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Core Capability and Core Rigidity: Organizational Memory Perspective
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Core competence and core rigidity: Organizational memory perspective
Chen-Yi Tsai 1, Lin, Julia L. 2, Chen, Ching-Hsiang3
1. Doctoral student, Graduate School of Management, I-Shou University.
lia05@ms57.hinet.net
2. Professor, Graduate School of Management, I-Shou University. julia@isu.edu.tw
3. Doctoral student, Graduate School of Management, I-Shou University.
frank813@giga.net.tw.
Core Capability and Core Rigidity: Organizational Memory Perspective
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Core competence and core rigidity: Organizational memory perspective
ABSTRACT
Organizations, in the hypercompetitive environment, continuously learn,
accumulate, and store knowledge to build organizational capability, and to sustain
competitive advantage. However, they do face the paradox of core capability and
core rigidity, which causes structure inertia and resistance to change. For capability
being embedded within organizational memory and different contents of
organizational memory, organizational memory perspective provides us more deeply
understanding of core capability and rigidity. Constructs of procedural and
declarative memory are adopted to explore the rationales underlying the paradox. We
also suggest that the trans-active memory system, an interactive learning system,
consolidates knowledge combination to facilitate endogenous change in the process
of capability evolution. After reviewing the nature of capability/rigidity and
organizational memory perspective, we infer propositions regarding the conceptual
framework. A discussion of implications and future research directions are included.
Key words:
Core capability; core rigidity; organizational memory; procedural memory;
declarative memory; transactive Memory System
Core Capability and Core Rigidity: Organizational Memory Perspective
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Core Capability and Core Rigidity: Organizational Memory Perspective
INTRODUCTION
Firms are viewed as repositories of knowledge, Organizational knowledge, being
institutionalized and embedded in organizational memory (Argote, 1999; Nonaka,
1994; Hubber, 1991; Kostova, 1999), becomes synonymous with organizational
capability. But the reversed-U relationship between slack resources and innovation
(Nohria and Gulati, 1996), negative relationship between performance and risk
preference (March and Shapira, 1987, 1992; Miller and Chen, 2004), indicates the
phenomenon of core capability and core rigidity (Prahalad and Hamel, 1990;
Leonard-Barton, 1992).
When learning needs to be distant, and radically new capabilities need to be
developed, firms often fall into competency traps, as core capability becomes core
rigidity (Nelson and Winter, 1982; Teece, Pisano, and Shuen, 1997; Tripsas and
Gavett, 2000). As capability may be deemed as collections of routines (Winter, 2000;
2003), the stability-providing effect of routines may lead to capability inertia. The
existing technological capabilities, codified in the routines, procedures, and
information processing capabilities of the firm, limit its adaptive intelligence.
We adopts metaphors of organizational memories to evaluate the paradox of core
capability and core rigidity. Organizational capability is embedded within
organizational memory (Nelson and Winter, 1982; Winter, 2000, 2003). The higher
Core Capability and Core Rigidity: Organizational Memory Perspective
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level of stored memory, the more organizational capability will exist. But organization
also ignores novel knowledge easily. We infer that different forms of accumulated
organizational memory have different relationship with capability.
When core capability becomes rigidity, organizations become resistance to
change. It’s necessary for organizations to combine existing and novel knowledge.
The trans-active memory system will be the mechanism bridging novel sources and
the existing knowledge base.
In the following section, we review the capability perspective to introduce the
paradoxical phenomenon of core capability and core rigidity, which refers to path of
capability evolution. Dimensions of capability are divided to novelty and speed. Then,
we build up conceptual framework. Discussion and conclusion are followed.
CAPABILITY AND RIGIDITY
Based on the resource-based view, firms can be seen as constituting a bundle of
resources (Wernerfelt, 1984). The resources determine an organization’s strength and
weakness to a greater degree than does industrial structure consideration (Rumelt,
1991; Gabriel, Venkat, and Paul, 2003). Capability approach deepens resource-based
perspective, offers rigorous definition of concepts, and continues to expand the
frontiers of understanding capability.
Core capabilities, embodied in employee knowledge, technical systems,
Core Capability and Core Rigidity: Organizational Memory Perspective
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managerial systems, and values, are institutionalized, and part of an organization’s
‘taken-for-granted’ reality. For the ‘taken-for-granted’ nature, routines economize
managerial cognitive resources, increase stability, and reduce uncertainty in
decision-making. For tacit ness nature, organizations sustain competitive advantage.
