Customer knowledge management, innovation capability and business performance: A case study of the banking industry

Abstract

Purpose
– This paper aims to examine the effect of customer knowledge management (CKM) on continuous innovation and firm performance in 35 private banks in Guilan (Iran). CKM emerges as an important and effective system for innovation capability and firm performance. However, the role of CKM in innovation and performance is not well understood.

Design/methodology/approach
– Data have been collected via questionnaires from managers of private banks in Guilan. Feedback was received from 265 managers in 350 distributed questionnaires, and hypotheses were tested using the structural equation modelling.

Findings
– The results of this paper indicate that knowledge from customers has a positive impact on both innovation speed and innovation quality as well as operational and financial performances. Also, our results demonstrate a different effect of knowledge about customer and knowledge for customers on various dimensions of innovation and firm performance. By using customer’s knowledge flows, firms will be aware of external environment and new changes in customers’ needs and so will be more innovative and perform better.

Practical implications
– CKM is known as an important system to connecting internal environment to external environment to create novel ideas. The results of this paper shed light on the consequences of CKM on firms and provide support for the importance of CKM to enhance innovation capacity and firm performance.

Originality/value
– This article is one of the first to find empirical support for the role of CKM within firms and its importance on innovation capability and firm performance. This study can provide valuable insights and guidance for researchers and managers as well.

Full text

Customer knowledge management,
innovation capability and business
performance: a case study of the banking
industry
Nastaran Taherparvar, Reza Esmaeilpour and Mohammad Dostar
Nastaran Taherparvar,
Reza Esmaeilpour and
Mohammad Dostar are all
based at the Department
of Management,
University of Guilan,
Rasht, Iran.
Abstract
Purpose –This paper aims to examine the effect of customer knowledge management (CKM) on
continuous innovation and firm performance in 35 private banks in Guilan (Iran). CKM emerges as an
important and effective system for innovation capability and firm performance. However, the role of CKM
in innovation and performance is not well understood.
Design/methodology/approach –Data have been collected via questionnaires from managers of
private banks in Guilan. Feedback was received from 265 managers in 350 distributed questionnaires,
and hypotheses were tested using the structural equation modelling.
Findings –The results of this paper indicate that knowledge from customers has a positive impact on
both innovation speed and innovation quality as well as operational and financial performances. Also,
our results demonstrate a different effect of knowledge about customer and knowledge for customers
on various dimensions of innovation and firm performance. By using customer’s knowledge flows, firms
will be aware of external environment and new changes in customers’ needs and so will be more
innovative and perform better.
Practical implications –CKM is known as an important system to connecting internal environment to
external environment to create novel ideas. The results of this paper shed light on the consequences of
CKM on firms and provide support for the importance of CKM to enhance innovation capacity and firm
performance.
Originality/value –This article is one of the first to find empirical support for the role of CKM within firms
and its importance on innovation capability and firm performance. This study can provide valuable
insights and guidance for researchers and managers as well.
Keywords Business performance, Innovation capability, Customer knowledge management
Paper type Research paper
1. Introduction
Over the past years, the importance of external sources, particularly customer knowledge,
has been highlighted by both practitioners and academics (Joshi, 2004). Today’s
customers have become more innovative and active and can easily communicate with
other customers and firms anywhere in the world. Therefore, customers have valuable
information and knowledge, which can be used as important sources for competition (von
Hippel, 2001;Bolton and Shruti, 2009;van Doorn, 2010;Hoyer et al., 2010). However,
customer knowledge does not constitute a strategic advantage by itself; it needs to be
managed (Hollebeek, 2013).
By increasing the position of the customer in the marketplace, new approaches to essential
questions such as “how to innovate”, “how to achieve a competitive advantage”, “how to
create value” or “how to reach superior performance” have to be considered. For example,
von Hipple (1986) and Chesbrough (2006) have pointed out the importance of customer
information, knowledge and competence in the innovation process. According to Belkahla
Received 11 November 2013
Revised 21 December 2013
8 January 2014
9 February 2014
16 February 2014
Accepted 20 February 2014
DOI 10.1108/JKM-11-2013-0446 VOL. 18 NO. 3 2014, pp. 591-610, © Emerald Group Publishing Limited, ISSN 1367-3270 JOURNAL OF KNOWLEDGE MANAGEMENT PAGE 591

and Triki (2011), absorptive capability is necessary for innovation capability. Cohen and
Levinthal (1990) have stated that absorptive capability allows firms to absorb external
knowledge and manage it internally. This capability helps firms to identify outside
opportunities and provides new knowledge for innovation. Matthing et al. (2004) have
argued for a newly customer-centric view where competitive advantage is defined and
cocreated with the customers. By rejecting the traditional models of closed innovation and
the firm-centric view of value, these new approaches emphasize the use and management
of customer knowledge as the main source for providing new outcomes (Smith and
McKeen, 2005;Monica Hu et al., 2009). Hence, firms have recently started to implement
customer knowledge management (CKM) to engage customers in the firms’ processes and
utilize their knowledge and ideas (Nambisan, 2009;Ngo and O’Cass, 2012).
CKM is a new organizational approach to capturing, sharing and using the information,
knowledge, experience and ideas related to customers. By engaging customers in a firm’s
process, CKM connects external environment to internal environment (Chen, 2008) and
transfers and shares information not only among customers and within firms but also
between customers and firms (Zhang, 2011). In fact, when CKM is applied, customers’
roles change from being purely passive recipients of products/services to being coequal
partners in the process of adding value (Gibbert et al., 2002).
In recent years, CKM has been regarded as a key source for innovation capability and
business performance (Tzokas and Saren, 2004;Rollins and Halinen, 2005;Rupak, 2008).
Through effective use of CKM, absorptive capability can be increased by a process of
identifying, disseminating and applying knowledge from, for and about customers
(Sulaiman et al., 2011;Hoyer et al., 2010). As Adams (2003) and Cardinal (2001) have
mentioned, availability of knowledge is essential for innovation. Therefore, by improving
absorptive capability, more knowledge is provided for the innovation process and firms
then have greater innovation capability.
On the other hand, according to the knowledge-based theory, competitive advantage and
superior performance are strongly dependent on firms’ knowledge. With CKM, firms create
new knowledge and learn from it to enhance their competitive advantage (Su et al., 2006)
because new knowledge developed today will become the core knowledge of tomorrow.
By considering customer knowledge as a main source of new knowledge, and through its
effective management, firms can better improve their ability to perform and to compete
against their competitors (Yeung et al., 2008).
In this paper, we argue that CKM enables firms to extract more from external resources,
which enhances their innovation capability and firm performance. Despite the importance
of CKM, the fundamental relationships among CKM, innovation capability and business
performance have not been examined yet in previous studies. The present research
addresses this gap by exploring the relationships among CKM, innovation capability and
business performance. Our research further differs from prior works in three ways. Few
studies have linked CKM and business performance directly; this research tries to fill this
gap. Moreover, this study not only testifies to the effect of CM on business performance but
also explores the effect of CKM on innovation capability. Finally, by discussing the effect of
CKM on innovation capability, which leads to superior business performance, this study
proposes that when complex and unpredictable situations happen, managers should
‘‘CKM is a new organizational approach to capturing, sharing
and using the information, knowledge, experience and ideas
related to customers.’’
PAGE 592 JOURNAL OF KNOWLEDGE MANAGEMENT VOL. 18 NO. 3 2014

