Knowledge creation in small-firm network

Knowledge creation in small-firm network

Alsones Balestrin, Lilia Maria Vargas and Pierre Fayard

Abstract

Purpose – The purpose of this research is to aim to understand how the dynamic of knowledge creation

takes place within a small-firm network (SFN).

Design/methodology/approach – The research, qualitative in nature, was developed through the case

study of the Clothing Industries Association, called AGIVEST, formed by 35 small clothing industries

located in southern Brazil. This article attempts to offer a more comprehensive approach towards the

creation of organizational knowledge, by shifting from an endogenous process of the individual firm to a

multidirectional exogenous process within networks.

Findings – The research presents evidence that the context of a cooperation network may provide an

environment of collective learning, represented above all by the interaction dynamic that occurs

between the firms through the creation of several types of ba (specific context in terms of time, space

and relationship), which support the process of knowledge creation.

Originality/value – This approach should consider the tacit, complex, interdependent and contextual

nature of knowledge, overcoming the eminently IT-oriented view defended by the Western perspective

of knowledge management. It is intended that the evidence presented encourages debate and a critical

attitude concerning the concepts of knowledge creation, cooperation and SFN in the academic

community.

Keywords Knowledge creation, Small enterprises, Knowledge management

Paper type Research paper

Introduction

Within a given perspective, which in this article will be called informational society, the

capacity of individuals and organizations to generate, process and transform information

and knowledge into economic assets is presented as the main factor promoting productivity

and competitiveness. Some authors, such as Prahalad and Hamel (1990), Nelson (1991),

Kogut and Zander (1992), Grant (1996), Nonaka et al. (2002), consider that the ability to

create and use knowledge is a major source of sustainable competitive advantages for

firms. However, the Western management epistemology has oversimplified the nature of

organizational knowledge, especially by granting privilege to the explicit and individual

nature with regard to the tacit and collective nature of knowledge (Cook and Brown, 1999).

According to Schultze and Leidner (2002), this oversimplification has been represented by

the normative discourse, which defends the rational nature of knowledge and considers the

possibility to manage and control it. For the authors of the normative literature (Zhao et al.,

2001; Dhaliwal and Benbasat, 1996; Gregor and Benbasat, 1999; Lee and O’Keefe, 1996;

Nissen, 2000), knowledge is seen as an object that can be found outside the individual and

is possible to be stored, manipulated and transferred by means of information technologies

(IT). These principles of the normative discourse have been widely disseminated in the

literature on knowledge management.

PAGE 94 j JOURNAL OF KNOWLEDGE MANAGEMENT j VOL. 12 NO. 2 2008, pp. 94-106, Q Emerald Group Publishing Limited, ISSN 1367-3270 DOI 10.1108/13673270810859541

Alsones Balestrin is based

at the University of Vale do

Rio dos Sinos – UNISINOS,

Brazil, Lilia Maria Vargas is

based at the School of

Management, Federal

University of Rio Grande do

Sul – UFRGS, Brazil, and

Pierre Fayard is based at

the Universite de Poitiers,

France.

On the other hand, the interpretative discourse has considered knowledge to be closely

connected to organizational practices. The authors of the interpretative literature (George

et al., 1995; Robey and Sahay, 1996; Brown, 1998; Schultze and Boland, 2000; Scott, 2000;

Stenmark, 2001) prioritise the role of knowledge in the organizational transformation without

considering it an objective datum or asset.

Thus, the following comparative situation may be established: whereas in the normative

discourse the focus is on problem solving by means of knowledge repository, in the

interpretative discourse the focus is on work processes and practices and the principle of

knowledge being socially constructed, through the interaction between individuals, is defended.

Aligned to the interpretative discourse and based on studies by Polanyi (1966), Nonaka and

Takeuchi (1995), they support the thesis that high value knowledge for the organization has

the following dimensions: it is tacit, since it is intimately related to action, procedures,

routines, ideas, values and emotions; it is dynamic, since it is created within social

interaction between individuals, groups and organizations; and it is humanistic, for being

essentially related to human action. According to the authors, these characteristics make

knowledge something very difficult to manage.

