a Knowledge Based Theory of the Firm|
by R.M. Grant
- Firms apply
knowledge to the production of good and services
is the most strategically important of a firm's resources
is created and held by individuals, not organizations
- Firms exist
because markets are incapable of coordinating the knowledge of
individual specialists. This is the role of the management within
Coordination of Specialized Knowledge
theory has spent much time focused on the difficulties of achieving
cooperation due to the differing goals of organizational
members or the divergence of employee and owner goals, Grant proposes
that even with cooperation, coordination of specialized
knowledge is quite difficult. The past focus on cooperation
resulted in an emphasis on hierarchical and authority relations
where cooperation is imposed by bureaucracy.
knowledge can be coordinated using the following mechanisms
- Rules and
directives - these include etiquette, social norms, and procedures
- each specialist's input occurs independently in own time slot
- also called coordination by mutual adjustment - can support
a high level of simultaneity of individuals performing their own
- Group problem
solving and decision making - unlike 1-3 which seek efficiency
through minimizing communication, tasks high in complexity and
uncertainty require more personal contact and communication.
While the above
mechanisms are ways to coordinate the specialized knowledge of employees,
coordination also depends on there being common knowledge among
common knowledge include:
and other forms of symbolic communication - literacy, numeracy,
of specialized knowledge - this is paradoxical but the more
specialized knowledge two people have in common, the more sophisticated
their communication can be. Of course, the purpose of the communication
is to share the specialized knowledge so if two people have the
same knowledge, there's no benefit from integration but if they
have entirely separate knowledge bases, then integration can't
occur except at a very basic level.
meaning - common mental frameworks allow for the transfer
of tacit information. Metaphors, analogies, and stories are vehicles
for reconciling different individual experiences.
of knowledge domains - need to know what others know in order
to coordinate with them.
The ability of a firm to integrate knowledge held by individuals
within the organization creates its competitive advantage. When
employees are mobile, the organizational capability depends more
on the integration mechanism than on the specialist knowledge that
employees possess. This makes increasing common knowledge more important
than deepening specialist knowledge leading to organizational practices
such as cross training, job rotation, etc. The broader the scope
of knowledge being integrated, the harder it is to replicate.
Implications for Organizational Structure
more useful for processing than integrating information. When knowledge
is held at all levels of an organization and when "higher level
decision are dependent on "lower level knowledge", hierarchy will
cause problems. Perha some of the recent push toward team based,
participative organizational structure! due to knowledge, not just
motivational, considerations. Decisions based on tacit and idiosyncratic
knowledge should be decentralized wh decisions requiring statistical
knowledge should be centralized.
When we focus on the cliffficulties of coordinating knowledge among
instead of eliciting cooperation from the individuals within an
organization, we may end up with different insights into which organizational
practices and structures will work, best to create competitive advantage
for the firm.