SIZE - mngt.waikato.ac.nz · The fragmented knowledge base of large organizations Donald Hislop Sheffield University Management School University of Sheffield, 9 Mappin Street, Sheffield,

SIZE Matters:

The fragmented knowledge base of large organizations

Donald Hislop

Sheffield University Management School

University of Sheffield,

9 Mappin Street, Sheffield, S1 4DT.

E-mail: [email protected] Telephone: 00 44 114 222 3438

Paper Presented at:

Management Knowledge: Construction, Dissemination and Consumption

Critical Management Studies 2001,

Manchester

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ABSTRACT

‘..big just keeps getting bigger..’1

Fuelled by wave after wave of mergers and acquisitions, the last quarter of the 20th century witnessed an enormous growth in the size of already large multinational corporations in virtually all parts of the global economy (Korten 1995). This paper reflects on the implications of this trend for the internal dissemination and management of organizational knowledge, which are potentially profound. This represents an important area of analysis, as it has been both under-reported and significantly under-theorized. In relation to the contemporary literature on knowledge in organizations, for example, little has been written about the effects of organizational size on processes of knowledge utilization. The first part of the paper presents a range of empirical evidence to illustrate this trend. This section utilises both primary empirical data on a small number of companies which were the focus of a recent research project, as well as a range of secondary, documentary evidence drawn from an extensive range of sources. The second half of the paper analyses the consequences of this trend for the internal management of knowledge within these enormous organizations. The analysis builds on theoretical/empirical work which emphasizes the fragmented nature of organizational knowledge (Tsoukas 1996). If organizations represent a ‘community of communities’ (Brown & Duguid 1998), large, global corporations, employing tens of thousands of workers, spread across potentially hundreds of sites, dispersed around the globe, represent a metropolis of disparate communities, each with it’s own knowledge base, culture, and value system. The paper concludes by challenging the utopian vision of the N-form multinational corporation. This perspective suggests that organizational knowledge sharing is predicated on fruitful interactions between heterogeneous personal networks which transcend traditional intra-functional modes of knowledge sharing. The paper develops a pessimistic scenario which emphasizes the difficulty of developing and sustaining such networks in large organizations. In such circumstances it is suggested that it may be as likely that localised ghettos may develop, where people rely on their pre-existing networks, rather than attempt to develop new ones. Overall, therefore, it will be suggested that in terms of the dissemination and management of knowledge within firms, size most definitely matters.

1 Actor Tim Roth, in one of the spectacularly unsuccessful Barclays adverts which attempted to outline the benefits to customers of Barclays being BIG. (shown circa March-April 2000).

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INTRODUCTION This paper considers how the size of large organizations affects both the internal distribution of knowledge, and patterns of knowledge sharing. This represents an important topic of study for a number of reasons. Firstly, empirical evidence suggests that the last quarter of the 20th century has witnessed a widespread and significant growth in the size of large organizations. This process, which will be examined in the first part of the paper, has resulted in already large organizations growing into enormous, transnational corporations. While this trend has been acknowledged and recognized by a significant number of writers, its implications have not been fully theorized. Secondly, there is a growing realization that size may be a crucial factor shaping not only patterns of intra-organizational knowledge distribution, but also the dynamics of personal networks, and processes of knowledge sharing. For example, both Fenton & Pettigrew (2000), and van Wijk & van den Bosch (2000) reach such conclusions in their analysis of the role of social networks on organizational knowledge flows. The importance of this topic is magnified by the significant extent to which network/organization size as a variable has been under-theorized in the knowledge literature. The paper is structured into two main sections, with the first providing empirical evidence to illustrate the trajectory of growth identified above. The second half of the paper then changes focus somewhat to reflect on the implications of organizational size for the intra-organizational distribution of knowledge and patterns of knowledge flows. The empirical data utilised in the first half of the paper is drawn from two areas. Firstly, anecdotal evidence from a research project that the author was involved in, which examined the implementation of IT based innovations within a number of large European multinationals will be utilized. This data will also be supported by documentary evidence from a wide cross section of the business press and other academic sources, which shows that the significant growth undergone by the majority of the case study companies is part of a broader, widespread patterns of growth in the size of large organizations. The empirical evidence used in the second half of the paper on the other hand is taken solely from the research project that the author was involved in. This part of the paper is itself divided into two subsections, with the first examining the character of their knowledge base, and the second considering how the identified characteristics of the knowledge base resulted in attempts to improve levels intra-organizational knowledge sharing, and more generally affected patterns of knowledge sharing. The first sub-section shows the knowledge bases of the case companies to be highly fragmented, being made up of overlapping, but relatively specialist knowledge sub-communities. These findings are related to, and arguably support the activity based perspective of knowledge, which suggest that knowledge, and knowing in organizations is inseparably bound up with practice and activity (Blackler 1995, Cook & Brown 1999, Gherardi 2000). The empirical data also supports the perspective that organizations require to be conceptualised as decentred, and distributed knowledge systems (Grant 1996, Tsoukas 1996, Blackler et al 2000). The following part of the paper builds on these insights to consider how the fragmented character of the knowledge base has been a factor shaping both the restructuring of large multinationals and how it may have potentially negative effects on patterns of knowledge sharing. While there has been a widespread

