A most peculiar commodity

Knowledge Assets - Information for Innovation
July 23, 1999

We are in the midst of an information revolution, in transit towards becoming an information (or knowledge-based) society. Sensitivity to the fundamental role of information, knowledge and the technologies that support their acquisition and spread is causing us to rethink the very assumptions on which our definitions of national economy, society, industry, organisation, our relationships to them and ultimately our identities are based.

Stuart Macdonald and Max Boisot both argue that information is not taken seriously, that knowledge is not understood in such a way as to enable its critical distinctions from physical goods to be noted and capitalised upon. For example, unlike tangible commodities, information is costly to produce and cheap to reproduce. Knowledge can be exchanged and retained at the same time. Knowledge that has been exchanged can maintain its usefulness for its original owner but the act of exchange renders it less scarce and reduces its worth. Both authors rail against the failure of prevailing approaches to innovation and change management to accommodate such "peculiar characteristics" (Macdonald) of information. The progressively expanding gap that has emerged between the world and our understanding of it are constraining the potential economic growth of firms and nations, forcing them "to fight tomorrow's competitive battles with yesterday's outdated weapons and tactics" (Boisot). Instead Macdonald and Boisot recommend the adoption of an information perspective.

Information for Innovation is a delight to read. The author attacks his subject with the intellectual incisiveness for which he is renowned. Using abundant examples taken from the implementation of government policies and management practices for innovation, Macdonald draws attention to the tendency for conventional innovation management wisdom to result in a focus on formal information transactions over informal information exchange. This focus can be seen in corporate hostility to information that originates from beyond its own boundaries and consequent resistance to strategic change. It is enshrined in the futile attempts by the Allies between the end of the second world war and the collapse of the Soviet Union to maintain technological supremacy through exercising control over the distribution and use of essential information. It is demonstrated by government policies that attempted to spur innovation in high technology through replicating the physical characteristics of Silicon Valley.

However, argues Macdonald, informal information transactions - for instance those involving the use of private information networks such as academic invisible colleges, company gate-keepers, professional peer networks - are often more appropriate to the fundamental characteristics of information. Recognition and support for informal transactions is an essential part of managing change from an information perspective. Information for Innovation may well be, as Macdonald claims, "too naive for some, too convoluted for others; too strange for many, too obvious for a few". Regardless it will intrigue and challenge a diverse readership.

Knowledge Assets takes up the theoretical agenda that is introduced through admitting the requirement for an innovation perspective. The book explores how firms might take strategic advantage from their knowledge assets (the stream of benefits that are expected to flow from stocks of knowledge within the firm). It delivers new insights into the ways that firms can maximise the returns to be had from their distinctive competences, capabilities and technologies. Boisot notes the growing complexity of management in the information economy. He identifies three processes - codification, abstraction and diffusion - that cooperate in order to economise on data-processing activities and simplify the management task.

Boisot integrates these three processes into dimensions of a single theoretical framework, the information space (or I-space) within which knowledge creation, transmission and evolution (learning) within particular institutional cultures can be understood and leveraged. Particularly useful are Boisot's refinements to the popular concept of tacit knowledge. Boisot argues that tacit knowledge is better understood when subdivided into three categories: knowledge that is not articulated (but in principle could be articulated) because everybody understands it, knowledge that is not articulated because nobody understands it, and knowledge that, while it is understood by some people, is not easy to articulate. Also informative are Boisot's insights into the factors that impact on the diffusion of knowledge, among them the establishment of a shared code of communication between sender and receiver, the existence of a shared context between sender and receiver and the rate and intensity of interaction.

Less convincing perhaps is the "social learning cycle", proposed to represent the theoretical complexities of the learning process that is responsible for driving the evolution of knowledge throughout the I-space.

Despite Boisot's claim that "abstract conceptual knowledge may find general application but may come across as pallid and bloodless", his book represents an important step towards the development of a knowledge-based theory of the firm. It is likely to be of particular use to academics, as well as the growing clan of practitioners in firms who are interested in management and organisational theory.

Jane Millar is research fellow in information, networks and knowledge, University of Sussex.

Knowledge Assets: Securing Competitive Advantage in the Information Economy

Author - Max H. Boisot
ISBN - 0 19 829086 1
Publisher - Oxford University Press
Price - £25.00
Pages - 284

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