Boundaries Innovation and Knowledge Integration

At this stage of the 21st century, Japanese firms are endeavouring to discover what isimportant in order to compete in global markets and revitalise their organisations. Thispaper draws on in-depth case studies of Japans consumer electronics, communicationsdevice, semiconductor and mobile phone services to clarify the origins of the competencesof outstanding Japanese firms. It also considers the knowledge integration firm, which isa new corporate model differing from that of Western management. Skilful coordinationand collaboration around Japanese firms organisational boundaries, aimed at technologicaland marketing innovation, renews accumulated path-dependent knowledge whiledynamically integrating diverse knowledge inside and outside the firm. The paper presentsa new business model and Japanese leadership style to create an independent knowledgeintegration model. Finally, it examines the key lessons that Asian firms have come to learnfrom their Japanese counterparts, based on the core concepts of Japanese management. 2009 Elsevier Ltd. All rights reserved.This papers objectiveAt this stage of the 21st century, Japanese firms are homing in on what is important if they are tosurvive in global markets and revitalise their organisations. Outstanding Japanese firms maintainand develop organisational cultures rooted in the shared values of teamwork, commitment andcommunity spirit for activities creating organisational knowledge based on accumulated tacitknowledge.1 Following Japans economic crises in the 1990s, some scholars are now witnessingthe phenomenon of Japanese firms looking to revitalise their innovative capacity through Westernknowledge management practices.2Long Range Planning 42 (2009) 463e494$ see front matter 2009 Elsevier Ltd. All rights reserved.doi:10.1016/j.lrp.2009.08.001Today, Japanese firms are maintaining market share and innovations in technology and servicesat the highest global levels, in the fiercely competitive environments of digital consumer electronics,automobiles, communications devices, factory automation (FA), mobile phone services and gamemachines.3 The world has many lessons to learn from successful examples of Japanese firms in hightechfields. Samsung Electronics of South Korea, for example, learned development and productiontechniques from Japanese manufacturers (including Sanyo Electric and NEC), and has now growninto a global high-tech corporation. In the telecom field, the business models of Japanese mobileinternet services have greatly influenced South Korean, Taiwanese and Chinese telecommunications.These Asian firms are still learning a great deal from Japanese management. This paper clarifiessources of competences at Japans outstanding firms through in-depth case studies of theconsumer electronics, communications device, semiconductor and mobile phone businesses, anddemonstrates practical implications for new leadership models and other Asian countries. It thenpresents a new viewpoint regarding the management elements that Asian firms have learned(and are still learning) from the core concepts of Japanese management.The paper is structured as follows. First, the theoretical framework at the core of this paper, derivedfrom existing literature and longitudinal qualitative research, is summarised. Second, a newframework of Japanese management is discussed in depth. Third comes an examination of the managementelements that Japanese management has imparted to Asian firms.Theoretical background and new frameworks e knowledge integrationmodelI have developed the model for knowledge integration (the knowledge integration firm e seeFigure 1), which is a corporate model distinctive to Japanese firms, from long-term ethnographicThe world has many lessons to learn from successful examples ofJapanese firms in high-tech fieldsFigure 1. The Knowledge Integration Model (knowledge integration firm)464 Boundaries Innovation and Knowledge Integrationand participant observation, as well as analysis of in-depth interviews (272 top and middle managers)at 54 firms in the consumer electronics, telecommunications equipment, semiconductorand mobile phone business fields (see Appendix 1). I have also drawn on my own practical experienceat major Japanese communications carriers, comprising 15 years at NTT (Japans largest telecommunicationcarrier), three years at NTT DoCoMo (Japans largest mobile carrier), and threeyears at KDDI (Japans second-largest telecommunication carrier).The knowledge integration model integrates heterogeneous knowledge inside and outside thefirm, arising from dynamic changes to vertical and horizontal corporate boundaries. It deliverstwo new insights regarding new knowledge creation: (i) the vertical value chain model distinctiveto Japanese firms realising new products, services and business models, and (ii) the co-evolutionmodel realising new win-win business models.Insight 1: The value chain model arising from the vertical integration of Japanese firms promotesthe creation of competitive new products and services as well as innovative business models.Insight 2: The co-evolution model spanning Japans various industries promotes the creation ofwin-win business models.With the knowledge integration model, the knowledge integration process takes place throughnetworks inside and outside the firms. Specifically, internal knowledge is integrated through internalnetworks and external knowledge through external networks. The knowledge integration processcreates new knowledge through these networks transcending the corporate boundaries. In thispaper, the term boundaries innovation is