Knowledge that Transforms

As both technologies and organizations undergo dramatic changes in form and function, organizational researchers are increasingly turning to concepts of innovation, emergence, and improvisation to help explain the new ways of organizing and using technology evident in practice. With a similar intent, I propose an extension to the structurational perspective on technology that develops a practice lens to examine how people, as they interact with a technology in their ongoing practices, enact structures which shape their emergent and situated use of that technology. Viewing the use of technology as a process of enactment enables a deeper understanding of the constitutive role of social practices in the ongoing use and change of technologies in the workplace. After developing this lens, I offer an example of its use in research, and then suggest some implications for the study of technology in organizations.

Whereas most prior research on the learning curve has focused on improvements in efficiency, this paper deals with the impact of learning on product quality. The key data are measures of automobile reliability published in Consumer Reports. Analysis yields three findings: (1) Quality improves over the production life of a car model with the same kind of regularity as an efficiency learning curve. Thus, there is a quality learning curve. (2) Unlike in the efficiency domain, however, learning in the domain of product reliability is primarily a function of time, and not of how many cars have gone down the assembly line. Thus, quality depends not on the accumulation of production experience per se, but on the intensity of “off-line”quality improvement activities and on the transfer of knowledge from the general environment over time. (3) In contrast to the traditional injunction, “do not buy a new car in its first year of production,”the opposite advice actually seems to apply: In any given year, the newest car models have the best quality. That is, new car-model designs typically include significant quality improvements that are more than enough to outweigh any disruption created in manufacturing by the new model's introduction and that even surpass the incremental improvements made to older, existing car models.

The dilemmas experienced by managers in cultural industries are also to be found in a growing number of other industries where knowledge and creativity are key to sustaining competitive advantage. Firms that compete in cultural industries must deal with a combination of ambiguity and dynamism, both of which are intrinsic to goods that serve an aesthetic or expressive rather than a utilitarian purpose. Managers involved with the creation, production, marketing, and distribution of cultural goods must navigate tensions that arise from opposing imperatives that result from these industry characteristics. In this paper we outline five polarities that are shaping organizational practices in cultural industries. First, managers must reconcile expression of artistic values with the economics of mass entertainment. Second, they must seek novelty that differentiates their products without making them fundamentally different in nature from others in the same category. Third, they must analyse and address existing demand while at the same time using their imagination to extend and transform the market. Fourth, they must balance the advantages of vertically integrating diverse activities under one roof against the need to maintain creative vitality through flexible specialization. And finally, they must build creative systems to support and market cultural products but not allow the system to suppress individual inspiration, which is ultimately at the root of creating value in cultural industries.

Diversification not only internalizes transactions of goods and services, but it also internalizes transactions of capital. Hence, the value of diversification will depend, inter alia, on whether internal capital markets are relatively efficient or inefficient. This essay reviews and discusses the possible benefits and costs of internal capital markets by conducting a careful comparative institutional analysis. The essay concludes that internal capital markets can add value to lines of business only under a limited number of circumstances. Some recent developments in the organization of internal capital markets in diversified firms can be understood as attempts to increase their efficiency.

Two studies were conducted to further explore the organizational and economic insights provided by the Cyert-March duopoly model (C-M) described in A Behavioral Theory of the Firm (ABTOF, Cyert and March 1963). Study 1 examined the extent to which two firms that differed solely in the decision behavior of a routine would also differ in organizational (quasiresolution of conflict, uncertainty avoidance, problem-driven search, and organizational learning) and economic (profit, price, market share, cost) measures and impacts. Three such manipulations were separately examined, where each manipulation altered the relative propensity of the firm to be more or less reactive to three events: production growth pressure, price adjustment under organizational goal conflict, and initial price adjustment under profit goal failure. Analysis of the behaviors revealed how subtle changes in these key routines could generate complex organizational and economic effects that impact firm success. The dominant result demonstrated that organizations that did not perform well organizationally did not perform well economically. In addition, higher reactivity resulted in higher costs, in part because of quantified organizational constructs (e.g., slack, pressure). Study 2 examined the data from the first study to determine the extent to which the performance of the duopoly was consistent with a set of eight stylized economic facts drawn from the empirical literature on oligopoly. Study 2 demonstrated consistency with five of the eight stylized economic facts and provided partial support for two others. We conclude that behavioral constructs of ABTOF, as articulated in the Cyert-March duopoly model, provide behavior and performance capabilities that bridge the gap between game-theoretic models of duopoly and the computational and informational realities of organizations.

