Two Experts are Better Than One: Reaping the Rewards of Specialization Through Better Communication

Abstract

The successful management of firm knowledge ensures that useful consumer knowledge is communicated effectively to inform product design decisions. This study analyzes how the use of a common organizational language can enhance communication between a marketing analyst and a product engineer. The use of a common language is shown to increase the probability of knowledge transfer; however, its dependence on learning effort from both parties makes it beneficial only when the cost of learning is not too high and each party can capture an adequate share of the firm's value. Distortions arise when the engineer, initially uncertain about the demand for its own product design, must determine the mode of communication with the marketing analyst to obtain information on consumer preferences. If the engineer is given the power to choose whether to implement a common language system and how much equity to allocate to the marketing analyst, the common language will be both under-used and under-exploited when it is adopted. The deviation of the engineer's actions from the firm optimal decision has managerial implications for the role of intermediation to resolve communication issues between disparate parties within an organization.