Definition of Constructs

Organizational learning

In defining ‘organizational learning,’ we agree with the growing group of theorists (e.g. Argyris and Schön, 1978; Duncan and Weiss, 1979; Miller, 1996) who emphasize the interrelationship between cognition and behavior and conclude that the learning process encompasses both cognitive and behavioral change. Individuals and groups learn by understanding and then acting or by acting and then interpreting (Crossan, Lane, White, and Djurfeldt, 1995). The definition of OL adopted for this chapter incorporates this thinking: organizational learning is the process of change in individual and shared thought and action, which is affected by and embedded in the institutions of the organization. When individual and group learning becomes institutionalized, organizational learning occurs and knowledge is embedded in non-human repositories such as routines, systems, structures, culture, and strategy (Crossan, Lane, and White, 1999; Nelson and Winter, 1982; Walsh and Rivera, 1991). The organizational learning system is comprised of the continually evolving knowledge stored in individuals, groups, and the organization and constitutes the fundamental infrastructure that supports a firm’s strategy formulation and implementation processes.

Early work in organizational learning, spearheaded by James March (Cohen and Sproull, 1996) made use of learning concepts that were translated from the psychology literature on individual learning (e.g. choice, decision making, information processing). For example, Argyris and Schön (1978) proposed that organizations learn through individuals acting as agents for them. When defining single-loop and double-loop learning, they explained learning in terms of individual level error detection and error correction. Today, authors offer more comprehensive frameworks of OL that link the different levels of learning and that study learning from a systemic view. Furthermore, the study of the OL phenomenon has been enriched by the contributions from diverse disciplines (Easterby-Smith, 1997) and new perspectives such as interpretive systems (Daft and Weick, 1984), communities of practice (Brown and Duguid, 1991), dialogue (Isaacs, 1993), and memory (Casey, 1997; Walsh and Rivera, 1991). Finally, because of its intrinsic notion of change, organizational learning research has been associated with questions of how organizations evolve, transform (e.g. Barnett, Greve, and Park, 1994; MacIntosh, 1999), and renew themselves (e.g. Crossan et al., 1999; Lant and Mezias, 1992; Mezias and Glynn, 1993) in order to face the challenges of a continuously changing environment.

When defining organizational learning, it is important to note its relationship to the ‘learning organization’ (LO). Senge (1990:1) defines a learning organization as ‘a place where people continually expand their capacity of creating results they really want, where patterns of thinking are broadened and nurtured, where collective aspiration is free and where people are continually learning to learn.’ Organizational learning and the learning organization belong to different streams of theorizing in the field (Easterby-Smith, Snell, and Gherardi, 1998). OL is a descriptive stream, with academics who pursue the question ‘how does an organization learn?’ In contrast, LO is a prescriptive stream, targeted at practitioners who are interested in the question ‘how should an organization learn?’

Knowledge management

In 2003, we noted that, in defining knowledge management, a major source of confusion arose from the failure to differentiate ‘knowledge management’ (KM) and ‘organizational knowledge’ (OK). In its origins, the term knowledge management was often used in conference programs and book titles, but seldom defined and incorporated in academic papers, where the concept of organizational knowledge was the one frequently used. Knowledge management has been defined as ‘the explicit control and management of knowledge within an organization aimed at achieving the company’s objectives’ (Van der Spek and Spijkervet, 1997: 43), ‘the formal management of knowledge for facilitating creation, access, and reuse of knowledge, typically using advanced technology’ (O’Leary, 1998: 34), ‘the process of creating, capturing, and using knowledge to enhance organizational performance’ (Bassi, 1999: 424), and ‘the ability of organizations to manage, store, value, and distribute knowledge’ (Liebowitz and Wilcox, 1997: i).

As the field has evolved two main paradigms have emerged: a computational view of knowledge management which approaches knowledge management as a process of identifying empirically validated facts and managing them through technology, and an organic view of knowledge management which emphasizes the role of people, group dynamics, social and cultural factors, and networks (Argote, 2005). These two views have been combined in an integrated socio-technological approach to managing actual and potential flows of knowledge creation, transfer, and retention (Prieto and Easterby-Smith, 2006). Two chapters in this Handbook address the issues within the domain of KM. Hayes (Chapter 5) discusses the role of information technology within the organic or ‘relational’ view of KM. Alavi and Denford (Chapter 6) adopt a combined socio-technological approach and move the discussion forward by assessing the role of Web 2.0 in KM practice. They advocate the necessity of having both technological capability of information processing and relevant social content for a KM platform to be successful.

