Knowledge-based view of the firm and the phenomenon of knowledge encapsulation

Abstract

The article is devoted to the development of the knowledge-based approach to the theory of the firm (KBV). It is noted that the modern mainstream KBV (R. Grant (1996) and numerous followers) sees the nature of the firm in effective integration of the knowledge of specialists employed in it. The article proposes to supplement this analysis with the second important function of the firm — its role as an encapsulator of knowledge. The foundations of such an approach to knowledge were laid by H. Demsetz, but have not yet been developed in the literature. The essence of encapsulation is to reduce complete knowledge to an algorithm of actions sufficient to achieve the goal, which is possible, say, with the help of instructions, directions of the manager, built in constructive “foolproofing”, etc. The compiler of the instruction does not integrate his knowledge with the knowledge of its performer, but prescribes the unquestioned implementation of the algorithm of behaviour. Thus, huge cost savings are achieved on the training of performers. The article considers the limiting case — the scheme of the firm functioning as a pure encapsulator of knowledge, the Markov property of the process is substantiated. The role of the entrepreneur as an architect and manager of the knowledge encapsulation scheme is revealed. At the same time, significant negative aspects of production based on the widespread use of encapsulated (incomplete — you do what you do not understand) knowledge are analyzed. In particular, the non-creative nature of labour in the encapsulationbased firm (a particular manifestation of which is the slow spread of horizontally organized or teal firms) and the threat of disqualification of performers when combining encapsulation with artificial intelligence are discussed