But core capability may become rigidity (Gilbert, 2005). Too much slack
resources reduce re-investment and are bad for innovation (Nohria & Gulati, 1996).
Existing routines for providing satisficing solutions prevent organizations from
outsourcing or initiating changes. That local learning leads core capability towards
rigidity and become competence trap. Thereby, core capability can be something of a
double-edge sword: “neglect it and you forgo an important source of competitive
advantage; hold on to it too long and you incur a strategic opportunity cost” (Boisot et
al., 1997 cited by O’Droscoll et al., 2001).
Dimensions of capability
Within hyper-competitive environment, we define two dimensions of
organizational capability, novelty, and speed and propose a conceptual framework of
organizational memory and capability.
Christensen and Foss (1997) suggested dynamic capability as the appropriate
balance between exploitation and exploration (March, 1991). Novelty will be critical
in term of exploration. The novelty is usually referred to characteristic of capability
Core Capability and Core Rigidity: Organizational Memory Perspective
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(Ford and Gioia, 2000; Moorman and Miner, 1998; Subin and Workman, 2004). To
explore the past experience, being embedded within organizational memory, we
define novelty, a divergence from the norm, refers to the degree of deviation from
prior routine.
Secondly, speed refers to the time required to plan and execute an action. In a
hyper-competitive era, only dynamic entry barriers can outperform the competitors.
The speed of innovation will be the necessary condition to establish dynamic entry
barriers.
WHAT IS ORGANIZATIONAL MEMORY?
When it comes to storage of organizational capability, and various effects on
capability and rigidity, the constructs of organizational memory provide us with a
deeper understanding and rationale underlying the conceptual framework.
Memory is the faculty of retaining and recalling things past, which will influence
subsequent individual behavior. The organization self does not possess memory.
However, there is a growing consensus that organizations have frames of references,
shared beliefs, values, norms, routines, structures, and other physical artifacts that
reflect the presence of organizational capability (Anand et al., 1998; Moorman and
Miner, 1997; 1998; Nelson and Winter, 1982; Walsh and Ungson, 1991).
Organizational memories have different forms, levels, contents (Walsh and Ungson,
Core Capability and Core Rigidity: Organizational Memory Perspective
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1991; Moorman and Miner, 1997), and are related to information management
(Anand et al., 1998), improvisation (Moorman and Miner, 1998; Vera and Crossan,
2005), new product development (Moorman and Miner, 1997, Kriakopoulos. and
Ruyter, 2004), organizational buying process (Park, and Bunn, 2003) and routines
(Cohen and Bacdayan, 1994).
Why metaphor of organizational memory is related to core capability and core
rigidity? Firstly, organizational capability is embedded within organizational memory.
An organizational capability is a collection of routines. Routine leads to the
accumulation of knowledge and the routinization of activity in an organization
constitute the most important form of storage. Although organizational ‘remembering’
is achieved largely through ‘routines (procedural memory)’, organizations keep
formal memories, and these formal memories play an important role (Nelson and
Winter, 1982). Thus, determining the consequences of different memory forms on
capability proves of interest, and constitutes the second issue, as follows.
Secondly, various levels and forms of organizational memory influence
capability differently. Mooreman and Miner’s (1997) empirical results indicated that
higher organizational memory levels enhanced the short-term financial performance
of new products, while greater memory dispersion increased both the performance
and capability of new product. After Moorman and Miner’s (1997) findings,
Core Capability and Core Rigidity: Organizational Memory Perspective
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Kyriakopoulos and Ruyter’s (2004) isolated the effects of different memory types,
and suggested that the greater the amount of procedural memory, the greater the
capability will be. But when a certain level of memory is achieved, local learning
prevents organizations from accruing novel knowledge, and becomes an obstacle or
rigidity. They proposed internal and external information flow as boundary condition,
but failed to verify the argument empirically. There may be other situational variables.
That is the third reason that we argue.
Finally, novel knowledge should be incorporated to existing memory to facilitate
endogenous change and to prevent competence tap. What is the facilitator?
