Informal Knowledge and Innovation: Next Steps

We have identified external knowledge drawn from informal sources (often linked by social communities) and the internal knowledge management process as the central process through which firms create innovation. Our inquiry into the sources of knowledge and the process by which it is utilized offers further insights into the literature on knowledge and innovation. We believe our study highlights the importance of knowledge from external informal sources. It also points to some of the challenges faced by firms in effectively utilizing this knowledge. By unbundling the components associated with utilization of this knowledge, we attempt to shed new light on the challenges faced by firms as they attempt to build and protect internal knowledge and yet fully utilize knowledge from external, and often informal, sources. The knowledge management process associated with innovation consists of three related yet distinct sub-processes: the search for external knowledge, its subsequent sourcing and transfer, and finally its integration.

We suggest that the fact that informal sources play an important role in enhancing organizational innovation has implications for how we design innovation processes in particular, but also organizational structures, systems, and processes in general. The challenge associated with designing and managing organizations has an added dimension and the processes get more complex as the process gets closer to culminating in value creation to innovation. The design and choice of different mechanisms of knowledge transfer must take careful account of the nature of the knowledge management process (e.g. the extent to which it seeks to replicate knowledge, to combine knowledge, or to create new knowledge through problem solving), the sources of knowledge (external versus internal, formal versus informal) and the types of knowledge being transferred (in particular, the less codifiable the knowledge, the richer the communication medium needs to be).

While firms have made huge strides in the use of information technology to transfer information and support communication worldwide, the next level of the innovation challenge lies in the design and operation of organizational structures, management systems, and shared values and behavioral norms that can facilitate the movement of complementary knowledge and link together different modes of communication and knowledge transfer.

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