Knowledge management: key to sustainable competitive advantage

Competitiveness is the ability of a firm to survive and prosper, given the competition of other firms for the same profits. The competitiveness of a firm is the result of a competitive advantage relative to other firms. Competitive advantage defined as the ability of a company to make products that provide more value to the customer than rival products, leading to higher sales and higher profits, is only achieved if a company manages to sustain its edge over its rivals over time. Knowledge is increasingly claimed to be a key critical resource and source of competitive advantage in the modern global economy, especially with the rise of the service economy, the growth in the number of ‘knowledge workers’, the increasingly rapid flow of global information, and the growing recognition of the importance of intellectual capital and intellectual property rights. This paper examines the strategic relevance of KM in enhancing human capital management in firms. To achieve this objective the present a detailed literature review on the implications of KM on effective human resource development, and the consequences for an organization's ability to attain and sustain competitive advantage in the marketplace. The paper proposes that firms that develop and apply strong KM culture would be able to achieve consistent high performance. In addition, when a firm is able to perform better than competitors; such a firm would be able to achieve sustainable competitive advantage. This paper will serve as a frame of reference for researchers, and could enable practitioners to gain better understanding of key requirements for maintaining a competitive advantage via effective integration of KM and human capital initiatives.