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Strategic knowledge Management

Term Paper

An Understanding toward Organizational Knowledge Creation Theory

Tong, Hui -Eng

R48941156

Knowledge is recognized as a key source for sustaining competitive advantage (Kogut,

and Zander, 1992, Conner and Prahalad, 1996; Grant, 1996; Hansen, et al.,1999). The widely held

belief that the richest resource of todays organizations is the knowledge residing

individually and collectively among their employees reflects the importance of

processes for promoting the creation, sharing, and leveraging of knowledge

(Becerra-Fernandez and Sabherwal, 2001). In other words, organization is viewed as a

knowledge-creating entity or systematic device (Nonaka et al., 2000; Grant, 1996; Fang,

2008). Organizational knowledge creation is the process of making available and

amplifying knowledge created by individuals as well as crystallizing and connecting it

to an organizations knowledge system (Nonaka et al., 2006). Over the last 15 years, the

organizational knowledge creation has developed rapidly in academia and been

broadly diffused in management practice. This essay summaries the concepts of

organizational knowledge, based on the article ofOrganizational Knowledge

Creation Theory: Evolutionary Paths and Future Advances written by Nonaka et al.,

2006.

Organizational knowledge Creation Theory

Two fundamental elements of organizational knowledge creation theory:

1. Epistemology Knowledge is justified true belief.

Individuals justify the truthfulness of their observations based on their

observations of the world.

Justification hinges on unique viewpoints, personal sensibility and

experience (Nonaka and Takeuchi, 1995)

Knowledge is embodied in the individual, and is therefore history


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dependent, context sensitive, specific(Varela et al, 1991).

Knowledge is the capacity to define a situation and act accordingly (Stehr, 1992,

1994; von Krogh et al, 2000).

Knowledge is oriented towards defining a situation or problem so as to act on

it. (Varela et al, 1991; Newell and Simon 1972).

Knowledge is explicit and tacit (Nonaka, 1991).

Knowledge includes explicit aspects (such as language and documentation),

and tacit aspects (such as experience and skills)

2. Knowledge Conversion

Knowledgecreation as a continuous process

Knowledge creation is a journey from being to becoming (Nonaka et al., 2006).

Individuals enhances the capacityto define a situation or problem, andapply his or her knowledge so as to act and specifically solve the problem.

In the organization, knowledge become orexpands through a

four -stage conversion process (SECI).

Organizationalknowledge creation as a construct comprising knowledge

conversion by means of externalization, internalization, socialization and

combination (Nonaka et al., 1994).

The concept ofknowledge conversion raises two important considerations.

Knowledge systemThe knowledge system captures the organizations global learning.

The outcome of organization knowledge creation is re-categorized and

re-contextualized this knowledge layer of the organization.

The knowledge layer is embedded in thecorporate vision(which outlines

the fields of development for the organization) and the organizational

culture(that orients individuals choices, mindsets, and actions.

Whereas the corporate vision and the organizational culture provide

the knowledge base from which to tap tacit knowledge, technology taps

the explicit knowledge in the organization (Nonaka and Takeuchi, 1995).

The knowledge system incorporates what is termed knowledge

management systems.

Knowledge management systems are often equated with the

information systems that assist knowledge conversion or information

processes in the organization.

Social justification

The expansion of knowledge in the organization through conversion

makes justification a social process.


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Social justification should be understood as a mechanism by which the

organization trades off innovation against cost containment in knowledge

creation.

Knowledge creation can be regarded as moving up through different

organizational level, from the individual to the communities and the larger

networks, and it spans sectional, departmental, divisional and organizational

boundaries (Swan et al., 1999).

Paths in the Evolution of Organizational Knowledge Creation

Theory and Research

The definition of knowledge and the concept of knowledge conversion promptedacademic works on organization-enabling conditionsand the context for knowledge

creation.

1. Organization-Enabling Conditions and Ba

A central purpose of organizational knowledge creation theory is to identify

conditions enabling knowledge creation in order to improve innovation and

learning (Nonaka, 1994; Nonaka and Takeuchi, 1995; von Krogh et al, 2000)

Organizational knowledge creation is context dependent.

The context for knowledge creation is ba(Nonaka and Konno, 1998).Ba is a shared space for emerging relationships.

To participate in ba means to become engaged in knowledge creation,

dialogue, adapt to and shape practices, and simultaneously transcend ones

own limited perspective or boundaries.

Various ba characteristics are particularly suited for the conversion of

knowledge (Nonaka and Konno, 1998).

