KNOWLEDGE MANAGEMENT AND ORGANIZATIONAL PERFORMANCE: THE CASE OF SELECTED BANKS IN MEKELLE CITY

Abstract

This study examined the effect of knowledge management (KM) practices on organizational performance in selected private banks in Mekelle City, Ethiopia. Specifically, the study focused on four dimensions of KM—knowledge acquisition, knowledge sharing, knowledge storage, and knowledge application—and their influence on organizational performance measured through the Balanced Scorecard perspectives: customer satisfaction, learning and growth, financial performance, and internal processes. A quantitative research approach and explanatory design were used. Data were gathered through structured questionnaires distributed to a sample of 279 employees and managers at Wegagen Bank and Lion International Bank, yielding 272 responses, which resulted in a 97.5% response rate. Descriptive statistics, correlation, and multiple regression analyses were performed using SPSS. The results revealed that all four KM dimensions are practiced to varying degrees, with knowledge application (Mean = 3.96) and knowledge acquisition (Mean = 3.78) being the most prevalent. In contrast, knowledge storage (Mean = 3.30) was the least practiced. Correlation analysis showed strong positive relationships between KM practices and organizational performance, with knowledge acquisition having the strongest association (r = 0.817). Regression results indicated that KM practices jointly explained 71.9% of the variation in organizational performance. Among the predictors, knowledge acquisition had the most significant effect (β = 0.532), followed by knowledge storage (β = 0.166), knowledge sharing (β = 0.135), and knowledge application (β = 0.119). The study concludes that effective KM practices are critical drivers of organizational performance in private banks. In particular, investing in systematic knowledge acquisition and robust storage mechanisms significantly enhances competitiveness and service delivery. It is recommended that banks strengthen their knowledge management systems by expanding training opportunities, improving knowledge repositories, fostering a culture of sharing, and integrating knowledge into strategic decision-making. Future research should explore additional factors such as leadership, technology adoption, and organizational culture that may also influence performance.