Knowledge Based Theory of the Firm
Knowledge Based Theory of the Firm by R.M. Grant
Assumptions * Firms apply knowledge to the production of good and services * Knowledge is the most strategically important of a firm 's resources * Knowledge 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 a firm.
Coordination of Specialized Knowledge
While organizational theory has spent much time focused on the difficulties of achievingcooperation due to the differing goals of organizational members or the divergence of employee and owner goals, Grant proposes that even with cooperation, coordination ofspecialized knowledge is quite difficult. The past focus on cooperation resulted in an emphasis on hierarchical and authority relations where cooperation is imposed by bureaucracy.
Specialized knowledge can be coordinated using the following mechanisms 1. Rules and directives - these include etiquette, social norms, and procedures 2. Sequencing - each specialist 's input occurs independently in own time slot 3. Routines - also called coordination by mutual adjustment - can support a high level of simultaneity of individuals performing their own specialized tasks 4. 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.
Importance of Common Knowledge
While the above mechanisms are ways to coordinate the specialized knowledge of employees, coordination also depends on there being common knowledge among organizational members.
Types of common knowledge include: * Language and other forms of symbolic communication - literacy, numeracy, software, statistics * Commonality of specialized knowledge - this is paradoxical but the more specialized knowledge two people have in common,
Assumptions * Firms apply knowledge to the production of good and services * Knowledge is the most strategically important of a firm 's resources * Knowledge 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 a firm.
Coordination of Specialized Knowledge
While organizational theory has spent much time focused on the difficulties of achievingcooperation due to the differing goals of organizational members or the divergence of employee and owner goals, Grant proposes that even with cooperation, coordination ofspecialized knowledge is quite difficult. The past focus on cooperation resulted in an emphasis on hierarchical and authority relations where cooperation is imposed by bureaucracy.
Specialized knowledge can be coordinated using the following mechanisms 1. Rules and directives - these include etiquette, social norms, and procedures 2. Sequencing - each specialist 's input occurs independently in own time slot 3. Routines - also called coordination by mutual adjustment - can support a high level of simultaneity of individuals performing their own specialized tasks 4. 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.
Importance of Common Knowledge
While the above mechanisms are ways to coordinate the specialized knowledge of employees, coordination also depends on there being common knowledge among organizational members.
Types of common knowledge include: * Language and other forms of symbolic communication - literacy, numeracy, software, statistics * Commonality of specialized knowledge - this is paradoxical but the more specialized knowledge two people have in common,