Introduction

The increase in workers’ knowledge has become a novel phenomenon in the growing competitive environment, which supports the firms’ sustainable development (Irfan et al., 2022). Knowledge is critical in combating emerging market challenges via Knowledge Management (KM) practices (Hamilton & Davison, 2018). The latter alludes to specified information, which is a strategic weapon for organizations that identify a business opportunity and leverage the firms’ competence (Abazeed, 2020).

However, knowledge sharing is a process that significantly encourages employees to share critical information about an organization’s network (Le & Lei, 2018). The high information quality enables the stakeholders to pay attention to information management (Zhou et al., 2023). It is an essential component of KM that enables organizations to benefit from employee experiences and reach their business goal (Kim et al., 2015). Human resources is the prime driver of knowledge sharing (Allameh, 2018), innovation (Huang & Liu, 2019), and a competitive advantage in the hospitality industry (Li & Liu, 2018). Kianto et al. (2014) suggest that organizations should implement a proper knowledge-based system to enhance employee knowledge creation and sharing of new and informative ideas.

KM has allowed firms in recent years to enhance the organizations’ HR practices, which improves Business Process Innovation (BPI) (Enad Al-Qaralleh & Atan, 2022). Jiang et al. (2012) stated that potential employees are more likely to acquire the information required for innovation, uniqueness, and newness. However, in this context, Duan et al. (2021) state that managing the firms’ knowledge and improving the firms’ heterogeneous innovation is not sufficient. Firms need to adopt an absorptive capacity to captivate new ideas, which can optimize the firms’ process innovation (Han, 2020; Chua & Han, 2022). Searching for knowledge is the prime goal of the hospitality industry (Han et al., 2019; Trang et al., 2019). Therefore, hospitality organizations should develop the capability of absorbing, transforming, and storing knowledge. In past years, absorptive capacity has emerged as a critical tool for absorbing, digesting, and exporting knowledge within the organization (Cohen & Levinthal, 1990). Absorptive Capacity (AC) is a distinct and new approach to learning and innovation. Scholars have studied and analyzed the influence of AC on the knowledge transfer process and its relationship with organization innovation, competitiveness, and production (Xie et al., 2018).

The organizations establishing their legitimate connection with the free flow of resources and knowledge intend to accept the opportunities that structure the firms’ process innovation (Zhou et al., 2020). BPI is defined as the outcomes of a novel, enhanced production or distribution approach that contains significant changes in techniques, methods, equipment, and designs (Cline & Girou, 2000). BPI improves the competency and output of production actions, increases product quality, and reduces the per-unit cost. BPI includes improvements and development in the production process, logistics, computing, and resources. Studies show that an organization’s process innovation helps to produce innovative and creative products and unique services (Hassan & AL-Hakim, 2011).

Indeed, business process innovation enhances the firms’ adaptability in multiple contexts. It encourages firms to adapt to an environment that broadly focuses on its processes and practices (Akmal et al., 2022). In achieving innovation, employee knowledge is imperative to increasing the organization’s process efficacy (Mast et al., 2022). An organization’s culture is considered a complex and multifaceted construct by scholars investigating various dimensions in diverse contexts (Shao et al., 2015). The current study focuses on investigating the roles of knowledge-centered culture because it contains cultural traits and properties that enhance and represent business innovation processes in organizations (Yang et al., 2018). Knowledge-Centered Organizational Culture (KCOC) defines a set of a firms’ values, core beliefs, norms, and social rules that act as a shared reference for workers regarding disseminating and creating knowledge (Peralta & Saldanha, 2014). The previous studies recommended that future researchers investigate the outcome of knowledge-based HR practices (El-Farr & Hosseingholizadeh, 2019). The current research understands the role of knowledge-based HRM practices in building knowledgeable infrastructure (Arsawan et al., 2022), influencing business process innovation.

The role of human resources in creating a strategic advantage requires organizations to understand the best HR practices for generating a knowledge culture (Chichkanov, 2021). The firms’ knowledge culture empowering an innovative climate for employees (Gutierrez et al., 2022) facilitates knowledge sharing, manifesting the BPI (Mohsin et al., 2022). The human resources collect the most valuable knowledge and establish a culture (Ahmad et al., 2021; Kong & Muthuveloo, 2022) of radical innovation (Gui et al., 2022). The firms’ knowledge-based practices empower the climate for the employees that drives the firm towards innovation activities. Indeed, knowledge-based HRM practices influence firms’ knowledge culture and enhance business process innovation (Abrar, 2021).

This study investigates the role of absorptive capacity and knowledge-centered organizational culture in the hospitality context, based on the significant part of knowledge-based HR practices. Knowledge-based HR practices critically affect an organization’s staffing, recruitment, selection, training & development, and compensation (Ahmad et al., 2022; Gürlek & Çemberci, 2020). They fundamentally help create an environment supporting knowledge sharing among its members (Radic et al., 2020). Moreover, it strengthens the organizational business process and absorptive capacity. The absorptive capacity plays a significant role in the current situation of resource constraints. But, it is still not confirmed that it mediates the relationship between knowledge-based HRM and business process innovation. Therefore, an intermediary chain is required to investigate the potential role of absorptive capacity in mediating knowledge-based HR practices and business process innovation. To understand the critical role of absorptive capacity, it is imperative to conduct a scoping view to answer the research questions that may arise due to the prevailing research gap (Godfrey et al., 2023). The development in the absorptive capacity in large knowledge-based firms is broad. The absorptive capacity enables the firms to establish alliances for the data flow and assist the firms’ activities and outputs (Lyu et al., 2022). However, puzzling the ambiguity regarding its connection, influencing the business process innovation encourages us to test its relationship to fill the gap.

