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ON THE MANAGEMENT OF KNOWLEDGE
by
Jean-Michel Saussois
École Supérieure de Commerce de Paris, France
Knowledge management in the learning society
Part II reports on the work carried out in four high-level seminars organised by CERI at the OECD and co-organised at Tokyo (with the Japanese Ministry for Education, Science, Culture and Sport), Paris at the OECD, Stanford (with the Graduate Business School) and Washington (with the US National Science Foundation). These seminars focused each on a specific theme relating to the production, diffusion and use of knowledge in different sectors. Some 30-40 people attended each of the seminars, two of which (Tokyo, Stanford) were preceded by visits to firms. The papers presented at the seminars were discussed by economists, historians and sociologists, but also by practitioners and policy makers.
The aim here is to present a selection of papers in order to allow the reader to participate “virtually” in the discussions about knowledge management, which assumes that there is an interrelation between produc-tion, mediation and use of knowledge. Knowledge management is nothing new. What is new is the awareness that knowledge has to be managed as a resource both individually and collectively by and for the actors who make and are the economy. What is also new is the fact that knowledge is consciously produced and that the users are well aware of this fact and play on it. Sociologists speak of reflexivity to designate this phenomenon, which is particularly visible in the medical sphere or education where “lay people” appropriate, in their own way, knowledge previously reserved to the professions and do so for better or worse.
A two-sided reflection ran though the four seminars.
First, speaking of the production of knowledge explicitly or implicitly recalls the powerful metaphor of production developed by what is known today as classical economics. It states that all economic activ-ity is a conversion of input into output, and this can carry over to the definition of any activactiv-ity. For exam-ple, to treat a patient is to convert someone who is ill into someone who is well; to teach is to convert an ignorant person into a knowledgeable one.
This metaphor leaves in shadow a certain number of far from trivial assumptions. For example, if the difference in firms’ performance is considered due to their combination of inputs into outputs, this assumes that there is a system of production in which techniques and knowledge are stable, known, artic-ulated and transmissible. This also assumes that all firms have equal access to this knowledge, that is, that they know how to read and understand “the same cookbooks” and are fully familiar with all the ingre-dients of success in “obtaining delicious dishes”, that is, in offering products and services recognised as of good quality on the market. In other words, knowledge is accessible and transmissible to all. In reality, the situation is more complicated. Aspects of learning, both individually and in general, will play a role.
Access to available knowledge will be unequal, and diffusion of knowledge may take place with difficulty or differently.
If this assumption about accessibility is more or less borne out in firms’ practice, the issue addressed by the four seminars, that of the production and use of knowledge, becomes more difficult. What is to be
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understood by “production of knowledge”? Does one produce knowledge as one produces soap or a car?
Obviously not: the assumption that knowledge is not a product like others served as a framework throughout the seminars and underlies the various papers. Moreover, when looking at the education sec-tor alone, the difficulty increases, as this is an area where the production function may not be the best metaphor for understanding the activity of teaching. For example, what are the inputs and the outputs?
Who are the users: pupils, parents or firms?
The second issue concerns the pertinence of a linear model in which basic knowledge is transmitted chronologically, upstream to downstream, or top to bottom, with a recognised specialisation in tasks and functions. This long-lived idea – that there is a clearly identified and delineated research and develop-ment function just as there is a manufacturing and diffusion and distribution function – is one that appears today too simple, even simplistic, in its lack of attention to sociology or history. It should how-ever be noted that the abandonment of the linear model, which is described at length in the first part of this report, was not always possible. Participants were very tempted to find lines of demarcation between scientific knowledge, the domain of researchers, and technical knowledge, the domain of businesses. The discussion of the blurring of borders was often very lively and it must be said that it was in the area of education that discussants wished to out-Herod Herod by maintaining a clear separation between the world of research and development and the world of users. Of course, the situation varies among OECD countries, but, in some, it must be recognised that the users, that is ultimately teachers and professors, appear more as objects of research than as participants in research.
To give an accounting of the different seminars, this part is organised around three themes which structure the various presentations: the argument for the renewal of the conceptual framework that would allow for understanding the knowledge economy; sectoral comparisons that help achieve a better under-standing of the education sector; the need to build a new generation of indicators.
