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CMS
13,2
276
Received 5 June 2018
Revised 7 August 2018
1 October 2018
17 November 2018
Accepted 17 December 2018
Chinese Management Studies
Vol. 13 No. 2, 2019
pp. 276-298
© Emerald Publishing Limited
1750-614X
DOI 10.1108/CMS-06-2018-0554
How knowledge sharing
connects interpersonal trust
and innovation capability
The moderating effect of leadership support
Hui Lei
School of Business Administration, Hunan University, Changsha, China
Thuong Thi Nguyen
School of Business Administration, Hunan University, Changsha, China
and Faculty of Economics-Business Administration, HaTinh University,
Hatinh, Vietnam, and
Phong Ba Le
School of Business Administration, Hunan University, Changsha, China,
and Faculty of Business Management, Hanoi University of Industry,
Hanoi, Vietnam
Abstract
Purpose – Knowledge sharing (KS) and innovation are generally believed as the antecedents of key
outcomes that help firms to attain and sustain competitive advantage in long term. The purpose of this paper
is to analyze the mechanism of how interpersonal trust and leader support affect KS and improve firm’s
innovation capabilities.
Design/methodology/approach – This is a research paper which is built using empirical data collected
from 68 manufacturing and service firms in China.
Findings – First, the findings show that leader supports moderate the correlation between interpersonal
trust and KS. Second, KS serves as mediator in the relationship between interpersonal trust and firm’s
innovation capabilities.
Research limitations/implications – KS plays a crucial role in stimulating innovation capabilities for
both manufacturing and service firms. Future research should explore the effects of the motivational factors
(such as positive psychological state, perceived benefits and costs) on KS and firm’s innovation capabilities.
Practical implications – The paper provides the evidence for the positive effects of interpersonal trust on
KS, which in turn is significantly associated with product innovation and process innovation. It highlights the
important role of leader supports in promoting the degree of sharing knowledge among individuals to
enhance innovation capabilities for firms.
Originality/value – This study puts the theory of innovation forward based on exploring the key factors
that have potential and positive impacts on two specific types of innovation capability, namely, product
innovation and process innovation, for both manufacturing and service firms.
Keywords Process innovation, Knowledge sharing
Paper type Research paper
The authors sincerely thank the Editorial board and two anonymous reviewers for their constructive
and valuable comments. The authors appreciate aids from the National Natural Science Foundation
of China under Grant No.71272208, 71521061 and 71790593 and the Ministry of Education foundation
for humanities and social science (No.17YJA630041).
1. Introduction Knowledge
Innovation management is becoming one of the hot topics that received much attention from sharing
scholars and practitioners, especially in case of Chinese firms (Leavy, 2015; Song, 2015; Chen
et al., 2016; Hussein et al., 2016; Hui et al., 2018; Yang et al., 2018). Since the reform and
opening up its economy in 1978, China has become one of the most favorite emerging
markets and attracted many foreign enterprises to investment and business with its
unprecedented economic explosion in the world (Ma et al., 2008). Before the increasing
pressure of competition from foreign enterprises, many Chinese firms considered innovation
277
as the key of success, but they are still grappling to transform from imitators to innovators
in their own right (Song, 2015). These lead to requirement of exploring the new, specific and
effective pathways to increase innovation capabilities for Chinese firms.
Recent studies indicated that interpersonal trust, leadership and knowledge sharing (KS)
are the potential factors that have significant influences on innovation capability (Nonaka
and Takeuchi, 1995; Shazi et al., 2015; Wang et al., 2017; Hui et al., 2018; Lei et al., 2018; Yang
et al., 2018). Interpersonal trust and leadership have values oriented toward openness
and atmosphere of trust, which are very useful to foster employees sharing more ideas and
knowledge for increasing firm’s innovation capabilities (Ellonen et al., 2008; Donate and
Guadamillas, 2011; Le and Lei, 2018; Yang et al., 2018). However, empirical evidence and the
mechanism of how KS mediates the relationship between interpersonal trust and innovation
capabilities are not sufficient (Donate and Guadamillas, 2011; Zhang et al., 2018), especially
in case of having the supports of leadership. Thus, this study focuses on investigating the
moderating role of leadership and mediating role of KS between interpersonal trust and two
specific aspects of innovation namely product innovation and process innovation in case of
Chinese firms. The research topic is new, interesting and urgent for following reasons.
First, although interpersonal trust and KS are identified as the antecedents of successful
innovation (Nonaka and Takeuchi, 1995; Ellonen et al., 2008; Wang et al., 2016; Hui et al.,
2018), the literature and empirical evidence on the relationship between interpersonal trust,
KS and innovation capability is still sparse and limited especially in the context of Chinese
firms (Golipour et al., 2011; Wang et al., 2011; Jain et al., 2015; Song, 2015; Hui et al., 2018;
Yang et al., 2018; Zhang et al., 2018). Moreover, Anderson et al. (2014) underlined the
necessity of recognizing the antecedents of innovation by proposing a question that: “What
is the relationship between organizational resources and different types of organizational
innovation?” Meanwhile, KS is widely known as one of the critical organizational resources
(Wang and Noe, 2010). Accordingly, examining how interpersonal trust and KS stimulate
product innovation and process innovation for Chinese firms is indispensable.
Second, employees’ KS activities help to turn individuals’ knowledge and expertise into
organization’s knowledge and capital, which are the key antecedents of increasing firm’s
innovation capabilities (Liao et al., 2007; Zhang et al., 2018; Le and Lei, 2018). However, KS is
contingent on the individuals’ degree of willingness to share knowledge, and it is
unfortunate that individuals tend to hoard of knowledge and be reluctant to share their key
knowledge because they are afraid of losing of knowledge ownership and related loss of
power (Kankanhalli et al., 2005; Alsharo et al., 2017). To overcome and address these
challenges, previous studies pointed out that firm can only enhance the activities of sharing
knowledge among employees to foster its innovation capability if interpersonal trust is built
(Donate and Guadamillas, 2011; Alsharo et al., 2017; Zhang et al., 2018). As a result,
investigating the mediating role of KS between interpersonal trust and specific aspects of
innovation is very needful in increasing the understanding and effective pathway to
stimulate innovation capability for Chinese firms.
CMS Third, leadership and their supports have the decisive roles in establishing a positive
13,2 environment that can exhort employees to exercise, collect, and share their knowledge with
the others in an organization (Nam Nguyen and Mohamed, 2011; Le and Lei, 2017; Le and
Lei, 2018). KS activities under different supports of leadership may create dissimilar
influences that can promote or hinder the correlation between interpersonal trust and KS
effectiveness (Donate and Guadamillas, 2011; Raab et al., 2014). Therefore, investigating the
278 potential moderating role of leadership supports is very meaningful in increasing the
understanding on the relationships among interpersonal trust, KS and innovation.
Given such context, to fill the theoretical and practical gaps, this paper develops a
research model to investigate the influence of interpersonal trust on firm’s innovation
capabilities through the mediating role of KS and the moderating role of leader supports.
This paper uses the structural equation modeling (SEM) to examine the correlation between
the factors in the proposal research based on the data collected from 389 participants in 68
manufacturing and service firms in China. The paper aims to elucidate some following
research questions:

