1. Learning to Grow: The Evolution of Business Knowledge
MMUBS HRM&OB Seminar Series
18 October 2006

2. Theoretical Antecedents
Penrose (1959)
Theory of the Growth of the Firm
Barney (1986, 1991)
Resource-based View of the Firm
Capability-based view of the Firm
Teece, Pisano and Sheun (1997)
Eisenhardt and Martin (2000)
Spender (1996)
Knowledge-based theory of the firm
Emerging Concerns of Knowledge as Situated and Contextual
Communities of Practice (Lave and Wenger 1991; Brown and Duguid, 1991)
Activity Theory (Engeström, 1990; Blackler, 1995)
Resource-based view notes that it is the unique and difficult to copy configuration of resources that provide the CA.
Implied here is a notion that knowledge is configured as resources – although there is also an acknowledgment that success is dependent on difficult to copy processes and systems that are unique and embedded in practice.
‘A dynamic capability is a learned and stable pattern of collective activity through which the organization systematically generates and modifies its operating routines in pursuit of improved effectiveness’ (Zollo and Winter, 2002:340).
Dynamic capabilities (Teece et al, 1997; Zollo and Winter: 2002)
Experience Accumulation
Knowledge Articulation
Knowledge Codification
Cof P – Identity and activity shaped by interactions and participation thorugh shared practices and interactions.
Activity Theory - , knowledge is seen as sustaining structures and routines that guide activity. The theory also suggests that knowledge work is a contested domain of action and interaction. During this process knowledge is reconfigured and reworked. The theory focuses on ‘creative aspects of learning and its [learning’s] dependence upon a culturally provided infrastructure’

3. Penrose on knowledge
She distinguishes between resources (e.g. knowledge/materials & services (processes and systems)
(entrepreneurial and managerial capabilities)
Use and configuration of resources provides services
Variety of options
Important for productivity
Bounded rationality/perception limits resource application by managers
As knowledge changes, creates new possibilities of resource configuration.
Change through experience and/or access to new knowledge resources

4. Knowledge and Opportunity
Knowledge limits the growth of the firm
Resources limit productive possibilities
Resources limit the recognition of productive opportunities
Organization essentially bundles knowledge in processes
Cumulative and evolutionary growth of collective knowledge
Routines – current state of state of collective knowledge evident in organizational activity (Nelson and Winter, 1982)

5. Understanding Growth : Stage Models
Phase 1
Phase 2
Phase 3
Phase 4
Phase 5
Crisis of red
tape
Crisis of?
Growth through
collaboration
Crisis of
control
Crisis of
autonomy
size
Growth through co-ordination
Crisis of
leadership
Growth through delegation
Major influence of resource and stage models over the years:
Here we can see that Griener suggests that a set of specific internal routines are necessary to transition between stages of growth – and knowledge required to create new appropriate routines
Increasingly under criticism
Levie and Hay (1999) Bessant et al (2005) note that despite the long tradition of these type of stage models that rely on particular knowledge capabilities and resources to manage transition points, there is little empirical evidence to suggest that is indeed the case!
My own research published in 2005 suggests that all of these crises are ongoing and continually being managed in growing firms – both internally and in relation to customers, suppliers and institutional environment
Managing all of these ‘knowledge routines’ depends on the available skill, competences and ability of the management team to act in specific situations in order to manage the unique aspects of their particular context.
Growth thorough direction
Growth through creativity
age
Revolution
Evolution
Greiner (1972, 1998)

6. Research Review on Knowledge and Growth in SMEs – AIM Reports
Research of knowledge within an SME context can be broken down into three distinct fields:
The knowledgeable SME manager or entrepreneur;
The knowledge systems and routines embedded within the context of the firm and their immediate networks;
The institutional and policy framework that is intended to support knowledge production within SMEs.
These fields are not discrete and inevitably overlap but they provide a useful heuristic through which research can be examined.
It is noteworthy that, apart from a handful of studies which address entrepreneurial knowledge construction through narrative analysis, knowledge is considered to exist as a configurable resource.
(IJMR, Thorpe et al, 2005; Research Policy, Macpherson and Holt, forthcoming)

7. Knowledge, Learning and Growth
This seems to be much more of a dynamic relationship, where these elements are much more interdependent and in tension.
Generally the variability of each element throws up the possibility of a multitude of organizational possibilities and
what might be more important than ‘certain knowledge resources’ is how these dimensions interact to support learning processes by which knowledge evolves

8. Conceptualizing Learning
There are four key areas to consider:
The principle agent(s) in the firm—their education and approach
The structural properties of human capital available—internally and externally
The social architecture of the firm—the routines and devices that mediate interaction and work in organizations
The normative context—powerful market and institutional relations
From the research review and analysis it is possible to conceptualize four key areas that contribute to the learning process that support the evolution of business knowledge:

9. Understanding Entrepreneurial Action
Entrepreneur is a significant influence on learning activity since, as principle agent in the firm, they have power and legitimacy to influence practices
Entrepreneurial action is directly related to the embeddedness of activities and experiences within specific communities.
Entrepreneurial Capabilities are:
Path dependent and situated (unique)
Continually Emergent – through practice
Dependent on individual motivations and capabilities to seek out opportunities – new communities of interaction
Dependent on recourse to others (isomorphic influences)
This resonates strongly with Lave and Wenger’s (1991) concept of ‘communities of practice’ where an individual’s identity and knowledgeable practice develops through the interactions within a specific domain of activity.
Communities of Practice – shape identity and experiences and limit repertories of action
Past and current interactions provide the entrepreneur or manager with unique experiences through which their knowledge is developed and negotiated. It has historicity, it is inevitably incomplete, and it is an ongoing project
the more active entrepreneurs and managers are in seeking out different communities, the more likely such interactions are to provide resources for reflecting on, and innovating, current activities. so
Creating situations in order to stretch existing human capital, or to enable access to new experiences, may encourage the reflection necessary to avoid rigidity and encourage innovation
But we should note that
Entrepreneurs cannot act without recourse to others; the institutional and social context in which they are active will influence the range of their potentially legitimate actions