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acknowledgement that the period since the late 1980’s witnessed a significant amount of change in the structural characteristics of multinational organizations (Castells 1996, Nohria & Ghoshal 1997, Pettigrew & Fenton 2000), the growth in the size of organizations has been not been considered to be an important underlying catalyst to this process. The paper suggests that this represents an important area in which size matters. Finally, the paper considers the potentially negative implications that the growth in the size of organizations may have on patterns of knowledge sharing. Brown & Duguid (1991) suggested that organizations require to be conceptualized as a ‘community of communities.’ This paper suggests that the trajectory of growth outlined in the first half of the paper has resulted in these organization-wide communities growing to the size of enormous conurbations. The paper concludes by considering the potential difficulties of knowledge sharing in such circumstances. GROWTH TREND – WHEN GIANTS STALK THIS LAND

‘..big just keeps getting bigger..’2 This section of the paper examines the trajectory of growth in contemporary capitalism, which has resulted in the apparently remorseless expansion in the size of already large organizations. This will be done in two main ways. Firstly, the growth of a significant number of the case companies researched will be illustrated. This shows that between the mid-1980’s and the end of the 20th century, most of these organizations grew significantly in size. Secondly, it will be shown that the type of growth through mergers and acquisitions undergone by these organizations was far from unique. In fact, data and statistics from a wide range of sectors will be utilized to demonstrate the relatively generalized nature of the trend. There are a diverse range of measures which can be used to indicate organizational size such as the number of employees, the number of sites, the value of sales revenues, and the value of an organizations overall assets. Each of these measures have their own advantages and disadvantages, and reflect different aspects of organizational size. Further, the correlation between these measures is limited and a league table of size based on sales revenues (such as the Fortune listing) would be very different from a league table based on number of employees. In an attempt to take account of these different indicators of size, this diversity has been embraced. Thus the empirical data presented makes use of all of these different measures. The rationale behind this strategy is that it attempts to avoid the problems of giving a partial and biased perspective on size by focussing too narrowly on one set of measures. (i) Growth of Case Companies The importance of organizational size and level of geographic distributedness to the innovation projects studied, emerged during the course of the research, and was not one of the main topics that the research initially set out to examine. During the course of the research, where specific change projects were examined longitudinally in a small number of case companies for a period of between 1-2 years, the importance of these factors became apparent in two primary ways. Firstly, for a least half of the organizations researched, non-organic growth through acquisition was an important contextual factor for the innovation projects (see Table 2, column 3). Further, in the 2 Actor Tim Roth, in one of the spectacularly unsuccessful Barclays adverts which attempted to outline the benefits to customers of Barclays being BIG. (shown circa March-April 2000).

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four companies where this was the case this provided one of the main catalysts to implementation of the innovations examined – the type of growth undertaken had stimulated a demand for greater levels of co-ordination across sites and business units. Secondly, in all of the innovation projects examined, the multi-site nature of the projects – which all involved a number of geographically dispersed sites – importantly affected key elements of the innovation process such as the (fragmented) sense of identity which existed across the sites involved in the projects, and the (dispersed) nature of the organizational knowledge base which had to be utilized.

Organization Details3

Organizational Structure

Relations to Parent Organization

UK-Cast UK based casting and injection

moulder

Nationally based, European-wide product divisions

One division of a UK based, diversified corporate group.

UK-Pharm Specialist, international

pharmaceuticals corporation

Market based, autonomous product divisions

Autonomous corporate group

UK-Pen-Gem

UK Pension and life assurance company

Two main product divisions: Pensions & life assurance

One autonomous division in an Australian based financial

service corporation UK-Pen-

Swin UK Pension and life assurance company

Two main product divisions: Pensions & life assurance

One autonomous division of a UK based financial services

corporation France-Connect

French, based mechanical connectors

Autonomous, market related product divisions

One division of a large diversified, French Corporate

group Neth-Bank Dutch based,

international bank Autonomous divisions

structured both by region, and product/service

Autonomous corporate group

Swed-Truck

Swedish based, fork lift truck company

Nationally based, autonomous European-wide

sales/service divisions

Autonomous corporate group

Table 1: Structure of Case Organizations

In all of the case companies examined, the change projects being examined were multi-site, and multi-functional in character, and were concerned with implementing standardised, enterprise level, information management systems. Therefore, all of the innovation projects involved personnel from different functions and sites, with different knowledge bases and levels of experience, and further required them to work together intensively. Background information on the case companies is summarised in Table 1, which illustrate the relations between the case companies examined and their parent, corporate groups, and also the way in which the case companies were themselves structured. As will be seen in the second half of the paper, the internal organizational structure will be shown to have importantly shaped the character of the knowledge base in the case companies.

3 These details relate to the case organizations at the START of the research project. During the course of the project, a number of the case organizations were involved in significant restructuring projects.

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Table 2, illustrates the size and growth characteristics of the case companies. Specifically, the table illustrates the importance of merger-acquisition activity to virtually all of the case companies, the significance of the growth produced by this activity, and an indication of the number of sites and employees likely to be affected by the innovation projects that were examined.

Company Merger-Acquisition Activity at Parent Group

Level4

Non-organic Organizational5 Growth at Organizational Level

No. of Employees (1997-98)

No. of Countries-Sites

(1997-98) UK-Cast UK-Cast was demerged from it’s

parent company during part of a strategic restructuring at that level.

No non-organic growth of UK-Cast during late 1990’s

Approx. 3,000 12 sites

UK-Pharm 1997 undertook two massive mergers-acquisitions.

Trebling of turnover following two mergers in 1997. Employment doubled in same period

Approx. 7,0006 50+ sites- 10+ countries

UK-Pen-Gem

No significant merger/acquisition activity during late 1990’s

No significant non-organic growth in UK-Pen-Gem during late 1990’s

? 60+ sites in UK

UK-Pen-Swin

In 1997-8, group of companies of which UK-Pen-Swin was a part was sold by parent company to another, European Financial service group In 2000, UK-Pen-Swin acquired the

sales force of a rival company

No significant non-organic growth in UK-Pen-Swin during late 1990’s

7,000 (50% direct

employees, and 50% Independent

financial advisors)

?