RQ1. Is interpersonal trust positively related to KS and innovation capabilities?

RQ2. Do leadership supports moderate interpersonal trust’s effects on KS?

RQ3. Does KS mediate interpersonal trust’s effects on innovation capabilities?

The remainder of the paper is arranged as follows. Section 2 reviews the current literature to
clarify the influence of interpersonal trust on KS to enhance the innovation capability and
the moderating role of leader’s support between interpersonal trust and KS. Section 3
presents the research methodology to test the proposal model. Section 4 analyzes the data
and discusses the empirical results. Finally, the discussions and conclusions are presented in
Section 5, with a focus on the theoretical and practical contributions of the paper and
directions for future research.

2. Literature review and hypotheses development

2.1 The effect of interpersonal trust on innovation capability
Developments in the organizational sciences have highlighted the crucial role of trust-based
relationships for sustaining individual and organizational effectiveness (McAllister, 1995).
Interpersonal trust is a psychological state of willing to accept vulnerability to the actions of
another party based on the expectation that the other will perform a particular and
important action to them (Six, 2007). According to Alsharo et al. (2017), trust among
individuals plays a crucial role in building and maintaining social relationships and
promoting cooperative relationships and effective teamwork. Interpersonal trust includes
major elements of risk, vulnerability, and uncertainty, according to which each individual
must overcome to work collaboratively and efficiently (Mayer et al., 1995). Scholars
considered interpersonal trust as the dynamic links and emotional ties between individuals
in an organization that is significantly related to many positive outcomes of a firm such as
employee’s satisfaction, organizational performance (Bligh, 2017) and KS behaviors (Le and
Lei, 2017; Le and lei, 2018). Interpersonal trust is also emphasized as a determinant of
employee’s innovative behaviors and a driver for innovation capability (Tan and Tan, 2000;
Ellonen et al., 2008; Golipour et al., 2011).
By the late twentieth century, most industrial economies had moved to an
“innovation-driven” stage, during which firms attempted to achieve competitive
advantage based on how to rapidly innovate and strengthen innovation capabilities Knowledge
(Porter and Sölvell, 1998). West and Farr (1990) defined innovation as an “intentional sharing
introduction and application of new products, processes, procedures, or ideas that are
designed to significantly benefit the individual, the group, the organization, or wider
society.” According to Drucker (2014) innovation refers to the capabilities of creating
new products, services, work processes, and management procedures to achieve an
organizational competitive advantage. This study uses the definition of Francis and
Bessant (2005) who described innovation capabilities as the changes in products/
279
service an organization offers to the market or the approach it develops in delivering
those offerings.
Innovation capability is classified into various categories (Liao et al., 2007; Podrug et al.,
2017) among which product innovation and process innovation are recognized as two
critical capabilities of innovation in complex and rapidly changing business environments
(Tsai et al., 2001; Lee et al., 2013). Product innovation refers to capability of a firm in
providing differentiated or new products/services in the market to meet customers’
satisfaction, and process innovation refers to a firm’s capability in providing a better
process than current operation to get better performance. Damanpour and Gopalakrishnan
(2001) pointed out that it is significant to distinguish between product and process
innovation, as the implementation of each one of them requires dissimilar skills and
resources of organization. Consequently, many managers and scholars have called for
finding the effective pathway to improve innovation capabilities at two aspects: process
innovation and product innovation (Damanpour, 1991; Damanpour and Gopalakrishnan,
2001; Lee et al., 2013; Anderson et al., 2014).
The relationship between interpersonal trust and specific aspect of innovation capability
has received little attention in empirical research (Ellonen et al., 2008; Hui et al., 2018), but the
literature has reported quite clearly the positive effect of interpersonal trust on innovation
capability. Indeed, trust plays a crucial role in social relations it improves the quality of
information exchanges, supports core capacity building, promotes mutual learning and
creates motivation for innovation (Murphy, 2002). Trust creates the openness and sincerity
in interpersonal relationship which will foster a collaborative atmosphere and KS culture for
flourishing the creativity and innovation capabilities (Martins and Martins, 2002; Barczak
et al., 2010; Zhang et al., 2018). Interpersonal trust is an essential binding and bridging
mechanism in social relations that promotes the effectiveness and quality of KS activities
and multiple aspects of innovation capabilities such as product innovation, process
innovation, behavior innovation and strategic innovation (Ellonen et al., 2008; Maurer, 2010;
Golipour et al., 2011).
Shazi et al. (2015) asserted that owing to the risks and uncertainties inherent in the
process of generating and implementing novel ideas, interpersonal trust becomes extremely
valuable for the innovation activities. Despite the commonness and importance of the
interpersonal trust in enhancing innovation capability are recognized, the literature and
knowledge on the relationship between interpersonal trust and specific aspects of
innovation capabilities is still limited (Golipour et al., 2011; Wang et al., 2011; Hui et al.,
2018). To increase clearer understanding of differences in interpersonal trust’s influences on
product and process innovation, we proposed the following hypothesis:

H1a. Interpersonal trust is positively associated with product innovation.

