Knowledge Management

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Theoretical Framework

The purpose of this chapter is to give a presentation of the theoretical framework underlying this research. The concept of knowledge is presented together with an extensive framework of how knowledge can be ac-quired and attained for a small firm.


There are probably as many definition of knowledge as there are researchers that has tried to define it. Knowledge is a human and highly personal asset that represents the pooled ex-pertise and efforts of networks and alliances. 99 per cent of the work done by people is knowledge based (Wah, 1999b cited in Smith, 2007).

Knowledge to Create Competitive Advantage

For knowledge to be useful for the organization it has to increase or maintain the organiza-tion’s competitive advantage. To gain a sustainable competitive advantage, Barney (1991) argues that the knowledge acquired has to have four attributes: be valuable, be rare, be imper-fectly imitable and have no substitutes (cited in Probst, Buchel & Raub, 1998).
Valuable knowledge- is used to exploit opportunities and reacts to threats to become more ef-ficient or effective (Probst et al., 1998).
Rare knowledge- is used to differentiate the company from the rest. The knowledge is based on a unique mix of knowledge from both single individuals as well as existing organization-al knowledge. (Probst et al., 1998)
Imperfectly imitable knowledge- is knowledge that cannot be copied to its full extension by competitors since the origin of the knowledge is unknown. This knowledge is developed from previous knowledge; it is ambiguous and socially complex. (Probst et al., 1998)
No substitution of knowledge- is gained when the knowledge cannot be replaced by other knowledge (Probst et al., 1998).

Tacit Knowledge and Explicit Knowledge

One dimension of the knowledge creation process is to make the distinction between two types of knowledge: tacit knowledge and explicit knowledge (Nonaka, 1994). The two types of knowledge differ in ability to transfer between individuals (Chirico, 2008). Explicit know-ledge can be defined as pure knowledge and is easily transferred, while tacit knowledge is the actual skill, the know-how, which is more difficult to transfer (Chirico, 2008: Pate, Mar-tin, Beaumont & McGoldrick, 2000). One should, however, be aware that comparing tacit knowledge and explicit knowledge is a way to think of knowledge rather than to focus on its differences (Smith, 2007).
It was the philosopher Polanyi who classified the human knowledge into two categories. He described tacit knowledge as “we know more than we can tell”. It is also the things we do without thinking about it, where one example is riding a bike (Smith, 2007). Tacit know-ledge is a personal quality which is difficult to communicate and it is founded in actions, commitment and involvement (Nonaka, 1994).
Explicit knowledge refers to the knowledge that is passed on in formal and systematic lan-guage (Nonaka, 1994). Explicit knowledge is technical and does usually require a level of academic knowledge or understanding that is gained through formal education or struc-tured study (Smith, 2007). It is knowledge which can described in formal language, like manuals, mathematic expressions, copyright and patents (Smith, 2007).
The importance of tacit knowledge or explicit knowledge is different depending on the cul-ture. According to Nonaka, Umemoto, and Sasaki (1998) Japanese culture focuses on the importance of tacit knowledge while western cultures has a larger emphasis on explicit knowledge. However, Nonaka et al. (1998) argues that the two types of knowledge are mu-tually complementary and therefore it is important to find a balance between the two. It has been explained like there is a tension between process and practice. Process is represented by the explicit knowledge, which means the way knowledge is organized while practice is represented by tacit knowledge, the way work is actually done. If companies deal successfully with this tension they use multiple types of tacit and explicit knowledge, and therefore gain competitive advantage (Smith, 2007).
When the two types of knowledge are handled successfully, tacit knowledge is used to fos-ter innovation and creation. While, explicit knowledge is used to organize the work tasks and predict the work environment. (Brown & Dugid, 2000 cited in Smith, 2007)

Knowledge Management

Knowledge management is a formal and directed process used to determine what know-ledge a company has and hence could benefit others in the company and then also find ways to make it available for others (Liss, 1999 cited in Smith, 2007). Advocators of know-ledge management have promoted it to be an essential corner stone for companies to de-velop sustainable competitive advantage (Wong & Aspinwall, 2004). Know-ledge management includes the planned and systematic handling of knowledge and the de-termined use of knowledge in an organization (Mandl & Winkler, 2007). However, know-ledge management must address these factors simultaneously: individual, organiza-tion, and technology in order to be recognized as a long-term strategy (Mandl & Winkler, 2007).
Knowledge management is organizations’ strategic efforts that are made in order to achieve a competitive advantage. This is done by identifying and making use of the employees’ and customers’ intellectual asset. Supporters of knowledge management believe that capturing, storing, and distributing knowledge is a way to help employees work smarter, reduce dupli-cation, and therefore produce more innovative products and services that meet the cus-tomers’ needs as well as to create good value. (Netzley & Kirkwood, 2006)

