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Knowledge of the Firm, Combinative Capabilities, and the Replication of Technology
Abstract
How should we understand why firms exist? A prevailing view has been that they serve to keep in check the transaction costs arising from the self-interested motivations of individuals. We develop in this article the argument that what firms do better than markets is the sharing and transfer of the knowledge of individuals and groups within an organization. This knowledge consists of information (e.g., who knows what) and of know-how (e.g., how to organize a research team). What is central to our argument is that knowledge is held by individuals, but is also expressed in regularities by which members cooperate in a social community (i.e., group, organization, or network). If knowledge is only held at the individual level, then firms could change simply by employee turnover. Because we know that hiring new workers is not equivalent to changing the skills of a firm, an analysis of what firms can do must understand knowledge as embedded in the organizing principles by which people cooperate within organizations. Based on this discussion, a paradox is identified: efforts by a firm to grow by the replication of its technology enhances the potential for imitation. By considering how firms can deter imitation by innovation, we develop a more dynamic view of how firms create new knowledge. We build up this dynamic perspective by suggesting that firms learn new skills by recombining their current capabilities. Because new ways of cooperating cannot be easily acquired, growth occurs by building on the social relationships that currently exist in a firm. What a firm has done before tends to predict what it can do in the future. In this sense, the cumulative knowledge of the firm provides options to expand in new but uncertain markets in the future. We discuss at length the example of the make/buy decision and propose several testable hypotheses regarding the boundaries of the firm, without appealing to the notion of “opportunism.”
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In the citing paper
“In our view, firms are efficient means by which knowledge is created and transferred.8”
From Knowledge of the Firm and the Evolutionary Theory of the Multinational Corporation (1993) · cites this paper as Kogut and Zander 1992
In the citing paper
“Nevertheless, research suggests that homing costs usually arise from the adaptation, coordination, and communication requirements (Kogut and Zander 1992) associated with joining a new platform (Cennamo et al. 2018;Kapoor and Lee 2013).”
From Smart Timing for Smart Products? Complementor Multihoming in Nascent Platform Markets (2026) · cites this paper as Kogut and Zander 1992
In the citing paper
“Knowledge can be characterized along various dimensions (Windhager et al., 2013), from explicit knowledge to tacit knowledge (Kogut & Zander, 1992;Nonaka & Von Krogh, 2009;Nonaka, 1994;Polanyi, 1962).”
From Linking knowledge management, organizational learning and memory (2020) · cites this paper as Kogut & Zander, 1992
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R&D Collaborations and Product Innovation *
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Renzl, B. E. (2006) · Omega · doi:10.1016/j.omega.2006.06.005 · Cited by 574
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“First, the concept of a knowledge base, or “what the organization knows,” is central to theories of technology search and organizational learning (Kogut and Zander, 1992; Grant, 1996).”
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“…with prior research: explicit knowledge such as drawings, analytic results, and scientific journal articles, as well as tacit knowledge such as insights, intuition, and implied assumptions (Beccerra-Fernandez and Sabherwal 2001, Grant 1996, Kogut and Zander 1992, Polanyi 1966, Teece 1981).”
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“With roots in both the RBV and RV, the knowledge-based view (KBV; Argote, 1999; Grant, 1996; Kogut & Zander, 1992) states that SCI can help firms coordinate and deploy knowledge resources by exchanging valuable information across the organizational boundary with key suppliers and customers.”
BackgroundKnowledge sharing, knowledge leaking and relative innovation performance: An empirical study
Ritala, P., Olander, H., Michailova, S., & Husted, K. (2014) · Technovation · doi:10.1016/j.technovation.2014.07.011 · Cited by 539
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“Employees’ explicit and implicit knowledge may be the most important source of competitive advantage (Grant 1991, Kogut & Zander 1992).”
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“Given the strategic importance of knowledge and its circulation within firms (Kogut and Zander, 1992), the role of interorganizational networks as conduits of information, learning, and knowledge is of concern to both managers and scholars.”
BackgroundDynamic capabilities through continuous improvement infrastructure
Anand, G., Ward, P. T., Tatikonda, M. V., & Schilling, D. A. (2009) · Journal of Operations Management · doi:10.1016/j.jom.2009.02.002 · Cited by 567
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BackgroundBlockchain Governance—A New Way of Organizing Collaborations?
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“High tacitness implies that it is dif fi cult to codify key transaction attributes (Hennart 1988, Kogut and Zander 1992).”
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“…clearly defined, but is considered ‘the most strategically important of the firm’s resources’ (Grant, 1996, p. 110) and ‘the central competitive dimension of what firms know how to do is to create and transfer knowledge efficiently within an organizational context’ (Kogut and Zander, 1992, p. 384).”
