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The Knowledge-Creating Company: How Japanese Companies Create the Dynamics of Innovation
by Ikujiro Nonaka and Hirotaka Takeuchi
The book has several objectives, which the authors themselves suggest are ambitious: (1) to present a theory of organizational knowledge creation; (2) provide a new explanation of certain Japanese companies' continuously successful innovation; and (3) develop a universal model of how a company should be managed. The book does a reasonable job of achieving the first objective, a moderate job on the second, and a poor job on the third.
The authors draw on their previous research to present a theory of organizational knowledge creation. Although the theory has been presented in other journal articles, the book provides a forum to extend the theory in two directions. It extends back into its theoretical roots in epistemology and forward into its application to several case studies. The basis for the theory, and what the authors contend to be the distinguishing feature of innovation in Japanese companies, is the relationship between tacit (personal, difficult to communicate) and explicit (codified, transmittable) knowledge. The authors build on Polanyi's distinction between tacit and explicit knowledge to present four modes of knowledge conversion in a two-by-two matrix. Tacit to tacit knowledge conversion, called "socialization," is a process of sharing experiences to create shared mental models and technical skills. The conversion of tacit to explicit knowledge, called "externalization," is the process of expressing and articulating knowledge through the use of metaphors and analogies. The reverse process of converting explicit to tacit knowledge, called "internalization," is closely associated with "learning by doing". Finally, the conversion of explicit to explicit knowledge through the process of "combination" works to systemize concepts into a knowledge system.
The knowledge creation process is depicted as a spiral, operating at the individual, group, organization, and interorganization levels, in which socialized knowledge is externalized, systemized through combination, and then internalized, thereby generating a new and enhanced cycle of developing socialized knowledge, and so on.
After providing an introduction to the book in chapter 1, the authors embark on a brief review of the literature on knowledge and its relationship with management. It is in this review that they plant the seeds of the distinction between Japanese and Western approaches to knowledge. Reaching back...