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The Quest for Knowledge in Innovative Organisations: A Tacit Viewpoint

Vivek Sharma
RMIT University, Melbourne, Australia
v.sharma@rmit.edu.au

The Quest for Knowledge in Innovative Organisations: A Tacit Viewpoint

This paper explores the concept of knowledge in innovative organisations and the emerging view of
knowledge creation, in particular the tacit knowledge, as another form of innovation. It is observed
that while the concept of knowledge creation is strongly linked to organisational innovativeness, in
practice it is not entirely understood and realised by organisations. An organisations ability to
translate individual insights and knowledge into collective knowledge and organisational capabilities
could mean a greater competitive advantage and an inimitable strategic resource. This paper
maintains that the degree of an organisations connectedness with its people is linked to its capacity to
innovate, and emphasises the importance of recognising the tacit knowledge as an essential cognitive
dimension of innovation.

Key Words: Knowledge Management, Organisational Learning, Innovation, Knowledge Economy,


Beyond Motivation, Integration

There has been a greater call for integration between knowledge creation and innovation within the
innovation literature (Casselman, Quntane, and Reiche, 2006) with a realisation that in in absence of a
link between knowledge creation and innovation outcomes, it will be difficult to optimise the speed
and effectiveness of innovation in organisations (Culter, 2008). The review of the literature shows
that the concept of knowledge creation is strongly linked to organisational innovativeness but not
entirely understood and realised by the organisation. As noted by Casselman et al (2006), the
knowledge literature identifies existing knowledge as a pre-requisite for occurrence of the innovation
processes. The need for organisation to connect and share knowledge at all levels of organisation has
been more pertinent in a rapidly changing global economic environment, where a lasting capacity to
innovate can be the deciding factor between success and failure for a large number of organisations.
Kanter (2010) emphasised that the courage to innovate involves a high tolerance for difference. Ideas
may emerge from people at all levels of the organisation regardless of the tasks they perform. The
literature on Organisational Learning and Knowledge Creation emphasises on understanding how
social interaction and group dynamics within organisations shape collective intelligence, learning and
knowledge generation, underpinning the innovative capability of organisations (Lam, 2004). Lam
(2004) stressed that social structure of the organisation and its internal cohesiveness could be a critical
determinant of its innovative performance. Traditionally, the tendency of organisations to view
innovation as an output has somewhat limited the focus on knowledge creation. As noted by

Casselman et al (2006), while key models such as Tsai and Ghoshals model of innovativeness tend to
draw a parallel between knowledge creation and innovation, they usually fail to establish if any new
knowledge created in organisations through various processes can itself be considered an innovation.
Nonaka and Takeuchis (1995) stressed the importance of knowledge creation and its importance in
the organisations long term success and survival. However, literature shows that there has not been a
great deal of empirical work in the area of knowledge creation. Nonaka and Takeuchi (1995) recognise
knowledge as a strategic asset and competitive advantage in organisations. Nonakas (1994)
distinction between explicit and tacit knowledge, and a lack of understanding of the former, further
underscores the need for a greater understanding of the knowledge creation and capture processes
within the organisations. While there has been an increasing discussion on knowledge creation and
learning organisation, there is very limited understanding of how and where these knowledge and idea
generation phenomenon occur within organisations. It can be assumed that while idea generation may
occur at an individual level, there will be a need to substantiated and captured at team or
organisational levels.

With an increasing number of organisations emphasising the need for a greater connectedness and
involvement with employees at all levels of organisation (Senge 2008, Zohar and Marshall 2004,
Finke, 2003) it becomes pertinent that such connection with the employees is explored within the
context of organisational culture and values. Proctor and Gambles CEO, A.G. Lafely (2008), believes
that even people who are not directly involved in the innovation process are affected through the social
networks like an unseen connection between all the employees which enabled them to expand their
idea of what is feasible (Lafely, 2008). Today, organisations need to do more than just become
technically efficient in order to create a competitive advantage in a rapidly transforming global
economic environment (Lam 2004, Casselman et al, 2006). In the context of innovation, Christensen
and Raynor (2003) define organisational values as standards by which employees make prioritisation
decisions. Their concept of values is linked to cost structures and type of innovation an organisation is
capable of promoting. In contrast, Florida (Chapman, Berman and Blitz, 2008) emphasises the human

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aspect of innovation driven by creativity. These concepts point towards social interaction and informal
networks within the organisations that may be contributing to the innovation processes.