Along this line of thought and vision of Nonaka et al. (2002), a strategic factor for

organizations is the potential to create new knowledge, which is much more relevant than the

attempt to manage it. For Barney (1991) and Lei et al. (1996), a major knowledge asset within

a firm is the capacity to continuously create new knowledge instead of stocking it as a

specific technology that the firm has at a given moment.

Considering this situation, the question that arises is how to put organizations in a position to

produce and use such a resource? Nonaka et al. (2002) emphasize that the favourable

conditions to the creation of knowledge within an organization go through the SECI method

(Socialization – Externalization – Combination – Internalization), but the emergence of a ba

is essential – it is a Japanese concept that means a physical, virtual or mental space within

which knowledge is generated, shared and used.

However, according to the evidence presented by Nonaka et al. (2006), it can be seen that the

essence of the research on the theory of the creation of knowledge has been limited to the study

of the internal aspects and in large organizations. Little attention has been given to external

aspects and to cooperative relations in the creation of knowledge within small firms (SF).

The present article attempts to understand how the dynamic of knowledge creation occurs

within a small firm network (SFN). Aiming to achieve the proposed objective, the article is

structured in the following manner: it starts with a consideration on the perspective of

knowledge creation within organizations, followed by a close examination of the conceptual

aspects of inter-organizational networks; next, the central thesis of the debate will be

presented: knowledge creation in the context of SFN. Afterwards, the methodology used in

the research is summarized, as well as the analysis of the main results. Finally, some

considerations on the implications and the conclusions of the study will be highlighted.

Theoretical references

Knowledge creation

Nonaka and Takeuchi (1995) called knowledge conversion the process with which

organizations create knowledge. It is by means of this conversion that the tacit and explicit

‘‘ To make the process of knowledge creation effectively occur,a specific context is necessary in terms of time, space andrelationship between individuals. ’’

VOL. 12 NO. 2 2008 j JOURNAL OF KNOWLEDGE MANAGEMENTj PAGE 95

knowledge is qualitatively and quantitatively expanded. There are four modes of knowledge

conversion: socialization (conversion of tacit knowledge into tacit knowledge);

externalization (conversion of tacit knowledge into explicit knowledge); combination

(conversion of explicit knowledge into explicit knowledge); and internalization (conversion of

explicit knowledge into tacit knowledge).

In order to make the SECI process effectively occur, a proper context is necessary. For

Suchman (1987), knowledge does not exist only in the individuals’ cognition. Therefore, to

make the process of knowledge creation effectively occur, a specific context is necessary in

terms of time, space and relationship between individuals. Nonaka et al. (2006) call such a

context ba, which has the function of serving as a platform of knowledge creation. Since

there is no knowledge creation without a place, the concept of ba aims to unify the physical

space (such as the physical space of a meeting room), the virtual space (such as the e-mail

or a virtual community) and the mental space (such as shared ideas and mental models).

Nonaka et al. (2002) present four groups of ba: originating ba, dialoguing ba, systematizing

ba and exercising ba. Each one of these ba supports a particular mode of knowledge

conversion in the stages of the SECI process, as represented in Figure 1.

The originating ba allows knowledge to be socialized by means of face-to-face interaction, in

which the individuals share feelings, emotions, experiences and mental models. The

dialoguing ba is a situation in which, by means of dialogue, individuals share their

experiences and abilities, converting them into common terms and concepts. The

systematizing ba offers a context for the combination of new explicit knowledge with the one

that already exists within the organization. And finally, the exercising ba allows the

knowledge that was socialized, externalised and systematized to be once again interpreted

and internalised by the individuals’ cognitive system as new concepts and work practices. It

can be thus noted that different ba may emerge from work groups, informal circles,

temporary meetings, virtual spaces and other moments in which the relationships take place

in a shared time and space.

