The Mediating Role of Knowledge Management in the Relationship between IT Capabilities and Innovation Capabilities

Abstract

Background: Small-medium enterprises (SMEs) manufacturing has been regarded as the pillar of the nation's economic development, especially in developing countries. However, this vital sector faces unprecedented challenges of intense global competition, rapid technology change, and consumer behaviour change. The literature suggests that information technology capabilities significantly influence the development of SMEs through facilitating knowledge transfer, which is the key driver for innovation development. However, past studies paid attention to large corporations rather than SMEs, which leaves a gap in what IT capabilities are and how IT capabilities interaction with knowledge management can influence innovation capabilities.

Objectives: The main goal of this paper was to find out if information technology capabilities, which are part of open innovation, help small and medium-sized businesses (SMEs) in a developing market, in this case the United Arab Emirates (UAE), to be more innovative.

Methods:A quantitative approach was used. Meanwhile, a survey was employed to gather information. As an exogenous variable, knowledge management (KM) was discovered as a mediating variable in this study. Finally, an indigenous variable was added: inventiveness.

Results:IT has an impact on knowledge management, including knowledge dissemination, knowledge management, and knowledge application, according to this study. IT capabilities have also been found to affect product innovation. Meanwhile, knowledge management serves as a bridge between ITC and product development.

Conclusions: The purpose of this study is to find out which information technology capabilities (ITC) are linked to improved knowledge management (KM) and innovation capabilities in small and medium-sized businesses (SMEs). Because of their considerable contribution to the economy's gross domestic product (GDP) and employment generation, SMEs are seen as the economy's fortitude. However, this vital industry faces significant challenges, including fierce rivalry, short product life cycles, technological change, and shifting customer behaviour.