Knowledge of the Firm, Combinative Capabilities, and the Replication of Technology

Bibliographic Data

ID23316886
AuthorsBruce Kogut (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104), Udo Zander (0000-0002-1968-1147, Stockholm School of Economics)
Year1992
Volume3
Issue3
Pages383-397
Publication date1992-08-01
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueOrganization Science (JOURNAL)
Journal identifiersISSN: 1047-7039 • E-ISSN: 1526-5455
PublisherInstitute for Operations Research and the Management Sciences (INFORMS) (PUBLISHER)
DOI10.1287/orsc.3.3.383
OpenAlexW2179492332
LanguageEN
Citations received509

How should we understand why firms exist? A prevailing view has been that they serve to keep in check the transaction costs arising from the self-interested motivations of individuals. We develop in this article the argument that what firms do better than markets is the sharing and transfer of the knowledge of individuals and groups within an organization. This knowledge consists of information (e.g., who knows what) and of know-how (e.g., how to organize a research team). What is central to our argument is that knowledge is held by individuals, but is also expressed in regularities by which members cooperate in a social community (i.e., group, organization, or network). If knowledge is only held at the individual level, then firms could change simply by employee turnover. Because we know that hiring new workers is not equivalent to changing the skills of a firm, an analysis of what firms can do must understand knowledge as embedded in the organizing principles by which people cooperate within organizations. Based on this discussion, a paradox is identified: efforts by a firm to grow by the replication of its technology enhances the potential for imitation. By considering how firms can deter imitation by innovation, we develop a more dynamic view of how firms create new knowledge. We build up this dynamic perspective by suggesting that firms learn new skills by recombining their current capabilities. Because new ways of cooperating cannot be easily acquired, growth occurs by building on the social relationships that currently exist in a firm. What a firm has done before tends to predict what it can do in the future. In this sense, the cumulative knowledge of the firm provides options to expand in new but uncertain markets in the future. We discuss at length the example of the make/buy decision and propose several testable hypotheses regarding the boundaries of the firm, without appealing to the notion of “opportunism.”

Argument (complex analysis) · Business · Database transaction · Imitation · Industrial organization · Knowledge management · Knowledge sharing · Knowledge transfer · Organizational learning · Perspective (graphical) · Replication (statistics) · Transaction cost · Business Strategy and Innovation · Computer Science · Innovation and Knowledge Management · Psychology · University-Industry-Government Innovation Models

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