A knowledge‐based theory of the firm to guide in strategy formulation
| Date | 01 December 2001 |
| Pages | 344-358 |
| Published date | 01 December 2001 |
| DOI | https://doi.org/10.1108/14691930110409651 |
| Author | Karl‐Erik Sveiby |
| Subject Matter | Accounting & finance,HR & organizational behaviour,Information & knowledge management |
JIC
2,4
344
Journal of Intellectual Capital,
Vol. 2 No. 4, 2001, pp. 344-358.
#MCB University Press, 1469-1930
A knowledge-based theory of
the firm to guide in strategy
formulation
Karl-Erik Sveiby
Swedish School of Economics and Business Administration,
Helsinki, Finland
Keywords Organizational theory, Information, Strategic management, Intangible assets,
Publishing
Abstract This article is seeking to explore the practical implications of an epistemological
approach to strategy formulation. In doing so it tries to expand the field of knowledge
management and intellectual capital beyond its operational and often inwardly technological focus
to a new theory of the firm. A resource-based perspective is suggested, using autopoietic
epistemology to guide strategy formulation. People use their capacity-to-act in order to create
value in mainly two directions; by transferring and converting knowledge externally and internally
to the organisation. The value grows each time a knowledge transfer or conversion takes place.
The strategy formulation issues are concerned with how to utilise the leverage and how to avoid
the blockages that prevent sharing and conversion. Activities that form the backbone of a
knowledge-based strategy are to be aimed at improving the capacity-to-act both inside and outside
the organisation.
Towards a knowledge-based theory of the firm
In the last two decades of the twentieth century the resource-based theory of
the firm has received attention as an alternative to the traditional product-
based or competitive advantage (Porter, 1980) view (Blackler, 1995; Wernerfelt,
1995). It is a perspective on organisation and strategy formulation inspired by
epistemology and suggesting a knowledge-based theory of the firm.
Venzin et al. (1998) make a distinction between three epistemologies that
may guide practice and research under such a perspective: the cognitivist
(represented by Simon, 1982), the connectionist (represented by Zander and
Kogut, 1995) and the autopoietic (introduced by Maturana and Varela, 1980).
The cognitivist perspective assumes organisations to be open systems, which
develop knowledge by formulating increasingly accurate ``representations'' of
the world. The more data and information organisations can gather the closer
the representation will be. Hence most cognitivist perspectives equate
knowledge with information and data. The connectionist epistemology the
organisation still ``represents'' its outside world, but the process of
representation reality is different. As in cognitivist epistemology information
processing is the basic activity of the system.
Autopoietic epistemology provides a fundamentally different understanding
of the input into a system. Input is regarded as data only. Knowledge is private,
The current issue and full text archive of this journal is available at
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This was a plenary presentation at ANZAM conference, Macquarie University Sydney,
December 2000. It has been edited slightly to suit a journal publication.
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