The evidence presented points to the crucial issue of how organizations can develop the

potential of their processes of knowledge creation. The literature on the theory of

organizational knowledge has generated answers that are mostly based on an endogenous

view of the process of knowledge creation within large organizations. As Wong and

Aspinwall (2004) point out, while few studies have attempted to understand the process of

knowledge management within the context of SF among those of particular note are Lim and

Klobas (2000), uit Beijerse (2000), Frey (2001), Sparrow (2001), McAdam and Reid (2001)

and Wiklund and Shepherd (2003). These studies highlight the fact that SF present distinct

characteristics form large firms and that, given this, they should be considered as something

Figure 1 Types of ba

PAGE 96 j JOURNAL OF KNOWLEDGE MANAGEMENTj VOL. 12 NO. 2 2008

other than a ‘‘little large businesses’’, in order that knowledge management projects might

be successful.

It can be seen that studies that take into consideration the characteristics of SF in knowledge

creation projects are increasingly important, as ‘‘the competitiveness of SF will increasingly

depend on the quality of the knowledge they apply to their business processes and the

amount which is embedded in their outputs’’ (Wong and Aspinwall, 2004, pp.47). For these

authors, SF have certain advantages in comparison with large firms in relation to knowledge

management projects, as, for example, the lower number of employees and the greater

degree of cooperation among them, simpler processes that facilitate the implementation of

new ideas, a unified culture that offers a strong base for change, simple structures, direct

communication with and the proximity of higher management and operational levels.

Nonetheless, Wong and Aspinwall (2004) emphasize that it is undeniable that SF experience

serious restrictions, such as lack of financial, technical and human resources that may put

the implementation of knowledge creation and management projects at risk.

In order to attenuate such restrictions and the lack of resources within SF in the processes of

creating knowledge and learning, some recent studies (Powell, 1998; Corno et al. 1999;

Michelis, 2001; Chua, 2002; Tsai, 2002; Spencer, 2003, Muthusamy and White, 2005) have

demonstrated the importance of interorganizational relations in the process of the

emergence of new knowledge. These authors argue that a network is more effective than a

‘‘lone’’ firm in the process knowledge creation, transfer and systematization. The results of

these studies stimulate and guide this article towards achieving a better understanding how

a SFN can undergo the process of knowledge creation.

Small-firm network

It is based on the awareness of the necessity for joint action and cooperation between the SF,

in an effort to become efficient and competitive, that the logic of network action emerges.

However, even with the acknowledged capacity of collective efficiency through network

action, few authors have dedicated themselves to the study of SFN configuration. Human

and Provan (1997) highlight the existence of only a few individual studies, such as that of

Inzerilli (1990), who used the perspective of transaction costs to describe how trust in a

social context favours the success of SF in northern Italy. Brusco and Righi (1989), as well as

Lorenzoni and Ornati (1988), confirmed the importance of environmental factors for the

growth of SF through networks. Saxenian (1994) described in his study the emergence of an

infrastructure in the United States to support the ‘‘European style’’ of cooperative systems.

For Perrow (1992), the form of production represented by the large integrated firm, originally

defended by Chandler (1977), has become a declining model in the face of contemporary

needs for flexibility. Perrow (1992) adds that the problem of Chandler’s (1977) theory was to

completely neglect the role given to trust and cooperation in economic models. The

dimension of trust and cooperation possibly represents a key role in the success achieved

by SFN, which will hardly be achieved by other forms of networks between large firms and

much less by large integrated firms. This fact was stated by Sabel (1991), who points out that

trust may never be intentionally created, but generated based on a proper structure or

context. Given this evidence, Perrow (1992) argues that, although trust cannot be created, it

can be encouraged by a deliberately created structure or context.

