Track – Knowledge and Learning
TITLE
Towards a Taxonomy of Knowledge Leakage: Literature and Framework
AUTHORS
Raphael Kaplinsky and Andrew Grantham – CENTRIM, University of Brighton
Diane Mynors and Souad Mohammed – Department of Design and Systems Engineering at Brunel University
Kathryn Walsh and Rhoda Coles – Wolfson School of Mechanical and Manufacturing Engineering Loughborough University
Paul Chan – School of the Built Environment Northumbria University
Contact author, Andrew Grantham
The Centre for Research in Innovation Managing, The University of Brighton, The Freeman Centre, Brighton, BN3 4QE
; 01273 877958
Word count 1666
PART OF AIM/EPSRC initiative: New Perspectives on Productivity
Towards a Taxonomy of Knowledge Leakage: Literature and Framework
Abstract
Changes in manufacturing philosophies such as outsourcing, radical manufacturing methodologies including lean, TQM, cellular working; integrated solutions from lower tier suppliers; and moving low value-adding activities to low cost-based regions, amongst others, result in knowledge leaking from its origin for good or bad for both the businesses concerned and the wider public good. The intellectual challenge is how to conceptualise knowledge leakage and facilitate businesses using knowledge resources strategically and effectively. This paper draws on literatures on knowledge management and intensity; core competences and dynamic capabilities; HR management and development; global value chains; supply chain management; and trust to present a framework for composing a taxonomy for knowledge leakage. The taxonomy is to be operationalised as a firm-level benchmarking tool for businesses to maximise the utility of their knowledge and manage flow for productivity improvement.
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1. THE CHALLENGE
The quest for sustained productivity growth and competitiveness has become increasingly challenging since the mid 1990s, particularly for small and medium-sized firms (SMEs). The rapidly deepening pace of globalisation poses new competitive challenges. Most sectors are characterised by continuously reconfiguring value chains involving an increasing extent of, and more complex forms of specialisation. Because of the growing openness of economies, these value chains are increasingly global in nature.
The global reconfiguration of value chains poses challenges for the firm. Are past and existing patterns of specialisation in areas of historic core competences viable, particularly in a dynamic context? Should the firm be outsourcing some of what it currently does, or perhaps in-sourcing new activities being jettisoned by other parties in the chain? What problems are posed for the firm, and particularly for SMEs, when new patterns of outsourcing and in-sourcing involve spillovers from intra-national to trans-national economic exchanges? And, what dynamic capabilities does the firm require to make appropriate judgements in this rapidly changing world?
A particular problem which this paper addresses is the management of the flows of knowledge between firms in a way which enables the firm to sustain its competitive advantage. The danger posed for individual firms is that as the extent and complexity of their relationships with other firms deepens value chains become more extended and global, so they face the dual challenge of ensuring that (a) this inter-firm intercourse does not lead to the loss of competitive advantage, and (b) it takes maximum advantage of the opportunities which are opened up for gaining knowledge. We refer to this integrated approach to knowledge loss and knowledge gain arising from inter-firm linkages as a process of knowledge leakage.
We use the metaphor of “leakage” for the control of competitive-sensitive knowledge in two ways. First, we draw on the idea of “leakage” in plumbing systems – that is, the inadvertent loss of knowledge, as in a pipe-leaking and draining the system. Second, the word “leakage” as also used to describe the deliberate and strategic broadcast of knowledge to selective audiences, as in the “leaking” of politically-sensitive information by politicians to journalists. To this we add the outcomes of these processes of leakage. They may be positive (augmenting the firm’s competitiveness), or negative (diminishing its competitiveness). Figure 1 provides an overview of this approach to knowledge leakage.
Figure 1. Knowledge leaking – intentional and unintentional
Leak / ImpactsPositive / Negative
Conduit/repository of knowledge (e.g. individual, digital) / Intentional
Unintentional
The elements of this strategic approach to knowledge leakage can be found in various sets of literature. These include the discussions of Schumpeterian innovation (Schumpeter, 1961), knowledge intensity (Autio, Sapienza et al., 2000; Smith, 2002), knowledge management (Grover and Davenport, 2001), core competences (Prahalad and Hamel, 1990) and dynamic capabilities (Teece, Pisano et al., 1997), human resource management and development (Storey and Quintas, 2001; Swart and Kinnie, 2003; Harrison and Kessels, 2004), global value chains (Gereffi, 1994), knowledge transfer (Sapsed, Gann et al., 2005), supply chain management (Lamming, 1993) and trust (Farrell and Knight, 2003). Each of these sets of literature (to be summarised in the article) provides us with important insights into the issue of knowledge leakage as we have defined it. However, and importantly, none of these literatures provides an integrated and holistic approach to the management of knowledge flows in the context of globalising value chains, particularly for SMEs. It is in this context that our research is positioned. We also have a particular objective in mind of providing a framework for the development of firm-level tools to aid the development of a strategic approach towards knowledge flows.
2. DRAWING ON THE LITERATURE
The objective of the discussion around the literature is to show how each of these provide insights into a comprehensive understanding of knowledge leakage and, additionally, how each is partial in its nature.
