Given assumptions about the characteristics of knowledge and the knowledge requirements of production, the firm is conceptualized as an institution for integrating knowledge. The primary contribution of the paper is in exploring the coordination mechanisms through which firms integrate the specialist knowledge of their members. In contrast to earlier literature, knowledge is viewed as residing within the individual, and the primary role of the organization is knowledge application rather than knowledge creation. The resulting theory has implications for the basis of organizational capability, the principles of organization design (in particular, the analysis of hierarchy and the distribution of decision-making authority), and the determinants of the horizontal and vertical boundaries of the firm. More generally, the knowledge-based approach sheds new light upon current organizational innovations and trends and has far-reaching implications for management practice.

Toward a Knowledge-Based Theory of the Firm,” Strategic Management Journal (17), pp.

https://memberfiles.freewebs.com/84/90/65819084/documents/TOWARD%20A%20KNOWLEDGE-BASED%20THEORY%20OF%20THE.pdf

Toward a Knowledge-Based Theory of the Firm

This pczper investigcztes irzterrelationslzi~~s of product design, orgcznization design, processes for leartlirzg and managing knowledge, arzd competitive strategy. This paper uses the principles of nearly decotnposable systems to investigate the ability of strind(irdized interfcices between components in cz product design to embed coordination of product development processes. Embedded coordination creates 'hierczrchical coordination' without the need to continually exercise authority-erzcrblirlg effective coordination of processes without the tight coupling of orgcznizationczl structures. We develop concepts of modularity in product and organization designs based orz smndcirdized component and organization interjczces. Modular product architec- tures create information structures that provide the 'glue' that holds together the loosely coupled parts of a modular orgatzizatiorz design. By fczcilitriting loose coupling, modularity can czlso reduce the cost and dyficulty of adaptive coordination, thereby incrensing the strategic flexibility of firms to respond to erzvironmentnl change. Modularity in product and organizcztion designs therefore etznbles cz new strcitegic approach to the management of knowledge based on cztz irztentionczl, carefully mcznaged loose coupling of (I firm's learning processes czt architec- tural cznd comporzent levels of product crecztiorz processes.

Modularity, flexibility, and knowledge management in product and organization design

This paper studies how communication allows for the specialized acquisition of knowledge. It shows that a knowledge-based hierarchy is a natural way to organize the acquisition of knowledge when matching problems with those who know how to solve them is costly. In such an organization, production workers acquire knowledge about the most common or easiest problems confronted, and specialized problem solvers deal with the more exceptional or harder problems. The paper shows that the model is consistent with stylized facts in the theory of organizations and uses it to analyze the impact of changes in production and information technology on organizational design.

/pdf/hierarchies-and-the-organization-of-knowledge-in-production-56zw5altue.pdf

Hierarchies and the Organization of Knowledge in Production

This paper studies how communication allows for the specialized acquisition of knowledge. It shows that a knowledge‐based hierarchy is a natural way to organize the acquisition of knowledge when matching problems with those who know how to solve them is costly. In such an organization, production workers acquire knowledge about the most common or easiest problems confronted, and specialized problem solvers deal with the more exceptional or harder problems. The paper shows that the model is consistent with stylized facts in the theory of organizations and uses it to analyze the impact of changes in production and information technology on organizational design.

/pdf/hierarchies-and-the-organization-of-knowledge-in-production-1gbb7tph5e.pdf

Roy Radner

Papers

Hierarchy: The Economics of Management