used for innovation resulting from this kind of knowledgeintegration process. Two aspects are derived for new knowledge creation in the knowledge integrationmodel: (i) new boundary conceptions; (ii) dynamic human networks and the architectureof knowledge integration process.Literature reviewNew boundary conceptionsA firms inherent conception of boundaries forms our first core framework for corporate strategy.One strategy driver is the industry value chain4 set up to realise the objectives of corporate-determinedstrategy. This driver comprises business activities carried out in order to form industry valuechains, and is an element determining a firms vertical boundaries.A second strategy driver comprises elements fixing a firms horizontal boundaries, which createnew business domains by expanding and diversifying the firms existing business domains (or reducethose domains by selecting and concentrating), or by integrating different technologies.Firms must always transform their own corporate governance structure and corporate boundariesto strengthen their strategic positioning under a constantly changing environment. AccordingThe co-evolution model spanning Japans various industries promotesthe creation of win-win business modelsThe knowledge integration process creates new knowledge throughthese networks transcending the corporate boundariesLong Range Planning, vol 42 2009 465to previous research on the theory of firm boundaries, decision-making on corporate governancestructure and boundaries relies on various elements including the identification, efficiency, powerand competence views (this paper refers to factors determining corporate boundaries as managementdrivers).5 Then decision-making over which type of activities to implement within the companywith regard to the innovation value chain, and whether to access external resources throughcontractual arrangements with the markets, becomes an element centred on the technology strategiesof both large corporations and venture companies.6Firms adopting a vertical integration strategy must apply a closed, hierarchical, vertically integratedgovernance structure within the firm in order to implement each one of a series of businessactivities (from R&D to production, sales and support) in-house. As is the case in Japans automobileindustry, it becomes strategically important for a firm to maximise its power by building verticallyintegrated hierarchies of keiretsu networks (keiretsu is a group of interlocking and mutuallysupportive firms). Meanwhile, firms in the IT and digital industries adopting horizontal specialisationmust focus their activities in specific domains, and adopt governance structures exhibitingopen, flat relationships with other firms in order to provide licensing and receive outsourcing business.Vertically integrated firms also exhibit intermediate forms of governance falling between verticalintegration and horizontal specialisation.7 Depending on the environment, these firms mightcollaborate with others in a vertical value chain for part of their business activities through partnering,or partially outsource their business activities. The governance structure that a firm appliesstrongly depends on the environments it faces and its targeted strategies. Accordingly, the dynamictransformation of corporate boundaries becomes an important theme for firms when choosing anddetermining the appropriate corporate governance structure in response to the environment andsituation. The firm must then define the strategic objectives of constantly competitive products,services and business models, and implement optimal design (architecture) of the strategy driversvertical and horizontal boundary elements to accomplish these objectives.The efficiency view perspective of corporate boundaries draws on transaction cost economicsand related exchange efficiency perspectives, and argues that the make or buy decision to minimisegovernance costs is an issue of organisation and the markets vertical boundaries.8While the efficiency view accounts for much of the decision-making that fixes corporate boundaries,our surveys revealed different aspects of decision-making elements at Japanese firms. Santosand Eisenhardt (2005, p. 503), who identified the four management drivers determining corporateboundaries, proposed non-efficiency conceptions as a new agenda for boundaries research. Thispaper suggests new creativity and dialectic views for these non-efficiency conceptions.The creativity viewThe model applied by Japanese consumer electronics, telecommunications equipment, and semiconductormanufacturers differs from the western model of horizontal specialisation (see Appendix2), in that Japanese firms realise original new products from business activities exploiting verticallyintegrated internal networks (see Appendix 3). In recent years, moreover, these firms have beendriving the integration of core knowledge outside the firm through joint development (includinginitiatives with competitors), based on building external networks. Indeed, the mobile phone business,led by NTT DoCoMos i-mode, is creating original business models from vertically integratedvalue chains of external networks comprising content providers, communications carriers andWhile the efficiency view accounts for much of the decision-makingthat fixes corporate boundaries, our surveys revealed different aspectsof decision-making elements at Japanese firms466 Boundaries Innovation and Knowledge Integrationvendors, and the market is still growing dramatically today (see Appendix 3). Japans mobile phonecarriers are making strategic alliances with industries in other fields