This study aims to examine absorptive ability, which is a novel perspective on learning and innovation, and knowledge-centered organizational culture in the hospitality sector of Pakistan. The current study investigates the role of knowledge base HR practices, Knowledge-Based Training and Development (KBTD), Knowledge-Based Compensation (KBC), Knowledge-Based Recruitment (KBR), and knowledge-based performance assessment Knowledge-Based Performance Assessment (KBPA) in the firms’ innovation processes to fill the research gap. This study illustrates the mediating role of AC and the moderating effect of KCOC regarding influencing the firms’ innovation processes. The prior studies indicate a growing interest in exploring absorptive capacity and knowledge-based organizational culture. In successfully implementing knowledge-based HRM practices, a consensus is needed for establishing a knowledge-centered culture, supporting absorptive capacity. An organization’s knowledge culture promotes the benefit of knowledge and learning in the firms’ day-to-day routine. As the KCOC increases the effectiveness of the absorptive capacity, this new idea is a significant one that suggests investigating the moderating role of a knowledge-centered culture nexus to the knowledge-based HRM practices and AC.

Given the rapidly changing and evolving environment of the hospitality sector, it is imperative to understand the best practices that may lead the organization to achieve superior innovation outcomes. Indeed, this study is novel and effectively fills the research gap. It incorporates the dynamic role of the absorptive capacity and suggests controlled and fostered actions to be taken at the organizational level. This research contributes to knowledge and human resource management by connecting knowledge-based HRM with business process innovation via AC and KCOC. The previous studies formed a conceptual base without empirically examining the organization’s internal enablers’ impact on business process innovation (Foss & Saebi, 2018). The literature mainly read various sources of knowledge regarding product innovation instead of process innovation. This research contributes to KCOC by exploring its moderating role along with KM and HRM research domains.

More specifically, extending the literature on the dimension of Knowledge-based organization culture, this study enables future researchers to understand the role of Knowledge-based human resource management in business process innovation. The knowledge-based HRM practices (i.e., training and development, compensation, recruitment, and performance assessment) help to facilitate the manageable side of the absorptive capacity and establish a knowledgeable organizational-centered culture, which ensures the business process innovation. So, it is clear from the research that firms need to adapt to the element that fosters their innovation capacity. Companies must create and structure up-to-date knowledge across the entire organization system to enhance their internal processes.

Study background and hypothesis development

The research shows that the hospitality industry has rigorously responded to innovations and new knowledge with the increasing transformation in global sectors (Hassi, 2019). The hospitality industry is a competitive industry that faces constant pressure and demands, and businesses should focus on knowledge creation to gain business success (Li Sa et al., 2020). Knowledge management practices that radically benefit the hospitality industry have made knowledge-based HR practices emerge over the last few years as key concepts that influence a firms’ innovation (Mehrez, 2019). Abrar (2021) signifies that knowledge-based HR practices have rapidly grown among hospitality organizations due to recent advancements, knowledge production, and innovation. Gürlek & Çemberci (2020) revealed that effective knowledge-based HR practices, including compensation, performance assessment, recruitment, and training & development, significantly improve the business process innovation and a firms’ absorptive capacity. As a result, this section investigates the impact of knowledge-based HR practices on business process innovation and absorptive ability.

Knowledge-based HR practices and business process innovation

Business innovation performance alludes to a firms’ ability to develop and adapt to new business processes, designs, models, and systems in response to changing market needs as an enabler of organizational effectiveness (Cline & Girou, 2000). Business process innovation radically encourages the change in business infrastructure, practices, and operations, focusing on upstreaming the business performance and enhancing a firms’ competitiveness (Ramadhan & Sofiyanurriyanti, 2020). However, business process innovation has provided profound value to organizations today by considering novel transformations.

The knowledge-based HR practices harness a firms’ knowledge management process, thereby improving business process innovation (Susanty et al., 2019). Knowledge management HR practices help businesses optimize their business process. It enables firms to foster their conventional practices by adapting effective organizational knowledge practices (Jahmani et al., 2018). Compensation, performance assessment, recruitment, and training & development add value to a firms’ knowledge process among HR practices. Knowledge management HR practices are a system where an organization contributes to organizational innovation and knowledge (De Winne & Sels, 2010b).

Employees’ job demands the addition of personal resource that leads to changes in the working environment (Cao et al., 2023). With the rising importance of knowledge sharing, employees’ knowledge plays a fundamental role in improving the organization’s activities. Knowledge-based HR practices are an effective way of evolving the organizational innovation process. In the current era of knowledge and information, organizations focus on equipping employees to adapt to market demands (Zutshi et al., 2021). In this regard, knowledge-based compensation has emerged as the best policy promoting the firms’ innovation process. Managers often use these policies to motivate employees. They provide incentives (i.e., tangible and intangible) that encourage employees to work towards the firms’ process innovation. The compensation enhances the employees’ skill set, scopes, and innovation performance (Elayan et al., 2022). Due to these compensations, the employees create, share, and apply new ideas that contribute to the organization’s key business process innovation (Ge et al., 2022).

The research shows that organizational compensation policies assist organizations in regards to promoting KM (Kianto et al., 2017). According to the research, organizational compensation policies help organizations regarding boosting KM. The prior studies propose that organizations should implement a proper incentive system to enhance the employees’ knowledge sharing, creation, and sharing of new and informative ideas (Kianto et al., 2017). The incentives and rewards are critical drivers of the employees’ knowledge sharing. Therefore, understanding the role of knowledge-based compensation can benefit organizations through improved BPI. Indeed, knowledgeable compensation is an opportunity to set the process innovation. As a result, the following hypothesis is presented, which aligns with the previous arguments.

H1(a): Knowledge-based compensation has a positive and significant effect on BPI.

