ABSTRACT
PurposeThis study aims to investigate the mediating effect of innovation on the relationship between KM (KM) capabilities and organisational performance in the context of construction firms operating in Pakistan. Worldwide innovation predicts the performance of any firm. Today, the construction industry in Pakistan is booming, which reinforces the need for a study on innovation and KM in this sector.Design/methodology/approachThis empirical study uses a correlational research design. An online survey questionnaire was used as a data collection method. Through convenient sampling, the sample comprised 277 employees from different construction firms working under the Defence Housing Authority (a construction company operating in major cities) in Pakistan. Data were analysed through partial least squares-structural equation modelling (Smart PLS-SEM version 3) to assess the hypothesis.FindingsData analysis reveals that KM dimensions, knowledge acquisition, application and protection positively and significantly influence organisational performance;however, knowledge conversion is insignificant. Furthermore, innovation positively and substantially mediates the relationship between knowledge acquisition, application, protection, organisational performance and the insignificant terms of knowledge conversion.Research limitations/implicationsThis study is limited to the construction industry, and future research should be conducted on larger scales for better generalisation. Other mediators between KM and organisational performance (i.e. organisational complexity, workplace environment, employee knowledge-sharing attitude) should be investigated.Practical implicationsThese results are crucial and encourage managers in the construction industry, especially from a developing country like Pakistan, to understand the importance of innovation, the application of KM and the essential role it has in boosting business performance.Originality/valueThis research contributes to the scholarly debate on the mediating role of innovation in the relationship between KM and organisational performance. It also expands the literature on KM through an empirical investigation on the innovation of the construction industry in Pakistan from a management perspective.