Establishing the Effects of Organizational Learning on Company Performance in the Road Haulage Business in Zimbabwe

TABLE OF CONTENTS

DEDICATION

ACKNOWLEDGEMENTS

EXECUTIVE SUMMARY

LIST OF TABLES

LIST OF FIGURES

CHAPTER ONE INTRODUCTION AND BACKGROUND TO THE STUDY
1.1 INTRODUCTION
1.2 BACKGROUND TO THE STUDY
1.2.1 Overview of Organizational Learning
1.2.2 Overview of Zimbabwe’s Haulage Business
1.2.3 Challenges Faced by Haulage Operators in Zimbabwe
1.3 RESEARCH PROBLEM
1.4 RESEARCH OBJECTIVES
1.5 RESEARCH QUESTIONS
1.6 RESEARCH HYPOTHESIS
1.7 JUSTIFICATION OF RESEARCH
1.7.1 To the Haulage Businesses
1.7.2 To the Academics
1.7.3 To the Researcher
1.8 SCOPE OF RESEARCH
1.9 DISSERTATION STRUCTURE
1.10 CHAPTER SUMMARY

CHAPTER TWO LITERATURE REVIEW
2.1 INTRODUCTION
2.2 THE CONCEPT OF LEARNING
2.3 DOES AN ORGANIZATION LEARN?
2.4 LEVELS OF LEARNING
2.4.1 Individual Learning
2.4.2 Group Learning
2.4.3 Organizational Learning
2.4.4 Inter-Organizational Learning
2.5 ORGANIZATIONAL LEARNING
2.5.1 Definition of Organizational Learning
2.5.2 The Development of Organizational Learning
2.5.3 Types of Organizational Learning
2.5.4 Measures of Organizational Learning
2.5.5 Organizational Learning Process by Daft and Weick
2.5.6 Organizational Learning Process by Nevis, Dibella and Gould
2.6 ORGANIZATIONAL PERFORMANCE
2.6.1 Balanced Scorecard
2.6.2 Stakeholder Approach
2.6.3 Organizational Learning in Small and Large Organizations
2.7 ORGANIZATIONAL LEARNING AND PERFORMANCE
2.8 CONCEPTUAL FRAMEWORK
2.9 CHAPTER SUMMARY

CHAPTER THREE RESEARCH METHODOLOGY
3.1 INTRODUCTION
3.2 RESEARCH DESIGN
3.2.1 Research Philosophy
3.2.2 Research Strategy
3.3 POPULATION AND SAMPLING TECHNIQUES
3.3.1 Population
3.3.2 Sampling
3.4 SOURCES OF DATA
3.5 DATA COLLECTION PROCEDURE
3.5.1 Questionnaire
3.5.2 Data Measurement Scales
3.5.3 Pretesting Of Questionnaire
3.6 DATA ANALYSIS
3.7 RESEARCH LIMITATIONS
3.8 RESEARCH ETHICS AND DATA CREDIBILITY
3.8.1 Research Ethics
3.8.2 Data Credibility
3.9 CHAPTER SUMMARY

CHAPTER FOUR DATA ANALYSIS, FINDINGS AND DISCUSSION
4.1 INTRODUCTION
4.2 RESPONSE RATE
4.3 CHARACTERISTICS OF RESPONDENTS
4.3.1 Sex Distribution
4.3.2 Age Distribution
4.3.3 Level of Education
4.3.4 Length of Employment
4.3.5 Managerial Level
4.4 COMPANY CHARACTERISTICS
4.4.1 Size of Company
4.4.2 Nature of Freight
4.5 RELIABILITY TESTS
4.6 VALIDITY TESTS
4.7 NORMALITY TESTS
4.8 DESCRIPTIVE STATISTICS
4.9 CORRELATION ANALYSIS
4.9.1 Information Acquisition Vs Organizational Performance
4.9.2 Information Interpretation Vs Organizational Performance
4.9.3 Information Sharing Vs Organizational Performance
4.9.4 Behaviour and Cognitive Changes Vs Organizational Performance
4.9.5 Information Quality Vs Organizational Performance
4.10 REGRESSION ANALYSIS
4.10.1 Model’s Goodness of Fit Test
4.10.2 Model’s Beta Coefficients
4.11 DIFFERENCES IN ORGANIZATIONAL LEARNING PRACTISES
4.12 DISCUSSION OF RESULTS
4.12.1 Descriptive Statistics Results
4.12.2 Correlation Analysis Results
4.12.3 Regression Analysis Results
4.12.4 Differences in Organizational Learning Results
4.13 HYPOTHESIS TESTING
4.14 CHAPTER SUMMARY

CHAPTER FIVE CONCLUSIONS, RECOMMENDATIONS AND FURTHER RESEARCH
5.1 INTRODUCTION
5.2 CONCLUSIONS
5.2.1 Main Research Question: Organizational Learning Vs Performance
5.2.1 Sub-research Question (i): Organizational Learning Practises
5.2.2 Sub-research Question (ii): Impact of Organizational Learning
5.2.3 Sub-research Question (iii): Differences in Organizational Learning
5.3 THEORETICAL CONTRIBUTION
5.4 RECOMMENDATIONS
5.4.1 Focusing on Organizational Learning
5.4.2 Creating an Environment of Organizational Learning
5.4.3 High Quality Information in Decision Making
5.4.4 Prioritizing Resources
5.4.5 Organizational Learning Irrespective of Company Size
5.5 LIMITATION OF THE STUDY
5.6 AREAS FOR FURTHER STUDY
5.7 CHAPTER SUMMARY

REFERENCES

APPENDICES

DEDICATION

To my mother Annamore

ACKNOWLEDGEMENTS

I am grateful to God for the good health He granted to me to complete my studies with University of Zimbabwe.

I also extend my gratitude to my dissertation supervisor, Dr. Sandada, for the guidance and encouragement he gave me throughout the dissertation writing process.

Thanks also to my family and friends for the direct and indirect support they gave me to complete my studies with the University of Zimbabwe.

Not forgetting University of Zimbabwe lecturers for their professionalism they display to the students in doing their daily work.

EXECUTIVE SUMMARY

This study was carried out to examine the nature of the relationship that exists between organizational learning and organizational performance of Zimbabwe’s road haulage businesses. Literature on organizational learning and organizational performance were reviewed and a conceptual framework for the purpose of the study formulated. Information acquisition, information interpretation, information sharing, information quality and behaviour and cognitive changes were used to measure organizational learning. To measure organizational performance the researcher used financial, employee and market dimensions of company performance.

