Social context and social capital as enablers of knowledge integration




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Social context and social capital as enablers of knowledge integration

Josephine Chinying Lang

Journal of Knowledge Management; 2004; 8, 3; ABI/INFORM Global

pg. 89

Social context and social capital as enablers of knowledge integration

Josephine Chinying Lang



Josephine Chinying Lang is an Assistant Professor, Nanyang Business School, Nanyang Technological University, Singapore (acylang@ntu.edu.sg).

Abstract This paper argues that social contexts and social capital enable knowledge integration; that different social contexts combined with different types of social capital enable different types of knowledge integration. Four types of social contexts are distinguished based on the extent of social embeddedness and closeness of interorganizational coupling; four types of social capital are also described. Based on the diversity of knowledge streams, the extent of tacitness of knowledge to be exchanged, and value created through such exchanges, four modes of knowledge integration are identified, namely frontier, incremental, combinative, and instrumental. This paper provides new insights about the processes of interorganizational transfer of knowledge: the unique combination of a specific social context with a specific type of social capital means firms can achieve equally effective yet highly differentiated approaches to different modes of knowledge integration.

Keywords Knowledge management, Human capital, Economic integration, Information exchange

rganizations can continually deepen their existing competencies with the capabilities of other organizations by developing existing relationships and exploring new ones

(Powell, 1998). In the 1990s, many forms of inferfirm collaborations came into being,

ranging from licensing arrangements and research contracts to joint development agreements, joint ventures, collaborative manufacturing and complex co-marketing arrangements. These partnerships spanned different stages of value chains from discovery to distribution to recycling (Hagedoom and Schakenraad, 1992; Gulati, 1995). Generally, failures outnumbered suc­cesses, and dissatisfaction with such arrangements was more prevalent than satisfaction (Hagedoorn and Narula, 1996; Ariho et al., 2001).

While such inter-organizational arrangements provided for formal information exchange, whether knowledge was also exchanged was quite another matter. In the knowledge-based view of competition, competitive advantage depends on the capacity of a firm to recombine organizational and individual knowledge continuously in flexible ways (e.g. Kogut and Zander, 1992; Grant, 1996b). However, knowledge is more than information, and knowledge flow is not friction-free as may be the case for information but is, instead, dependent on suitable social contexts. Answers cannot be found solely in information technologies and managers of interfirm collaborations should pay attention to the multiple, overlapping and ongoing social relationships within which knowledge exchange in their collaboration is embedded.

Interfirm collaborations have been known to be unstable, difficult to manage, and likely to fail especially where intensive knowledge sharing such as joint R&D or joint product development is

D0I 10.1108/13673270410541060 VOL. 8 NO. 3 2004, pp. 89-105, ©Emerald Group Publishing Limited, ISSN 1367-3270 JOURNAL OF KNOWLEDGE MANAGEMENT

PAGE 89

Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.

«f? Knowledge consists of both explicit and tacit elements. »?

1

involved. Much of the literature lays the blame for such problems at the doorstep of inappropriate governance structures which are said to fail to handle the problems of task structure or organizational complexity adequately (e.g. Osborne and Baughn, 1990). So research has focused largely on what new organizational forms or management structures may improve a firm's ability to combine and integrate specialized knowledge (e.g. Daft and Lewin, 1993; llinitch et al., 1996). The assumption has been that specific structural arrangements to organize knowledge integration may improve an organization's ability to adapt to changing environments. Thus, for example, Sanchez and Mahoney (1996) proposed "modularity" while Davidow and Malone (1992) proposed "virtuality", as exemplars of such structures.

This paper argues instead that social context and social capital enable knowledge integration; that different social contexts combined with different types of social capital enable different types of knowledge integration. Four types of social contexts are distinguished based on the extent of social embeddedness and closeness of interorganizational coupling; four types of social capital are also described. Based on the diversity of knowledge streams, the extent of tacitness of knowledge to be exchanged, and valued created through such exchanges, four modes of knowledge integration are identified, namely frontier, incremental, combinative, and instrumental. This paper provides new insights about the processes of interorganizational transfer of knowledge: the unique combination of a specific social context with a specific type of social capital means firms can achieve equally effective yet highly differentiated approaches to different modes of knowledge integration.

