Absorptive Capacity in Communities of Practice
A Case Study of Absorptive Capacity in Communities of Practice and the role of Knowledge Sharing Activities
Mark Dijkhof Student number: 1383531 MSc. Strategy & Innovation Supervisor: P.M.M. de Faria Rijksuniversiteit Groningen
28-06-2011
Abstract
This paper discusses absorptive capacity, its antecedents; prior knowledge and knowledge sharing activities, and the relation to the concept of communities of practice.
Based on the literature review, a model of absorptive capacity is constructed. The literature suggests communities of practice should exhibit a higher level of absorptive capacity and a higher level of knowledge sharing activities. The paper‟s research question is: What is the effect of communities of practice on the absorptive capacity of an organization? In a case- study research, a survey is used for data collection in the research and development department of one organization. The survey measures several factors determining the level of absorptive capacity, factors influencing knowledge sharing activities and characteristics of communities of practice. One sample represents employees who exhibit more of the characteristics of communities of practice and one sample represented employees who exhibit less of the characteristics of communities of practice. The first sample presented significantly higher scores on knowledge sharing activities and absorptive capacity. The sample also presented a stronger causal relationship between knowledge sharing activities and absorptive capacity. The results of this study suggest that the existence of communities of practice enhance the level of absorptive capacity of that group of employees. The study recommends organizations, that hold the development of knowledge in high regard, should focus on enabling and promoting knowledge sharing and facilitating communities of practice with the goal of increasing levels of absorptive capacity.
Keywords: absorptive capacity, communities of practice, knowledge
Table of Contents
Introduction ... 4
Theoretical Background ... 6
Relevancy of absorptive capacity to innovation and competitive advantage ... 6
The learning processes of absorptive capacity ... 13
Prior knowledge ... 15
Prior knowledge and KSA and their influence on AbCa‟s learning processes ... 21
Model of absorptive capacity ... 22
Communities of practice ... 24
Problem Statement ... 26
Methodology ... 28
Findings ... 32
Conclusion ... 40
References ... 44
Introduction
“Knowledge can be created only as combinations of what is already known” – Plato While visiting an organization for research purposes, I observed the secrecy and strict rules surrounding its research and development (R&D) department. The R&D department was closed off and one would need security clearance to enter the department. Interviewing employees of this particular department was considered „inappropriate‟ and surely, inquisitions regarding subjects of research were deemed „off limits‟. These measures are examples of ways for this organization to protect its research projects and to prevent knowledge spills. The secrecy surrounding the organization‟s R&D department also displayed the value of its practice to the organization.
Besides being separated from other departments, the group of employees working in the R&D department had another characteristic that set it apart from the rest of the organization. There seemed to be a great amount of group cohesiveness among the employees of the department, which may be in part due to its exclusivity. The characteristics exhibited resembled those of a community of practice. In the interviews held with different employees in that organization, it became more apparent that the researchers and engineers working in the secluded sections of the organization had a strong feeling of belonging to the group. The group‟s cohesiveness bounded the employees to a common goal.
These observations started me thinking about the implications of these structures and the impact such a group or community has on the absorptive capacity of the organization.
Those observations, combined with the theories of absorptive capacity have led to the main research question that is posed in this paper: What is the effect of communities of practice on the absorptive capacity of an organization? This main research question is supported by three sub research questions: (1) Does a community of practice have a high level of knowledge sharing activities?; (2) Does a community of practice have a high level of absorptive capacity?; and (3) Is the level of knowledge sharing activities related to the level of absorptive capacity?
To answer these questions, relevant literature is reviewed to find the factors relevant to the relationship between communities of practice and absorptive capacity. The literature review describes a couple of different concepts. It first describes the effects of absorptive
capacity on innovative capability and organizational performance. It then goes on to describe the concept of absorptive capacity itself: its definitions and relevant antecedents. The literature review describes the exploration vs. exploitation paradox, the role of prior knowledge and knowledge sharing activities on absorptive capacity and it goes on by presenting an integrated model of the concepts. Thereafter, the concept of communities of practice is discussed. From the literature review, some relationships between the concepts are suggested to exist. These relationships are tested in this research.
Several hypotheses are designed to test the relationships between the concepts discussed in the literature review. Four hypotheses are proposed in this research. These hypotheses state that the level of knowledge sharing activities (KSA) (H1) and the level of absorptive capacity (AbCa) (H2) is higher in populations exhibiting a high level of characteristics related to communities of practice (CoP), relative to populations exhibiting lower levels of characteristics related to communities of practice (non-CoP). The next hypotheses test whether the level knowledge sharing activities determine the level of absorptive capacity (H3) and whether this effect is stronger in CoP populations relative to non-CoP populations (H4). A survey is distributed among employees of the research and development department of an organization. The sample is divided in multiple strata according to how the participants score on exhibiting characteristics of communities of practice.
The results show support for all hypotheses. The level of knowledge sharing activities is found to be a predictor of absorptive capacity, although the relationship is not very strong.
Also, the existence of a community of practice enhances the participants‟ knowledge sharing activities and levels of absorptive capacity.
The structure of the paper is as follows: at first, the literature is reviewed and a model of absorptive capacity is constructed. Then the methodology is discussed and the findings of the analysis are presented. Afterwards, the findings are discussed and the research questions are answered. At last, managerial implications and the limitations and future research directives are presented.
Theoretical Background
In this literature review, relevant concepts and their relationships are introduced. The first section describes the role absorptive capacity plays in converting knowledge to commercial output. The following section focuses more on the main concept itself and its definition, followed by the antecedents that define the degree of absorptive capacity: prior knowledge and knowledge sharing activities.
