Salience of knowledge in a strategic theory of the firm
| Published date | 01 September 2001 |
| Date | 01 September 2001 |
| DOI | https://doi.org/10.1108/14691930110399950 |
| Pages | 215-224 |
| Author | P.N. SubbaNarasimha |
| Subject Matter | Accounting & finance,HR & organizational behaviour,Information & knowledge management |
Salience of
knowledge
215
Journal of Intellectual Capital,
Vol. 2 No. 3, 2001, pp. 215-224.
#MCB University Press, 1469-1930
Salience of knowledge in a
strategic theory of the firm
P.N. SubbaNarasimha
Department of Management, G.R. Herberger College of Business, St
Cloud State University, St Cloud, Minnesota, USA
Keywords Information, Management, Competitive advantage
Abstract Sustained competitive advantage has become problematic because of turbulent
environments. Thus, a strategist's theory of the firm ought to focus on a theory of sustained
competitive advantage. Clarifies the concept of turbulent environment faced by modern
organizations. Argues that knowledge serves as an important source of sustained competitive
advantage in turbulent environments. Viewing organizations as knowledge stocks poses questions
of how to design organizations for knowledge management. Constitutional theories of the nation-
state are useful in this regard. Concludes with some preliminary thoughts on how the central
concepts in constitutional theory can facilitate organizational design for knowledge management.
Theory of the firm versus a strategic theory of the firm
Superior performance is a result of gaining and maintaining a competitive
advantage over rivals. The turbulent environment that firms face because of
escalating global competition, decreasing product life cycles, increasing rate of
technological change have all made sustained competitive advantage a thorny
problem. Thus, a fundamental challenge for strategy students is development
of a strategic theory of the firm ± i.e. a theory of firm competitive advantage.
Existing economic theories of the firm or strategic theories of the firm are
inadequate for purposes of strategy research because they are:
.often concerned with industryor societal, rather than firm, consequences;
.interested in explaining why firms exist rather than what leads to firm
competitive advantage; or
.inadequate because their assumptions of supply and demand
homogeneity, markets-in-equilibrium and rational behavior are grossly
unrepresentative of the organization and its environment (Jacobson,
1992; Knudsen 1995; Rumelt et al., 1991). Thus, the need for a strategic
theory of the firm that focuses on understanding sources of sustained
competitive advantage without making unrealistic assumptions of the
firm and its environment.
In this paper, I discuss three elements essential for development of a
managerially useful strategic theory of the firm. First, is the need for a clear
conceptualization of the term ``turbulent environment'' that is often cited as the
challenge facing modern-day firms. I define turbulence as dynamic
heterogeneity and discussing how the supply and demand sides contribute to
turbulence of organizational environments. Second, is my argument that long-
term success in turbulent environments is predicated on exploitation of
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