France-Connect

Substantial number of acquisitions during 1990’s of competing

companies (in Europe, USA and Asia).

Between 1992-97 turnover trebled, due significantly to the acquisitions undertaken

750 6 Sites7

Neth-Bank Massive growth through acquisition during 1990’s (in Europe, USA,

Asia, S. America and Australasia).

Growth from predominantly national business to global business

80,000+ 50+ countries

Swed-Truck Late 1990’s – acquired large US

vehicle company

Steady state growth by acquisition in Europe. Doubled in size (sales and employees)

following American acquisition.

8,800 13 countries

Table 2: Organizational Growth and Innovation Characteristics

(ii) General Growth

‘It is concentration of capitals already formed, destruction of their individual independence, expropriation of capitalist by capitalist, transformation of many small into few large capitals.’

Marx (1977, p. 586) A significant amount of research and writing can be mobilized to show that the patterns of growth through merger and acquisition undertaken by many of the case companies, is by no means exceptional. The last decade of the 20th century saw the emergence of a growing realization, amongst an extremely diverse range of sources, of an apparently significant growth trend in the size of contemporary organizations 4 This includes mergers and acquisitions not only in the business units that were the primary focus of our research. Also included are mergers/acquisitions in related business areas, either in parent company, or in ‘sister’ organizations. 5 Growth here (and in terms of employment and number of countries/sites) refers SOLELY to the business unit that was being researched, and not the parent corporate group. 6 The precise number of sites, and employees involved in, and affected by the change project being researched changed significantly over the course of the project. 7 These 6 sites, which were the focus of our research, were part of the pilot project. The full project, for the whole of the France-Connect corporation, was planned to involve 32 worldwide sites employing approximately 15,000 staff.

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(Burrell 1997 p. 71-72, Carchedi 1991, Ch. 7, Chandler 1990, Economist 1993, Klein 2000, Giddens 2000, Ch 5., Whitley 1987, Thompson & McHugh 1995, Ch. 3, Scullion & Starkey 2000; p. 1064). However neither the existence of large organizations, or the analysis of them, is totally new. For example, almost exactly a century ago Standard Oil was so large that it was forcibly broken up by the U.S. Government of the day. Equally, the analysis of large organizations also has a historical heritage, embodied in the work of Kaplan (1954), Chandler (1962), Mills (1959), Galbraith (1967), and Baran & Sweezy (1968) among others. Finally, and of most direct relevance to the arguments put forward in the first half of the paper, Marx, in the middle of the 19th century, identified the general tendency within capitalist economies for the emergence of large scale, monopolistic enterprises to occur through processes of concentration and centralization (Marx 1977, p. 586). While the academic study of multinationals represents an industry by itself, and has produced a vast amount of writing (Ghoshal & Bartlett 1990, Buckley & Casson 1991, Cox et al 1993b, Nohria & Ghoshal 1997), organizational size or changes in organizational size are not typically issues central to much of the analysis undertaken. One issue that is widely discussed is the growing internationalization/globalization of multinationals, but there is no explicit recognition that this process may be accompanied by a growth in organization size. For example, Buckley & Young (1993), and Cox et al (1993a) when discussing the main research agenda for the study of multinationals in the 1990’s make no explicit reference to changes in organizational size, and do not raise it as an issue warranting analysis. What this section of the paper attempts to illustrate is that the growth in the size of organizations during the last quarter of the 20th century has been on such a scale that not only have the largest organizations continued to grow significantly in size, but that there has been a quantum leap in the number of enormous multi-national organizations which exist.8 Before considering some data which illustrates this, the paper briefly examines one of the main mechanisms by which this process of organizational growth was achieved: mergers and acquisitions. One of the main methods which has fuelled the growth in the size of large organizations has been mergers and acquisitions, rather than organic growth. The 1990’s witnessed a ‘mania’ for mergers and acquisitions across an extremely broad range of sectors/industries including pharmaceuticals, banking and financial services, life assurance & pensions, oil, car production, media, food production, telecommunications and military equipment (Atkinson 2000, Bolger 2000, Economist 1999, Farrelly 2001, Hislop 2000, Nairn 1999, Teather 2000). In all of these sectors this process resulted in the creation of giant monolithic corporations such as AOL/Time Warner, GlaxoSmithKline, Daimler-Chrysler, and BAE Systems. One organization, Cisco Systems, which though an extreme case, illustrates the extent to which growth can be achieved by these means. Cisco Systems, which produces 8 One topic of significant debate in this area relates to the extent to which this growth in multinationals has produced truly international companies, spread evenly across the globe, with no home base, and no primary focus on any particular national, or regional markets. Some commentators suggest that the extent of this internationalization is somewhat exaggerated in much of the globalization literature, and that vast majority of the multi-nationals are still ‘home-centred’ or regionally centred, to some extent (Hirst & Thompson 1995, Harman 1996, Rugman 2000). However, this issue is not central to this paper, which is more concerned with the absolute size of large organizations, than with their level of internationalization.