Relevancy of absorptive capacity to innovation and competitive advantage
Absorptive capacity can play an important role in increasing a firm‟s competitive advantage, increase its performance and increase its innovative ability. The goal of this section is to explain the reason why organizations should be familiar with the concept of absorptive capacity,and how it can be of value in their strategic plans.
According to the resource-based view of the firm, knowledge can be an important source of (sustainable) competitive advantage (Barney, 1991). According to the knowledge- based view of the firm, knowledge is the most important source of (sustainable) competitive advantage and the main reason for an organization‟s existence (Grant, 1996). Developing the organization‟s knowledge domain can therefore be an important factor for an organization to try to gain a competitive advantage (Dyer & Singh, 1998; Hoopes & Postel, 1999; Jansen, van den Bosch & Volberda, 2005; Lane & Lubatkin, 1998; Liao et al., 2007).
External sources of information and knowledge are important sources for innovation (Cohen & Levinthal, 1990; Frenz & Ietto-Gillies, 2009; von Hippel, 1988; Lichtenthaler, 2009; Tsai, 2001), especially in the context of turbulent knowledge environments (van den Bosch, Volberda & de Boer, 1999), increased firm performance (Lichtenthaler, 2009), and gaining and sustaining competitive advantage (Jansen, van den Bosch & Volberda, 2005;
Todorova & Durisin, 2007; Zahra & George, 2002). Information, knowledge and know-how aid in the identification and exploitation of market opportunities (Kogut & Zander, 1992). The transfer of knowledge from one subject to another can provide opportunities for mutual learning, which in turn stimulates the creation of knowledge and contributes to the organization‟s ability to innovate (Tsai, 2001). Absorptive capacity, through its processes, facilitates the transfer of knowledge from outside sources to the firm, and it incorporates the exploitation
External sources of knowledge
Absorptive capacity
Competitive advantage Higher performance Innovative capacity
Figure 1; Simplification of relationships – input and outcome of absorptive capacity
of the acquired knowledge for innovative purposes and increased competitive advantage (Lane, Koka & Pathak, 2006).
Based on the literature, the relationships and role of the absorptive capacity concept can be compiled in a simplified model, depicted in Figure 1. Seen here as the input are the external sources of knowledge. These sources of knowledge can, through the processes of absorptive capacity (in this model, absorptive capacity is described as a black box), lead to a (sustainable) competitive advantage, a higher firm performance and increased innovative capacity.
The importance of innovation and its relationship to absorptive capacity
Organizations increasingly have to be able to compete in global markets and respond quicker to changing environments. Innovation is a key factor, but increased competition, high research and development costs and ineffectiveness of internal research and development - the latter being referred to as the traditional innovation process (Chesbrough, 2005) - may hinder the organization‟s innovative abilities (OECD, 2008). Traditional innovation practice is characterized as being internal to the organization. Traditional innovation relies for the most part on the knowledge and abilities of personnel in the R&D departments and for a small part on sources external to the firm (Chesbrough, 2005). Increased investments in traditional innovation and internal R&D are sometimes met with diminishing marginal utility, as was the case for Proctor & Gamble, who found in 2000 that their innovation model was no longer satisfying their needs for growth. Subsequently, they needed to change their innovation model from traditional R&D to their so-called connect and develop (C&D) model (Huston &
Sakkab, 2008).
When new ways of innovating are necessary, firms turn more and more towards new innovation models, such as „open innovation‟ (OECD, 2008). One important factor in these new ways of approaching innovation is the source of knowledge.
New ways of innovating focus less on internal practices, but are more focused outwards and try to leverage investments in R&D through the use of external sources of knowledge. New innovation models make more use of external sources of knowledge to increase innovative ability. Combinations between knowledge internal to the firm and knowledge found in external sources can provide the organization with a crucial advantage in developing new products or services or improving the organization‟s processes (Cohen &
Levinthal, 1990). It is important for an organization to be able to acquire these external sources of knowledge and use them to commercial ends.
To tap into external sources of knowledge, organizations can exploit several options:
licensing, R&D outsourcing, company acquisition, hire the personnel with relevant knowledge and creating (learning) alliances with competitors or other organizations (Cohen &
Levinthal, 1990; Cassiman & Veugelers, 2006; Hitt et. al., 2000; Lane & Lubatkin, 1998).
Using external sources of knowledge can benefit the organization. But for external sources of knowledge to be of value, the ability to acquire and exploit knowledge from these external sources is important. Organizations need to be able to acquire and use knowledge from external sources to aid in product development and innovation. The better an organization is able to acquire and use knowledge from external sources, the more benefits they can derive from this ability. This specific ability is the main subject of this paper. “The ability to recognize the value of new information, assimilate it, and apply it to commercial ends...” is collectively called the organizations absorptive capacity (Cohen & Levinthal, 1990).
Absorptive capacity can reinforce, complement or refocus the organization‟s knowledge domain (Lane, Koka & Pathak, 2006). By absorbing knowledge and combining the new knowledge with prior knowledge, novel linkages can be made (Van den Bosch, Volberda & de Boer, 1999; Kogut & Zander, 1992). This can result in learning new ways to produce, new ways to solve problems and have new perspectives on new situations (Liao et al., 2007). Absorptive capacity is critical for an organization‟s innovative capability (Cohen &
Levinthal, 1990) and leads to increased firm performance (Marinova, 2004; Lichtenthaler, 2009).