In contrast to the knowledge management concept, which was initially considered a prescriptive term, organizational knowledge is an established theoretical construct. Knowledge has been proposed as a key firm resource and a source of competitive advantage. This research is rooted in the resource-based view (RBV) of the firm (Barney, 1991; Penrose, 1959). Several authors argue for a ‘knowledge-based’ theory of the firm as a theory that explains the organizational advantage of firms over markets (Ghoshal and Moran, 1996; Grant, 1996; Kogut and Zander, 1992).

To develop a theory where the creation, transfer, and application of knowledge is the reason why firms exist, researchers have engaged in a passionate debate about what knowledge is and what forms or types of it are available (Collins, 1993). Whereas the term learning has not been bound up in questions of veridicality and accuracy, the term knowledge has witnessed many debates. Different philosophical views and conceptual paradigms offer different perspectives about what knowledge is and how it can be studied. For example, based on their distinct epistemological and ontological assumptions, positivists argue that reality is objective and can be comprehended accurately, while for post-modernists all meanings are context specific. While it is impossible to integrate these theories or resolve their disagreements, Gioia and Pitre (1990) propose that there is ‘similarity despite disparity’ across paradigms, and that a multi-paradigm approach to theory building would help researchers achieve a more comprehensive understanding of organizational phenomena. In the study of knowledge, the positivist view (‘knowledge as justified true belief’) is the predominant one in Western culture and a generally accepted assumption in organizational theory (Nonaka and Takeuchi, 1995). However, it has been increasingly challenged and complemented by more constructivist perspectives that argue that knowledge cannot be conceived independently from action, shifting the notion of knowledge as a commodity that individuals or organizations may acquire, to the study of knowing as something that they do (Blackler, 1995; Cook and Brown, 1999; Nicolini and Meznar, 1995; Polanyi, 1967). Polanyi’s (1967) work, in particular, has been highly influential in defining knowledge as dynamic, when he argues that knowledge is an activity, which could be better described as a process of knowing.

Although the knowledge (explicit and tacit) and knowing constructs come from different paradigms, we believe that efforts towards integrating them are consistent with Gioia and Pitre’s (1990) call for more multi-paradigm research. According to Polanyi (1967), explicit knowledge is articulated and specified either verbally or in writing, while tacit knowledge is unarticulated, intuitive, and non-verbalizable. Perception, the process of getting to know an external object by the impression made by it on our senses, underlies the paradigm of tacit knowledge (Polanyi, 1967). In perceiving a simple object, there are clues that are unspecifiable, thus, all empirical knowledge has an indeterminate content. Building on this work, Cook and Brown (1999) propose that explicit and tacit knowledge are not enough to understand the nature of knowledge and that to account for all somebody knows, it is necessary to add the notion of knowing. For them, while explicit and tacit knowledge are ‘possessed’ by people, knowing is not about possession, but about ‘practice’ and about interacting with the things of the social and physical world. For example, when riding a bike, people use their explicit knowledge about the parts of a bike and the tacit knowledge about how to keep balance on a bike. People possess this knowledge even when they are not riding a bike. The difference is that while biking, people practice their knowing, that is, they put knowledge into action.

In Figure 8.1, we summarize the relationships we observe between knowledge, knowing, and learning. First, knowledge can be obtained through the mind (learning by reflection, anticipatory learning) and through the body (learning by doing, experimental learning). Second, knowledge is accumulated in our minds (know what, declarative knowledge) and also in our bodies (know how, procedural knowledge). Third, knowing is practice, it is something we do. Knowing is not knowledge used in action, but knowledge that is part of action (Cook and Brown, 1999). Last, learning is the change in knowledge and the change in knowing, which involves, as mentioned before, changes in cognition and changes in behavior. Knowledge and knowing are the content of the learning process, in other words, what we learn or get to know. The main distinction between knowledge and knowing is that knowledge is mainly cognitive, including the facts and the skills we possess, while knowing is mainly behavioral, it is knowledge as action.

