THE MEDIATING EFFECT OF KNOWLEDGE MANAGEMENT CAPABILITY ON THE RELATIONSHIP BETWEEN HRM PRACTICES AND RADICAL INNOVATION AMONG MALAYSIA ICT SMES

Abstract

For companies that work in quickly changing technology contexts, radical innovation has become a must-have strategic goal. However, organizations—especially small and medium-sized enterprises (SMEs) in emerging economies—still have a hard time developing the internal skills they need to make such changes happen. Although human resource management (HRM) practices are broadly acknowledged as facilitators of employee competency and organisational learning, the mechanisms by which HRM fosters radical innovation are little examined. This study examines whether knowledge management competence (KMC) serves as a mediator in the relationship between HRM practices and radical innovation capability within ICT SMEs in Malaysia. A survey involving 200 SMEs in the Klang Valley was executed, and the data were evaluated via Partial Least Squares Structural Equation Modelling (PLS-SEM). The findings demonstrate that whereas HRM practices exert a substantial impact on KMC, KMC does not serve as a significant mediator in the relationship between HRM practices and radical innovation. The results show that ICT SMEs have structural and contextual problems when it comes to using knowledge resources to make radical innovations. These problems include not having enough absorptive ability, a culture of taking risks, and being ready for change. This research enhances the literature on HRM–innovation connections in emerging markets and provides actionable insights for bolstering knowledge-driven initiatives to foster innovation.