Kyriakopoulos and Ruyter (2004) tried to extend the work of Moormen and Miner
(1997), which examined the moderating role of environmental factors, to the role of
information flow. They inferred that internal and external information flow improves
the relationship between organizational memory and capability. But the empirical
study failed to have significant results. This paper argues Transactive memory system
(TMS), as divergent shared mental model (Lewis, 2003), will help to consolidate
information flow and existing knowledge base.
Characteristics of organizational memory
Level, dispersion and content of memory, which are relevance to our conceptual
framework, will be discussed here. The level of organizational memory refers to the
Core Capability and Core Rigidity: Organizational Memory Perspective
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amount of stored knowledge an organization has about a particular phenomenon. High
level of memory provides base of organizational absorptive capability, which
enhances learning and accumulates more knowledge. Fortune (always) favors the
prepared firm (Cohen and Levinthal, 1990). But the greater the prior experience, the
less likely organizations engage in information searching activities (Weiss and Heide,
1993). This may influence flexibility, causes competence trap or core rigidity.
Dispersion: Becker (2004) cited Hayer (1945) and distinguished different
meaning of distribution and dispersion. One means knowledge or information
distributed and shared among various knowledge retention bins. The more highly
organizational memory is distributed, the more shared norm, value, or routines among
various individuals, groups or organizational units. The convergent nature of
organizational memory enhances organizational coherence, which enhances the
efficiency of exchange. But the consistent min-set implied by convergence lessens the
diverse opinions and perspective essential to new knowledge creation (McFadyen and
Cannella, 2004; Nahapiet and Ghoshal, 1998). The dispersion of knowledge means
specialization and complementarities which can provide various domain and novel
knowledge to prevent local learning and enhance capability.
Content: There are two types of organizational memory: procedural and
declarative memory. Procedural memory is distinguished from declarative memory.
Core Capability and Core Rigidity: Organizational Memory Perspective
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Procedural memory refers to process memory, which is similar to routines (Nelson
and Winter, 1982) and mades the performance faster and more reliable over time
(Cohen and Bacdayan, 1994).
Declarative memory refers to the memory of concepts, facts, or events. In
organizational context, declarative memories may refer to knowledge about
customers’ requirement, commercial specification, product specification, production
capability, bill of materials, and scheduling rules. They can be found across different
organizational units, databases, or intranet.
Riding a bike is a good example. Riding a bike involves procedural memory, but
it is contrasted to the declarative memory of the mechanics underlying riding a bike
(Cohen, 1991; Moorman and Miner, 1997; 1998, Kyriakopolos and Ruyter, 2004).
Another example, concurrent engineering is the involvement of a
cross-functional team in a process to plan product, process, and manufacturing,
simultaneously (Koufteros, Vonderembse, Doll, 2002). Concurrent engineering
process involves various organization units of marketing, product engineering,
process engineering, manufacturing planning, material and inventory handling. While
concurrent process becomes organizational routines as procedural memories shared
norms and value within various units, the declarative memories, i.e. knowledge of
customers’ requirement, commercial specification, product specification, production
Core Capability and Core Rigidity: Organizational Memory Perspective
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capability, bill of materials, and scheduling rules, are dispersed and specialized within
various units and individuals. Each unit specialize distinct domain of declarative
memory.
THE TRANSACTIVE MEMORY SYSTEM
In example of concurrent engineering process, each organizational unit self
doesn’t own all knowledge. They rely on other unit’s knowledge and interact with
each other to complete whole process successfully. For example, it’s not necessary for
department of product engineer to gather consumer requirement. They know
marketing department can do it and store such knowledge. They interact with
marketing unit and combine consumer requirement with production capacity to design
product specification. We use metaphor of transactive memory system (TMS) to refer
to such mechanism.
TMS’s construct, developed by Wegner and his colleagues (Wegner, 1986;
Wegner, Erber, and Raymond, 1991), is a cooperative division of labor for learning,
remembering, and communicating knowledge needed to complete a joint task
(Hollingshead, 1998; Wegner, 1995). This system combines the knowledge possessed
by individual group members with a shared awareness of who knows what. So, when
group members need information, but cannot remember it on their own, or doubt that
their own memories are accurate, they can turn to one another for help. A transactive
Core Capability and Core Rigidity: Organizational Memory Perspective
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memory system can thus provide the group’s members with more and better
information than any of them could remember alone (Argote and Moreland, 2000).
