Handbook of Organizational Learning and Knowledge Management, Second Edition

A Theory of the Learning Firm

The economic ‘theory of the firm,’ currently dominated by the contracting perspective pioneered by two Nobel laureates, Ronald Coase and Oliver Williamson, needs to be augmented to account for these new factors, particularly the superiority of the firm (i.e. internal organization) over ‘markets’ for the creation, transfer, protection, alignment, and realignment of intangible assets. Complementarities and co-specialization are advanced as two emerging concepts of particular relevance to a new theory of the learning firm, an organization ‘which has the capacity to learn effectively and hence to prosper’ (Easterby-Smith and Lyles, 2003: 2).

Context

As explained above, fundamental changes in the global economy are changing the way firms develop and deploy new knowledge. More open and competitive trading regimes have increased the importance of know-how and other intangible assets. There are significant implications for the theory of the firm, if such a theory is to connect meaningfully with the contemporary economy.

This section begins by introducing some of the theories of the firm that have emerged outside mainstream economics. Subsequent sections use the dynamic capabilities framework to reconsider the ‘problems’ for which firms are the solution, showing the complementarity of the contracting and capabilities perspectives. The final section argues that a more complete theory of the firm will recognize that firms exist in part to compensate for weak ...