Quantitative research methodology was used where data was gathered using a questionnaire. The questionnaire was carefully designed to collect the right data about organizational learning and organizational performance in the haulage business sector for analysis. A total of 120 questionnaires was administered where 105 were completed and returned. Out of the 105 questionnaires that were returned 2 had missing responses and these were discarded from data analysis. Thus, the study response rate was 85.8%.

Statistical Package for the Social Sciences was used to analyse data. Descriptive statistics i.e. arithmetic means and standard deviations were used to describe how organizational learning is practised in the haulage business sector in Zimbabwe. Inferential statistics in the form of correlation and regression analysis were used to test answer research questions and to test research hypothesis.

The main conclusion reached was that organizational learning is a partial predictor of company performance in Zimbabwe’s haulage sector. Thus, the study partially confirms the study hypothesis. Based on the study conclusions, the study recommends that managers in the haulage business in Zimbabwe focus organizational learning practises to enhance business performance. Haulage companies’ limited resources can be channelled towards enhancing information acquisition, information quality and individual behaviour and cognitive changes by individuals as these were found to positively contribute to company performance.

LIST OF TABLES

2.1 Various Definitions of Organizational Learning

2.2 The Process of Organizational Learning by Daft and Weick

2.3 The Process of Organizational Learning by Nevis, Dibella and Gould

2.4 Relationship between Organizational Learning and Performance

4.1 Reliability Test

4.2 Normality Test

4.3 Descriptive Statistics

4.4 Correlation Analysis

4.5 The Model’s Goodness of Fit Test

4.6 Beta Coefficients

LIST OF FIGURES

2.1 The Balanced Scorecard

2.2 Stakeholder Theory

2.3 Conceptual Framework

4.1 Gender Composition

4.2 Aged Distribution

4.3 Level of Education

4.4 Tenure of Respondents

4.5 Managerial Level

4.6 Number of Employees

4.7 Nature of Freight

4.8 Organizational Learning Differences across Companies

CHAPTER ONE INTRODUCTION AND BACKGROUND TO THE STUDY

1.1 INTRODUCTION

In this chapter the researcher introduces the study, focusing on background of the study, problem statement, research objectives, research questions and research hypothesis. The chapter is also a discussion of the study justifications and scope of the study. The structure of the dissertation is also laid out in this chapter.

1.2 BACKGROUND TO THE STUDY

The contemporary business environment that is unstable and dynamic has made organizational learning a necessity than a choice. Organizational learning is the ability of a business organization to make use of information in order to adapt to the changes taking place in the environment. Today’s business environments are ever-changing hence the need for businesses to be highly adaptive and this can be achieved through practising effective organizational learning. The instability of the business environments forces businesses to adopt organizational learning as a strategy to enhance business survival, boost business performance and competitiveness.

When faced with change and unstable business environments, organizations are supposed to be quick to adapt in order to survive. According to Robbins, Judge, Millett and Boyle (2013), organizational learning enhances business ability to make relevant business changes in time and decisions that are in line with the changes taking place. The authors put forward the view that organizational learning is a means through which a business gathers relevant and current information that is critically important in business decision making. Thus, organizational learning is a worth concept to study in today’s changing business environments.

Organizational learning is also viewed in terms of a business’ ability to learn from experience. The experience that a business learns from can be positive or negative. What is important is the ability of an organization to learn from the events that once happened and once this takes place, an organization is said to have learnt. Organizational learning is therefore important in that it leads to highly performing, competitive and innovative companies (Easterby-Smith and Lyles, 2011). Through the use of past information, an organization is also able to make sound business decisions that enhance the sustainable growth and success of the business. Thus, business decision makers cannot afford to ignore the role that organizational learning plays in organizations given the changing business environments of the 21st century.

Changes in business environment will continue to take place and these changes affect companies not only in Zimbabwe but the world over. Change is a worldwide phenomenon that has affected not only Zimbabwean companies but everyone and every organization in the world. For instance, technological changes have seen some companies failing to catch-up with change resulting in them failing. The closing of these companies, due to technological changes, have seen thousands of people losing their jobs and source of income.

In Zimbabwe haulage sector, technological changes have seen an increase in competition in the market. The small haulage businesses are now able to fairly wrestle for customers with the large haulage business operators in the market. The volume of private automobile in Zimbabwe has risen (Transport Indaba Report, 2014), and this has resulted in increased competition in the haulage sector. The small and unregistered haulage operators have become visible and posed a great threat to the large and registered haulage operators. This has also been fuelled by the continued informalization of Zimbabwe’s economy.

Faced with the above challenges, the formal and registered haulage business operators do not seem to be taking visible and significant steps or strategies to circumvent the problems and challenges brought about by change. It is against this background that this researcher developed interest in examining the contribution of organizational learning on company performance in the haulage businesses sector in Zimbabwe in order to recommend how organizational learning can be used as a strategy to enhance business performance and company competitiveness.

1.2.1 Overview of Organizational Learning

Faced with change and unstable business environments, organizations continuously seek ways to stay in business and practising organizational learning is one of the possible tactics that can be employed. Easterby-Smith and Lyles (2011) define organizational learning a process whereby a business organization improves on its performance, effectiveness and efficiency through learning from experience. We are now living in an information era and information has become the key success factor for businesses in the contemporary business environment if it is managed well.

Organization continuously makes use of information to make relevant business decisions and to map a way forward about mission and visions of an organization. Organizational learning also takes place when a business improves on its performance through accepting and responding to business internal and external changes. The view that organizational learning practise is a source of business competitive advantage and that it improves on business performance is supported by Zhao, Li, Lee and Chen (2011). These authors argue that organizational learning enables a business to efficiently process information and create valuable knowledge that is critically important in enhancing business decisions and performance.

Garcia-Morales, Jimenez-Barrionuevo and Gutierrez-Gutierrez (2012) argue that organizational learning enhances a business’ performance through increasing its adaptation abilities to the changes taking place in the market. The authors also posit that organizational learning has the potential to improve the performance and efficiency of an organization through the use of experience or past information. Effective practise of organizational learning enables a business to be quick at interpreting the meaning of events and making relevant business decisions. According to Haeckel (2013), a business becomes adaptive to changing environments if it is quick at processing and disseminating information to its various members. Organizational learning is therefore worth studying given the contemporary business environments that are continuously changing and highly unstable.

1.2.2 Overview of Zimbabwe’s Haulage Business

The haulage business sector in Zimbabwe plays a key role to the economy as it contributes to the country’s Gross Domestic Product (GDP), creating employment and it facilitating effective and efficient trade. The sector is made up of small, medium and large operators. Within the small, medium and large business organizations, there are formally registered and unregistered operators. The rise in volume of private automobiles in Zimbabwe has seen the formal haulage business operators facing stiff competition from private and informal players flooding the market.

