Knowledge Management, Competitive Advantage, and Value Creation: A Case Study of Icelandic SMEs

The purpose of this paper is to analyse the effect of knowledge management on value creation in Icelandic firms. The aim is to examine the ways KM contributes to value creation, and measure the ways in which KM affects customer capital, innovation, and human capital. Given the limited number of firms in the survey with KM programmes, the findings should be seen more as a case study of Icelandic SMEs. The main conclusions are that firms which have adopted KM programmes and strategies have increased employee skills more than other firms; are better at attracting staff; and manifest improved decision making. The same goes for customer handling, innovation, and competitive standing. In general, this means that KM contributes to value creation by enhancing employee skills and innovation which, in turn, strengthen customer handling skills and the firm’s competitive advantage. A conception model based on these findings is also presented in the paper.