3. PUTTING FLESH ON TO BONES: WHAT DO WE MEAN BY KNOWLEDGE LEAKAGE?
Our objective is to develop a comprehensive strategic overview of knowledge leakage, defined as an integrated approach to knowledge loss and knowledge gain arising from inter-firm linkages. Here we will deal with three different categories:
1. Vectors in inter-firm intercourse.
2. Knowledge as a private and public good.
3. Tacit and codified knowledge, trust and contractual relations.
3.1. Vectors in inter-firm intercourse
We identify six major vectors of the firm’s interaction with the external world:
· Relationships with suppliers
· Relationships with customers
· Relationships with competitors
· Incoming human resources
· Departing human resources
· The purchase, sale and registration of IPRs and other forms of knowledge
In each case, a firm’s intercourse with other firms may involve intentional acts (for example, passing manuals to customers or aiding suppliers in supply chain management programmes) or unintentional (for example, losing core design advantage through subcontracting mould manufacture, or strengthening relationships through “alumni” who have left and are working with a customer). Similarly, as the examples in the previous sentence show, the impacts of these leakages may be positive or negative (see Figure 2).
Figure 2. Vectors of knowledge leakage
Suppliers / Intentional
Unintentional
Customers / Positive / Negative
Intentional
Unintentional
Positive / Negative
Competitors / Intentional
Unintentional
People inflow / Positive / Negative
Conscious
Unconscious
People outflow / Positive / Negative
Intentional
Unintentional
IPRs/Trust / Positive / Negative
Intentional
Unintentional
3.2. Private and public goods
In each of these vectors, we are concerned with the loss or gain of knowledge, and here we need to distinguish between knowledge as a private good (that is, it can be appropriated/owned, and only one party can use it at a given time) and knowledge as a public good (that is, more than one party can use it at a given time) (Arrow, 1962). Three main characteristics define public goods. The first is that there are externalities, which may either be positive or negative. The second is that they are non-excludable (it is difficult to limit access) and non-competitive (they are not used-up in their consumption). And, third, they lend themselves to common action (although the domain of this cooperation may vary).
This distinction is important since the firm needs to distinguish between the consequences of knowledge sharing (both parties have access to it) and absolute knowledge loss (that is, one firm’s gain is another’s loss, as in the flow of people). The fact that a particular form of knowledge may be a private or a public good does not necessarily mean that it has a negative or positive impact on productivity and competitiveness – in some cases, the sharing or loss of knowledge may harm a firm, in other cases it may be beneficial (Figure 3). Similarly, the flow of people may either close off opportunities, or open up new ones. However, whatever the case, it is important that the firm should be aware of this in their positioning towards knowledge leakage.
Figure 3: Knowledge leakage as a private and a public good
ImpactsPositive / Negative
Nature of knowledge / Private good
Public good
3.3. Tacit and codified knowledge, trust and contractual relations.
A further factor which affects the ability of the firm to develop an effective strategic approach towards knowledge leakage is the ability which it has to control the use of knowledge which has been “leaked” during the course of its interactions with other firms. Here it is necessary to distinguish knowledge which can be codified, and hence transferred either wholly in a disembodied manner, or partially through the flow of people as well as documentation. Codified knowledge does not necessarily mean that it can be appropriated – this all depends on the ability to appropriate it through intellectual property rights. The impact of leaking (that is either sharing or losing) tacit knowledge depends heavily on the degree of trust embedded in relations with other firms (Figure 4).
Figure 4: Knowledge leakage, trust and contracts
Nature of knowledgeTacit / Codified
Nature of relations with other firms / Contractual
Trust-based
4. SO WHAT? IMPACT FOR PRODUCTIVITY AND COMPETITIVENESS
Developing an integrated and holistic approach to knowledge transfer in intercourse with other firms (that is, managing knowledge leakages) is of increasing importance in a world of globalising value chains and changing patterns of inter-firm specialisation. This is particularly the case for SMEs, many of which are newly confronting the challenge of repositioning in value chains, particularly on a global scale. An appropriate and effective response to this strategic challenge is a prerequisite for productivity growth, and for enhanced competitiveness, particularly in a dynamic frame. The challenge is to develop the appropriate dynamic capabilities which are required to achieve this objective, and with this in mind, we will be developing a series of tools, including a web-based benchmarking tool, to assist firms in this task.
However, firm-level productivity growth and competitiveness is only one level of aggregation. There is also the issue of regional and national level productivity-growth and competitiveness. And here there may be important differences in the approach towards knowledge leakage. From the perspective of the firm, the restricted flow of knowledge may be a primary objective, that is, to ensure that knowledge remains a private and appropriated good. However, from the perspective of the region or nation, the objective may be to make knowledge a public good, or at least, public within a particular geographic space. This is seen as an issue of technological diffusion.
We argue that the same three analytical principles can be used to analyse optimal approaches towards knowledge leakages at each of these levels – the firm (micro), the region (meso) and the nation (macro). However, the actions appropriate to meet the objectives of stakeholders in these three levels will of course vary. Indicative findings from a sample of firms in a scoping study hint at particular knowledge losses emanating from interactions with suppliers and the recognition of value in building trust-based quality relationships. In terms of gains, we investigate strategic leverage arising from customer interactions and full utilisation of immanent knowledge held by individuals and strategies for retaining it. The issue of knowledge as a public good is, as expected, problematic for firms (and under-explored), whilst the case for wider diffusion has some merit.
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