Private and unregistered haulage operators are serving a significant part of the market and this means a shrink in the market for the registered haulage operators (Transport Indaba Report, 2014). According to Transport Indaba Report (2014), customers in the haulage business increasingly prefer same-day service being offered by private and informal operators than the overnight facility being offered by large and registered haulage businesses. Thus, the competition in the haulage business in Zimbabwe is stiff.

As has been pointed out earlier on, the effects of technological changes cannot be underestimated with regards to the survival and performance of haulage businesses in Zimbabwe. According to the Transport Indaba Report (2014), the road haulage sector recorded a 10% reduction in business for the past decade due to technological changes. The report has it that the haulage business used to get significant revenue from parcels and documents but this has long changed. Technology has allowed people to send documents, which used to be part of freight for the haulage businesses, through the use of smart phone, scanners and the use of email i.e. without the need for transport services.

1.2.3 Challenges Faced by Haulage Operators in Zimbabwe

A careful review of the haulage sector in Zimbabwe revealed that operators in this sector are not taking visible steps towards embracing organizational learning as a tool to enhance business performance, survival and competitiveness. According to Transport Indaba Report (2014), the haulage operators are not making use of organizational learning through knowledge management to boost business performance and competitiveness. The report has it that part of the 10% drop in haulage business performance in the past decade is attributed to the inability to adapt to the changes in the business environments by the haulage operators.

The other challenge faced by the haulage business operators in Zimbabwe is an increase in customer complaints. The haulage business sector recorded a 12% increase in customer complaints over the past decade (Transport Indaba Report, 2014). An increase in customer complaints is a sign that the haulage businesses sector is falling short in meeting the needs and expectations of the customers. Rising customer complaints is also a sign that the haulage operators are not innovative and creative to meet the changing needs and expectations of the customers.

Increasing rate of accidents is another challenge being faced by Zimbabwe’s haulage business sector. Transport Indaba Report (2014) reports that the haulage business in Zimbabwe recorded a 10% increase in accidents over the past decade. The rising accidents and their negative effect on customer satisfaction is attributed to reasons such as the use of old and dilapidated fleet of vehicles to collect and deliver customer freight. The use of old fleet of vehicle increases business’ operational costs. The costs have the negative effect that a business will fail to meet the needs of the customer e.g. timely collection and delivery of customer freight.

Faced with the challenges as discussed above, the haulage operators are expected to take positive steps towards implementing strategies to circumvent the problems. Literature has it that organizational learning is one of the various strategies that can be used to enhance a business’ performance and competitiveness. Hence, it is a possible solution to the challenges facing Zimbabwe’s haulage business sector. It is the hope of this researcher that the solution of the haulage business operators’ problems in changing business environments rests in their ability to practice effective organizational learning.

1.3 RESEARCH PROBLEM

Many scholars who carried out empirical studies on organizational learning and performance conclude that there is a positive relationship between organizational learning and company performance (Garcia-Morales, Llorens-Montes and Verdu-Jover, 2008; Jimenez-Jimenez and Sanz-Valle, 2011). However, this nature of relationship between organizational learning and company performance does not seem to follow in Zimbabwe haulage business sector. It is this anomaly that has triggered the interest of the researcher to carry out a study that examines the relationship between organizational learning and company performance in the haulage sector in Zimbabwe.

Road haulage operators in Zimbabwe seem to be stuck in their old ways of doing business despite facing many challenges brought about by changing business environments. Literature has shown that organizational learning can be used to solve the problems arising from changing business environments but this strategy does not seem to be benefiting the haulage operators in Zimbabwe much. There are no vivid signs that organizational learning is being practised to enhance business performance in Zimbabwe’s haulage business sector. There are no new products and new services coming from the industry as a sign that organizational learning is benefiting the sector. The low level of innovation in the haulage business sector in Zimbabwe is manifestation that the businesses are not making use of organizational learning to improve on business performance and their competitive standing.

The various challenges faced by the haulage operators and the missed opportunities, in the form of new products and services, triggered the researcher’s interest in examining the relationship between organizational learning and company performance in the haulage sector in Zimbabwe. The aim of the researcher was to establish if organizational learning practises can be used as a tool to enhance the performance of haulage businesses in Zimbabwe given the ever-changing and unstable business environments.

1.4 RESEARCH OBJECTIVES

The main objective of this study was to examine the nature of the relationship that exists between organizational learning and company performance of the haulage businesses in Zimbabwe. The following were the sub-objectives for the study:

(i) To find out how organizational learning is practised in the in the haulage sector in Zimbabwe.
(ii) To determine the impact of organisational learning practices on firm performance in the haulage sector in Zimbabwe.
(iii) To establish if organizational learning practises differ across the different sizes of haulage businesses in Zimbabwe.
(iv) To recommend organizational learning tactics that can be used by Zimbabwe’s haulage businesses in order to enhance their performance.

1.5 RESEARCH QUESTIONS

The main research question of this study was formulated thus, what is the nature of relationship that exists between organizational learning and organizational performance in the road haulage sector in Zimbabwe? The following were the sub-research questions for the study:

(i) How is organizational learning being practised in the haulage business sector in Zimbabwe?
(ii) What is the impact of organizational learning practises on firm performance in the haulage sector in Zimbabwe?
(iii) Are there any differences in organizational learning practices across small, medium and large haulage businesses in Zimbabwe?

1.6 RESEARCH HYPOTHESIS

Based on prior empirical studies and theoretical foundations, the hypothesis of this study was formulated thus:

“There is a statistically significant and positive relationship between organizational learning and company performance in Zimbabwe’s road haulage sector”

1.7 JUSTIFICATION OF RESEARCH

Literature review showed that many studies carried out to establish the relationship between organizational learning and company performance is still scarce in the context of developing countries (Kropp, Lindsay and Shoham, 2006; Calantone, Cavusgil and Zhao, 2002; Liao and Wu, 2010). The scarcity of literature on organizational learning in developing countries such as Zimbabwe motivated the researcher to study the nature of relationship between organizational learning and firm performance in the haulage business sector in Zimbabwe. This study is expected to benefit a lot of stakeholders and the following are some of the expected merits of the study.

1.7.1 To the Haulage Businesses

Consultants in the haulage business sector may use this research’s findings and conclusions to design and recommend organizational learning strategies for the haulage operators in Zimbabwe and elsewhere. The recommended strategies and actions by the consultants may lead to improved business performance being recorded by the organizations in the haulage sector in Zimbabwe.

