A Dynamic Theory of Organizational Knowledge Creation

Abstract It is widely observed that the society we live in has been gradually turning into a “knowledge society” (Drucker 1968, Bell 1973, Toffler 1990). The ever increasing importance of knowledge in contemporary society calls for a shift in our thinking concerning innovation in large business organizations-be it technical innovation, product innovation, or strategic or organizational innovation.1 It raises questions about how organizations process knowledge and, more important, how they create new knowledge. Such a shift in general orientation will involve, among other things, a reconceptualization of the organizational knowledge creation processes. The theory of organization has long been dominated by a paradigm that conceptualizes the organization as a system that “processes” information or” solves” problems. Central to this paradigm is the assumption that a fundamental task for the organization is how efficiently it can deal with information and decisions in an uncertain environment. This paradigm suggests that the solution lies in the “input-process-output” sequence of hierarchical information processing.