The knowledge-based theory of the firm, or knowledge-based view (KBV), considers

knowledge Knowledge can be defined as awareness of facts or as practical skills, and may also refer to familiarity with objects or situations. Knowledge of facts, also called propositional knowledge, is often defined as true belief that is disti ...

as an essentially important, scarce, and valuable

resource Resource refers to all the materials available in our environment which are technologically accessible, economically feasible and culturally sustainable and help us to satisfy our needs and wants. Resources can broadly be classified upon their av ...

in a

firm A company, abbreviated as co., is a legal entity representing an association of people, whether natural, legal or a mixture of both, with a specific objective. Company members share a common purpose and unite to achieve specific, declared go ...

. According to the knowledge-based theory of the firm, the possession of knowledge-based resources, known as

intellectual capital Intellectual capital is the result of mental processes that form a set of intangible objects that can be used in economic activity and bring income to its owner (organization), covering the competencies of its people ( human capital), the value rela ...

, is essential in dynamic business environments. These resources contribute to lower costs, foster innovation and creativity, improve efficiencies, and deliver customer benefits. Collectively, they are considered key drivers of overall

organizational performance Organizational performance comprises the actual output or results of an organization as measured against its intended outputs (or goals and objectives). Organizational performance is also the success or fulfillment of organization at the end of pro ...

. The proponents of the theory argue, that because knowledge-based resources are usually complex and difficult to imitate, different sources of knowledge and intellectual capital can be seen as the main sources for a sustainable

competitive advantage In business, a competitive advantage is an attribute that allows an organization to outperform its competitors. A competitive advantage may include access to natural resources, such as high-grade ores or a low-cost power source, highly skilled ...

. This knowledge is embedded and carried through multiple entities including organizational culture and identity, policies, routines, documents, systems, and employees. Originating from the

strategic management In the field of management, strategic management involves the formulation and implementation of the major goals and initiatives taken by an organization's managers on behalf of stakeholders, based on consideration of resources and an assessment ...

literature, this perspective builds upon and extends the

resource-based view The resource-based view (RBV) is a managerial framework used to determine the strategic resources a firm can exploit to achieve sustainable competitive advantage. Barney's 1991 article "Firm Resources and Sustained Competitive Advantage" is widely ...

of the firm (RBV) initially promoted by Penrose (1959) and later expanded by others ( Wernerfelt 1984, Barney 1991, Conner 1991). Although the resource-based view of the firm recognizes the important role of knowledge in firms that achieve a competitive advantage, proponents of the knowledge-based view argue that the resource-based perspective does not go far enough. Specifically, the RBV treats knowledge as a generic resource, rather than having special characteristics. It therefore does not distinguish between different types of knowledge-based capabilities.

Information technologies Information technology (IT) is the use of computers to create, process, store, retrieve, and exchange all kinds of data . and information. IT forms part of information and communications technology (ICT). An information technology system ( ...

can play an important role in the knowledge-based view of the firm in that information systems can be used to synthesize, enhance, and expedite large-scale intra- and inter-firm knowledge management. Whether or not the Knowledge-based theory of the firm actually constitutes a theory has been the subject of considerable debate. According to one notable proponent of the knowledge-based view of the firm (KBV), "The emerging knowledge-based view of the firm is not a theory of the firm in any formal sense". The research on the knowledge-based view of the firm is a sub-discourse on resources and capabilities, which is part of the broader research on

strategy Strategy (from Greek στρατηγία ''stratēgia'', "art of troop leader; office of general, command, generalship") is a general plan to achieve one or more long-term or overall goals under conditions of uncertainty. In the sense of the " a ...

References

Sources

* * Grant, R.M. “Prospering in Dynamically-Competitive Environments: Organizational Capability as Knowledge Integration,” Organization Science (7:4), 1996, pp. 375–387. * Kogut, Bruce, and

Udo Zander Udo Zander (born March 30, 1959) is a Swedish organizational theorist, and Professor in Business Administration at the Stockholm School of Economics The Stockholm School of Economics (SSE; sv, Handelshögskolan i Stockholm, HHS) is a priva ...

. “Knowledge of the Firm, Combinative Capabilities, and the Replication of Technology,” Organization Science (3:3), 1992, pp. 383–397. * Kogut, Bruce, and

. “The Network as Knowledge: Generative Rules and the Emergence of Structure,” Strategic Management Journal (21), 2000, pp. 405–425. * Nickerson, J. and Zenger, T. “A knowledge-based theory of the firm: the problem-solving perspective,” Organization Science, (15:6) 2004, 617-632. * Nonaka, I., and Takeuchi, H. The Knowledge-Creating Company: How Japanese Companies Create the Dynamics of Innovation, Oxford University Press, New York, 1995. {{DEFAULTSORT:Knowledge based theory of the firm Knowledge management

See also

References

Sources