1.7.2 To the Academics

This study is also expected to benefit academics in the field of management and organizational behaviour because it contributes positively to the body of knowledge. Despite many studies having been carried out on organizational learning and firm performance there is not yet universally agreed meaning of organizational learning and organizational performance. Thus, this study contributes towards reaching an agreement by minimizing the gap between the diverging views by different scholars on the definition of organizational learning and organizational performance in the context of developing countries like Zimbabwe.

1.7.3 To the Researcher

The preparation of this dissertation significantly enhanced the researcher’s practical research skills. The researcher’s practical research skills got sharpen by going through all of the various rigorous and straining dissertation preparation processes. The study also allowed the researcher to gain a deeper understanding of organizational learning and company performance in theory and in practice.

1.8 SCOPE OF RESEARCH

In carrying out this study, the researcher targeted only registred road haulage operators in Harare. A list of registered haulage businesses in Harare from Transport Operators’ Association of Zimbabwe (TOA) database was used to randomly select a sample of companies for study. Only haulage companies with offices in Harare were targeted. The reason the researcher targeted Harare only is because the city is considered the hub of Zimbabwe’s economic activities in the current state of economic affairs in Zimbabwe. In the other cities in Zimbabwe there are not much economic activities taking place given the continued de-industrialization of the country. Harare haulage operators were also preferred given the convenience of data collection since the researcher resides in Harare and wanted to meet the dissertation submission date as per the requirements of the University of Zimbabwe.

1.9 DISSERTATION STRUCTURE

This dissertation is made up five chapters, references and a list of appendices. The following is an outline of the structure of the main five chapters.

Chapter One introduces the study topic and provides the background to the study as well as an overview of the haulage business sector in Zimbabwe. This chapter further lays out the research objectives, research questions, research hypothesis and justification of the study.

Chapter Two reviews literature on organizational learning and firm performance. The main focus of this chapter is on examining the relationship that exists between organizational learning and company from other researchers’ empirical studies. This chapter also presents the conceptual framework for the study which was the basis for hypothesis testing and parameter discussion in chapter four.

Chapter Three is a discussion of the research methods used to conduct this research mainly in terms of how data was collected for analysis. In this chapter, the researcher discusses and justifies the research methods and techniques that were used to collect data. The researcher used quantitative research methodology where a questionnaire was used to gather data.

In Chapter Four the researcher presents and discusses results from data analysis. Various presentation methods, such as graphs and tables, are used in this chapter to make the findings easy to read and understand by the readers. The researcher made sure that the most appropriate data analysis and presentation techniques were used for the various data analysis output.

In Chapter Five, the last chapter of the dissertation, the researcher focuses on research conclusions, recommendations and area of further research. It is also in this chapter that the researcher states the limitations of the study.

1.10 CHAPTER SUMMARY

The foregoing chapter focused on introduction of the study, background to the study, statement problem, research objectives, research questions, research hypothesis and rationale of the study. The scope of the study and structure of dissertation was also presented in this chapter. In the next chapter, the researcher reviews relevant literature on organizational learning and company performance and develop the contextual framework for the study.

CHAPTER TWO LITERATURE REVIEW

2.1 INTRODUCTION

In this chapter the researcher reviews literature on organizational learning and company performance. Various and relevant journals, articles and textbooks were used to prepare this chapter. The chapter also discusses the relationship that exists between organizational learning and company performance using prior empirical studies by other scholars. It is also in this chapter that the conceptual framework for the study is presented.

2.2 THE CONCEPT OF LEARNING

Learning in human beings is the act of acquiring new knowledge that result in change in behaviour and beliefs (Crossan, Nicolini and Easterby-Smith, 2000). When individuals learn, they use information to adjust their thinking, behaviours and beliefs. This ability to learn is not only displayed by individuals but also by organizations (Crossan, Nicolini and Easterby-Smith, 2000). The authors argue that learning allows individuals and organizations to adjust behaviour in line with the changes that are taking place in the environment. According to Arthur and Aiman-Smith (2001), learning is a survival technique for individuals and for organizations when faced with change and unstable business environments. Organizations and individuals are supposed to continuously adapt to the changes taking place in the environment in order to survival and be competitive.

There are many debates surrounding the concept of learning and one of them is whether learning is said to have occurred after individuals exhibited behavioural, cognitive or both changes (Salim and Sulaiman, 2013). Cognitive learning occurs where there is change in an individual’s mental models, norms and beliefs (Bontis, Crossan and Hulland, 2002). According to Hyland and Beckett (2002), behavioural learning takes place where individuals exhibit changes in their behaviour, beliefs and norms. Academics increasingly adopt the broader meaning of learning that embraces both behavioural and cognitive changes as a sign that learning has taken place (Esterby-Smith et al., 2000).

2.3 DOES AN ORGANIZATION LEARN?

The other debate in learning is whether organizations learn like what individuals do. Some scholars maintain that organizations are not learning entities (Klimecki and Lassleben, 1998; Simon, 1991; Sloan, Hyland and Beckett, 2002; Taylor, Templeton and Baker, 2010). However, there are other authors who view organizations as learning entities. Michana (2009) and March and Olsen (1991) share the same view that organizational learning is a reflection of the collective ideas, processes and systems of an organization. They agree that organizations are learning entities. Taylor, Templeton and Baker (2010), argues that organizations learn through the learning of the individuals and that learning of an organization takes place through coming and going or hiring and firing of members in an organization. An organization is said to have learnt if it hires the employees with the skills it previously did not have.

Learning by individuals is very much a social than a lonely phenomenon in organizations. According to Brown and Duguid (1991), it is a mistake to conclude that learning in organizations is nothing but the cumulative result of the members’ learning process. Brown and Duguid (1991) argument is that organizations do not have brains but they have cognitive systems and memories. Thus, the author agrees that organizations are learning entities. In organizations, individuals come and go with leadership changing from time to time as well and these phenomenon allow one to conclude if an organization has learnt or not. According to Sloan, Hyland and Beckett (2002), through the process of firing and hiring, some of the organization’s behaviour, norms, values and memories can be preserved. When some of the organizations behaviours, norms and values are preserved we conclude that an organization has learnt, making them learning entities.

The other authors who maintain that organizations do learn are Nonaka and Takeuchi (1995). According to Nonaka and Takeuchi (1995), an organization is a living entity with a collective sense of identity and a fundamental purpose. The collective sense of identity and fundamental purpose of an organization influence the employees’ commitment to learning. These also influence the sharing of information in the organization. Sharing of information in an organization is important in that it allows individuals to pass on their different knowledge to the other members of the organization. The question of whether organizations are learning entities significantly contributed to an exploration of the different levels at which learning occurs in organizations (Boh, Slaughter and Espinosa, 2007). According to Hoe and McShane (2010), learning in organizations takes place at individual, group, organizational and inter-organizational level.