Therefore, there are some characteristics in the context of SFN that form a profitable

environment for the generation of trust between firms, such as: when firms share and discuss

information about markets, technologies and profitability; when there is enough similarity

between the techniques and processes of firms and, thus, each one may understand and

judge the behaviour of others; when the relationships are established over the long term;

when there is little difference between size, power or strategic position of firms; when there is

a periodic turnover of leadership to represent the group of firms; when there is a similar

financial reward for firms and employees; and when an economic advantage is achieved by

the collective experience of firms, by the increase in sales and by marginal gains.


It is worth highlighting that within the term SFN, developed by Perrow (1992) and Human and

Provan (1997), the following characteristics are stressed: a group of firms are gathered; they

are located geographically close; they operate in a specific market segment; they establish

horizontal and cooperative relationships between their actors; they are formed for an

undetermined period of time; mutual trust relationships between firms prevail; and they are

structured based on minimum contractual instruments, which assure basic rules for their

coordination.

Knowledge creation in small-firm networks

Nonaka and Takeuchi (1995) demonstrated the creation of new knowledge based on the

interaction between individuals, groups and organizations. For the authors, knowledge

emerges at an individual level, and is expanded by the interaction dynamic – knowledge

socialization – to an organizational level and, afterwards, to an inter-organizational level. It is

then observed that the knowledge is created only by individuals; an organization or an

inter-organizational network cannot create knowledge, but it can provide a space for positive

and constructive relationships between the actors. The exchange of data, information,

knowledge and competencies at a given project of inter-organizational network may

converge to a singular context for the creation of strategic knowledge for the

competitiveness of organizations.

In order to make the process of inter-organizational knowledge creation effective, it is

necessary to have an environment of synergy and stimulation, in which emotions,

experiences, feelings and mental images are shared beyond the organizational borders. As

Tsai (2002) points out, this environment cannot be produced by the ‘‘command and control’’

model of the traditional firm, but by the organizational configurations adapted to these new

challenges that are presented to the organizational management.

Thus, it can be noted that an inter-organizational network may provide the existence of an

efficient interaction between people, groups and organizations, inter-organizationally

widening the knowledge initially created by the individuals. This dynamic offers the

complementarity of competencies by which the individuals’ knowledge, practices, values,

processes, culture and differences are collectively shared in favour of a common project. For

Corno et al. (1999), the networks represent the place where learning processes and

knowledge consolidation take place.

The theories presented here point out that the network configuration may facilitate the

emergence of ba that is favourable to the process of knowledge creation. In order to better

understand how this dynamic occurs and its potential contribution for the SFN, we attempted

to find empirical evidence based on a case study performed in a SFN located in southern

Brazil, which will be presented next.

Methodological procedures

The case selected for the research was the Clothing Industries Association of Rio Grande do

Sul, called AGIVEST, formed by 35 small clothing industries located in southern Brazil.

AGIVEST is part of the Cooperation Networks program, developed by the State Government

of Rio Grande do Sul (RS). It was created in September 2001 with the aim of expanding the

market, promoting technological improvements and reaching a higher competitiveness for

the small-firms that are part of the program.

‘‘ The evidence presented points to the crucial issue of howorganizations can develop the potential of their processes ofknowledge creation. ’’


The choice for the AGIVESTas a study object was due to the following reasons: for being an

SFN with only two years of existence and that could already present concrete results; for

being an industrial SFN that aims to innovate their products to better compete in the national

market, which can be demonstrated by the launching of a set of products at a national fair;

for the interest expressed by the Secretary of Development and Foreign Affairs (SEDAI) of

the State Government of Rio Grande do Sul in studying AGIVEST, by providing meetings

between the researcher and the consultant, president and businessmen belonging to this

network; and for being an industry network that works from product development to

commercialisation, which is more appropriate for the theoretical constructs of the research,

such as, for example, information and knowledge needed for the innovation processes in the

competitive world of fashion.

The research operationalisation took place based on the systematisation between the

conceptual elements, the authors and the corresponding variables. This structuring logic

allowed a better adequacy between the variables to be observed and the underlying

theoretical constructs, as can be seen in Table I.