Figure 8.1 Knowledge-Knowing-Learning Matrix

In this Handbook, Tsoukas (Chapter 21) continues the discussion about tacit knowledge by providing a review of the previous work on the subject by Polanyi, Nonaka, Takeuchi, and others, and a clarification of the construct. Contrary to Nonaka and Takeuchi, he maintains that tacit knowledge is not hibernating explicit knowledge waiting to be articulated: ‘tacit and explicit knowledge are not the two ends of a continuum but two sides of the same coin: even the most explicit kind of knowledge is underlain by tacit knowledge.’

In addition to the explicit/tacit dimension, recent developments in the field offered a plethora of other dimensions, which are summarized in Table 8.1. Furthermore, another important focus of the organizational knowledge literature is studying the processes through which knowledge is created, developed, retained, and transferred (e.g. Argote and Ingram, 2000; Nonaka and Takeuchi, 1995; Pisano, 1994; Szulanski, 1996). Thus, this second branch of research steps back from the questions about knowledge types and forms and emphasizes the need to understand the micro-processes by which knowledge is created or acquired, communicated, applied, and utilized in organizations.

Table 8.1 Dimensions of organizational knowledge

Dynamic capabilities

The concept of ‘dynamic capabilities’ (DC) was introduced by Teece, Pisano, and Shuen (1997) to offer a more dynamic perspective of the resource-based view (Barney, 1991). They argue that because the value of a resource can change over time, competitive advantage comes not only from organizational resources, but also from the firm’s capability to continually create, integrate, and reconfigure new resources. While building on the work of Teece et al., (1997), Eisenhardt and Martin (2000) provide a different perspective on dynamic capabilities. They define dynamic capabilities as the process by which firms use resources, i.e. the ‘organizational and strategic routines by which firms achieve new resource configurations’ (2000: 1007). In contrast to Teece et al. (1997), Eisenhardt and Martin argue that competitive advantage ‘lies in the resource configurations that they create, not in the capabilities themselves’ (2000: 1106), because dynamic capabilities exhibit commonalities among effective firms and become what managers call ‘best practices.’

The last decade has witnessed great confusion in the DC field because of a lack of agreement about what dynamic capabilities actually are (Cepeda and Vera, 2007). Some definitions are prescriptive in nature in the sense that they assume that dynamic capabilities are always good and are a source of competitive advantage; these definitions have been criticized as tautological (Priem and Butler, 2001). Furthermore, if there is always a capability behind a capability, we face an infinite regress problem and it is impossible to identify the ultimate source of competitive advantage (Collis, 1994).

In an effort to understand the true nature of dynamic capabilities, several authors propose the need to differentiate among the types of processes and routines available in firms. Collis (1994) distinguishes between a first category of capabilities, which reflect an ability to perform the basic functional activities of the firm (e.g. plant layout, distribution logistics, and marketing campaigns), and a second category of capabilities, which deals with the dynamic improvement to the activities of the firm. In his detailed treatment of the subject, Winter (2003) defines capabilities as ‘high level routine(s)’ which in turn are ‘learned and repetitious behaviors’ (Winter, 2003: 991). He categorizes capabilities into a hierarchy using a mathematical metaphor of derivatives:

Winter (2003) proposes learning as the ultimate second-order capability, and creates an explicit link between the concepts of organizational learning and dynamic capabilities. This hierarchical classification has increasingly been adopted in recent models of dynamic capabilities (e.g. Helfat and Peteraf, 2003; Zahra and George, 2002; Zahra, Sapienza, and Davidsson, 2006) and helps to eliminate the tautological flavor associated with dynamic capabilities. In addition, Teece (2007: 1319) establishes an explicit connection between dynamic capabilities and knowledge management, when he proposes that ‘dynamic capabilities can be disaggregated into the capacity (1) to sense and shape opportunities and threats, (2) to seize opportunities, and (3) to maintain competitiveness through enhancing, combining, protecting, and, when necessary, reconfiguring the business enterprise’s intangible and tangible assets,’ and includes knowledge management as part of the third type of process.