Knowledge is a critical asset that encourages management to drive a firms’ business innovation activity (Hameed et al., 2021). This accelerating notion undoubtedly sets an innovative trend for the world’s leading organizations. This creative phenomenon offers novel insight for developing organizations, encouraging them to adopt innovative tools to foster their success. According to Koseoglu et al. (2010), strategic knowledge management initiatives enhance a firms’ innovative performance, which achieves business success. Knowledge-based practice is a profound construct that directs a firms’ innovation (Al-Tal & Emeagwali, 2019). It enables organizations to judge employees based on the performance criteria of the knowledge process. It encourages employees to work creatively (Jiang et al., 2012), thereby harnessing new business opportunities.

KBPAs assess individuals according to their role, participation, and contributions to improving an organization’s knowledge process, such as sharing knowledge & information, creating knowledge, and its applications (Alavi & Leidner, 2001). As a result, it is vital that when selecting employees, HR managers should consider their present expertize and judge them based on their potential so that they can compete with future requirements. Jiang et al. (2012) stated that workers with potential are also motivated to learn and acquire the knowledge needed for novelty.

H1(b): Knowledge-based performance assessment has a positive and significant effect on BPI.

Achieving business process innovation in hospitality has significantly become necessary for many organizations to gain higher business profits, according to Presenza et al. (2019). The critical function of businesses in the hospitality industry is to gain innovation and competitiveness. In this regard, the emergence of the knowledge economy has led organizations to recruit talented staff who can contribute to creation. HRM lays the foundation of the knowledge economy. As a result, today’s organizations have realized the worth of recurring, training, and developing knowledgeable individuals to harness a firms’ BPI (Úbeda-García et al., 2018). The research indicates that organizations’ knowledge-based HRM practices improve their BPI (Al-Tal & Emeagwali, 2019).

H1(c): Knowledge-based recruitment has a positive and significant effect on BPI.

Furthermore, performance assessment and recruitment play a significant role in regard to boosting a firms’ business innovation process as compensation and training and development is also the fundamental determinant of an organization’s innovation. Scheming and executing activities for the training and development of individuals assist in regards to maximizing the fit among employees’ obligatory and current talent and knowledge, which ultimately enhances the organization’s human capital (Cabello-Medina et al., 2011). Furthermore, it helps an organization to improve its abilities and skills in regard to creating knowledge and novelty (De Winne & Sels, 2010a). Training is the source of employee work-related expertize, creative thought and understanding, and capabilities (Lau & Ngo, 2004). Therefore, the following hypothesis is presented, which is based on the previous studies.

H1(d): Knowledge-based training and development has a positive and significant effect on BPI.

Knowledge-based HR practices and absorptive capacity

Over the years, the most profound concept of absorptive capacity has become a prime focus of the world’s researchers. Absorptive capacity refers to an organization’s ability to identify, acquire, store, and utilize external knowledge (Cohen & Levinthal, 1990). Absorptive capacity is a dominant source that accelerates the organizational learning process. According to Nieto & Quevedo (2005), it is a strategic tool that structures organizational knowledge characteristics. However, numerous publications have realized the richness of absorptive capacity over the years.

AC is a powerful multilevel construct that speeds up a firms’ knowledge acquisition and implementation process (Bosch et al., 2006). It significantly boosts a firms’ productivity and resource-based knowledge (Harris & Yan, 2019). Employee participation in value-added activities ensures knowledge transfer within the organization (Wong & Lai, 2018). Knowledge-based HR practices create value for firms, which enhances their AC. The literature in the hospitality industry emphasized the increasing importance of knowledge-based HR practices reinforcing AC (Gürlek, 2021). Boosting a firms’ knowledge practices indicates that intellectual capital drives its AC (Arubayi et al., 2020). HR practices strengthen a firms’ AC to facilitate knowledge processes (Ryu et al., 2021).

AC significantly influences a firms’ HR practices, such as recruitment, staffing, training, performance appraisal, and compensation. Research has proven that organizational compensation policies assist organizations in regards promoting KM (Kianto et al., 2017). However, scholars recognize compensation, rewards, and incentive structures as antecedents of AC, which may affect it. Scholars have been analyzing and investigating the impact of AC and the knowledge transfer process on the success of an organization and how AC affects innovation, competitiveness, and presentation (Xie et al., 2018). The presence of mature networks and the long chains of partners do not guarantee that any firm will benefit from transferred knowledge. AC certainly still assists firms in benefiting from transferred knowledge (Tsai, 2001). As a result, the following hypothesis is postulated.

H2(a): Knowledge-based compensation has a positive influence on AC.

Implementing HRM practices fundamentally promotes individual learning and absorptive capacity. Knowledgeable HR practices support a firms’ absorptive capacity, ensuring knowledge distribution among individuals. AC enables employees to improve inter-organizational learning and work practices (Saiz et al., 2018). According to Volberda et al. (2010), AC is a dynamic capability that competitors cannot replicate because it contains properties of the prior knowledge of an organization. The literature operationalizes the concept of AC as a group of intangible capabilities in order to manage knowledge (Saiz et al., 2018) or as several sequential stages, such as acquisition, assimilation, transformation, and exploitation (Zahra & George, 2002). Performance assessment practices that are based on knowledge evaluate employees based on their contributions and involvement in regard to improving a firms’ knowledge process as well as applications that are helpful for other processes and AC (Alavi & Leidner, 2001). As a result, the following hypothesis is presented, which is based on the prior arguments.

H2(b): Knowledge-based performance assessment has a positive and significant effect on AC.

The research suggests that the intellectual capital comprising a firms’ knowledge increases its AC (Gürlek, 2021). Jiang et al. (2012) stated that employees with potential are more inclined to learn and acquire the knowledge or skills that are related to AC. The absorptive capacity plays an essential role in the knowledge of human resource practices in regard to creating value from the knowledge resource (Liao et al., 2021). Knowledge-based recruitment fosters a firms’ processes, making AC an influential tool that stimulates knowledge practices (Zhang et al., 2019). Human resource knowledgeable practices enhance the employees’ skills, nurture a firms’ R&D efforts, and increase the absorptive capacity (Martínez-Sánchez et al., 2020). The knowledgeable HR approaches that ensure the development of absorptive capacity result in improved organizational resource management and firm performance (Chang et al., 2013b). Hence, the motive behind KBR involves hiring new candidates, the panel should consider a person’s socialization capability and ability to share information and knowledge.

