Organisations, Innovation and Complexity: New Perspectives on the Knowledge Economy

University of Manchester
9-10th September 2004

Conference Aims | Paper Abstracts | Programme | Further Information

Leveraging internal knowledge through formal interaction in knowledge markets

Dr Barbara Becker

barbara_becker@mckinsey.com

Abstract

Summary
This paper identifies a knowledge market view of the knowledge generating and selection process that enhances the knowledge-based view of the firm. Understanding the characteristics and incentives of both, the demand- and supply-side of knowledge, can help overcome institutionalised barriers to innovation in organisations. The identified formal process consists of four steps: (a) decide to seek, (b) locate provider, (c) establish contact, and (d) transfer expertise. Results are based on a twofold research approach. Explorative interviews (n=13) were conducted to understand how knowledge creation and dissemination are carried out within the strategic consulting company McKinsey and the World Bank. Insights were enhanced by two detailed surveys conducted in a Canadian financial service organisation for management (n=15, 65% response rate) and staff across all departments (n=511, 46% response rate) including follow up interviews. Rational for data selection were common focus on service, size and international orientation of the organizations.

Knowledge is one of the most strategically important organisational resources with which to support innovations in institutions, yet it is often overlooked and underleveraged, regardless of the move towards a knowledge economy. Different streams of literature examined the knowledge-based view in respect of its link to the resource-based view and the firm’s strategic capabilities, definitions and modes of knowledge, knowledge epistemology, knowledge creation and sources of knowledge. Their approach to knowledge was usually process-oriented, focusing on learning and innovation (Grant and Baden-Fuller, 1995; Grant, 1996; Spender, 1996; Grant, 1997).

Based on Polanyi’s assertion in reference to tacit knowledge “we can know more than we can tell” (Polanyi, 1967), research has long dealt with how implicit or tacit knowledge can be made explicit in codified documents (Nonaka, 1994; Spender, 1996). This can overcome the not-invented-here-syndrome which leads to negative reaction to borrowing or using knowledge sources from other departments within or from the outside the firm (Leonard-Barton, 1995, p. 159). Traditionally, organisations have relied on informal methods such as unofficial "connectors" (called knowledge promoters, see Hausschildt and Chakrabarti, 1988) or casual encounters (e.g., "conversation at the water cooler") to find and leverage expertise. Different professional service firms, such as PriceWaterhouseCoopers, Goldman Sachs, Monitor, Prudential Financial as well as technology companies such as Microsoft, IBM, Intel, Unisys, and Boeing, have launched initiatives to systematically orchestrate the knowledge exchange between the supply and demand side.

However, our research found three barriers to the sharing of knowledge: (a) Experts do not spend time writing down what they know, (b) experts’ knowledge is highly situation-specific and its codification potential is rather limited, and (c) people tend to prefer conversation to reading a document. A formal generating and selection process can be identified to improve the transfer of knowledge and thus enhance innovation.

The functioning of a knowledge market with the identified interaction process between the knowledge demander and supplier provide first insights into how knowledge islands, driven by hierarchies and individual interests, can be overcome. Further research needs to elaborate on the incentive structure required by both sides of the market applying principal-agent and transaction cost theory. This increases our understanding how the market’s degree of complexity might change the described knowledge process.

Back to paper abstracts

Top