Knowledge management and innovation performance

Purpose - The purpose of this paper is to show why the establishment of “learning organisations” must be a central element of knowledge management – especially in firms operating on markets where product innovation is an important parameter of competition. Design/methodology/approach - The argument straddles and combines insights related to management and organisation theory with an evolutionary economic analysis of the relationship between innovation, learning and knowledge. It is supported by an empirical analysis of survey data on Danish private sector firms. The survey was addressed to all firms in the private urban sector with 25 or more employees, supplemented with a stratified proportional sample of firms with 20‐25 employees. Findings - The analysis shows that firms that introduce several organisational practices, assumed to characterise the learning organisation, are more innovative than the average firm. Research limitations/implications - The empirical findings are limited to the private sector and do not cover public sector organisations. Practical implications - The learning organisation characteristics have a positive impact on dynamic performance and there are obviously lessons to be learned from the successful firms operating in turbulent environments that introduce specific organisational characteristics such as job rotation, inter‐divisional teams, delegation of responsibility and reducing the number of levels in the organisational hierarchy. Originality/value - The paper puts “knowledge management” into the wider concept of “learning economy” and shows how a key element of knowledge management is to enhance the learning capacity of the firm.