H1b. Interpersonal trust is positively associated with process innovation.

CMS 2.2 Knowledge sharing mediates interpersonal trust’s effects on innovation capabilities
13,2 Knowledge and knowledge management are crucial to attain success in most organizations
(Carneiro, 2000; Lee et al., 2016; Le and lei, 2018). KS is one of the most important
components and plays a decisive role in knowledge management (Pee and Min, 2017; Wu
and Lee, 2017; Le et al., 2018). Van Den Hooff and De Ridder (2004) defined KS as a process
of exchanging knowledge among individuals to create new knowledge for each other. It is
280 the process of sharing knowledge, information, ideas, suggestions, and expertise among
individuals in an organization (Bartol and Srivastava, 2002). The successful extent of
initiatives of knowledge management mainly depends on the effectiveness of KS activities in
the organization (Le and lei, 2018). KS helps to maximize a firm’s ability to manage
knowledge and allows individuals in organization to work or achieve goals more efficiently
(Le and Lei, 2017).
Regarding the relationship between trust and KS, previous theoretical works and
empirical research suggested direct and positive effects of interpersonal trust on KS
(Politis, 2003; Cheng et al., 2008; Holste and Fields, 2010; Jain et al., 2015; Rutten et al.,
2016; Koohang et al., 2017; Le and lei, 2018). Interpersonal trust is extremely important
in the process of strengthening collaboration and boosting KS among members in an
organization (Politis, 2003). Individuals will not be able to share and manage
knowledge effectively if they do not trust in their colleagues. In contrast, they will have
greater motivation to actively participate in the KS process and share more useful
knowledge with the others (Cheng et al., 2008; Holste and Fields, 2010). In the same vein,
Rutten et al. (2016) suggested that interpersonal trust is the driving force of KS. It may
seriously hinder the sharing of key information and knowledge, even damaging the
effectiveness of business processes if employees are lack of trust in each other. Jain et al.
(2015) believed that a higher level of trust among individuals creates a greater intention
to willingly engage in KS. Interpersonal trust contributes to the willingness to share
knowledge and the successful implementation of the knowledge management processes
(Koohang et al., 2017). Recently, Le and Lei (2018) reported that interpersonal trust is
significantly related to two main tendencies of KS behaviors namely knowledge
donating and knowledge collecting.
Above argument supports the positive influence of interpersonal trust on KS. We,
therefore, propose following hypothesis:

H2. Interpersonal trust significantly correlates KS.

With regard to the relationship between KS and innovation capability, previous studies
have verified the value of KS in supporting and enhancing innovation capabilities.
Indeed, Jantunen (2005) contended that KS behaviors among employees may help firms
to have superior innovation capability. Innovation initiatives mostly arise from the
process of sharing knowledge, experience and skill, and a firm’s capability to transform
and apply knowledge may decide its level of innovation capability on both product
innovation and process innovation (Liao et al., 2007; Wang and Wang, 2012; Lee et al.,
2013). Sáenz et al. (2012) demonstrated that the employees’ KS mechanisms (such as
communities of practice, coaching and/or mentoring, and employee functional rotation)
are the key means of increasing and exerting a positive influence on innovation
capability in Spanish and Colombian high-tech firms. Wang et al. (2016) indicated that
KS has significant impacts on various aspects of innovation such as innovation speed
and innovation quality. By sharing knowledge employees can learn and combine again
all kinds of knowledge, thereby being more capable in translating new ideas into
innovations. As a result, the higher level of sharing knowledge will bring about more Knowledge
innovation (Wu, 2016; Wang et al., 2017). sharing
Overall, the previous studies indicate the existence of a positive relationship between KS
and innovation capability. However, empirical studies on how KS affects employee
creativity and different aspects of innovation are still insufficient (Anderson et al., 2014).
Aim to provide more understanding of how KS affects two specific aspects of innovation
capabilities (product innovation and process innovation), we proposed following
hypotheses:
281

H3a. KS is positively related to product innovation.

H3b. KS is positively related to process innovation.

The current literature provides the evidence that interpersonal trust is the important
antecedents to foster KS behavior among employees (Cheng et al., 2008; Koohang et al.,
2017; Le and lei, 2018). This is the origin and basic driver of improving firm’s
innovation capability (Wang and Wang, 2012; Wu, 2016). Indeed, the high level of trust
among individual will create a collaborative climate for strengthening the exploitation
of knowledge and experimentation, which are the core values and real conditions for
innovation (Barczak et al., 2010; Donate and Guadamillas, 2011; Alsharo et al., 2017).
Recently, Zhang et al. (2018) indicated that a firm’s ability to acquire and apply
knowledge plays a mediating role in the relationship between interpersonal trust and
innovation capabilities. Based on above argument, we assert that interpersonal trust
can create an atmosphere of trust and collaboration among employees and positively
stimulate them to share more key information, knowledge, and resources which are the
important basis and prerequisite for increasing firms’ innovation capabilities. Thus
following hypotheses are posed (Figure 1):

H4a. KS mediates between interpersonal trust and product innovation.

H4b. KS mediates between interpersonal trust and process innovation.