The empirical evidence was collected from seven interviews made with the following actors:

five interviews with AGIVEST SF managers randomly chosen, one interview with the

AGIVESTconsultant and one interview with the network president. Each interview lasted for

approximately 60 minutes and they were all performed by the researcher. An interview script

was used – which was created based on the constant research variables in Table I – with the

aim to present a logical sequence of the questions to the interviewees. Besides the

interviews, other evidence was collected by the researcher while attending a meeting of the

AGIVEST, especially to observe the coordination dynamic and collective decision making.

The interviews were taped and then transcribed. The results of the interviews and

observations made by the researcher were compared with the conceptual elements.

Table I Operationalization of research variables

Conceptual elements Authors Research variables

SFN networks Sabel, 1991; Saxenian, 1994; Oliver and Ebers, 1998;Fayard, 2004; Marcon and Moinet, 2000; Human andProvan, 1997; Perrow, 1992

Geographical proximity between firms;Number of firms involved;Type of business (industry, commerce or service);Type of product;Coordination instruments;Formalization level concerning the relationshipsbetween network firms (formal vs. informal);Hierarchy level concerning the relationships betweenfirms (hierarchy vs. cooperation);Cooperation level vs. competition between networkfirms;Objectives underlying network formation

Knowledge creation Polanyi, 1966; Barney, 1991; Corno et al., 1999;Michelis, 2001; Chua, 2002; Nonaka et al., 2002;Schultze and Leidner, 2002; Spencer, 2003 and Tsai,2002

Types and amount of originating ba (socialgatherings, visits to industries, other informalmeetings);Types and amount of dialoguing ba (formal meetings,collective decision process making, planningmeetings);Types and amount of systematizing ba (electroniccommunication, formal documents, database,shared management systems);Types and amount of exercising ba (newmanagement and production concepts andpractices, other actions of knowledge application);Trust in the sharing of information and knowledge;Firms’ opportunism with regard to the existingknowledge in the network;Main knowledge assets created in the network


According to guidelines by Yin (1989) and Wacheux (1996), this procedure aims to achieve

a better understanding of the phenomenon being studied, as well as of the theoretical

implications of the research. The interviews were first individually analysed, and later as a

whole, in an attempt to identify similar and convergent elements that could have an impact

on the research conclusions.

Results and discussion

AGIVEST case

In December 2000, the State Government of Rio Grande do Sul launched the Cooperation

Networks program, in an effort to promote and strengthen the cooperation between the SFN.

Two years after its launch, 33 SFN were formed in several economic segments,

comprehending 733 firms and a total of 5,000 employees. The program has the support

of six universities, which provide 42 consultants to help the formation and management of

the network. There are also other actions that strengthen and favour the development of

networks, such as easy access to credit, the development of management capacitation and

the fulfilment of specific network demands, such as the incentive and the participation in

trade fairs.

The main characteristics of the AGIVEST are the following: it is essentially formed by

small-firms with an approximate average number of six employees; the firms are

geographically close to each other (within a radius of 90 km); all firms operate in the

clothing segment; the network management structure consists of a president and a

vice-president, with the supervision of the administration council, the ethics council and the

fiscal council; the strategic network decisions are made by means of a general meeting, and

the controversial issues may be solved by applying some legal instruments, such as the

network statutes, code of ethics and internal regulation.

According to these characteristics and based on the guidelines proposed by Perrow (1992),

Human and Provan (1997) and Marcon and Moinet (2000), the AGIVESTcan be classified as

a horizontal cooperation network. In contrast to other typologies of SFN, such as the

outsourcing vertical networks, horizontal networks are formed by SF with the aim to work in

cooperation to achieve certain strategic objectives that would hardly be achieved if the firms

acted individually.