A series of laboratory researches (Hollingshead, 1998; Moreland, 1999; Liang,
Moreland, and Argote, 1995; Moreland, Argote, Krishnan, 1996) looked for group
dynamics that were suggestive of the existence of a TMS. These dynamics included:
specialization of tasks, task coordination activities, and task credibility actions
(evidence that group members trusted each other’s expertise) (Austin, 2003). Not only
laboratory research, but also field studies were conducted to measure dimensions of
TMS (Lewis, 2003; Austin, 2003).
Dimensions of TMS
According to Wegner and his colleague’s definition, transactive memory includes
two parts: (1) a combination of the knowledge possessed by each individual, and (2) a
collective awareness of who knows what (Wegner, 1986; Wegner et al., 1991) or
interpersonal awareness of others’ knowledge (Austin, 2003). Lewis’s field study
suggested a 15-item self-report scale, developed by a series of laboratory researches,
designed to measure dimensions of TMS, including specialization, credibility, and
coordination. Lewis (2003) elaborated them as follows:
Transactive memory exists when a person understands what another person knows, and uses that
understanding to develop different but complementary knowledge…. Specialized knowledge alone is
Core Capability and Core Rigidity: Organizational Memory Perspective
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not sufficient for defining TMS because members may develop distinctly different knowledge for other
reasons. Members will only develop different knowledge if they can rely on others to remember other
task-critical information. Absent this, members would likely develop overlapping or redundant
knowledge instead of differentiated expertise. In addition to members’ specialization and credibility,
TMS includes the process members use to combine their transactive knowledge (Wegner, 1987). The
three proposed manifestations do seem to tap the essence of the TMS construct, implying that
inferences about TMS can be made from evidence of specialization, credibility, and coordination (Lewis,
2003; 590).
Building upon Wegner’s definition and the previous conceptualizations of
transactive memory, Anstin (2003) conceptualized transactive memory as a
combination of four dimensions. These dimensions are group knowledge stock
(combination of individual knowledge), consensus about knowledge sources,
specialization of expertise, and accuracy.
Drawing from the above theory development and contributions, we suggest four
dimensions of TMS, including specialization, consensus, accuracy, and credibility. In
a transactive memory system, members who have special skills will be accordingly
assigned to particular tasks. When TMS relies on their profession, they become
experts, and specialized. Rather than collective or redundant specialization, members
have various knowledge domains. Secondly, consensus of TMS means shared
Core Capability and Core Rigidity: Organizational Memory Perspective
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understanding about the distribution of knowledge within a group, organization, or
knowledge network, which is similar to the mental model. Transactive consensus is a
team mental model of the distribution of knowledge (Austin, 2003). Shared
understanding may become group thinking. In order to coordinate and combine
distributed/various domains of knowledge, it’s necessary that TMS members display
accuracy, which involves the extent to which individuals identified by others in the
TMS, as possessing particular knowledge actually posses that knowledge (Austin,
2003). Finally, credibility is to extend which TMS members have faith in other people,
trust other people’s knowledge. Thereby, they are comfortable accepting procedure.
CONCEPTUAL FRAMEWORK
Figure 1 shows the conceptual framework of relationship between constructs of
organizational memory and dimensions of organizational capability. After reviewing
the nature of various forms of organizational memory, we infer the propositions
regarding the conceptual framework.
------------------------------- Insert figure 1 about here -------------------------------
Procedural memory and organizational capability
Procedural memory refers to memory on “how things are done” or “things you can
do”. It means process memory or memory underlying skills needed for performing
Core Capability and Core Rigidity: Organizational Memory Perspective
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tasks. It becomes embodied in organizational routines, standard operating procedures.
Therefore, procedural memory has close links to notions of individual skills, habits
and organizational routines (Nelson and Winter, 1982).
The nature of routines, being both automatic and inarticulate (Cohen and
Bacdayan, 1994; Kyriakopolos and Ruyter, 2004), are both good and ill. The
repetitive patterns of routines enhance efficiency by decreasing the effort spent on
decision-making and implementation. Thus, the automatic routines facilitate
reliability and speed. However, more institutionalized routines become resistant to
change, and hamper the absorption of novel information that is a critical component
of capability. So, routines are a two-sided sword. On the positive side, they speed up
execution, reduce costs, and ensure reliable organizational action. On the other hand,
procedural memories or routines act as perceptual filters that may hinder meeting
turbulent changes in environment. In this way, the procedural memory will hurt
organizational capability; the deeper that the practices and routines of procedural
memory become institutionalized, the greater the possibilities of core rigidity will be.