H2(c): Knowledge-based recruitment has a positive and significant effect on AC.

The abortive capacity indeed boosts the knowledge transformation capacity from a practical point of view (Xie et al., 2018). The new knowledge that is gained by the absorptive capacity can be deployed internally and externally by an organization. Human resource practices, which benefit from this concept, play a critical role today in regard to accelerating a firms’ effectiveness. It enables the firms to draw knowledge competencies, which include in recruitment and training programs as well as performance and compensation schemes. The knowledge, skills, and employees’ capabilities foster an organization’s knowledge-sharing process. Malik et al. (2020) suggested that knowledge-based training empowers and motivates employees to share and use knowledge among their fellow members in this regard. The knowledge-based training enhances the employee’s experiences, capabilities, and skills. Therefore, organizations should focus on conducting valuable training sessions to ensure knowledge transfer in order to acquire the effective implementation of knowledge (Lee et al., 2020). The following hypothesis is proposed, which is based on the arguments above.

H2(d): Knowledge base training and development has a positive and significant effect on absorptive capacity.

Absorptive capacity and business process innovation

The previous studies investigated the influence of AC and the knowledge transfer process on the success of an organization and how AC affects innovation, competitiveness, and performance (Xie et al., 2018). Companies today are actively enhancing their knowledge creation to increase the innovation process. As such, one prior study stated that a firms’ innovative practices and knowledge acquisition enable it to stay ahead of the others (Grimsdottir & Edvardsson, 2018).

AC ensures a firms’ innovation and growth. Therefore, an organization with AC might be more successful in regards to responding and catering to its customer’s needs, demands, and wants, which will ultimately have an effective innovation process (Yang & Roh, 2015). Organizational innovation seems to accordingly bring about the inevitable developments in services in the hospitality industry. Hospitality firms in recent years have profoundly responded to these types of novel developments, which enhance their BPI. One study stated that AC increases a firms’ competitiveness in order to explain this notion, which influences its BPI (Lim & Ok, 2021). As a result, the capacity for innovation has become paramount in the hospitality industry in today’s highly competitive world. Innovative hospitality services demand knowledge-oriented sources to drive a firms’ innovation process. Organizations should indeed embrace knowledge management practices to enhance workplace creativity and innovation in order to promote the business innovation process (González-González & García-Almeida, 2021). As a result, the following hypothesis is proposed.

H3: Absorptive capacity has a positive and significant effect on business process innovation.

Mediating role of absorptive capacity

Extending the firms-employee exchange relationship can add to the firms’ working environment (Li et al., 2021). An improvement in learning enhances the firms’ knowledge exchange structure (Sarfraz et al., 2022). Given the statement, knowledge exchange practices under HR are defined as coordination antecedents that increase a firms’ ability to acquire and assimilate knowledge (Yahya & Goh, 2002). An organization uses knowledge-based practices to increase the effect of absorptive capacity on a firms’ development in order to achieve a competitive landscape (Selivanovskikh et al., 2020). Organizations use AC to foster their knowledge culture. Various studies historically contributed to the effect of AC, which influences a firms’ BIP (Ramayah et al., 2020). One study shows that knowledgeable HR practices widely drive AC in order to explain this notion, which thereby improves a firms’ business innovation (Yang et al., 2018).

Knowledge-based HR practices have seen today global services industries exploit employee training and development considering AC. Knowledge-based HR practices work as a pillar that enables AC to improve organizational training and development. Moreover, according to Inkinen et al. (2015), training and development consist of courses, meetings, and other training of employees in order to strengthen their capabilities. According to Darwish et al. (2016), employees’ past experiences that are related to training, development, and knowledge impact their unique thinking and new ideas. It is evident in the previous literature that knowledge-related variables, such as AC have a mediating role as precursors of the performance of an organization (Harris et al., 2021).

Effective knowledge utilization has become in recent years a crucial factor in the creative performance of businesses. According to Hamilton & Davison (2018), recruitment research has gained considerable significance with the deployment of this type of knowledge becoming a critical aspect in regards to fostering the business legacy. The hiring process calls for recruiting exceptional knowledge talent to boost innovation processes. HR’s recruitment of knowledgeable staff has ensured the implementation of workplace innovation through effective KM in the fast-growing business environment (Hamilton & Davison, 2018). In summary, KBR involves recruiting and hiring people based on learning and knowledge capabilities. AC exists in individual workers, whereas these workers’ learning behavior is what transforms the AC of an organization (Volberda et al., 2010). Workers with knowledge-creating behavior always develop new ideas, which helps an organization develop AC (Chang et al., 2013a). AC strengthens the association among KM that is related to HR practices, project teams, and innovation. As a result, the following hypotheses are proposed.

H4(a): The link between knowledge base compensation and business process innovation is mediated by absorptive capacity.

H4(b): The link between knowledge base performance assessment and business process innovation is mediated by absorptive capacity.

H4(c): The link between knowledge base recruitment and business process innovation is mediated by absorptive capacity.

H4(d): The link between knowledge base training & development and business process innovation is mediated by absorptive capacity.

Moderating role of knowledge-centered organizational culture

An organization’s culture is considered a potential and conclusive factor that has a significant and essential influence on the knowledge-sharing and knowledge-creating conduct of all firm workers (Z. Yang et al., 2018). KCOC is defined as “a set of values, core beliefs, norms and social rules of a firm organization that acts as a shared reference for workers in sharing, creating knowledge.” Culture is considered the main factor in an organization in order to teach employees about the organization’s rules and regulations, which plays a vital role in regards to creating awareness among them. This is why it will instigate knowledge sharing or knowledge-creating along with the application of knowledge in the workplace. Mueller (2014) stated that a firms’ culture symbolizes values and beliefs that affect an organizational member’s knowledge and information-sharing behavior.

