The Competitiveness of Nations in a Global Knowledge-Based Economy

Robin Cowan (a), Paul A. David (b) & Dominique Foray (c)

The Explicit Economics of Knowledge: Codifcation and Tacitness (cont'd)


Page 1


1. Introduction: What’s All this Fuss over Tacit Knowledge About?

2. How the Tacit Dimension Found a Wonderful New Career in Economics

2.1 The Roots in the Sociology of Scientific Knowledge, and Cognitive Science

2.2 From Evolutionary Economics to Management Strategy and Technology Policy

Page 2

3. Codification and Tacitness Reconsidered

4. A Proposed Topography for Knowledge Activities

Page 3

5. Boundaries in the Re-mapped Knowledge Space and Their Significance

6. On the Value of This Re-mapping

6.1 On the Topography Itself

6.2 On Interactions with External Phenomena

Page 4

7. The Economic Determinants of Codification

7.1 The Endogeneity of the Tacitness - Codification Boundary

7.2 Costs, Benefits and the Knowledge Environment

7.3 Costs and Benefits in a Stable Context

7.4 Costs and Benefits in the Context of Change

8. Conclusions and the Direction of Further Work



HHC: Index added



Industrial and Corporate Change, 9 (2), 2000 , 211-253

page 3

5. Boundaries in the Re-mapped Knowledge Space and Their Significance

Across the space described by the foregoing taxonomic structure it is possible to define (at least) three interesting boundaries.  The ‘Collins-Latour-Callon’ boundary would separate articulated codified knowledge from all the rest - assigning observational situations in which there was a displaced codebook to the same realm as that in which learning and transmission of scientific knowledge, and praxis, were proceeding in the absence of codification.  The line labeled ‘the Merton-Kuhn boundary’ puts codified and codebook-displaced situations together on its left side, and would focus primary attention there - as it constituted the distinctive regions occupied by modern science.  That would leave all the rest to general psychological and sociological inquiries about ‘enculturation processes’ involved in human knowledge acquisition.

Our branching structure recognizes that it is possible, nonetheless, for epistemic communities to exist and function in the zone to the right of the Merton-Kuhn boundary.  Such communities, which may be small working groups, comprise knowledge-creating agents who are engaged on a mutually recognized subset of questions, and who (at the very least) accept some commonly understood procedural authority as essential to the success of their collective activities.  The line labeled the ‘functional epistemic community boundary’ separates them from the region immediately to their right in the topography.  Beyond that border lies the zone populated by personal (and organizational) gurus of one shape or another, including the ‘new age’ cult


leaders in whom procedural and personal authority over the conduct of group affairs are fused.

As is clear from the foregoing discussion, there are two quite distinct aspects of knowledge that are pertinent in the codified-tacit discussions, although they are often left unidentified.  On the one hand, knowledge might or might not be presented or stored in a text.  This is the notion associated with codification.  On the other hand, there is the degree to which knowledge appears explicitly in standard activities.  Here, we can think of knowledge as being manifest or not.  Figure 2 elaborates these two properties in a tableau.  For this purpose we have used a 3 X 3 matrix, in which one axis represents the extent of codification: codified, partially codified, and uncodified; the other axis represents the extent to which the knowledge is manifest, or commonly referred to in knowledge endeavors: manifest, alluded to, and latent.  These divisions that are indicated along the vertical and horizontal axes are patently arbitrary, for mixtures in the ordinary human knowledge activities form a continuum, rather than a set of discrete boxes.

To make clearer the meaning of Figure 2, it may be useful to look specifically at the four extreme cases: the corners north-west, south-west, north-east and south-east.  Both the codified-manifest case (the north-west corner) and the uncodified-latent case (the south-east corner) describe situations which are easily comprehensible because the criteria fit together


naturally.  The codified-latent case (the north-east) was described as a situation in which the codebook is displaced while knowledge is not tacit.  Finally the uncodified-manifest case (south-west) describes situations in which agents start to make their discoveries, inventions and new ideas manifest (in order to diffuse them) but still cannot use a full and stabilized codebook to do so; and even ‘writing’ a book with which to make this new knowledge manifest does not necessarily imply codification.  It is possible that the vocabulary or symbolic representation employed is highly idiosyncratic, that there are many ambiguities, and so on.  This implies that while certain aspects of codification may be present (in knowledge storage and recall, for example), other important aspects (such as an agreed vocabulary of expression) can be missing.

The overly sharp coordinates nevertheless give us a tableau which can be used heuristically in distinguishing major regions of the states-space within which knowledge-groups can be working at a given moments in their history.  Instruction or deliberate knowledge transfer is thus roughly situated in the tableau’s ‘manifest’ column, spilling over somewhat into the ‘alluded to’ column.  Formal instruction comes near the top (‘codified’), whereas apprenticeship lies near the bottom (‘uncodified’) of the array.  The world of normal science inquiries extends across the ellipse-shaped region that is oriented along the minor diagonal (southwest-northeast axis) of the array, leaving out the north-west and south-west corners.  In the former of the two excluded regions codified knowledge is most plainly manifested for purposes of didactic instruction, in which reference is made to textbooks, grammars and dictionaries, manuals, reference standards, and the like.  In contrast, most craft apprenticeship training, and even some computer-based tutorial programs, occupy the lower portion of the ‘soft-trapezoidal’ region covering the left side of the array in Figure 2: a mixture of both codified and uncodified procedural routines are made manifest, through the use of manuals as well as practical demonstrations, whereas other bodies of codified knowledge may simply be alluded to in the course of instruction. [20]

The boundaries of the world of engineering and applied R&D also extend upwards from the south-west corner in which closed, proprietary research

