The Problem with Dispersed Knowledge: Firms in Theory and Practice

In this paper, the author shows how the dispersed knowledge workers possess poses problems for both firms and economists' theories of the firm. For firms, continued adherence to old style mass production techniques when market demand changes rapidly is proving to be inadequate. For economists, dispersed knowledge causes structural uncertainty, which in turn implies that agency, transaction-cost, and Austrian analyses of the firm are inadequate. In contrast, the author suggests how the 'capabilities' theory of the firm could incorporate dispersed knowledge to account for organizational innovations that redistribute decision-making within the firm. Copyright 1993 by WWZ and Helbing & Lichtenhahn Verlag AG

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