ORGANISATIONAL VALUES

Organisational values can be seen as the pillars of the organisational culture. Values create an essential
cultural foundation for the organisation and determine the way people behave and operate (Denison,
1996). While the values are generally defined by organisations, there is not much study on how they
influence peoples propensity or motivation to innovate, especially in innovative organisations.
Denison (1996) defines organisational culture as the deep structure of organisations, which is rooted in
the values, beliefs and assumptions held by organizational members. Contextually, Hills and Jones
(2008) define organisational values as;
beliefs and ideas about what kinds of goals members of an organization
should pursue and ideas about the appropriate kinds or standards of
behaviour organisational members should use to achieve these goals (Hills
and Jones, 2008, p4).

As an organisational value structure directly impacts social interactions and relationships between the
employees within an organisation, an exploration of underlying values can form a strong basis for
developing employee-focussed understanding and concepts.

The underlying concept of a value-based organisation, or a perceived link between organisational


values and innovativeness I recent studies, revives the decades old concepts of social and human
capital in organisations. The concepts of social capital and human capital have their roots in the
history of social science. Hegels concept of moving subject (Rasmussen, 1996, p11) who through the
process of self-reflection, comes to know itself at even higher level of consciousness, and Marxs
notion of historical materialism (Rasmussen, 1996) bring the human self and the being-nature to the
fore with emphasis on emancipation through action and critical reflection. The post-modern concept of
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Spiritual Capital (Dahkli and Clercq, 2004) views human capital as a sustainable resource that can be
linked to innovation. Although the innovation and knowledge literature illustrates new and emergent
theories in the area of organisational philosophy and consciousness (Dakhli and Clercq 2004, Dehler
and Welsh, 1994), they do have not yet provide the required bridge between theory and practice that
can lead to organisational transformation. Similarly, while the enquiry and discussion on spiritual and
human capital is becoming mainstream (Zohar and Marshall 2004, Finke, 2003), there is no concrete
framework to facilitate such a change at organisational level. An initial review of literature has shown
very limited discussion on linkage of intrinsic human elements to the process of innovation. Guillory
(2000) envisages an adaptable spiritual organisation that reinvents itself in response of changing
internal and external conditions but does not link personal and spiritual development of the employees
to the innovative output. Similarly, Senge (2008) envisages a sustainable organisation that aligns
social and individual values with organisational values but stays short of linking organisational
transformation to individual transformation or spirituality. As an organisational value structure
directly impacts social interactions and relationships between the employees within an organisation, an
exploration of underlying values in organisations can form a strong basis for developing employeefocussed understanding and concepts.

INNOVATION AND CONCEPT OF KNOWLEDGE IN ORGANISATIONS

In a review of the National Innovation System (NIS) commissioned by the Australian government in
2008, it was observed that the system required renewal, refurbishment, recasting and where necessary
re-imagining (Cutler, 2008). An urgent need for transformation of the innovation system was realised
in view of rapid expansion of global economy and emergence of competing markets, boosted by
advancements in information and communication technologies (Cutler, 2008). Australia currently
stands at number 18 in worlds most innovative countries and promotion of innovation is central to
governments R&D spending. In an increasingly competitive environment, innovative firms continue
to face the challenges of sustaining the innovation and creating new knowledge that lead to market
differentiation and long-term competitive advantage. In the process, the organisations will need to
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identify innovation opportunities and create an environment where creativity and innovation thrives at
all levels of operations. Culter (2008) noted,
Innovation in the first decades of the 21st century is more open and
pervasive, characterised by skill in collaborating and making connections so
that knowledge flows and grows, and so becomes available to meet customer
and community needs (Cutler, 2008, piii).

