Examining the Impact of Knowledge Management

Capability on Organizational Performance: A Study

Case at one of The International School in South
Tangerang, Indonesia
Muhammad Akbar Rivai Sfenrianto
Information Systems Management Department, Information Systems Management Departement,
BINUS Graduate Program- BINUS Graduate Program-
Master of Information Systems Management Master of Information Systems Management
Bina Nusantara University Bina Nusantara University
Jakarta, Indonesia, 11480 Jakarta, Indonesia, 11480
muhammad.rivai@binus.ac.id sfenrianto@binus.edu

Abstract— Knowledge in institutions or organizations,
especially in this context, is an international standard
educational institution, which they have realized needs to
manage and document the understanding of each of their
human resources in a knowledge management system in the
form of web-based services. So that it can be a reference for
each individual to gain knowledge without having to depend on
other individuals, with the hope, in the future, the management
of this knowledge will facilitate access and use of this
knowledge. Common understanding occurs because the author
observes that the affiliated organization has not yet optimized
the effectiveness of existing knowledge management. The
observation that the author did, the author tries to make
observations or investigations related to the ability to survive
knowledge management and the performance of this
organization to the infrastructure of knowledge effects, which,
according to the author, correlate with the performance with
affiliated the educational institution. By using the Structural
Equation Modeling (SEM) analysis method by showing the
results, it means that knowledge management capability effects
that each of these indicator variables influence the
performance of performance in this institution related to the
application of knowledge management.
Keywords—knowledge management, knowledge
management capability, organanizational performance
I. INTRODUCTION
Based on observations by researchers, it can say that
educational institutions located in the south of Tangerang,
Indonesia have implemented a knowledge management
system that facilitates the process of transferring knowledge.
Therefore the authors are interested in research to analyze
the impact of Knowledge Management Capabilities on the
process. Performance in this organization methods on
organizational performance that expect to be able to
accommodate the activities of transfer & sharing
knowledge. Based on the background set out, the
management of existing knowledge at this institution needs
to be improved to be able to product innovation through
knowledge creation. Therefore, the necessary institutional
conditions that support it (enabling condition). Enabling
conditions referred to are the approach to using a framework
introduced by After Gold (2001) related to knowledge
management capabilities that embody (structure) researchers
studying the correlation between knowledge management
capabilities and critical business problems in an
organization.
A. What is Knowledge?
In epistemology, often the term from knowledge is
associated with the word "data." Referring to the
explanations put forth by Davenport, Prusak, and Peter
Drucker, the data has a set of meanings of facts related to
objective and discrete events. While the term of information
has the meaning of data that is complemented by relevance
and purpose, knowledge has an understanding of data that
has gained a place in the user terms of reference so that
users can link their actions based on these terms of reference
(North & Kumta, 2018) .The difference of some of these
terms (data, information, and knowledge) lies in the degree
of depth, namely the term knowledge is seen as the most
profound understanding of its meaning compared to the
terms information, data (Tan & Md. Noor, 2013) Thus, the
term from data, information, and knowledge (knowledge), in
essence, is a concept that intersects/relates.
II. LITERATURE REVIEW
A. Knowledge Management Capabilty (The Research
Framework)
This study uses empirical evidence as a reference to identify
the relationship between knowledge management capability
variables and four perspectives of organizational
performance (Figure 1). Smith (2006b) notes that increasing
the ability of the knowledge infrastructure can lead to
significant and positive improvements related to the strength
of the knowledge process in an organization. This study
shows that investment in the ability of the knowledge
infrastructure can improve the ability of the knowledge
process and can lead to increased organizational
effectiveness. The study does not identify the relationship
between knowledge infrastructure elements and process
capability elements of knowledge management capabilities.
That is interconnected and systematically affect each other
but instead looks at the links generated by knowledge
management capability from the analysis using Structural

