Download Enterprise Networks: A Systematic Knowledge-generating Enterprise

Enterprise Networks: A Systematic Knowledge-generating Enterprise
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ZHANG Shuai1
MU Ji Fang 2
School of Economics, Renmin University of China, Beijing, China
2
School of Management, University of Washington at Seattle, Seaattle,USA
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：
Abstract In this paper, we discuss the knowledge innovation of firms in view of the art of the
enterprise network. We make some comparative analysis of the firm’s nature between Coase’s origin and
that of knowledge-based. The resource-based, networks are nature of firm. We propose that firm is not
only a knowledge-creation but a knowledge-preserving entity. In dynamically environment, the
importance of enterprise network and the nature of enterprise network firms are knowledge-generating
from an integrated perspective of sociology, economics, and management framework..
Key words: enterprise network; embeddedness; innovation; knowledge-generating, knowledge
management generated in the network
1.Introduction
Much has been written on the nature of and the knowledge innovation of firms. Examples
originates from Coase, and his inherits who extends Coase’s idea into transaction economics, and other
branches of theory like principal-agent theory. In this paper, I firstly discuss the art of the enterprise
network; presents a definition of enterprise network, then I mainly make discussions on the benefits
from enterprise networks, makes some comparative analysis of the nature of firm between Coase’s
origin and that of knowledge-based of the firms, transaction cost economics, resource-based, networks
and the nature of firm, proposing that firm is creation of knowledge also a knowledge-preserving entity,
argues that in dynamically environment, the importance of enterprise network and the nature of
enterprise network and firms as a knowledge-generating enterprise from an integrated perspective of
sociology, economics, and management framework, and the following part of the text I mainly discuss
the novel make enterprise network a systematic knowledge-generating enterprise.; the last part I draw
some conclusions and presents some ideas on how to manage knowledge generated in the networks.
2.Related Literature
Enterprise networks as one important enterprise type are superior over that of market, plan, and
hierarchical enterprise forms(Sun Tianqi, 2001), the decision of enterprises are the results of contagion
between networking firms(DiMaggio and Powell, 1983), the competition between firms has become the
competition between different enterprise networks. Teece argues that the importance of network in
dissemination and communication of technological and organizational competencies(Teece,1986), and
the competition between firms in knowledge-based economy are knowledge---------the new ideas
generated and its commercial application in business----------provide superior advantage for firms, the
network can be regarded as one of the channels that can provide firms with the great opportunity to the
acquisition of human resources, financial resources, scarce managerial experiences, and precious
knowledge that can contribute to the firm’s profit and efficiency(Oliver, 1990), the intra-firm networks
thus can provide the firms opportunity of co-learning, transformation of new technologies, legitimacy,
and resource exchange(Nohria and Exxles, 1992), and especially that of knowledge dissemination, the
single firms are path-dependent, also the core competency can leads to the core rigidity because of the
naturally historical evolved culture and other related reasons (Leonard-Barton,1992), but the network
is helpful for the firms to innovate and to assimilate knowledge from the interacting firms, but the
literature does not answer the question of why the enterprise firms can facilitate knowledge-generation.
This paper try to provide some ideas on this question.
3. Enterprise networks: a knowledge-generating enterprise
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3.1. Transaction costs, resources, networks, and the nature of the firm
Following Coase’s seminal contribution, a theory of the firm should explain why some economic
activities are organized within the boundaries of a firm and some are organized across markets.
Originating in Coase, the transaction cost economics maintains that the operation of a market costs
something and by forming an organization and allowing some authority, and entrepreneur to direct
resources, certain market costs are saved. Firms, thus, exist to economize on these marketing or
transacting cost, associated basically with information acquisition, bargaining, contracting, policing and
enforcing agreements. As a result, market price co-ordination of exchanges is replaced by hierarchical
co-ordination. The make-or-buy decision provides transaction cost economics with its basic unit of
analysis. It tells us that the decision to vertically integrate depends on the relative monitoring costs that
arise from the inability to make perfect decisions and from the uncertainty which arise when the firm
must trust a self-interest external agent. These cost increase when the firm frequently requires large
amounts of work for which specific assets are necessary. Divergent strategic interests requires the use of
complex and expensive governing procedures to monitor information and promises. Because of
transaction cost are particularly pertinent in the simultaneous presence of bounded rationality,
opportunism and asset specificity. Hence, the existence of firms is seen as a means to lesson the
opportunistic potential that arises when transaction-specific investments are made in a world of
imperfect information, the internalization of market transaction through hierarchical authority.
