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KNOWLEDGE CREATION

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Knowledge Creation A Source of Value Edited by Georg von Krogh Ikujiro Nonaka and Toshihiro Nishiguchi Palgrave

* Selection and editorial matter Georg von Krogh, lkujiro Nonaka and Toshihiro Nishiguchi 2000 Individual chapters (in order) Georg von Krogh and Simon Grand; Clause Otto Scharmer; Salvlo Vicari and Gabriele Troilo; lkujiro Nonaka, Patrick Reinmoeller and Dai Senoo; Robert M. Grant and Charles Baden-Fuller; Michael L. Gerlach and james R. Lincoln; Toshihiro Nishiguchi and Alexandre Beaudet; Richard Hall and Pierpaolo Andriani 2000 Softcover reprint of the hardcover 1st edition 2000 978-0-312-22974-0 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1T 4LP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. Published by PALGRAVE Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y. 10010 Companies and representatives throughout the world PALGRAVE Is the new global academic Imprint of St. Martin's Press LLC Scholarly and Reference Division and Palgrave Publishers Ltd (formerly Macmillan Press Ltd). Outside North America ISBN 978-0-333-76108-3 Inside North America ISBN 978-1-349-62755-4 DOI 10.1007/978-1-349-62753-0 ISBN 978-1-349-62753-0 (ebook) This book Is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. Library of Congress Catalog Number: 99--046781 10 9 8 7 6 5 4 3 09 08 07 06 05 04 03 02

Contents List of Figures List of Tables Notes on the Contributors viii ix X Introduction Georg von Krogh, lkujiro Nonaka and Toshihiro Nishiguchi 1 PART I FUNDAMENTAL ISSUES IN KNOWLEDGE CREATION THEORY 1 Justification in Knowledge Creation: Dominant Logic in Management Discourses Georg von Krogh and Simon Grand Justification in knowledge creation: The basic propositions Knowledge Creation and Justification: Open Issues and Research Questions Justification and the Impact of Dominant Logic: Basic Argument Justification in Knowledge Creation: Underlying Discursive Practices Theoretical and Managerial Implications 2 Organizing Around Not-Yet-Embodied Knowledge Claus Otto Scharmer Two Types of Tacit Knowledge Three Propositions on Not-Yet-Embodied Knowledge The Case of AHC Conclusion: Towards an Emerging Double Knowledge Spiral Implications 13 13 16 19 24 29 36 36 38 46 49 53 v

vi Contents PART II CREATING MARKET KNOWLEDGE 3 Organizational Creativity: A New Perspective from Cognitive Systems Theory 63 Salvia Vicari and Gabriele Troilo Introduction 63 The Firm as an Autopoietic Cognitive System 64 The Relations between Knowledge and Creativity 67 Creativity 69 Levels of Creativity 70 Organizational Creativity 72 Enabling Organizational Creativity 75 Perturbations as the Engine for Creativity 78 Managerial Implications 81 Conclusions 82 4 Integrated IT Systems to Capitalize on Market Knowledge 89 Ikujiro Nonaka, Patrick Reinmoeller and Dai Senoo Introduction 89 The Theory of Knowledge Creation 89 The Ontological Platforms for Knowledge Creation 92 Three Kinds of Action-Reflection-Trigger Systems 95 The Context for Action-Reflection-Trigger Systems 97 Constructing ART Systems 102 Case-study: Seven-Eleven Japan 103 Implications 108 PART III KNOWLEDGE CREATION IN INTERFIRM COLLABORATION 5 Knowledge and Economic Organization: An Application to the Analysis of Interfirm Collaboration 113 Robert M. Grant and Charles Baden-Fuller 'TI:ansaction Cost Approaches to Interfirm Collaboration 117 The Knowledge-based View of Organization 120 The Determinants of Productive Efficiency 122 Knowledge Integration in Markets and Firms 126 Efficiency Advantages of Interfirm Collaboration 129 Operationalizing the Theory 140 Conclusion 141

