Knowledge Management and Performance of Small and Medium Entities in Indonesia

Past researches showed that successful knowledge management programs can produce more returns, thus indicating that knowledge management might also have a positive effect on firm performance. This study examines the determinant of knowledge management and its effect on Small and medium entities (SMEs) performance by conducting quantitative study on empirical data of SMEs in Surabaya – East Java, Indonesia. The result shows that knowledge is managed on people-based-approach in Small and medium enterprises. Given SMEs characteristics – mainly owned by local people, labor intensive, workers and entrepreneurs are low educated, and financing their operations from personal savings – knowledge management capability in SMEs are mainly achieved by networking with other organization such as companies, universities, technical colleges, and government agencies through alliances. This study found that organizational learning and competitive strategy have positive correlation with knowledge management while family orientation has a negative correlation. It means that the lower the family orientation, the more they open to other knowledge to improve company’s performance