Growing attention has been paid to the knowledge economy in today’s business environments, where the foundations of economy are largely based on creating and trading knowledge. It is believed that the knowledge economy is facilitated by a transformation of top management executives’ approach to managing human assets as knowledge holders. Herein, a critical question that arises is whether the management of companies’ intellectual capital itself can be a source of effectiveness for transformational leaders. The basic question that provides interesting theoretical insights for the literature of knowledge management has remained unexplored to date. This can pose the following possible scenarios for the companies performing in the knowledge economy:
Firstly, an ineffective vision and strategic plan may be developed for future suffering from inexact and in-comprehensive information about employees’ existing capacities, coming opportunities in international and domestic markets, and the concerns and values of external business partners.
Secondly, the human assets’ learning essentials may cannot be effectively recognized by upper levels. Thirdly, the crucial role of some knowledge management activities such as coordinating and hosting the continuous sessions of company-wide experts to share their knowledge may be underestimated in the effectiveness of the way a company is managed by top management executives.
To define knowledge management as a facilitator of transformational leadership, Lee and Kim’s (2001) approach to managing knowledge has been selected, which reflects a more strategic and practical perspective. This approach is process oriented and most applicable in the context of leading organizations. In Lee and Kim’s (2001) view, organizational knowledge, first, is accumulated by creating new knowledge from organizational intellectual capital and acquiring knowledge from external environments. Therefore, this process embraces generating knowledge form existing intellectual capital through developing organizational innovation. This knowledge exchange with external business partners develops innovative environments (Wang & Wang, 2012) that enable transformational leaders in intellectual stimulation for creating a more creative climate in companies (Canty, 2005).
In addition, this process enhances the capabilities of transformational leaders to play the role of inspirational motivation, which is directed at setting highly desired expectation to recognize possible opportunities in the business environments. The knowledge exchange also positively contributes to transformational leaders to facilitate idealized influence developing a more effective vision, includes more comprehensive information and insights about external environments. Furthermore, the knowledge creation improves employees’ empowerment (Badah, 2012), and largely develops the role of transformational leaders in individualized consideration that focuses on empowering human knowledge holders.
Secondly, knowledge is integrated internally to enhance the effectiveness and efficiencies in various systems and processes, as well as to be more responsive to market changes. In this process, “organizational knowledge activities are institutionalized as daily activities over the whole organization” (Lee and Kim, 2001, p.303), and the accumulated knowledge is synthesized to produce higher quality outcomes. In general, knowledge integration focuses on monitoring and controlling knowledge management practices, evaluating the effectiveness of current knowledge, defining and recognizing core knowledge areas, coordinating experts, sharing organizational knowledge, and scanning the changes of knowledge requirements to keep the quality of their productions/services in market (Day & Glazer 1994; Wiig 1995; Lee and Kim, 2001). In order to promote knowledge integration, it can be argued that members’ diversity of skills and interpersonal relations based on trust and reciprocity can increasingly empower the performance of these expert groups.
It is clear that both knowledge integration activities of evaluating the existing organizational knowledge and assessing the required changes to keep the quality positively impact on transformational leaders to more effectively recognize their employee’s learning needs. Further, a systematic process of coordinating company-wide experts enables transformational leadership by propelling the role of intellectual stimulation, which creates a more creative environment. In addition, an apparent argument is that those qualities indicating a high-performing expert group are considerably overlapped with Webb’s (2007, p.54) scales about an effective transformational leader that look at the capabilities of these leaders in creating trust within companies.
Thirdly, the knowledge within organizations needs to be reconfigured to meet environmental changes and new challenges. In this process, knowledge is globally shared with other organizations in the environment. Past studies have observed that companies might lack the required capabilities to interact with other companies (Caldwell & Ancona 1988), or even suffer the distrust to share their knowledge (Kraut & Streeter 1995).
These studies show that expert groups may not have enough diversity to comprehend knowledge acquired from external sources. Due to these limitations, Lee and Kim (2001) posit that networking with business partners are a key activity for companies to enhance knowledge exchange. Given these points, networking with external business partners facilitates the role of idealized influence, thereby empowering transformational leaders’ strategic insights to develop a more effective vision incorporating various concerns and values of external business partners.
Additionally, the knowledge transference among companies itself improves the effectiveness of learning, which in turn enables both transformational leadership roles of idealized consideration by empowering human resource and intellectual stimulation through creating new knowledge and solutions. Taken together, this review illustrates that networking among companies in a domestic and international market leads to enhance the effectiveness of transformational leadership within companies. This review is brought forward illustrates that the significant role of knowledge management in supporting the scales related to effective transformational leadership, which have been also left out in the existing literature.
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