Contents 6 Economic Organization and Innovation in Japan: Networks, Spin-offs and the Creation of Enterprise 151 Michael L. Gerlach and James R. Lincoln Introduction 151 The Sources of Technological Change 153 Innovation and the Limits to Hierarchy 161 Innovation and the Limits to Markets 174 Summary 184 Conclusion and Implications 187 vii PART IV KNOWLEDGE CREATION IN THE SUPPLY CHAIN 7 Fractal Design: Self-organizing Links in Supply Chain ~anagement 199 Toshihiro Nishiguchi and Alexandre Beaudet Supply Chain Management and Self-Organization in the Toyota Supplier Network 200 The Aisin Seiki Crisis 208 Conclusions and Implications 218 8 Analyzing Intangible Resources and ~anaging Knowledge in a Supply Chain Context 231 Richard Hall and Pierpaolo Andriani Introduction 231 The Technique for Analyzing the Role of Intangible Resources 234 The Nature of the Research in Stage 1 239 Findings 241 Product/Delivery System Attributes 241 Discussion of Findings 245 The Management of Knowledge associated with Interorganizational Innovation 248 Conclusion 254 Index 259

List of Figures 1.1 The locus of justification in knowledge creation 18 1.2 Dominant logic and knowledge creation 21 1.3 Dominant logic in management discourses 25 2.1 The process of self-transcending knowledge creation 49 2.2 The double spiral of self-knowledge creation 52 2.3 Four field-logics of languaging 55 3.1 Different economic systemic levels 73 3.2 The process of creativity 74 3.3 Creativity as a circular process 74 4.1 SECI as a self-transcending process 90 4.2 The necessity of multi-dynamic knowledge management 93 4.3 Three levels of utilizing customer knowledge 96 5.1 The knowledge-based theory of interfirm collaboration: an overview 116 5.2 An input-output representation of product and knowledge domains 133 5.3 The overlap between product and knowledge domains 134 6.1 Japanese spin-off pattern 159 6.2 The structure of growth in successful spinoffs versus divisions 165 6.3 Evolution of the Furukawa Group 169 6.4 Equity relations within the contemporary Furukawa Group 171 7.1 Self-similar pyramid 205 7.2 Input-output representation of product and knowledge domains 206 8.1 Mapping the body of knowledge in 'strategic space' 251 8.2 Mapping the body of knowledge in 'project management space' 253 8A.1 BA students' opinions of Morgan cars 256 viii

List of Tables I.1 Overview of key propositions 7 2.1 Three epistemologies 39 2.2 Twelve types of knowledge in organizations 43 6.1 Satellite companies affiliated with major electronics producers, 1994 167 6.2 New ventures created by NTT, as of February 1988 173 6.3 Probabilities that core electronic forms are major suppliers or customers of satellite firms 178 6.4 Capital and governance relationships among core electronics companies, satellites and banks 181 6A.1 The sample of 50 satellite companies 189 8.1 A checklist of product/delivery system attributes which produce sales advantage 235 8.2 The framework of four capabilities 237 8.3 Issues with respect to the development of intangible assets 238 8.4 The managers participating in the research project 239 8.5 The researchers' roles 241 8.6 Frequently quoted product/delivery system attributes 243 8.7 Important intangible resources 244 8.8 Statements designed to identify the nature of the knowledge associated with each unit of analysis 250 8A.1 The intangible resources related to the key product/ delivery system attributes 255 8A.2 Development scenarios 256 ix

Notes on the Contributors Pierpaolo Andriani is Senior Research Associate and Lecturer in Technological Innovation at the Centre for the Study of Supply Chain Strategy, Durham University Business School. His research interests include the area at the interface between knowledge management, innovation and supply chain; the application of complexity theories to social systems, specifically industrial districts. Charles Baden-Fuller is the Centenary Professor of Strategy at City University Business School, Director of Research for the School and Visiting Research Professor at the Rotterdam School of Management, Erasmus University, Rotterdam. He has held positions at the University of Bath, London Business School and has been a Visiting Professor at the University of Paris Dauphine, Duke University {USA) and a visitor at the University of Bologna (NOMISMA) and Sloan School {MIT). He has also worked at the Chase Manhattan Bank, New York. Alexandre Beaudet is currently research advisor at the 'ftansnational Consulting Department, Mitsubishi Research Institute {MRI). He studied at the University of Montreal and Hitotsubashi University and conducted research at the Japan Society for the Promotion of Machine Industry as well as the Institute for International Economic Studies. His research interests include supply chain management, organizational change, and economic development. Michael L. Gerlach is an Associate Professor in the Haas School of Business at the University of California, Berkeley. His teaching and research interests are in the areas of organizational theory, business policy and strategy, and comparative management, with a special emphasis on Japan and East Asia. Simon Grand is Research Associate and Lecturer in Strategy and International Management at the University of St Gallen and, since 1997, Guest Lecturer in Organization Theory at the University of Zurich and Manager of a Swiss-based software company. His research interests include Strategy Process Research ('strategic think- X

