Knowledge management and value creation in service firms

The purpose of this paper is to analyse the effect of knowledge management (KM) on value creation in Icelandic service firms. The aim is to examine how KM contributes to value creation, and measure the ways in which KM affects intangible assets, such as customer capital, innovation, and human capital. The authors propose a survey approach conducted in 2007 among 222 firms (46.1 percent response rate). Of these firms 97 had KM programmes in place and this paper is based on these firms. Service firms were 60 percent of the firms that had implemented KM. The findings of the study show that firms with KM report more value creation in the fields of customer capital, innovation and human capital compared to firms that have not introduced KM. This indicates that KM has a positive impact on intangible assets in firms, but given the few firms involved in the survey, findings need to be interpreted with care. The findings of the study have highly practical implications for managers and researchers, as KM programmes seem to enhance the creation of intangible assets so vital for the competitive advantage of firms in a knowledge economy. The paper analyses the effect on value creation of knowledge management in Icelandic service firms.