simultaneously focus on customer-oriented strategies and innovation to outpace their
competitors.
The rest of the paper is arranged as follows. First, a literature review of CKM, innovation
capability and business performance provides an overview of the key issues. Second, we
develop a research model to develop a hypothesis. We then provide a research
methodology for the data collection and measure validation procedures. Finally, data
analysis, findings and concluding remarks are presented, followed by the conclusion of the
study.
2. Literature review
2.1 Customer knowledge management
Owing to the importance of customers and their increased competencies and abilities,
firms should engage customers in their internal process (Teece, 2010) to manage customer
knowledge and access to important sources of information and ideas (Rollins and Halinen,
2005). By acquiring, sharing, transferring and utilizing information, knowledge and ideas
related to customers, CKM effectively manages knowledge from the customer perspective
and provides important sources for novel ideas. These can be used to develop new
products/services and new solutions for satisfying customers’ needs and problems
(Garcia-Murillo and Annabi, 2002;Xu and Walton, 2005;Peng et al., 2009).
CKM supports the exchange of customer knowledge within a firm and between customers
and firms to learn from, about and with customers. In fact, CKM is a learning process from
which both customers and firms, sharing their experience and knowledge, learn from each
other, solve their problems and take advantage of the exchange process benefits (Plessis,
2007).
CKM improves the absorptive capacity of a firm, which is defined by Cohen and Levinthal
(1990) as a special capability that allows a firm to gain and absorb external knowledge and
manage and develop it internally. In fact, CKM recognizes and identifies the value of new
external knowledge and invests in customers’ competencies to assimilate and utilize them
for commercial ends, which is essential for a firm’s innovation (Belkahla and Triki, 2011).
To access customer knowledge takes a lot of effort because it is embedded in the
customer’s mind as tacit knowledge. Through CKM, customers are encouraged to share
their experiences with other customers to solve their problems. Knowledge workers can
use these experiences and extract useful information from them; these then become an
important source of innovative ideas and competitive advantage. However, exchanging
customers’ tacit knowledge (customers’ experience, ideas, information, problems, needs
and data) to explicit knowledge (useful ideas for solving customers’ problems and helpful
ideas for new innovative services or for improving current services) is not as easy as it may
seem. In Figure 1, rectangle 1 shows the position of customer knowledge and rectangle 4
shows the position of firm knowledge. CK does not have a direct connection with FK.
Therefore, knowledge workers must make some fundamental changes to change external
and tacit knowledge into internal and explicit knowledge. CK exclusively stands for
customer knowledge with customer-oriented processes, which must first merge with firms’
processes (rectangle 2). This then becomes firms’ knowledge with a customer-oriented
process (rectangle 3) and finally converts to the last rectangle and becomes meaningful
‘‘CKM enables firms to extract more from external resources,
which enhances their innovation capability and firm
performance.’’
VOL. 18 NO. 3 2014 JOURNAL OF KNOWLEDGE MANAGEMENT PAGE 593

firms’ knowledge with firms’ processes. The linkage between rectangles 4 and 3 indicates
the complete merger of customer knowledge with firm knowledge. In rectangle 4, customer
knowledge has passed through different levels and has penetrated to a deeper layer of the
firm. Therefore, the customers’ usual data and information becomes useful, valuable and
inimitable knowledge for firms, which can not only be used to solve customers’ problems
but also becomes an important source of innovative ideas and competitive advantage.
CKM pays attention to both customer knowledge and firm knowledge and invests in both
external and internal competencies, so it enables firms to create new products and
services to respond to variable market situations. Data, information and knowledge, which
are gathered by CKM, are important sources for competitive advantage because they are
embedded in a firm’s process and are difficult for competitors to imitate (Garcia-Murillo and
Annabi, 2002;Campbell, 2003;Zhang, 2011).
CKM consists of three main flows: knowledge from customers, knowledge about customers
and knowledge for customers (Garcia-Murillo and Annabi, 2002;Gibbert et al., 2002;
Gebert et al., 2003). Using knowledge from customers and knowledge about customers,
CKM can inform firms of customers’ changing needs, and through knowledge for
customers, CKM can provide required information for customers.
Knowledge from customers is customers’ information about products, competitors and
markets, which is acquired from customers to understand the external environment
(Garcia-Murillo and Annabi, 2002). This kind of knowledge has a tacit nature and improves
innovation capability, which leads to new product advantages. However, a greater
challenge for firms is to exploit knowledge from customers and turn it into explicit
knowledge (Desouza and Awazu, 2005). The use of social media, such as discussion
forums, is an important tool used by CKM that can help firms gain knowledge from
customers. In these forums, diverse people with different levels of knowledge can express
their needs, problems and doubts (Maswera et al., 2006), and firms can use this information
to make sense of community perspectives to develop new ideas, improve current products/
services and launch new and innovative products/services.
Knowledge about customers has a explicit nature and includes looking into customers’
backgrounds, transaction histories, customer motivations and wants, etc. which help firms
better understand customer’s needs (Smith and McKeen, 2005).
Knowledge for customers includes everything that a firm provides for customers to help
them, satisfy their knowledge needs and promote the level of their knowledge. The nature
of this knowledge is explicit and affects the customer’s perception of service quality
(Gebert et al., 2003). Document repositories and workflow applications are CKM tools,
which access information for customers and help them to make better decisions. Firms can
Figure 1 Converting customer’s knowledge to firm’s knowledge
PAGE 594 JOURNAL OF KNOWLEDGE MANAGEMENT VOL. 18 NO. 3 2014

use these tools to provide knowledge for customers (Lopez-Nicolas and Molina-Castillo,
2008).
In general, knowledge from customers creates long-term benefits by developing new ideas
and continuously improving products/services; knowledge about customers creates
short-term value by improving effectiveness; and knowledge for customers creates
short-term value by improving customers’ experience and information and increasing a
firm’s validity (Smith and McKeen, 2005).
Using customer knowledge flows to establish a co-creative environment for customer
participation and interaction can help firms attain superior performance (Rollins and
Halinen, 2005). For this reason, firms must put themselves in customers’ mindset and pay
attention to their intrinsic motivation. For example, to provide an interactive environment,
many banks now offer cost-effective interactive sites to create highly personalized services
to customers (including the virtual counter) and to diminish the real impact of the economic
slowdown on customers’ investment portfolios, thereby increasing the motivation of
customers to participate as well as reducing the cost. In this way, banks have a special
database of customers which allow them to be accessible to the customer (Gibbert et al.,
2002).
Furthermore, creating a knowledge sharing platform can be useful for providing an
interactive environment. This platform allows firms not only to transact business (pay online,
place orders) but also share and exchange knowledge (e.g. share good and bad
experiences with other customers). Holcim.com is one of the successful firms using a
knowledge sharing platform for engaging customers in the firm’s process. Holcim’s
customers say: “we like the firm’s knowledge sharing platform, because it listens to what we
tell it and really take our comments very seriously!”
Another example of a successful firm using CKM is Threadless.com, a T-shirt manufacturer.
This firm obtains the graphic designs for its T-shirts from its consumers who submit designs
online. The most popular designs that are chosen by the Web site’s members are sent into
production and sales. In addition, chosen designers receive a monetary award and get to
keep the rights to their designs (Beer, 2007;Liu, 2007). This process not only encourages
many customers to register on the Web site and share their ideas and designs with the firm
but it also helps the firm to create new designs that are accepted by its customers.
2.2 Innovation capability
Paying attention to innovation and supplying products/services in accordance with the
changing needs of customers are the most important goals of any firm in an era which is
characterized by short product life cycles, dynamic markets and complex processes
(Lolfsten, 2005). Innovation is creating new knowledge and ideas to facilitate business
results and improve firms’ processes and produce new products/services (Plessis, 2007).
In recent years, due to the importance of customer knowledge and information as one of the
main sources of knowledge and ideas, many firms are increasingly shifting to open
innovation and customer-driven innovations models in which useful information,
knowledge, ideas and competence are widely disseminated outside the borders of any
particular firm (von Hipple, 1986,Chesbrough, 2003,2006). In fact, firms put a stronger
focus on connect and develop (C&D) than research and development (R&D). The C&D
model assumes that innovative ideas suggested by customers are more creative and more
effective than inside personnel’s ideas and therefore affect innovation speed and
innovation quality, both of which are two important dimensions of innovation (Sakkab, 2002;
Magnusson, 2003). Innovation speed is the elapsed time between initial development
(including the conception and definition of an innovation) and ultimate commercialization of
new products/services (Wang and Wang, 2012). Innovation quality is how launched
products/services meet customers’ needs and expectations (Lanjouw and Schankerman,
2004). According to Lanjouw and Schankerman (2004), innovation quality reflects the
standardization, low tolerance and systematic procedure. In general, speed and quality in
VOL. 18 NO. 3 2014 JOURNAL OF KNOWLEDGE MANAGEMENT PAGE 595