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internet hardware, could be described as the acquisition king. It grew from being relatively small in the early 1990’s to reaching the position in 1999 of being the third largest U.S. corporation in terms of market capitalization (Hill 2000, Luce & Kehoe 2001), with the astounding number of acquisitions it undertook (70 between 1993 and 2001 – Luce & Kehoe 2001), playing a significant role in this growth trajectory (Wheelwright 1998). This relatively anecdotal data is supported by an extensive range of more aggregated statistics on merger and acquisition activity. For example: Hughes (1993) identified a significant wave of mergers in the UK during the 1980’s; Savary (1993, p. 151) found that between the early 1980’s, and 1990 that merger and acquisition activity within the European Community increased threefold; while Cooke identified a similar global trend in the mid-1980’s (Cook 1988, p. 50, p. 80). Rugman (2000) identified mergers and acquisitions as being a core element of the strategies of large multinationals in the late 1990’s. Finally, various reports produced by the United Nations have all highlighted the importance of mergers and acquisitions in the apparently inexorable growth of transnational corporations (UN 1983, UN 1988, WIR 1996, WIR 1999).9 One consequence of the above described process of mergers and acquisitions, the growing size of the world’s largest organizations, can be illustrated in a number ways. Firstly, historical-comparative data, taken from the Fortune 500 list of organizations is used, to show how the size of the largest companies has grown since the mid-1960’s. Secondly, a diverse number of different contemporary statistics are also be utilised to demonstrate the absolute size of the largest contemporary organizations. Based on the Fortune lists of the largest companies, Table 3 illustrates that, measured both by revenue, or assets, and with figures adjusted for price inflation, that the size of the largest organizations has grown significantly in the thirty years from the mid-1960’s to the mid-1990’s. This data is also corroborated by Klein (2000, p. 264) who showed that between 1980 and 1995 the total assets of the top 100 transnational corporations grew by almost 700%.

Revenue ($000m) Assets ($000m)

Fortune

Top

196210 1995 % Increase 1962 1995 % Increase

10 626 1500 239 600 1073 179

25 987 2532 256 923 2581 280

50 1345 3658 272 1229 4938 402

Table 3: Change in Size of Fortune companies 1962-95

The absolute size of contemporary large scale organizations can also be demonstrated through a plethora of diverse statistics. In Europe, in the early 1990’s in markets for aerospace, motor vehicles, computer and office equipment, tobacco, electronics and 9 These reports suggest that the growth of transnational corporations started to develop significantly from the mid-1970’s onwards (UN 1988; p. 17-21). 10 These figures have been adjusted for inflation using price indexes.

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chemicals, the largest 5 organizations together accounted for over 40% of business (Carchedi 1991, p. 232-3). At a global level, some markets were even more concentrated, with the largest five organizations accounting for at least half of sales in the automotive, airline, aerospace, electronic components and steel industries (Korten 1995, p. 223). Further, comparing the size of organizational economies to those of national economies equally demonstrates the phenomenal size of the World’s largest organizations. For example, the combined revenue of the Fortune 500 companies for 1994 (over $10 trillion) was equivalent to 1.5 times the GDP of the USA for the same year (Fortune 1995). The aggregate sales of the world’s 10 largest corporations was also equivalent to the combined GDP of the World’s poorest 100 countries (Korten 1995, p. 220). Finally, of the 100 largest economies in the world in the late 1990’s, 51 were corporations and 49 countries (Morgan 2000). As this paper is primarily concerned with the implications of organizational size on the dissemination, utlization and sharing of knowledge in organizations, it seems appropriate to conclude this section of the paper by examining the size and scale of a sample of the organizations that Davenport and Prusak used in Working Knowledge (1998). The data on these organizations illustrates both their enormous size, as well as the extent to which they are geographically distributed (Table 4).

Organization Number of Employees Number of Countries/Sites in which organizations

operate Accenture

(Andersen Consulting) 65,500

(consultants only) 48 Countries

Boeing 198,000 7 main sites in USA BP Amoco 97,000 100 countries

Buckman Laboratories 1,200 8 R&D sites (90 including sales/service)

JPMorganChase 90,000 60 countries Coca-Cola 34,000 200 Countries

CSIRO 6,500 75+ sites Dow Chemical 41,000 100+ sites Ernst & Young 77,000

(consultants only) 130 countries

General Motors 388,000 200+ countries Hewlett-Packard 86,000 120 countries

Hoeschst-Celanese 14,000 32 production sites Hoffmann-LaRoche 68,000 100+ countries

IBM 307,000 100+ countries IDEO 350 10 Sites (3 continents) Table 4: Size of ‘example’ organizations from Davenport and Prusak11

In conclusion, the first half of the paper has attempted to show that, to some extent fuelled by a wave of mergers and acquisitions, there has been a significant and 11 Page XV of the introduction provides the full list of organizations from which Davenport and Prusak drew examples. Table x lists half of them, many of which have changed their names due to mergers and acquisitions(for example British Petroleum are now BP Amoco, and the Chase Manhattan Bank is now JPMorganChase). In all cases, the information in Table x was taken from company web sites in January 2001.