In this Handbook, Teece (Chapter 23) extends this theorizing by connecting DC and ‘knowledge assets’ with the theory of the firm. Teece argues that the economic theory of the firm currently dominated by the contracting perspective should be augmented by the DC/KM perspective where learning is viewed as a way of development and maintenance of knowledge assets.

Absorptive capacity

The concept of ‘absorptive capacity’ (AC) was first1 introduced by Cohen and Levinthal as ‘the firm’s ability to identify, assimilate and exploit knowledge from the environment’ (Cohen and Levinthal, 1989: 569–570) and the ‘ability of the firm to recognize the value of new external information, assimilate it, and apply it to commercial ends’ (Cohen and Levinthal, 1990: 128). There have been three recent efforts to review the literature with the goal of reconceptualizing the construct from theoretical and definitional perspectives (Lane, Koka, and Pathak, 2006; Todorova and Durisin, 2007; Zahra and George, 2002). In fact, although the concept of absorptive capacity was introduced earlier than that of dynamic capabilities, the former has been greatly influenced by the latter, and absorptive capacity is increasingly being positioned as a firm’s dynamic capability (Easterby-Smith, Graca, Antonacopoulou, and Ferdinand, 2008).

Zahra and George (2002) define absorptive capacity as a set of organizational routines and processes, by which firms acquire, assimilate, transform, and exploit knowledge to produce a dynamic organizational capability. They were the first to differentiate between potential and realized absorptive capacity. Potential absorptive capacity is a firm’s capability to value and acquire external knowledge, but does not guarantee the exploitation of this knowledge. Realized absorptive capacity reflects the firm’s capacity to leverage the knowledge that has been absorbed. Zahra and George (2002) also furthered the ideas about the role of the internal knowledge base as an antecedent of potential absorptive capacity, and added (1) activation triggers as moderators of the relationship between internal knowledge and potential absorptive capacity and (2) social interaction mechanisms as factors that reduce the gap between potential and realized absorptive capacity.

In a critical review, Lane et al. (2006) defined absorptive capacity as a firm’s ability to utilize externally held knowledge through three sequential organizational learning processes: (1) recognizing and understanding potentially valuable new knowledge outside the firm through exploratory learning, (2) assimilating valuable new knowledge through transformative learning, and (3) using the assimilated knowledge to create new knowledge and commercial outputs through exploitative learning. They concluded that the construct has become reified; i.e. become a taken-for-granted, general-purpose concept and identified fundamental weaknesses in our understanding of AC calling for a ‘rejuvenation of the construct’ (Lane et al., 2006). They ask researchers to engage in empirical analysis and integrative theoretical work that: characterizes the construct as a capability rather than a knowledge asset, focuses at the micro level to broaden understanding of the role of team cognition, emphasizes the multiple dimensions of the concept, and considers the impact of team structural factors on the efficiency of applying assimilated knowledge.

In fact, an important debate in the AC field has been the dimensionality of AC (Nemanich, 2008). Lane et al. (2006) argued that the concepts of potential and realized AC bias the construct definition toward the short-term benefits of AC. They offered a model that returned to the three dimensions identified by Cohen and Levinthal (1990). Todorova and Durisin (2007) also made theoretical arguments for explicitly rejecting the idea of potential and realized AC constructs. Their model returned to the roots of Cohen and Levinthal’s (1990) work and then expanded it by incorporating the following learning processes as dimensions: recognize the value, acquire, assimilate, transform, and exploit. Building on this work and addressing Lane et al.’s (2006) criticisms, Nemanich, Keller, Vera, and Chin (2010) recently added team shared cognition to the three traditional dimensions of AC—evaluate, assimilate, and apply capabilities—and argued that these capabilities manifest themselves in different levels of analysis, individual or team.

Finally, linking the AC and DC concepts, and emphasizing the micro-processes involved, not just the dimensions, Easterby-Smith et al. (2008) positioned absorptive capacity as a dynamic capability and pursued qualitative work that identified power and boundaries as central features of a process view of absorptive capacity.

Having discussed the roots and definitions of the four constructs of interest, the next section will delineate not only connections, but also the boundaries of each research area.