The awareness of a bas particular characteristics and their support enable

successful knowledge creation (e.g. Nonaka and Konno, 1998).

Organizational knowledge creation theory epitomizes a dynamic view:The organization might be a well-designed engine for information processing,

but more importantly, it assiduously becomes a context in which

knowledge engines fuel is created.

Relationships among individuals in ba impact organizational knowledgessynthesis and expansion.

knowledge creation is more effective when relationships exhibit a high

degree of carefor the other (mutual trust, active empathy, access to help,

leniency in judgement, and courage), particularly in the originating ba in


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which individuals share tacit knowledge (von Krogh 1998).

Based on the construct of care as a condition for knowledge creation,

Zarraga and Bonache (2005) developed a framework that linked team

atmosphere to knowledge transfer and creation. The study confirmed that

high-care relationships favour both the transfer and creation of knowledge.

Various types of information systemssupport ba and enable organizational

knowledge creation (e.g. Alavi and Leidner, 2001).

Chou and Wang (2003) developed and tested a model of organizational

learning mechanisms and organizational information mechanisms of

composite effects on organizational knowledge creation. They identified

several ways in which information systems can facilitate and support ba.

2. Knowledge Vision and Activism

The concept ofba highlighted two critical challenges for organizational

knowledge creation theory.

Whether or not the organization is successful at creating knowledge hinges

on a broader set of factors than merely the knowledge outcome of team

work(Zarraga & Bonache, 2005; Swan et al., 1999; Grant, 2001; Goodall & Roberts,

2003).

How the organization coordinates and shares knowledge more broadly

matters.Ba might have either negative (Zaleznick,1985)or positive effect on

knowledge creation in groups (Nonaka et al. ,2006).

Knowledge activism (von Krogh et al. 1997, 2000)

Various forms of knowledge activism (e.g. CEO, project manager,

middle-level manager) perform similar roles: they catalyse and coordinate

knowledge creation and transfer, and communicate future prospects.

(i) As outsiders, knowledge activists provide new input for knowledge

creation.

knowledge activists bring different knowledge sets, and introduced

creative abrasion(Leonard-Barton 1995) that leads to conflicting ideas

but also new possibilities to create knowledge.

(ii) Knowledge activists coordinate and transfer knowledge, by spanning

the boundaries of teams and communities (e.g. Quinn et al. 1997, Wenger

2000, Newell et al. 2002).

(iii)Knowledge activists communicate future prospects and so provide an

overall direction for knowledge

Knowledge visions


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Due to the dispersed nature or organizational knowledge creation, the need

for the coordination of teams and knowledge transfer, the theory of

organizational knowledge creation emphasizes the development of

knowledge visions(Nonaka & Takeuchi, 1995; von Krogh et al., 2000; Nonaka et

al., 2005; Giroux & Taylor, 2002).

A knowledge vision specifies potentiality for being: the current and

future organizational state, and the broad contours of knowledge that the

organization should seek and create in order to move from the current to

the future state (Nonaka et al. (2005).

Knowledge vision both result from, and inspire, conversations and rhetoric

throughout the organizations, and, as such, they are important resources to

justify involvement in organizational knowledge creation ( see also Giroux &

Taylor(2002) .

3. Organizational Forms

Hedlund (1994) proposed that heterarchy is superior to hierarchy as an

organizational form for knowledge creation, based on the Japanese vs.

Western firm forms dichotomy (Hedlund & Nonaka, 1993; Osterloh and Frey; 2000) Hypertext organization granted organizations the high capacity required to

solve coordination problems inherent in knowledge creation (Nonaka ,1994;

Nanaka & Takeuchi, 1995) .Hypertext organization is a layered structure of activities, including

business system layer, and project system layer. These two layers provide

distinct, purposeful bas for organizational knowledge creation and allow for

both heterarchical and hierarchical coordination of these activities.

The organizational form that best coordinates and enables knowledge creation

is an amalgamation of three layers working in parallel: the business system,

the project system and the knowledge system.

Without a knowledge system, the organization would fail to share

information, face rapidly increasing task complexity, develop an inability to

cope with uncertainty in decision making, or repeat problem-solving errors (e.g.

Lyles & Schwenk, 1992; Huber, 1991; March, 1991; Walsh & Ungson, 1991; Werr &

Stjernberg, 2003).

4. Leadership

Leaderships primary function is to maintain efficiency in the business system

layer, thus enabling knowledge creation in the project system layer, while

shaping, maintaining and securing the knowledge system layer.