innovation differentiates firms from their competitors and ultimately affect a business’s
superior performance (Wang and Wang, 2012).
Innovation is a way to overcome complex and changing situations, especially if firms use
open innovation or customer-oriented innovation (Chesbrough, 2003,2006). In fact,
customers have an outside view on firms and have more realistic ideas, which are often
more creative and more effective than inside ideas (Magnusson, 2003). In addition,
attention on customers’ ideas and needs creates faster ideas and launch much better
innovative products/services. Therefore, paying attention to knowledge flows, which impact
innovation speed and quality, is important for firms (Wang and Wang, 2012). Firms must
develop special systems for co-creation and reintegration to be able to meet the needs of
customers and satisfy them and also provide appropriate environments for engaging
customers in innovation processes to better access customer knowledge and ideas for
innovation (Hoyer et al., 2010;Hollebeek, 2013).
3. Research model and hypotheses
By providing appropriate feedback and a special environment for sharing information
among customers, and between firms and customers, CKM enables firms to know what
their customers know. So, through CKM, firms have access to an important source of novel
ideas, which are suitable for innovation and performance. By proposing a conceptual
model, which is shown in Figure 2, this paper aims to investigate the relationships among
CKM, innovation capability and business performance.
3.1 CKM and business performance
Through increasing the number of competitors, customers have more options (Buckinx and
Van den, 2005) and firms are matched with customers’ needs and expectations. This
attracts more customers and increases their satisfaction level (Das et al., 2000). One of the
effective practices aligned with the changing needs of customers is using and managing
customers’ knowledge as an important source of tacit knowledge.
In fact, to achieve a sustainable competitive advantage in comparison with competitors, not
only are continuous observations of customers’ perceptions and expectations of delivered
products/services required but it is also vital to continuously interact with customers to
exploit and apply their tacit knowledge. A successful knowledge partnership with important
and valuable customers can strengthen business performance and create an inimitable
competitive advantage that is difficult for the competition to duplicate.
Figure 2 The conceptual model
PAGE 596 JOURNAL OF KNOWLEDGE MANAGEMENT VOL. 18 NO. 3 2014

Customer knowledge allows firms to identify the unique features of market segments and
formulate appropriate strategies for these segments. Therefore, firms that know their customers
have better ability to identify opportunities and are more likely to better perform (Lee et al.,
2011). Moreover, the ideas acquired from CKM are more realistic, so they are more easily
accepted by customers and market and better satisfy their needs. In fact, having a continuous
ability to use and manage customer knowledge is vital for superior performance; therefore,
firms need to continuously update their knowledge in accordance with their customers’
information (Claycomb et al., 2005;Da Silva et al., 2002;Tuominen et al., 2004).
Previously, Yang and Kang (2008) pointed to a direct and positive effect of customer
capital on business performance and Lee et al. (2011) found that customer knowledge has
a direct effect on firm performance. Ngo and O’Cass (2012) also explored the indirect
effect of customer participation on operational performance. Although the empirical
relationships between CKM and business performance have been investigated, only a few
studies have considered the direct effects of CKM on business performance. In this study,
based on the above discussions, we propose our first hypothesis:
H1. CKM has a direct and positive effect on business performance.
Prior research has shown that CKM can improve business performance indirectly through
higher innovation capability (Garcia-Murillo and Annabi, 2002;Gibbert et al., 2002;Gebert
et al., 2003;Rollins and Halinen, 2005). In addition, CKM is a kind of external knowledge
management which is related to customers (Zhang, 2011). Therefore, prior research in the
KM field can be used in the CKM field as well. Following Massey et al. (2002),Gloet and
Terziovski (2004) and Yang (2010), we consider an intermediate variable between KM and
business performance, that is, innovation capability (Lopez-Nicolas and Merono-Cerdan,
2011;Wang and Wang, 2012). Based on previous discussions, and considering that both
academics and practitioners state that innovation capacity leads to superior performance
and competitiveness (Calantone et al., 2002), we posit the following:
H1a. CKM has an indirect and positive effect on business performance through an
increase of innovation capacity.
3.2 CKM and innovation capability
In the knowledge economy, customer knowledge is becoming an important source of
innovation process (Gann, 2000;Harty, 2005), which directly effects the discovery of
innovative ideas and indirectly effects the efficiency of innovation (Lu, 2008). Hence,
firms increasingly integrate their sources with sources of external actors, especially
customers, to gain novel ideas for innovation capability. In fact, firms need to connect
with customers to make them aware of the external changes and extract customers’
ideas, information and knowledge. With the three main knowledge flows, CKM provides
special feedback for firms to remain informed of customers’ needs. Through CKM,
customers can both receive and give immediate feedback and share their information,
which is enhanced value creation and innovation (Johannessen and Olsen, 2010).
In general, customers play an active and significant role in innovation, as their ideas are
much closer to market needs (Hoyer et al., 2010). The ideas and knowledge of customers
can produce new products/services or improve existing products/services, which may
have been ignored by a firm. Therefore, if customers’ knowledge is managed effectively, it
can improve the innovation process and R&D activities (Rowley, 2002;Rollins and Halinen,
2005) and also affect the future of organizational innovation (Lopez-Nicolas and
Molina-Castillo, 2008;Zhang et al., 2009).
Through CKM, firms increase their integrative capacity, which is defined as a firm’s ability to
involve customers in the innovation process to create value (Belkahla and Triki, 2011). In
passive integration, CKM gathers knowledge about customers through several methods, such
as customers’ purchase frequencies, their complaints analysis, their socio-demographic
features, etc. On the other hand, in active integration, CKM gathers knowledge from customers
VOL. 18 NO. 3 2014 JOURNAL OF KNOWLEDGE MANAGEMENT PAGE 597