Knowledge creation within the AGIVEST network

One of the unanimous answers obtained in the research was that the most considerable gain

firms obtained by means of the AGIVEST was the sharing of information and knowledge

between the firms. The shared information that brought most benefits to the network was

related to production processes, suppliers, inputs, technologies and markets. Such

information was shared through an intense social inter-relationship, which occurs informally

between the businessmen.

Several spaces in which information and knowledge sharing takes place in the network were

identified. Following the guidelines by Nonaka et al. (2002), each type of ba identified works

as different situations that promote an effective ‘‘platform’’ to make the process of knowledge

creation easier between the network firms. The types of ba were identified based on the data

collected and are presented in Table II.

There is evidence of the existence of several physical or virtual spaces that make the

process of knowledge creation easier. One of these spaces, especially for the

communication of the tacit knowledge, is the visits made by the businessmen between

the network industries. Such visits help them to identify improvement possibilities of the

production processes, technologies and other production concepts that lead to substantial

gains to SFN. As reported by one of the businessman, ‘‘in the factories I visited, all

businessmen showed their production processes [. . .]. As the network evolves, secrets are

revealed’’. Another fact observed is that, as the network evolves, the social relationships

become stronger and the trust and cooperation levels become more intense.


The assembly, which is held at least once a month, has become a relevant ba of network

knowledge sharing. It works as a formal forum for the collective process of strategic decision

making. The decisions are taken in a process of debate and thinking, so that a satisfactory

choice is made. At the assembly attended by the researcher, one fact that caught the

attention was that some businessmen arrived early to the place and started to talk informally

to other network businessmen. At the end of the assembly, one businesswoman said the

informal conversations that are held before and/or after these meetings favour the

discussion of specific issues between the participants, such as solutions for problems

related to production, a new supplier or representative and new raw material. This fact

confirms the claim made by Tsai (2002, p. 179), in which ‘‘informal lateral relationships, in the

form of social interactions, have a significant effect on knowledge sharing’’.

SFN, since they are inserted in a community environment with strong social relationships,

often combine friendship and business simultaneously. One example is the social

gatherings – such as lunches or dinners – which occur between businessmen, employees

and relatives involved with the network. These moments are important to strengthen

trust-based relationships. Moreover, they provide informal conversations on opportunities,

challenges and the future of the network and its firms. It can be noted that trust – essential

for the existence of cooperation – is established more by informal and face-to-face means,

as argued by Rosenfeld (1997) in a critique directed to the massive use of IT in the

communication process between the actors within a network.

Events such as trips, visits and exhibitions of products in fairs give the businessmen the

opportunity to know other experiences and think together about the trends and challenges.

Table II Types of ba identified in the AGIVEST

Types of ba Empirical evidence

Meetings at firms ‘‘Each meeting of the specific segments in the network is held at a firm and each businessman shows hisproduction, purchase, the sales systems and, from then on, we start to analyse what can be improved in ourfirms [. . .] within this segment each one shares their experiences with the other colleagues. Nobody hideswho they are buying from, what they are producing, the way they are producing’’ (SFN manager)For us, businessmen, it is very interesting to know other firms, which was impossible before the network. Now,all network businessmen show their factory and the production processes, socialize their problems, themachines they use, the modus operandi, where they bought from, their suppliers’’ (SFN manager)

Assemblies ‘‘Information sharing is quite informal, it is usually done before and after the assemblies in which theassociates are present’’ (SFN manager)‘‘Information is shared in an informal manner [. . .] When the businessman has a problem in his firm, he talks toa colleague to find out how to solve it [. . .] this happens before or after the formal assemblies’’ (SFNmanager)‘‘The assemblies are a deliberative forum of network strategic decisions and occur in a widely participativemanner’’ (Network consultant)

Social gatherings ‘‘An interesting moment of information sharing are the social gatherings (lunches or dinners), which include allbusinessmen, employees and relatives involved with the network or with specific network sub-segments’’(SFN manager)