Training and Development Opportunities

Training has been argued to be critical for every job (Tyler, 2005 cited in Thassanabanjong et al., 2009). Training is defined as a learning experience that is creating a relatively perma-nent change in an individual and improves their ability to perform on the job (Treven, 2003 Stone, 2006 cited in Thassanabanjong et al., 2009). In addition, Kitching and Blackburn (2002 p.5 ) says in their study that training is; “to include any activities at all through which manag-ers and workers improve their work-related skills and knowledge. These activities may occur on- or off-the-job. They may occur in short bursts or be over a longer period of time. They may be linked to a qualification or not.”
It is noticeable that smaller firms undertake less or are even reluctant to training initiatives regardless of the incentives offered (Maton, 1999 cited in Patton et al., 2000). Kithching and Blackburn (2002) agrees with this, stating that most studies report that small businesses provide less formal training than larger organizations. Reasons for this are that it exists ob-stacles to training in smaller firms such as the lack of finance and or time or the ignorance of the benefits gainable from it (Westhead & Storey, 1997 cited in Patton et al., 2000). Another reason to why firms tend not to attend training is, according to Matlay (1999, cited in Blackburn & Athayde, 2000) due to the problem of identifying training suitable to their needs. On the other hand, when small firms decide to attend training, the decisions are, ac-cording to Blackburn and Athayde (2000), responsive to immediate and identified needs.
There has, however, been a focus on training regarding technical knowledge, skills and the capabilities necessary to complete the work (Treven, 2003 & Stone, 2006 cited in Thassa-nabanjong, 2009). Evidence shows that better trained members will perform more effec-tively and efficiently, they will be more motivated and valuable, take greater responsibility as well as make a greater contribution to performance (Spitzer, 1999).
“Training can influence performance, but organizational performance can also influ-ence training.”
– de Kok, 2002, p. 275
With this, de Kok (2002) argues that there is a positive relationship between investments in training and performance. De Kok (2002) sees that a company that is utilizing training will improve its performance, on the other hand, if a company is performing well it will see the advantage of continuous development to sustain their market position. Furthermore, a firm that are experiencing an economic downturn are more likely to invest in training since op-portunity cost of training decreases when time is not as limited (de Kok, 2002).
Training and development within firms can be divided into formal training and informal train-ing opportunities (Thassanabanjong et al., 2009). Training within small businesses is often described as informal, on-the-job and related to short term business objectives ( Johnson, 2002).This goes in line with the study by Blackburn and Athayde (2000) who argues that informal on-the-job training if preferred over formal training. According to Blackburn and Athayde’s study (2000) less than 7% had obtained formal training during their research period.

Formal Training

Formal training is the less common form of training attended to by small firms (Blackburn Athayde, 2000). The primary reason why firms do not attend external training is, accord-ing to Blackburn and Athayde (2000), since small firms’ managers perceive the training as inconvenient and unnecessary.
One type of formal training is off-the-job training, which is more structured. Off -the-job train-ing is often the training that is required by those who need specialized skills and qualifica-tions (Green, Ashton & Felstead, 2001). Off -the-job training has the advantage that the employees are not distracted by work and can therefore focus on the training (Green et al., 2001). Other types of formal trainings are: distance learning, individual guidance and workshops (Johnson & Loader, 2003).
Distance learning is a flexible learning situation without preset dates and location, where the student takes responsibility of their own learning. According to Kotey and Anderson (2006), students attending distance -learning courses learn to the same level as in-class stu-dents. Individual guided training is when student and teacher meet one-on-one; where top-ic, place and time devoted to training is determined by the course attendee (Johnson & Loader, 2003).Workshops are single occasion meetings with a number of participants where a certain topic is decided in advance and discussed during for example a half day seminar (Johnson & Loader, 2003).