Product
Leadership innovation
supports

Interpersonal Knowledge Control variables

trust sharing Firm size; industry type

Process
innovation Figure 1.
Research framework
CMS 2.3 Leadership supports moderate interpersonal trust’s effects on knowledge sharing
13,2 Referring the role of leadership in supporting knowledge management and innovation,
Dess and Picken’s (2000) study of “Changing Roles: Leadership in the 21st Century”
showed that supportive leaders produce the perfect conditions for organizational
innovation by forming teams of innovative people, encouraging mutual trust, risk
taking and shared vision among employees, and minimizing internal communication
282 costs. Donate and Guadamillas (2011) verified that leaders not only play an essential
role in stimulating employees to voluntarily transfer their experience and knowledge
for organizational knowledge creation through empowerment, coaching and building a
climate of trust, but also significantly contribute to organizational innovation by
encouraging creative behaviors and experimentation. These authors also highlight the
importance of analyzing and giving more empirical evidence about the correlation
between leadership, KS, and innovation.
A number of studies have shown that leadership support is directly or indirectly
related to KS by generating a supportive climate and providing sufficient and
necessary resources for KS activities (Connelly and Kelloway, 2003; MacNeil, 2004; Lin,
2007; Ho, 2009; Raab et al., 2014; Han et al., 2016). Specifically, according to Connelly
and Kelloway (2003), leadership support is considered one of the significant and
potential influences on KS process. MacNeil (2004) underlined the importance of the
leader’s support to KS atmosphere of organizations. In line with this point of view, Lin
(2007) stressed the role of leader’s support and indicated that management’s support
positively affects employee willingness to share knowledge and skill with colleagues.
Han et al. (2016) reported that transformational leaders have indirect effect on
employees’ organizational citizenship behavior, which is recognized as the primary
factor that influences KS.
Emphasizing trust as a mediator of the leadership-KS relationship, previous studies
showed the evidence that leaders can enhance KS by focusing on building trust among
individuals in their organization (Lee et al., 2010; Donate and Guadamillas, 2011).
Leadership plays a crucial role in establishing the trust among employees and
employees’ trust in leadership, which results in motivating them to share more
knowledge with the others (Lin and Hsiao, 2014; Le and Lei, 2018). In particular, Raab
et al. (2014) suggested that purposeful and significant supports of leadership will
encourage the value of social integration or trust on the KS process of employees. Their
finding showed that management involvement could moderate the effect of
interpersonal trust on KS effectiveness. Based on above discussion, the authors argue
that leadership support positively moderates the influences of interpersonal trust on
KS. Accordingly, following hypothesis is established:

H5. Leader supports positively moderate the relationship between interpersonal trust
and KS.

3. Research methodology
3.1 Sample and data collection
The paper used the survey method based on using questionnaire to collect data. To
select participants, we examined a total of 100 Chinese firms randomly selected from
Wind Info’s 2015 list of 16,500 enterprises in Hunan Province. We interacted with
representatives of these firms by phone and/or made personal visits to explain the
motivation of the work and ask for their assistance in collecting the questionnaires. The
respondents in this study are key employees who mainly are the team leader, leader or
supervisor in departments of administration, operation, R&D, marketing and sales, Knowledge
which ensured that the respondents had the necessary understanding of their firm and sharing
frequently exchanged key information in the operating process. The measurement
items were adapted from scales in the literature to develop the initial list of items. To
confirm the efficiency of the questionnaire before the process of formal data collection, a
pilot test was conducted via in-depth interviews with five outstanding academic
scholars at three universities with deep knowledge in organizational behavior and 45
participants from five firms. In the formal data collection, 675 questionnaires were
283
issued to participants from 68 firms, and 471 responses were received. Of the responses,
389 were valid (validity rate of 57.6 per cent). This validity rate is similar to those for
surveys of Chinese participants in relevant studies (Le and Lei, 2017). The descriptive
statistics for sample demographics are presented in Table I. We used the Armstrong
and Overton’s (1977) method to assess potential nonresponse bias. Chi-square and
independent sample t tests were used to compare the first 100 and the last 100
participants, based on in terms of demographic variables, such as gender, age and level
of education. The results demonstrated that there was no significant difference between
the two groups of responses (p > 0.05), indicating that common method bias was not a
concern.

3.2 Variable measurement

To ensure the validity and reliability of the study, the variables were measured using items
developed and used in previous studies (Table A1 in the Appendix). All constructs were
measured using multiple items, and all items were measured via five-point Likert-type
scales ranging from “1” (strongly disagree) to “5” (strongly agree) or from “1” (strongly
unwilling to) to 5 (strongly willing to).
Interpersonal trust. To measure trust among employees, we used five items designed by
Yilmaz and Hunt’s (2001) interpersonal trust at work scale. These items reflect employees’
trust in colleagues stemmed from the perceptions of such trust-generating qualities of

Characteristics Frequency (%)

Industry type
Manufacturing firms 249 64.1
Service firms 140 35.9
Firm size
<100 employees 88 22.6
From 100 to <500 employees 129 33.2
From 500 to <1,000 employees 119 30.6

1,000 employees 53 13.6
Gender
Male 226 58.1
Female 163 41.9
Working Positions
Director/Manager 39 10.0
Deputy director/manager 61 15.7
Supervisor/Head of department 136 35.0
Team leader 153 39.3 Table I.
Total 389 100.00 Respondent profiles
CMS colleagues as integrity, reliability, and competence. Some samples are “I consider my
13,2 colleagues as people who are always faithful” and “I consider my colleagues as people who
can be counted on to do what is right.”
KS. Five items derived from Bock et al.’s (2005) work was used to reflect the extent to
which individuals share their knowledge and expertise with their colleagues. Sample items
are “I am willing to share my work reports and official documents with members of my
284 organization”, and “I am willing to share my expertise from my education or training with
other organizational members in an effective way.”
Innovation capability. This study used 11 items adapted from the research of Tsai et al.
(2001) and Liao et al. (2007) to measure two specific types of innovation. Among these, six
items were used to measure product innovation, an example is “Our firm often develops new
products and services well accepted by the market,” and five items used to measure process
innovation, an example is “Our firm can develop more efficient manufacturing process or
operation procedure.”
Leader’s supports. This study used four items developed by Tan and Zhao (2003) to
assess the extent of employees’ perceptions of support and encouragement of KS from their
leaders. These items were also adopted in the studies of Lin (2007) in the Taiwan context.
Sample items include “My leader provides most of the necessary help and resources to
enable employees to share knowledge” and “My leader always supports and encourages
employees to share their knowledge with colleagues.”
Control variables. Firm characteristics of industry type, and firm size were used as
control variables to account for differences among firms that have potential impacts on
innovation capabilities. It is consistent with previous research (Birasnav et al., 2013).