through collaboration and investmentaimed at expanding horizontal boundaries, and are creating new products, services andbusiness models. Such cases involve the corporate strategy view of creatively, flexibly and autonomouslycreating new knowledge by embracing the concepts of flexibility and the capacity to inspire.In this paper such cases are referred to as the creativity view.The creativity view, described in detail in section 3.1, is a key factor in promoting a firms verticalintegration. Japanese firms are using the creativity view to upgrade their own path-dependentknowledge through vertical integration, while absorbing new knowledge and accelerating knowledgeintegration within their own firm through collaboration (arising from the construction of externalnetworks with external partner firms). Japanese firms exploit vertical integration strategy toassess other firms knowledge and business models, with a view to absorbing ideas and expertise,and connect and development strategy to enhance the independence of product, service, and businessmodels.9 Thus the creativity view determines a firms corporate boundaries, and becomesa core concept leading to Insight 1: the vertically integrated value chain model promotes the creationof ground-breaking business models and competitive new products and services.The dialectic viewCoherence as mentioned by Santos and Eisenhardt (2005) possesses the meanings of harmonyand unity, and signifies coordination and collaboration among stakeholders. This paper usesthe term dialectic view to indicate corporate strategy behaviour creating co-evolution modelsbased on this kind of coherence.Peng and Nisbett (1999) analysed the psychological reactions that could easily result from twoapparently contradictory propositions and proposed dialectical thinking in a broad sense thatjudged parts of both propositions to be correct. This sort of dialectical thought has also been reportedin literature on institutional theory, strategic alliances and corporate management.10The dialectic view promotes the building of co-evolution models among stakeholders who constructvertical value chains. i-mode, for example, built win-win business model structures for verticalvalue chains comprising content providers, communications carriers, and machinery and toolvendors, and created network externality effects. Sonys and Nintendos game businesses also builtwin-win business models for the vertical value chains comprising software manufacturers, devicemanufacturers, and machinery and tool vendors.11The dialectic view, moreover, enables co-evolution models crossing heterogeneous industries tocreate new product, service and business models, while expanding horizontal boundaries. Japansmobile phone carriers, for example, are building business models exhibiting mutual synergy effectsfrom their alliance with portal sites such as Google and record firms in the music distribution businesse alliance strategies and investment cooperation aimed at nurturing collaborative relationshipsand merging broadcasting and communications. Moreover, as mobile phones loaded with e-moneyand IC cards grow more popular in Japan and other Asian countries, Japans carriers are maximisingthe value of individual stakeholder business models through partnership and collaboration athorizontal boundaries in different industry fields (such as finance, cards, retail and railways).The strategic behaviour of firms that results from their dialectic and strategy views is the startingpoint for the creation of new business models arising from the co-evolution model of co-existencei-mode built win-win business model structures for vertical value chainscomprising content providers, communications carriers and machineryvendorsLong Range Planning, vol 42 2009 467and co-prosperity among stakeholders (see section 3.1 for details). The dialectic view determinesa firms corporate boundaries, and becomes a core concept leading to Insight 2: industry-transcendingco-evolution models promote the creation of win-win business models.Dynamic human networks and the architecture of the knowledge integration processOur second core framework comprises the mechanisms and patterns of the knowledge integrationprocess, which realises the vertically integrated value-chain and industry-spanning co-evolutionmodels existing as a backdrop to the knowledge integration model insights. The shared understandingof this knowledge integration process leads to the formation of dynamic human networks transcendingpractitioners formal organisations. One aspect of the knowledge integration process isnew knowledge from network theory12 relating to the formation of human networks at a microlevel,which is an important organisational platform of knowledge integration. Networks amongpeople, groups, organisations, and firms form complementary relationships with formal organisations,and practitioners become an important platform for facilitating knowledge-based activities.The form of the practitioner, group, organisation, and firm networks has a great impact on the integrationof information and knowledge.13 Moreover, firms must dynamically form networks tocontinually acquire new competences, and dynamically rebuild these networks in response tochanges in environment and strategy behaviour.Network theories of nodes (such as individuals, groups of people, and organisations of groups),network ties, and several network topologies (such as small-world and scale-free structures) impartimportant knowledge and insight into relationships between practitioners and the behavior of practitionerscrossing boundaries inside and outside a firm.14 Furthermore, the