1. Organization of the Modern Firm
The principles of organization got more attention among us than they did then in universities.
Alfred Sloan

2. What Organizations Do?
Organizations exist to motivate their members and coordinate their activities.
Chief Challenge
entrepreneurialism
knowledge

3. Successful Organizational Designs
Must solve the challenges of entre-preneurialism and knowledge in tandem
The Disaggregation imperative
Internal disaggregation
External disaggregation

4. Internal or External? Internal disagg. may not sufficient
how to solve “imperfect commitment”
External disagg. may be the more straightforward choice

5. Forms of Organization Market forms Hierarchical forms (firms) Personal
initiative
(motivation)
Forms of Organization
Market forms
Hierarchical
forms (firms)
Enforced cooperation
(coordination)

6. Impact of Disaggregation
Personal
initiative
(motivation)
Impact of Disaggregation
Market forms
External
disaggregation
Internal
disaggregation
Hierarchical
forms (firms)
Enforced cooperation
(coordination)

7. Relational Forms of Organization
The relational forms of organization, allow companies to make market-based relationships more like the coordinated interactions within a firm.
Alliances
joint ventures
long-term supplier relationships
licensing arrangements

8. Innovative Relational Forms
Personal
initiative
(motivation)
Market forms
Relational
forms
Hierarchical
forms (firms)
Enforced cooperation
(coordination)

9. Managing Relational Forms
The Key to capturing value within a relational form is ownership of an asset that is both scarce and complementary.
complementarity also operates within a firm
call for carefully planning and continuous monitoring

10. The Difficulty of Knowledge Management
Knowledge has complex characteristics
disaggregation may put up barriers to the generation of knowledge.

11. Complex Characteristics of Knowledge
extraordinary leverage and increasing returns
tendency toward fragmentation and leakage
need for refreshment
uncertainty to value creation and value sharing

12. The Shape of the Modern Firm
No single form will prevail.
Organizations will adopt a variety of shapes, and change them as new strategic challenge emerge.

13. Case in Point The ABB Group British Airways North West Company
successful internal disaggregation
British Airways
relational form of organization
North West Company
established in 1779
with the shape of the “modern” firm

14. How does a firm integrate and thereby benefit from the decentralised tacit competences dispersed on multiple sites?

15. Theory of the Firm Firm as a processor of information
a firm is a nexus of bilateral contracts
Firm as a process of knowledge
a firm is an evolving, knowledge-based organization

16. Firm as a Processor of Information
bounded rationality
principal-agent problem
the theory of teams
imperfect information problems

17. Firm as a Processor of Knowledge
Evolutionary theory of Firm
cognitive mechanisms of individual agents
The creation and management of knowledge
firm is a locus where competences are continuously built, managed, combined, transformed, tested and selected.

18. What Matters Is Not Information per se
Information -> knowledge ->competence
What may most hamper the firm’s dynamics is the risk of lock-in to inefficient routines rather than the problem of a limited capacity to deal with information.

19. The Elusive Notion of Competence
As Andreu and Ciborra (1996) suggest, there are three levels of learning process allow the emergence of new competences
routinization learning loop
capability learning loop
strategic loop

20. Competitive Environment
Core Competences
Strategic loop
Competences
Capability
learning loop
Work Practice
Routinization
learning loop
Resources

21. The Notion of Distributed Competences
Granstrand et al (1997, CMS) suggested that, in the multi-technology corporations competences are distributed
across a large and increasing number of technical field
in different parts of the organization
among different strategic objectives of the corporation

22. The Organizational Knowledge-Creation Process
Individual or collective learning activities
Tacit knowledge vs. codified knowledge
The interaction of tacit and codified knowledge forms the basis for creation of organizational knowledge

23. Modes of Knowledge Conversion
(Nonaka, 1994) To
Tacit
Explicit
Explicit
Combination
Internalization
From
Externalization
Socialization
Tacit

24. Knowledge Transfer and Creation
According to Nonaka & Takeuchi (1995),
dialogue between bodies of tacit and explicit knowledge forms the basis of a dynamic spiral of creation of new knowledge.

25. Things Are Different Now
Synergy and continuous innovation are increasingly required to cope with a rapidly changing environment, while the multi-divisionalized structure centralizes competences, in inter-product allocation and diversification, but decentralizes competences in inter-functional coordination.