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widespread growth in the size and number of large, multi-national organizations. The scale of this transformation has been such that Korten (1995, p. 121) described it as ‘the most rapid and sweeping institutional transformation in human history.’ While this quote may contain an element of hyperbole, it does indicate the significance of the growth trend that has been occurring. The second half of the paper, changes focus to consider the implications of the size and geographic distribution of these organizations both for the way knowledge is distributed and dispersed, and for the way they manage, utilize and share knowledge and information. As will be seen, it is suggested that these implications are potentially significant. Further, it will be suggested that this trajectory of growth represents a potentially important but unexplored catalyst to the restructuring of multinational organizations away from the traditional M-form structure, which a number of writers suggest has been widespread (Castells 1996, Hedlund 1994, Nohria & Ghoshal 1997, Pettigrew & Fenton 2000). SIZE, GEOGRAPHIC DISTRIBUTEDNESS AND THE SHARING OF KNOWLEDGE The empirical focus here is solely on the seven case companies. However, the data presented in the previous section on the general trend of growth through acquisition suggests that the issues examined here have relevance to a wide range of organizations. Overall, the larger organizations grow and the more geographically dispersed they become, the more, in general, their knowledge base is likely to be highly fragmented, with potentially significant implications for the sharing and communication of knowledge and information. However, this is getting somewhat ahead of the argument. This half of the paper is structured into two sections with the first considering how the size and geographic dispersal of the case companies affected their knowledge bases. The second half of the paper suggests that the change projects examined represented part of the formal organizational strategic response to this fragmentation. However, this section of the paper suggests somewhat pessimistically, that once organizations go beyond a certain size there may be significant problems to the effective sharing of knowledge.. (i) Fragmented Knowledge Bases Much contemporary literature, as will be seen, suggests that organizations are distributed knowledge systems, and in the case companies examined, this proved to be very much the case. The knowledge base in all the case companies could be usefully conceptualised as being constituted by a collection of overlapping, but separate, specific and somewhat specialized knowledge communities. This was to a large extent because any individual, or group of individuals, unless working at relatively senior corporate levels, tended to have responsibility for, and involvement with a narrowly defined range of products, customers, or work activities. Further, as suggested by Brown & Duguid (1998; p. 98), the distribution of knowledge in each case, was shaped by the social division of labour. Thus, while the knowledge bases of all the case companies were generally fragmented, the specific ways in which they were structured and constituted varied significantly, to some extent due to way in which business/work was internally structured and managed (see table 1). Primarily, organizational knowledge was structured either by function, or by business unit activity, and in most cases, both simultaneously.

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The knowledge bases of UK-Pen-Swin, and UK-Pen-Gem were divided primarily into discrete business areas, reflecting the internal structuring of business activities. Business in both organizations had traditionally been structured around their two main product areas, pensions and life assurance. These divisions were run as separate businesses, with their own, distinct management structures, staff, business processes, IT systems, and customer bases. Further, there had historically been little interaction between them. In fact they operated in relative isolation from each other. One interviewee in UK-Pen-Swin described their historical structure as resembling ‘big silos’. Communication only occurred with the divisions, and never across them. One illustration of the extent of their separateness, and the lack of communication that was, until the mid-1990’s traditional, is in the fact that there was no sharing of customer information. Neither division had any straightforward way of finding out whether any of their customers had business in the other division, and it was impossible for customers with products in both divisions to get a single, summarised statement of their total business portfolio. This resulted in the development of two separate and specialized knowledge communities, which only had knowledge of their own customers, IT systems, and working practices. The autonomy of these divisions was such that the evolution and development of their working practices, the upgrading of their IT systems etc, was done purely on the basis of intra-divisional considerations, and issues of inter-divisional compatibility, standardization were never considered. For example, each division had it’s own separate IT systems, and working practices for using them. These systems, and working procedures were so different that administrative staff in the pensions division would not have been able to able to use the IT systems in the life assurance division without substantial training, and vice versa. Similar to these two companies, the knowledge bases of the other five case companies were also structured and divided into discrete, autonomous business areas (see Table 1), which produced a similarly fragmented knowledge base. However, their business units were structured along somewhat different lines in each case. In Swed-Truck, and UK-Cast, business was structured into geographic regions, rather than along product lines. In the other three case companies (UK-Pharm, France-Connect, and Neth-Bank) business units were structured both by product, and geography. In Swed-Truck and UK-Cast, work was organized into relatively small, separate business units, which had responsibility for all business within a specific geographic region. Each business unit thus had their own separate customer base. Within this structure, there was typically little need for interaction across these business units, and they operated in relative isolation from each other. While the business units in principle sold a standard range of products and services, they had significant autonomy over how precisely they conducted their business. Further, in both cases, there was significant variance between business units in terms of the characteristics and demands of their customers. One important consequence of this, in terms of the issues considered here, was that each business unit developed their own distinct ways of working, and used different IT systems to support these practices. Thus, discrete and specific knowledge communities developed, with staff in each business unit possessing substantial amounts of specialised knowledge, relevant to their own localised working practices, and customer demands, which had limited transferability, and relevance, in other business units. These findings are reinforced by other research,