Several constructs have influenced organizational HR practices over the years. AC and organizations’ knowledge culture has accordingly emerged as the most dominant factors that enhance a firms’ AC (Ardito & Petruzzelli, 2017; Naqshbandi & Tabche, 2018). Organizational culture accelerates knowledge-based practices to influence a firms’ outputs. It encourages organizations to improve their business practices, which foster a firms’ ACs. The KCOC shapes a firms’ activities by effectively promoting HR practices to strive for innovativeness. One study states that a firms’ organizational culture makes their ACs foster the effectiveness of their knowledge practices in order to explain this notion, which accelerates business performance (Liu & Kang, 2021). Hence, organizations should strengthen their HR activities to enhance AC.

According to KM, HR-related practices, such as hiring, teaching & development, compensation, and performance assessment flourish in a knowledge-centered environment. The previous research shows that a firms’ culture is regarded as a contextual aspect or social environment, and its influence might strengthen or weaken a firms’ knowledge activities and learning mechanism (Janz & Prasarnphanich, 2003). However, knowledge-centered organizational culture in the service industry has gained researchers’ attention in recent years. The organization’s culture has become the support of management practices in today’s business environment (Oriade et al., 2021).

It is consequently conceivable that KCOC can assist an organization in strengthening the relationship between KM-based HR practices and AC, which KCOC supports in every way. If there are knowledge-based HR practices in a firm, the culture must also be knowledge-based to improve these practices, and AC will increase. As a result, the study proposes the following hypotheses, which are presented in Fig. 1.

Fig. 1
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Study conceptual model.

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H5(a): The relationship between knowledge base compensation and absorptive capacity is moderated by knowledge-centered organizational culture.

H5(b): The relationship between knowledge base performance assessment and absorptive capacity is moderated by knowledge-centered organizational culture.

H5(c): The relationship between knowledge base recruitment and absorptive capacity is moderated by knowledge-centered organizational culture.

H5(d): The relationship between knowledge base training & development and absorptive capacity is moderated by a knowledge-centered organizational culture.

Methodology

Study participants and data collection

The current study takes a quantitative approach, and the survey method was applied to evaluate the cause-and-effect relationship among the variables of the present study. We conducted a multi-wave survey study over a period of four months, from May to September 2022, targeting employees of hospitality companies based in Lahore, Islamabad, and Karachi (Pakistan). Our choice of location was determined by the concentration and variety of hospitality businesses in the area, which provided a robust and diverse sample for the study. The study was conducted in Pakistan, using a convenience sampling method and a non-probability sample. To ensure a broad representation of the hospitality industry, we collaborated with companies across the spectrum, including hotels, restaurants, and travel agencies. These companies were selected based on their willingness to participate in the study and the relevance of our research to their operational concerns. In terms of the data collection process, an email invitation with a link to the survey was sent to employees, and reminders were sent at periodic intervals to encourage maximum participation. Confidentiality of responses was assured to eliminate any potential fear of reprisal that could affect response accuracy.

It is commonly accepted that N = 10, and X is the number of items (Mundfrom et al., 2005; Wolf et al., 2013). A total of 200 participants is usually the minimum amount for a factor analysis. There are 45 study measurement items, so the study sample size should be more than 450 (N = 10*45). This study employs a time-lagged design to reduce the possibility of Common Method Bias (CMB), which can result in an exaggeration of correlations due to the variance of the method rather than actual relationships between the variables. By collecting data at different time points, we ensure that independent and dependent variables are measured independently. The time-lagged design enhances the study’s robustness by improving causal inference and offering a more accurate representation of the relationships between variables, thereby strengthening the validity of our findings.

Around 880 questionnaires were distributed at time 1, and around 715 of them were received in a usable form, which achieved a response rate of about 81.25%. The questionnaires for time-2, which comprised of questions for the mediator (AC) and moderator (KCOC), were circulated among the participants after a gap of approximately one to two weeks. Around 649 were returned in a completely usable form, which provided a response rate of about 90.76%. The third part of the questionnaires comprised questions for the research outcome BPI, and they were distributed among similar participants after a time lag of around one to two weeks, of which 587 of them were received in fully usable form.

Of the total respondents, 54% were males, and 46% were females. Hence, it can be said both genders had a somewhat balanced representation in the data set. Moreover, nearly 17.7% of the respondents were between 21 to 30, 29.1% were between 31 and 40, 34.9% were between 41 and 50, and 18.2% were above 51 years old. The majority of the respondents, which included 50.6%, were married in regard to marital status, whereas 49.4% were unmarried. 32.37% of the respondents were managers, 42.50% were assistant managers, and 25.13% were regular employees regarding the employees’ work designations. The total and present length of experience of the respondents ranged between one and 30 years.

Statistical software

SPSS version 21 was used for the data analysis, and the frequencies were calculated to handle the missing data and find the errors. In addition, reliability analysis, descriptive statistics, correlations, and regression analyses were carried out to obtain empirical evidence for the variables. The regression results were correspondingly used for hypothesis testing with a mediation regression analysis in SPSS (MACRO PROCESS). Harman’s single-factor technique was also used to examine the common method bias in this study. The study also shows no common method bias because the variance extracted by one single factor is 37.632%, which is less than 50% (Podsakoff et al, 2003).