(Sustainable) competitive advantage
The absorptive capacity concept originated during the development of other popular areas of business research, which are for example: organizational learning (Grant, 1996), knowledge management, the resource-based view of the firm and the knowledge-based view of the firm. Research on absorptive capacity has some overlap with these areas of research (Lane, Koka & Pathak, 2006). The resource-based view of the firm explains why some firms are able to establish positions of sustainable competitive advantage. It perceives the organization as a unique combination of resources and capabilities (Barney, 1991; Grant, 1996). The knowledge-based view of the firm regards knowledge as the most important resource (Grant, 1996).
The ability to recognize the potential value of new external sources of knowledge and the ability to assimilate and exploit that knowledge is a resource that can differentiate a firm strategically (Van den Bosch, Volberda & de Boer, 1999; Mcdonald & Madharavan, 2007).
Depending on whether the resource is Valuable, Rare, imperfectly Imitable and Non- substitutable (the VRIN-framework), a resource can have the ability to supply the organization with a (sustainable) competitive advantage (Barney, 1991). When tested against Barney‟s VRIN-framework, the potential that absorptive capacity has to aid in sustaining a competitive advantage can be described. The characteristics of absorptive capacity determine that it can be - when developed to a certain degree - a rare and imperfectly imitable resource.
It is path dependent (Van den Bosch, Volberda & de Boer, 1999), based in knowledge and embedded in social structures (Cohen & Levinthal, 1990; Lane, Koka & Pathak, 2006). If an organization is able to exploit the knowledge absorbed, absorptive capacity can also be seen as valuable, as absorptive capacity is enabling the organization to absorb and exploit knowledge and create value.
The next section focuses on the concept of absorptive capacity itself. It describes the construct and its definition, its processes and its antecedents and describes the model of absorptive capacity used in this paper.
Absorptive capacity
Absorptive capacity is the ability a firm has to absorb knowledge from external sources and apply it to commercial ends. The absorptive capacity construct has been mentioned first by
Cohen and Levinthal in 1989. Definitions, models and research about the construct have been evolving ever since (Abecassis-Moedas & Mahmoud-Jouini, 2008; Lane, Koka & Pathak, 2006; Zahra & George, 2002). The following definitions are three important definitions in absorptive capacity literature:
( 1)
The ability to recognize the value of new information, assimilate it, and apply it to commercial ends (Cohen & Levinthal, 1990).
( 2)
A set of organizational routines and processes by which firms acquire, assimilate, transform, and exploit knowledge to produce a dynamic organizational capability (Zahra & George, 2002).
( 3)
Absorptive capacity is a firm‟s ability to utilize externally held knowledge through three sequential 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 (Lane, Koka & Pathak, 2006).
The definition from Cohen and Levinthal is from their 1990 article “Absorptive Capacity: A New Perspective on Learning and Innovation”, which is the follow-up of their 1989 article where they first mention absorptive capacity. Anecdotal evidence shows that this 1990 definition (or a slight adaptation) has been used frequently in papers. Until June 2002, only four papers extended or refined the absorptive capacity construct (Lane, Koka & Pathak, 2006). Of these four, only Zahra and George looked critically at the construct‟s definition (Todorova & Durisin, 2007; Zahra & George, 2002). Zahra and George‟s definition explicitly mentioned absorptive capacity as a capability, whereas that was more implicitly mentioned by Cohen and Levinthal (Cohen & Levinthal, 1990; Lane, Koka & Pathak, 2006; Zahra &
George, 2002). Describing absorptive capacity as a capability (an organizational learning ability), is in line with approximately 40 percent of the papers in Lane, Koka and Pathak‟s research. Lane, Koka and Pathak‟s definition explicitly mentions learning processes (exploratory, transformative and exploitative), emphasizing absorptive capacity as being an organizational capability. Also, by comparing Cohen and Levinthal‟s (1990) definition with Lane, Koka and Pathak‟s definition shows similarities, keeping in line with the original
process perspective of their 1990 article (Cohen & Levinthal, 1990; Lane, Koka & Pathak, 2006).
The definition used to describe absorptive capacity comes from the article of Lane, Koka and Pathak (2006). It is the most recent and best supported definition and it captures the original ideas from Cohen and Levinthal. This definition is based on a broad range of articles concerned with absorptive capacity. Furthermore, absorptive capacity is described as an organizational capability which is shown by the learning processes mentioned in the definition. The definition enables dividing absorptive capacity in different learning processes that can be measured independently and can aid in better understanding various potential outcomes of absorptive capacity research. In the rest of this paper, absorptive capacity is referred to as AbCa. Figure 2 displays a model representation of AbCa based on the definition by Lane, Koka and Pathak (2006).
AbCa is seen as an ability of the organization. It is the ability to process externally held knowledge to commercial outputs and new knowledge. The degree to which an organization is able to do this is based on their ability to fulfill the three learning processes that together constitute the AbCa process. The paper continues by describing the learning processes of AbCa. The three learning processes of AbCa are explained below and are revisited later on in the paper, after the concepts of prior knowledge and knowledge sharing have been discussed.
Recognizing and understanding
potentially valuable new
knowledge
Assimilating valuable new
knowledge
Using the assimilated knowledge Externally
held knowledge
New knowledge
Commercial outputs
Absorptive capacity
Figure 2; A model of AbCa based on Lane, Koka and Pathak (2006)
Exploration and exploitation
The concepts of exploration and exploitation are both mentioned in the definition of AbCa. According to March (1991), exploration includes things captured by the terms:
“search, variation, risk taking, experimentation, play, flexibility, discovery and innovation”. It is “the pursuit of new knowledge, of things that might come to be known” (Levinthal &
March, 1993, p.105). Returns from exploration activities are indirect, less certain and more remote in time. In the field of knowledge management, with exploration is meant the broadening of the knowledge domain (Schulz, 2001). In innovation, the exploration dimension is characterized by the departure from existing knowledge into unexplored areas of scientific research (Jansen, van den Bosch & Volberda, 2005). Exploitation is captured by terms such as: “refinement, choice, production, efficiency, selection, implementation and execution (March, 1991). It is “the use and development of things already known” (Levinthal
& March, 1993, p.105). Exploitation leads to more returns relative to exploration, is more direct and develops competence. In knowledge management, exploitation is the commercial application and recombination of knowledge already possessed (Schulz, 2001). In innovation, the exploitation dimension is characterized by reinforcing existing skills, processes and structures (Jansen, van den Bosch & Volberda, 2005).