3.3 Data analysis methods

We applied multiple regression method and SEM approach to test the model and casual
relationships between variables. These approaches are appropriate and practical to identify
interaction and mediation effects (Johnson, 2000; Liao, 2016; De Clercq and
Belausteguigoitia, 2017). Prior research indicated that the simultaneous inclusion of multiple
effects in one model can conceal true effects (Aiken and West, 1991; Zahra and Hayton,
2008), and multiple regression method and SEM are particularly useful to test the model of
having multiple correlations between variables of interest (Noruzy et al., 2013; Sankowska,
2013).
Analysis of Moment Structures (AMOS) was used for measurement validation and to
examine the structural model based on the data gathered from the 389 respondents in 68
manufacturing and service firms. Data analysis was conducted using SPSS and AMOS
version 21. Confirmatory factor analysis (CFA) was implemented to examine the validity
and reliability of the constructs.

4. Data analysis and results

4.1 Measurement model
We first tested the reliability of the measures of the constructs by examining the individual
Cronbach’s alpha (Ca) coefficients, which ranged from 0.89 to 0.96 and were all higher than
the recommended level of 0.7 (Nunnally and Bernstein, 1994). We then performed
confirmatory factor analysis (CFA) to assess the convergent and discriminant validity of the
overall measurement model.
To evaluate the convergent validity as recommended by Hair et al. (2006), we adopted
three primary measures:
 (1) statistically significant factor loadings of the indicators, with values greater than Knowledge
0.6; sharing
(2) values of composite reliability (CR) greater than 0.7; and
(3) values of average variance extracted (AVE) greater than 0.5.

Overall, our model met the Hair et al.’s (2006) convergent validity criteria because:
(1) all factor loadings range from 0.73 to 0.95 (all larger than 0.6; p < 0.001); 285
(2) CR values range from 0.89 to 0.96 (all higher than 0.7); and
(3) the AVE values range from 0.66 to 0.80 (all greater than 0.5).

Table II shows AVE, CR, Ca, mean and standard deviation (SD) of every construct.
Discriminant validity is the degree to which factors that are supposed to measure a
specific construct do not predict conceptually unrelated criteria (Fornell and Larcker, 1981).
This study used Fornell and Larcker’s (1981) measure of AVE to assess discriminant
validity. The discriminant validity of the research instrument was assessed by comparing
the square root of the AVE with the correlations among the latent variables. Table II also
shows that the square root of AVE for each construct (diagonal elements in italic) is greater
than the correlations among constructs in the model. It, therefore, provided strong support
for the construct reliability, as well as for the convergent and discriminant validity of the
scales.
Table III indicates that all fit indices of the measurement model were satisfactory; thus,
the model fit the data.

4.2 Structural model

This section presents the main results of the hypothesis testing of the structural
relationships among the latent variables.
4.2.1 Direct effects analysis. Multiple regression analyses were performed separately,
considering interpersonal trust as the independent variable and KS and the two dimensions
of innovation capability as the dependent variables (Table IV). The results in Table IV show
that all the path coefficients of direct effects are found to be significant and in line with the
stated hypothesis. Specifically:
Model 1 shows that interpersonal trust is positively related to KS ( b = 0.668; p < 0.001).
Thus, H1 is supported.
Models 2 and 3 indicate that interpersonal trust is positively associated with process
innovation ( b = 0.695; p < 0.001) and product innovation ( b = 0.622; p < 0.001). H2a and
H2b are supported.

Construct AVE CR Ca Mean SD IT LS KS PCI PDI

Interpersonal trust (IT) 0.73 0.93 0.93 3.63 0.57 0.85

Leader’s supports (LS) 0.69 0.89 0.89 3.52 0.63 0.71 0.83
KS 0.66 0.91 0.91 3.43 0.59 0.69 0.62 0.81 Table II.
Process innovation (PCI) 0.74 0.93 0.93 3.79 0.58 0.72 0.72 0.73 0.86
Descriptive statistics
Product innovation (PDI) 0.80 0.96 0.96 3.74 0.62 0.70 0.69 0.72 0.68 0.89
and average
Notes: Ca
0.7; CR
0.7; AVE
0.5; SD: standard deviation. Diagonal elements (in italic) are the square variances extracted
root of the AVE; Off-diagonal elements are the correlations among constructs from constructs
CMS Fit index Scores Recommended threshold value
13,2
Absolute fit measures
CMIN/df 1.536 #2a; #5b
GFI 0.921
0.90a;
0.80b
RMSEA 0.037 #0.08a; #0.10b

286 Incremental fit measures

NFI 0.955
0.90a;
AGFI 0.901
0.90a;
0.80b
CFI 0.984
0.90a;
Parsimonious fit measures
PGFI 0.733 The higher the better
PNFI 0.819 The higher the better
Table III. Notes: aAcceptability: acceptable; bAcceptability: marginal; RMSEA: root mean square error of
Overall fit index of approximation; GFI: goodness-of-fit index; CFI: comparative fit index; NFI: normed fit index; AGFI:
the CFA model adjusted goodness-of-fit index; PGFI: parsimony goodness-of-fit index; PNFI: parsimony normed fit index