In this context, innovation is not just about technical expertise in the hands of a lone innovator but
rather a collaborative process of knowledge and idea creation (Culter, 2008) that creates a sustainable
competitive advantage for innovative organisations.. Lawrence and Lorschs (Lam, 2004)
Organisational Integration theory directs attention to the social structure of the organisation and its
internal cohesiveness as a critical determinant of corporate strategy and innovative performance. Hage
(1999) acknowledged that in spite of an increasing interest in the area of creative and flexible
organisations, the topic of organisational innovation has not been taken up either in management or
organisational theories or research. However, with the advent of new technologies, global market
access and changing cultural dynamics of workplaces, it has become critical for the organisations to
consider innovation as an important answer to market demands and competitive challenges.

The innovation can either be a new idea, technology, product, service or process (Hage, 1999,
Damanpour 1994). The key for the organisations would be to find link between knowledge creation
and innovation (Casselman, et al, 2006) that result in creating a sustainable advantage. As observed by
Sarros, Cooper and Santora (2008) the actual innovation that occurs in an organisation can be linked to
the degree of support and encouragement provided by the organisation to its employees. This
observation is consistent with the study of Tushman and OReilly (1997) that found that
encouragement and use of social control can result in promoting and sustaining innovation over a long
period of time. Norms suggested by Tushman and OReilly (1997) that promote innovation and
change include support for risk taking and change, tolerance of mistakes, effective group functioning
and speed of action. Zine and Buckler (Katz, 2004) in their research on innovativeness of
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organisations found that companies such as Sony, HP, Toshiba and Club Med that craft and sustain
innovation also embody an innovation culture that nurtures, rewards and demands innovation at all
levels of organisation. Christensen (Katz, 2004) noted that innovation failed when managers attempted
to implement innovation in organisations that did not have the capability to succeed.
Damanpour (1996) defined organisational innovation as the process of adaptation of an idea or
behaviour that is new to the organisation. The existing literature on innovation is diverse and subject
to different interpretation within the different social and organisational contexts (Lam, 2004).
Amabile, Conti, Coon, Lazenby and Herron (1996) with a focus on creativity have defined innovation
as;
the successful implementation of creative ideas within an organization. In
this view, creativity by individuals and teams is a starting point for
innovation; the first is necessary but not sufficient condition for the second
(Amabile et al, 1996, p1155).

Lam (2004) classified the literature on innovation in three major streams, structural characteristics of
an innovative organisation or technological innovation, organisational cognition and learning or
knowledge creation, and organisational change and adaptation. Review of the literature showed that
although there were some interconnection and commonalities between these three forms of innovation,
there is no single coherent conceptual framework for understanding the phenomenon of
organisational innovation (Lam 2004, p31). Christensen (Katz, 2004, p625) Christensen (Katz, 2004)
stresses that ground-breaking disruptive innovation without exception is rooted in free standing value
network that includes the organisation as well as other stakeholders. Florida (Chapman, Berman and
Blitz, 2008) looks at creativity as an inherent human capability that comes from within, Creative
people are motivated from within they seek challenges and excitement and they seek to work on
great projects (Chapman, Berman and Blitz, 2008, p38) The focus in the innovation literature on the
need to explore social and human dimensions of organisation is congruent with the need to maintain
market competitiveness through continuous and sustainable innovation.

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EXPLICIT VS TACIT KNOWLEDGE

A key aspect of organisational learning and knowledge creation models is an organisations ability to
translate individual insights and knowledge into collective knowledge and organisation capabilities
(Lam, 2004, Nonaka, 1994). Ylirenko, Autio and Sapienza (Casselman et al, 2006) viewed knowledge
acquisition as a mediator between social capital and new product development. Nonaka (1994),
recognised explicit knowledge as formal and systematic that can be easily communicated and shared
and tacit knowledge that is hard to formalise and difficult to communicate as it is rooted in human
behaviour and interaction. This distinction between explicit and tacit knowledge, and a lack of
understanding of the former, provides the grounds for research into the human aspects of knowledge
creation and examining the impact of such engagement on innovation processes. The impact of this
comparison and study can be beneficial for organisations that have to rely on effectiveness of their
innovation and knowledge management processes to sustain their competitive advantage and succeed
in rapidly changing global economy.

