ABSTRACT
However, in light of our previous argument, we need to pause at this point and enquire more carefully into the idea that organisations can know. Taken literally this would imply that they can enjoy sense experiences, that they can reflect, that they possess memory and that they can reason and infer. Now one immediate objection to this is the claim made above that knowledge is an attribute of individuals and individuals alone. However, epistemologists also recognise that what individuals believe also depends upon the testimony of others; that it is possible, indeed essential, in the presence of the division of knowledge, to share information – that is to say, representations of what is known by individuals. Firms are organisations in which the testimony of other team members matters crucially, and thus firms embody instituted, shared practices such as language and trust and agreed procedures that permit the sharing of reliable knowledge. Thus, to understand the ‘knowledge of the firm’ one must know how that firm is organised and how its patterns and language of communication are articulated. Arrow (1974) refers to this organisation-contingent aspect of the extension of understanding in terms of the communication codes that are defined by particular organisations. Moreover, and this is exactly Penrose’s point, capabilities depend upon team activity in which the knowledge and skills of the individuals are transformed into the synthetic understanding of the organisation. Thus the organisation, in all its aspects, becomes an operator for creating the collective from the individual. Since these phenomena are often less than transparent to the external observer (and are certainly complex, social processes), this has given rise to the idea of causal ambiguity. In short, the link between capabilities and competitive performance is not readily decipherable, even perhaps by the management of the firm to which its operations are partly a black box (Rumelt 1984). Of course, this raises particular difficulties when a firm comes to choose which other imperfectly understood organisations to engage with in cooperative arrangements to generate new capabilities (James and Metcalfe 1999; Lado et al. 1997).
