A Knowledge Based View Approach

The knowledge-based view (KBV) colloquially builds on Sir Francis Bacon's "knowledge is power”. Grant (1996) argued that "if we were to resurrect a single-factor theory of value... then the only defensible approach would be a knowledge based theory of value, on the grounds that all human productivity is knowledge dependent, and machines are simply embodiments of knowledge" (p112). The knowledge-based view purports that knowledge is the key resource to sustained competitive advantage (Grant, 1996). In the new economy, knowledge has a strategic position in creating a firm’s value; this encourages the researchers to develop the KBV. It assumes that knowledge is the main source of a firm’s outcomes. Knowledge is a unique resource (Kogut and Zander, 1992; Nonaka, 1995). Other researchers (e.g., Conner and Prahalad, 1996; Grant, 1996; Zheng et al., 2010) argued that The KBV of

44

the organisation is at the centre of the RBV, indicating that the most important source of an organisation’s sustainable competitive advantage is its ability to create and utilise knowledge (Prahalad and Hamel, 1990; Kogut and Zander, 1992; Nonaka, 1995; Grant, 1996). This view supported by other researchers such as Nonaka (1991), who argued that successful firms are then those with the ability to consistently create new knowledge, disseminate it throughout the organization, and quickly embodies it in new technologies and products. Moreover, knowledge is a key source for competitive advantage which is translated into innovation (Kandampully, 2002). Successful innovation relies on the amount of knowledge possessed by the firm. The KBV gives a new view for the implications of product and process innovation (Gopalakrishana and Bierlyb, 2001).

The KBV indicates that to access and utilise knowledge owned by employees, it is important to understand the organisational processes (Grant, 1996). It has developed the view of the firm as a bundle of resources from the RBV, focusing on the most strategically valuable and perhaps the only source of competitive advantage and one definition of a firm is “an institution where the issues of creating, acquiring, storing and deploying knowledge are the fundamental organisational activities” (Grant and Baden-Fuller, 1995; Grant, 1996). There have been few theoretical contributions on the nature and major assumptions to theoretically frame and empirically test the KBV.

Grant (1996) confirmed that the challenge of the KBV is effective coordination among organisational members, as their knowledge is specialised and needs to be integrated. The KBV described as an emerging theory of the existence, organisation and competitive advantage of the firm, which is founded on the role of organisations in creating, storing and applying knowledge (Grant and Baden-Fuller, 1995). According to Minbaeva et al. (2003) this knowledge will have competitive effects when they are difficult to be replicated by competitors. It is argued that knowledge is embedded in and present throughout

45

organisational culture, policies, practices, systems and individuals (Michailova and Minbaeva, 2012).

Several researchers (e.g., Grant and Baden-Fuller, 1995; Grant, 1996), identified four main assumptions of knowledge in the KBV: Firstly, from the value added prospective, Knowledge is the key productive resource of the firm in terms of contribution to value added and strategic significance. Secondly, from different type of knowledge prospective, Knowledge comprises information, technology, know-how, and skills. Different types of knowledge vary in their transferability. Transferring tacit knowledge as compared to transferring explicit knowledge is costly and slow. Thirdly, from subject to economies of scale and scope prospective, Knowledge is subject to economies of scale and scope: initial creation of knowledge is more costly than its subsequent replication. Fourthly, from cognition prospective, Knowledge is created, acquired and stored by individuals. Due to the cognitive and time limitations of human beings, individuals must specialise in their ability to create, acquire and store more knowledge. Lastly, from knowledge application prospective, the creation of value for the organisation typically requires the application of numerous different types of specialised knowledge.

Knowledge-based view of the firm suggests that organisations are best viewed as ‘a social community specialising in speed and efficiency in the creation and sharing of knowledge’ (Kogut and Zander, 1996: 503). The social capital inherent in the social relations within an organisation can, therefore, be regarded as a potentially critical asset in maximising organisational advantage. Where there are high levels of collaboration and good will among organisation members, which incresae knowledge and stimulating innovation (Nahapiet and Ghoshal, 1998; Perry-Smith and Shalley, 2003; Andrews, 2010).

46

By linking the KBV rationale with KS literature, the KBV treats KS through the organisational capacity to integrate knowledge within existing structures of the organisation and share the integrated knowledge between individuals (Michailova and Minbaeva, 2012). It stresses the significance of considering knowledge characteristics. For example, it is argued that identifying motivational factors and knowledge-related factors that create internal “stickiness” of knowledge in organisations and impede their internal sharing can explore the knowledge characteristics that influence the degree of knowledge sharing (Szulanski, 1996). Michailova and Minbaeva (2012) indicated that knowledge sharing does not happen automatically, it may require substantial organisational efforts aimed at enhancing close relationships among individuals. Accordingly, organisations should invest in systems which are symbolised by continuous social interactions, communication of ideas, sharing of knowledge and other acts associated with the social character of learning (Minbaeva et al., 2003). The KBV considers the organisation as a set of knowledge-assets and the role of the organisation is creating, organising and deploying these assets to create value from them (Grant, 1996). The knowledge-based view recognises that knowledge is a valuable resource of organisations (Nonaka and Takeuchi, 1995, Nonaka and Toyama, 2005). According to the knowledge-based view, when knowledge can be shared among organisational members through donating and collecting, the stock of knowledge will be made available, and this will help to generate new ideas, which in turn can improve product and process innovation (Liao and Wu, 2010, Ferraresi et al., 2012, von Krogh et al., 2012, Wang and Wang, 2012). Also, organisational context can be perceived as the organisation’s plan of deploying and sharing knowledge assets. Thus, to better understand knowledge as a competitive resource and link it with KS and innovation, this study aims to extend the KBV in the context of KS.

Overall, it is recognised that the integration of both social captial and knowledge sharing as the most important resource of organisations allows firms to increase their innovation (Kim

47

and Lee, 2010; Mura et al. 2013; Akhavan and Hosseini, 2016). The RBV and KBV have recently become recognised and was mentioned in several recent research articles (Kim and Lee, 2010; Kim et al., 2013). Therefore, based on this discussion, the inclusion of the relational resources in the proposed research can be supported and justified by the “RBV and KBV”. Having discussed the theoretical approach underpinning this study’s conceptual model, the next two sections reviews knowledge sharing and social capital factors and their affecting on innovation and tested in previous empirical studies.