thought processes andbehaviour of practitioners forming human networks are important triggers to initiate managementdrivers and implement the knowledge integration process.This paper focuses attention on small-world structures (small-world networks)15 as one of theleading network topology clusters, and shows how networks among clusters of small-world structuresinside and outside firms mobilise management drivers and form key infrastructure to enablethe knowledge integration process.Small-world structures, in which there is a high degree of local clustering and only a few linksexist between any two nodes, were found to enhance mutual dependence among cluster nodesand facilitate communication, coordination and collaboration among practitioners, especiallywhen tight collaboration is required to connect value chains within the organisation. The availabilityof such short paths for bridging nodes enhances network coordination and collaboration, particularlyduring interaction within organisations. Such network properties are also effective whencreating new ideas and innovation in complex and heterogeneous organisations.16Small-world structures have come to provide organisations with robust network forms capable ofresponding to dramatic environmental change and destruction, including heavy information traffic,overload, bottlenecks, and sudden accidents. In 1997, for instance, Toyota and affiliated suppliersmanaged to evade a destructive crisis facing a leading supplier, Aisin, by building mutually cooperativeand emergent inter-organisational networks. This led to the formation of genuine smallworldstructures among suppliers, focused on Toyota.17Practitioners also form cross-functional strategic communities (SCs)18 among heterogeneous organisationsand firms, and these SCs form small-world structures (see Figure 2). Considered from theviewpoint of social network theory, SCs correspond to clusters and cliques accumulated as smallThis paper shows how networks among clusters of small-worldstructures inside and outside firms form key infrastructure to enable theknowledge integration process468 Boundaries Innovation and Knowledge Integrationhuman nodes.19 Whereas cliques are assemblies where practitioners exchange and share closely connectedinformation, context and knowledge, however, SCs are teams and projects that go beyond thisstage to dynamically produce new contexts and knowledge in response to environmental change.SCs are groups forming small-world structures where practitioners in diverse specialisations realiseinnovations aimed at solving the issues facing them and implement problem-searching and creativestrategies. Short connections between nodes (people are the first unit nodes) and localclustering are features of small-world structures. For example, short paths among nodes of practitionersbelonging to heterogeneous organisations enable easier access to other practitioners withina firm or based in other firms, including customers. Each node in a small-world structure is embeddedin a local cluster. This clustering then enhances the possibility of fostering reliable accessibility.A small-world structure can be formed by either randomly rewiring a portion of an existingregular network or attaching each new node to a neighbourhood that already exists.20Figure 2 also corresponds to what are known in social network theory as two-mode (bipartite)and affiliation networks.21 Id especially like to call attention to dynamically changing SC and networkedSC formations that Watts (2003) called group interlock networks. Watts (2003) describedactors linked to specific contexts, but in the present business world practitioners subjectively formgroups involving specific contexts and simultaneously incorporate other practitioners into thisgroup, thus extending links to them. Accordingly, these SC groups change dynamically in responseto context, and at the same time dynamically change the form of their network formations.Figure 2. Knowledge integration through uniting boundaries (graphic): Group Interlock NetworkMultiple practitioners participate in multiple strategic communities(SCs) and share information, context and knowledge, which theytransfer to other SCs they are participating inLong Range Planning, vol 42 2009 469SCs are dynamically rebuilt as a result of practitioners day-to-day practical activities. Multiplepractitioners participate in multiple SCs and share information, context and knowledge, whichthey transfer to other SCs they are participating in. Thus sharing takes place among practitioners,and this sharing process forms networked SCs comprising the group interlock network. Within theframework of this network, SCs can be seen as corresponding to nodes and hubs. The practitionersbelonging to the hub and node SCs inside and outside the firm dynamically bridge the multiple,heterogeneous SCs and create (or consolidate) networks among the SCs. As a result, SCs createnew contexts and knowledge that is integrated by the networks. Practitioners deliberately create networksof multiple SCs among the various organisations inside and outside the firm and make closeconnections with these SCs, aiming to develop new products and services and build new businessprocesses (see Figure 2). The dynamic networks of these SCs and networked SCs enable the knowledgeintegration process.Yet another key aspect of the knowledge integration process is the architectural thought behindthese knowledge integration processes, in which robust network architectures reside (see section3.2 for details).22 One type of network architecture is vertically integrated architecture (see Table 1).This is the process of