March (1991) explains the paradox of exploration and exploitation in his 1991 article.
Exploration and exploitation compete for scarce resources and as a result, organizations have to make explicit (through investments or strategies) or implicit (through features of organizational form or custom) choices between the two (Levinthal & March, 1993). As both exploration and exploitation compete for scarce resources, organizations should search for a way to balance both practices. Exploration without exploitation will not lead to any returns because of a lack of implementation and execution, and exploitation without exploration will diminish returns because of a lack of innovation and variation. A balance between exploration and exploitation will lead to the generation of new opportunities and the exploitation of these opportunities (Levinthal & March, 1993).
The same ideas hold for the learning processes in the AbCa process. Organizations should seek a balance between exploratory learning and exploitative learning. According to Zahra & George‟s model of AbCa (2002), the processes of acquiring and assimilating knowledge make up the organizations „potential AbCa‟ and the processes of transformation
and exploitation are the organizations „realized AbCa‟. Potential AbCa defines the bottleneck of an organizations level of AbCa, whereas realized AbCa shows the effectiveness of exploiting acquired and assimilated knowledge (Zahra & George, 2002). When compared with the processes in the definition of Lane, Koka and Pathak (2006), which is the definition used in this paper, the potential AbCa is determined by the organizations abilities in exploratory learning and transformative learning and the realized AbCa is determined by the organizations ability in exploitative learning. An organization should have the ability to practice all three learning processes to be able to successfully use their absorptive capacity.
An excessive focus on only one learning process will likely have negative consequences (Lane, Koka & Pathak, 2006; Lichtenthaler, 2009; Zahra & George, 2002).
The learning processes of absorptive capacity
The definition that is used in this paper describes the three learning processes that the AbCa-concept consists of. Separating these three learning processes is necessary for analysis, because each of the three require different processes in the organization to exist (Lane, Koka
& Pathak, 2006). A short introduction of these three processes follows in the next section.
Further on in the paper, these learning processes are discussed again with a focus on organizational antecedents of AbCa in the form of prior knowledge and knowledge sharing activities.
Recognizing the value / Exploratory learning
Exploratory learning refers to knowledge acquisition. In the definition, the exploratory learning process is used to recognize and understand new external knowledge (Lane, Koka &
Pathak, 2006). Knowledge acquisition does not necessarily lead to knowledge application (Zahra & George, 2002). Organizations that have a need for knowledge use scanning mechanisms to recognize external sources of knowledge (Cohen & Levinthal, 1990). Prior knowledge (discussed as an antecedent of AbCa later in this review) is an essential resource for scanning mechanisms in exploratory learning (Szulanski, 1996). Prior knowledge helps in recognizing external knowledge and assimilating that knowledge (Zahra & George, 2002). A high level of exploratory learning is a necessary process of AbCa for an organization to acquire knowledge and sustain superior performance, but a high level of ability in the other
two processes is needed as well (Lane, Koka & Pathak, 2006; Lichtenthaler, 2009; Zahra &
George, 2002).
Assimilating knowledge / Transformative learning
Transformative learning refers to the retention of knowledge over time. It links the processes of exploratory learning and exploitative learning in the AbCa process together (Lane, Koka & Pathak, 2006). Transformative learning is about assimilating and reactivating knowledge over time. Knowledge absorbed in the exploratory learning process for example may not be used directly, but may be used in a couple of year‟s time. Retention of knowledge is important for the organization to be able to use the knowledge and exploit it. The transformative learning process is characterized by knowledge management practices that facilitate internal knowledge sharing activities. Through internal knowledge sharing, more members of the organization acquire the knowledge and are able to retain and recombine that knowledge over time, ensuring retention (Lane, Koka & Pathak, 2006; Lichtenthaler, 2009).
An organizations potential AbCa is defined by the organizations exploratory learning and transformative learning ability (Zahra & George, 2002).
Using assimilated knowledge / Exploitative learning.
Exploitative learning is associated with matching knowledge and markets. Applying the absorbed knowledge and exploiting the market with that applied knowledge constitutes the exploitation step in absorptive capacity (Lane, Koka & Pathak, 2006; Lichtenthaler, 2009). Innovation and exploitation of opportunities can happen through applying or recombining knowledge from external sources with knowledge already possessed (March, 1991; Schulz, 2001). The knowledge already possessed is considered prior knowledge.
Market knowledge determines the discovery of exploitation opportunities (Shane, 2000). Prior related market knowledge determines the ability an organization has to exploit knowledge (Lichtenthaler, 2009).
As was mentioned before, all three processes depend on different organizational processes and resources for their effectiveness. These processes and resources are the antecedents for the learning processes of AbCa. The antecedents that define an organizations level of AbCa (Lane, Koka & Pathak, 2006) are the organizations level of prior related
knowledge and the intra-organizational knowledge sharing and knowledge management activities.