The phenomenon becomes an obstacle for organization’s ability to adapt to changes in
its environment.
According to the rationales explained above, the influence of procedural memory
on the components of capability (speed, and novelty) will be presented as follows.
Core Capability and Core Rigidity: Organizational Memory Perspective
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Firstly, within a hyper-competitive environment, there are radical changes and
their attendant uncertainty. Organizational managers can search, filter more
information for their decision-making, but owing to bounded rationality (human
behavior is intended to be rational, but bounded by limited cognitive capability),
managers can not obtain all of the necessary information. Thereby, satisficing
solutions will substitute for the optimal ones (Simon, 1947). Routines provide another
solution; they can satisfy the criteria of decision-making, and reduce the complexity
of the information searching process.
Due to the repetitive patterns of routines, procedural memories enhance the
decision-making of capability-based actions. The institutionalized practice or
innovation process will reduce the amount of information needed. The lower the cost,
the more efficiently decision-making facilitates the speed of capability. Therefore, the
paper proposes the following:
Proposition 1: The procedural memory will promote the speed of
organizational capability: the greater the level of procedural memory,
the higher the speed of the organizational capability.
The procedural memory, i.e. standard operation procedures, provides structures
or platforms for organization members to exchange innovative information and
knowledge. Knowledge-sharing, facilitated via communication channels of
Core Capability and Core Rigidity: Organizational Memory Perspective
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procedural memory, will also increase the information level of capability actions. But
fine-tuned routines and processes can become obstacles for knowledge searching and
reception. When high levels of procedural memory can provide satisfactory solutions,
external knowledge will not be needed. The problem of local learning occurs, and
exploitation drives out exploration. Accruing novel knowledge is inhibited. Core
capability becomes core rigidity or competence trap.
Becker (2004) also indicated that routines (due to the interactions they are
composed of) enable feedback, but the feedback is ignored. That is, procedural
memories, acting as perceptual filters, filters out novel information and knowledge.
Therefore, the proposition of novelty is proposed.
Proposition 2: The procedural memory will decelerate the novelty of
organizational capability: the greater the level of procedural memory,
the less novelty the organizational capability will be.
Declarative memory and organizational capability
Unlike the repeated action and core rigidity of procedural memories, the
declarative memory tells another story. Declarative memory refers to the memory of
concepts, facts, or events (Anderson, 1983; Cohen, 1991), including know-what,
know-why or know-when (Huber, 1991; Moorman and Miner, 1997; 1998). It can be
used in a variety of applications (Singley and Anderson, 1989 cited by Moorman and
Core Capability and Core Rigidity: Organizational Memory Perspective
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Miner, 1998) or more general.
Declarative memory can be applied to numerous situations in countless ways,
thereby encouraging greater novelty (Moorman and Miner, 1998). Kyriakpopoulos
and Ruyter (2004) also indicated that the conscious application of declarative memory
increases chance of using prior knowledge in a less standard fashion, using general
principles to find innovative solutions. In the example of concurrent engineering,
memories of customers’ preference can be applied to numerous situations. The higher
level of memories of customers’ preference, the higher level of novelty will be.
Proposition 3: The declarative memory will promote novelty of
organizational capability: the greater the level of declarative memory,
the higher the novelty of the organizational capability.
Although declarative memory can enhance novel capability, the speed of
capability actions may be impeded for information-searching problems. Because
declarative knowledge is not committed to a particular issue, vast amounts of it are
potentially relevant in any problem-solving situation. And this leads to serious
problems for information searching (Singley and Anderson, 1989, cited by Moorman
and Miner, 1998). In the example of concurrent engineering process, it’s difficult to
detect actual preference of consumers. Product specification is not committed to a
particular consumer requirement, but various matches. Other thing being equal,
Core Capability and Core Rigidity: Organizational Memory Perspective
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bundle of commercial specification, product specification resided in various files, or
information system, causes information searching ineffectively and inefficiently. Not
only amount of them decrease speed, the accuracy of “where are they”, caused by
dispersed nature of declarative memory, also slow down speed. Therefore, the paper
proposes the following:
Proposition 4: The declarative memory will influence the speed of
organizational capability: the greater the level of declarative
memory, the slower the speed of the organizational capability.