The tacit component of knowledge relates directly to how people feel, respond and interact in the
process of exchanging something that goes beyond an explicit explanation. Nonaka and Takeuchi
(1995) emphasise that tacit knowledge embodies an important cognitive dimension that consisted of
schemata, mental models, beliefs and perceptions. In one of the early studies Perry (Richardson,
Eysenck and Piper, 1987) noted that the students, when they entered university, generally equated
knowledge with what is commonly referred to as facts, i.e. statements about the world that are
accepted as unequivocally true and correct, they failed to see the point of much of the teaching they
were exposed to (Richardson et al, p104). As noted by Scruton (1996), it was first Plato who
distinguished genuine knowledge from mere opinion (doxa) as true belief with an account and
supposed that we could answer the question of epistemology by inquiring into the peculiar state of
mind of the one who knows (Scruton, 1996, p317). Lam (2004) has discussed Simones bounded
rationality problem that looks at limitation in individual ability to process the complex variety of
stimuli contained in the external environment.
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However, cognitive models of organisational learning only deal with psychological aspects of human
behaviour. This distinction between explicit and tacit knowledge, and a lack of understanding of the
former, provides the grounds for research into the human aspects of knowledge creation and
examining the impact of such engagement on innovation processes. Quinn (1992), noted that the
capacity to manage human intellectand to transform intellectual output into a service or a group of
services embodied in a productis fast becoming the critical executive skill of this era (Quinn, 1992,
p241). The concept of tacit knowledge was originally developed by Michael Polanyi (1958) which he
referred to as structures of tacit knowing. Polanyi (1958) argued that creative acts were influenced
by strong personal feelings, awareness, personal experiences, emotions and abilities that were hard to
express and communicate. He believed that what is expressed in words, language and numbers is only
a fraction of actual knowledge that an individual has. Inspired by Polanyis concept of tacit knowing
(1958), Nonaka and Takeuchi (1995) proposed their SECI model (fig 1) that describes a process by
which organisations spiral their knowledge within and outside their organisations. The model presents
a dynamic nature of knowledge creation that holds that new knowledge is created and improved as it
moves between individuals and teams throughout the organisation. Value of the knowledge is, thus,
created through synergies between knowledge holders (both individual and group) within a supportive
and developmental organisational context (Rice and Rice, 2005).

Nonaka and Takeuchi (1995) argued that even though many of the new management theories since the
mid-1980s have pointed to the importance of knowledge to society and organisations in the coming
era, there are very few studies on how knowledge is created within and between business
organizations (Nonaka and Takeuchi, 1995, p49). They noted that Japanese companies viewed
knowledge primarily as tacit knowledge that was highly personal and hard to formalise, making it
difficult to communicate and share with others (Nonaka and Takeuchi 1995, p5). They proposed that
subjective insights, intuitions, hunches and other intrinsic propensities fell within the tacit knowledge.

Rice and Rice (2005) observed that an important addition to the above SECI model addition of the
Japanese concept of Ba provides a strong philosophical construct rooted in Japanese society that
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relates to the physical, relational and spiritual elements of place or perhaps context (Rice and
Rice, 2005, p672). The SECI model and movement of the spiral ba is show in the figure below.

Figure 1: Nonaka and Takeuchis SECI Model, Rice and Rice, 2005

Four different notions of Ba noted by the authors are defined in relation to each of the four quadrants
of the SECI model, which together make up the knowledge spiral (Rice and Rice, 2005);


The Originating Ba: a locale where individuals can share feelings, emotions, experiences and
perceptual models (Upper left)

The Dialoguing Ba: a space where tacit knowledge is transferred and documented to explicit
form. Two key methods factors are through dialogue and metaphor creation (Upper Right)

The Systematising Ba: a virtual space, where information technology facilitates the
recombination of existing explicit knowledge to form new explicit knowledge (Lower right)
and;

The Exercising Ba: a space where explicit knowledge is converted into tacit knowledge
(Lower Left)

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Nonaka and Konno (Rice and Rice, 2005) emphasised that both the task specific and the cognitive
dimensions of tacit knowledge, but in a departure from previous work, they also provided emphasis on
the emotional and even spiritual aspects of knowledge and its located space (Rice and Rice, 2005,
p673). Nonaka and Takeuchi (1995) provide examples of highly successful Japanese companies such
as Honda, Cannon, NEC and Sharp in tapping the tacit and often highly subjective insights, intuitions,
and ideals of employees as part of the knowledge creation process. Berger and Hefner (2003) observed
that Asian and Middle Eastern organisations such as Toyota, Mitsubishi, Sony, LG, Saudi Aramco,
Reliance Industries and Sinopec, which have a pre-dominant home culture, have successfully
managed their overseas ventures with a multi-cultural workforce. Maslow (1957) commented in his
speech,
what we have found during last ten years or so is that the source of
creativeness of the kind that we are actually interested in, i.e., the generation
of really new ideas, are in the depth of human nature. We dont even have a
vocabulary for it yet that is very good (Maslow, 1957)