Trips and visits to fairs ‘‘The trips are special moments to promote integration between the group of businessmen’’ (SFN manager)‘‘In a trip to Fenit (National Textile Industry Fair), we stayed 4 days inside the stand, talked a lot andexchanged information. We exchanged web sites containing information that can help other businessmen’’(SFN manager)

Courses and lectures ‘‘From themoment I joined the network, I started to see how small my business was [. . .] I had no cost control, Ididn’t know how to manage [. . .] I don’t know how I survived [. . .] From that moment on, I started to attend thecourses and talk to other colleagues and I found out that the problems are very similar and the solutions arefound by the group’’ (SFN manager)‘‘We attended a 120-hour course together and that also helped to promote a great share of information’’ (SFNmanager)

Strategic planning ‘‘The strategic planning is a moment in which all businessmen start to form a common view about the networkobjectives, goals, challenges and opportunities for the future’’ (Network consultant)

Electronic space ‘‘We talk a lot on the phone, by e-mail and fax’’ (SFN manager)


For example, by attending an exhibition of products of the AGIVEST at the National Textile

Industry Fair (Fenit), held in Sao Paulo, the businessmen observed that the differentiated and

sophisticated products were the ones with the highest demand. This market knowledge can

become a competitive advantage when developing the marketing strategies for the network.

In order to improve the managerial development of the network businessmen, the State

Government of Rio Grande do Sul provided courses of management capacitation. In these

120-hour courses, the businessmen develop management concepts and techniques.

Management learning is relevant when the network works with a single brand. Thus, the

standards of products and processes must be observed by all firms, in order to guarantee

an acceptable quality of the products of the AGIVEST brand.

Another example of ba observed in the AGIVEST is the development of the network strategic

planning. The planning is developed in a participative manner by all the network

businessmen. Collective thinking, as in the case of the SWOT matrix (Strengths,

Weaknesses, Opportunities and Threats), provided a vision of the network future.

Therefore, by involving all network members in the definition of objectives, strategies,

goals and schedules, this process, besides representing an opportunity for high learning,

attempts to create a commitment in the group to perform the actions based on what has

been planned.

The use of electronic resources – e-mail, telephone and fax – was observed in the dynamic

of network knowledge creation. The telephone and the fax are more frequently used,

whereas the internet and other IT are less used. This evidence represents an issue that

needs to be strengthened in the AGIVESTwith regard to its dynamic of knowledge creation,

according to the following analysis. In Figure 2, we propose a classification of the several

types of ba identified in the process of knowledge creation in the AGIVEST.

The originating ba emerges from the visits to the factories, when the businessmen directly

observe the solutions and the best practices adopted by other businessmen. Moreover,

during the trips, social gatherings and other informal meetings, the businessmen also share

their experiences, emotions and feelings by means of informal interaction.

The dialoguing ba takes place at formal assemblies, at meetings to develop the strategic

planning and at collective decision making processes. These activities allow the

businessmen – through dialogue and collective thinking – to share ideas and

experiences (tacit knowledge), converting them into common concepts, in the form of

models, hypotheses and scenarios (explicit knowledge).

The systematizing ba occurs, for example, during the courses and lectures, as well as by

using the IT to make this process easier. However, the resources for the systematisation of

knowledge are fragile and deficient, especially due to the lack of use of IT systems.

Figure 2 Types of ba in the AGIVEST


The exercising ba, which supports the last stage of the SECI process, in which knowledge is

internalised and applied in terms of new organizational practices, led to good results, such

as the application of new management concepts and reengineering of production

processes at SFN.

By analysing the different types of ba in the AGIVEST, a context of strong interaction among

businessmen can be observed. This interaction, which mainly occurs informally and

face-to-face, offers a valuable basis for knowledge creation. According to authors as

Nonaka and Nishiguchi (2001), most, if not all, knowledge is created through an interactive

process of experimenting and dialoguing, which involves several individuals. From the point

of view of other authors, such as Soo et al. (2002), for many organizations the informal

communication channels have been a rich source of knowledge that cannot be found in

databases or company manuals. The importance of the informal interaction is a crucial

element for the creation of knowledge, especially when the knowledge is systemic, complex

and tacit (Bhagat et al., 2002).