Prior knowledge
One antecedent of AbCa that has been mentioned by many authors, and still is one of the most mentioned and used antecedents in models and definitions, is prior related knowledge (Abecassis-Moedas & Mahmoud-Jouini, 2008; Cohen & Levinthal, 1989, 1990;
Lane & Lubatkin, 1998; Lichtenthaler, 2009; Szulanski, 1996; Todorova & Durisin, 2007;
Tsai, 2001; van den Bosch, Volberda & de Boer, 1999; Zahra & George, 2002). Prior knowledge has been called a „mediating variable‟ by Lane, Koka and Pathak (2006), meaning the variable is defining the level of AbCa. Cohen and Levinthal were the first to note the importance of prior knowledge to AbCa.
A small excerpt from Cohen and Levinthal‟s 1990 article states that: “…the ability to evaluate and utilize outside knowledge is largely a function of the level of prior related knowledge. At the most elemental level, this prior knowledge includes basic skills or even a shared language but may also include knowledge of the most recent scientific or technological developments in a given field. Thus, prior related knowledge confers an ability to recognize the value of new information, assimilate it, and apply it to commercial ends. These abilities collectively constitute what we call a firm‟s „absorptive capacity‟.” (p.128) In this paper, when „prior knowledge‟ is mentioned, it refers partly to Cohen and Levinthal‟s (1990) description. When they mention prior knowledge, they include basic skills, a shared language and knowledge of scientific or technological developments in a given field.
Prior knowledge in this paper also includes implicit or tacit knowledge and skills relevant to the activities of the subject. The following section is an explanation of the concept of „prior knowledge‟.
Figure 3 depicts a simple system, with multiple actors. These actors (A, B and C) all have a particular set of prior knowledge, their respective knowledge domains, which in the figure are depicted by a circle. These actors have some overlap in some parts of their knowledge domains. Some degree of their knowledge domain is shared with others, but each actor also has some part of their knowledge and skills that is not shared. This may include a deeper
understanding in fields of expertise and other technological developments, expert knowledge and expert skills (of which most are contextual and tacit) and experience (which is path dependent). The knowledge that overlaps is seen as a common stock of knowledge, which provides the organization or group with the ability to transfer knowledge (Grant, 1996; Kogut
& Zander, 1992; Mowery, Oxley & Silverman, 1996).
A gatekeeper is an employee who, through expert knowledge and skills, can better understand a specific knowledge field and transfer the knowledge from the field to other employees. The gatekeeper is the one that makes the (sub)conscious decision whether or not the knowledge is relevant and/or valuable enough to diffuse throughout the organization. In this system, all actors can act as gatekeepers for the organization (Cohen & Levinthal, 1990), but in the specific example of knowledge domain „X‟, actor A can act as the gatekeeper. Only actor A has relevant knowledge about knowledge domain „X‟ and therefore is the only one that can, through the use of a shared language and via the social and communication structures, spread knowledge about domain „X‟ throughout the organization. In this example, knowledge domain „X‟ consists of technical or scientific information that is difficult for the rest of the organizations members to understand. Actor A serves as a gatekeeper for the rest of the organization. If a knowledge domain is closer related to the organizations activities, the role of a gatekeeper is not as necessary. Other employees are expected to have a sufficiently broad knowledge domain to learn and understand the knowledge. The basic idea is that one needs (prior) knowledge to understand (new) knowledge and thus some overlap in knowledge is needed (Lane & Lubatkin, 1998).
A B
C X
Figure 3; Model of concept of prior knowledge
In this example, the total of prior knowledge of the organization is the combination of knowledge domains of subjects A, B and C. However, the accumulation of prior knowledge does not solely determine the level of AbCa in an organization.
Market and technological knowledge
Some authors have made a distinction between different characteristics of the relevant prior knowledge that an organization needs for its absorptive capacity. The distinction presented here, one made by multiple authors (Kogut & Zander, 1992; Lichtenthaler, 2009;
Shane, 2000; Song et al., 2005), is between market knowledge and technological knowledge.
This distinction is presented because the different knowledge types have different effects on the three learning processes in the absorptive capacity process (Garud & Nayyar, 1994;
Jansen, van den Bosch & Volberda, 2005). These knowledge types are identified as critical components of prior knowledge (Lichtenthaler, 2009).
Cohen and Levinthal (1990) describe absorptive capacity as a byproduct of research and development practices or a byproduct of manufacturing experience. A higher level of scientific and technological knowledge allows employees to better absorb scientific and technological knowledge, creating a loop of learning. Cohen and Levinthal associated a certain level of absorptive capacity with the investment in research and development and therefore assumed prior knowledge as an antecedent to consist of scientific and technological knowledge. In absorptive capacity research, multiple authors have only considered technological knowledge as prior related knowledge (Cohen & Levinthal, 1990; Mowery, Oxley & Silverman, 1996; Tsai, 2001).
According to Lichtenthaler (2009), technological knowledge is the knowledge that an organization explores, transforms and exploits in its absorptive capacity processes. Market knowledge is the knowledge that enables recognition and commercialization of market opportunities (Shane, 2000). The combination of technological knowledge and market knowledge enables the creation of value (Song et al., 2005). Market knowledge helps in applying acquired and assimilated (technological) knowledge. Therefore a higher level of market knowledge is needed towards the end of the absorptive capacity process.
As is stated by Cohen and Levinthal: “Assuming a sufficient level of knowledge overlap to ensure effective communication, interactions across individuals who
each possess diverse and different knowledge structures will augment the organization‟s capacity for making novel linkages and associations – innovating – beyond what any one individual can achieve.” (1990, p.133) Knowledge sharing
Prior knowledge alone is not enough to determine and describe an organization‟s level of absorptive capacity. Both types of prior knowledge need to be integrated into organizational learning processes, which most likely enhance innovation and performance.