2.4 LEVELS OF LEARNING

There are four main levels of learning namely, individual, group, organizational and inter-organizational learning (Salim and Sulaiman, 2013; McShane, 2010). Some authors such as Eshlaghy and Maatofi (2011) and Espinosa and Porter (2011) argue that individual learning is the most important form of learning in an organization because individuals are a primary learning entity in organization.

2.4.1 Individual Learning

According to French, Rayner, Rees and Rumbles (2011), the smallest unit at which learning occurs in an organization is individual learning. This form of learning takes place when an employee learns new skills and ideas in their place of work. The employee’s productivity at work may increase after gaining the new skills and ideas (Boh, Slaughter and Espinosa, 2007). Individual learning is more beneficial to the organization if it is shared between members of the organization. However, individuals may decide to or not to share the knowledge that they have. If an individual employee leaves an organization before sharing their knowledge, the organization loses that knowledge. French, Rayner, Rees and Rumbles (2011) support this view by arguing that organizations benefit more from a culture of knowledge sharing where individuals share what they know with the other members of the organization.

2.4.2 Group Learning

According to Hoe and McShane (2010), group learning is the next larger unit after individual learning. This form of learning occurs when individuals within a group acquire, share and combine knowledge through interaction with one another. According Reagans, Argote and Brooks (2005), group learning takes place when individuals willingly share what they know with the other members of the organization. Once individuals start to share their knowledge it transforms into group learning. According to French, Rayner, Rees and Rumbles (2011), working together of the members of an organization promotes better coordination and, teamwork. Espinosa and Porter (2011) also support that view and argue that sharing of knowledge through group learning further enhances the willingness by individuals to share knowledge with the others.

2.4.3 Organizational Learning

Organizational learning is defined by Espinosa and Porter (2011) as the process through which an organization creates and organizes information and knowledge that relates to its functions. Organizational learning takes place when an organization adapts to the changing operating environments. It involves the ability of an organization to acquire, interpret and share information for decision making (Eshlaghy and Maatofi, 2011). The practise of organizational learning enhances a business’ ability to adapt to changing environments (French, Rayner, Rees and Rumbles, 2011). Organizational learning also allows a business to be quick at adjusting and adapting to uncertain business conditions as well as improving on business efficiency.

2.4.4 Inter-Organizational Learning

Argote (2011) defines inter-organizational learning as the process through which organizations collaborate and share knowledge. Through inter-organizational learning, organizations learn from one another. In the contemporary business environment, where change is inevitable and the operating environment is ever-dynamic, a business organization is able to improve its processes and products through the use of new insights from other organizations (Espinosa and Porter, 2011). Thus, the role of competitors cannot be underestimated in the study of organizational learning as the competitors play a key role as part of inter-organizational learning.

There a lot of benefits that arise when a business collaborate with other organizations. According to Lahteenmaki, Toivonen and Mattila (2001), inter-organizational learning allows a business to cut time taken in decision making which might be too costly for an organization. Collaboration with the other businesses also reduces the risks that are associated with decision making because sharing of information refines decisions, thus resulting in better business decisions being made. Also, collaboration allows an organization the ability to apply the same ideas being used by other organizations to improve on its products, services and systems (Espinosa and Porter, 2011). The information from other business organizations can be used in modifying business ideas and enhancing a business’ innovation and creativity.

2.5 ORGANIZATIONAL LEARNING

Cyert and March were the first authors to reference the term organizational learning (Huber, 1991; March and Olsen, 1991; Chen, 2005; Hoe and McShane, 2010). Since then there has been an increase in literature on organizational learning. This is evidenced by growing number of journals and articles on organizational learning (Espinosa and Porter, 2011). Due to changing business environment, the corporate world also began to adopt the concept of organizational learning as a tool to enhance business performance and competitiveness (Espinosa and Porter, 2011). These developments together with the introduction of formal lectures and courses on organizational learning in learning institutions popularized the concept of organizational learning and making it a practically applicable concept in the contemporary business world and worth studying.

Despite the growing popularity of organizational learning, the concept still remains complex to the researchers and business managers (Espinosa and Porter, 2011, Chen, 2005). Various definitions of organizational learning have been proposed but not one definition has been agreed upon as the universal (Lahteenmaki, Toivonen and Mattila, 2001; Chen, 2005; Argote, 2011). The various and different definitions proposed by different authors also confirm that the concept is multidimensional and different authors have different opinion on what it encompasses. Thus, organizational learning is viewed as multidimensional, complex and not easily understood (Espinosa and Porter, 2011).

2.5.1 Definition of Organizational Learning

Many scholars have defined organizational learning differently (Eshlaghy and Maatofi, 2011; Espinosa and Porter, 2011; French, Rayner, Rees and Rumbles, 2011). According to Cyert and March (1963), organizational learning is an adaptive process through which firms respond to the changing business environment by readjusting their goals and attention. The definition shows that learning takes place when there is behaviour or cognitive changes in the form of readjustment of organizational attention and goals. According to Argyris and Schon (1978), organizational learning is the process whereby a business organization detects and corrects errors. When faced with changing business environments, an organization is bound to make errors and mistakes but through organizational learning, a business is able to work through the errors and challenges arising from change.

Senge (1990), who is considered the father of organizational learning, defines organizational learning as the process whereby individuals and teams work together with a shared vision and towards achieving a common organizational goal. Thus, organizational learning is hinged on the ability to share knowledge by individual members. Similarly, Lipshitz et al. (1996) view organizational learning as the process whereby an organization’s members use experience to develop a shared vision about the organization. These definitions confirm that learning is more beneficial to an organization if it takes place at an organizational level than at individual level and if it is shared between the members of the organization.

March and Olsen (1991), Chen (2005), Hoe and McShane (2010) and Argote (2011) all share the same view about organizational learning that it is a response to the changes in the operating environments. March and Olsen (1991) define organizational learning as the adaptive behaviour of a business organization over time and as a result of changes in the environments. Similarly, Lahteenmaki et al. (2001) argue that organizational learning is the process whereby a business adapts to the changes in the business environments. Parallel to these definitions is Chen (2005)’s definition that organizational learning is the process whereby an organization continuously acquires new knowledge and adjusts its operations to match the changing business environments.

