Strategies for Managing Knowledge Assets: the Role of Firm Structure and Industrial Context

Abstract

In the new economy, the sustainable competitive advantage of business firms flows from the creation, ownership, protection and use of difficult-to-imitate commercial and industrial knowledge assets. Such assets include tacit and codified know-how, both technical and organisational, whether or not protected by the instruments of intellectual property such as trade secrets, copyrights and patents. Competitive advantage undergirded by such assets can be sustainable to the extent to which it is transferable and useable inside the firm, but difficult for outsiders to access and/or recreate. Knowledge management can be used to describe the panoply of procedures and techniques used to get the most from a firm’s knowledge assets. Information technology can assist knowledge management, but knowledge management involves much more than the astute use of IT tools. In particular, knowledge management requires the development of dynamic capabilities… the ability to sense and then seize opportunities quickly and proficiently. This is especially so in environments characterised by increasing returns, irrespective of the appropriability regime. Companies slow to respond to the new reality will be severely handicapped.

Introduction

There is increasing recognition that the competitive advantage of firms depends on their ability to create, transfer, utilise and protect difficult-to-imitate knowledge assets. The shift to knowledge assets as the basis of competitive advantage has become compelling with the liberalisation and expansion of markets both domestically and internationally. These trends have created a business environment in the United States and in many other developed countries where components and inputs are available to all firms everywhere at similar prices. Even if components or inputs do not trade, firms are free to locate so as to access them at low cost. Fuelled by free market philosophy and assisted by new information technology, these developments have a levelling effect with respect to competitive advantage. The trend is well established, and unlikely to be reversed, in societies where openness to trade is the dominant ethos. In this article, certain general implications of this are distilled.

The managerial challenges that flow from the centrality of knowledge and intellectual property are rather different from those of a bygone era where physical assets were the key to competitive advantage. Furthermore, there are also major differences in knowledge management requirements from situation to situation according to the underlying cost and demand logic at work, the ‘appropriability regimes’ in which the firm operates, the importance of compatibility standards, the nature of innovation at issue, and the richness of the technological opportunity facing the firm. This article analyses knowledge management requirements in these different contexts. But first, some background.