Social contexts and knowledge integration

Knowledge consists of both explicit and tacit elements. Explicit knowledge is that which can be articulated and codified which, therefore, transmits easily. Tacit knowledge is widely dispersed, residing in patterns of heedful interactions between individuals within a shared area of competence (Weick and Roberts, 1993).

Much of knowledge is sticky and to be found within complex social interactions such as team relationships within organizations (Badaracco, 1991). What makes this dispersed knowledge difficult to track down is the difficulty in identifying its parts since much of it resides in social interactions themselves. That is, much of human knowledge is grounded in daily life experiences, which are elusive and refuse obstinately to be trapped in a verbal matrix. For example, though emotions may be somewhat communicated through words, they cannot be reduced to words alone.

Since much of knowledge is tacit residing in social interactions, different social contexts facilitate different modes of knowledge integration. Social contexts in turn depend on individual and organizational levels, viz.: the nature of interpersonal ties, whether they are embedded or not; and the nature of inter-organizational linkages, whether organizations are loosely or tightly coupled.

Embeddedness of interpersonal ties

The Embeddedness of interpersonal ties may be viewed as a continuum ranging from one extreme of high social embeddedness to the other extreme of low embeddedness or arm's length in nature. For Granovetter (1985), embeddedness refers to the notion that behaviors and institutions are constrained by ongoing social relations. Embedded relationships involve repeated interactions over long-term horizons and are characterized by mutual cooperation and trust.

People are most strongly influenced by members with whom they have frequent interactions (Epstein, 1961; Kadushin, 1966). In fact, social information processing theory argues that individual perceptions are likely to be influenced by the opinions, information, and behaviors of

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salient others. Individuals may be influenced by cues from others about what to attend to, how salient dimensions of a certain phenomenon are to be valued, and how others may evaluate the same phenomenon (Salancik and Pfeffer, 1978; Hardin and Higgins, 1996). People are especially prone to be influenced by others who are more proximate in attitudes, perceptions and behavior patterns as well as social and cultural contexts (Salancik and Pfeffer, 1978; Dean and Brass, 1985; Burt, 1987; Contractor and Eisenberg, 1990; Messick and Mackie, 1989; Axelrod, 1997; Chatman etal., 1998).

In embedded relationships, people tend to influence those with whom they have direct interaction and are influenced in turn by them (Burt, 1987; Erickson, 1988). Through such interactions, people glean insights and, in turn, share their own insights. This may lead to the development of shared beliefs and world-views that impact social values beyond their instrumental utility in communication or exchange (Selznick, 1957). These relationships are therefore value-laden within which members develop esoteric languages and interpretive schemas that become linked to one's sense of identity. Such relationships and linkages between individuals may augment the transfer of fine-grain knowledge and joint problem-solving arrangements between firms (Uzzi, 1997).

Fine-grain knowledge, which is detailed, proprietary and holistic, can be communicated effectively with the use of "local language" that grows out of repeated complex transactions (Romo and Schwartz, 1995). Local language is an indigenous "dialect" consisting of locally understood words idiosyncratic meanings and makes sense only to people with a history of common experiences in a shared social environment. Uzzi (1997) illustrates such relationships in the New York apparel cluster where embedded ties have built-in coordination mechanisms that help people solve their problems flexibly by using quick trouble-shooting arrangements and mutual adjustments. Also to be stressed here is the importance of work practices and training cultures that are shared by collaborators as well as the broader regulatory and institutional frameworks (Gertler, 1995).

