The impact of organizational learning on Polish SME market performance

In a global, complex, and turbulent environment, knowledge is an essential reliable source of gaining competitive advantage. Modern conditions of aggressive competition, ambiguous and volatile environmental factors, and sophisticated information technology and artificial intelligence (AI) have led to growing importance of knowledge economy and have changed the perception of effective organizational learning (OL) in a firm. Through the process of continuous employee training and development, the efficient management of human resources provides constant innovation and creates conditions for mutual knowledge exchange and proactive behavior, leading to improvement of a firm’s competitive position in the market. The SME sector is not an exception. The concept of OL refers to multiple disciplines in both the natural and social sciences, including psychology, sociology, and anthropology [Sun, 2003]. To offer a clear foundation, this paper begins with the definitions characterizing the nature of OL and rationales justifying its existence and growing importance for a firm’s performance.

The basic concept of OL was first introduced by Senge [1990]. One of the early definitions coined by Marsick [1994] perceived OL as a process of “coordinated systems change, with mechanisms built in for individuals and groups to access, build and use organizational memory, structure and culture to develop long-term organizational capacity.” According to Sinkula et al. [1997] OL is a dynamic process that involves three major elements: commitment to learning, shared vision, and open mindedness.

OL can also be characterized as an intricate three-stage process consisting of knowledge acquisition, dissemination, and shared implementation [Dale, 1994]

Argyris and Schon [1996] indicated two essential conditions for efficient process of OL: first, when an organization achieves what is intended, and second, when mismatch between intentions and outcomes is identified and corrected. They distinguished between single-loop and double-loop learning. Single-loop learning is described as an adaptive learning or incremental learning that is limited to correction of deviations from the norm by introduction of small adjustments without challenging beliefs or assumptions. As suggested by Argyris [1992], organizations where single-loop learning is the norm, “governing variables” that they expect to achieve in terms of targets and standards are indicated. The controlling process is carried out through monitoring and review of achievements and is followed by corrective actions, thus completing the loop. In contrast, double-loop learning is associated “with radical change, which might involve a major change in strategic direction, possibly linked to replacement of senior personnel, and wholesale revision of systems” [Argyris, 1992, p. 716]. The basic assumption indicates the superiority of double-loop learning, except some (rare) situations when single-loop learning may be more relevant [Easterby-Smith and Araujo, 1999].

The main principles of OL were coined by Harrison [1997] who pointed out to (a) the need for a powerful and coherent vision of the organization to be communicated, (b) the need to develop a strategy in the context of a vision that is open ended and unambiguous, (c) promotion of lateral thinking and training of employees, as well as knowledge-creating activities, (d) frequent dialog within the framework of vision and firm’s goals, and (e) development of a conducive learning and innovation climate. As an important remark, he indicated that the concept of OL should not be confused with learning organization which is an idea that points out to the use of specific diagnostic instruments that can help to identify, promote, and evaluate the quality of the learning processes inside the firm.

An overview of the literature on a diverse theoretical OL approach has been presented in Bontis et al. [2002]. More recent research studies define OL as “the process through which organizations change or modify their mental models, rules, processes or knowledge, maintaining or improving their performance” [Chiva et al., 2014] and point out that the dynamic process of knowledge creation is a critical OL component [Loermans, 2002; Cheng et al., 2014; Real et al., 2014]. As a result, OL is perceived as a fundamental for gaining a sustainable competitive advantage and a key factor in the enhancement of organizational effectiveness [Bontis et al., 2002; Brockmand and Morgan, 2003; Easterby-Smith et al. 2000]. Other researchers [Tippins and Sohi, 2003; Keskin, 2006; Ussahawanitchakit, 2008] also provide evidence of a positive relationship between OL and firm performance. The findings obtained by Darroch and McNaughton [2003], Oh [2019], Maiga [2015], and Altinay et al. [2016] confirm that the whole process of OL produces better firm performance. Thus, a majority of researchers stressed that OL will be a crucial determinant for corporate survival and development.

Michna [2009, p. 356] indicated that: “there is no theory of organizational learning which would take into account the specificity of small- or medium-size enterprise (SME) management in connection with the corporate performance. Because not enough attention has been given to the specific character of these processes in SMEs and the relationship between the processes and SMEs performance so far .” In her research focused on 211 enterprises from Polish SME sector, she showed empirically a relationship between OL and organizational performance. In practice, it implicates that organizations with a higher level of OL achieve higher performance.

It should be noted that in the Polish economy, the SME sector plays a significant role. It produces 50% of GDP, gives employment to 7 million people, and accounts for 99.8% of all Polish enterprises [PARP, 2020]. But still, it has a great potential to grow as the number of Polish SMEs per capita and average contribution to the GDP growth is lower than the EU average (58%).

Important findings by Adian et al. [2020] explicitly indicate that SMEs are by above 8% more likely to temporarily shut down due to COVID-19 and other environmental turbulences than larger firms, across all countries and sectors in the sample. SMEs can also have fewer tools to respond to pandemic threats and volatility, uncertainty, complexity, ambiguity (VUCA) environmental factors; so, the responsive strategy and OL might be perceived as essential for their survival. According to Polski Instytut Ekonomiczny (PIE) [2022], 64% of Polish entrepreneurs indicated that environmental uncertainty and growing risk of economic activity would induce high motivation for managers to organize and pay for human capital training to gain new competences. Surprisingly, the same report indicates that 72% of Polish entrepreneurs didn’t invest in 2021 or didn’t even plan to invest in human capital in a form of training in forthcoming 2022.