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which also highlights the specific and specialized nature of local knowledge within the divisions of multinational corporations (Lord & Ranft 2000). The empirical material just described hints at the idea that the fragmentation of the knowledge base in the case companies, into specialist and specific sub-communities is related to the particular nature of the tasks that organizational staff/communities carry out. This conclusion is reinforced by a growing body of theory which argues that knowledge and knowing is intimately bound up with activity, and that it is impossible to separate knowing from doing (Barnes 1977, Blackler 1992, Clark 2000; ch. 13, Gherardi 2000, Tsoukas 1996). This perspective has been differently referred to as an ‘epistemology of practice’ (Cook & Brown 1999), and a relational view of knowledge (Scarbrough 1998). From this perspective, knowing and doing are inseparably fused together in knowledgeable activity. Thus the knowledge that people possess is expressed through the practice and activity that they carry out, and it can never be completely objectified, disembodied and removed from this context. Not only is knowing embedded in activity, it is also embedded in the specific socio-material circumstances that this activity takes place in (Barnes 1977, Tsoukas 1996). Individuals possess knowledge, attitudes and values, but they are learned, shared, used and developed within particular social situations, and through particular activities. Other research also confirms the experiential basis of much local organizational knowledge (Lord & Ranft 2000; p. 575, Eriksson et al 1997). These arguments thus help explain why the knowledge base of any and all organizations are to some extent fragmented, and made up of a collection of disparate, specialist knowledge communities (Blackler et al 2000, Brown & Duguid 1991). The range and diversity of activities conducted within any organization are such that they will always have specialist, knowledge sub-communities. Brown and Duguid (1991; p. 53) articulated this by suggesting that (all?) organizations require to be conceptualised not as coherent communities, but instead as a ‘community-of-communities.’ Further, what effect is growth through mergers and acquisitions likely to have on the character of the organizational knowledge base? Pessimistically, it could be suggested that growth through acquisition represents a centrifugal force on the knowledge base of organizations, resulting in the knowledge base of the newly merged organization being extremely fragmented, dispersed, and divided. In these circumstances, the knowledge base of the newly merged organization will not only be divided into specialist knowledge sub-communities, but these sub-communities are likely to have no common history and culture, and may even have contradictory interests, or antagonistic relations to each other (Marx 2001). Thus growth through mergers and acquisitions, which the first half of the paper showed to be extremely common, is likely to increase the fragmentation of the organizational knowledge base, and make the creation of an integrated, co-operative and communicative knowledge base a difficult and time consuming task to achieve. Overall however, the academic understanding of these processes is limited, as there has been little empirical research which has looked in detail at the nature of knowledge sharing processes following mergers and acquisitions (Bresman et al 1999). This merger-induced fragmentation was visible in all four of the case companies where the innovations being examined where significantly affected by such growth

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strategies (France-Connect, UK-Pharm, Swed-Truck, and Neth-Bank). The negative aspects of this will be illustrated by describing episodes from two of the case companies: UK-Pharm and Neth-Bank. Neth-Bank, as was illustrated in the first half of the paper, grew massively through acquisition. Our research in Neth-Bank was focused on attempts to develop a corporate level intranet, to facilitate the sharing of knowledge, and the communication of best practice. However, the project to achieve this was significantly hampered by the fact that most divisions/business units had their own autonomous IT facilities, and had developed their own intranet systems. The fragmentation of Neth-Bank’s IT division was such that there were estimated to be at least 150 separate intranets (Newell et al 2000). The development of these sites had, almost without exception, been done in isolation, with little sharing of knowledge between site developers. Not only that, but the vast majority of these sites developers’ knew little about the existence of the vast majority of the other intranet sites.12 The episode from UK-Pharm illustrates equally well the significant (though not insurmountable) problems of communication across specialist knowledge communities with different cultures. In UK-Pharm one stage of their innovation project involved detailed interaction, and communication between personnel from sites in the UK, and the USA, which had never dealt with each other before. This communication was hampered by differing interpretations of the terminology that was being used, which resulted from the use of different reporting structures, different cultures et. One specific example was the word ‘contract.’ While this was common parlance for the UK staff, the American staff involved were extremely hostile to the word, and were uncomfortable using it in the context considered. Differences over the definitions of all words were resolved, but communication was significantly hampered by a problem that had not been anticipated. The research of Bresman et al (1999; p. 453-454) reinforces these findings, as their longitudinal research into knowledge sharing following acquisitions found that in the immediate period following the acquisitions that the extent of the knowledge sharing between staff from the acquired and the acquiring company was extremely limited. (ii) Responding to Knowledge Fragmentation This paper attempts to develop and extend the idea of organizations as a ‘community-of-communities’ by suggesting that the size, and level of geographic dispersal of large organizations, such as the seven case companies, or the large organizations looked at in the first part of the paper, may significantly influence the nature of intra-organizational knowledge sharing processes. Extending Brown & Duguid’s (1991) metaphor of organizations as a ‘community of communities,’ do large organizations represent a vast metropolis of disparate communities. Further, in such circumstances, has size become an impediment to the effective sharing of knowledge? This broad question open up a number of more detailed and specialized questions. Are organizations growing so large that it is becoming difficult, for specialist knowledge communities to know about the existence of all other relevant knowledge communities, let along share knowledge and information with them? Perhaps in such circumstances the degree of common knowledge shared by some communities may be minimal? If organizations are so large that some communities don’t share the same

12 It was not possible to get a precise figure on the number of intranets that existed at any one time, as no mechanism existed to identify, or count them.

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alphabet, let alone the same vocabulary, how does this affect possibilities for knowledge sharing and mutual understanding? This final part of the paper examines how this fragmentation of the organizational knowledge base was responded to in the seven case study companies. Firstly, the formal strategic response of senior management is considered, where it will be suggested that the change projects examined represented part of an attempt to redress this fragmentation through improving levels of intra-organizational communication and knowledge sharing. Following on from this a pessimistic scenario relating to the difficulties of sharing knowledge within such large organizations will be examined. This concludes by suggesting that the sheer scale of contemporary large organizations may make effective intra-organizational knowledge sharing difficult to achieve. Formal Strategy Brown and Duguid (1991), in their much referenced article on communities of practice suggested that their are benefits to be achieved from large organizations supporting, and encouraging a fragmented knowledge base made up from multiple, specialist sub-communities. Primarily, they suggest that such a strategy of supporting a diverse knowledge base will have positive effects on an organizations’ innovativeness, through allowing these different sub-communities to develop the ‘non-canonical’ practices that they suggest are an important source of innovation. The opposite strategy, they argue, is thus likely to inhibit innovation through imposing too much standardization.