Informal Training- most preferable by small firms

Informal training is often preferred by the small firms. This is firstly, because this type of training is less costly than formal training. Secondly, informal training can easily be in-cluded in the daily work of a small firm. Finally, it is focused on the specific needs of the employees. In addition, another advantage is that the employees learn in the context in which their skills are later utilized. (Hill and Stewart 2000).
Types of informal training are: learning by doing, and On -the-Job (OTJ) Training. Considering the training to be in a hierarchy of structure; learning by doing is the most unstructured and informal training. Followed by the OTJ training which is relatively unstructured and means that the employees learn at the workplace. OTJ training is done by one-to-one instructions as well as it involves a description of the procedure together with a visual demonstration by the trainer. This training technique provides valuable help for the employees and can be de-fined as informal, unplanned training that is provided by supervisors. (Harris, 1997; Treven, 2003 cited in Thassanabanjong, 2009)

Networking- an additional method for development

“No matter where you work— Networking is a pivotal professional competency. It’s the BEST way to get the job done, make things work, improve the processes, and advance your career.”
-Baber & Waymon, 2007, p. 161
A network is a social tie between two or more individuals. According to Aldrich and Zim-mer, (1986) the relationship between the individuals can have multiple purposes such as; passing of information, the exchange of goods and services and/or to change experiences. (Aldrich & Zimmer, 1986)
According to O’Donnell, (2004) a firm’s network can be evaluated in three dimensions; level of networking, networking reactivity and the strength of network ties. The level of networking refers to how a manager interacts with his/her network. The level of networking is measured on a scale from limited networking to extended networking. Limited networking refers to a manager who seldom and irregularly interacts with his network ties. Extended networking on the other hand means a manager who has more frequent and long-term relationships with his network ties. In regards of networking proactively, O’Donnell (2004) refers to how the firm works with extending its networks. Extending networks can either be done in a proactive or reactive manner. Curran et al. (1993 cited in O’Donnell 2004) argues that small firms tend to be more reactive than proactive in their networking. Al-drich and Zimmer, (1986) on the other hand, see that networking is both a deliberate and subconscious process. Hence, some contacts are planned for a certain purpose, while oth-ers are accidental interactions with random people, but proven useful in a later situation (Aldrich & Zimmer, 1986).
Regarding the dimension strength of network tie, the network connections are divided into strong links and weak links. What defines a strong tie or weak tie differs among research-ers. The strong links and weak links are, according to Granovetter (1973 cited in O’Donnell 2004), divided dependent on time, the emotional intensity and the intimacy of the relationship. Others ads frequency of use and level of trust as variables to determine strong ties from weak ties (Johannisson, 1986 cited in O’Donnell, 2004).
Apart from O’Donnell’s (2004) theory regarding the different dimensions of networks, Bir-ley (1985) also distinguishes between different types of networks; informal and formal.

Formal Networks

According to Birley (1985) formal networks consist of relationships between the firm and banks, accountants, chamber of commerce, small firm administrations and lawyers among many. The use of formal networks is according to Birley (1985) more common when the firm is started and for example additional financing is needed.

Informal Networks

Informal networks consist of ties between the owner of the firm and his/her family, friends and business contacts (Birley 1985).
Informal networks are according to Birley (1985) the prime source when searching for in-formation concerning different elements of the business in the start up phase as well as searching for locations and new employees later on. Using informal networks as a primary resource over formal networks is, according to Dubini and Aldrich, (1991), a good source for small firms since the knowledge will be acquired both faster and at a lower cost.

Cold Contacts

In addition to the importance of using networks to gain new knowledge and to access in-formation that is lacking in a firm, Birley (1985) also highlights the use of cold contacts. Cold contacts are referring to published resources such as newspapers and magazines. Both to gain information as well as to publish an advertisement regarding a need required in the company. (Birley, 1985)
According to Birley (1985) cold contacts are ranked as the second most common used me-thod to collect resources, where informal networks are the primary resource.

Networking for Small Firms

According to Valkokari and Helander (2007) the small firms’ network is an option to com-pensate for the knowledge lacking within the firm. The benefit small firms can gain from their network contacts are access to knowledge and other capabilities that their network holds (Valkokari & Helander, 2007). Baber and Waymon (2007) also argue that networking is a useful method to expand your knowledge base. In order to expand its knowledge base, a firm should identify what resources they are in need of and create a network with people that have these areas of expertise (Baber and Waymon, 2007). This expansion of know-ledge can, according to Birley (1985), be done through the use of multiple networks, both informal network and formal networks simultaneously. Most common to gain the lacking knowledge is to use more than one of the networks as a resource (Birley, 1985).
For a network to be useful for the firm, the network must be willing and able to share its knowledge among the different network members (Baber & Waymon, 2007: Valkokari & Helander, 2007). Sharing knowledge within the network creates exposure to new ideas and future development opportunities (Baber & Waymon, 2007: Valkokari & Helander, 2007). According to Coviello & Hugh (1995) the development of small firms are highly dependent on the relationships with others. Håkansson (1989), Håkansson and Waluszewski, (2002), Gadde et al. (2003) and Hoang and Antoncic (2003) further emphasize that the business
relationships that a firms has within its business network is a critical factor to a firm’s suc-cess of failure (cited in von Raesfeld & Roos, 2008).

