This research seeks to respond to Simon's challenge to apply “an economic calculus to knowledge”. The paper aims to develop a typology of knowledge that may be fruitful in facilitating research in a knowledge‐based view of production.
The paper reviews the enduring literature on the knowledge‐based view of the firm (KBV) and gleans three classifications of organisational knowledge as distinct factors of production: tacit, codified, and encapsulated knowledge.
Differences between the tacit, codified, and encapsulated shapes of knowledge carry strategic implications for the firm along six important dimensions. Distinguishing between its three classifications sets the stage for measurement of knowledge as a factor of production.
Distinctions between the three shapes of knowledge may be less defined in practice than in theory. The classification in which a repository of knowledge falls is dependent on the tacit knowledge being applied by the user. Software may be encapsulated to a user, but codified to its creator.
Recognition of the differences between the three shapes of organisational knowledge may help managers to: determine the most economic combination of knowledge to use in production; transfer knowledge more effectively within and across organisational boundaries; determine the most economic location of firm boundaries; and ensure value is appropriated for the firm.
The paper suggests that distinguishing and accentuating encapsulated knowledge as a distinct classification of knowledge can help advance the development of a strategic knowledge‐based theory of production.
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