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One of the essential requirements for organizations to survive in the current hypercompetitive organizational environment is flexibility, the ability to cope with constant change (Volberda, 1996). As a way of developing this capability, researchers have taken a learning organization approach, because learning is a primary source of developing pro-activeness in response to change, which in turn allows organizations to assume superior positions in the market (Hung et al., 2010).
A primary characteristic of a learning organization is continuous learning that enables an organization to steadily transform (Watkins and Marsick, 1993). If such transformation positively affects organizations’ ability to compete, and eventually their survival, it could be presumed that learning plays a critical role in terms of accomplishing organizational performance, and that encouraging continuous learning will promote this performance.
Researchers have supported the idea that the way a learning organization enables an organization to become more effective is by enhancing the organization’s knowledge and financial performance (Awasthy and Gupta, 2011; Ellinger et al., 2002; Davis and Daley, 2008; Kumar, 2005; Kumar and Idris, 2006; Noubar et al., 2011; Rose et al., 2006; Yu and Chen, 2015). The purpose of this study is to empirically examine relationships among a learning organization, knowledge performance and financial performance.
Literature review
This section reviews different approaches to a learning organization and its relationships with organizational performance, focusing on financial and knowledge performance, and establishes a theoretical background for the research models.
Learning organizations
A distinguishing characteristic of a learning organization is its ability to continuously learn and transform (Senge, 1990; Watkins and Marsick, 1993). To develop this ability, an organization needs to think systemically, so the organization is enabled to simultaneously understand itself as a whole as well as the dynamic relationships between each part of the organization (Senge, 1990). Thus, we would expect that creating a culture focused on learning would also affect performance outcomes (Watkins and Marsick, 1993, 1996).
Managers have proven to be a pivotal factor in an organization becoming a learning organization (Ellinger et al., 1999; McGill et al., 1992; Ulrich et al., 1993). An organization whose managers encourage individuals to be open and creative with a sense of efficacy is able to experience generative learning (McGill et al.