By contrast, where relationships are arm's length in nature and affected mainly by their direct relevance to parties involved, self-interested actors sustain cooperation through "calculated trust" (Swanson, 1965; Williamson, 1993). The attitude is one where "I trust you because I calculate that your short-run benefit from an opportunistic defection is outweighed by your long-run benefit from continued cooperation" (Montgomery, 1998, p. 93). In such relationships, the incentive not to cheat comes from the cost of losing one's reputation which is a generalized commodity.

Arm's length relationships are suitable for the transfer of codified knowledge where uncertainty is low. Advances in information and communication technologies (ICTs) that facilitate the rapid collection, collation, analysis, storage and retrieval of data, information, images, video clips, or audio clips may aid the transfer of explicit knowledge. By contrast, such technologically mediated communication is ineffective for transferring tacit knowledge and thus cannot replace face-to-face social interaction.

Tightness of interorganizational coupling

The tightness of inter-organizational linkages or coupling of two or more organizations impacts the exchange of knowledge between them to varying degrees (Steenma and Corley, 2000). Loose interdependence obtains where organizations either have few variables in common or if the variables they do have in common are only weakly important to them (Glassman, 1973). There is the retention of distinctiveness of collaborative elements in a loosely coupled collaboration despite the responsiveness of these elements to one another. Tight inter­dependence, on the other hand, is about the lack of distinctiveness of collaborative elements.

Like Steenma and Corley (2000) and others, we refer to interorganizational linkages in terms of tight or loose "coupling", borrowing Weick's (1976, 1982) terminology used originally in the context of the activities of one part of an organization as being more or less independent of the activities of other parts of that organization. Weick demonstrated that substantive

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independence among organizational subunits renders an organization a loosely coupled system which confers flexibility to the system. Subsequently, Orton and Weick (1990), Contractor and Lorange (1988) and Leonard-Barton (1995) have also used the term "coupling" to refer to organizational interdependence, the level of mutual commitment between partners, and intensity of alliances ties. In joint development agreements for example, organizations were said to be tightly coupled. Here, the firm sourcing a technology can exert hierarchical control over individuals with the desired know-how in the supplier firm rather than rely on market exchanges (Folta, 1998; Osborn and Baugh, 1990; Robertson and Gatignon, 1998).

Interorganizational relationships have to do with exchange - voluntary not coerced - of material goods as well as intangibles often beyond gratifications in the immediate present (Levin and White, 1961). As individuals interact, organizational domains get clarified and the development of greater domain consensus leads to solving the problem of who gets what for which purpose. The tightness of coupling has implications for the intensity of interaction and the richness of exchange between collaborating firms (Steensma and Corley, 2000), As organizational interdependence gets tighter, richer knowledge exchange may occur well but governance costs and managerial overheads also tend to increase (Jones and Hill, 1988).

While loosely coupled collaborations have limited interactions and constrained communication, tightly coupled collaborations are associated with regular group meetings, formalized reporting and feedback sessions, and interdependent parts such as linked information systems and databases. In short, frequent formal monitoring and control. Tight coupling is associated with a higher degree of similarity in behavioral norms and expectations, compatibility of decision­making styles, and convergence of worldviews among exchange parties. Shared routines may include shared administrative authority, joint ownership of operating policies, and interlinked agendas on content, process, control, and learning. Such similarities in the norms and values of collaborating firms may permit better know-how assimilation (Lane and Lubatkin, 1998). This comes from the ability to economize on communication through a shared coding scheme and routines which make for more efficient coordination (Arrow, 1974; Ghoshal and Moran, 1996). The opposite holds true where interorganization partnerships are more loosely coupled such as research contracts.

Social capital and knowledge integration

Knowledge integration also depends on social capital. The transfer of information and knowledge at micro- and macro-levels between individuals and between organizations depends on people initiating and facilitating those transfers (Charles and Howells, 1992; Roberts, 2000). Consequently, all those things that encourage or inhibit inter-personal com­munication affect knowledge transfer. Of these, the importance of trust has long been noted (Golembiewski and McConkie, 1975; Kramer, 1999).

