Resource-based theory

According to resource-based theory, organizations that own “strategic resources” have important competitive advantages over organizations that do not. Some resources, such as cash and trucks, are not considered to be strategic resources because an organization’s competitors can readily acquire them. Instead, a resource is strategic to the extent that it is valuable, rare, difficult

Review: “Knowledge of the Firm, Combinative Capabilities, and the Replication of Technology” – by Kogut and Zander (1992))

This review focuses on summarizing the main contents of the article published by Kogut and Zander in 1992 on the Organization Science. In the literature, this article is considered as fundamental one for the knowledge-based view – a branch of Resource-Based Theory of the Firm approach, that explains why firms exist and differ in

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Foundations of the Knowledge-based theory of the firm

The foundation for any theory of the firm is a set of initial premises which form the basis for the logical development of propositions concerning the structure, behavior, performance and, indeed, the very existence of firms. Developing a knowledge-based theory of the firm raises the issue: What is knowledge? Since this question has intrigued

Knowledge-based theory: The existence of the firm

The above precepts establish a rationale for the existence of firms. Following Demsetz (1991: 171- 175), the existence of the firm represents a response to a fundamental asymmetry in the economics of knowledge: knowledge acquisition requires greater specialization than is needed for its utilization. Hence, production requires the coordinated efforts of individual specialists who

Knowledge-based theory: Coordination within the firm

The assumptions that there are gains from special-ization in knowledge acquisition and storage, and that production requires the input of a wide range of specialized knowledge, restates a premise which, either explicitly or implicitly, is fundamental to all theories of the firm. Without benefits from specialization there is no need for organizations comprising multiple

Knowledge-based theory of the firm: Organizational structure

The above assumptions about knowledge and the conceptualization of the firm as a knowledge- integrating institution have two main implications for the internal structure of the firm: first, the role of hierarchy; second, the location of decision making. 1. Implications for hierarchy The fundamental organizational problem is achieving purposeful, coordinated action from organizations comprising

Knowledge-based theory: Boundaries of the firm

If firms exist to integrate the specialized knowledge possessed by a number of individuals because such integration cannot be performed efficiently across markets, what determines the boundaries of the firm? In the light of the initial assumptions about knowledge, the vertical and horizontal boundaries may be analyzed in terms of relative efficiency of knowledge

Capability and Knowledge Formation as Problem Solving

Problem solving and knowledge formation are at the center of our theory. The manager’s fundamental knowledge-based objective is to sustain above-normal profits by continually discovering new knowledge or new solutions that form from unique combinations of existing knowledge. Nelson and Winter (1982) explicitly define a firm’s knowledge (or capability) as the “inputoutput combinations achievable

Governance Choices and Knowledge Formation Hazards

If differing problems demand differing search processes, then the manager’s task is to identify relevant knowledge sets and to craft a mechanism of governance that supports or enhances the method of search appropriate for the chosen problem. For simple, decomposable problems involving limited interaction among design choices, directional search based on feedback is desired.

Governance Alternatives for Mitigating Knowledge-Formation Hazards

To this point we have argued that problems differ in complexity and in optimal forms of solution search. Complex problems require solution search that involves extensive knowledge transfer, which is discouraged by knowledge-exchange hazards. Efficiency thus dictates the selection of governance forms, which support the appropriate level of knowledge transfer. At the same time,

Discriminating Alignment

Our theory suggests an alignment between the search needs of problems and the search costs and performance of governance alternatives. We summarize the proposed alignment in Table 3 and Figure 1. Table 3 summa­rizes the set of relationships from problem type to gov­ernance choice. Figure 1 compares the stylized costs we described above for

Rethinking the Corporation in The Core Competence Perspetive

Once, the diversified corporation could simply point its business units at particular end prod- uct markets and admonish them to become world leaders. But with market boundaries changing ever more quickly, targets are elu- sive and capture is at best temporary. A few companies have proven themselves adept at inventing new markets, quickly entering

The Core Competence: Roots of Competitive Advantage of the Corporation

The distinction we observed in the way NEC and GTE conceived of themselves—a portfo- lio of competencies versus a portfolio of busi- nesses—was repeated across many industries. From 1980 to 1988, Canon grew by 264%, Honda by 200%. Compare that with Xerox and Chrysler. And if Western managers were once anxious about the low

How Not to Think of Core Competence of the Corporation

Since companies are in a race to build the competencies that determine global leader- ship, successful companies have stopped imagining themselves as bundles of businesses making products. Canon, Honda, Casio, or NEC may seem to preside over portfolios of businesses unrelated in terms of customers, distribution channels, and merchandising strategy. Indeed, they have portfolios

Identifying Core Competencies— And Losing Them in Firm

At least three tests can be applied to identify core competencies in a company. First, a core competence provides potential access to a wide variety of markets. Competence in dis- play systems, for example, enables a company to participate in such diverse businesses as cal- culators, miniature TV sets, monitors for lap- top computers,

From Core Competencies to Core Products of the Firm

The tangible link between identified core competencies and end products is what we call the core products—the physical embodi- ments of one or more core competencies. Honda’s engines, for example, are core prod- ucts, linchpins between design and develop- ment skills that ultimately lead to a prolifera- tion of end products. Core products are

The Tyranny of the SBU of the Firm in Competence Perspective

The new terms of competitive engagement cannot be understood using analytical tools devised to manage the diversified corporation of 20 years ago, when competition was prima- rily domestic (GE versus Westinghouse, Gen- eral Motors versus Ford) and all the key play- ers were speaking the language of the same business schools and consultancies. Old

Developing Strategic Architecture of the Firm in Competence Perspective

The fragmentation of core competencies be-comes inevitable when a diversified com-pany’s information systems, patterns of com-munication, career  paths, managerial rewards, and processes of strategy develop- ment do not transcend SBU lines. We believe that senior management should spend a sig- nificant amount of its time developing a cor-poratewide strategic architecture that estab- lishes objectives

Developing Strategic Architecture of the Firm in Competence Perspective

The idea that top management should develop a corporate strategy for acquiring and deploying core competencies is relatively new in most U.S. companies. There are a few exceptions. An early convert was Trinova (previously Libbey Owens Ford), a Toledobased corporation, which enjoys a worldwide position in power and motion controls and engineered plastics. One

Redeploying to Exploit Competencies in Corporation

If the company’s core competencies are its critical resource and if top management must ensure that competence carriers are not held hostage by some particular business, then it follows that SBUs should bid for core compe- tencies in the same way they bid for capital. We’ve made this point glancingly. It is impor- tant