarching goal of all technology adoption. In KM, we have the essential capabilities of knowledge capture, knowledge conversion and knowledge application. There is a strong theoretical foundation supporting the concept that organizational learning is the culminating result of these three constructs. You seek information from the external environment to convert it and absorb it internally and then apply it to current practices thereby making efficient use of knowledge. The model shows the mediation effect of exploitation and exploration strategies as there is a balancing act to be done in the KM effort. Both of these strategies are important to optimize performance. However, it is very difficult to both explore new marketing trends and technologies and exploit the existing marketing trends and technologies. The purpose of this study was to examine if this balancing act could be done with limited resources in an emerging economy, Mexico.

In a surprising fashion, our results reveal that there is almost perfect equilibrium in exploitation and exploration processes, revealing that it is possible to achieve rationality in emerging economies with limited resources. In other words, it is not to be assumed that exploitation strategies are preferred in Mexico and that exploration strategies are not beneficial in emerging economies. This points to the enormous benefit of the separation of exploration and exploitation strategies, which capture ambidexterity as mediating marketing performance. While there has been an underlying assumption about the role of ambidexterity in pursuing knowledge management, this study provides evidence on how it is important to separate the two types of strategies and enhance both to maximize business performance. Contrary to previous studies, this paper presents an analysis of simultaneous impacts of exploitation and exploration strategies separately to measure their mediating role and individual impact on business performance. The proposal and successful measurement of the conceptual model is an important academic contribution to this study.

In addition to the academic contributions, this study presents findings of interest to practicing managers. Managing ambidexterity during KM acquisition, conversion and application is a complex challenge. In fact, encouraging employees to simultaneously share their knowledge, learn from each other, implement ideas for continuous improvement, and innovate is particularly difficult in the context of change, fear, and uncertainty that characterizes the emerging market environment. Nevertheless, managers in these firms are under tremendous pressure to identify synergies that provide a financial return from their marketing efforts. Our results show that teams can be encouraged and supported to manage ambidexterity as separate though both necessary functions. Our work provides practical insights for managers charged with leadership responsibilities during acquisition integrations on ways to encourage an equal balance of both strategies.

KM has become increasingly important in Mexican economic development and global competitiveness. This study shows that knowledge leadership behaviors have permeated various industries and Mexico is poised to endeavor in both exploration and exploitation of their KM capability to increase market share of their products. In this paper, we have shown that the Mexican organizational culture combined with knowledge management practices have created competitive advantages, not only in the domestic market, but also in international markets. Organizations attempting to embark in knowledge management need material, ideas, best-practices, and role models from existing adopters or practitioners to help them adopt it [48]. KM is strongly diffused in Mexican companies and has improved marketing performance [2]. A strong innovative capacity within Mexican organizations on how successful they are in the generation of knowledge, and how the knowledge leadership skills of managers in knowledge acquisition, knowledge conversion and knowledge application support this process [2]. With this paper we have provided theoretical convergence of KM that are relevant for a company’s market wisdom as had been called for in the literature [24].

5. Conclusion

In conclusion, the data collected from the MNEs based in Mexico fully support four hypotheses, which examines a holistic approach to the KM capability matter for marketing strategies in an emergent market environment. Previous research focused on identifying the open innovation that promotes innovation in general without adding the role that KM capabilities plays in that process [49]. It was essential to understand the effect of knowledge management on business performance using exploitation and exploration as mediators. Our model tested the often assumed direct and positive relationships by testing four hypotheses, finding all relationships statistically significant. Based on the findings of this study, it is inferred that firms that manage their knowledge resources effectively are successful by exploring and exploiting their knowledge resources. This is possible by promoting the usage of KM technology to speed up the decision-making process, and by managing the processes of knowledge acquisition, conversion, and application. This KM capability to know how to acquire, transfer, store and implement knowledge in a firm, and assisted by exploring and exploiting marketing strategies leads to increased business performance. The use of a multidimensional measure of knowledge management consisting of three processes as has been shown in the literature to be knowledge acquisition, knowledge conversion, and knowledge application [3, 50]. We expand the knowledge management literature by offering empirical analysis that confirms the importance of individual constructs of the knowledge management capability as an antecedent to exploration and exploitation strategies to enhance the business performance.

5.1 Limitations and future research

Though this study sample includes respondents from a wide range of functional areas and industries, there is the limitation that because data was obtained from a single country (i.e., Mexico), the findings may not be generalizable to other contexts. In addition, the results of this research are not based on a large sample of firms, and forthcoming research may wish to use larger data sets to also increase the validity of the findings. Cultural factors and dimensions including ingroup collectiveness and power distance can be added to the research model to test their impact on the adoption of KM processes, such as collaboration, trust, knowledge sharing and communication.

Future studies can apply the model used in this study to examine KM capability in different environmental and cultural settings, i.e., different countries for the validation and a cross-cultural comparison of results. Future studies could take the firm’s perspective and examine other strategic and organizational factors, such as customer involvement, emphasis on product quality, cost or development speed, and other organizational support such as culture may also influence its use of different customer involvement approaches.