Generating innovations and improvement of performance of companies using knowledge chain model

Modern business conditions, characterized by general uncertainty embodied in the permanent and intermittent changes, demand constant innovation from business entities. This is precisely why entrepreneurship and knowledge-based information are in constant focus of the scientific community. As an intangible resource, knowledge possesses unlimited possibilities of application as well as the status of the most valuable personal and organizational asset. It can be understood as encompassing of all that the company knows, the way it uses its knowledge and the speed at which it adopts something new and creates new knowledge. Its share in the increase of the company’s value is growing, which should represent the point of special attention when the management of this resource is in question. Knowledge management (KM) is a systematic process of organizational creation, storage, sharing and applying of knowledge. Its aim is to create individual knowledge, its transformation into collective knowledge and proper use of all forms of it in order to achieve further innovation and higher profitability of the company. On the one hand, this requires a formalization of tacit knowledge into explicit, and, on the other hand, the use of explicit knowledge to improve existing and create new implicit knowledge. The efforts of knowledge management, time and investment it requires often face condemna tion in the context of economic inefficiency. The reason lies in the inability to observe the co nnection between the activities of knowledge management and organizational performance. Porter's concept of its value chain offered a tool for identifying, analyzing and evaluating the contribution of each activity performed by the company in order to deliver its final value to the customer. The subject of our research is the application and adaptation of Porter's generic va lue chain in the process of knowledge management. The goal is to create a framework that will enable the identification and observation of the connection between knowledge management ini tiatives as well as a competitive advantage. The possibility of modeling the knowledge manage ment activities in order to create a useful tool for their analysis and interpretation is being considered. Such an instrument is called the knowledge chain model and, same as Porter's va lue chain, includes nine generic activities that the company performs in managing their know ledge resources. The knowledge chain model is used as bases for the identification of the kno wledge management activities, their contribution to the degree of influence upon the process of knowledge creation and determination of how valuable they are, how rare, difficult to imitate and sustainable over time. In this way we get an insight into the competitive position which can range from the competitive standstill, through equity and temporary competitiveness to susta inable competitive advantage which should be every company’s goal.