More recent definitions of organizational learning are that by Hoe and McShane (2010) and Argote (2011). Hoe and McShane (2010) define organizational learning as the process of acquiring, sharing and using knowledge to adapt to the changing environments. The author identified organizational learning measures as namely, information acquisition, interpretation and sharing. According to Argote (2011), organizational learning is the process whereby an organization changes its behaviour as a result of reflecting on its past experience i.e. learning from experience.

Combining the various definitions above, organizational learning is made up of four constructs namely, information acquisition, information interpretation, information sharing and behaviour and cognitive changes. Also, Huber’s (1991) framework identified four measured of organizational learning identified above. There are other authors who stressed the importance of quality of information in organizational learning. According to Lahteenmaki et al. (2001), the quality of information is critically important in enhancing organizational learning and ultimately the performance of an organization. It is important when making decisions while faced with change. Thus, quality of information is another measure of organizational learning that can be used to measure organizational learning. The following table, Table 2.1, summarises definitions of organizational learning discussed above.

Table 2.1: Summary of Organizational Learning Definitions

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2.5.2 The Development of Organizational Learning

The various definitions of organizational learning identified above confirm that organizational learning concept is not a new phenomenon. The concept has been in existence for decades. According to Crossan, Nicolini and Easterby-Smith (2000), literature on organizational learning can be grouped into classical, foundational and popularizing literature. This grouping gives a complete summery of how organizational learning evolved. Classic literature pre-dates the identification of the idea of organizational learning by Cyert and March in 1963, foundational literature covers first works that set the agenda for subsequent writing on organizational learning by other authors and popularizing literature covers the works that made the field of organizational learning visible and quite relevant in the cotemporary business world.

2.5.2.1 Classic Literature

Easterby-Smith and Lyles (2011) pointed out that four main authors made a significant influence in the field of organizational learning well before the term ‘organizational learning’ was referenced by Cyert and March (1963). These authors are Michael Polanyi, John Dewey, Fredrick Hayek and Edith Penrose. These authors made varying contribution in the field of organizational learning.

Dewey (1933) explicitly focused attention on the concept of learning by individuals in organizations. The view of Dewey of learning is that individuals learn from experience. They make use of past information to make present and relevant decisions. Learning of this nature is achieved through reflection of the past events by the individual. What is important to take note of is that individual can learn from both a successful past and they can also learn from the failures of the past. Dewey (1933) argues that learning from experience fits squarely to organizational learning where reflection is critically important to organizations and to individuals all alike.

Polanyi (1966) is best known in the field of organizational learning for the distinction of tacit and explicit knowledge. The idea of Polanyi’s tacit knowledge is parallel to Dewey (1933)’s learning from experience. The argument of Polanyi (1966) focuses mainly on the study of knowledge in organizations. Thus, the work of Polanyi (1966) is more important to the studies of organizational knowledge management where tacit knowledge, that knowledge which cannot be presented in written form, is used as a competitive tool that can be used by a business to survive change.

Penrose (1959) is well known for the contribution made in organizational learning that it enhances business innovation and creativity. Organizations that allow employees to learn from errors are more innovative and creative than those that do not allow employees to make mistakes and errors (Penrose, 1959). Creativity and innovation is enhanced in an environment when errors are accepted and appreciated as learning tools. Penrose (1959) also argues that organizational learning can be achieved through formal training as well as through personal experience.

Fredrick Hayek (1945) mainly focuses on the link between organizational learning and the economic benefits to the business. The author argues that the problem faced by business is on how to make the knowledge gained through sharing by individual beneficial to the society and organizations in the form of better decisions. The work of Fredrick is considered the most important work that caused many authors to focus more on organizational learning than on mere knowledge management (Easterby-Smith and Lyles, 2011).

2.5.2.2 Foundational literature

The idea that organizations can learn was a key breakthrough first articulated by Cyert and March (Easterby-Smith and Lyles, 2011). According to Cyert and March (1963), organizational learning is part of decision making process model in a business where the decision makers respond to the changing business environments or external shocks. The work of Cyert and March (1963) cited various organizational learning concepts that were later developed by other authors. In the field of organizational learning, the work of Cyert and March (1963) is described as the foundation literature although there are other authors who also contributed to laying the foundation of organizational learning.

The work of Argyris and Schon (1978) was also very important in the foundation of organizational learning. Argyris and Schon (1978) distinguish business organizations that have a capacity to learn and those that do not have the capacity to learn. The authors argue that both individuals and organizations create defence mechanisms to the unpleasant changes in their operating environments in order to survive and remain competitive. Various foundational contributions were made on organizational learning in the 1970s and 1980s as evidenced by the various definitions of organizational learning discussed earlier on.

2.5.2.3 Popularizing Literature

According to Easterby-Smith and Lyles (2011), the establishment of Special Edition of Organizational Science in the 90s is viewed as one of the reasons organizational learning became very popular. The Special Edition of Organizational Science contains a lot of highly cited organizational learning journals and articles. Some of the authors who had their works published in the Special Edition of Organizational Science and made organizational learning poplar include March and Olsen (1991), Huber (1991), Simon (1991) and Epple, Argote and Devadas (1991). These authors were very influential in popularizing organizational learning. The contemporary business environment, which is dynamic and highly unstable, also makes organizational learning literature and practises very popular and worth studying.

2.5.3 Types of Organizational Learning

The categorization of learning has been mainly on two forms namely, adaptive and generative learning (Arthur and Aiman-Smith, 2001). However there are other ways of categorizing organizational learning. Learning can be classified also as either double or single loop learning. Single loop learning is also called adaptive learning and double loop learning is also called generative learning (Chiva and Alegre, 2009).

2.5.3.1 Adaptive Learning

Adaptive learning is that learning where an individual makes a selection from a given set of alternative actions in response to a particular event (Arthur and Aiman-Smith, 2001). It is that learning where an individual make changes to behaviour as a way to correct the errors of choice within a set of alternatives. According to Crossan and Bedrow (2003), adaptive learning can be defined as the process of as obtaining information to correct or improve on procedures. It is relevant in business where changes in the environment have resulted in some procedures rendered less useful and ineffective. As a way to keep the business in business and competitive, individuals respond by working on finding solutions or better alternatives.

Adaptive learning can be considered as the ability to detect and correct errors in certain operating procedures (Taylor, Templeton and Baker, 2010; Senge, 1990). According to Taylor, Templeton and Baker (2010), adaptive learning allows an organization to maintain its present policies or achieve its present objectives by adjusting its behaviors in line with the changes that are taking place in the environment. It involves refinement and improvement of existing competences, technologies and paradigms without necessarily challenging the underlying beliefs and assumptions of the organization (Crossan and Bedrow, 2003).