Study measures

The questionnaire items were measured using a 5-point Likert scale that ranged from 1 = strongly disagree to 5 = strongly agree. For the knowledge-based HR practices, which were borrowed from Kianto et al. (2017), a 13-item scale was used to measure the KM-based HR practices. For the knowledge-centered organizational culture, which was adapted from Donate and Guadamillas (2011), a 7-item scale was used in order to measure KCOC. For the absorptive capacity, which was adopted from Jansen et al.’s (2005), a 21-item scale was used in order to measure AC, an ad for business Process Innovation, which was borrowed from Wang and Ahmed’s (2004), a 4-item scale was used in order to measure business process innovation.

Results

Measurement model analysis

Table 1 shows the results of the factor analysis, Cronbach’s Alpha (α), Composite reliability (CR), and average variance extracted (AVE). The factor loading value is calculated to check the validity of the data with the help of SPSS software. The measurement model results indicate the great reliability of alpha and CR because the values of knowledge base compensation, knowledge base performance assessment, knowledge base recruitment, knowledge base training and development, absorptive capacity, knowledge-centered organizational culture, and business process innovation are between the ranges of 0.7 and 0.9. There was no need to remove the items from the factor loadings table because all the items were positively loaded on their respective latent variables.

Table 1 Constructs reliability and validity analysis.
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Hair et al. (2013) indicated that Cronbach’s alpha and the CR threshold should be >0.70. Therefore, it is confirmed that the Cronbach’s alpha value of all the study constructs is greater than the suggested value. The internal consistency reliability CA was estimated, and the values are greater than 0.7. According to Nunnally (1994), the values of CA must be greater than 0.7, which is considered moderately reliable. Therefore, the results show that all the variables are reliable, which are illustrated in Fig. 2.

Fig. 2
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Graphical illustration of the measurement model evaluation.

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Table 2 displays the inter-correlations between the study variables, and these values are lower than the threshold of 0.85 (Nunnally, 1994). As shown in Table 2, all the latent constructs’ HTMT values were less than 0.90.

Table 2 Discriminant validity analysis (Fornel Larcker and HTMT).
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Regression analysis

Preacher and Hayes (2008) presented a progressive method that utilized bootstrapping for the testing intervention in order to prove/disprove mediation and the moderation hypotheses. We used Hayes’s PROCESS macro in our study to test the mediation hypothesis via SPSS. The Confidence Interval (CI) was calculated during this process with the help of the bootstrapping method.

Table 3 illustrates the direct relationship among the study variables. KBC positively influences BPI, because the beta value = 0.152, t = 4.396, and p < 0.001. This shows that H1(a), which states that knowledge-based compensation has a positive influence on BPI, is proven. KBPA positively influences BPI, because the beta value = 0.124, t = 3.441, and p < 0.01. This reflects that H1(b), which states that knowledge-based performance assessment has a positive influence on BPI, is also proven. KBR positively influences BPI because the beta value = 0.115, t = 3.236, and p < 0.01. This indicates that H1(c), which states that knowledge-based recruitment has a positive influence on BPI, is proven. Knowledge-based training and development positively influences BPI, because the beta value = 0.197, t = 4.854, and p < 0.001. This indicates that H1(d), which states that KBTD has a positive influence on BPI, is proven.

Table 3 Direct hypothesis testing.
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Table 3 illustrates that KBC positively influences AC, because the beta value = 0.231, t = 5.600, and p < 0.001. This reveals that H2(a), which states that knowledge-based compensation positively impacts absorptive capacity, is proven. KBPA positively influences AC, because the beta value = 0.223, t = 4.900, and p < 0.001. This reflects that H2 (b), which states that knowledge-based performance assessment positively impacts AC, is proven. KBR positively influences AC, because the beta value = 0.169, t = 4.127, and p < 0.001. Therefore, H2 (c), which states that knowledge-based recruitment positively impacts AC, is proven. KBTD positively influences AC, because the beta value = 0.153, t = 2.970, and p < 0.01, so H2 (d), which states that KBTD positively impacts AC, is also proven. The results show that AC positively influences BIP, because the beta value = 0.253, t = 5.223, and p < 0.001. This shows that Hypothesis H3, which states that AC has a positive association with BPI, is proved. Figure 3 is a graphical representation of the structural model results.

Fig. 3
figure 3

Structural model results graphical representation.

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Table 4 shows that all the hypothesized mediation effects paths were found to be statistically significant, which is due to having a p-value that is less than the standard level of 0.05. Therefore, Hypothesis 4(a), Hypothesis 4(b), Hypothesis 4(c), and Hypothesis 4(d) were all supported.

Table 4 Mediated regression analysis (absorptive capacity as a mediator).
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Moderation regression analysis

We tested four moderating relationships in this study, and the Preacher & Hayes (2004) process techniques using a bootstrapping approach were used for the moderation analysis. The demographic variables were found to potentially influence the dependent variable BIP. Hence, those variables were controlled while the moderation regression analysis was performed. As shown in Table 5, the interaction term of the knowledge-centered organizational culture significantly moderated the relationship between knowledge base compensation, knowledge base performance assessment, knowledge base recruitment, and knowledge base training & development in regard to predicting absorptive capacity at β = 0.170, 0.164, 0.142 and 0.112, so Hypothesis H5(a), Hypothesis H5(b), Hypothesis H5(c), and Hypothesis H5(d) were accepted in this study.

Table 5 Moderating hypotheses testing.
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Figures 4–7 show the interaction plot, which unveiled that the three lines showed a positive association between knowledge base compensation, knowledge base performance assessment, knowledge base recruitment, knowledge base training & development, and absorptive capacity. The three lines weren’t parallel, which suggests that the current study’s moderating effect was present.

Fig. 4
figure 4

Interaction plot between KCOC*KBC→AC.

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Fig. 5
figure 5

Interaction plot between KCOC*KBPA→AC.

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Fig. 6
figure 6

Interaction plot between KCOC*KBR→AC.

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Fig. 7
figure 7

Interaction plot between KCOC*KBTD→AC.