Renewing the conceptual framework so as to understand the knowledge economy
When one analyses knowledge as a resource, unquestionably of a very specific type, there arises the issue of its source, its exploitation and its delivery, to use the classical expressions of the value chain described by economists. A discussion arose among economists with respect to the basic division between two modes: the world of objects and the world of ideas. In a stimulating oral presentation at the Stanford seminar, Professor Paul Romer of Stanford University argued convincingly that the participants should work to construct a theoretical framework that would make it possible to understand the devel-opment of knowledge economies. For Romer, the distinction between objects and ideas does not neces-sarily lead to a distinction between public and private goods. Romer said, provocatively, that a shoal of sardines was as much a public good as Thales’ theorem if the mechanisms controlling access to the source are null or essentially null; in other words, the distinction between a public and a private good would no longer be a fundamental distinction for economists insofar as it refers to a public policy choice, or to insti-tutional arrangements as Professor David Mowery of the University of California at Berkeley put it when he spoke at the Washington seminar.
For Romer, this distinction has more an institutional, sociological and political basis than an eco-nomic one. Taking the position of the devil’s advocate, he underscored the lack of tragedy for the “intel-lectual commons”, an explicit allusion to the eighteenth century debates in England which fed the thinking of the founders of political economy. When the number of sheep put to pasture on the commons depended on the dimensions of the fields, political problems of distribution arose: whether to increase the extent of the fields or reduce the size of the flock – a tragic choice. There is no such problem with ideas which do not come up against the question of scarce resources and distribution. Ideas have very specific characteristics and can extend indefinitely. Some can fly far afield, ignoring national borders, while others are embedded in organisations or are “sticky”, in the felicitous expression of Professor Eric von Hippel of MIT, who participated in the Washington seminar. Some ideas are easy to convert into human capital, while others are used to redistribute objects, and still others solely to produce further ideas. It is within the framework of this classification of ideas that the separation between tacit and cod-ified knowledge takes on all its meaning. Romer also proposed topics for study to public policy makers
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by suggesting that they take many more initiatives to encourage the birth and production of ideas, a pro-cess which is, by definition, infinite. Policy makers should show imagination and envisage new mecha-nisms, fiscal but also organisational incentives so as to speed the process.
For example, at the Washington seminar, David Mowery analysed the Bayh-Dole Act* as a mechanism which has profoundly modified the relations between academics and businessmen in the United States.
The extension of intellectual property rights to firms that seek to make use of university studies financed by the federal government has had a significant impact on the behaviour of the interested parties. Professor Susanne Huttner, University of California at Berkeley, in her presentation at the Washington seminar, pro-vides convincing descriptions taken from biotechnology to show the impact of this law on the acceleration of the diffusion of knowledge. Such a mechanism has changed in a lasting way the asymmetries in contracts between businessmen and academics. In other words, behaviour can be modified by new incentive mech-anisms. What comes into play is a sort of rule of “political” good behaviour in order to define what comes under the heading of public good and what comes under that of private good. This separation obviously refers back to national institutional frameworks. Indeed, Romer raised a far-reaching question: Are we see-ing the end of science? The time when the French scientists Pierre and Marie Curie openly communicated all of their work to their foreign colleagues in the name of the universality of scientific knowledge seems to be over. The organisation model defended by the historian and economist Paul David, Oxford and Stanford University, who participated in the Washington seminar, was to some extent questioned by the participants.
Is it pertinent today to distinguish, in David’s expression, the republic of science and the kingdom of tech-nology? When new institutional arrangement openly encourage (cf. Bayh-Dole) the interpenetration of pub-lic and private interests, compromises are made between private appropriation of results and the circulation of scientific knowledge. It is these types of compromise that it is necessary to seek to understand and which necessarily require an institutional analysis of the economy.
Professor Richard Nelson, of Columbia University, was among the first economists, along with Profes-sor Sidney Winter, to have called attention to the awkwardness with which orthodox classical theory attempted to address economic change. His analysis is found in an important work which seeks to pro-pose an institutional theory of economic change. It argues in particular that firms can be understood not as combinations of input into output but as organisational capacities. Using work on firm behaviour (fessors Herbert Simon, Richard Michael Cyert, and James March) but also the work of historians like Pro-fessor Chandler and economists like Schumpeter, this is pioneering work which seeks to achieve better understanding.
