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6 The Theory of the Knowledge-Creating Company

Michael Polanyi made an important distinction between tacit knowledge and

explicit knowledge.

When we are relying on our awareness of something (A) for attending to someone else (B), we are but subsidiarily aware of A. The thing B to which we are thus focally attending, is then the meaning of A. The focal object B is always identifiable, while things like A, of which we are subsidiarily aware, may be unidentifiable. The two kinds of awareness are mutually exclusive: when we switch our attention to something of which we have hitherto been subsidiarily aware, it loses its previous meaning. Such is briefly, the structure of tacit knowledge. Now to the distinction between tacit and explicit knowledge. Things of which we are focally aware can be explicitly identified; but no knowledge can be made wholly explicit. For one thing, the meaning of language, when in use, lies in its tacit component; for another, to use language involves actions of our body of which we have only a subsidiary awareness. Hence tacit knowing is more fundamental than explicit knowing: we can know more than we can tell and we can tell nothing without relying on our awareness of things we may not be able to tell. Things that we can tell, we know by observing them, those that we cannot tell, we know by dwelling in them. All understanding is based on our dwelling in the particulars of that which we comprehend. Such indwelling is a participation of ours in the existence of that which we comprehend; it is Heidegger's being-in-the-world. (Polanyi 1964, p. x)

Polanyi's ideas about the importance of the first, are particularly relevant because they have influenced Ikujiro Nonakás theory of the knowledge-creating company: Nonaka (1994), Nonaka and Takeuchi (1995), Nonaka and Toyama (2003). Nonakás theory embeds the concepts of tacit and explicit knowledge into a model composed by four modes of knowledge acquisition, namely, socialization, externalization, combination, and internalization, a model that has the form of a spiral, starting from tacit knowledge (knowing-how), passing through explicit knowledge (knowing-that), and ending again with new embodied tacit knowledge, where the interaction between tacit knowledge and explicit knowledge is amplified through the conversion of knowledge from one mode to the other.

Knowledge creation starts with socialization, the processes by which people convert their personal (tacit) knowledge, consisting of skills, mental models, and beliefs that shape the perception of the world, into shared experiences, which are mostly time and space specific.

In the socialization process, the phenomenological method of seeing things as they are is effective. By 'indwelling' or 'living in' the world, individuals accumulate and share tacit knowledge about the world that surrounds them. (Nonaka & Toyama 2003, p. 5)

Then, in the externalization process, tacit knowledge is articulated into explicit knowledge by means of dialogue within the organization and with the help of metaphors, analogies, models, hypotheses. Explicit knowledge is manipulated and shared throughout the organization by building up theories, models, codified procedures, also making use of formal languages, during the combination process. This newly created explicit (and linguistic) knowledge is converted again into tacit knowledge by individuals through the internalization process, by learning by doing, developing shared mental models and technical know-how.

Art scholar Mary Jane Jacob has pointed out the parallels between Nonakás theory of knowledge production and John Dewey's philosophy of learning-bydoing, where knowledge is conceptualized as a dialectic process of interaction between man and his environment going through active phases (doing) and passive phases (undergoing): Jacob (2013). A basic difference between the two models lays in the fact that the second one is a collective model:

in contrast to Dewey's relational model, in which new ideas are formed in thoughtful reflection by the individual, Nonaka and Toyamás model places emphasis on the sharing and interaction of one's ideas in relation to those of others. Nonaka and Toyama employ the Japanese word Ba to denote this space of shared context. (Jacob 2013, p. 106)

This notion of Ba, a knowledge-creating place for firms, is similar to Galison's notion of a trading zone for scientific material culture:

The knowledge-creating process is necessarily context-specific in terms of time, space, and relationship with others. Knowledge cannot be created in vacuum, and needs a place where information is given meaning through interpretation to become knowledge. […] Building on the concept that was originally proposed by the Japanese philosopher Kitaro Nishida (1970, 1990), we define ba as a shared context in motion, in which knowledge is shared, created, and utilized. Ba provides the energy, quality, and places to perform the individual knowledge conversions and to move along the knowledge spiral. (Nonaka & Toyama 2003,

p. 6)

Ba is a dynamic self-organizing structure which is created and disappears according to the need of the organization, whose boundaries are fluid and persons can come and go, where contradictory beliefs are confronted and eventually can be synthesized: Nonaka and Toyama (2003), Nonaka, Toyama, and Konno (2000). Ba is a zone open for experimentation, communication and understanding, and where new knowledge can occur.

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