Learning, innovation and firm performance: knowledge management in small firms

This study aims to examine the relationships between managerial learning as a facet of knowledge absorption (KA), firm innovation as a facet of knowledge exploitation (KE), and performance of small firms (i.e., firms with fewer than 50 employees). It builds on the knowledge‐based view of the firm and the upper echelons theory to describe the effects of KA on KE, and that of KE on firm performance, in the small‐firm context. Using survey data of 1441 small firms in New Zealand, the study applies a partial least squares approach to structural equation modelling to test the main hypotheses of the study. The main findings show the positive and significant effects of three types of managerial learning, namely, practice‐based, proximal, and distal learning, on innovation and on innovation in firm performance. However, the curvilinear relationships suggest rather that the effects are finite and, potentially, confounded by factors unaccounted for in the models.