Tacit Knowledge, Organizational Learning and Societal Institutions: An Integrated Framework

Abstract

The importance of tacit knowledge in organizational learning and innovation has become the focus of considerable attention in the recent literature. Our understanding of the nature of the links between tacit knowledge and organizational learning, however, has been hampered by the lack of a conceptual framework integrating micro-level learning activities with organizational forms and macro-level societal institutions. This paper seeks to achieve such an integrative task. It argues that there is an interactive relationship between dominant knowledge types and organizational forms. Further, the extent to which tacit knowledge constitutes the knowledge base of the firm, and how it is formed and used are powerfully shaped by the broader institutional context. The paper develops a four-fold typology at the cognitive, organizational and societal levels, as an analytical framework to explain the links between knowledge types, organizational forms and societal institutions. It shows how the three levels interact to sh ape the learning and innovative capabilities of firms. The theory developed in this paper represents the first attempt to integrate the diverse strands of literature and different levels of analysis into a single coherent framework.

Descriptors: tacit knowledge, organizational learning, innovation, societal institutions, learning economy

Introduction

Knowledge is increasingly regarded as the critical resource of firms and economies (Drucker 1993; Quinn 1992; Reich 1992). Much recent attention has focused on the importance of 'tacit knowledge' for sustaining firms' competitiveness (Grant 1996; Hall 1993; Winter 1987; Teece and Pisano 1994), and its role in technological innovation and organizational learning (Senker 1995; Howells 1996; Nonaka and Takeuchi 1995; Spender 1996b). While there is a growing body of literature on the role of tacit knowledge in firms' learning and innovation activities, our understanding of the nature of tacit knowledge and its relationship with organizational learning has been hampered by the lack of a coherent conceptual framework integrating micro-level learning activities with organizational forms and macro-level societal institutions. This paper seeks to achieve such an integrative task, and in so doing, it introduces a societal perspective to the debate which has been largely absent in the existing literature. The paper argu es that there is an interactive relationship between dominant knowledge types and organizational forms. Further, the extent to which tacit knowledge constitutes the knowledge base of the firm, and how it is formed and used are powerfully shaped by the broader institutional context (Boisot 1995a, 1995b; Lam 1996, 1997). The knowledge of the firm is socially embedded. It is rooted in firms' coordination mechanisms and organizational routines which, in turn, are heavily influenced by societal institutions. The purpose of this paper is to develop a typological framework, at the cognitive, organizational and societal levels, to explain the links between knowledge types, organizational forms and societal institutions. It shows how these three levels interact to shape the learning and innovative capabilities of firms. It focuses on the role of tacit knowledge and how firms located in different institutional contexts might differ in their capability to mobilize it.

The framework developed in this paper builds on and integrates the following three major strands of literature. First, the theory of knowledge and organizational learning, most notably the work of Polanyi (1962, 1966), Nelson and Winter (1982), Spender (1996a, 1996b) and Nonaka (1994), which seeks to understand the nature of knowledge and organizational learning from a pluralistic epistemological perspective. It distinguishes between explicit and tacit knowledge and argues that the interaction between these two modes of knowing is vital for the creation of new knowledge. Their emphasis on tacit knowing as the origin of human knowledge directs our attention to the social and interactive nature of learning. Second, the paper also draws upon the theoretical insights of the resource- or knowledge-based theory of the firm. Following Penrose (1959), the knowledge-based theory sees the firm as a body of knowledge residing in its structures of coordination, which in turn, defines the social context for cooperation, c ommunication and learning (Nelson and Winter 1982; Kogut and Zander 1992, 1996; Fransman 1995). At the heart of this theory is the idea that the primary role of the firm, and the essence of organizational capability are the integration and creation of knowledge (Spender 1996a; Grant 1996; Tsoukas 1996). Differences in the organizing principles of firms thus reflect their differing knowledge base and learning capabilities. Finally, the perspective adopted in this paper follows the 'societal' approach in industrial sociology, and builds on the theoretical foundations of the literature on the 'national systems of innovation'. The 'societal' approach demonstrates how external societal institutions interact with internal organizational structures and processes to generate societally distinctive organizational forms (Maurice et al. 1986; Sorge and Warner 1986; Maurice 1995). Literature on 'national innovation systems', most notably the work of Freeman (1987, 1995), Lundvall (1992) and Nelson (1993), seeks to unders tand the link between national institutions, primarily at the macro-level, and the innovative performance of firms and economies. Lundvall's work is particularly relevant in highlighting the 'specificity' and 'interconnectedness' of societal institutions' bearing on learning and innovation.