2.5.3.2 Generative Learning

As has been mentioned earlier on, generative learning corresponds to double-loop learning (Taylor, Templeton and Baker, 2010; Senge, 1990; Chiva and Alegre, 2009). It involves the change of one’s beliefs and assumptions by becoming aware of defensive routines. Thus, it involves the modification of an organization’s underlying norms, values, policies and objectives (Senge, 1990). Learning of this nature allows individuals in an organization to question some of the organization’s operating procedures, values, norms and beliefs. Generative learning is that learning where individuals are required to view the world through a different lens, given that the world is ever changing. This is quite relevant given that customers’ tastes are changing and that technology in ever changing as at alarming rate than before.

2.5.4 Measures of Organizational Learning

According to Huber (1991), organizational learning is a function of information acquisition, information sharing, information interpretation and organizational memory. Lahteenmaki et al. (2001) stressed the important of quality information in decision making and hence the importance of information quality as a measure of organizational learning. The other aspect that was considered important as a measure of organizational learning by the researcher is behaviour and cognitive changes arising from the gaining of new knowledge. Salim and Sulaiman (2013) also agree with Huber (1991) that organizational learning is combination of information acquisition, interpretation, sharing, quality and behaviour and cognitive changes.

2.5.4.1 Information Acquisition

The acquisition of information is critically important for organizational learning process to take place (Huber, 1991; Salim and Sulaiman, 2013). Information has to be acquired first before it can be useful to an organization. There are various techniques that can be used by an organization to acquire information internally and externally (Salim and Sulaiman, 2013). Internal and external training are some of the ways that can be used to acquire information. When an employee attends training the expectation is that the individual brings back to his workplace well equipped with new information that help in solving the problems being faced back at work.

Learning from experience and observing other companies are two key ways through which information can be acquired by a business (Salim and Sulaiman, 2013). Huber (1991) also argued that information acquisition can be achieved through intentional information search by a business. Intentional search for information can be achieved by having employees in an organization whose task is to gather internal and external relevant information and disseminate it to the decision makers. This has made theorists to generally agree that there is need for organizations to continuously monitor and manage their means of information acquisition.

Arthur and Aiman-Smith (2001) argue that there are blockages of information flow in organizations. These blockages disrupt the efficient flow of information in an organization, thus disrupting efficient decision making process. The other reason organizations must manage their information acquisition process is that some people in the organization might be having important information that benefit the organization but they are not aware of the importance of the information. It is the responsibility of management to see to it that there is unlocking information by allowing individuals to share the information that they have with the others in the organization.

Huber (1991) argued that the acquisition of information can be distorted by individuals in an organization intentionally. The author argued that this mainly happens when an employee feel that if they share the information that they have their job will be stake. People in organization tend to conceal information that they know is the cause for change or information that they know will reveal a mistake. Thus, managers are supposed to strategically design ways to gather information from the employees before they leave with the relevant and important information.

According to Arthur and Aiman-Smith (2001) external experts and competitors are sources of information for decision making in changing business environment. External experts may be expensive but the information that is supplied is more objective and useful than less objective internal information (Easterby-Smith and Lyles, 2011). The actions of the competitors are also a source of information that an organization can make use of a part of as its organizational learning practise. The authors argue that competitor products and services analysis is critically important in information acquisition process.

Training of employees is also important in information acquisition because it means that employees are being equipped with better decision making abilities. Through training, the employees gain more and useful information that assist them in decision making process. According to Arthur and Aiman-Smith (2001) an organization that has well trained employees who know what is expected of them by their employers are quick at making decisions. Thus, Arthur and Aiman-Smith (2001) view various formal and informal training techniques in an organization are measures of the learning capabilities of an organization.

The ability of an organization to acquire relevant information is critically important to its success and competitiveness (Arthur and Aiman-Smith, 2001). In today’s environment of information, successful business organizations are able to continuously and quickly acquire information (Salim and Sulaiman, 2013). Salim and Sulaiman (2013) found a strong and statistically significant relationship between information acquisition and company performance. Also, Arthur and Aiman-Smith (2001) argue that information acquisition is important and is positively related to company performance as it enhances timely business decisions. The authors argue that, in the changing business environments, the ability of an organization to produce goods and services that meets the needs of the customers is through effective and efficient information acquisition. Easterby-Smith and Lyles (2011) also argue the same by stressing the importance of market research in today’s business environment. The authors argue that information acquisition in the form of information gathering enhances a business performance and competitiveness.

2.5.4.2 Information Sharing

Information sharing is also important in organizational learning because it allows for the individuals in an organization to have a shared vision of where the organization is headed. It is the process whereby individuals disseminate information to where it is needed in the organization (Arthur and Aiman-Smith, 2001).information sharing is also called information distribution. The sharing of information is important in organizational learning because it determined the depth of organizational learning that takes place in an organization (Argote and Miron-Spektor, 2011). Effective organizational learning takes place in an organization where individuals willingly share their knowledge and important information with the other in the organization.

The leadership style that is displayed in an organization is important in allowing the sharing of information and knowledge. According to Argote and Miron-Spektor (2011), learning is enhanced in an organization with leadership style that facilitates the smooth sharing of information. Thus, participative leadership of management style is the most important style where an organization intends to promote organizational learning through sharing of information. According to Salim and Sulaiman (2013) democratic leadership style facilitates information sharing and hence enhances a business’ learning capabilities.

Jones (2010) also shares the same view that sharing of information enhances learning in an organization. The argument by Jones (2010) is that when information is widely distributed within the organization, individuals are more likely to learn faster since the information is readily available to them. Increased information sharing enhances information retrieval ability by individuals in the organization (Argote and Miron-Spektor, 2011). Thus, sharing of information in an organization leads to a more broad based learning and enhances a business’ ability to adapt to the changes in the environment.

Many researcher agree that information sharing is positively related to company performance (Chauvel and Despres, 2002; Dantas and Seville, 2006, Li and Lin, 2006, Argote and Miron-Spektor, 2011). According to Lin and Lin (2006) the growing competition in the contemporary market makes information sharing a necessity that organizations cannot do without. Individuals in an organization are expected to share information and knowledge with their colleagues in the organization so that they have the same and common objective to meet as a team.

Dantas and Seville (2006) also maintain that organizations need to share information and knowledge between individuals and also between themselves i.e. inter-organizational learning. For instance, companies can share information with other companies with the intention to better its products, services and systems. A business can learn a lot from its competitors through imitation strategy where a business copies and modifies what is being offered by other organizations. Dantas and Seville (2006) argue that there is a positive link between information sharing and company performance. Chauvel and Despres (2002) also argue that there is a positive and statistically significant relationship between information sharing and company performance as it enhances a business’ profitability, reputation and image.