through several techniques, such as market studies, online discussion forums, social networks,
focus groups with customers, etc. By providing knowledge about and from customers, CKM
helps firms gain valuable information and ideas, which can be useful for the innovation process.
In the literature, CKM has been frequently identified as a main antecedent of innovation
capacity. According to Berghman (2006) and Mukherji (2012), customers’ participation and
absorption of their knowledge is vital for innovation capability. Therefore, using CKM to
engage customers in the innovation process and utilizing their ideas and knowledge is
essential for firms (Auh et al., 2007;Yi et al., 2011). Gibbert et al. (2002) and Rollins and
Halinen (2005) have also argued that CKM is one of the methods for improving innovation.
Although the relationships between CKM and innovation capability have been empirically
stated, none have explicitly considered the direct effect of CKM on innovation capability. To
fill this gap, this paper proposes its next hypothesis:
H2. CKM has a direct and positive effect on innovation capability.
3.3 Innovation capability and business performance
In many studies, innovation capability has been considered a significant factor and an
intangible asset for firms to create value and sustainable competitive advantage, which
finally leads to superior performance (Weerawardena and O’Cass, 2004;Sher and Yang,
2005;Subramaniam and Youndt, 2005;Yang and Kang, 2008). In an innovation process,
firms make continued efforts to achieve improvements and changes, which lead not only to
making full use of current resources but also to bringing new intangible assets to firms
(Plessis, 2007). On the other hand, firms with superior innovativeness are more successful
in responding to customers’ demands and needs (Calantone et al., 2002;Sadikoglu and
Zehir, 2010). A significant and positive relationship between innovation capability and
business performance is fairly well established in the extant literature. For example, Jenny
(2005),Lopez-Nicolas and Merono-Cerdan (2011) and also Wang and Wang (2012) have
argued that innovation has a positive effect on business performance. On this basis, we
propose our last hypothesis:
H3. Innovation capability has a direct and positive effect on business performance.
4. Research methodology
In this paper, a quantitative survey was used to empirically test the hypotheses. In the next
part, we explain the sample, operational definitions and measurements of main variables.
4.1 Sample
This paper examined a sample of 35 private banks in Guilan, including the Pasargad Bank,
Parsian Bank, Sina Bank, Ansar Bank, Ghavamin Bank, Iran-Zamin Bank, Eghtesade Novin
Bank, Shahr Bank and Sarmaye Bank. Choosing private banks as a sample for this study has
two advantages. First, due to fierce competition, customers play an essential role in private
banks and most banks have CKM systems to connect with their customers and apply external
ideas which can be used to launch innovative services more quickly than their competitors.
Second, due to the diversity of different private banks in Iran, customers have a wide range of
options from which to choose. Therefore, to attract customers, private banks are strongly
dependent on innovation capability. This feature makes private banks a good setting for
examining the link among CKM, innovation capability and business performance.
Data were collected from 350 bank managers as the key information source due to their
direct and indirect relationships with customers, their knowledge of banks and their
familiarity with the CKM system and external environment. Questionnaires were distributed
among 49 marketing managers, 56 CRM managers, 67 new service managers, 69 research
and innovation managers, 49 complaints managers and 60 customer service managers
(Table I). Two hundred and sixty five usable questionnaires for analyzing were collected.
Table II shows the number of managers and their roles in each bank.
PAGE 598 JOURNAL OF KNOWLEDGE MANAGEMENT VOL. 18 NO. 3 2014

After analyzing the data, it was found that 82 per cent of the respondents were male. Most
respondents were 30-40 years old (55 per cent), and most of them had 5-10 years of work
experience (27 per cent). Also, 43 per cent of the respondents had bachelor’s degree.
Table II summarizes the respondents’ profiles.
Table I Number and role of respondents
Bank
Number of
branches
Number of
respondents Role of respondents
Pasargad 8 4 Marketing manager
5 CRM manager
6 New service manager
8 Research and innovation manager
6 Complaints manager
7 Customer service manager
Parsian 9 5 Marketing manager
6 CRM manager
8 New service manager
8 Research and innovation manager
5 Complaints manager
6 Customer service manager
Sina 13 7 Marketing manager
9 CRM manager
8 New service manager
11 Research and innovation manager
6 Complaints manager
8 Customer service manager
Sarmaye 3 2 Marketing manager
1 CRM manager
2 New service manager
3 Research and innovation manager
2 Complaints manager
2 Customer service manager
Shahr 2 1 Marketing manager
2 CRM manager
2 New service manager
2 Research and innovation manager
1 Complaints manager
2 Customer service manager
Iran-Zamin 4 2 Marketing manager
2 CRM manager
1 New service manager
3 Research and innovation manager
2 Complaints manager
3 Customer service manager
Eghtesade Novin 3 2 Marketing manager
1 CRM manager
2 New service manager
3 Research and innovation manager
2 Complaints manage
3 Customer service manager
Ghavamin 14 6 Marketing manager
9 CRM manager
11 New service manager
9 Research and innovation manager
7 Complaints manager
9 Customer service manager
Ansar 12 5 Marketing manager
7 CRM manager
6 New service manager
10 Research and innovation manager
6 Complaints manager
9 Customer service manager
VOL. 18 NO. 3 2014 JOURNAL OF KNOWLEDGE MANAGEMENT PAGE 599

4.2 Questionnaire design
In this study, the quantitative research methodology was used for the collection of primary
data. Before the data collection, a questionnaire was developed and pilot tested. Whenever
possible, we used existing scales from the literature for measurement items. However, this
differed in the case of CKM. CKM did not have a standard questionnaire; therefore, we
developed a scale based on the interpretation of the literature. In the end, we made
some modifications to align the scales with the private banks’ context. The five-point
Likert-type scale ranging from “1” (totally disagree) to “5” (totally agree) was used to
gather the managers’ responses. The Appendix shows the details of the measurement
items.
4.3 Measurement of CKM
This study adopts the work of Garcia-Murillo and Annabi (2002),Gibbert et al. (2002) and
Gebert et al. (2003) for the CKM measurement. Three components of CKM of the
questionnaire include knowledge from customer (four items), knowledge about customer
(seven items) and knowledge for customer (four items). Knowledge from customer can be
viewed as knowledge and ideas that are acquired from customers through interaction.
Knowledge about customer is accumulated to understand customers’ motivations and
requirements. Knowledge for customer includes everything that a firm provides for its
customers.
4.4 Measurement of innovation capability
Innovation speed and innovation quality were used for measuring innovation capability.
Innovation speed includes five items: firms’ speed in generating original and novel ideas,
new service launching, new service development, new technology and equipment
deployment and new problem solving (Liao et al., 2010). This study adopts the work of
Lahiri (2010) on innovation quality. Innovation quality includes five items, which show the
newness and creativity of new and novel ideas, services, processes, technology and
equipment and problems.
Table II Profiles of respondents
Characteristics Percentage (100 per cent) Frequency
Gender:
Female 18.11 48
Male 81.89 217
Total 100.00 265
Age (years)
⬎30 12.83 34
30-40 51.33 136
40-50 26.04 69
50 ⬎9.8 26
Total 100.00 265
Job experience
⬎5 16.24 43
5-10 27.18 72
10-15 20.75 55
15-20 10.94 29
20-25 11.7 31
25-30 7.9 21
30 ⬎5.29 14
Total 100.00 265
Education
Diploma 18.11 48
Associated Diploma 24.53 65
Bachelor 42.64 113
Master ⬎14.72 39
Total 100.00 265
PAGE 600 JOURNAL OF KNOWLEDGE MANAGEMENT VOL. 18 NO. 3 2014