The diffusion of knowledge throughout the organization enables employees to develop novel linkages between knowledge from internal and external sources. Knowledge sharing is therefore an important aspect for an organization to develop knowledge and increase its absorptive capacity.
The other antecedent that influences an organization‟s AbCa, next to the before mentioned prior knowledge, are the characteristics of the organization‟s structures and processes with a focus on those that affect knowledge transfer, sharing, integration and creation (Cohen & Levinthal, 1990; Lane, Koka & Pathak, 2006; Lane & Lubatkin, 1998;
Liao et al., 2007; van den Bosch, Volberda & de Boer, 1999). Organizational and human factors have an impact on the effectiveness of knowledge management systems that facilitate knowledge sharing (Cabrera, Collins & Salgado, 2006). By sharing and transferring knowledge, an individual can increase his or her prior knowledge domain (Nonaka, 1994;
Zahra & George, 2002). These structures and processes affect an organization‟s knowledge domain by diffusing knowledge between individuals and groups, thereby influencing an organization‟s level of prior knowledge and thus absorptive capacity (van den Bosch, Volberda & de Boer, 1999). According to Lane, Koka and Pathak (2006), these structures and processes influence the efficiency and effectiveness of assimilation and application in the AbCa process.
For this research, the focus will be on knowledge sharing activities internal to organization. Knowledge sharing plays a role in all three learning processes of AbCa. The next chapter discusses the role of knowledge sharing activities in these processes.
Knowledge
Knowledge is often divided in two types: information (explicit knowledge) and tacit knowledge (Grant 1996; Kogut & Zander, 1992). Information is defined as: “codifiable knowledge that can be easily transmitted” (Dyer & Singh, 1998, p.665). Information can easily be communicated and is therefore explicit (Grant, 1996). Tacit knowledge, or know- how, is more tacit and therefore “reveals itself in its application” (Grant, 1996, p111). It is the things we know but cannot tell (Lubatkin, Florin & Lane, 2001). Tacit knowledge is “sticky”
(Szulanski, 1996), difficult to codify and more difficult to transfer relative to explicit knowledge (Kogut & Zander, 1992). Information can be seen as a flow of messages while knowledge is created from that flow of information (Nonaka, 1994). Due to the characteristics of tacit knowledge compared to explicit knowledge, the former is much more likely to create advantages and value (Dyer & Singh, 1998). In this paper, knowledge (if not specifically described otherwise) refers to tacit knowledge.
Knowledge sharing is the interaction between individuals in which they share knowledge among themselves and others, a process which consists of the intake and output of knowledge (Liao et al., 2007; van den Hooff & van Weenen, 2004). The sharing of knowledge can involve different processes and structures, depending on whether the knowledge is tacit or explicit (Nonaka & Takeuchi, 1995) and depending on the means of communication the individuals use. Explicit knowledge and information, as discussed, is easily codified and transferred. There is no need for a relevant level of knowledge sharing activities for sharing explicit knowledge. When knowledge is more tacit, it influences how knowledge is transferred (Lubatkin, Florin & Lane, 2001). Based on Nonaka‟s modes of knowledge conversion (1994), sharing tacit knowledge among individuals is done through socialization. By socialization is meant the social interactions between individuals with the intent to convert tacit knowledge from one individual to tacit knowledge for another individual (Nonaka, 1994). Individuals can learn from each other through observation, imitation and practice. Nonaka does mention the need for a shared mental model (similar to the idea of a significant degree of prior related knowledge) to enable knowledge transfer.
Knowledge sharing activities (KSA) are the behaviors of employees with the purpose of sharing and diffusing knowledge with and among others. Successful knowledge sharing can result in a shared knowledge domain among employees (Liao et al., 2007). Individuals
learn tacit knowledge through social interactions with others. But for knowledge sharing activities processes to take place, employees have to be motivated to share knowledge.
Factors that influence knowledge sharing between people are trust, willingness to share and processes and structures facilitating knowledge sharing activities to take place.
Trust defines the way in which people act towards others. The following excerpt is from Mayer, Davis and Schoorman (1996). They‟ve composed a definition of trust. Authors do have recognized the difficulty in creating an all encompassing definition of the concept of trust (Lazaric & Lorenz, 1998, In Roberts, 2006)
Mayer, Davis and Schoorman on trust: “The definition of trust […] is the willingness of a party to be vulnerable to the actions of another party based on the expectation that the other will perform a particular action important to the trustor, irrespective of the ability to monitor or control that other party. This definition of trust is applicable to a relationship with another identifiable party who is perceived to act and react with volition toward the trustor. […] Being vulnerable […] implies that there is something of importance to be lost.
Making oneself vulnerable is taking risk. Trust is not taking risk per se, but rather it is a willingness to take risk.” (1995, p.712)
If there is a certain degree of trust between parties, they might be more willing to share knowledge because they are more willing to take risk. The risk in sharing knowledge is that one can lose something of value, such as a basis of power or the feeling of being needed.
Important is that employees are willing to interact with each other and share knowledge.
Employee willingness to share knowledge is the most important factor for successful knowledge sharing (Liao et al., 2007).
Knowledge sharing activities are facilitated through structures and processes that enable socialization to take place. Organizational structures that support socialization are for example communication systems where employees can interact (van Hooff & van Weenen, 2004). These structures enable people to retain and exchange information and explicit knowledge with each other. It may also help in determining where in the organization relevant knowledge is to be found. Furthermore, these structures might enhance communication and contact moments. Processes that enable socialization can be structured, such as weekly or
monthly meetings, or less structured such as „on-the-job‟ interactions. These processes create contact moments and allow people to interact and communicate with each other, thus allowing learning and socialization to take place.