In a similar observation, A.G. Lafley, Chairman and CEO of Proctor and Gamble wrote on P&Gs
innovation culture;
The kinds of innovation needed at Procter & Gamble must be realised
through teams. The idea for a new product may spring from the mind of an
individual, but only a collective effort can carry that idea through
prototyping and launch. If innovation is to be integrated with both business
strategy and work processes, as we believe it should be, it requires a broad
network of social interactions (Lafely, 2008).

There are indications that organisations have started looking at other aspects of innovation. As
reported in Bloomberg BusinessWeek (2006), General Electric (GE), has begun evaluating its top
5,000 managers on "growth traits" that include innovation-oriented themes such as "external focus"
and "imagination and courage. Likewise, Nokia inducts engineers with at least 10 patents into its
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"Club 10," recognising them each year in a formal awards ceremony hosted by CEO Jorma Ollila
(Business Week, 2010). In India, Infosys Technologies Ltd runs voice of youth program that
ensures that management stays involved in the innovation process in the company. Each year the
company selects nine top-performing young guns - each under 30 - to participate in its eight yearly
senior management council meetings, presenting and discussing their ideas with the top leadership
team (Business Week, 2010). Bierly, Kessler and Christensen (2000) term the judgement, selection
and use of specific knowledge for a specific context as organisational wisdom. They have presented
a framework that differentiates between data, information, knowledge and wisdom and argued that
organisational wisdom involves both the collection, transference and integration of individuals
wisdom and the use of institution and social processes such as structure and culture (Bierly, Kessler
and Christensen, 2000, p597).

The initial review of the literature on innovation and knowledge raises some interesting areas of
discussion, in particular the idea of viewing new knowledge or creation of new knowledge as an
innovation itself. However, it still has to link to tangible product-based outcomes that benefit the
organisation. At the same time, these discussions point towards important aspects of knowledge and
social cultures in organisations that can further be leveraged to sustain the innovation and develop new
capabilities. The link between organisational knowledge and innovation further extends to the
concepts of social integration and capital with emergence of new concepts such as Spiritual
Intelligence (Zohar and Marshall, 2000). The increased focus on the human potential and capabilities,
along with the concepts of spiritual capital, human capital and meaning of work, put the study in the
social context where the process of innovation can be identified with the advancement of human life
and a collective sense of achievement within the society.

CONCLUSION

The impact of social interaction and process on innovation outcomes is a relatively new area of study.
From the point of view of the current studies in the innovation field, there has been an interest in
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knowledge creation as another form of innovation with an example of Nonaka and Takeuchis (1995)
concept of tacit knowledge. However, there is not much understanding of how this knowledge, which
is hard to express and articulate, can be transferred and used in organisations. Polanyi (1958) believed
that what is expressed in words, language and numbers is only a fraction of actual knowledge that an
individual possesses. There is an apparent dimension of human sensitivities and intrinsic elements in
the discussion on tacit knowledge that may be linked to organisational culture and values. The review
of the literature shows that the concept of knowledge creation is strongly linked to organisational
innovativeness but not entirely understood and realised by the organisation. As noted by Casselman et
al (2006), the knowledge literature identifies existing knowledge as a pre-requisite for occurrence of
the innovation processes. These are evidences of an increasing interest in integration of innovation and
knowledge literature to conceptualise innovation as an outcome from a knowledge perspective. While
Nonaka and Takeuchi (1995) claim that the Japanese organisations are distinct in tapping into the tacit
knowledge of their employees and groups, they do not provide a transmission mechanism of transfer
between various forms of explicit and tacit knowledge. Practical mechanisms of such transfers of
knowledge may be critical in an innovative environment, especially from a competitive point of view,
and should be examined through empirical research frameworks.

***

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