The research results from sociologist run against the above transaction economics view. Building
on an open systems perspectives first put forward by organizational theorists, structural sociologists
have suggested that the most important facet of an organization’s environment is its social network of
external contacts. They emphasize the fact that economic action------like any other firm of social
action--------does not take place in a barren social context but, rather, is embedded in social networks of
relationships. Networks perspectives build on the general notion that economic actions are influenced by
the social context in which they are embedded and that actions can be influenced by the position of
actors in social networks and the nature of relationships among these different but ongoing interactive
actors.
Embeddedness refer to the fact and discussions within a group typically have a history, and thus
history results in the routinization and stabilization of linkages among members. As elements of ongoing
social structures, actors do not respond solely to individualistically determined interests … a structure of
relations affects the actions taken by the individual actors composing it. It does so by constraining the
set of actions available to the individual actors and by changing the dispositions of those actors toward
the actions they may take.
Underlying embeddedness is the quest for information to reduce uncertainty, a quest that has been
identified as one of the main drivers of organization action(Granovetter,1985). Social factors resulting
from the embeddedness of firms in a rich social context can be influential in altering the opportunity set
perceived by firms, the social structure of ties within which economic actors are embedded can
influence their subsequent actions. Network of contact between actors can be important sources of
information for the participant. This in turn provides both opportunities and constraints for actors and
can have implications for their behavior and performance. The influences of social networks can cause
difference in resource available between actors, enable difficult transactions, promote behavioral
conformity by serving as conduits for both technological and social information about organizational
activities, which in turn can influence the extent to which they adopt new innovations. Networks
provides informational benefits through two mechanisms. Relational embeddedness or cohesion
perspective stress the role of direct cohesive ties as a mechanism for gaining fine-grained information.
That is, it suggests the actors who are strongly tied to each other are likely to develop a shared
understanding of the utility, which in turn influence their actions, to carry information that diminish
uncertainty and promote trust between actors, it is the unique source of information about the partners ‘s
capabilities and reliability. Structural embeddedness on networks go beyond the immediate ties of firms
and emphasize the informational value of the structural position these actors occupy in the overall
structure of network.
From a network view of enterprise, firms are interconnected with a lot of other actors through a
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wide array of social and economic relationships, each of which can constitute an interactive social
network. From this view, the transaction economics deals only with the static efficiencies while for the
most part neglecting market power and dynamic production-based rationales for hierarchical economic
organizations.
From the perspective of resources-based view of firm, firms are a nexus resources. Resources can
influence a variety of the actions taken by the firm actors, the direction of firm growth, the rate of
growth.
The implications from the above-mentioned discussion and a dynamic view, we can say that the
existence of firms is because the market has no memory, the market can produce information, but it can
not preserve it, the firm can produce and store information, also it can look, buy, acquire information
from its external. The firm own special resources, the firm exists because the cohesion generated by
the close and on-going proximity of interacting and interdependent firm can produce specialized
knowledge that can not be created in a spot market setting. The tacitness, social complexity and the
specificity of productive knowledge render it non-treadeable and hence, non-available in the market as
no price reflecting the marginal productivity of the resources can be established. The firm not only can
create idiosyncratic crucial knowledge assets, but also serves as a knowledge-preserving entity and
knowledge-transferring entity. The more precious, tacit and socially complex and specific knowledge
(the experiences and in particular team capital) developed within the firm, the more competitive
advantage a firm has. The administrative setting of a firm provides the necessary cohesion by
guaranteeing on going and close relationships that such knowledge capital can be developed. The
development of specific knowledge assets needs an administrative shell serving as fertile soil. Since the
market by its very nature is not able to provide such a stable setting, the knowledge creating capability
of the firm can be seen as the reason for the existence of the firm.
3.2 The enterprise network serves as a systematic knowledge-generating enterprise
The network provides firm access information that it is a member of it, it not only enhances the
individual capabilities of member firms, but themselves lead to capabilities that are not isolated to any
one firm. The ability of a firm to access information in a network constitutes an advantage. Cooperation
among member firms, can also engender capabilities in the relationship itself. These capabilities
encourage innovations by technology transfer and incentives. Networks offer the benefits of both
specialization and variety generation.
