Two kinds of knowledge

The case study evidences the impossibility to sharply divide all of the knowledge-related elements of a firm into the three generally accepted categories of human, organisational (structural) and relational capital. While such a categorisation is always conceptually possible by imposing a specific lens on the observed cases, it appears seldom respectful of the actual way they are mobilised and changed through their interrelationships.

The analysis of IC as a set of stock of resources is important, but it is really partial due to the fact that IC and knowledge continuously change. The dynamics of the firm can be better analysed by combining the analysis of stocks to the analysis of flows.

Formal and informal knowledge coexist but in different areas of the firm. A sort of possible specialisation of the two kinds of knowledge can be inferred. In the case study SME the formal IC was built up around the procedures for quality control and ERP implemented by the firm. Informal IC is rooted on tacit knowledge and employees’ closeness, and it strongly mobilises resources. However, knowledge tacitness related to some aspects of decision making, such as pricing, could potentially threaten the firm.

Formal knowledge and consequently formal controls are limited to the area of operations, and their implementation has been sometimes forced by the largest client, where support has been offered.

Knowledge and knowledge governance mechanisms in the areas of strategy, HR management, and marketing are tacit and informal, this being a major difference in respect to large firms. Such mechanisms are mainly based on the closeness of people working inside the firm.

Such coexistence of the two kinds of knowledge also influences the importance of the people working for the firm. At workshop level, the availability of formal and codified knowledge makes it possible to easily integrate new workers into the processes of the firm, without suffering from inefficiency or delay. The important role that tacit and informal knowledge play at top management level clearly mimics the way power is distributed within the company.

As a result of the coexistence of the two forms of knowledge, a clear reporting appears problematic especially for external purposes: To appreciate the firm’s IC it is important to be part of the company.

IC and knowledge management

The dynamic perspective here employed, aimed at examining the way in which IC is acquired, produced and transformed, therefore focusing on the activities and processes involved in the generation and management of IC rather than on its individual elements. A fundamental issue is that when focusing on knowledge, the legal boundaries of the firm lose importance.

Knowledge flows outside and inside the firm. Suppliers, competitors and clients all play a fundamental role. For example, a major part of the knowledge resources for operational control have been developed with the help of the ERP supplier. Also, competitors carry out an important function, and in some cases collaboration and competition coexist. Knowledge shared mainly refers to technical aspects of operational processes and cost saving. Clients play also a crucial role in pushing the firm to adopt more formal controls in the operations side.

The analysis of the case study suggests to consider both the role of clients and the way clients act for stimulating the development of new knowledge. In fact clients with high bargaining power force the firm to develop new systems and new knowledge.

The paper highlights the important role that dialogue and familiarity have in knowledge management. The “traditional” way assumed for the management of knowledge and IC fails to consider the peculiarities of SMEs. Clearly SMEs are not smaller large firms, and hence it is generally impossible to interpret SME management systems as being simpler or smaller than those adopted by large firms. The key point is that SMEs – or at least the one analysed in the paper – have management systems which are ontologically different and that deserve specific analysis and interpretive theoretical frameworks.

Finally, the focus of management is not knowledge per se, but the solution to specific problems that the firm must deal with. Knowledge (and knowledge management) is only one of the issues to be considered in order to solve problems. The sequence in which problems arrive, drives the attention of firm management to find the particular solution and the type of knowledge required relating to the specific case. In SME therefore the management of IC is indirect, sequential and jeopardised.

From SMEs to large companies

While the aforementioned remarks arise from the SME case here studied, we cannot necessarily confine some of them only to SMEs. For example, the vital role of activity for mobilising IC and knowledge assets is also important for large companies. Again, the “knowledge conversion cycle” (Nonaka and Takeuchi, 1995) was not specifically intended for SMEs.

What appears to be the main contrast in the two different categories of firms is really the way things are done. As previously studied and highlighted there are some characterising traits of SMEs residing in the very informal relationships and closeness among the firm members, the way decision making is run and a sort of naivety relating to the management of knowledge. Such a naivety is however only apparent, as it originates only from observing SMEs through the lens of large companies’ practices. However, it does seem consistent with the mood and the context of SMEs.

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