Prior knowledge and KSA and their influence on AbCa’s learning processes Now that it has been established that AbCa consists of three learning processes, and that both prior knowledge and KSA have an influence on the level of AbCa in the organization, it is necessary to examine the influence of these antecedents of AbCa in each of the three learning processes specifically.
Exploratory learning
Exploratory learning refers to knowledge acquisition. Organizations use environmental scanning mechanisms to scan for external sources of knowledge. The knowledge processed by the AbCa process is usually technological or scientific (Cohen &
Levinthal, 1990; Lane, Koka & Pathak, 2006; Lichtenthaler, 2009). As is explained in the section on prior knowledge, employees need prior related knowledge to recognize knowledge.
In the exploratory learning process, prior related knowledge is essential (Szulanski, 1996). A relatively high level of technological and/or scientific knowledge is needed to recognize the external sources of knowledge, because the knowledge that needs to be acquired is also characterized as technological and/or scientific (Zahra & George, 2002). Market knowledge is also needed to some extent, but organizations tend to have sufficient market knowledge available for this process (Todorova & Durisin, 2007). A high level of KSA is not needed in this process, as there is less need for combining and transferring of knowledge. There is some need for KSA in terms of the sharing of market knowledge.
Transformative learning
Transformative learning refers to the retention of knowledge over time. Acquired knowledge needs to be assimilated and diffused so it can be reactivated over time. Diffusion of knowledge throughout the organization ensures retention and facilitates recombining knowledge (Lane, Koka & Pathak, 2006; Lichtenthaler, 2009). The transformative learning process depends on a high level of KSA. Organizations need sufficient prior technological and market knowledge in this learning process (Marsh & Stock, 2006). A high level of technological knowledge enables an organization to easier maintain and reactivate assimilated
knowledge (Garud & Nayyar, 1994). Market knowledge is needed to determine whether or not to maintain specific knowledge (Marsh & Stock, 2006; Lichtenthaler, 2009).
Exploitative learning
Exploitative learning is associated with matching knowledge and markets. Assimilated technological knowledge from external sources is combined with technological knowledge already in the organization. To successfully exploit the knowledge assimilated, market knowledge is needed. Market knowledge is the critical component of the exploitative learning process (Teece, 2007). Market knowledge helps identifying market opportunities (Shane, 2000). Market opportunities can be exploited through the recombination of internal and external sources of technological knowledge. With these new combinations of knowledge, Therefore, a high level of technological knowledge is also needed. KSA activities facilitate the sharing of knowledge and therefore facilitate the recombination of knowledge.
Model of absorptive capacity
Based on the literature, the concepts and their relationships can be depicted in a model.
This model is based on the definition of AbCa by Lane, Koka and Pathak (2006), which is already displayed in Figure 2. Extending that model with the antecedents of AbCa – prior related knowledge and KSA – creates a new model. This is the model of AbCa that is used in this paper, displayed in Figure 4. Displayed are the inputs (the external knowledge source), which through the process of AbCa can lead to the outputs: competitive advantage, higher performance and innovative capacity. The AbCa process consists of three sequential learning processes: exploratory learning, transformative learning and exploitative learning. The degree to which an organization is able to complete these processes is determined by their level of prior related knowledge and their level of KSA.
External sources of knowledge are the inputs for the AbCa process, which consists of three learning processes by which the knowledge is recognized, assimilated and exploited.
The AbCa process increases competitive advantage, performance and innovative ability.
These processes are depicted by a solid arrow in the model. The effectiveness of AbCa is determined by the level of relevant prior knowledge, of which technological and market knowledge are the most significant, and KSA, which are determined by trust among employees, employees‟ willingness to share knowledge and processes and structures that
facilitate knowledge sharing and socialization. These relationships are depicted with a dotted arrow in the model. The arrow between knowledge sharing activities and prior knowledge indicates that knowledge sharing activities has an effect on the knowledge domain and so affects the levels of prior related knowledge. This is also a dotted line, indicating the relationship.
Knowledge sharing activities help with diffusing knowledge and can deepen an organization‟s knowledge domain (Levinthal & March, 1993). The definition for AbCa states that another outcome of the AbCa learning processes is new knowledge, which broadens the organization‟s knowledge domain and therefore increases the organization‟s level of prior knowledge (Cohen & Levinthal, 1990; Levinthal & March, 1993). This relationship however is omitted in the model for its irrelevancy in this research.
According to Cohen and Levinthal (1990), an organization‟s AbCa is dependent on the levels of AbCa of its members. Each member of the organization has knowledge which can add to the organizations prior level of knowledge. Members of the organization can also act as gatekeepers for the organization, as was discussed earlier. An organization‟s AbCa could therefore be thought of the sum of the levels of AbCa of its members, combined with the structures and processes that facilitate socialization of knowledge between the organizations members.
Prior knowledge Knowledge sharing activities
Absorptive capacity
Technological knowledge Market knowledge
Trust
Willingness to share Processes and structures
External sources of knowledge
Recognizing the value / Exploratory
learning
Assimilating knowledge / Transformative
learning
Using assimilated knowledge / Exploitative
learning
Competitive advantage Increased performance Innovative capability
Figure 4; A consolidated model of absorptive capacity, based on literature
Communities of practice
As can be seen in Figure 3, different actors have differing areas of knowledge. This logic can be extended to include different groups within an organization having different knowledge fields. Employees working together in a group communicate and learn from each other. They have knowledge about the ongoing activities in that group and have a common understanding of how to get work done. Again looking at Figure 3, these subjects (A, B and C) can also represent different communities of practice within an organization. The following excerpt from the book of Wenger, McDermott & Snyder (2002) explains in short what a community of practice is:
“Communities of practice are „groups of people who share a concern, a set of problems, or a passion about a topic, and who deepen their knowledge and expertise in this area by interacting on an ongoing basis.‟ They operate as
„social learning systems‟ where practitioners connect to solve problems, share ideas, set standards, build tools, and develop relationships with peer and stakeholders … [They] feature peer-to-peer collaborative activities to build member skills and steward the knowledge assets of organizations and society.”
