**2.2 Internal knowledge creation**

Companies as social organizations are specialized in creating and transforming knowledge [25], based on the assumption that knowledge cannot exist without human subjectivities and the context that surrounds humans [19]. The creation of internal knowledge is understood as a process that increases knowledge in organizations created by specific individuals and as part of the knowledge network of the company [18]. Knowledge is created through the dynamic interaction between individuals and/or between individuals and their environment, rather than an individual working alone [23]. That is, an organization cannot create knowledge without individuals who generate it, while the business must provide the right environment for individuals to create knowledge [6]. The knowledge created within the organization is especially valuable because it tends to be unique, specifically with a large tacit component. This is what makes it more difficult to be imitated by competitors, which is a strategic advantage for the organization.

Organizational culture is the most significant element that supports knowledge generation: employees are motivated to improve or find new ways of doing their activities. In contrast, management style, personal motivation, and opportunity to

*Current Issues in Knowledge Management*

is still unexplored [7, 13].

further lines of research.

**2. Conceptual background and hypotheses**

**2.1 External knowledge acquisition**

Knowledge generation is mainly an institutionalized activity, so each organization must be able to establish its own creative routines and human interventions to make this process possible and to be a learning-oriented institution where having a shared vision and a commitment to learning and open-mindedness are key drivers [7]. The challenge is to build systems that collect the learning processes acquired during projects and ongoing activities, capture that knowledge in a database or document, and spread it throughout the entire organization [8, 9]; and that will be useful for innovation strategies. In this sense, there are many studies discussing how knowledge generation is positively related to innovation and performance [10–12]; but the impact of individual skills and organizational factors to generate knowledge

The present research was conducted in Mexico, where innovation capability could accelerate the country's productivity and economic growth to as much as 4% per year over the next 10 years [14]. According to the Global Competitiveness Index in which Mexico is ranked 51 out of 137 countries [15], even when Mexico presented some progress, it has a relatively slower rate than other countries. In this context, our study suggests that the challenge for Mexican firms is that for a dynamic economy where organizations can take full advantage of opportunities to grow and compete more effectively, it requires the foundation of a strong business environment [16] and organizational leverages where knowledge generation could be a pillar to grow and survive rather than to keep competing on a lower cost basis. The aim of the chapter is to identify the individual skills and organizational factors that support external and internal knowledge generation and show to what extent and in what way these factors differ from those in Mexican and foreign firms with operations in Mexico. This research analyzes a database generated through a survey of knowledge generation activities and how its innovation capability impacts firms operating in Mexico. This chapter is structured as follows: Section 2 exposes the development of a conceptual framework related to knowledge generation, both external acquisition and internal creation, and how this process is supported by individual skills and organizational factors, Section 3 presents the methods used to conduct the empirical study, Section 4 discusses the results, and Section 5 finalizes the research with conclusions and limitations and describes

All successful organizations create and use knowledge as a fundamental tool for interacting with their environments, absorbing information, making informed decisions, and carrying out actions based on the combination of this knowledge and organizational experiences, values, and rules [1, 12, 17]. All of these are activities that make up the knowledge generation process in organizations [18]. The present study posits that knowledge generation requires individual skills and organizational

Often, organizations do not have all necessary resources, so they have to acquire beyond organizational limits [19]. Thus, acquiring external resources plays a critical role in determining the performance implications of knowledge creation capabilities [20]. Engaging with market-based partners such as customers and suppliers can help to better specify the market requirement for innovative goods, services, or

factors that enable external acquisition and internal creation of knowledge.

processes and to spread the costs and risks of the innovative capability [21].

**20**

learn are the organizational elements that support this process for manufacturing firms. In these types of organizations, the top management team is aware of how knowledge generation is relevant, providing time and space to seek new ways of doing things and to increase employees' knowledge through learning in action. A learning-oriented culture, along with other factors, promotes receptivity to new ideas and innovation as part of an organization's culture [26].

In terms of knowledge exchange, the interaction among organizational members facilitates dissemination of explicit and tacit knowledge. When the frequency of knowledge exchange within an organization is high, the organizational members have more opportunities to access and acquire knowledge that is different from their own. This will trigger more novel ideas [25]. Moreover, knowledge exchange, as has been discussed, can induce organizational members to combine their existing knowledge with acquired knowledge or recombine their existing knowledge in better ways. For instance, the results of an exploratory study in Mexican firms show that the internal creation of knowledge occurs primarily in meetings that occur within the organization followed by employee self-directed learning [27]. Based on these arguments, Hypothesis 3 is proposed:

Hypothesis 3: Organizational factors such as organizational culture, management style, commitment to learn, and open-mindedness positively impact internal knowledge creation.

To recognize and evaluate the organization's relevant and new knowledge, employees need to hold some prior knowledge base [24]. This expertise and knowhow enables employees to recognize the value of new knowledge, and it is helpful to communicate and be cooperative in sharing new knowledge [7]. Social interaction develops the ability for people to exchange and acquire knowledge that is tacit in nature. In the notion of exchange, the assumption that individuals hold different levels and types of knowledge and will engage in teamwork and communication to learn from one another seems to be implicit [28].

Moreover, the dynamic environment in which organizations work currently provides motivation for employees to create new knowledge and the opportunity to learn. Employees feel they can learn from the work they perform and the experience gained in applying their knowledge. The literature shows that employee motivation is essential to create new knowledge and the opportunity to learn about issues of interest motivates employees to seek new ways of doing things, leading to innovation [28]. In addition to that, professional qualifications allow exploration and exploitation of new ways of doing things, and social skills promote cooperation and social interaction among employees, influencing the knowledge creation process inside the firm. This leads to the final hypothesis.

Hypothesis 4: Individual skills such as professional skills, social skills, personal motivation, and the opportunity to learn have a positive influence on internal knowledge creation.