Moderating roles of TMS
Effect on relationship between procedural memory and capability
After capability accumulation, core rigidity arises from organizational local
learning and knowledge filtering as mentioned above. Members of TMS’s who are
more specialized and who possess various domains of dispersed knowledge, provide
more novel information and knowledge to reduce local learning. On the one hand,
specialization characteristic of transactive memory system provides novel knowledge.
On the other hand, it also reduces the effect of core rigidity on local learning. But
various domain of knowledge available is not sufficient; members of teams or units of
organization must trust the content of knowledge is valuable, and the reliability of
knowledge source.
Core Capability and Core Rigidity: Organizational Memory Perspective
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With greater credibility among members of TMS’s, they are comfortable and
confident relying on the information that other members brought to the decision
(Lewis, 2003). Consensus and accuracy characteristics also enhance combination of
dispersed knowledge. Therefore, the paper proposes the following.
Proposition 5: The greater the effectiveness of TMS, the lower the
likelihood that procedural memory will hamper the novelty of
capability.
For speed of decision making, procedural memory economizes
cognitive resource. TMS, a cooperative division of labor, provides reliable
and specific alternatives, which can also facilitate decision making.
Therefore, the paper proposes the following.
Proposition 6: The greater the effectiveness of TMS, the higher the
likelihood that procedural memory will promote the speed of
capability.
Effect on relationship between declarative memory and capability
We argue that information-searching problems reduce the speed of
decision-making. There are two dimensions of the information/knowledge-searching
problem: (1)quantity of declarative memory, and (2)the extent of accuracy concerning
where the knowledge is dispersed. The greater the understanding of the dispersion of
Core Capability and Core Rigidity: Organizational Memory Perspective
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knowledge (consensus), the more easily the quantity of memory will be categorized.
The greater the extent of identifying locations of memory (accuracy), the less the time
required for knowledge searching. The extent of knowledge searching problem will be
reduced. Therefore, we propose the following.
Proposition 7: The greater the effectiveness of TMS, the lower the
likelihood that declarative memory will hamper the speed of capability.
When declarative memory provides dispersed knowledge, TMS facilitates
knowledge combination and enhance novelty of existing capability. Therefore,
we propose the following.
Proposition 8: The greater the effectiveness of TMS, the higher the
likelihood that declarative memory will promote the novelty of capability.
DISSCUSSION
We offer conceptual framework, which adopts procedural (know-how) and
declarative memory (know what) to explain the phenomenon of core capability and
rigidity, and to presents transactive memory (know who is good at what) as a
mechanism to promote endogenous change by facilitating knowledge combination.
The conceptual framework indicates that procedural memory can speed
organizational capability (P1). Although procedural memory provides structure for
novel innovation, however, higher level of knowledge, evolved and institutionalized
Core Capability and Core Rigidity: Organizational Memory Perspective
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routines, make procedural memory become rigidity (P2). In P3, P4, declarative
memory tells different stories, but similar inference. High level of declarative memory
provides novel sources of capability, but leave searching problem that lower down
speed of capability. In sum, the above propositions infer the constructs and rationales,
which cause effects of organizational memories on organizational capabilities.
Secondly, the framework proposes moderating effect of TMS. Other than know
how (procedural memory), know what and know why (declarative memory),
transactive memory system, which refers to who know where, provides specialization,
credibility, consensus, and accuracy to enact and facilitate knowledge learning and
transferring. Specialization of TMS provides various domain of knowledge, and
credibility ensures motivation and confidence of sender and receiver of knowledge
transfer. Both of them increase effectiveness of knowledge learning. For the nature of
knowledge dispersion, consensus and accuracy of TMS decrease information-
searching problem and increase the speed of knowledge learning and transferring. The
propositions (P5, P7) may explain a part of reason why is non-significance of
information flows which test in Kyriakopoulos and Ruyter, 2004). Organization can
scan environment turbulences and benefit from novel information flow. But
organization can’t absorb novel information or knowledge with existing memory,
until applicable mechanisms. TMS can act as interactive learning mechanism that
Core Capability and Core Rigidity: Organizational Memory Perspective
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promotes endogenous change to prevent core capability from becoming rigidity.
Theoretical implication of Evolution of organizational capability
According the conceptual framework, we propose two theoretical implications:
the evolution of organizational capabilities and the roles of procedural, declarative
memory and transactive memory system.
