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Knowledge and Competence as Strategic Assets
Goriola Dawodu Diomede Richard Hong Qi
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Knowledge Competitive and strategic asset of a company
Firm Repository of knowledge embedded in business routine and business
process, technology competence, knowledge of customers and
suppliers
The knowledge outcome Reflects the maturity level of the firm and the competitive advantage
of the firm
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Competitive advantage
Ability for a firm to combine knowledge asset with other asset to create
a value
“Economic prosperity rest upon knowledge and its useful application”
---------Teece, 1981
Advances in developed countries economy signify knowledge and its
management.
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Growth of IT has amplified the meaning of IP to include
knowledge asset
Requires same protection and treatment as other IP
Knowledge asset are difficult to copy when compared to other
IP
Knowledge asset and Intellectual
property (IP)
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Developed economies have undergone a transformation
from largely raw material processing and manufacturing
activities to the processing of information and
development, application and transfer of new knowledge.
Consequence of this includes replacement of diminishing
return with increasing returns this is usually paramount by
knowledge-based industries.
Growth importance
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Positive feedback reinforced the winners and challenged the
looser
Market tilts in favor of provider that gets out in front. These
firms are not the pioneer and need not have the best product
Outcome
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Capturing value from knowledge and competence
Introduction
Distinction between creation of new knowledge and its commercialization.
Creation of new knowledge as domain of individuals, or of research laboratory or of autonomous business units.(No complex organization needed- better designed for smaller organization.)
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Capturing value from knowledge and competence Commercialization of new technology as domain of complex
organization.
Some requirements:
---challenges requiring new organization form and development of new dynamic capabilities.
--- understanding of the nature of knowledge and competence as strategic assets.
---The nature of knowledge is critical to the strategic nature of knowledge and competence.
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Nature of knowledge Codified /Tacit Taxonomy
Relationship between codification of knowledge and the costs of its transfer
Good and relative economical result for a transfer of a codified item of knowledge or experience(technical property). The transfer of information has a meaning to those who received it due to the fact the info is codified.
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Nature of knowledge
Uncodified knowledge is slow and costly: required face to face contact to eliminate the ambiguities surrounding that nature of knowledge.
Positive/negative knowledge Taxonomy.
Positive knowledge know as Discovery most focus on promising areas, tend to avoid blind alley(failures)
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Nature of knowledgeNegative knowledge or knowledge of failure
Necessary to concentrate on negative knowledge to allocate better resources into promising sectors and projects
Autonomous/systematic knowledge
Autonomous knowledge: no major modification of the system to implement new knowledge.
Systematic Innovation: modification of the sub-system.
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Replicability, Imitability, and appropriability
Replication: transfer or redeployment of competences from one concrete economic setting to another.(possible if knowledge is fully coded, or productive knowledge transfer has been prior tested)
Knowledge assets normally rather difficult to replicate
Imitation is a replication performed by competitor
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Replicability, Imitability, and appropriability
Link between replication and imitation
---Factors that make replication difficult also make imitation difficult
---Ease of imitation determine the sustainability of competitive advantage
Two types of strategies to explain replication.
---Ability to support geographic and product line expansion to support customer where needed.
---ability to replicate using the foundations in place for learning and improvement
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Replicability, Imitability, and Appropriability.
Appropriability: ease of imitation.
Appropriability is strong when a technology is inherent and difficult to imitate by competitor.
Appropriability is easy to replicate(weak) when intellectual property protection is unavailable or ineffectual
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Intellectual Property Rights
Inherent Replicability
Easy Hard
Loose Weak Moderate
Tight Moderate Strong
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Appropriability and Markets for know- how competenceStrong profitability support asset as source of competitive advantage
Competence can be embedded in other corporate assets (like complementary to knowledge asset)
Understanding the limits on the market for know-how help to understand how firms can capture value from knowledge assets
Challenges presented by the know-how and intellectual property
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Inherent tradeability of Different Asset
---Recognition of trading Opportunities
---Disclosure of performance Features
---uncertain Legal rights
---Item of Sale.
---Variety
--- Unit of consumption
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Sectoral differences in the market for Know-how
Challenge Chemical/Pharmaceuticals
Electronics
Recognition Manageable Extremely complex, often impossible
Disclosure Handled by NDA, patents common
More difficult
Interface issues Compatibility generally not an issue
Compatibility generally critical
Royalty stacking, royalty base dilemmas
Infrequent Frequent
Value context dependent
Strongly so Very strongly so
Patent strength Generally high Sometimes limited
Development cycle
Often long Generally short
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Complementary Assets & Dynamic capabilitiesExternal Sensing
Profits from knowledge assets ($$$)
Inherent replicability of the product
Complementary Assets & Technologies
basic (operation
al) competenc
ies of the firm
price/performance characteristics of the product
timing
standards
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Organizational actions Role of external resources and internal resources in working
together to seize and maximize opportunities
Complementary Assets & Dynamic capabilities
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Implications for the Theory of the Firm
The firm is a repository for knowledge
The knowledge is embedded in business routines and process
The firm’s knowledge base includes its technological competences
as well as it knowledge of customer needs and supplier capabilities
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Implications for the Theory of the Firm
The essence of the firm is its ability to create, transfer, assemble,
integrate and exploit knowledge assets
Knowledge assets underpin competences, and competences in turn
underpin the firm’s product and service offering to the market
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Implications for the Theory of the
Firm
Dynamic capabilities
---The firm’s ability to sense and seize opportunitie
--- The firm’s ability to reconfigure its knowledge assets,
competencies, and complementary assets
----The firm’s ability to select appropriate organization forms,
---The firm’s ability to allocate resources astutely and
price strategically
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Implications for the Theory of the Firm
Dynamic capabilities reflect the firm’s entrepreneurial side of
management. Comparative advantage flows from both management
and structure.
The emphasis on the development and exploitation of knowledge
assets shifts the focus of attention from cost minimization to value
maximization.
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ConclusionKnowledge, competence and related intangibles have emerged as the
key drivers of competitive advantage in developed nation
The value-enhancing challenges facing management are gravitating
away from the administrative and towards the entrepreneurial. This is
not to deny the importance of administration, but merely to indicate that
better administration is unlikely to be where the superior profits reside
It is no longer in product markets but in intangible assets where
advantage is built and defended.