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Abstract
This study builds a typology of organizational knowledge in business services and empirically
examines the effects of knowledge on innovation performance. We suggest that firms differ with
respect to their knowledge creation approaches and that these approaches have implications for firm
performance in terms of innovation success. A conceptual framework of knowledge assets with
degrees of tacitness and collectiveness as the principal axes is used to ground the empirical analysis.
We find that innovation in business services is associated with both tacit and explicit collective
knowledge, and with explicit individual knowledge. In contrast, relying solely on tacit knowledge
held by individuals may hamper innovation. These empirical results shed new light on the debates
in organization studies concerning the strategic effects of tacitness and collectiveness of knowledge:
Innovation benefits may be gained from codifying knowledge and making it appropriable at the
collective level, as opposed to the individual one. Additionally, our results indicate that tacit
collective knowledge is more closely associated with new service introductions while explicit
collective knowledge is associated with service improvements. In other words, tacit collective
knowledge may be conducive to significant departures from existing capabilities and activities
while explicit collective knowledge is conducive to incremental improvements. The firm’s
knowledge creation approaches thus need to be aligned with its service strategy.