4.5 Measurement of business performance
Operational performance and financial performance were used for measuring business
performance. This study confirms the work of Wang and Wang (2012) on operational
performance measures. Six items were used for operational performance including
customer satisfaction, developed service, cost management, responsiveness, past
performance and company management. Financial performance was measured with four
items adapted from Inman et al. (2011). They consist of shares profit, previous period profit,
customers’ deposits and shareholders’ investment.
5. Analysis and results
5.1 Measurement model
To evaluate the overall measurement model, we first tested the convergent validity and
internal reliability. Convergent validity is defined as the degrees to which items that are
supported measure a single construct and agree with each other. Average variance
extracted (AVE) was used for testing convergent validity, which should be ⬎0.5. In our
model, all constructs ranged from 0.632 to 0.655 and were ⬎0.50 cut-off value (Fornell and
Larcker, 1981). The internal reliability was tested using Cronbach’s alpha (C-a), which
should be ⬎0.7. As shown in Table III, internal reliability is acceptable, as all contracts are
⬎0.70 cut-off value (Nunnly and Bernstein, 1994).
Before testing the hypotheses, we evaluated the measurement model fit by LISREL 8/7. We
used fit indices which include:
●root mean square error of approximation (RMSEA);
●chi-square (
␹
2
);
●goodness-of-fit index (GFI);
●normal fit index (NFI);
●non-normal fit index (NNFI);
●adjusted goodness-of-fit (AGFI);
●comparative fit index (CFI);
●parsimony goodness-of-fit index (PGFI); and
●parsimony normal fit index (PNFI).
As shown in Table IV, all fit indices met satisfactory levels; therefore, the model was able
to explain the research hypotheses.
Table III AVE and Cronbach’s alpha reports
Constructs Items AVE Cronbach’s alpha Results
Customer knowledge management (CKM) 15 0.650 0.872 Both validity and reliability are accepted
Innovation capability (IC) 10 0.655 0.792 Both validity and reliability are accepted
Business performance (BP) 10 0.632 0.818 Both validity and reliability are accepted
Table IV Overall fit indices of the CFA mode
Fit index RMSEA
␹
2
/df GFI AGFI CFI NFI NNFI PGFI PNFI
Scores 0.076 2.93 0.97 0.91 0.98 0.97 0.96 0.76 0.83
Recommended
cut-off value
⬍0.08 3⬎ⱖ0.90 ⱖ0.90 ⱖ0.90 ⱖ0.90 ⱖ0.90 The higher,
the better
The higher,
the better
VOL. 18 NO. 3 2014 JOURNAL OF KNOWLEDGE MANAGEMENT PAGE 601

5.2 Structural model
Table V shows the results of the hypothesis, and Figure 3 shows the structural model, which
was tested by LISREL 8/7 (Jöreskog et al., 1999). In Figure 3, the model was tested by
considering latent variables.
According to Table III, the overall fit of the research model was acceptable (RMSEA ⫽
0.076;
␹
2
/df ⫽2.93; GFI ⫽0.97; AGFI ⫽0.91; CFI ⫽0.98; NFI ⫽0.97; NNFI ⫽0.96; PGFI ⫽
0.76; and PNFI ⫽0.83), and, according to Figure 3, all hypotheses were supported. In the
following paragraphs, we separately describe the details of each hypothesis.
First of all, we examined the effects of CKM on business performance. As shown in
Table IV, the effect of CKM on business performance has values of 0.15 (p⬍0.01), so H1
was supported. Previously, Yang and Kang (2008) argued that customer capital positively
influences business performance. Also, Lee et al. (2011) reported the positive impact of
CKM on firm performance. They explained that by using CKM, firms are able to identify the
unique features of market segments and formulate appropriate strategies for these
segments and, therefore, have superior performance on the market. Furthermore, Ngo and
O’Cass (2012) explored an indirect effect of customer participation on operational
performance. Our findings show that CKM has a positive and significant effect on business
performance. This means that applying CKM can create new competitive advantage for
firms, which eventually leads to better performance.
Regarding H2, we examined the effects of CKM on innovation capability. As the results
show, the effect of CKM on innovation capability has values of 0.34 (p⬍0.05). Therefore,
H2 was supported. Findings support the statement by Gibbert et al. (2002) and Gebert et
al. (2003) that CKM improves the ability to innovate. Moreover, Garcia-Murillo and Annabi
(2002) argued that CKM creates new ideas for firms; therefore, it is especially critical for
innovation. Based on previous studies and the present findings, we can conclude that CKM
Table V Standardized path coefficients
Hypotheses Path Estimate pRemarks
H1 CKM¡BP 0.15* 2.21 Supported
H2 CKM¡IC 0.34** 4.39 Supported
H3 IC¡BP 0.72** 9.00 Supported
Notes: *Significant at the 0.10 level (2-tailed);
**
Significant at the 0.05 level (2-tailed)
Figure 3 Research model
PAGE 602 JOURNAL OF KNOWLEDGE MANAGEMENT VOL. 18 NO. 3 2014

has a positive and significant effect on business performance. This means that firms should
focus on CKM to gain more novel and realistic ideas for enhancing innovation capabilities.
Finally, we examined the effects of innovation capability on business performance. As
Table IV shows, the effect of innovation capability on business performance has a value of
0.72 and is statistically significant (p⬍0.05). So, H3 was supported and innovation
capability showed a positive and significant effect on business performance. This finding
is evidenced in many practices (Capon et al., 1992;Han et al., 1998;Li and Calantone,
1998;Jenny, 2005;Lopez-Nicolas and Merono-Cerdan, 2011;Wang and Wang, 2012).
5.3 Effect analysis
This study not only testifies to the direct impact of CKM on business performance but also
explores how this mechanism works through innovation capability. Therefore, after testing
the direct effects of independent variables on dependent variables, we calculated the
indirect effects of CKM on business performance through innovation capability. Table VI
shows the result of direct/indirect effects and total effects, respectively.
Direct effects in Table VI show that CKM has a larger effect on innovation capability than
business performance (0.34 ⬎0.15). Also, business performance is more influenced by
innovation capability than CKM (0.72 ⬎0.15).
Indirect effect in Table VI confirms the mediator role of innovation capability between CKM
and business performance. Furthermore, CKM has a significant indirect effect on business
performance through innovation capability (0.646 ⬎⬎ 0.15). So, H1a was supported.
As to the total effects, we can infer from Table VI that CKM can be more effective for
business performance if firms use innovation capability as a mediator variable between
CKM and business performance (0.796 ⬎0.646 ⬎0.15).
6. Conclusions
6.1 Implications for theory
The main purpose of this paper is to advance the marketing literature by untangling the
relationships among CKM, innovation capability and business performance. In this study,
we found that CKM affects business performance. Managers who solely pay attention to
innovation capability may not achieve their expected objectives in performance if they do
not take advantage of customer knowledge as an essential source of competitive
advantage. Therefore, firms that put their effort into reaching better performance should
effectively manage their customers’ knowledge (Lee et al., 2011;Ngo and O’Cass, 2012).
Present findings also show that CKM enhances innovation capability, which supports the
views of Gibbert et al. (2002) and Rollins and Halinen (2005). Customers must be seen as
important outside resources for creating knowledge and ideas. Therefore, firms must invest
in the potentials and abilities of customers to be more innovative. In line with Lopez-Nicolas
and Molina-Castillo (2008) and Wang and Wang (2012), this study finds that innovation
capability has a positive and significant effect on business performance.
Table VI Direct, indirect and total effects analysis
Predictor/dependent IC BP
Direct effects
CKM 0.34 0.15
IC 0.72
Indirect effect
CKM 0.646
Total effects
CKM 0.796
VOL. 18 NO. 3 2014 JOURNAL OF KNOWLEDGE MANAGEMENT PAGE 603