Drawing inspiration from Penrose (1959)’s influential book on “The theory of the
growth of the firm”, Wenerfelt (1984), Barney (1991), and many scholars made great
contribution to competence perspective (Williamson, 1999). Idiosyncratic resources
contribute to firms’ sustainable competitive advantage. When firms’ internal factors
are the focus (Gabriel et al, 2003; Powell, 1996; Rumelt, 1991; Barney, 1991;
Wernerfelt, 1984), slack resources facilitate firm’s endogenous growth (Penrose,
1959). Firms with coherence outperform less coherent firms (Teece, Rumelt, Dosi,
and Winter, 1994). As capability, being path dependence and embedded within
organizational routines (Nelson and Winter, 1982), becomes competence trap
(Lenard-Barton, 1992), dynamic capability, collectively set of routines (Winter, 2000,
2003), focus on balance between capability exploitation and exploration (Christensen
and Foss, 1997; Ghoshal, Hahn and Moran, 2000; March, 1991). This paper’s
contribution to the evolution of organizational capabilities details as followed:
Why core capability becomes core rigidity?
Core Capability and Core Rigidity: Organizational Memory Perspective
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In trajectory of capability evolution, slack resources (Penrose, 1959) and genies
of routines (Nelson and Winter, 1982) play critical role. The concept of coherence is
path dependent and local learning, which is embedded in tacit routines (Teece et al.,
1994). Firms with coherence will outperform less coherent firms. But accumulation
of slack resources and nature of routines only tell partial story, which core capability
becomes core rigidity. For capability, result of organizational learning (Huber, 1991),
not only resided in routines (procedural memory), but also embodied within
declarative memory. While stability-inertia of routines, that economizes
decision-making, prevails, reversed-U shape between slack resources and innovation
emerges. Declarative memories, while decrease speed, bring novel knowledge,
which is source of organizational dynamic capability.
Drawing from Nelson and Winter (1982)’s concept, routines as organizational
memory, we offer different effects of distinctive form of organizational memory on
capability evolution. That is, organizational capabilities are not only embodied
within routines. Routines can be as organizational memory, but only one of
organizational memory types. In the process of organization capability evolution,
different level and forms of organization memory produce different effects. When
higher level of distributed procedural memory may push routines to be rigidity,
dispersed declarative memory pulls another direction.
Core Capability and Core Rigidity: Organizational Memory Perspective
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This paper suggests distinctive effects of different forms of organization
memory on organizational capability. The relative strength between procedural and
declarative memories needs future research work.
What conditions promote endogenous change?
Coherent firms outperform less coherent firms, but coherent firms may become
inertia, which inhibit firms’ continuous growth. Organizational scholars suggest
dynamic capability to balance of exploitation and exploration (Christen and Foss,
1997; Ghoshal et al., 2000; March, 1991). Not only endogenous slack resources,
accounting for organizational capability accumulation, but also novel knowledge,
stored in external storage bin, contribute firm’s growth. The above statement argues
that turbulence of external environment promote organizational change.
But under environment complexity, organizations have different choices.
Organizational routines may be still habitual regardless of environmental turbulence.
A few organizations may modify routines to absorptive environmental complexity.
Some organizations will select robust transformation to reduce complexity
(Lengnick-Hall and Beck, 2005). Feldman and Pentland (2003) propose agency
perspective to account for the choice. But the question, what conditions promote
endogenous change, still need future research. This paper’s framework suggests TMS
as the facilitator, in which mediates novel and existing knowledge.
Core Capability and Core Rigidity: Organizational Memory Perspective
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CONCLUSION
Organizational memory perspective provides insight to expand existing
knowledge of core capability and core rigidity. For the conceptual paper, we propose
conceptual framework to evaluate rationales and theoretical implication. When
opposite effects of novelty and speed of organizational capability, the relative
strength between procedural and declarative memories needs future research work.
In process of capability accumulation, adaptive fit or robust transformation, the
relations among “Know-how (procedural memory), know-what (declarative
memory), and know-where (Transactive memory) remain future direction. Finally,
empirical research is needed in the future.
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P1
P4
P3
P5
P6
P2
P7
P8
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Figure 1: Conceptual framework
Procedural memory Speed
Novelty Declarative memory
Transactive memory system
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