Smith recognized the power of the market to achieve variety through specialization in the division
of labor. Smithian efficiencies in specialization were due to the inherent learning by doing by
completing repetitive tasks as well as the reduction in loss time due to changing tools and tasks. The
implication is that learning by doing, accumulating to the lowering the costs of subsequent production,
through dynamic learning of specialization, is the driver of the acquisition of competence and,
consequently, of knowledge. The perspective of the firm as a repository of knowledge indicates the firm
as a knowledge-generating entity based on experienced learning through a division of labor both a static
coordination problem as well as determining dynamic paths of knowledge acquisition.
Boundaries to a firm represent not only the legal unit of accrual, but also the cognitive
representation of what constitutes the object of membership, that is, of identity. Through identity,
individuals anchor their perceptions of self and other and attaching meaning to membership in a firm, as
well as in the categories of skill that define in a division of labor. By this anchoring, they employ focal
rules by which actions is coordinated and intention communicated through common categorization of
self and other, and individuals are guided and motivated along coordinated paths of joint-learning., the
knowledge created thus bounded within the firm. Identities thus represented a norm which indicates
avenues of exploration. The organization by forms is variety-reducing because of specialization.
From the resource-based view of the firm, the firm’s know-how that makes it a unique provider
in terms of price, quality and product development. The know-how refers to the non-codified knowledge
and procedures that employees gain by working in firm’s structural setting as team members, it is
produced by experience and social interactions that are not readily duplicated. thus, know-how is tacit,
sticky knowledge that firms can fosters for rent-garnering idiosyncratic skills. Because know-how
happens as a cumulative learning process, firms compete in an evolutionary way where successes and
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failures, if handled properly, enhance team know-how.
The assets which are essential to sustain and develop the firm’s capabilities, the firm in a network
can access its partners knowledge-based assets, if one man in a firm starts a new idea, it is taken by
others and combined with suggestions of their own in another firm; and thus becomes the source of
further new ideas. The decentralized enterprise networks thus is an effective learning system-------an
efficient governance mechanisms for collective learning. Interactions, communications, and more or less
intended sharing of knowledge between independent firm brings stability and variety. Stability, because
personal ties, norms, etc. creating a constraining framework, variety, because the spread of knowledge
may fuel the process of technological change, thus promoting the growth of commercially valuable new
knowledge. Every firm is a bundle of knowledge. And because of the existence of a number of distinct
network capabilities, tying together and interacting with the capabilities of individual firms, the network
is more than the sum of the capabilities of firms, the market network enterprise is in fact able to learn
and generate new capabilities in a self-reinforcing and synergistic way, an engine of innovation and
knowledge-generating enterprise.
Hayek’s contention that market is the engines of variety. The great power of the market is not only
its information properties, but also its functions as a generator of variety in innovations and capabilities
that are subjected to selection. The generation of variety is of the fundamental trends in the development
of economic systems (Saviotti,1996). The networks as defined, is a collection of firms, pursuing
different visions and organized by distinct identities, generates a variety that individual firms can not
manufactured internally, each ensconced in a identity that supports specialization and a dynamic of
learning and exploration. Specialization is self-preserving, even markets generate information as to
their valuation and accessibility, because prices can be communicated, but not competencies. The
dynamic advantage of the market is the generation of variety through an extended order that supports
coordination among specialized firms.
4.Conclusion
The knowledge is the fundamental important for the firm to be robust and prosperous in dynamic
environment, and the innovation capability essentially the sustainable competitiveness of firms, the core
elements for the firm to succeed in fierce competition market is the its ability of knowledge creation,
acquisition, storage, and application, rather than the transaction cost-lowering. Thus from the
knowledge-based and resourced based views based on an integrated perspective of economic,
managerial and sociological framework, the nature of firm is that of its idiosyncratic crucial socially
complex knowledge creating and preserving entity. Firms are social communities that permit the
specialization in the creation and replication of partly tacit, partly explicit organizing principles of work,
networks are more than just relationships that cover the diffusion of innovations and norms, networks
constitute capabilities that argument the value of firms. Nowadays, forms like to form networks, the
decentralized enterprise networks is an effective adaptive, evolving complex learning system-------an
efficient governance mechanisms for collective learning, networks as knowledge encoding coordination
within and between specialized firms in specific cooperative and competitive structures, can both
engender variety and innovation, thus enterprise network is a knowledge-generating enterprise.
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ZHANG Shuai, PHD candidate , School of Economics, Renmin University of China, Beijing,
China
MU Ji Feng,
PHD candidate, School of Management, University of Washington at Seattle,
Seaattle,USA
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