Company Change Type Stated Managerial Objectives of Change

UK-Cast ERP System (Enterprise Resource

Planning)

♦ Standardization of operating practices/IT systems

♦ Improve cross business co-operation

UK-Pharm ERP System ♦ Improve efficiency of manufacturing practices

♦ Improve cross functional co-ordination ♦ Improve inter-business co-ordination of

manufacturing UK-Pen-Gem Sales Automation

Tool ♦ Automation and standardization of sales

support processes ♦ Improve co-ordination between sales offices

and corporate centre UK-Pen-Swin Telephone Service

Centre ♦ Improve customer service and business

retention ♦ Improve co-ordination of assurance and

pensions business France-Connect ERP System ♦ Improve/Introduce co-ordination across

sites/businesses ♦ Improve cross-functional communications

Neth-Bank Intranet ♦ Create a ‘networked bank’ ♦ Improve co-operation across business units

Swed-Truck ERP System ♦ Standardization of business processes/IT systems in Europe

Table 5: Objectives of Change

However, this somewhat contradicts the dominant knowledge management rhetoric. Typically, this literature suggests that there are significant benefits to be achieved from improving levels of intra-organizational communication, co-ordination, knowledge sharing, and standardization (Newell et al 2000, p. 88). The articulated

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advantages of doing this are that it allows learning in general, and ‘best practice’ in particular, to be shared more easily. Further, it helps avoid the problems of ‘reinventing the wheel’ or of system and information incompatibilities. In terms of formal strategy the case companies all embody this second position (see table 5), as two of the most important, stated managerial objectives for the changes researched were concerned with the closely inter-related objectives of improving co-ordination levels (between sites, functions, business units), and/or developing greater levels of standardization (Swan et al 2000). There is widespread acknowledgement that the last years of the 20th century witnessed a significant amount of change in the structural configurations of large multinationals (Pettigrew & Fenton 2000, Hedlund 1994, Nohria & Ghoshal 1997, Nohria & Eccles 1992, Castells 1996). However, the growth in size of these organizations has not been considered to be one of the primary catalysts to these developments. Instead, this process of restructuring has typically been argued to have been stimulated by the rapid evolution of information and communication technologies, the international expansion of organizations, or the requirement of organizations to increase their levels of flexibility and adaptability. The data presented here suggests that the growth in size of organizations may therefore also be an important, but relatively unexplored catalyst to these changes. G-Form, or N-Form? Competing Models of Knowledge Sharing Behaviour in Large Organizations The success of the change projects examined, on the basis of the research undertaken, is difficult to establish, as the research examined the implementation phase, and was not able to follow the projects into the post-implementation phase. This final section of the paper questions the general optimism regarding the ability to facilitate effective, organization-wide processes of knowledge sharing, whether this is done through the implementation of an IT system, as was attempted by the case companies, or even through attempting to improve inter-personal knowledge sharing, for example by developing an improved knowledge sharing culture. The model of the N-Form organization, involving decentralized decision making, heteregeneous communication and mutual trust and inter-dependence between business units in large multinationals could be argued to represent a somewhat utopian vision of knowledge sharing patterns. For example, this idealised model jarred significantly with the reality of the case companies, where knowledge sharing between communities was inhibited and shaped by political struggles. Other evidence, which illustrates the extent to which knowledge hoarding is commonplace, also suggests that these characteristics are not uncommon (Boisot & Griffiths 1999, Ciborra & Patriotta 1998, Collinson 1999, Lazega 1992, Storey & Barnett 2000). In contrast, this closing section of the paper presents a more pessimistic and dystopian picture of potential patterns of (limited) knowledge sharing which may occur when organizations expand beyond a certain, critical size. The N-form model of knowledge sharing and communication, is predicated on the idea that knowledge sharing processes are supported and facilitated by diverse networks of personal relations (Ghoshal & Bartlett 1990, Marschan et al 1997). However, as organizations grow in size, do they reach a point where knowledge

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sharing via such mechanisms becomes difficult, ineffective or problematic? For example, returning to the urban geography metaphor, when an organization can be conceived of as a metropolis of different specialist communities, how practical is it that any individual will have a complete overview of the organizations knowledge base, or even know about other knowledge communities which are relevant to their own? In the case companies which grew most significantly by acquisition (Neth-Bank, UK-Pharm and France-Connect) the participants interviewed typically had a somewhat partial and limited understanding of the knowledge base of their parent corporate groups, and many were not even aware of relevant, specialist knowledge communities in other parts of their corporate group. Thus for example, most of the Dutch IT staff in Neth-Bank who were interviewed, only knew of intranet developments and IT staff in the Netherlands, and possibly Europe, and had little or no knowledge of intranet developments within other parts of Neth-Bank. Similarly, British staff in UK-Pharm involved in their change project had little knowledge of relevant IT developments in parts of their newly created parent corporation. In such circumstances Gargiulo & Benassi (2000) suggest that individuals with ‘cohesive’ existing networks are unlikely to adapt them to changed circumstances. Thus, the existence of effective, pre-existing social networks may act to inhibit the development of new or expanded social networks. The weakness of strong ties is therefore that they can lock people into particular social networks and inhibit the development of new ones (Gargiulo & Benassi 2000; p. 186, Grahber 1993). As Granovetter (1973) suggested, the problem with such a situation is that this is likely to inhibit the range of knowledge, information and ideas that people have access to, or make use of. In the most extreme case this may produce a ghetto effect, where people retreat within a known and apparently trusted community, and develop a suspicion and mistrust of other communities, In such circumstances, as is occurring in one of the world’s largest urban sprawls, Los Angeles, those living in the most affluent suburbs/ghettos/communities have become so paranoid and defensive about crime and protecting their lifestyle that they have attempted to defend and demarcate the boundaries of their community through the use of physical fortifications, close circuit television surveillance, and 24 hour security patrols (Davis 1992, Ch. 4). Large, global organizations, such as those discussed in the first section of the paper, and particularly in those which have grown through merger and acquisition, may have knowledge bases which are so extensive, diffuse and fragmented, that knowledge ghettos develop, in which organizational staff only communicate and share knowledge within pre-existing and established networks. The rapid development of information and communication technologies (ICT’s) have often been heralded as providing an effective means of communication within global, geographically dispersed organizations. For example, research into global virtual teams illustrates the important role of ICT’s in sustaining and developing communication and knowledge sharing processes within such groups (Ahuja & Carley 1999, Jarvenpaa & Leidner 1999, Maznevski & Chudoba 2000). However, there appears to be no contemporary evidence which suggests that ICT’s can help facilitate the development of new networks amongst people with no common task focus, or who have no pre-existing social relations. Therefore whether ICT’s can reduce the ghettoisation of large organizations requires empirical investigation.