Trust is a belief that an exchange partner will not act in self-interest at one's expense or expectation, that her future actions will be favorable to one!s interests such that one is willing to be vulnerable to those actions (Mayer et a!., 1995; Robinson, 1996; Uzzi, 1997). It is the warranted belief that someone else will honor her obligations, not merely because of material incentives, but out of moral commitment too. It assumes that moral commitment is rational because it generates emotional rewards (Casson, 1991). Thus, trust is "the conscious regulation of one's dependence on another that will vary with the task, the situation, and the other person" (Zand, 1972, p. 230).

Trust is especially important whenever the complexity of relationships or whenever unanticipated contingencies preclude recourse to completely contingent contracts with third party enforcement. Thus trust is critical to knowledge sharing (Lazaric and Lorenz, 1998), which means that trust is essential for the efficient operation of a knowledge economy since the

|s« Different social contexts facilitate different modes of
knowledge integration, w _

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exchange of knowledge involves risks and uncertainties which can only be minimized by a high level of trust.

Although it is a valuable commodity, trust cannot be purchased in the market. As Arrow (1974, p. 23) notes, "If you have to buy it, you already have some doubts about what you've bought". Instead, trust depends on the sharing of a set of social values, cultural institutions and common expectations. Through a common culture, expectations and perceptions about the behavioral patterns of others may develop, setting the foundations upon which a network of trusting relationships may be built. Because trust is influenced by social contexts, the levels of trust present in a market may vary across firms, cultures and nations (Casson, 1991, 1997). In cross-border exchanges of knowledge between people from different cultural or national backgrounds, developing trust will require greater investment in time and effort to build up shared expectations.

It is trust that enables social capital to be created between people which, therefore, inheres in the structure of relations among actors. A group where there is extensive trust can accomplish much more than a comparable group with less trust. Still, all social relations facilitate some form of social capital which are those aspects of the social structure that facilitate actions within those structures (Coleman, 1988). Social capital inheres in the structures of relations within which purposive action takes place and consists of "those expectations for action within collectivity that affect the economic goals and goal-seeking behavior of its members, even if these expectations are not oriented toward the economic sphere" (Portes and Sensenbrenner, 1993, p. 1323).

Social capital comprises those resources that actors may access through social ties that may affect an individual's action directed toward another based on the social structure in which the action is embedded and the history of transactions between the actors (Bourdieu, 1986; Coleman, 1988; Putnam, 1993). It is "the sum of the resources, actual or virtual, that accrue to an individual or group by virtue of possessing a durable network of more or less institutionalized relationships of mutual acquaintance and recognition" (Bourdieu and Wacquant, 1992, p. 119). It is not lodged either in the actors themselves (that is, it is not human capital), or in physical implements of production (that is, it is not physical capital). But like other forms of capital, social capital is productive, making possible the achievements of certain ends that, in its absence, would not be possible.

Social capital represents resources that reside in function-specific social relationships in which individuals are embedded. It is function specific in the sense that it may well be important to one outcome but irrelevant to another outcome (Teachman et a/., 1997). Social capital serves three important functions. First, it represents a structure of obligations, expectations, and trustworthiness. Social systems with high trustworthiness are ones in which expect social obligations to be repaid somewhere down the line. As such, individuals in social structures with higher level of obligations outstanding have more social capital to draw on. Second, it serves as information channels. As information may be costly to acquire because it requires attention, which is scarce, social relations constitute a form of social capital that provides access to information which facilitates action. Finally, social capital serves as a system of norms and effective sanctions, that is, effective norms which constrain people from socially undesirable actions. For example, one prescriptive norm within a collectivity that constitutes an especially important form of social capital is the norm that one should forgo one's self-interest to act in the collectivity's interest.

In sum, social capital confers information and control advantages by brokering relations between people who may otherwise be disconnected in a social structure (Burt, 1997). Certain kinds of social structure, however, are especially important in facilitating some forms of social capital (Coleman, 1988). Studying immigrant communities, Portes and Sensenbrenner (1993) elicited four origins of social capital within four sets of economically-relevant expectations: value introjection, reciprocity transactions, bounded solidarity, and enforceable trust.