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Figure 4 indicates that with the increase in knowledge-centered organizational culture as a moderator, the impact of knowledge base compensation as an independent variable on absorptive capacity as a dependent variable will increase. The relationship for a medium level of knowledge-centered organizational culture, which is illustrated by the green line, was also steeper than the relationship for a low level of knowledge-centered organizational culture, which is illustrated by the blue line. The results confirmed H5(a) that the positive moderating role of knowledge-centered organizational culture showed a positive relationship between knowledge base compensation and absorptive capacity.

Figure 5 indicates that with the increase in knowledge-centered organizational culture as a moderator, the impact of knowledge base performance assessment as an independent variable on absorptive capacity as a dependent variable will increase. The results confirmed H5(b) on the positive moderating role of knowledge-centered organizational culture for the positive relationship between knowledge base performance assessment and absorptive capacity.

Figure 6 indicates that with the increase in knowledge-centered organizational culture as a moderator, the impact of knowledge base recruitment as an independent variable on absorptive capacity as a dependent variable will increase. The results confirmed H5(c) on the positive moderating role of knowledge base recruitment for the positive relationship between knowledge base performance assessment and absorptive capacity.

Figure 7 indicates that with the increase in the level of knowledge-centered organizational culture as a moderator, the impact of knowledge base training and development as an independent variable on absorptive capacity as a dependent variable will increase. Knowledge-based training and development are positively related to absorptive ability, and the H5(d) results validated the positive moderating role of knowledge-centered organizational culture in this connection.

Table 6 shows the value of R2, which is the proportion of the dependent variable’s variance that its predictors can explain. The R2 values for absorptive capacity and business process innovation as two dependent variables in the research model were 0.645 and 0.468, respectively. The results showed that the study’s R² values meet the basic cut-off criteria (0.30), which was suggested by (Zhang et al., 2009). The value of Q2 represents the cross-validated redundancy. The value of Q2 for absorptive capacity and business process innovation were 0.640 and 0.463, respectively, in this study. These values are greater than 0, which means that the current study model has good relevance (Chin, 2010).

Table 6 Quality criteria.
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Discussion

Organizations have started to realize the importance of a society that is dominated by knowledge-based resources, which a knowledge-based organizational culture shapes the competitive landscape. Based on previous studies, knowledge is essential for business process innovation (Perry-Smith & Mannucci, 2017; Singh et al., 2016). Knowledge management-related HR practices, such as compensation, performance assessment, recruitment, training, and development flourish in a knowledge-centered environment. Knowledge management is vital and critical in regard to improving the organization’s innovation capability. Darroch & McNaughton (2002) proposed that knowledge-oriented practices are associated with business innovation and take part in a firms’ performance.

Compensation policies assist organizations in regards to promoting knowledge management (Kianto et al., 2017). Managers frequently use tangible and intangible incentives to encourage knowledge creation, sharing, and application among employees. Tangible incentives include one-off rewards and bonuses, whereas intangible incentives include recognition and status. The existing literature shows that organizations should implement a proper incentive system in order to enhance employee knowledge sharing, creation, and dissemination of new and informative ideas (Hussinki et al., 2017). In this study, a positive and significant relationship exists between knowledge-based HR practices and BRI.

Knowledge-based performance assessments rank individuals according to their involvement and contribution in regard to improving the organization’s knowledge process, such as sharing of knowledge & information, creation of knowledge, and knowledge application (Alavi & Leidner, 2001). Business process innovation has a positive and significant effect on knowledge-based performance assessment, according to hypothesis 1(b). Human resource managers should consider the employees’ present expertize in addition to their potential to compete in the future when selecting employees. Consequently, hypothesis 1(c) is accepted, since knowledge-based recruitment has a positive and significant effect on business process innovation.

Scheming and executing activities for the training and development of individuals will assist in regards to maximizing the fit among employees’ obligatory and current talent and knowledge, which will ultimately enhance the human capital of an organization (Cabello-Medina et al., 2011) as well as help the organization to improve its abilities and skills in regards to creating knowledge and novelty (De Winne & Sels, 2010b). Training is the source of the employees’ work-related expertize, creative thought & understanding, and capabilities (Lau & Ngo, 2004). Accordingly, hypothesis 1(d) is accepted, as knowledge-based training and development have a positive and significant impact on business process innovation.

Absorptive capacity is considered a new and novel perspective and viewpoint on learning and innovation. Scholars have analyzed and investigated the impact of AC and the knowledge transfer process on the success of an organization. It shows how absorptive capacity affects organizational innovation, competitiveness, and performance (Ali et al., 2016). Hypothesis 2(a), Hypothesis 2(b), Hypothesis 2(c), and Hypothesis 2(d) were accepted in this study, because knowledge base compensation, performance assessment, recruitment, and training & development have a positive and significant effect on absorptive capacity. It is evident in the past literature that knowledge-related variables, such as absorptive capacity have a mediating role with the precursors of the performance of an organization (Kang & Lee, 2017). A positive and significant effect of absorptive capacity on business process innovation was found in this study.

As a result of the research, Hypothesis 4(a), Hypothesis 4(b), Hypothesis 4(c), and Hypothesis 4(d) were supported, as AC acts as a mediator between knowledge-based HR practices and the development of business processes.

According to the RBV, an organization can achieve innovation or performance via internal and external organizational resources, which include organizational culture, knowledge, information, expertize, and skills. The RBV’s assumptions propose that a firm should utilize its valuable and well-perished resources, such as knowledge of the employees, organizational culture, and HR because they play a vital role in regards to achieving success and prosperity (Barney, 1991). The past literature provides evidence that a firms’ culture is considered a contextual element or a social environment. Its effect may boost or diminish a company’s learning and knowledge endeavors (Janz & Prasarnphanich, 2003).