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Thus an alternative vision of knowledge sharing in large multinationals which can be starkly counterposed with the idealism and utopianism of the N-form organization is the Ghetto, of G-form organization. It is suggested that such a vision is most likely in the largest, contemporary organizations ,where their sheer size acts as an effective barrier to the type of person-to-person knowledge sharing that the N-form organizational vision is predicated on. As outlined here, these ideas are extremely tentative, and are supported by largely anecdotal evidence. Therefore, there is a need for further empirical research investigating the extent to which, and the circumstances in which G-form patterns of knowledge sharing occur. However, the empirical evidence supporting the existence of the N-form organization is itself somewhat limited, and is by no means convincing (Barley & Kunda 2001). Therefore there is a great need for empirical research in this area to investigate the general patterns of knowledge sharing which occur in large multinationals. These conclusions resonate with the tentative findings of both Fenton & Pettigrew (2000) and Van Wijk & van den Bosch (2000), which suggested that the size of organizational networks was a crucial variable in understanding their dynamics, and in shaping patterns of knowledge sharing. However, such insights are relatively rare in much of the ‘knowledge’ literature, which appears to be blind to size as a key variable. For example, while there is writing which has considered how the geographic dispersal (virtualisation) of work teams may affect patterns of communication, and knowledge sharing – see for example Gupta and Govindarajan (2000), Hildreth et al (2000) and Jarvenpaa & Leidner (1999) – this work typically takes no account of organization/network size as an important variable. This section of the paper has attempted to outline why such an omission may be problematic, and that when examining patterns of knowledge flows within networks, that network size matters. CONCLUSION Whitley’s 1987 article can be seen as advocating the need to take greater account of organizational size as an important variable of analysis. This paper attempted to take up this call, through considering how organizational size can, and may affects patterns of knowledge sharing within large organizations. One of the objectives of the first half of the paper was to illustrate the importance and relevance of such a analysis. Primarily it was suggested, through using a diverse range of empirical data, that the last decades of the 20th century witnessed a significant growth in the size of large organizations. The growth has been such that this period has witnessed the emergence of an vast number of truly colossal transnational organizations, employing large numbers of workers spread across the globe. The second half of the paper explored the nature of the knowledge base, and the character of knowledge sharing processes in such large organizations. One of the most striking, and important characteristics of the knowledge bases in these organizations was that they were highly fragmented and dispersed. Thus the knowledge base of large organizations is constituted by a vast network of overlapping, but largely specialist and specific knowledge communities, each of which possesses localised knowledge relevant to the particular context, culture and practices that they are involved in. The final part of the paper examined how the extreme fragmentation of the knowledge base of the largest organizations may affect the internal sharing of knowledge. The N-form model of multinationals suggests that effective organizational

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knowledge sharing is predicated on fruitful interactions between heterogeneous personal networks which transcend the traditional intra-functional, and intra-business modes of knowledge sharing. This paper developed a pessimistic scenario which suggested that the sheer size of large organizations is likely to make difficult the development of such networks, due largely to the difficulties involved in both identifying relevant, knowledgeable people, and developing relations with them. In such circumstances it was suggested that localised ghettos may develop, where people rely on their pre-existing networks, rather than attempt to develop new networks. These arguments are extremely tentative in nature as they are based on a limited amount of empirical data, drawn from a small number of case studies. Thus, the issues explored need to be empirically researched in much more detail. In terms of the growth in size of large organizations, the type of qualitative evidence provided could be usefully supported by the statistical analysis of large data sets. Further, greater research is also needed into the character and dynamics of the actual processes of knowledge sharing within large organizations to establish the veracity of either the N-form, or G-form models. As with Lord & Ranft (2000) and Barley & Kunda (2001), it is suggested that our understanding of such processes is currently somewhat limited. The paper has attempted to suggest that, as with the tentative findings of Fenton & Pettigrew (2000), that greater account requires to be taken of network/organizational size as a variable effecting network dynamics and the sharing of knowledge. Hopefully the paper has provided enough data and a convincing enough argument to suggest that this does warrant a fruitful avenue for further investigation. The issues explored in the paper point towards the importance of organizational size as being a crucial variable shaping both the character of the organizational knowledge base, and the nature of knowledge sharing practices. Further, it can also be seen as an important, but unexplored catalyst to the restructuring of restructuring of multinationals that has been occurring. Thus it can be concluded that, in a significant number of ways, size most definitely matters.

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