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In keeping with the concept of the heterarchy form, leadership is distributed in

the organization that supports the flow of knowledge from the middle to the

top and down to the rest of the organization (Nonaka and Takeuchi, 1995).

Middle managers promote organizational knowledge by facilitating all four

modes of knowledge conversion.

Leadership is about enabling knowledge creation, not controlling and

directing it.

Top managers and middle managers are engaged in a cycle of

formulating and reformulating visions that explore the new territory

envisioned by the top, while ensuring that the visions and the old frontline

realities fit.

The organization is in a state of becoming, moving between cycles of

sense-giving from the top and sense-making in the middle , to sense-giving inthe middle and sense-making at the top (Gioia and Chittipeddi, 1991).

5. The Nature of the Firm and Knowledge Strategy

The Nature of the Firm

Firms differ because they want and strive to differ, and first and foremost,

because they cannot escape the idiosyncrasy of organizational knowledge

creation.

Due to the intersubjective nature of knowledge, firms differ becauseorganizational knowledge creation gives rise to unique organizational

knowledge systems.

Organizational knowledge creation theory proposes concepts and

relationships regarding organizational enabling conditions and ba,

organizational forms, as well as leadershipthat explain the conundrum of

firm differences.

Knowledge strategy

The firms knowledge system layer relates to firm profit, directly (DeCarolis

and Deeds 1999) or indirectly (Droge etal. 2003) , giving rise to strategic

considerations.

Knowledge assets

Knowledge assets are the outcomes of knowledge creating processes

through the dialogues and practices in ba, and are used to provide an

analysis of knowledge system layer for strategic purposes (Nonaka et al.

2000; Nonaka and Toyama 2005).

To counter the problem ofinertia orcore-rigidities, firm have

creative routines to develops and accumulates knowledge assets of a


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higher order: knowledge to create knowledge, or organizational

capability to innovate and self-renew.

knowledge visions, ba and the knowledge creation process that

takes place in ba are part of the firms creative routines and it is nurtured

by leadership(Nonaka & Toyama 2002, 2005; Nonaka & Reinmoeller 2002).

Knowledge assets are the focus of the firms strategic decision making

and resource allocation aimed at aligning it with its changing

environment (Nonaka et al. 2005). Managers formulate and implement

knowledge strategies to build and utilize knowledge assets.

Therelationship between firm performance and knowledge strategy has

been confirmed (Bierly & Chakrabarti, 1996; Choi & Lee ,2002).

Knowledge strategies build distinctiveness through resource allocation.

Future Advances in Organizational Knowledge Creation Theory

1. The origin of knowledge

Without substantial emphasis on this topic, those analyses will be confined to

knowledge-in- motion reflected in organizational becoming.

2. Ba ba is empirically under-explored. Little is known about the many factors that potentially impact the

effectiveness of ba across organizations.

-- to identify ways in which management can develop bas to foster knowledge

processes both in teams and the organization as a whole

-- to reveal the nature of interaction, relationships and learning that is bestowed

on individuals as they enter, dwell in or exit ba.

-- to explore ba as an aesthetic space in which groups aspire to function without

compromising form and beauty.

-- to explore the implications of plural epistemologies for an understanding of

the nature of knowledge, its origin, and the ba.

Theoretical and empirical work is needed to shed more light on the

controversial issue ofthe possibilities of and constraints on the sharing of

tacit knowledge, orthe process of conversion from tacit to explicit

knowledge (Gourlay 2002; Tsoukas 2003)

More theoretical elaboration is needed on the interrelationships between

leadership and bain organizational knowledge creation theory.


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-- What does leadership of, and/or in ba entail?

-- What forms, shapes, energizes, positions, nurtures and transforms them?

-- Is there an empirically robust and conceptually elegant theory ofhigh quality

leadership that proposes specific and mutual interactions between leadership

and ba?

A promising line of work would be inductive theorizing in the vein of

Ghoshal and Bartlett (1966), which first identified the dimensions of

leadership, and thereafter the characteristics of leadership quality that

created effective change in an organization.

3. The orgin of firm

Entrepreneurship research is limited used in organizational knowledge creation

theory, and particularly of the exploration ofthe relationship between the

origin of knowledge and the origin of firms and organization

--Does the ba precede the firm, and if yes, what characterizes the ba of

entrepreneurship prior to firm formation?

-- What distinguishes entrepreneurial knowledge creation from knowledge

creation within the boundaries of a firm?

-- What spaces, discourses and stakeholders are imperative for entrepreneurs

knowledge creation (Steyaert and Katz 2004)?

-- What is the relationship between entrepreneurial knowledge creation and theentrepreneurs ability to perceive, create and profit from business

opportunities?

