Advancing Firm Performance through Knowledge Management Process: Mediating Role of Innovation Capabilities and Moderating Role of Organization Size

Abstract

This study investigates the influence of knowledge management processes (KMP) on firm performance (FP) in the ready-made garments industry. It also observes the mediating role of product (PDI) and process innovation (PCI). Additionally, the moderating effect of organization size (OS) is also studied. By integrating KMP with operational and innovation perspectives, the research aims to provide actionable insights for improving production efficiency and competitiveness. Grounded on the Resource-Based-View, the study employs a quantitative research approach. Data were collected from 273 respondents across 77 firms. Analysis are performed using partial least square structural equation modelling (PLS-SEM) and multi-group method (MGA). Results reveal that KMP significantly enhance FP, with PCI emerging as a significant mediating factor in the relationship of KMP and FP. This is in contrast to the non-significant mediating role of PDI. The findings from the MGA suggest medium and large firms generate greater performance improvements than small firms due to superior technological resources and operating competencies. This study provides new insights that differentiate between the mediating roles of PDI and PCI in the KMP relationship within Bangladesh's RMG sector a context underrepresented in innovation literature. It uniquely demonstrates that only PCI significantly mediates this link, challenging assumptions that treat innovation as a unified construct. Besides, it shows how OS moderates such dynamics, with medium and large firms benefiting more due to superior resources.