Through effects analysis, this study provides a mechanism by which CKM practices contribute
to innovation capability and firm performance. The mediator role of innovation capability is also
confirmed. As we see in the analysis, although both CKM and innovation capability have
positive and significant effects on business performance, innovation capability has a higher
effect. Consequently, we can get a better result if we use innovation capability as the
moderating variable between CKM and business performance.
This study offers a new insight that innovation capability makes CKM a valuable tool in
achieving superiority in performance. In fact, innovation capability plays a specific role
between CKM and performance. In particular, CKM is necessary, but not sufficient for
superiority in performance, while the potential value of CKM is realized through effective
innovation capability.
Compared to existing literature, the present study practically depicts the effects of CKM on
innovation capability and business performance. Using this study, firms can evaluate the
positive impact of CKM on innovation capability and business performance. Specifically,
banks, by applying CKM, can become more innovative and achieve better performance
results.
6.2 Implication for managers
CKM has been hailed as a new organizational approach. Unfortunately, the results of using
CKM are not discussed extensively in knowledge management literature. This study is the
first attempt to fill this gap by examining the relationship among CKM, innovation capability
and business performance. According to our findings, we recommend that bank managers
consider and manage both internal and external knowledge to enhance innovation
capability and performance. We also propose that managers need to be continuously
aware of customers’ needs, problems, ideas and knowledge and use them as an important
source to better compete in the marketplace. In general, external KM should have equal
importance to bank managers as internal KM, and managers should pay attention not only
to employees’ experience, ideas, information and knowledge but also to customers’
problems, needs, information and ideas.
6.3 Limitations
Like any research, this paper faced some limitations. First, as data were collected from a
sample of private banks in Iran, the generalization of the findings was limited. Moreover, the
effect of industry type, firm size or market share on CKM is unknown. For example, it might
transpire that firms with more market share better attract and manage customer knowledge
and effectively use it in the innovation process. In addition, the type of industry can
influence CKM and the customers’ tendency to share their knowledge and experience.
Moreover, due to the newness of the present research topic, this study did not examine the
effects of moderating variables between CKM and performance. Considering appropriate
variables can facilitate the relationship between CKM and business performance.
6.4 Future research
Future research should investigate the relationship among CKM, innovation capability and
business performance in different contexts, such as insurance industries, cosmetics
‘‘Managers who solely pay attention to innovation capability
may not achieve their expected objectives in performance if
they do not take advantage of customer knowledge as an
essential source of competitive advantage.’’
PAGE 604 JOURNAL OF KNOWLEDGE MANAGEMENT VOL. 18 NO. 3 2014

industries and mobile industries in other countries. Furthermore, the effect of moderating
variables like organizational learning, organizational structure, etc. could be studied in the
future to complete the research model. Finally, this research did not consider the
psychological characteristics of the customer. Because this element has an important
impact on customers’ willingness to share their knowledge, it is suggested that future
research should consider it in a model.
References
Adams, G. (2003), “Knowledge management systems and developing sustainable competitive
advantage”, Journal of Knowledge Management, Vol. 7 No. 2, pp. 142-154.
Auh, S., Bell, S.J., McLeod, C.S. and Shih, E. (2007), “Co-production and customer loyalty in financial
services”, Journal of Retailing, Vol. 83 No. 3, pp. 359-370.
Beer, J. (2007), “Threadless: fighting for the t-shirt democracy”, Advertising Age’s Creativity, Vol. 15
No. 9, pp. 235-253.
Belkahla, W. and Triki, A. (2011), “Customer knowledge enabled innovation capability: proposing
measurement scale”, Journal of Knowledge Management, Vol. 15 No. 4, pp. 648-674.
Berghman, L.M. (2006), “Building competences for new customer value creation: an exploratory
study”, Industrial Marketing Management, Vol. 35, pp. 961-973.
Bolton, R.N. and Shruti, S.-I. (2009), “Interactive services: a framework, synthesis and research
directions”, Journal of Interactive Marketing, Vol. 23 No. 1, pp. 91-104.
Buckinx, W. and Van den, P.D. (2005), “Customer base analysis: partial defection of behaviourally loyal
clients in a noncontractual FMCG retail setting”, European Journal of Operational Research, Vol. 164
No. 1, pp. 252-268.
Calantone, R.J., Cavusgil, S.T. and Zhao, Y.S. (2002), “Learning orientation, firm capability, and firm
performance”, Industrial Marketing Management, Vol. 31 No. 6, pp. 515-524.
Campbell, A. (2003), “Creating customer knowledge: managing customer relationship management
programs strategically”, Industrial Marketing Management, Vol. 32 No. 5, pp. 375-383.
Capon, N., Farley, J.U., Lehmann, D.R. and Hulbert, M.J. (1992), “Profiles of product innovators among
large US manufacturers”, Management Science, Vol. 38 No. 2, pp. 157-168.
Cardinal, L.A. (2001), “Knowledge codifiability, resources, and science based innovation”, Journal of
Knowledge Management, Vol. 5 No. 2, pp. 195-204.
Chen, Y. (2008), “The positive effect of green intellectual capital on competitive advantages of firms”,
Journal of Business Ethics, Vol. 77 No. 3, pp. 271-286.
Chesbrough, H.W. (2003), Open Innovation: The New Imperative for Creating and Profiting from
Technology, Harvard Business School Press, Boston, MA.
Chesbrough, H. (2006), “Open innovation: a new paradigm for understanding industrial innovation”, in
Chesbrough, H., Vanhaverbeke, W. and West, J. (Eds), Open Innovation: Researching a New
Paradigm, Oxford University Press.
Claycomb, C., Droge, C. and Germain, R. (2005), “Applied customer knowledge in a manufacturing
environment: flexibility for industrial firms”, Industrial Marketing Management, Vol. 34 No. 6,
pp. 629-640.
Cohen, W.M. and Levinthal, D.A. (1990), “Absorptive capacity – a new perspective on learning and
innovation”, Administrative Science Quarterly, Vol. 35 No. 1, pp. 128-152.
Da Silva, R.V., Davies, G. and Naude, P. (2002), “Assessing customer orientation in the context of
buyer/supplier relationships using judgmental modelling”, Industrial Marketing Management, Vol. 31
No. 3, pp. 241-252.
Das, A., Handfield, R.B., Calantone, R.J. and Ghosh, S. (2000), “A contingent view of quality
management—The impact of internal competition on quality”, Decision Sciences, Vol. 31 No. 3,
pp. 649-690.
Desouza, K. and Awazu, Y. (2005), “What do they know?”, Business Strategy Review, Vol. 16 No. 1,
pp. 42-45.
VOL. 18 NO. 3 2014 JOURNAL OF KNOWLEDGE MANAGEMENT PAGE 605