Selection Process of Knowledge

Supplier selection process is a multi-criteria process that contains qualitative as well as quantitative aspects (Ghodsypour & Brien, 1998). In order to select the best supplier in the leading industry one has to make a tradeoff between tangible and intangible factors, some of which may conflict. Gonzal´lez and Quesada (2004) have in their study found the tra-deoffs to be quality, cost and delivery performance measures in the supplier selection process. In addition, Verma and Pullman (1998) have found that customers select suppliers based on the relative importance of different attributes such as quality, price, flexibility, and delivery per-formance.


Crant (2000) defines proactive behavior as taking initiative in improving current circums-tances or creating new opportunities. This means that one is not passively adapting to present conditions, but rather constantly challenging the status quo. Employees can engage in proactive activities as part of their in-role behavior. Studies suggest that proactive perso-nality is an important element of employee, team, and firm effectiveness. (Crant, 2000)


Reactive behavior in a person is, according to Larson, Bussom and Vicars, (1986), defined as a person who is passive and who’s goals are not driven by their desire but rather as a re-sult of a requirement.
According to Fairman and Yapp (2005), small firms more commonly use the reactive ap-proach to search for information. With this Fairman and Yapp (2005) means that small firms do not tend to search information and search for training actively unless the informa-tion or training is required due to for example changes in regulations.


Trust is an important variable to client satisfaction (Connor & Prahalad, 1996). Wilson and Jantrainia (1993, cited in Huemer, Krogh and Roos, 1998) argue that trust is a key to suc-cessful relationships. Trust has been examined by the use of different theoretical perspec-tives and it is defined as the willingness to make oneself vulnerable for another party (McAllister, 1995). Johnson and Swap (1982, p. 1306) define this issue as the; “willingness to take risks may be one of the few characteristics common to all trust situations.”
The regular exchange of information between parties is particularly important since the more the parties interact with each other, the more they will understand each other’s val-ues, norms, and behaviors (McAllister, 1995). This will lead to a better understanding of each other and hence increase the ability to create trusting relationships (McAllister, 1995). When trust is present the vendor is more likely to better serve the client needs (Connor & Prahalad, 1996). This means that the firm may be less likely to fully utilize the vendor’s ex-pertise when there is limited trust, which then affects the quality of the services and in the end the client satisfaction (Connor & Prahalad, 1996).
According to Mayer, Davis and Shoorman (1995) there are three factors for trustworthi-ness: ability, benevolence, and integrity. Although these factors are related they can differ inde-pendently of each other.
Ability is the combination of skills, competencies, and characteristics which enable one par-ty to influence the other party within a specific area. Benevolence is to which extent the trustee is believed to want to do what is good for the trustor without a selfish profit inten-tion. Integrity entails the trustor’s perception that the trustee stays to a preset of principles that the trustor finds acceptable. (Mayer et al., 1995)
If ability, benevolence, and integrity all are perceived to be high, the trustee would be con-sidered trustworthy. Trustworthiness should, however, be thought of as a continuum rather than the trustee being either trustworthy or not trustworthy. (Mayer et al., 1995)

Table of Contents
1 Introduction
1.1 Background
1.2 Problem
1.3 Purpose
1.4 Delimitations
1.5 Disposition
2 Methodology 
2.1 Grounded Theory
2.2 Research Approach
2.3 Data Collection
2.4 Data Analysis
2.5 Data Quality
3 Theoretical Framework 
3.1 Knowledge
3.2 Knowledge Management
3.3 Training and Development Opportunities
3.4 Selection Process of Knowledge
3.5 Absorptive Capability
4 Empirical Findings 
4.1 Training Vendors Perspective
4.2 Small Firms Perspective
5 Analysis 
5.1 Training and Development Needs for Small firms
5.2 Barriers to Training and Development
5.3 Small Firms’ Methods used to Increase Knowledge
6 Discussion 
6.1 Future methods to Overcome Barriers- A dual perspective
7 Conclusion 
7.1 Further studies
Knowledge Development A dual perspective on Small Firms’ training and development needs

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