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Equation Modeling (SEM) methods on institutional
performance at this school institution. (Stenmark, 2011).
Fig. 1. Knowledge management capabilities and organizational
performance (Gold, 2011)
Knowledge has become one of the various resources that
have a competitive advantage and sustainable, and this is
very important in today's global economy, especially global
markets. Specialized knowledge can have a tremendous
effect on the success of a company or organization and be
an asset that distinguishes it from its competitors.
Experience has considered a significant source in creating
the organization's core capabilities and as a basis for
sustainable profitability (Kim, Lee, Chun, & Benbasat,
2014).
Besides, in this context, organizations/institutions
determine/create the foundation or basis of their knowledge
by collecting (collecting) information from various internal
and external sources. Organizations/institutions may also
use their methods passively or actively related to
organizational exploration regarding their intellectual assets.
Organizations and institutions can use their knowledge and
utilize it from existing personnel knowledge, mutual
experiences from continuous change processes
(Purwihartuti, Sule, Hilmiana, & Muizu, 2015).
The hypothesis in this study is :
• H1: There is a significant relationship between
knowledge infrastructure capability and perceptual
organizational performance (organizational
performance).
• H2: There is a significant relationship between
knowledge process capability and organizational
performance
• H3: There is a significant correlation between
parallel knowledge infrastructure capability and
knowledge process capability on organizational
performance.
. not refer to any particular distribution. This method is an
B. Organizational Performances
Many researchers have tried to explain the relationship
between knowledge management and organizational
performance (organizational performance), both directly and
indirectly. As in the results of a study by Choi and Lee (Lee
& Choi, 2003), they examined the relationship between the
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four types of nature of knowledge management: dynamic,
system-oriented, human-oriented, and passive. As well as
assessing organizational performance through surveys on
the line of middle managers in companies in South Korea,
and the results found that dynamic knowledge management
has the most significant impact on organizational
performance, followed by knowledge-oriented, human-
oriented knowledge management. However, the size of
organizational performance, according to their study,
depends entirely on the perception responses of corporate
members.
Therefore, the researcher assumes that it concluded to
conclude that the conscious aspect of organizational
performance leads to actual organizational performance.
Besides, a study conducted by Hsu (2008) (Authors, 2009)
tried to identify the relationship between human capital and
organizational effectiveness with the mediation of
knowledge management capability. The results show that
the three latent variables are positively related, and human
capital is mainly positively associated with organizational
effectiveness mediated by knowledge process capability and
structural capital.
III. ANALYSISMETHODOLOGY
A. Analysis Regression
Data analysis techniques in this study use Structural
Equation Modeling (SEM) because researchers believe that
this model allows researchers to examine the relationship
between variables both recursive and non-recursive to
represent a whole model. This model is also a second-
generation model of multivariate analysis techniques
(multiple regression and factor analysis), the SEM model is
capable of testing simultaneously, with a structural equation
model that measures the relationship between indicators and
their constructs (Khan et al., 2019). This technique has
applied in various disciplines such as Management
Information Systems (MIS) (Cepeda-Carrion, Cegarra-
Navarro, & Cillo, 2019) concerning the research, the authors
decide to use data analysis techniques with SEM models
because following the scientific discipline of this research.
SEM method, classified into two parts, the first is
Covariance Based SEM (CBSEM), which uses the
Maximum Likelihood (ML) function and Variance Based
and Component-Based, which uses Partial Least Square
(PLS) (Williams, Dalgleish, Karl, & Kuyken, 2014). PLS is
a regression-based method introduced by Herman O.A Wold
as the creation and development of models and techniques
in the social sciences with a prediction-oriented approach.
This PLS method assumes that the research data is
distribution-free, which means that the research data does
alternative method of Structural Equation Modeling (SEM),
which can overcome the problem of relationships between
complex variables. Still, the data sample size is relatively
small (around 30 to 100), with a minimum sample size of