KS Innovation capability
PCI PDI PCI PDI
Variable Model 1 Model 2 Model 3 Model 4 Model 5

Control variable
Firm size 0.048 0.085 0.195 0.107 0.211
Industry type –0.020 0.020 –0.045 –0.022 –0.041
Independent variable
Interpersonal trust 0.668 0.695 0.622
Table IV. KS 0.704 0.655
R2 0.454 0.507 0.514 0.534 0.576
The effects of Adjusted R2 0.449 0.503 0.510 0.530 0.572
interpersonal trust on F 106.7 131.9 135.7 147.1 174.3
KS and innovation
capabilities Notes:  p < 0.001;  p < 0.05; N = 389; PCI: process innovation; PDI: product innovation

Models 4 and 5 show that is KS is positively related to both process innovation ( b = 0.704;
p < 0.001) and product innovation ( b = 0.655; p < 0.001). H3a and H3b are also supported.
We examine the control role of firm size and firm type for innovation capabilities over 4
models (Models 2-5). The results indicate that the influence of firm size on aspects of
innovation is significant at p-value less than 0.05, whereas the effect of firm’s industry type
on innovation capabilities is not significant at p value more than 0.05 in all models. It implies
that firms with greater size will have greater potential to innovate their process and products.
4.2.2 Test of the mediating effect. Models 6 and 7 in Figure 2 and Table V shows that
after KS has been added as a mediator between interpersonal trust and process innovation
(model 6), and between interpersonal trust and product innovation (Model 7), KS’s effects on
process innovation ( b = 0.453; p < 0.001) and product innovation ( b = 0.460; p < 0.001) are
significant. However, for interpersonal trust’s effects, as compared with Models 2 and 3, the
direct effect of interpersonal trust on process innovation decreases from 0.695 (p < 0.001) to
0.394 (p < 0.001) and interpersonal trust’s effects on product innovation decreases from
 Knowledge
Product sharing
innovation

0.39*** 0.45***
0.06***
Interpersonal Knowledge
287
trust sharing Firm Industry
0.66*** size type

0.17**
0.46***
0.32***
Product
innovation

Figure 2.
Path diagram of the
mediating model
Notes: ***p < 0.001; **p < 0.05; —– Non-significant paths

Mediating effect Moderating effect

PCI PDI KS
Variable Model 6 Model 7 Model 8 Model 9

Control variable
Firm size 0.066 0.177 0.047 0.039
Industry type 0.027 0.037 0.008 0.002
Independent variable
Interpersonal trust 0.394 0.322 0.483 0.239
Mediators
KS 0.453 0.460
Moderators
Leader’s supports 0.272 0.101
Interaction variable
Interpersonal trust Leader’s supports 0.566
R2 0.619 0.623 0.439 0.442
Adjusted R2 0.615 0.619 0.433 0.435
Table V.
F 155.9 157.8 75.1 60.7 Test of mediating
and moderating
Notes:  p < 0.001;  p < 0.05; N = 389; PCI: process innovation; PDI: product innovation effects

0.622 (p < 0.001) to 0.322 (p < 0.001); thus, KS partially mediates the effects of interpersonal
trust on two aspects of innovation capabilities.
Moreover, the paper implements further analyses to verify the magnitude and the
statistical significance of the indirect effects. For statistical inferences as the suggestion of
Preacher and Hayes (2008), we used the bootstrap confidence intervals method with 5,000
iterations to test the significance of indirect effects (Table VI).
CMS The results in Table VI indicate that the indirect effects of interpersonal trust on process
13,2 innovation ( b = 0.310; p < 0.001) and product innovation ( b = 0.315; p < 0.001) are
significant within the range of confidence intervals. Thus, hypotheses H4a and H4b are
supported. In general, these findings are the first to confirm the mediating role of KS in the
relationship between interpersonal trust and innovation capabilities.
4.2.3 Test of the moderating effect. Models 8 and 9 are the test results on the moderating
288 effect of leader’s supports. The results show that the direct effect of leader’s supports on KS
is significant ( b = 0.272; p < 0.001). Especially, interpersonal trust leader’s support has a
significant effect on KS, with standardized coefficients of 0.566 (p < 0.001); therefore, H5 is
verified. This result confirms that leader’s supports play a positive moderating role between
interpersonal trust and KS (see Figure 3).

5. Discussions and conclusions

The changes of technology and customer need have put tremendous pressures on
organization to increase the efficiency and effectiveness which mainly exhibit in
organizational innovation capability (Jung et al., 2003). Knowledge resource and knowledge
management ability are the important driving force to promote innovation capability and
attaining success for most organizations (Lee et al., 2016; Wu, 2016). To effectively manage
organizational knowledge and increase knowledge management capability, numerous
studies have indicated that individuals’ motivation, attitude and willingness in KS process
play a decisive role (Wang and Noe, 2010; Bavik et al., 2017). Therefore, identification
potential factors and mechanism to foster employee’s attitudes, behaviors and willingness

Bias-corrected confidence intervals

Direct Indirect Total Lower confidence Upper confidence
Path effects effects effects level level

IT!KS!PCI 0.394 0.310 0.704 0.231 0.395

IT!KS!PDI 0.322 0.315 0.637 0.242 0.398
Table VI.
Confidence intervals Notes:  p < 0.001;  p < 0.05; IT: interpersonal trust; KS: knowledge sharing; PCI: process innovation;
of the indirect effects PDI: product innovation
Knowledge sharing

“Low leader's”
supports

Figure 3.
The moderation effect “High leader's”
of leader’s supports supports
on the relationship
between
interpersonal trust
and KS
Low interpersonal trust High interpersonal trust
toward KS might be one of the most effective strategies for enhancing organizational Knowledge
knowledge capital and innovation capabilities (Shazi et al., 2015; Song, 2015). The sharing
assessment of the hypotheses developed in this paper significantly contributes to the
theoretical and practical initiatives on KS and managing innovation.