Fornell, C. and Larcker, D.F. (1981), “Evaluating structural equation models with unobservable
variables and measurement error”, Journal of Marketing Research, Vol. 18 No. 1, pp. 39-50.
Gann, D. (2000), “Innovation in project-based, service-enhanced firms: the construction of complex
products and systems”, Research Policy, Vol. 29 Nos 7/8, pp. 955-972.
Garcia-Murillo, M. and Annabi, H. (2002), “Customer knowledge management”, Journal of the
Operational Research Society, Vol. 53 No. 8, pp. 875-884.
Gebert, H., Geib, M., Kolbe, L. and Brenner, W. (2003), “Knowledge-enabled customer relationship
management: integrating customer relationship management and knowledge management
concepts”, Journal of Knowledge Management, Vol. 7 No. 5, pp. 107-123.
Gibbert, M., Leibold, M. and Probst, G. (2002), “Five styles of customer knowledge management, and
how smart companies use them to create value”, European Management Journal, Vol. 20 No. 5,
pp. 459-469.
Gloet, M. and Terziovski, M. (2004), “Exploring the relationship between knowledge management
practices and innovation performance”, Journal of Manufacturing Technology Management, Vol. 15
No. 5, pp. 402-409.
Han, J.K., Kim, N. and Srivastava, R.K. (1998), “Market orientation and organizational performance: is
innovation a missing link?”, Journal of Marketing, Vol. 62 No. 4, pp. 30-45.
Harty, C. (2005), “Innovation in construction: a sociology of technology approach”, Building Research
and Information, Vol. 33 No. 6, pp. 512-522.
Hollebeek, L.D. (2013), “The customer engagement/value interface: an exploratory investigation”,
Australasian Marketing Journal, Vol. 21 No. 1, pp. 17-24.
Hoyer, W.D., Chandy, R., Dorotic, M., Krafft, M. and Singh, S.S. (2010), “Consumer cocreation in new
product development”, Journal of Service Research, Vol. 13 No. 3, pp. 283-296.
Inman, R.A., Sale, R.S., Green, K.W. Jr and Whit, D. (2011), “Agile manufacturing: relation to JIT,
operational performance and firm performance”, Journal of Operations Management, Vol. 29 No. 4,
pp. 343-355.
Jenny, D. (2005), “Knowledge management, innovation and firm performance”, Journal of Knowledge
Management, Vol. 9 No. 3, pp. 101-125.
Johannessen, J.-A. and Olsen, B. (2010), “The future of value creation and innovations: aspects of a
theory of value creation and innovation in a global knowledge economy”, International Journal of
Information Management, Vol. 30 No. 6, pp. 502-511.
Jöreskog, K.G., Sörbo, D., Du Toit, S. and Du Toit, M. (1999), LISREL 8: New Statistical Features,
Scientific Software International, Chicago, IL.
Joshi, A.W. (2004), “Customer knowledge development: antecedents and impact on new product
performance”, Journal of Marketing, Vol. 68 No. 4, pp. 47-59.
Lahiri, N. (2010), “Geographic distribution of R&D activity: how does it affect innovation quality?”, The
Academy of Management Journal (AMJ), Vol. 53 No. 5, pp. 1194-1209.
Lanjouw, J.O. and Schankerman, M. (2004), “Patent quality and research productivity: measuring
innovation with multiple indicators”, The Economic Journal, Vol. 114 No. 495, pp. 441-465.
Lee, R.P., Naylor, G. and Chen, Q. (2011), “Linking customer resources to firm success: the role of
marketing program implementation”, Journal of Business Research, Vol. 64 No. 4, pp. 394-400.
Li, T. and Calantone, R.J. (1998), “The impact of market knowledge competence on new product
advantage: conceptualization and empirical examination”, Journal of Marketing, Vol. 62 No. 4,
pp. 13-29.
Liao, C.C., Wang, H.Y., Chuang, S.H. and Shih, M. (2010), “Enhancing knowledge management for
R&D innovation and firm performance: an integrative view”, African Journal of Business Management,
Vol. 4 No. 14, pp. 3026-3038.
Liu, K. (2007), “Cyber tees grow beyond the web: threadless takes its online success to the streets with
a Chicago store”, The Toronto Star, accessed 8 September 2012.
Lolfsten, H.L. (2005), “R&D networks and product innovation patterns—academic and non-academic
new technology based firms on science parks”, Technovation, Vol. 25 No. 9, pp. 1025-1037.
PAGE 606 JOURNAL OF KNOWLEDGE MANAGEMENT VOL. 18 NO. 3 2014

Lopez-Nicolas, C. and Merono-Cerdan, A.L. (2011), “Strategic knowledge management, innovation
and performance”, International Journal of Information Management, Vol. 31 No. 6, pp. 502-509.
Lopez-Nicolas, C. and Molina-Castillo, F.J. (2008), “Customer knowledge management and
e-commerce: the role of customer perceived risk”, International Journal of Information Management,
Vol. 28 No. 2, pp. 102-113.
Lu, S. (2008), “The role of the client in the innovation process of small construction professional service
firms”, in Brandon, P.S. and Lu, S.L. (Eds), Clients Driving Innovation, Blackwell, Oxford.
Magnusson, P.R. (2003), “Benefits of involving users in service innovation”, European Journal of
Innovation Management, Vol. 6 No. 4, pp. 228-238.
Massey, A.P., Montoya-Weiss, M.M. and O’Driscoll, T.M. (2002), “Knowledge management in pursuit
of performance: insights from Nortel networks”, MIS Quarterly, Vol. 26 No. 3, pp. 269-289.
Maswera, T., Dawson, R. and Edwards, J. (2006), “Assessing the levels of knowledge transfer within
e-commerce websites of tourist organisations in Africa”, Electronic Journal of Knowledge
Management, Vol. 4 No. 1, pp. 59-66.
Matthing, J., Sandén, B. and Edvardsson, B. (2004), “Newservice development: learning from and with
customers”, International Journal of Service Industry Management, Vol. 15 No. 5, pp. 479-498.
Monica Hu, M.-L., Horng, J.-S. and Christine Sun, Y.-H. (2009), “Hospitality teams: knowledge sharing
and service innovation performance”, Tourism Management, Vol. 30 No. 1, pp. 41-50.
Mukherji, S. (2012), “A framework for managing customer knowledge in retail industry”, IIMB
Management Review, Vol. 24 No. 2, pp. 95-103.
Nambisan, S. (2009), “Virtual customer environments: testing a model of voluntary participation in
value co-creation activities”, The Journal of Product Innovation Management, Vol. 26 No. 4,
pp. 388-406.
Ngo, L.V. and O’Cass, A. (2012), “Innovation and business success: the mediating role of customer
participation”, Journal of Business Research, Vol. 66 No. 8, pp. 1134-1142.
Nunnly, J. and Bernstein, I. (1994), Psychometric Theory, 3rd ed., McGraw-Hill, New York, NY.
Peng, J., Lawrence, A. and Koo, T. (2009), “Customer knowledge management in international project:
a case study”, Journal of Technology Management in China, Vol. 4 No. 2, pp. 145-157.
Plessis, M. (2007), “The role of knowledge management in innovation”, Journal of Knowledge
Management, Vol. 11 No. 4, pp. 20-29.
Rollins, M. and Halinen, A. (2005), “Customer knowledge management compentence: towards a
theoretical framework”, paper presented at The 38th Hawaii International Conference on System
Sciences,Hawaii.
Rowley, J.E. (2002), “Reflections on customer knowledge management in e-business”, Qualitative
Market Research: An International Journal, Vol. 5 No. 4, pp. 268-280.
Rupak, R.W. (2008), “Shared knowledge and product design glitches in integrated product
development”, International Journal of Production Economics, Vol. 114 No. 2, pp. 723-736.
Sadikoglu, E. and Zehir, C. (2010), “Investigating the effects of innovation and employee performance
on the relationship between total quality management practices and firm performance: an empirical
study of Turkish firms”, International Journal of Production Economics, Vol. 127 No. 1, pp. 13-26.
Sakkab, N.Y. (2002), “Connect & develop complements research and develop at P&G”, Research
Technology Management, Vo. 45 No. 2, pp. 38-45.
Sher, P.J. and Yang, P.Y. (2005), “The effects of innovative capabilities and R&D clustering on firm
performance: the evidence of Taiwan’s semiconductor industry”, Technovation, Vol. 25 No. 1,
pp. 33-43.
Smith, H.A. and McKeen, J.D. (2005), “Developments in practice xviii - customer knowledge
management: adding value for our customers”, Communications of the Association for Information
Systems, Vol. 16 No. 1, pp. 744-755.
Su, C.-T., Chen, Y.-H. and Sha, D. (2006), “Linking innovative product development with customer
knowledge: a data-mining approach”, Technovation, Vol. 26 No. 7, pp. 784-795.
VOL. 18 NO. 3 2014 JOURNAL OF KNOWLEDGE MANAGEMENT PAGE 607