100 (Hair et al. ., 2010).
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With the understanding that PLS has two similarities,
namely the inner model and the outer model. The internal
model functions in determining the specification of the
relationship between constructs and other constructs, as well
as the external model being able to decide on the
specification of the relationship between constructs and their
associated indicators. The extract itself divided into two,
namely: exogenous extract and endogenous extract.
Exogenous extracts have the meaning of a causal construct,
which is not influenced by other constructs. However, this
exogenous extract can give effect to other constructs (Hair
et al., 2010). Whereas endogenous extracts are extracts
explained by exogenous extracts and a fact extract from
exogenous extracts
Fig. 2. Inner and Outer Model
B. Validity and Reliability Test
In terminology, the term "validity" comes from the term
validity, which has a definition of how to shape / how
accurate the accuracy and accuracy of the measuring
instrument in carrying out its functions (Hair Jr., Matthews,
Matthews, & Sarstedt, 2017). Validity is also a measure that
provides an explanation related to the measured variable is
indeed true is the variable examined by researchers. Validity
has a relationship between a measuring variable and what
should be and will be measured. In research, efficacy
explains the degree of accuracy of the measuring instrument
against the measured content. This test used to show also to
measure the validity of a questionnaire. A questionnaire can
be said to be valid if the questions in an inquiry can reveal
the Allies estimated from the survey (Abdi, Chin, Vinzi,
Russolillo, & Trinchera, 2013)
In conducting a validity test on a questionnaire, it
categorizes into two parts, namely factor validity & item
validity. The validity of factors has a definition; take
measurements if an item arranged using more than one
factor or in another sense. Between elements, one has in
common with other factors. In contrast, the measure of the
validity of factors uses a way of correlating between the sum
of the items added to one factor with the total of all elements
(Rosemann, 2012). By doing the correlation calculation,
then the correlation coefficient will be obtained, which can
be applied in a measure the level of item validity and to
determine whether an item is feasible or not used. In
determining the feasibility, a re-test is carried out, namely
the significance test of the correlation coefficient in the
significance level of 0.05 or 5%, with the understanding that
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the item will be considered as valid if it correlates
significantly with the total of all factors (J. Hair,
Hollingsworth, Randolph, & Chong, 2017).
IV. RESULT AND DISCUSSION
A. Examining the Model (Outer Model)
This study attempts to test the framework introduced by
After Gold (2011) in his research, which examines
knowledge management capability on the dependent
variable, organizational performance. This research
conducted at an international standard school in the southern
Tangerang region, Indonesia. The data collection is by
distributing questionnaires using five scale likes and spread
to the entire population at the school, a total of 100
communities who are teaching staff at the schoolThe outer
measurement model (exterior model) has done by
researchers on variable indicators/manifesto variables that
have correlations with factors/latency. The results of direct
measurements made on the indicator variables describe a
dimension of the element / latent variable. The indications
are in the form of measurement results stated in a standard
loading factor and coefficient weights. The following is the
result of loading factor which illustrates the validity of the
size of a construct indicator variable that has analyzed.
Fig. 3. Outer Model Result
In figure 4 listed above, it can explain that the
knowledge infrastructure capability, construct variable is
measured by its four indicator variables, with each loading
factor value, the loading factor is the standard of an
estimated weight that relates the elements to the indicator.
the loading factor of the variables in figure 4, among others:
• Indicator of technology with a loading factor of
0.704 (valid)
• Indicator of structure with a loading factor value of
0.833 (valid)
• Indicator of culture with a loading factor of 0.840
(valid)
• Indicator of incentive with a loading factor value of
0.821 (valid)
Based on that result can be said to reflect the measurement
model for the constructed variable of knowledge
infrastructure capability. Next is, the measurement results
obtained from the construct variable knowledge process
capability with four (4) indicator variables; each loading
factor value of each indicator obtained as follows:
• Acquisition indicator variable with a loading factor
of 0.794 (valid)