knowledge integration through internal corporate networks at internal verticalboundaries and external corporate networks at external vertical boundaries. These networks can bedivided into the vertical value chain and multi-layered models.The vertical value chain model involves forming small-world structures (SCs) to coordinate andcollaborate on individual tasks, and networked SCs as a vertical integration of SCs, with the aim ofrealising vertical integration of each in-house task involving R&D, production technology, manufactureand marketing. Empirical cases of networked SCs realising vertical integration in-house havealready been reported among Japanese manufacturers (see Table 1). The SC networks among heterogeneousorganisations and specialisations of the consumer electronics and telecommunicationsequipment manufacturers detailed in these case studies integrate internal knowledge and createa distinctively Japanese type of vertically integrated business model.These vertical value chain models also function as inter-corporate networks that link Japans mobilephone and automobile industries with strong ties. With networked SCs building vertical value chainmodels that share a high degree of the information and knowledge visible in these industries, leadercorporations such as DoCoMo and Toyota gain leadership and bargaining power in technologiesand markets. Corporate networks among Japans automakers and parts manufacturers are leading examplesof such SCs. The above-mentioned i-mode business model, moreover, comprises vertically integratedvalue chains among DoCoMo, mobile handset manufacturers and content providers (CPs).Meanwhile, the multi-layered model has small-world structure hierarchies. Practitioners fromvarious sections within the firm form cross-functional, multiple SCs comprising layered networksat management levels. Multi-layered models are frequently observed in cases of large-scale newproduct development (NPD) and major projects, such as DoCoMos i-mode project. Strategic behaviourresulting from the above-mentioned creativity view promotes the knowledge integrationmodel arising from vertically integrated architecture, builds multi-layered and vertical value chainmodels within and among firms, and goes on to create new product, service and business models.Another type of network architecture is horizontally integrated architecture (see Table 2). This isa process that integrates knowledge through external networks at a firms horizontal boundaries,and divides into the horizontal value chain and complementary models. The horizontal value chainMulti-layered models are frequently observed in cases of large-scalenew product development and major projects, such as DoCoMosi-mode project470 Boundaries Innovation and Knowledge IntegrationTable 1. Vertical integrated architectureModel Vertical value chain model Multi-layered modelStructureFeatures Accumulating technological strength and expertise with in-house activities(including R&D and production) and other activities through theformation of networked SCs Building business platforms (such as i-mode and game businesses) as verticalvalue chains through coordination and collaboration centred on leader companiesForming layered, mixed teams spanning knowledge boundariesamong organisations and specialisationsBuilding collaborative networks spanning each management layerIntegrating knowledge in-house through the formation ofnetworked SCsEmpiricalcases Building organisational and competitive capabilities through verticalintegration of digital consumer electronics Matsushita Electric (Kodama, 2007a)Sharp, Cannon (Kodama, 2007c) Business platforms for vertical value chain i-mode (Kodama, 2002), PlayStation (Kodama, 2007c) Developing i-mode & 3G services NTT DoCoMo (Kodama, 2007a) Successful examples of new product development in thecommunications device field Fujitsu (See Figure 5) Mitsubishi Electric (Kodama, 2007c) Toyotas TQM promotion activities (Kodama, 2007c)Long Range Planning, vol 42 2009 471Table 2. Horizontal integrated architectureModel Horizontal value chain model Complementary modelStructureFeatures New knowledge integration through the formation of networkedSCs among companies in different industries Formation of new business platforms (such as mobile-EC services andtelematics) among companies in different industry typesKnowledge integration through the formation of networked SCswith externally distributed and in-house knowledgeNew knowledge integration through collaborating in same or relatedindustries (neighbouring business domains)Empirical cases 1. Mobile e-commerceNTT DoCoMo (Kodama, 2007a) Networks among companies in different industries Network formation centered on NTT DoCoMoand au (KDDI) (see Figure 6) NTT DoCoMos international strategy Global development of Conexus Mobile Alliance and i-mode (Kodama, 2007a) Examples of successful new product development in communicationsdevice and machine tool fields Fujitsu (Kodama, 2005)(see Figure 5)Fanuc, NEC (Shibata and Kodama, 2007) Formation of supplier networks Suppliers learning networks (Dyer and Hatch, 2004)The Toyota Group and the Aisin Fire (Nishiguchi et al. 1998)472 Boundaries Innovation and Knowledge Integrationmodel involves firms expanding from existing to new business domains, and building networkedSCs to create new value chains. The horizontal value chain model determines the corporate horizontalboundaries to answer the questions of what products and services a firm should retain andwhat businesses it should diversify into for value creation. The formation of SCs with firms in differentindustries, especially, promotes access to heterogeneous