-- What is the knowledge system layers impact on the emerging project and

business system layers in the entrepreneurial firm?

--What is the project system and business system layers impact on the

knowledge system layer after the firm has been founded and resources

acquired for business and projects?

4. The dynamics of organizational knowledge creation in organizational

adaptation

An important area for future research is not only why organizations succeed in

doing all this, but also why they fail.

Organizational failure must be studied along the temporal dimension where

imbalances can emerge (Probst & Raisch 2005)

(e.g. creative routines vs. easily manageable assets,

applying existing knowledge assets vs. generating its capacity

exploration vs. exploitation, and so on)


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The organization does not build effective organizational memories and

knowledge management, and the organizations knowledge system layer

falters (e.g. Argote 1999).

The lack ofknowledge vision

The justification of knowledge creation hinges on the past and current

utility of knowledge, driven by the immediate needs in the business

system and project system layers. The firm sacrifices economy of patience

for economy of speed (Nonaka and Toyama 2002): fast and effective

knowledge use becomes the primary justification criterion. .

In the long run, it will fail to adapt to a changing environment, and more

importantly, it loses its reason for being.

The study of the balance in organizational knowledge creation is not only a

topic for cross-sectional research (e.g. resources allocated to exploration vs.exploitation, the yearly R&D budget versus investment in operational

improvement), but should also be studied as processes.

Firms may create, lose and restore their balance on the temporal dimension,

and it is important for future research to understand how these processes work.

Comparing successful and unsuccessful organizations will lead to better

predictions regarding the adaptation of organizations in the face of internal and

external changes.

Nonaka et al. (2006) argued that understanding relative success requires a

retrospective view of the context of entrepreneurial knowledge creation, ba and

leadership, and, ultimately, the very origin of organizational knowledge. In this sense,

epistemology continues to matter!

Reflections

Nonaka and Takeuchi (1995) proposed a rich model that conceptualized the activities

of knowledge creation. However, they only presented the guidelines that can

purportedly facilitate knowledge creation at a high level of generality and did not

provide explicit guidance for organizational actions. In order to make the knowledge

creation feasible and effective, it is important to identify the possible causality of

knowledge creation. Factors that may contribute to knowledge creation and

conversion need to be identified. Quantitative empirical test relating Nonakas

knowledge creation modes to organizational performance (e.g. Lee and Choi, 2003) might

verify the feasibility of the model as well.


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Supplementary Readings

1.

355-374 89

2. 97

3. Becerra-Fernandez, I. and Sabherwal, J. (2001), Organizational knowledge

management: A contingency perspective, Journal of Management Information

Systems, 18(1), pp.23-55.

4. Conner, K.R., and Prahalad, C.K. (1996), A resource-based theory of the firm:

knowledge versus opportunism, Organization Science, 7( 5), pp.477-501

5. Hansen, M.; Nohria, N.; and Tierney, T. (1999), Whats your strategy for

managing knowledge?, Harvard Business Review, 77(2), 106-119.

6. Grant, R.M. (1996), Toward A knowledge-Based Theory of The Firm,Strategic Management Journal, 17:109-122.

7. Kogut, B. and Zander, U. (1992), Knowledge of the Firm, Combinative

Capabilities, and the Replication of Technology, Organization Science,

3(3):383-397.

8. Lee, H., and Choi, B. (2003), Knowledge Management Enablers, Processes, and

Organizational Performance: An Integrative View and Empirical Examination,

Journal of Management Information Systems, 20( 1), pp.179-228.

9. Nonaka, I. (1994), A dynamic theory of organizational knowledge creation,Organization Science, 5( 1), pp.14-17.

10. Nonaka, I., and Takeuchi, H. (1995), The Knowledge-creating company. New

York: Oxford University Press.

11. Nonaka, I., and Toyama, R. and Nagata, A. (2000), A firm as a

knowledge-creating entity: A new perspective on the theory of the firm,

Industrial and Corporate Change, 9(1): 1-20.

12. Nonaka, I., and Toyama, R. (2002), A firm as dialectical being: towards a

dynamic theory of a firm, Industrial and Corporate Change, 11(5): 995-1009.

13. Nonaka, I., Georg von Krogh and Voelpel, S. (2006), Organizational

knowledge creation theory: Evolutionary paths and future advances,

Organization Science, 27( 8), pp.1179-1208

14. Schulze , A., and Hoegl, M. (2006), Knowledge Creation in New Product

Development Projects, Journal of Management, 11(5): 995-1009.

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