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 • Indicator conversion variable with a loading factor
value of 0.749 (valid)
• Application indicator variable with a loading factor
value of 0.701 (valid)
• Protection indicator variable with a loading factor
value of 0.677 (valid)
Besides, measurement of organizational performance
construct variables is also measured, measured by four (4)
indicator variables, and each of the loading factor variable
values has obtained as follows:
• Perceptual finance indicator variable with a loading
factor value of 0.830 (valid)
• Customer perspective indicator variable with a
loading factor value of 0.809 (valid)
• Learning and growth indicator variable with a
loading factor value of 0.716 (valid)
• Internal process indicator variable with a loading
factor value of 0.738 (valid)
B. Validity and Reliability Test Results
In Figure 4, we have seen an explanation related to the
measurement of the reflective model, which can see from
Loading Factor, AVE, Internal consistency, and
discriminant validity. Formative model measurements can
see from the amount of convergent validity (AVE), as well
as the collinearity indicator (VIF <5) and also from the
significance of the outer weight (Ali, Rasoolimanesh,
Sarstedt, Ringle, & Ryu, 2018). Analysis of the
measurement model researchers do by measuring the
convergent validity and discriminant validity. Concurrent
validity has to do with the principle that the measurer of the
manifest variable will be a construct, should be highly
correlated. Test of convergent validity with its reflexive
indicators can see from:
• The factor loading measure is a way to find out the
correlation of each sign with its construct
• Internal Consistency, a format dimension of the
construct measured by looking at Composite
reliability, Cronbach's Alpha, and Average Variance
extracted (AVE).
With reflexive indicators, you can see the rules in Figure 14. The
following authors describe the construct reliability and validity test
using SmartPLS 3 software:
Fig. 4. Construct reliability and Validity
In the table above, it concluded that:
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• Variable knowledge infrastructure capability
declared valid because the magnitude of
Cronbach's alpha value of 0.8137 exceeds the
standard of 0.60. It also said to be reliable because
of the magnitude of the composite reliability of
0.8770 > 0.770.
• Variable knowledge process capability, declared
valid, due to the magnitude of Cronbach's alpha
value of 0.7185 > 0.60, exceeding the standard of
0.60. It also said to be reliable because of the extent
of the composite reliability of 0.8221 > 0.770.
• Variable organizational performance is declared
valid, due to the magnitude of Cronbach's alpha
value of 0.7801 > 0.60, exceeding the standard of
0.60. It also said to be reliable because of the extent
of the composite reliability of 0.8567 > 0.70.
In this study, the applied statistic is the magnitude of the
value of composite reliability, or it also said that the
construct reliability represented by Cronbach's alpha items
and D.Gho (PCA). The scale of the Cronbach's alpha and
D.Gho (PCA) values above 0.7 (> 0.7) it said that the
constructs show reliability or can rely on with high amounts
sufficient as a measurement tool. A value limit of more than
0.7, means acceptable, and a value of 0.8 means very
satisfying (J. Hair et al., 2017).
Meanwhile, related to the value of Average Variance
Extracted (AVE), displays a magnitude of variance that can
be explained by each item by comparing it with the variant
that causes measurement error. By default, if the AVE value
is above 0.5 (> 0.5), it can be said that the construct has
good convergent validity, meaning that the latent variable is
capable and reliable to explain the average of more than half
the variance of each indicator (Hair Jr. et al., 2017).
C. Analysis of Inner Model
There are several stages related to the evaluation or
analysis of the structural model. The initial step is to look at
the signification between influence and its extract. These
stages These stages obtained from the path coefficient
received, where it presents a picture of the strength of the
relationship between constructs. Figure 4. we can also see
related to the structural model, which consists of two (2)
types of variables, including:
• The exigent variable is an independent variable—a
variable for constructing organizational performance
variables consisting of knowledge infrastructure
capability and knowledge process capability.
• Endogent Variables in this study are organizational
performance construct variables that are influenced by
two exogenous construct variables; knowledge
infrastructure capability and knowledge process
capability
• Endogent Variables in this study are organizational
performance construct variables that are influenced by
two exogenous construct variables; knowledge
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 infrastructure capability and knowledge process
capability