5.1 Theoretical contributions

The paper makes significant contributions to theories of innovation and knowledge
management in the following ways.
289
First, in their research on “knowledge sharing: a review and directions for future
research,” Wang and Noe (2010) pointed out that interpersonal trust is the necessary
antecedent had great effects on employees’ KS activities, the trust–KS relationship has
received little attention from researchers. In response to the suggestions for future research
(Wang and Noe, 2010; Jain et al., 2015), this study proposes a research model to link
interpersonal trust and KS behavior of employees in Chinese manufacturing and service
firms. Contrary to Chow and Chan’s (2008) findings, this study verify the significant and
direct influences of interpersonal trust on employees’ KS behavior. In line with previous
studies (Sankowska, 2013; Koohang et al., 2017), this paper supplements the empirical
evidence to verify that interpersonal trust is particularly vital in the process of KS. The main
reason to explain for this result is that interpersonal trust creates a positive and
collaborative atmosphere which helps to improve the interactions and increase the
commitment among employees for sharing knowledge (Politis, 2003). Accordingly, building
and strengthening the mutual trust among employees might be one of the most efficient and
effective ways for firms to enhance the quality and quantity of KS.
Second, the research findings bolster the moderating role of leadership support between
interpersonal trust and KS. In other words, the findings assert that leadership is an essential
organizational factor that significantly promotes the effects of interpersonal trust on KS.
This could be explained by the fact that the success of KS mainly depends on the employees’
behavior and willingness in the processes of creation, sharing and integration of explicit and
tacit knowledge. Thus, leadership support or knowledge-oriented leadership will contribute
to enhancing employees’ behavior and willingness toward KS by both material and spiritual
encouragement (Wang and Noe, 2010; Donate and Guadamillas, 2011; Raab et al., 2014). In
line with prior research (Lin, 2007; Wang and Noe, 2010; Donate and Guadamillas, 2011), the
paper highlights the important role of supports, encourages, and necessary resources which
is implemented by leaders to strengthen and promote the transformation of mutual trust
among employees into better KS behaviors. The paper, therefore, contributes to better
understanding and mechanism of the role of leadership in the process of simulating
employees’ KS behaviors.
Third, interpersonal trust and KS are considered the essential ingredients for creativity
(Anderson et al., 2014; Le and Lei, 2018) however empirical studies on how these factors
affect creativity and innovation capability are still scarce and limited (Anderson et al., 2014;
Lei et al., 2018). So, the paper has contributed to fill the theoretical gaps by proposing a
research model to link interpersonal trust and innovation capability based on the mediating
role of KS. The empirical findings verify that interpersonal trust can be seen as the valuable
social capital which directly and indirectly impacts on two specific aspects of innovation
capability via the mediating role of KS. This finding implies that the high degree of trust
among individuals helps to establish a trustful and collaborative climate. In other words,
high degree of interpersonal trust is the fundament and driving force to stimulate KS among
employees which, in turn, fosters firm’s innovation capability. In line with this conclusion,
Sankowska (2013) reported that knowledge creation mediates the relationship between
CMS organizational trust and innovativeness in Polish companies; Maurer (2010) denoted that the
13,2 process of KS among project partners serves as a mediator in the relationship between trust
in inter-organizational projects and product innovation. The findings of this study differs
from previous work and deepens understanding of the pathways to improving specific
aspects of innovation capability namely product and process innovation by examining the
effects of interpersonal trust on KS.
290
6. Practical contributions
Based on its theoretical contributions and the empirical analyses, this study provides a
better understanding of the causal correlations among interpersonal trust, KS and
innovation capabilities. This study, therefore, has value to directors/managers in Chinese
firms as a reference for leader supports, fostering KS activities and improving innovation
capabilities in their firms. Specific managerial implications include the following.
First, according to Fan (2014), “China has a long history of pursuing innovation and
technological advancement.” China is attempting to transition into an “innovation-driven
economy.” However, there is a considerable difference between the expected and actual
outcomes. As a result, many Chinese firms are still getting difficult in finding the
appropriate way to become innovators (Song, 2015). To address this issue, Hogan and Coote
(2014) stressed that researchers and practitioners need to focus on studying the processes
that support innovation because innovation is the key for firms to survive and develop
before the increasing competitive intensity and higher market complexity. Nevertheless the
available studies on guiding Chinese firms to enhance their innovation capability are still
not adequate (Wang and Kafouros, 2009; Song, 2015; Lei et al., 2018). For this reason, this
paper has provided firms a significant implication, practical guidance, and deeper
understanding of the correlation between interpersonal trust, KS and two aspects of
innovation. More specifically, the findings indicate that both interpersonal trust and KS are
more significantly associated with process innovation compared with product innovation.
The main reason may be that interpersonal trust reduces the vulnerability and risk inherent
in interpersonal ties at the workplace to arouse and stimulate KS among employees
(Birasnav et al., 2013; Anderson et al., 2014; Bligh, 2017) this helps firms to develop more
efficient manufacturing process or operation procedure. In line with previous works
(Maurer, 2010; Birasnav et al., 2013; Alsharo et al., 2017), the findings provide Chinese firms
a clear pathway leading to each aspect of innovation by underlining that KS is a drive of
innovation and employees are the core force played dominant role in the process of KS.
Thus, directors/managers should concentrate in building a culture of trust, encouraging KS
behaviors and inspiring and motivating employee to participate in KS process for
innovation. For example, they can design a well-structured reward strategy to support
employees to collect, share, and apply knowledge (Birasnav et al., 2013).
Second, the empirical findings show that the supports of leadership are very necessary to
stimulate employees’ willingness to share knowledge. These supports can increase the
correlation between interpersonal trust and KS. The finding implies that if leadership
encourages and provides the necessary help and resources for employees to share
knowledge, and if employees perceive that the success in their goal and career are closely
related to the success of KS, they will actively participate in process of sharing their
expertise and knowledge, consequently increases firm innovation capability. This is a
significant finding because employees tend to fear losing their unique intellectual capital or
expert power (Renzl, 2008; Wang and Noe, 2010). Therefore, to stimulate KS process,
directors/managers should increase their supports to KS by:
  enhancing communication about the benefits of KS to individuals and Knowledge
organizations; sharing
 building and using appropriate rewards and incentives to encourage employees
sharing more knowledge and expertise with colleagues for common benefit; and
 providing necessary helps and resources to enable and facilitate KS activities.