Su, H.-Y. and Lin, Y. (2005), “Building customer knowledge base through knowledge management: a
missionary and visionary perspective”, International Journal of Electronic Business Management, Vol. 3
No. 2, pp. 140-150.
Subramaniam, M. and Youndt, M.A. (2005), “The influence of intellectual capital on the types of
innovative capabilities”, Academy of Management Review, Vol. 48 No. 3, pp. 450-463.
Sulaiman, S., Ariffin, M., Esmaeilian, G.R., Faghihi, K. and Baharudin, B. (2011), “Customer knowledge
management application in Malaysian mobile service providers”, Procedia Engineering, Vol. 15 No. 4,
pp. 3891-3895.
Teece, D.J. (2010), “Business models, business strategy and innovation”, Long Range Planning,
Vol. 43 No. 2, pp. 172-194.
Tuominen, M., Rajala, A. and Moller, K. (2004), “Market-driving versus market-driven: divergent roles
of market orientation in business relationships”, Industrial Marking Management, Vol. 28 No. 1,
pp. 207-217.
Tzokas, N. and Saren, M. (2004), “Competitive advantage, knowledge and relationship marketing:
where, what and how?”, Journal of Business and Industrial Marketing, Vol. 19 No. 2, pp. 124-135.
van Doorn, J.K. (2010), “Customer engagement behavior: theoretical foundations and research
directions”, Journal of Service Research, Vol. 13 No. 3, pp. 253-266.
von Hippel, E. (2001), “PERSPECTIVE: user toolkits for innovation”, Journal of Product Innovation
Management, Vol. 18 No. 4, pp. 247-257.
von Hipple, E. (1986), “Lead user: a source of novel product concepts”, Management Science, Vol. 32
No. 7, pp. 791-805.
Wang, Z. and Wang, N. (2012), “Knowledge sharing, innovation and firm performance”, Expert
Systems with Applications, Vol. 39 No. 10, pp. 8899-8908.
Weerawardena, J. and O’Cass, A. (2004), “Exploring the characteristics of the marketdriven firms and
antecedents to sustained competitive advantage”, Industrial Marketing Management, Vol. 33 No. 5,
pp. 419-428.
Xu, M. and Walton, J. (2005), “Gaining customer knowledge through analytical CRM”, Industrial
Management ⫹Data Systems, Vol. 105 No. 7, pp. 955-971.
Yang, S. and Kang, H.H. (2008), “Is synergy always good? Clarifying the effect of innovation
capital and customer capital on firm performance in two contexts”, Technovation, Vol. 28 No. 10,
pp. 667-678.
Yang, J. (2010), “The knowledge management strategy and its effect on firm performance: a
contingency analysis”, Int. J. Production Economics, Vol. 125 No. 2, pp. 215-223.
Yeung, A.H., Lo, V.H., Yeung, A.C. and Cheng, T.C. (2008), “Specific customer knowledge and
operational performance in apparel manufacturing”, International Journal Production Economics,
Vol. 114 No. 2, pp. 520-533.
Yi, Y., Nataraajan, R. and Gong, T. (2011), “Customer participation and citizenship behavioral
influences on employee performance, satisfaction, commitment, and turnover intention”, Journal of
Business Research, Vol. 64 No. 1, pp. 87-95.
Zhang, Z. (2011), “Customer knowledge management and the strategies of social software”, Business
Process Management Journal, Vol. 17 No. 1, pp. 82-106.
Zhang, J., Hoenig, S., Benedetto, A.D., Lancioni, R.A. and Phatak, A. (2009), “What contributes to the
enhanced use of customer, competition and technology knowledge for product innovation
performance? A survey of multinational industrial companies’ subsidiaries operating in China”,
Industrial Marketing Management, Vol. 38 No. 3, pp. 207-218.
Further reading
Davenport, T.H. and Harris, J.G. (2001), “How do they know their customers so well?”, Sloan
Management Review, Vol. 39, pp. 43-57.
Haner, U.E. (2002), “Innovation quality—a conceptual framework”, International Journal of Production
Economics, Vol. 80 No. 1, pp. 31-37.
PAGE 608 JOURNAL OF KNOWLEDGE MANAGEMENT VOL. 18 NO. 3 2014

Hauser, J.G. (2006), “Research on innovation: a review and agenda for marketing science”, Marketing
Science, Vol. 25 No. 6, pp. 686-717.
Prahalad, C. and Ramaswamy, V. (2000), “Co-opting customer competence”, Harvard Business
Review, Vol. 78 No. 1, pp. 79-87.
Tatikonda, M.V. and Montoya-Weiss, M.M. (2001), “Integrating operations and marketing perspectives
of product innovation: the influence of organizational process factors and capabilities on development
performance”, Management Science, Vol. 47 No. 1, pp. 15-172.
Thomke, S. (2002), “Customers as innovators: a new way to create value”, Harvard Business Review,
pp. 2-11.
Tseng, C.Y. and Wu, L.Y. (2007), “Innovation quality in the automobile industry: measurement
indicators and performance implications”, International Journal of Technology Management, Vol. 37
No. 2, pp. 162-177.
Appendix
A.1 Knowledge from customer
1. Our bank asks customers about current service quality.
2. Our bank asks customers about competitor’s service quality.
3. Our bank asks customers about their required services.
4. Gaining customer’s ideas affects development of novel and innovative
services of our bank.
A.2 Knowledge about customer
1. Our bank has been informed about customer’s background.
2. Our bank has been informed about number of customer’s referrals.
3. Our bank has been informed about customer’s requirements and
prerequisites.
4. Our bank has been informed about customer’s demands and requests.
5. Our bank has been informed about customer’s problems.
6. Our bank has been informed about customer’s job and income level.
7. Our bank has been informed about customer’s credit and validity.
A.3 Knowledge for customer
1. Our bank provides information about current services for customers.
2. Our bank provides information about innovative and new services for
customers.
3. Our bank provides information about benefits of innovative and new services
for customers.
4. Our bank helps customers to make better decisions by providing information.
A.4 Innovation speed
1. Our bank has fast speed in generating novel ideas.
2. Our bank has fast speed in launching new service.
3. Our bank has fast speed in developing new service.
4. Our bank has fast speed in using new technology and equipment.
5. Our bank has fast speed in solving customers’ problems.
A.5 Innovation quality
1. Our bank has good performance in generating novel ideas.
VOL. 18 NO. 3 2014 JOURNAL OF KNOWLEDGE MANAGEMENT PAGE 609

2. Our bank has good performance in launching new service.
3. Our bank has good performance in developing new service.
4. Our bank has good performance in using new technology and equipment.
5. Our bank has good performance in solving customers’ problems.
A.6 firm’s operational performance
1. Customer satisfaction of our bank is high.
2. Our bank’s services are developed.
3. Cost management of our bank is good.
4. Responsiveness of our bank is good.
5. Past performance of our bank is good.
6. Our bank management is good.
A.7 firm’s financial performance
1. Shares profit of our bank is high.
2. Previous period profit of our bank is high.
3. Customers’ deposit in our bank is high.
4. Shareholders’ investment in our bank is high.
About the authors
Nastaran Taherparvar is a student of MSc of Business Administration at the University of
Guilan. She has worked on CKM in her thesis and participated in a research that
investigated in CKM in online games. She is interested in customer relationship
management, customer participation, customer knowledge and how to use them to create
new products and services. Nastaran Taherparvar is the corresponding author and can be
contacted at: N_taherparvar@yahoo.com
Reza Esmaeilpour is Assistant Professor at the University of Guilan, Faculty of Literature
and Humanities, Department of Management, Iran. His special interests are in knowledge
management, customer management, customer relationship management, customer
electronic participation, market analysis, online marketing issues, new products/service
development and organizational learning from customers. He has published ⬎50 articles in
academic marketing journals.
Mohammad Dostar is Assistant Professor at the University of Guilan, Faculty of Literature
and Humanities, Department of Management, Iran. His research interests include
knowledge management, electronic learning, customer satisfaction, organizational
innovation and creativity, customer behavior, and organizational learning.
To purchase reprints of this article please e-mail: reprints@emeraldinsight.com
Or visit our web site for further details: www.emeraldinsight.com/reprints
PAGE 610 JOURNAL OF KNOWLEDGE MANAGEMENT VOL. 18 NO. 3 2014