BackgroundWhere do transactions come from? Modularity, transactions, and the boundaries of firms
Baldwin, C. Y. (2007) · Industrial and Corporate Change · doi:10.1093/icc/dtm036 · Cited by 512
“A brief sampling of this literature includes Nelson and Winter (1982), Demsetz (1988), Hayes et al. (1988), Pavitt (1991), Leonard-Barton (1992), Kogut and Zander (1992, 1996), Grant (1996), Conner and Prahalad (1996), Teece et al. (1997), Dosi et al. (2000), Nickerson and Zenger (2004), Marengo…”
BackgroundIbarra, H., Kilduff, M., & Tsai, W. (2005) · Organization Science · doi:10.1287/orsc.1050.0129 · Cited by 518
“separated individuals and units within the organization (Kogut and Zander, 1992).”
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University spillovers and new firm location
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“Central to the theories of localized knowledge spillovers is the distinction between codified and tacit knowledge (Kogut and Zander, 1992).”
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“Coordination of a specific property, for example, the necessary physical connections will be made at a specific time and date, is easier to specify in advance than the coordination of knowledge-based assets, with their attendant tacitness and embeddedness (Kogut and Zander, 1992).”
BackgroundLocal Knowledge Transfer and Performance: Implications for Alliance Formation in Asia
Makino, S., & Delios, A. (1996) · Journal of International Business Studies · doi:10.1057/palgrave.jibs.8490156 · Cited by 503
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“…product lines, including new product releases and improved product platforms (Comanor and Scherer, 1969; Henderson and Clark, 1990; Katila and Ahuja, 2002), and the consequences of innovation such as product performance (Cohen and Levinthal, 1989; Kogut and Zander, 1992; Grant, 1996b).”
BackgroundLi, J., Poppo, L., & Zhou, K. Z. (2009) · Strategic Management Journal · doi:10.1002/smj.813 · Cited by 514
“Second, as a bridge, the focal supplier would be more effective at transmitting explicit knowledge, facts, and discrete information because explicit knowledge can be transmitted through simple communication without loss of integrity (Hansen, 1999; Kogut and Zander, 1992).”
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Villalonga, B. (2004) · Journal of Economic Behavior & Organization · doi:10.1016/j.jebo.2003.07.001 · Cited by 512
“54 (2004) 205–230 207 Intangible resources are typically tacit and hard to codify (Kogut and Zander, 1992; Conner and Prahalad, 1996).”
BackgroundWang, C., & Hu, Q. (2017) · Technovation · doi:10.1016/j.technovation.2017.12.002 · Cited by 572
Rise of strategic nets — New modes of value creation
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Believing Is Seeing: Joint Ventures and Organization Learning*
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FOREIGN ENTRY, CULTURAL BARRIERS, AND LEARNING
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“…research on institutional complexity (Greenwood, Raynard, Kodeih, Micelotta, & Lounsbury, 2011), managing complex knowledge within organizations (Kogut & Zander, 1992; Tsoukas, 2005) or across interorganizational networks (Reagans & McEvily, 2003), or even research on managing complex strategic…”
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The impact of distance on knowledge transfer effectiveness in multinational corporations
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“and efficiently” ( Kogut and Zander, 1992, p. 386 ).”
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“Likewise, it is assumed that a more sustainable competitive advantage relies heavily on the ability to move beyond local search and to reconfigure its knowledge (Kogut and Zander, 1992; Rosenkopf and Nerkar, 2001).”
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“Selective Intervention and Internal Hybrids Interpreting and Learning from the Rise and Decline of the Oticon Spaghetti Organization Foss, Nicolai J. Document Version Final published version Publication date: 2001 License CC BY-NC-ND Citation for published version (APA): Foss, N. J. (2001).”
BackgroundWhy do firms both make and buy? An investigation of concurrent sourcing
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“Making the good improves the firm's understanding, since it gains a deeper tacit knowledge of the good and its processes (Kogut and Zander , 1992; Darr, Argote, and Epple, 1995; Grant, 1996).”
A Resource-Based View of Product Development
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Resources, Capabilities and Entrepreneurial Perceptions*
Kor, Y. Y., Mahoney, J. T., & Michael, S. C. (2007) · Journal of Management Studies · doi:10.1111/j.1467-6486.2007.00727.x · Cited by 487
“…can occur at any level in the organization, yet consistent with Penrose’s (1959) resources approach, we give close attention to the entrepreneurial services provided by the firm’s managers and the importance of their personal experiences in shaping their capacity to provide these services.”