Notes on the Contributors xi ing and acting') and Epistemology of Social Science ('theory and practice'). Robert M. Grant is Professor of Management at City University Business School and at Georgetown University. His primary interests are knowledge management, corporate strategy, and resource-based strategies. Richard Hall is Professor of Operations and Procurement Strategy at Durham University Business School. He has a background of experience in industry, including Unilever and PA Consulting. His research interests include strategy; long-term surviving companies; knowledge management, and the role of intangible resources in business success. Georg von Krogh is Professor at the Institute of Management at the University of St Gallen and a member of the board of directors at the Institute of Management. His present research interests are in the area of Strategic Management; cooperative strategies; strategic processes including knowledge creation; strategic management practices in emerging industries; the foundations of qualitative research in the field of strategy. He has published several books as well as some 40 articles in international journals. James R. Lincoln is the Spieker Professor of Leadership in the Organizational Behaviour and Industrial Relations group of the Walter A. Haas School of Business and Director of the Institute of Industrial Relations at the University of California, Berkeley. His primary research and teaching interests include organizational design and innovation; Japanese management and interorganizational networks. He has been a visiting scholar at Hitotsubashi, Doshisha and Ritsumeikan Universities in Japan. Toshihiro Nishiguchi is a Professor of Management at the Institute of Innovation Research, Hitotsubashi University, Tokyo, Japan. He holds a BA from Waseda University, Tokyo, an MSc from Imperial College, London and DPhil in Sociology from Nuffield College, Oxford. Building on his decades of research experience on industrial sourcing, his current research focuses on global interfirm collaboration in product development and manufacturing in the automotive and aircraft industries, as well as on the coevolutionary theory of interorganizational relations.

xii Notes on the Contributors Ikujiro Nonaka is Dean of the Graduate School of Knowledge Science at the Japan Advanced Institute of Science and Technology, Ishikawa, Japan. He holds a PhD in Business Administration and MBA from the University of California, Berkeley, and BS in Political Science from Waseda University. Patrick Reinmoeller is Assistant Professor at the Graduate School of Knowledge Science, Japan Advanced Institute of Science and Technology. He is also Visiting Professor 'Strategy and Self-renewal', LIUC Libero Instituto Universitario Carlo Cattaneo, Castellenza (VA), Italy and Lecturer 'Keiei Soshiki Ron' (Management Organizational Theory) Kanazawa Gakuin Daigaku. Claus Otto Scharmer is Lecturer at the MIT Sloan School of Management, Cambridge, Massachusetts He has taught Planning and Managing Change at MIT Sloan School of Management; Organizational Learning at the University of Innsbruck; Leading Learning Communities at the University of Vienna and Epistemological Economics and Organizational Studies at Witten-Herdecke University. Dai Senoo is Assistant Professor at the Graduate School of Knowledge Science, Japan Advanced Institute of Science and Technology (JAIST), Japan. Dai Senoo joined JAIST in April 1998 from Hitotusubashi University. His present research interests are in knowledge management, leadership and creativity. Gabriele 'frollo is PhD in Business Administration, Assistant Professor of Marketing at SDA Bocconi, Professor of New Product Development at Universita Bocconi, and Professor of Marketing at Politecnico of Milano. He researches in the area of creativity and innovation management, consumer behaviour and environmental management. He has published many articles in the same research areas. Salvio Vicari is Director of the PhD programme in Business Administration and Full Professor of Management at Universita Bocconi. He is also Senior Professor at the Graduate School of Business Sda Bocconi and co-founder ofvaldani Vicari & Associati. He has been a Visiting Scholar at the Wharton School of Business, University of Pennsylvania and holds an ITP postgraduate degree from the London Business School.