(p.17)
Communities of practice (CoP) are mechanisms used for knowledge management practices. Knowledge management, defined by Blair (2002) is the active management of organizational support and expertise. A CoP is identified as a mechanism through which knowledge is held, transferred and created (Roberts, 2006). A CoP promotes organizational learning through information sharing (Lesser & Everest, 2001; Wenger, 1991). Through a CoP, the capture and prevention of loss of tacit knowledge is facilitated (Droege & Hoobler, 2003; Hemmasi & Csanda, 2009). This is done by connecting people with similar interest, allowing them to capture information and knowledge and transfer it to members of the CoP (Hemassi & Csanda, 2009; Lesser & Everest, 2001).
One of the key objectives of the CoP is to improve the problem solving techniques and to enhance the innovation skills of all the members inside the CoP (Yang & Wei, 2010). This is done by facilitating knowledge sharing and transfer and joint problem solving activities (Lesser & Everest, 2001). CoPs are known as effective structures, capable of producing
innovations (Anand, Gardner & Morris, 2007). Innovative and problem-solving behavior is promoted by the combination of knowledge domains within the CoP. Although CoPs are mechanisms which can be used for knowledge management practices, a CoP cannot be established by management. Management can however establish a team and promote the development of a CoP by facilitating, supporting and cultivating a CoP‟s emergence (Lesser
& Everest, 2001; Roberts, 2006).
Retention and transfer of knowledge is achieved by sharing knowledge about the ongoing activities or shared subjects from the group. Through mutual experience and a feeling of belonging to a group, members are more willing to share (Nonaka, 1994). Trust is also an issue for effective knowledge sharing within the CoP, as is discussed in the section on knowledge sharing. Empirical evidence suggests that trust leads to higher levels of openness and thereby facilitate knowledge sharing (Wathne, Roos & von Krogh, 1996). The presence of trust between individuals indicates an ability to share a high degree of mutual understanding. “Trust, familiarity and mutual understanding, developed in their social and cultural context, are prerequisites for the successful transfer of tacit knowledge” (Roberts, 2006). By sharing knowledge and skills, the group‟s knowledge domain is increased.
Communities of practice are important for socialization processes (Nonaka, 1994) and knowledge sharing and creation processes (Koliba & Gadja, 2009).
There is also some critique on the use of CoPs. One area of critique is of importance for this research. Over time, communities may develop preferences and predispositions that will influence their ability to create and absorb new knowledge. CoPs may become resistant to change (Roberts, 2006). Some knowledge may be in line with a community‟s identity and may be more likely to be absorbed. A CoP‟s resistance to new ideas and new knowledge may result in an increasingly static knowledge domain.
A community of practice can be recognized by the following characteristics: (1) a recognized domain of interest that the group members share an interest in and commit to, (2) relationships between group members that allow them to engage in joint activities, share information and help each other, and (3) the development of a shared practice that consists of shared resources, experiences, stories, tools, etc. (Hemmasi & Csanda, 2009; Roberts, 2006;
Wenger, McDermott & Snyder, 2003).
The process of exploratory learning in AbCa is the scanning of the environment for sources of knowledge and acquiring the knowledge from the external sources. The level of exploratory learning within a CoP depends on the openness of the CoP to the environment. A high level of exploratory learning indicates a high level of openness to the environment, whereas a low level of exploratory learning indicates a low level of openness to the environment.
The process of transformative learning is about the retention of acquired knowledge and the reactivation of that knowledge over time. Retention of knowledge is a function of KSA (Lane, Koka & Pathak, 2006). As is assumed per definition that a CoP has a high level of KSA, a CoP is assumed to exhibit a high level of transformative learning.
Exploitative learning is the process that combines newly acquired knowledge with already possessed knowledge with the intent to commercially exploit the outcomes. It is expected that the problem solving activities and sharing of ideas within a CoP will account for combinations of knowledge within the group and will lead to innovations. Therefore a CoP is assumed to exhibit a high level of exploitative learning.
Problem Statement
In the literature review is explained that both prior knowledge and KSA are determinants of the level of AbCa the organization has. Literature on CoPs suggest that inherent to the characteristics of the CoP is a high level of KSA, due to shared resources, shared interest and the supposed enhanced relationships between members of the CoP (Roberts, 2006; Wenger, McDermott & Snyder, 2003). When groups of people display the characteristics of a CoP, they would also display a heightened level of KSA. Due to the higher levels of KSA, the group would be able to better fulfill the three learning processes of AbCa and enhance their level of AbCa. But, as has been discussed in the literature review, all three of AbCa‟s learning processes should be sufficiently present to enhance AbCa-levels (Lane, Koka & Pathak, 2006). Some critique on CoPs – probability of developing predispositions and resistance to change – suggests that a higher level of KSA does not necessarily mean a higher level of AbCa (Roberts, 2006). This case-study tries to find answers to the question whether the existence of a community of practice actually does enhance the level of absorptive capacity through an increased level of knowledge sharing activities. By measuring
