The Effect of Knowledge Management Practices on Project Efficiency: The Mediating Role of Innovation Capability

Abstract

Project-based organisations increasingly rely on Knowledge Management Practices (KMP) to improve Project Efficiency (PE) in dynamic and competitive environments. However, despite substantial investments in knowledge systems, many projects still fail to meet their established time, cost, and scope objectives. The existing literature suggests that the mere acquisition and storage of knowledge are insufficient; knowledge assets must be actively transformed through an organisation's Innovation Capability (IC) to yield tangible project outcomes. Consequently, this study investigates the direct association of KMP on PE, while specifically examining the mediating role of IC within Saudi Arabia's rapidly growing cultural and entertainment sector. Grounded in the Knowledge-Based View (KBV) and Dynamic Capabilities Theory (DCT), the research adopted a quantitative, deductive, and cross-sectional design. A census approach was utilized to collect primary data from 221 highly experienced project professionals and managers at Knowliom Company, achieving an 88.4% response rate. Data were gathered using a structured, validated 5-point Likert scale questionnaire. The complex triadic relationships and mediation effects were analysed using variance-based partial least squares structural equation modelling via Smart-PLS 4 software. The empirical findings confirmed the robust validity of the proposed conceptual model, supporting all four hypotheses. KMP was found to exert a highly significant association on both PE and IC. Furthermore, IC exhibited a statistically significant direct relationship with PE and successfully functioned as a complementary partial mediator in the relationship between KMP and PE. Notably, KMP produced a large standalone association with efficiency; IC's standalone practical effect was comparatively small due to the transitional learning curves associated with adopting new operational workflows. The study concludes that while structured knowledge ecosystems serve as the fundamental structural anchor for operational predictability, their full strategic value is realised when actively utilised to fuel dynamic, innovative capabilities. Importance-performance map analysis further indicated that executive management should prioritise the direct application of historical knowledge to minimize resource waste. Ultimately, this research enriches organisational theory by empirically demonstrating the evolutionary mechanism from static knowledge assets to dynamic project execution success.