Moreover, the empirical findings of the study support Hypothesis 5(a), Hypothesis 5(b), Hypothesis 5(c), and Hypothesis 5(d). According to the findings, knowledge-centered organizational culture moderates the relationship between knowledge-based HR practices and absorptive capacity (Ajmal et al., 2010; Z. Yang et al., 2018).

Study theoretical contribution

This research adds to the knowledge management literature by examining how knowledge management practices impact business process innovation. The study explained that cultural traits, such as KCOC play a key role regarding directly promoting or stimulating AC and moderating the association between knowledge-based HR practices and AC. The current research is distinctive regarding exploring a vital mechanism, in which organizations can facilitate business processes through innovation via knowledge-based HR practices and AC. The study developed a mediated moderation model by building on the existing gap via the integration of RBV. It empirically tested the relationships between knowledge-based HR practices, AC, KCOC, and the dependent variables, such as BPI. The current study suggests that BPI in the hospitality sector is influenced by knowledge-based HR practices, AC, and KCOC.

Our study offers significant results, highlighting the importance of knowledge-based human resource management practices, absorption capacities, and knowledge-centered cultures in accelerating firm-wide process innovation. The results showed that knowledge-based HRM practices are significant drivers of BPI. Therefore, this viewpoint suggests that future researchers investigate the application of these practices by conceptualizing new models that are more comprehensive. It encourages them to present a clear and systematic picture of the relationship between all the variables. Our research also contributes to establishing a knowledge culture. As a fair idea of producing innovation, it advises future scholars to strengthen the dimension of knowledge-based HRM practices in cross-border research, which will lay the foundation for the firms and will work as a search path for them. This research on heterogeneous knowledgeable HRM practices will contribute to the clarification and enrichment of this research mechanism, enhancing business process innovation. However, theoretically, and empirically searching, this knowledge search will not only help to improve the business process innovation but also lead the organizations to gain other benefits, such as sustainable competitive advantage, improved performance, productivity, and many more. Hence, in this regard, combining and analyzing the role of knowledge-based practices with AC, KCOC, and BPI will guide future studies in understanding the importance of these constructs (i.e., knowledge-based training and development, compensation, recruitment, and performance assessment) in different dimensions, thus providing a new perspective to this topic.

The study’s practical implications

This study’s findings provide research-based practical implications for various stakeholders. As such, the current study offers empirical evidence that is helpful for the management of the hospitality industry of Pakistan. Our results guide the stakeholders’ actions, leading the firms’ knowledgeable HRM practices toward achieving business process innovation. Our study is a significant one that enables organizations to respond to the changing market demands by realizing the complete benefits of knowledge-based- HRM practices in enhancing the BPI, AC, and KCOC.

At the managerial level, the study suggests the practical implementation of knowledgeable practices. The study suggests that managers must devise policies to improve business process innovation. It advises the firms to develop the best recruitment, compensation, training, and performance strategies for disseminating and creating new ideas. Furthermore, it proposes managers to provide their employees with knowledge-based incentives and payback that will motivate them to strengthen the firms’ process innovation. Managers can play a significant role in building and utilizing knowledge-based HR practices and absorptive capacity.

Knowledge has become the new instrument to use to compete in a competitive business environment in the knowledge-based environment. A knowledgeable culture enhances the employees’ skills and their collective intelligence. To establish an informative culture, the study’s findings suggest organizations design multidimensional policies facilitating the manageable side of knowledge management. Which, in turn, encourages the adoption of innovation activities. Indeed, considering the dynamics of the study’s results, the extent the managers will be dedicated to adopting these suggestions can enlarge the scope of these variables in academics.

The current research outcomes will assist top-level management of hospitality firms who are concerned about transforming their human resource capital into organizational success. This work will improve the capacity for knowledge and innovation by increasing the organization’s learning capacity, which is necessary to structure business functions. Indeed, by maintaining a nurturing environment with a knowledge culture, the managers will be able to select the right combination of HRM tools and practices, ensuring the organization’s improved operations.

Furthermore, the study’s results prescribe that the government should ensure business process innovation. It advises them to analyze the amount of work needed for value creation and managerial applicability in terms of knowledgeable HRM practices. Similarly, this study helps practitioners foster knowledge management implementation inside an organization. It can ultimately promote the repositioning of human resource management to survive in the turbulent environment of the knowledge economy era. By supporting the cultural aspects of the knowledgeable philosophy, it directs the practitioners and policymakers to take necessary actions toward its implementation. Indeed, it makes market professionals understand the better way to develop and optimize the knowledge within the organization. This study examines the antecedences or the enablers that assist an organization in regards to competing in this type of environment, and it facilitates the business process innovation proactively to gain a sustainable competitive advantage in the hospitality industry. Altogether, integrating these suggestions will be a great benefit for all the stakeholders (e.g., employees, customers, managers, and governments), thus improving the BPI.

Future research directions, limitations

This study is also not immune from certain limitations. Our study focused only on absorptive capacity instead of all its dimensions. Future researchers should investigate different dimensions of absorptive capacity with this model. The current study gathered data from the hospitality sector, and future studies might consider other sectors for the data collection, such as banking, manufacturing, and telecommunication. The outcome variable in the current study includes business process innovation, but future researchers can test this model with multiple outcomes.

Conclusion

This study shows how knowledge-based HR practices affect absorptive capacity, which significantly influences a firms’ business process innovation. Knowledge is valued as an asset in a knowledge-based economy to maintain a competitive advantage and strength in the business world. The study shows that knowledge is key to success because the resource-based view considers unique and inimitable resources to be the building blocks of competitive advantage. The results demonstrate that formal and informal knowledge-based HR practices play an important role in achieving business process innovation, and interpersonal absorptive capacity plays a mediating role. Knowledge-based HR practices and absorptive capacity are in contrast moderated by the KCOC. Moreover, knowledge is the foundation for creating competitive advantages via developing core competencies and improving organizational performance in the hospitality industry.