In the Collineaarity assessment evaluation (VIF <5), the

term collinearity is a term used to illustrate the correlation
between latent variables in a model, the strength of its
predictions is both unreliable and unstable, the cause of the
correlation repeated by other variables (Hair Jr. et al., 2017).
If the value of collinearity is high, it can cause errors in
weight estimation as well as errors related to significance
assessments. An assessment of the value of collinearity in a
formative construct obtained by calculating Tolerance
(TOL) and VIF:

Fig. 7. Bootstrapping Analyzed

Fig. 5. R-square

• TOL outer model = 1 - R-square, for example if

Rsuare is 0.75, then the TOL is 1 - 0.75 with a
value of 0.25. In this study the R-square value of
0.4783, 1 - 0.4783 = TOL value of 0.5217 was
obtained
• VIF (Variance Inflation Factor), if outer mode = 1:
TOL, then 1: 0.25 = 4 and the calculation of the
standard error of the VIF root, which is 2.
Indicators related to the occurrence of collinearity
if the value of VIF > 5, it said that the variable
should to excludes from the measurement model
(Ali et al., 2018).
Fig. 8. Path Coefficients
From the structural model evaluation using the
Bootstrapping Analysis method, then the following. The
hypothesis testing criteria is, reject Ho if t statistics are more
significant than t tables or t statistics are smaller than t
tables. In this study, there are t tables of 1.992. Concerning
this, the T-statistic value obtained on the knowledge
infrastructure capability variable (2.5673)> 1,992, and the
knowledge process capability (4,1364)> 1,992 which affects
the organizational performance variable

• H1: There is a significant relationship between

knowledge infrastructure capability and perceptual
organizational performance (organizational
performance). (Accepted, because it refers to the
value of the path coefficient that can describe the
contribution or influence between the constructed
variable with the amount of T-Statistics> t table
(2.5673> 1992)
Fig. 6. VIF tabel • H2: There is a significant relationship between
knowledge process capability and organizational
performance (Accepted, because it refers to the
D. Hypothesis Results
value of the path coefficient that can describe the
Bootstrap procedure analysis is a representation of the
contribution or influence between construct
precision estimation of non-parametric analysis on the outer
variables) with the amount of T-Statistics> t table
and inner models. Values related to the magnitude of
(4.1364> 1,992)
significance obtained expressed in terms of the value of the
T-test statistic, in this study, the researchers focused on the
use of two-tailed bootstrap analyzes, the following
researchers explain the estimated significance of the test
results. In the table pictured above with the results of the
evaluation analysis of the accuracy of the estimation, then
by referring to the T-statistic value, the researcher will
answer the null hypothesis that has stated previously,
whether it can be accepted or rejected.
Fig. 9. F-square

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 • H3: In the F-square test, the results show that there
is a significant correlation between the ability of
parallel knowledge infrastructure (small effect
0.0734) and the strength of the knowledge process
(substantial effect 0.2285) on organizational
performance. (Accepted, because it refers to the F-
square value that can describe the contribution or
influence between construct variables)
At this stage of the F-Square test, it provides an evaluation
related to endogenous constructs, which see the magnitude
of the exogenous substantive influence (f-square) and its
total effect. The f-square value will represent the effect of
the exogenous substrate on its endogenous construct
variable. The standards of the magnitude of exogenous
substrate influence on latent endogens classified into three
categories:
• Magnitude of value with 0.02 means the little
effect
• The amount of 0.15 has a medium scale
• A cost of less than 0.02 (<0.02) represents that
there is no effect (J. F. Hair, Sarstedt, Hopkins, &
Kuppelwieser, 2014).
V. CONCLUSION
This study also aims as a means to evaluate the
application of knowledge management that already exists.
Using the knowledge management capability model of the
results of a survey by After Gold (2011) with the
respondents being employees at this institution. The
variables in this study include; that knowledge infrastructure
capability and knowledge process capability, which act as
exogenous variables, and organizational performance
variables that act as endogenous variables (Williams et al.,
2014). Based on the analysis of the research that has been
done, from the results of the study. it concluded as follows:
Variable knowledge infrastructure capability has a
significant effect on organizational performance in the
application of existing knowledge management in this
institution, with a magnitude of influence value of 0.814,
which means that each indicator of the variable knowledge
infrastructure capability has an impact on the level of
performance in this institution related to the application of
knowledge management. Variable knowledge process
capability, influencing organizational performance variables
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associated with the effects of knowledge management
capability on organizational performance, with the
magnitude of the effect value at 0.718. By having the
meaning that the knowledge process capability variable has
the impact that each indicator of this variable affects the
performance of performance in this institution related to the
application of knowledge management
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