More importantly, the current literature highlights transformational leadership as one of the 291
most effective leadership styles for enhancing employee trust, KS and innovation (Noruzy
et al., 2013; Lin and Hsiao, 2014; Le and Lei, 2018). As a result, strengthening the practice of
transformational leadership style by establishing emotional links with employees, inspiring
them to higher values and building a culture of collaboration and sharing will be the key
solution to promote trust and KS behaviors for innovation (Le and Lei, 2018).
Finally, by examining the influences of the control variables such as firm size and firm type,
we found that firm size is significantly correlated with firm’s innovation capability. This implies
that firms with greater capital and resources can have more opportunities and capabilities to
renew their product and process. In line with this finding, the research by Laursen and Salter
(2004) noted that larger firms tend to spend huge amounts of resources to perform research with
universities and more time to train their employees to urge innovation activities.

7. Limitations and directions for future research

The paper has provided the understanding and values to the literature and practice, it has
certain limitations. First, the cross-sectional design does not eliminate the possibility that
causal correlation may emerge in the long term due to changes in the psychology and trust of
individuals over time. A longitudinal study would overcome this limitation and consolidate
the results. Second, motivational factors (such as trust, individual attitudes, perceived benefits
and costs, and positive psychological state) are suggested having considerable influences to
the success of KS process (Wang and Noe, 2010; Bavik et al., 2017; Wu and Lee, 2017), but this
study only explores the role of trust in KS process. Future studies should investigate the
effects of the other motivational factors on KS through which stimulate firm’s innovation
capabilities. Third, knowledge is widely accepted as core and lasting resources enabling firms
to innovate and sustain competitive advantage (Chen et al., 2016), this study has only focused
on investigating the mediating role of KS between interpersonal trust and innovation
capability. To have full understanding of important role of knowledge capital toward
innovation capability of organizations, future works should investigate the mediating
mechanism of knowledge management process and its constituents (knowledge acquisition,
KS, and knowledge application) between motivational factors and aspects of innovation
capability. Finally, the collectivistic essence of Chinese culture (Ma et al., 2008) creates a
challenge to the understanding of characteristics in KS between state firms and non-state
firms and affecting innovation capabilities. To help Chinese firms to have more understanding
of factors, process, and mechanism affecting innovation, future studies should explore more
deeply the relationship between latent variables by assessing the moderating roles of firm
ownership forms which might influence the transformation of KS into better innovation.

8. Conclusions
The paper’s findings provide significant theoretical and practical implications for literature
on organizational behavior, knowledge management, and innovation that can be used to
analyze the relationships among interpersonal trust, KS and innovation capabilities. The
findings verify the hypotheses that interpersonal trust and KS have positive and significant
CMS roles in promoting product innovation and process innovation. The findings also provide the
13,2 empirical evidence on the moderating role of leader’s support in the correlation between
interpersonal trust and KS and the mediating mechanism of KS between interpersonal trust
and innovation capabilities. Overall, by operating a climate of trust among employees and
regularly having the appropriate and timely supports, leaders can create a positive and
appropriate environment to facilitate KS activities and significantly contribute to enhancing
292 innovation capabilities for their firms.

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Appendix Knowledge
sharing
Measures and items Source

Interpersonal trust Yilmaz and Hunt (2001)

I consider my co-workers as people who(m):
IT1. Can be trusted s
IT2. Can be counted on to do what is right 297
IT3. Can be counted on to get the job done right
IT4. Are always faithful
IT5. I have great confidence in

Supports of leadership Lin (2007)

LS1. My leader thinks that encouraging knowledge sharing with
colleagues is beneficial
LS2. My leader always supports and encourages employees to share their
knowledge with colleagues
LS3. My leader provides most of the necessary help and resources to enable
employees to share knowledge
LS4. My leader is keen to see that the employees are happy to share their
knowledge with colleagues

KS Bock et al. (2005)

KS1. I am willing to share my work reports and official documents with
members of my organization more frequently in the future
KS2. I will always provide my manuals, methodologies and models for
members of my organization
KS3. I am willing to share my experience or know-how from work with
other organizational members more frequently in the future
KS4. I will always provide my know-where or know-whom at the request
of other organizational members
KS5. I am willing to share my expertise from my education or training with
other organizational members in a more effective way

Product innovation Liao et al. (2007)

PDI1. Our company often develops new products and services well
accepted by the market
PDI2.A great majority of our company’s profits are generated by the new
products and services developed
PDI3.The new products or services developed by our company always
arouse imitation from competitors
PDI4.Our company can often launch new products or services faster than
our competitors
PDI5.Our company has better capability in R&D of new products or
services than our competitors Table AI.
PDI6. Our company always develops novel skills for transforming old Measurement
products into new ones for market summary and
(continued) sources
CMS
13,2 Measures and items Source

Process innovation Liao et al. (2007)

PCI1. Our company often tries different operation procedures to hasten the
realization of the company’s goals
PCI2.Our company always acquires new skills or equipment to improve
298 the manufacturing operation or service process
PCI3.Our company can develop more efficient manufacturing process or
operation procedure
PCI4.Our company can flexibly provide products and services according to
the demands of the customers
PCI5.The new manufacturing process or operation procedure used by our
Table AI. company always arouses imitation from competitors

Corresponding author
Phong Ba Le can be contacted at: lebaphong.vn@gmail.com

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