1. Arrow (1962) has pointed out that innovation is not an ideal phenomenon for this kind of analysis because its most fundamental characteristic is that it gives rise to something not known in advance and that it is not possible to apply the principle of rational choice if the set of choices is not defined in advance. However, new growth the-ory, for instance, operates with models that combine ongoing innovation with assumptions of rational choice.
2. The concept of tacit knowledge was originally developed by Polanyi (1958/1978 and 1966).
3. These are typically situations where cultural differences make it difficult to interpret the facts obtained. After negotiations broke down, French managers involved in attempts to merge Renault and Volvo described the dif-ficulties in establishing a clear picture of the internal dynamics of the other firm.
4. It should be emphasised that IT may be regarded from a different perspective when the emphasis is on its potential to reinforce human interaction and interactive learning. Here, the focus is not on its capacity to replace tacit knowledge but rather on how it can support and mobilise tacit knowledge. E-mail systems connecting agents who share common local codes and frameworks of understanding can have this effect. Broad access to data and information among employees can further the development of common perspectives and objectives.
One interesting issue is whether the new virtual reality and multimedia technologies can replace direct human interaction when it comes to transferring elements of tacit knowledge.
5. In his introductory remarks, the president of EIRMA, Dr. E. Spitz, stated, "In a time of intensive global competi-tion, speeding up the innovation process is one of the most important ingredients which enable the company to bring to the market the right product for right price at the right time (...). We know that it is not only the R&D pro-cess which is important. We have to put emphasis on the integration of technology in the complete business environment – production, marketing, regulations and many other activities essential to commercial success.
These are the areas where the innovation process is being retarded. This subject is a very deep-seated one which sometimes leads to important, fundamental rethinking and radical redesign of the whole business pro-cess. In this respect, especially during the difficult period in which we live today, where pressure is much higher, our organisations may in fact, need to be changed" (EIRMA, 1993, p. 7).
6. A recent development, sometimes referred to as outsourcing, may be interpreted as an externalisation of some of these costs of change. A series of studies starting with Antonelli (1997) has shown how, across industries, there is a strong correlation between the rate of productivity growth and growth in the use of knowledge-intensive ser-vices.
7. Fukuyama (1995) focuses on trust as "social capital" and argues that it tends to be eroded, at least in the United States. To a European, the analysis may appear somewhat biased by the definition of what is at the core or social capital, but the basic intuition of the importance of social relationships for economic efficiency are to the point.
8. The model is more complex than these remarks indicate. For instance, it assumes that the process is a spiral movement from tacit to explicit knowledge, then back to tacit knowledge. The conversion of one to the other plays a crucial role in the theory. This is a point worth critical attention. In some of Nonaka and Takeuchi's exam-ples, it is not clear whether interaction between different forms of knowledge or conversion of one to the other is illustrated.
9. The only explicit important reference to the Japanese model appears to be that to the Aoki juxtaposition of the A model and the J model of work organisation; Eliasson emphasises that the J model hampers innovation (1996, pp. 109-110).
10. Lam (1998) presents a fascinating story of the kind of problems that arise when the two cultures collide when they attempt to collaborate in knowledge creation.
11. Nissan's development of its Primera model for the European market is an interesting illustration of how Japanese firms try to absorb local tacit knowledge from potential overseas markets in Europe (Nonaka and Takeuchi, 1995, pp. 200 et passim).
12. Activities of an international organisation such as the OECD may sometimes reinforce some of the problems.
"Benchmarking" is much easier in areas dominated by formal training and codified knowledge. It may be tempt-ing for Member countries to aim at approachtempt-ing a fictive best practice (or to converge towards an OECD average) for isolated variables rather than take into account systemic features of the domestic sub-system.
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