BackgroundThe Process of Postmerger Integration: A Review and Agenda for Future Research
Graebner, M. E., Heimeriks, K. H., Huy, Q. N., & Vaara, E. (2017) · Academy of Management Annals · doi:10.5465/annals.2014.0078 · Cited by 470
Isobe, T., Makino, S., & Montgomery, D. B. (2000) · Academy of Management Journal · doi:10.2307/1556405 · Cited by 465
Marion, T. J., & Fixson, S. K. (2020) · Journal of Product Innovation Management · doi:10.1111/jpim.12547 · Cited by 562
“According to the KBV, knowledge is an organizational resource, and the ability of a firm to generate and deploy this knowledge in the NPD process can improve firm performance (Grant, 1996; Kogut and Zander, 1992; Nonaka, 1994; Spender, 1996).”
Social practices and the management of knowledge in project environments
Bresnen, M., Edelman, L. F., Newell, S., Scarbrough, H., & Swan, J. A. (2003) · International Journal of Project Management · doi:10.1016/s0263-7863(02)00090-x · Cited by 469
“Certainly, many studies have highlighted the importance of the wider organisational context for the capture and dissemination of knowledge and learning [45].”
BackgroundRenewing Research on Problemistic Search—A Review and Research Agenda
Posen, H. E., Keil, T. J., Kim, S., & Meissner, F. D. (2017) · Academy of Management Annals · doi:10.5465/annals.2016.0018 · Cited by 482
Entry mode research: Past and future
Canabal, A., & White, G. O. (2008) · International Business Review · doi:10.1016/j.ibusrev.2008.01.003 · Cited by 481
“If firms successfully realize these strategic processes they will generate competitive advantages, which will enhance their capabilities and performance (Kogut & Zander, 1992, 1993).”
BackgroundAlliance entrepreneurship and firm market performance
Sarkar, M., Echambadi, R., & Harrison, J. S. (2001) · Strategic Management Journal · doi:10.1002/smj.179 · Cited by 477
“First, the tacit nature of relevant resources and capabilities precludes adequate bundling through market transactions since they are distributed and embedded throughout a firm (Teece and Pisano, 1994; Kogut and Zander, 1992).”
Technological Platforms and Diversification
Kim, D.-J., & Kogut, B. (1996) · Organization Science · doi:10.1287/orsc.7.3.283 · Cited by 455
Self-citationBeugelsdijk, S., Kostova, T., Kunst, V. E., Spadafora, E., & van Essen, M. (2017) · Journal of Management · doi:10.1177/0149206317729027 · Cited by 469
“According to the classic view (Hymer, 1976; Kogut & Zander, 1992), negative performance effects are due to costs exceeding the benefits of internationalization.”
BackgroundMonteiro, L. F., Arvidsson, N., & Birkinshaw, J. (2007) · Organization Science · doi:10.1287/orsc.1070.0264 · Cited by 456
Real Options and IT Platform Adoption: Implications for Theory and Practice
Fichman, R. G. (2004) · Information Systems Research · doi:10.1287/isre.1040.0021 · Cited by 457
“Many scholars have noted the intimate relationship between organizational learning and technological innovation (Cohen and Levinthal 1990, Kogut and Zander 1992, Leonard-Barton 1988a, Pennings and Harianto 1992).”
Background
Metadata
- Authors
- Kogut, B., & Zander, U.
- Affiliations
- University of Pennsylvania (US)
- Stockholm School of Economics (SE)
- Venue
- Organization Science
- Published
- 1992-08
- Volume
- 3
- Issue
- 3
- Pages
- 383-397
- ISSN
- 1047-7039 (ISSN-L)
- 1526-5455
- OpenAlex
- W2179492332
- Cited by
- 12,939
- References
- 0
- Citations by year
- 2026: 312 · 2025: 276 · 2024: 330 · 2023: 350 · 2022: 467 · 2021: 499 · 2020: 524 · 2019: 459 · 2018: 559 · 2017: 539 · 2016: 541 · 2015: 667 · 2014: 630 · 2013: 770 · 2012: 740
- FWCI
- 127.03
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- Organization Science (publishedVersion)
- Topics
- Social Sciences › Business, Management and Accounting › Strategy and Management › Innovation and Knowledge Management
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic Theory and Institutions
- Social Sciences › Business, Management and Accounting › Management Information Systems › Outsourcing and Supply Chain Management
- Keywords
- embedded knowledge, transaction costs, imitation, firm boundaries, organizational learning, know-how, employee turnover, innovation, cumulative knowledge
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