10. Structural Properties of Human Capital
Internal:
Management Team
Staff Capabilities
Staff involvement (e.g. delegation and empowerment)
External:
Social Technical and Business Networks
Professional Advisors
Structural properties of available endogenous and exogenous sources of human capital is important
Processes, routines create interactions with these, and are perhaps more important:

11. Organizing Routines Systems of Exploitation
are essential for realizing efficiency and profit from existing knowledge
Systems of Exploration (Learning)
are important for organizational renewal
Systems of ‘Absorptive Capacity
Recognition and embedding of ‘new’ knowledge in organizational routines
Entrepreneur’s knowledge is best embodied in configurations of organized routines
organizational systems, processes and routines are the structures and that support interactions and exchanges within and external to the firm
- exploitation
- exploration
includes: creating ‘space’ for activity that enables problem solving; - e.g. delegation
the capacity for knowledge acquisition (via external knowledge networks);
and the capacity for internal knowledge dissemination and sharing. (involvement)
the concept of ‘absorptive capacity’ encourages scrutiny of both the formal and informal systems and relationships at the firm level.
But it is how these relationships are negotiated that are important for understanding their influence on knowledge evolution and growth.

12. Relational and Cognitive Social Capital
Depth of relations (strong/weak)
Trust, reciprocity, loyalty, collaboration
Transactional, contractual, fleeting
Discursive Resources
The ability to persuade and leverage the support of others (inside and out)
Social and Discursive Skills
Political will and power
The influence, ability and desire to challenge accepted practice in the firm
It is the interactions that support the potential to learn within the ambit of the firm.
Activities that sustain and create complex relational interactions (Bogenrieder, 2002),
and discursive structures that shape communicative actions (Oswick et al., 2000)
are the social processes that sustain the transfer of knowledge and knowing essential for learning and growth.
The types of interactional dimensions that might influence this process include:
Depth of relations:
These can vary between strong and weak ties – the former support complex knowledge and learning relations, but they can limit acces to new ides and can stifle change in the long term.,
Discourse:
This can include rhetorical skill, narrative construction and other communication skills.
The ability to network, make friends and engender support is a key part of developing relations that support learning.
Politics:
Ability and willingness to put the everyday accepted routines under review, and engage in genuine dialogue about whether they are appropriate.
and also
More powerful members of a social group (e.g. customer) may significantly influence the accepted discourse and frames of reference, and shared assumptions about the correct way to ‘act’
Resolving tensions is a fundamental part of genuine collective learning that is often hidden in any understanding of community based social analysis

13. Context of Institutional and Market Conditions
Owner-managers are subject to institutionalizing pressures when responding to uncertainty.
Vary depending on geography, markets, politics
Competition can create a crisis that stimulates learning and change
Potential role for a variety of institutional support activities:
Business clubs
Supply chain development initiatives
Knowledge Transfer Partnerships
Education
Some firms more willing and able to respond than others
Understanding of learning orientation important
Specific geographic, industry, political or market contexts will have a role to play in the learning processes in small firms
market of customer relations create crises that stimulate the owner-director into action, which can speed-up the process of learning (Clarysse and Moray, 2004).
However, what is more interesting is that there is a potential role for the institutional infrastructure in supporting or directing the learning process.

14. Conceptualizing Learning in Small Firms
Owner Director
experience
education
‘learning orientation’
Internal Human Capital
management team
staff capabilities
staff involvement
External Human Capital
social, technical & business networks
professional advisors
Relational & Cognitive Social Capital
depth of relations
discursive resources
power and political will
Structures and Systems of Organizing
systems of absorptive capacity
systems of exploitation
systems of exploration
Social Architectures of Mediating Means
Structures of Human and Social Capital
Context of Institutional and Market Conditions
Structural properties refer to the existing state of affairs in terms of abilities, attitudes and approaches to managing
relationships and routines are the social architectures of mediating means, and they are both the expression of the state of knowing present in the firm, and they are also the learning mechanisms, or ‘objects of activity’, through which learning occurs and absorptive capacity is created.
The institutional framework refers to the context in which these relations are negotiated. They may also provide mechanisms and support through which learning and growth can be driven (for example institutional support mechanism).
Policy support needs to be more flexible and responsive to the unique relationships experienced by all firms along these dimensions
But they also constitute leverage points through which policy support can be driven. (e.g. in context this would include business agencies, universities, professional advisors – all useful, but in different situations and dependent on existing states of affairs in terms of social architecture and available human capital)

15. Directions of Research
Recognition of the political nature of learning activity and the complexity of growth processes.
Specific areas of interest:
‘Objects of Activity’ that can facilitate interactions and leverage learning.
Mediating devices that support learning relationships (e.g. business analysis tools, soft process technologies etc)
Shift from knowledge resources to learning processes
Fundamental shift towards research into actions/practices as opposed to assets of knowledge (different research methods and philosophies)
Particularly a shift in focus to ‘communicative actions’ - the everyday structuring of relations that are the means by which knowledge evolves and is made ‘real’
Discursive strategies and devices used to influence others
Issues of human capital, the owner-director’s important leadership role, the variety of potential systems of interaction, the influence of outside agencies and also the political nature of learning activity combine to create degrees of complexity not discussed in stage models of growth.
In order to understand the important relationship between knowledge, learning and growth ther are some areas that are worth investigating.

16. Knowledge, Learning and Growth
Any Questions?