First, it is value introjection that prompts individuals to behave in ways other than naked greed. That is, value imperatives learned during the process of socialization in a culture function to

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guide the moral character of economic transactions. The benefits of such behavior that transcends naked greed are appropriable by others in the collectivity.

The second origin of social capital consists of "chits" accumulated by one's good deeds done to others when they are backed by the norm of reciprocity. In reciprocity transactions, people may not be expected to behave according to some higher group morality but rather for their own selfish ends in the sense that they expect reciprocation. In contrast to market behavior, however, these transactions are not largely about money or material goods but more about social intangibles such as goodwill.

The third source of social capital, bounded solidarity, refers to those circumstances that lead to principled group-oriented behavior arising as situational reactions of a class of people facing a set of common problems. Rather than early value introjection during socialization, or even reciprocity exchanges, bounded solidarity leads to mutual support, something people in a collectivity can appropriate as a resource.

The fourth source of social capital, enforceable trust, emphasizes the monitoring capacity and sanctioning capacity of interacting parties. Individual members subordinate their present desires to collective expectations in anticipation of future "utilities". This involves substantive rationality to particularistic obligations such that one member refrains from acting against another who enforces her trust by foregoing potentially immediate gain in resources (Weber, 1947). Here it is not values or convictions that motivate but rather the anticipation of future utilities associated with having "good standing" in a particular collectivity. Unlike an actor who anticipates that a direct supportive act of his/hers will be reciprocated by another because of some group norm, the actor who enforces the trust of another through mediated social structures is assured only that the other will not act against her.

Based on the above discussion, we suggest:

P1. Knowledge integration is highly dependent on the type of social context and the kind of social capital inhering therein. Specific social contexts coupled with specific collective expectations can facilitate specific kinds of knowledge integration.

Modes of knowledge integration

To recapitulate, the social context can be one where interpersonal ties are either highly embedded or arm's length in nature, and where interorganizational linkages involved are either tightly or loosely coupled. Each type of social capital coupled with a specific social context is associated with a different type of efficiency in integrating knowledge across firm borders. Four modes of knowledge integration, namely, frontier, incremental, instrumental and combinative, are identified based on the diversity of knowledge streams, tacitness of knowledge, and value created (see Figure 1).

Frontier knowledge integration

The main aim of frontier knowledge integration is to generate new knowledge, insights, and discovery, focusing on searching and exploring knowledge that is new, emergent, and leading edge with significant uncertainty regarding the quality, reliability and usability (Gertler, 1995). New knowledge is gained not only through specialized knowledge-seeking activities but also as a by-product of searching for new technologies. Thus, frontier knowledge integration emphasizes efficient search for leads and clues in a diversity of disciplines and sectors.

Efficient search involves specifically knowledge in several important aspects:

  • knowledge of the linkages between technological attributes and economic attributes;

  • R&D knowledge on how to prioritize the testing of candidate technologies;

  • knowledge about the economic characteristics of other similar technologies or techniques that have been previously tried-out; and

  • strategic knowledge of what directions to push R&D through (Nelson, 1982).

Strong search knowledge enhances efficiency both by enabling R&D to proceed on a generally better set of candidate projects, and by enabling the set worked upon to reflect more accurately

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Figure 1 1
















Social Context
















Knowledge Integration






















Social Capital




























Social Context: High social embeddedness & loose interorganizational coupling
















Frontier

Knowledge

Integration






















Social Capital: Value Introjection

























Social Context: High social embeddedness & tight interorganizational coupling
















Incremental Knowledge Integration






















Social Capital: Reciprocity

























Social Context: Low social embeddedness & loose interorganizational coupling













Instrumental

Knowledge

Integration






















Social Capital: Generalized trust






















Social Context: Low social embeddedness & tight interorganizational coupling
















Combinative

Knowledge

Integration






















Social Capital: Bounded solidarity



























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