The Intensity and Extensity of Knowledge and the Multinational Corporation as a Nearly Recomposable System (NRS)

Knowledge and its management are increasingly seen as the stuff that economic activity and competition are made of.(1) The plea for such a focus is accompanied, although in my view not to an adequate extent, by efforts to analyze the properties and subcategories of knowledge and their consequences for firms and management.(2) The aim of the present paper is to contribute to this discussion. Rather than reviewing previous conceptions and dimensionalizations of knowledge, I will suggest a simple categorization in two dimensions - knowledge intensity and knowledge extensity. I will argue that the modern multinational corporation (MNC) is working with knowledge that is both intensive and extensive, in senses to be explained below. This, in turn, requires the MNC to strive to become a nearly recomposable system (NRS), rather than a nearly decomposable one, as is the explicit or implicit principle guiding the design of most hierarchical systems.(3) The main part of the paper is devoted to a discussion of the properties of nearly recomposable systems and the ability of the MNC and other socio-economic institutions in this regard. The Intensity and Extensity of Knowledge "Post-industrialism" is usually seen to involve not just the increased role of intangibles - such as services, information and knowledge - in relation to tangibles. It also suggests "higher" grades of intangibles, "intelligables" if one so wishes. The knowledge intensity of an activity or a firm is the degree to which it is dependent on an internal supply of advanced, complex and recent knowledge.4 A possible measure, all imperfections admitted, is the level of education of those involved in the firm or activity. If this was all there was to it, the management challenge would be difficult but not that difficult. Firms have had to "manage intellectuals" and deal with complex knowledge for a long time, as have other institutions, notably the military. What is new is the increased dispersion of knowledge, its extensity. By knowledge extensity, I refer to the geographical, organizational (between individual firms and between their divisions, departments, subsidiaries, individuals, etc.), and "substantive" (over technical fields and types of knowledge) dispersion of knowledge relevant to the competitive distinctiveness of the firm.(5) Operational measurement is even more difficult than in the case of intensity. One index, for the geographical extensity, would be the spatial spread of units for research, development, top levels of management, and other strategic functions in the firm. Another would be a measure of the variance of knowledge intensity between geographically or organizationally separated units. High variance implies low knowledge extensity, as in the firm that undertakes all advanced functions in one place and disperses routine activities globally. Low variance may imply the dispersion of similar activities (as in an integrated system of globally dispersed R&D units for a product) or of quite different ones (as when design units in one country coordinate with component technology ones in another). My hypothesis is that the world economy is moving toward higher degrees of both knowledge intensity (KI) and knowledge extensity (KE).(6) However, this broad trend contains much diversity, which can be discussed along the lines suggested by Figure 1. I have chosen to concentrate on the geographical dimension concerning extension. The terms "creation" and "exploitation" should be taken in no theological and/or Marxist senses. Exploitation refers to the utilization of given resources and bases of competitiveness. Creation entails the search for and design of new sources of strength and ways to utilize them. Taking the combination of extremes for the two dimensions (obviously, they are both continuous), we end up with four archetypes. I will not describe them closely here, but only note that three of the four quadrants harbour respectable MNCs. …