knowledge and dialogue at knowledgeboundaries. Creative abrasion and productive friction at knowledge boundaries inspiresnew knowledge, and enhances creativity to achieve new business models.The complementary model comprises collaborative and networked SCs, which have equal relationshipswith external partners in the same or neighbouring business domains and few of the hierarchicalelements seen in vertically integrated architecture. Cases involve disseminating shared knowledge withexternal partners and jointly developing new products and services on an equal footing. Strategic behaviourresulting from the dialectic view (mentioned above) promotes the knowledge integrationmodel arising from horizontally integrated architecture, builds industry-spanning horizontal valuechain and complementary models, and goes on to create co-evolution models among firms.These vertically and horizontally integrated network architectures promote dynamic knowledgeintegration processes through a firms internal and external networks, and become enablers for thetwo Insights mentioned above: the creation of new products, services and business models throughthe vertical value chain model, and win-win business models through the co-evolution model (seeFigure 1). Then the knowledge integration firm perceives customers and external partners (in theform of markets and environments) as precious knowledge assets, seeks out and absorbs optimalknowledge to realise strategy, and goes on to implement integration.DiscussionThis section discusses in detail the two core frameworks of the knowledge integration model describedin section 2.Conceptual framework of the creativity and dialectic viewsTheoretical background of the relationship between vertical integration and creativityThis paper considers why the creativity view promotes a value chain model through vertical integrationfrom the viewpoints of competitive technological excellence and knowledge integration.Looking at the technology aspect, existing research emphasises that firms should not implementvertical integration in industries where the rate of change is high.23 From the viewpoint of transactioncost economics, the disadvantage of business processes operating through vertical integrationthat adheres to unchanging and outdated technologies is clear.24 But vertical integration can also beadvantageous for firms wanting to lead the way in new technology markets. It functions as an earlyadoption advantage for firms that introduce the new technology, enabling them to respond to newtechnological change or create their own. Vertical integration is an effective strategy for a firmwanting to establish superiority over rivals through its original technology and early establishmentof de facto standards.25According to Pisanos technology strategy research in the pharmaceutical and biotechnologyfields, the vertical integration model should be adopted for highly innovative development in thescientific and technological aspects of pharmaceutical products.26 R&D and manufacturing technologyfor innovative products requires tacit knowledge comprising the creativity (new concepts andadvanced expertise and skills) of scientists and developers. Transfer of tacit knowledge among firmsVertical integration is an effective strategy for a firm wanting toestablish superiority over rivals through its original technologyLong Range Planning, vol 42 2009 473is especially difficult, and vertical disintegration conversely raises transaction costs and acts as a disincentiveto new innovation. Accordingly, vertical integration can be said to function advantageouslyin realising high-tech products that require creativity. Japanese firms behaviour inbuilding vertically integrated value chains to obtain a competitive technological edge, with theaim of realising new products and constantly exploiting creative new technologies by exercising creativity,was observed from interview data related to the creativity view (see Figure 3).Looking at the knowledge integration aspect of vertical integration, both interview data and existingresearch have shown that Japanese firms possess natural features that make it easy to routinelyform mixed cross-divisional teams (possibly including external partners and customers),oriented to achieving new targets and solving problems.27 In-house vertical integration systemsbuilt from heterogeneous specialised fields and routine business also become knowledge capitalplatforms (resources with value), forming mixed teams that elastically and flexibly cross divisionalboundaries without being seized by sectionalism, and they can also trigger action aimed at noveltyand uncertainty. The mixed teams that overcome organisational and knowledge boundaries amongpractitioners can also trigger creativity and new knowledge inspiration.28In high-tech fields, moreover, the interdependence among R&D and manufacturing functions isstrong, and tacit knowledge (including experience and expertise) among researchers, developersand manufacturing engineers is shared and accumulated. This high degree of information stickiness29 makes it difficult to transfer tacit knowledge to external firms, and for high-tech firms to separateR&D and manufacturing. As mentioned above, building vertically integrated knowledgecapital platforms from accumulated experience and expertise works advantageously in respondingto technological change and resolving new issues which require speed and creativity. It follows thatthe action of mixed teams with vertically integrated systems becomes the foundation for integratingthe knowledge of various practitioners.

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