Knowledge Management and Profitability: The Critical Role of Breakthrough Innovation as a Catalyst
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Abstract
Objective: in today’s volatile and knowledge-intensive business environment, knowledge management has become a key driver of organizational profitability beyond traditional cost- and productivity-based measures. This study addresses a gap in the literature by empirically examining how tacit and explicit knowledge contribute to profitability, with particular attention to the mediating role of breakthrough innovation. Methods: a quantitative research design was adopted using a structured questionnaire. Data were collected from 189 valid respondents, randomly selected from an initial sample of 240, ensuring a respondent-to-item ratio of 15:1. The relationships among tacit knowledge, explicit knowledge, breakthrough innovation, and organizational profitability were analyzed using SPSS and AMOS. Results: the findings reveal that both tacit and explicit knowledge exert significant positive effects on organizational profitability. A one-unit increase in tacit knowledge leads to a 0.26-unit increase in profitability and a 0.32-unit increase in breakthrough innovation. Likewise, explicit knowledge increases profitability by 0.21 units and breakthrough innovation by 0.10 units. When both knowledge types increase simultaneously, profitability rises by approximately 0.10 units, confirming the mediating role of breakthrough innovation. Conclusions: empirical evidence on the knowledge–profitability nexus, particularly within the healthcare sector, remains limited. This study advances the literature by demonstrating how breakthrough innovation translates knowledge assets into competitive advantage. The results also highlight the strategic importance of medical teaching institution (MTI) reforms in fostering innovation-driven performance. Overall, the study offers valuable theoretical and practical implications for developing knowledge-centric strategies to sustain organizational competitiveness.
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