Concluding remarks

An effective process of knowledge creation, supported by the different types of ba, allows the

emergence of essential knowledge assets for the creation of value and competitive differential

for firms. In the AGIVEST, it was possible to find the emergence of knowledge assets that are

certainly providing competitive advantages compared to the SF that work alone. According to

the results of the research, the firms working as a network received new production concepts

and know-how, new product designs, better understanding of the scenario of networking,

patent and trademark registry, product specifications, knowledge of suppliers and

representatives, knowledge of new technologies and raw materials. The intangible assets,

resulting from the firm learning, are already contributing towards the improvement of

production processes and the launching of new products by the firms within the AGIVEST.

According to the results of the research, we observed that the social interaction provided by

the network configuration had a positive influence on the dynamic of knowledge creation

within the SFN. The existence of formal and informal situations so that the businessmen can

share abilities, experiences, emotions and know-how, by means of face-to-face

communication, promoted an environment of intense sharing of tacit knowledge in the

AGIVEST, which is an essential resource for the sustainability of competitive advantages

over the long term.

As a research conclusion, we point out that the inter-relational structure of a network can

develop the potential of the process of knowledge creation within SFN, reinforcing some

evidence previously mentioned in the literature. For example, Richardson (1972) argues that

network cooperation may favour the complementary gathering of abilities from different

firms. Teece et al. (1994) point out that the learning process is an intrinsically social and

collective phenomenon. Ahuja (2000) also shows that the direct relationships between the

actors within a network positively affect the result of innovation.

Nevertheless, such evidencemust be confronted with other existing studies in the literature on

organizational networks. Some research has demonstrated that network closure made

possible by strong ties between the internal actors are less effective in the innovation

processes (Granovetter, 1973; Burt, 1992; Ruef, 2002). This ‘‘perverse’’ effect is particularly

caused by the redundancy of information as a consequence of the actors’ isolation from the

environment external to the network. According toWalker et al. (1997), such a problem ismore

related to the market transaction networks – such as, for instance, outsourcing networks –

than the cooperation networks between small-firms, which are similar to the AGIVEST.

It is worth pointing out that this article attempt to contribute towards a more comprehensive

approach towards the creation of organizational knowledge, by shifting from an endogenous

process of the individual firm to an exogenous multidirectional process, within a network.

This approach should consider the tacit, complex, interdependent and contextual nature of

knowledge, overcoming the eminently IT-oriented view defended by the Western

perspective of knowledge management. Nonetheless, such evidence does not intend to


be a definitive theory, but aims to encourage debate and critique concerning the concepts of

knowledge creation, cooperation and SFN development in the academic community.

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About the authors

Alsones Balestrin is a Professor and researcher at the School of Management of theUniversity of Vale do Rio dos Sinos. Doctor in Business Administration at the FederalUniversity of Rio Grande do Sul. Research interests include inter-organizational networks,and knowledge creation. Alsones Balestrin is the corresponding author and can becontacted at: [email protected]

Lilia Maria Vargas is a Professor and researcher at the School of Management of UFRGS.Docteur in Business Administration at the University of Pierre Mendes France, Grenoble(France). Research interests include information and technological innovation management,cooperation networks and information technology management.

Pierre Fayard is a Professor at the Communication and New Technologies Institute of theUniversite de Poitiers, visiting professor at the universities Pompeu Fabra (Barcelone),Salamanca (Spain), Caxias do Sul and Umesp de Sao Paulo (Brazil). Docteur in Informationand Comunication Sciences by the Universite Grenoble III – France. General director of theCenDoTeC – Brazilian-French Center of Techno-Scientific Documentation. Researchinterests include: organizational knowledge creation and strategy culture.


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