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Knowledge-Based Theory

The main idea of the knowledge-based theory of the firm is that organizations exist in the way that they do because of their ability to manage knowledge more efficiently than is possible under other types of organizational structures (Conner, 1991; Kogut & Zander, 1992, 1993, 1996; Conner & Prahalad, 1996; Foss, 1996; Grant, 1996a, 1996b; Madhok, 1996; Nahapiet & Ghoshal, 1998; Nickerson & Zenger, 2004). In other words, organizations are social entities that use and store internal knowledge, competencies, and capabilities that are vital for the firm’s survival, growth, and success (Hakanson, 2010). The theory emphasizes the organizational need for superior coordination and integration of learning by employees inside ...

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