Nelson argues that one can understand the firm’s behaviour only in relation to its place in its envi-ronment, an almost natural, one might even say ecological, place. He then proposes a more realistic anal-ysis of the firm, whose trajectory can only be understood in its place in an environment, a sector with its specificity and system of values. His is an argument in favour of a sectoral analysis which makes it possi-ble to project trajectories insofar as it is developed in a community of shared practices and values. Airbus and Boeing are undoubtedly competitors, but they belong to the aviation community, and the same can be said of electricians or petrochemists.
In his paper, Nelson came back to the basic issue that concerned him in that earlier work, that is to say his intellectual discomfort with the assumptions of standard theory about the production function.
Nelson, along with others such as Professor Kenneth Arrow, Stanford University, a pioneering thinker about the economic consequences of knowledge, underlines the importance of “learning by doing”, a kind of knowledge which cannot be transmitted in the form of procedural manuals but only through expe-rience shared between people. Arrow raised this point at the Stanford seminar to “explain” the Silicon Valley phenomenon. He pointed out that direct personal contact, that is, the relations that make it pos-sible to correct reasoning “in real time” and mutual adjustments, are always necessary if an economy is to be efficient.
* The Bayh-Dole Act provides american universities and other research institutions that receive federal money with a specific mechanism for extending intellectual propriety rights to firms seeking to commercialise university inventions.
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Professor Bengt-Åke Lundvall, Aalborg University, Denmark, develops the concept of “learning by doing” in his paper. He addresses not the “knowledge economy” but the “learning economy”. His work makes use of the distinction between reproducible and non-reproducible knowledge. This distinction, which is different from that between tangible and intangible knowledge, makes it possible to attack in another way the problem of the transmission of knowledge. To transmit is not to communicate; transmis-sion cannot be reduced to a choice of the medium that diffuses new knowledge to receivers ready to absorb it. Transmission involves moving from one state of learning to another. It may be dramatic. For example, in the past, in the dialogue between generations, the older person knew more than the young apprentice and transmitted knowledge through rites of initiation and integration. The opposite case can be seen today, as young people know more about computers than their elders. The older generation, which is not knowledgeable, is excluded, and transmission takes on a dramatic colouring because this new knowledge causes anxiety and destabilises. It is necessary to find compromises to avoid ruptures and be able to ignore the dangers of being unaware of a new kind of knowledge. This transmission process requires time, a period of incubation, of discussing the advantages and disadvantages of new ways of doing things. The learning economy addresses precisely this question of the speed with which new knowledge can be reproduced or again the strength with which organisational routines can reject innovation.
Value of sectoral approaches for better understanding the education sector
Along the lines of Nelson’s work, one can say that the sectoral level is to be understood as a true eco-logical niche in which the strategies of actors are carried out within professional communities. The sec-toral level appears as an appropriate level for analysis. Secsec-toral levels were primarily discussed in Tokyo for engineering, in Paris for health and education and in Stanford for the information technology sector.
There are two articles in Part II focusing on the production, mediation and use of knowledge in the engi-neering (Eliasson, Schuetze) and health sectors (Bauer, Kervasdoué). Hargreaves’s paper gives compar-ative analyses of knowledge processes in the education and health sectors whereas Kogan’s and Carnoy’s paper focus on education.
The engineering sector
Professor Gunnar Eliasson’s article justifies the sectoral approach by clearly presenting the method-ological problem that consists of saying that it is not possible to understand firm strategy if one does not understand the configuration of actors and techniques. One must look again to the great economists, like Marshall, too much in advance to have been understood by his colleagues. It was Marshall who first cre-ated, in 1919, the concept of industrial district to underscore the positive eternality enjoyed by a firm when it is part of a territory, a network of relations joining actors with different goals, such as researchers, suppliers, banks, etc. In other words, such a firm is surrounded by a specific environment which will cre-ate overall productivity gains from which the firm will benefit. It is this “territory” effect that another econ-omist as little understood at the time as Knight called, for lack of a better word, “knowledge”. In brief, knowledge, through its spillovers is to be understood as a positive externality. Here lies, some 60 years earlier, the premises that constitute the theory of new knowledge developed by Romer.