The main purpose of this article is to fill in the gap in the current knowledge of OL in Polish SMEs operating in turbulent, pandemic conditions and to make recommendations for their strategic and entrepreneurial market orientation.

First, the characteristics of two research samples are presented, and the formulation of hypothesis is explained.

Our findings are based on a survey conducted among company’s owners and managers from two samples of Polish SMEs: a “pre-COVID-19” sample (first sample) and a “COVID-19” sample (second sample).

The data in the first sample were collected¹ during May–July 2019 through questionnaires sent to a representative sample of Polish SMEs established after 2004. Random selection was made within two strata of non-exporters and exporters with exports being at least 25% of their sales and two strata of small- and medium-sized companies. The data collection was conducted through the internet questionnaire (CAWI) and telephone interviews (CATI). The total sample size accounted for 240 firms randomly selected from the database of 2,969 Polish SMEs. The share of exporters vs. non-exporters in the sample is 50% vs. 50%. The share of medium-sized vs. small-sized enterprises is 33.3% vs. 67.7%.

The data in the second sample were collected² during December 2020–January 2021 through questionnaires sent to a representative sample of Polish SMEs established after 1995. Random selection was made within two strata of small- and medium-sized companies and two strata of non-exporters and exporters with at least 15% of their sales being sold abroad. Data were obtained through the internet questionnaire (CAWI) and telephone interviews (CATI). The total sample size was 219 firms selected from the database of 1,395 Polish SMEs that met the sampling criteria. The share of exporters is 49.8%, and the share of non-exporters in the sample is 50.2%. The share of medium-sized and small-sized enterprises is 37.9% and 62.1%, respectively.

Both samples differ in terms of the threshold for exports share in total sales (25% vs. 15%), age (established after 2004 vs. 1995), and the fact that, in the “COVID-19” sample, only managers of companies from medium-tech and high-tech industries, serving either B2B clients only or B2B and B2C, were interviewed (the “pre-COVID-19” sample also included firms selling goods to B2C customers).

The main objective of this research is to analyze relationship between OL and market performance of Polish SMEs.

Presented literature review has shown that the majority of authors indicate importance of OL for firm performance from both theoretical perspective [Bontis et al., 2002; Brockmand and Morgan, 2003] and empirical findings [Tippins and Sohi, 2003; Keskin, 2006; Ussahawanitchakit, 2008, Kowalik, 2018]. As mentioned earlier, also Michna [2009] in her research related to Polish SMEs from the Silesia region found a positive relationship between OL and firm performance.

Thus, we pose the following hypothesis:

H: There is a positive relationship between OL and market performance of SMEs.

The presentation of research results is organized as follows. For each set of variables and results, data related to the “pre-COVID-19” sample are presented prior to results for the “COVID-19” sample.

Adapted to the context of Polish small-sized and medium-sized enterprises, three items of the scale of OL proposed by Sinkula et al. [1997] showed good reliability and positive, significant, although weak correlations, with measures of OL based on behavior.

The fact that correlations between the two above-mentioned types of measures of OL were not strong and that the behavior related to OL also showed positive and significant relationships with some market performance measures (independently of the scale of OL) indicates the necessity to go beyond multi-item scales based on general declarations in the measurement of constructs.

According to the presented research results from the “pre-COVID-19” sample, partial support for the hypothesis about a positive relationship between market performance and OL for Polish SMEs was obtained. Two out of three measures of OL, i.e., diversity of information sources and commitment to learning showed a positive relationship with two aspects of market performance, i.e., sales dynamics and self-assessed success compared with competitors. No OL measures were found to be correlated with financial results.

For the “COVID-19” sample, although commitment to learning showed very weak positive correlations with both financial results and sales dynamics, these relationships were not confirmed when other firm characteristics had been taken into account.

The main limitation of presented research is that at least medium-term perspective could not be taken into account due to the form of our data (surveys conducted once on different samples of enterprises). Effects of a “sudden” increase in attitudinal learning commitment and/or spending on employee learning may be beneficial for a given company after some time.

In Sinkula et al. [1997] opinion, the relationship between market performance and OL is not straightforward. Their explanation is worth mentioning: “a change in market performance is not a simple function of absolute organizational learning. First, before market performance changes can be expected, absolute thresholds of improvement must be surpassed (e.g., an automobile manufacturer may improve the braking ability of its automobiles 10 percent, but a 25 percent improvement may be necessary before consumers are able to perceive and, hence, react to the improvement). Therefore, learning may be affecting the dynamism of new product development (improvement) without affecting market performance. Second, the rate of learning within an organization must be at least equal to that of competitors if changes in market performance are to be expected ( ). For these reasons, in the short run, measures of market performance may mask real improvements in the learning capabilities of an organization.” [Sinkula et al., 1997, p. 307].

Further research should also include other operationalizations of OL, e.g., spending on training and information acquisition as a percentage of sales and profits, expenses per employee, etc. It should be noted that the specificity of particular industrial branches seems to be of high importance and requires careful consideration in the context of OL and SME performance in further research.