2.5.4.3 Information Interpretation

The other measure of organizational learning is information interpretation. It is defined by Dantas and Seville (2006) as the process whereby information is given meaning by individuals, resulting in action being taken by the individual. The individual may opt to act or not act. This construct of organizational learning is critically important such that some authors define learning in terms of this construct alone. According to Jones (2010), organizational learning is the process whereby information is given meaning by individuals in an organization. Thus, where there is no meaning there is no learning that would have taken place. The action that one takes is a result of the meaning that one has attached to the information (Jones, 2010). Employees get more creative and innovative when faced with changing business environment if they can interpret the meaning of the information that they are getting. Organizational learning cannot take place if the individual does not get the meaning of the information.

Learning can only take place when there is meaning in the information being received by an individual or by an organization (Argote and Miron-Spektor, 2011). According to Argote and Miron-Spektor (2011), more learning in an organization takes place when more people get an understanding and meaning of the different concepts by the different people in the organization. The information that is shared in the organization must be meaningful to all so that a shared vision is developed (Jones, 2010). If the information is not clear and confusing to the receiver, learning cannot take place effectively and the individuals will not be working towards one common purpose. It is therefore important that decision makers in an organization make sure that information being disseminated is simple and easy to understand.

French, Rayner and Rumbles (2011) also argue that that when people in an organization have a common understanding of business concepts and issues, they are more likely to work together in harmony and improve on their collective performance than a situation where they do not have a common understanding of what is expected on them. Organizations are supposed to come up with approaches that enhance information interpretation if they are to gain from learning. Interpretation of information is distorted if there is information overload (Argote and Miron-Spektor, 2011). Information overload occurs when the information presented exceed the capacity of the individual’s ability to process information (French, Rayner and Rumbles, 2011). Thus, individuals in organization must get only sufficient information that helps them to accomplish their tasks.

The contribution of information interpretation towards organizational learning is viewed by many researchers as positive (French, Rayner and Rumbles, 2011; Jones, 2010; French, Rayner and Rumbles, 2011). According to Argote and Miron-Spektor (2011), organization learning, in the form of the ability to make sense from information, enhances a business performance (Jones, 2010; French, Rayner and Rumbles, 2011). Also Jones (2010) argues that information interpretation enhances a business’ performance as it enhances an individual’s decision making abilities. Thus, information interpretation is important in enhancing business performance as it transforms words into action.

2.5.4.4 Organizational Memory

The last construct of organizational learning on Huber’s (1991) framework is organizational memory. Organizational memory is defined by Argote (2011) as the means by which an organization stores information for future use. This construct is affected by employee attrition, information sharing, norms and values prevailing in an organization (Dantas and Seville, 2006). For example, if an employee leaves an organization without sharing information, the organization would have lost the knowledge not shared by the leaving employee. Senge (2014) also support this view by pointing out that allowing employees to leave in their numbers from an organization make an organization lose the important tacit knowledge that is critically important in enhancing a business’ competitiveness and performance.

The storing of information in an organization can take many forms e.g. in employee brains, procedure manuals, computer files and organizational journals. The memory of the organization is as accurate as the information storage (Argote and Miron-Spektor, 2011). Employee turnover also affect organizational memory. An organization loses a lot of memory if employees leave in their numbers without the replacement of these employees with the others with the same skills. It is the responsibility of management to see to it that the right employees with the required knowledge and skills are retained.

2.5.4.5 Behaviour and Cognitive Changes

The other construct of organizational learning by Huber (1991) is behaviour and cognitive changes. According to Jones (2010), learning takes place where there is behaviour and cognitive change. Behavioural and cognitive changes are the two main ways through which a business organization changes words into action. This construct manifests in the form of enhanced ability by a business to adapt to the change in the operating environment (French, Rayner and Rumbles, 2011). French, Rayner and Rumbles (2011) agree that organisational learning takes place when there is change in individual behaviour as well as change in belief about the organization. Cognitive aspect in this construct is about how the organization acquires new knowledge and change beliefs while behaviour aspect is about how adaptive the organization is towards the changes taking place in the market i.e. the change of behaviour of the individuals and the organization.

The general view of literature is that when individuals display learning in the form of positive behaviour and cognitive changes the performance of an organization is enhanced (Bontis, Crossan and Hulland, 2002; Rayner and Rumbles, 2011). Bontis, Crossan and Hulland (2002) argue that this construct of learning, behaviour and cognitive changes, represent the stage of learning where words are changed into action. They argue that learning of this form enhances a business performance because the individuals will be displaying their abilities and reacting to the information they would have received. Sloan, Hyland and Beckett (2002), Bontis, Crossan and Hulland (2002) and French, Rayner and Rumbles (2011) also share the same view that behaviour and cognitive changes enhances a business performance and managers must ensure that the beliefs and behaviours of the employees are aligned to the corporate objectives of an organization.

2.5.4.6 Information Quality

The performance of a business organization is a function of the quality of the decisions that a business makes (Gorla, Somers and Wong, 2010; Argote, 2011; Kotnour, 2000). According to Gorla, Somers and Wong 2010, the quality of information that is used to make the decisions determines the quality of the final decisions. If poor quality information is used to make decisions, the outcome of the decisions is unlikely to help a business to perform better.

Gorla, Somers and Wong (2010), Argote (2011) and Kotnour (2000) maintain that there is positive relationship between information quality and company performance. Also, Argote (2011) and Kotnour (2000) share the same view that quality information is a predictor of organizational learning. According to Kotnour (2000), the quality of information positively affects the performance of a business in the form of decisions that are ultimately reached. The quality of information is measured in terms of how accurate, clear, applicable, concise, consistent and correct the information is. The information’s accessibility and how current it is also important in determining the performance of a business organization.

2.5.5 Organizational Learning Process by Daft and Weick

Various authors proposed various processes or steps of organizational learning. According to Daft and Weick (1984), organizational learning is viewed as a three step process of data collection, interpretation and learning as the last step. The following is Table 2.2 that shows the three steps of organizational learning as proposed by Daft and Weick (1984).

Table 2.2: The Process of Learning by Daft and Weick

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Source: Daft and Weick (1984).

According to Daft and Weick (1984), the first step is data scanning. Through scanning individuals in an organization gathers information. After the gathering of information, it is given meaning through the interpretation process. After interpretation and one has gotten the meaning of the information, action is taken as the last step of organizational learning process. The definition of organizational learning by Daft and Weick (1984) does not stress organizational memory. However, Huber (1991) stresses the importance of information storage. However, Daft and Weick (1984), emphasised information interpretation construct as critically important construct of organizational learning.

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