Eliasson’s article takes as its point of departure Marshall’s work on the positive externalities of knowl-edge to create a new concept which he calls the “competence bloc”. What is to be understood by this?
Essentially that one cannot separate the strategies of private actors from those of public ones, that one cannot separate actors from the incentive mechanisms that lead them to act in a territory, that one cannot separate the incentive mechanisms from the institutions in which they are contained and which are part of national cultures. In brief, things have to be taken as a “bloc”. Eliasson’s thinking lies along the lines of what is known today as the school of institutional economists like Nelson. In this definition of compe-tence blocs, one cannot fail to take the example of Silicon Valley, California, whose history cannot be reduced to a series of individual successes in the shadow of university campuses in a sunny climate. In his oral presentation during the Stanford seminar, William Miller, professor at the Stanford Graduate
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ness School and considered one of the historic figures of Silicon Valley, was able to trace the history of Silicon Valley and flesh out the concept of the competence bloc.
Hans Schuetze’s paper raises the issue of the terms of the exchange between industry and universi-ties when these are called upon to work together. Mutual expectations are a central issue here, inasmuch as the players do not want to find themselves in what game theorists have called “the prisoner’s dilemma”, which is bound to produce winners and losers when the cards are not on the table. What exactly does this entail? Namely that each side must predict how the other will behave when entering into a working relationship whose outcome is uncertain. To put it another way, what makes a firm want to work with university laboratories, and what makes universities want to work with industry? In a sector like engineering the answer is important, precisely because the linear model has been abandoned; the actual terms of the exchange constitute the social learning curve. Schuetze manages to demonstrate that firms are motivated for different reasons (size being a contingency factor). They may want to take a short cut and save time and money by harnessing specialist knowledge, but they may also want to develop rela-tions with the laboratories as a means of permanently updating their own knowledge base; in other words, working with university laboratories is a way of keeping the firm on its toes and fighting the com-placency that comes with routine; such firms can constantly improve their capacity to absorb information (from customers but also suppliers). As for universities, it is fair to say that the old bias against private enterprise is fading; working with firms is no longer considered taboo by research communities in Japan and France, for instance; academics are learning to work with industry (with varying degrees of success) and their contract work is of course aimed at killing two birds with one stone.
The medical sector
For the medical sector, comparisons with the engineering sector come to a halt on the sector’s struc-ture even if they have several points in common: the separation between basic and applied science exists just as much for physicists and engineers as for biologists and practising physicians. Both engineers and physicians share professional practices. In both cases, the rhythm of change differs, depending on the nature of the knowledge and what is at stake. In medical research, the race to discover a new mole-cule, the race to be first to publish results that will make a mark in a scientific community whose members are both competitors and colleagues, represents a significant challenge. The time frame of the research (publish or perish) is not the same as the time that the physician gives to a patient or the length of hos-pitalisation of the patient for the insurance company. Yet time will affect knowledge: how can the length of hospitalisation be reduced by developing new, less invasive techniques? How can the time physicians devote to administration be reduced? How can the time of getting new molecules to market be pared down? All these questions concerning shortening time spans are those of different actors with different concerns (economic, scientific, public policy).
The articles of Jeffrey Bauer and Professor Jean de Kervasdoué bring to light the cultural and national aspects of the health sectors in the United States and in France, which make the task of international com-parisons difficult. If information technologies standardise the use of equipment and practices, differ-ences clearly appear in terms of the place of the medical sector in the economy, which reflects, as in a mirror, the national framework.
Bauer’s article maps precisely the stakes and resources that each actor will be concerned with in a North American framework. This map is not without consequences for the structuring of knowledge. Bauer predicts a relative decline in academic knowledge and a rise in knowledge that will more and more be produced by the pharmaceutical companies. To recall an expression of Eliasson’s in his article, this would confirm the view that firms are more and more becoming technical universities which compete with the universities, previously considered as the storehouses of knowledge. Bauer speaks of the corporatisation of this sector, thereby underscoring the fact that the production and mediation of knowledge will be undertaken by large private groups (purchases of services, producers of drugs, the media) that will change the shape of the current landscape. Is this diagnosis valid only for North America?
In his article, Professor de Kervasdoué paints a very different picture, as French as the preceding one is American. France’s medical community as yet takes little responsibility for the economic aspect of its