Employees are motivated intrinsically as well as extrinsically. Intrinsic motivation is crucial when tacit knowledge in and between teams must be transferred. Organizational forms enable different kinds of motivation and have different capacities to generate and transfer tacit knowledge. Since knowledge generation and transfer are essential for a firm's sustainable competitive advantage, we ask specifically what kinds of motivation are needed to generate and transfer tacit knowledge, as opposed to explicit knowledge.

This paper explores the tension between two opposite views on how networks create social capital. Network closure (Coleman 1988) stresses the role of cohesive ties in fostering a normative environment that facilitates cooperation. Structural hole theory (Burt 1992) sees cohesive ties as a source of rigidity that hinders the coordination of complex organizational tasks. The two theories lead to opposite predictions on how the structure of an actor's network may affect his ability to adapt that network to a significant change in task environment. Using data from a newly created special unit within the Italian subsidiary of a multinational computer manufacturer, we show that managers with cohesive communication networks were less likely to adapt these networks to the change in coordination requirements prompted by their new assignments, which in turn jeopardized their role as facilitators of horizontal cooperation within a newly created business unit structure. We conclude with a discussion of the trade-off between the safety of cooperation within cohesive networks and the flexibility provided by networks rich in structural holes.

This paper considers the impacts of different investments in human capital (firm-specific versus generalized investments) on employee commitment to the firm. The resource-based literature has stressed that only firm-specific human capital is likely to generate organizational rents, since those assets are more likely to be inimitable, rare, and therefore a better basis for sustained competitive advantage. Generalized investments in human capital (i.e., investments in capabilities that people can transfer and deploy to other firms or settings) are to be avoided. However, observing lessons from the literature on psychological contracts and organizational commitment, we argue that generalized investments may have value for the firm through their effects on worker commitment to the firm. The gain in worker commitment is valuable to firms given the fragile state of the contemporary employment relation, in which the lack of job security is likely to breed diminished employee commitment. This is particularly a concern for employment relations consisting of externalized labor (i.e., contract work or selfemployed professionals operating as agents of the firm), in which agent commitment is vital but likely to be more scarce. In this paper we focus on the externalized workers (independent agents) of two insurance firms in addressing these issues. A sample of 237 agents shows support for the benefits of generalized investments on agent commitment, questioning conventional wisdom that such investments should be avoided. We also examine the impact of relation-specific investments and other key antecedents on agent commitment, concluding that a mixture of strategic investments in human capital should be considered, taking into account their impacts on the firm-worker psychological contract. We also examine the impact of agent commitment on agent performance in this context, finding committed agents do provide greater value to the insurer.

This paper explores the cognitive aspects underlying industries in hypercompetitive environments. Hypercompetition represents a state of competition with rapidly escalating levels of competition and reduced periods of competitive advantage for firms. In hypercompetitive industries member firms act boldly and aggressively to create a state of competitive disequilibrium. In this paper we explore the particular conditions that managers encounter in making sense of hypercompetitive industries and argue that the nature of these conditions is such that conventional sensemaking frameworks will not work. We then describe the “adaptive sensemaking” practices established in the literature for dealing with temporary turbulence and suggest that in hypercompetition those processes continue indefinitely. We argue that these processes can become institutionalized as standard operating procedures within firms, and as shared recipes within industries, which in turn perpetuates hyperturbulent conditions.

With the increasing globalization of business, there has been growing interest in how to create and manage a successful international enterprise. Although researchers and practitioners have grappled with the issue of globalization for some time, there is no one model that encompasses the range of phenomena we observe in the global economy, nor have those models that do exist been precisely formalized. This paper provides an expanded approach to thinking about the organizational forms and linkages that exist in international business operations. Building on the popular integration-responsiveness framework of international strategic orientation, we develop a more expansive approach that is better able to account for the diversity of organizational forms and strategic choices open to managers. By adding a third set of environmental pressures, incorporating the beliefs of managers, and by employing the idea of efficient frontiers, we reformulate the integration-responsiveness framework, making it more consistent with modern economic models of the firm. Our integration-responsiveness-completeness (IRC) model argues that global firms can respond to these fundamental and competing pressures by configuring themselves in a variety of ways—rather than normatively prescribing that the transnational form is optimal. In addition, our model has methodological ramifications. Its formal structure suggests that empirical techniques that focus on the best rather than average performance are necessary to adequately investigate the performance differences among alternative organizational forms. This may explain the paradoxical lack of empirical support for a link between organizational form and performance.