20. A number of interesting examples are presented in Balconi’s (1998) study of worker training programs in the modern steel-making industry, showing that what formerly could justifiably be described as ‘rules of the art’ have been transformed into codified knowledge of a generic sort, as well as explicit operating procedures for the plant in question.  According to Balconi (pp. 73-74), an overly sharp distinction has been drawn by Bell and Pavitt (1993) when they contrast the nature of the ‘learning within firms’ that is necessary to augment the content of the formal education and training conducted by institutions outside industry.  In the cases she discusses, ‘the aim of training [provided within the industry] is to transmit know-how by teaching know-why (the explanations of the causes of the physical transformations carried out [in the plant]), and know-what (codified operation practices)’.


groups function on the basis of the uncodified skills (experience-based expertise) of the team members, and their shared and manifest references to procedures that previously were found to be successful.  But, if we are to accept the descriptions provided for us by articulate academic engineers, those boundaries are more tightly drawn than the ones within which science-groups operate; in particular they do not reach as far upwards into the area where there is a large body of latent but nevertheless highly codified knowledge under-girding research and discovery (see, e.g., Vincenti, 1990; Ferguson, 1992).


6. On the Value of This Re-mapping

What value can be claimed for the topography of knowledge activities that we have just presented?  Evidently it serves to increase the precision and to allow greater nuance in the distinctions made among types of knowledge-getting and transferring pursuits.  But, in addition, and of greater usefulness for purposes of economic analysis, it will be seen to permit a more fruitful examination of the influence of external, economic conditions upon the codification and manifestation of knowledge as information.  A number of the specific benefits derived from looking at the world in this way warrant closer examination, and to these we now turn.


6.1 On the Topography Itself

Figures 1 and 2 clean up a confusion concerning the putative tacitness of the working knowledge of scientists in situations that we have here been able to characterize by applying the ‘displaced codebook’ rubric.  A number of studies, including some widely cited in the literature, seem to have placed undue reliance upon an overly casual observational test, identifying situations where no codebook was manifestly present as instances showing the crucial role of ‘tacit knowledge’, pure and simple (see e.g. Collins, 1974; Latour and Woolgar, 1979; Latour, 1987; Traweek, 1988).  It now should be seen that this fails to allow for the possibility that explicit references to codified sources of ‘authority’ may be supplanted by the formation of ‘common knowledge’ regarding the subscription of the epistemic community to that displaced but nonetheless ‘authoritative’ body of information.

The location of the Collins-Latour-Callon boundary in Figure 1, and its relationship to the regeneration of knowledge in tacit form, signifies that this latter process - involving the mental ‘repackaging’ of formal algorithms and other codified materials for more efficient retrieval and frequent applications,


including those involved in the recombinant creation of new knowledge - rests upon the pre-existing establishment of a well-articulated body of codified, disciplinary tools. [21]

Economists’ recent concerns with the economics of knowledge tend to lie in the ‘no disagreements’ (uncodified, manifest) box in Figure 2.  We are talking here about the literature that views reliance upon ‘sticky data’ or ‘local jargons’ as methods of appropriating returns from knowledge.  This is the region of the map in which knowledge-building gives rise to the ‘quasi’ aspect of the description of knowledge assets as quasi-public goods.  The immediate implication is that to determine the degree to which some particular pieces of knowledge are indeed only quasi-public goods calls for a contextual examination of both the completeness of the codification and the extent of manifestation.

The argument has recently been advanced, by Gibbons et al. (1996), that an emergent late twentieth century trend was the rise of a new regime of knowledge production, so-called Mode 2.  This has been contrasted with the antecedent dominant organizational features of scientific inquiry, associated with Mode 1: in particular, the new regime is described as being more reliant upon tacit knowledge, and transdisciplinary - as opposed to the importance accorded by Mode 1 to the publication of codified material in areas of disciplinary specialization as the legitimate basis of collegiate reputational status, selection decisions in personnel recruitment, and the structuring of criteria for evaluating and rewarding professional performance.  Doubts have been raised about the alleged novelty and self-sufficiency of Mode 2 as a successor that will displace the antecedent, highly institutionalized system of research and innovation (see e.g. David et al, 1999, and references therein).  But the main point to be noted in the present context is that such coherence and functionality as groups working in Mode 2 have been able to obtain would appear to rest upon their development of procedural authority to which the fluid membership subscribes.


6.2 On Interactions with External Phenomena

How do changes in information and communications technologies impinge

21. Further, in much the same vein, it is quite possible that practiced experimental researchers, having developed and codified procedures involving a sequence of discrete steps, may be observed discussing and executing the routine in a holistic manner - even to the point of finding it difficult to immediately articulate every discrete constituent step of the process.  The latter is a situation found quite commonly when experienced computer programmers are asked to explain and document the strings of code that they have just typed.  The phenomenon would seem to have more to do with the efficient ‘granularity’ for mental storage and recall of knowledge, than with the nature of the knowledge itself, or the manner in which it was initially acquired.


upon the distribution of knowledge production and distribution activities within the re-mapped space described by our topography?  The first and most obvious thing to notice is the endogeneity of the boundaries (which we discuss more fully in the next section).  In the new taxonomy there are two interesting distinctions: knowledge activities may use and produce codified or uncodified knowledge, or they may use and produce knowledge that is either manifest or latent.  We should re-state here that ‘boundary’ is not being used in reference to the distribution of the world knowledge stock, but instead to the prevailing locus of the activities of knowledge agents in a specific cognitive, temporal and social milieu.  Nevertheless, it is most likely to be true that the situation of a group’s knowledge stock will be intimately related to, and possibly even coterminous with, the location of its knowledge production activities.

Organizational goals affect the manifest-latent boundary.  Activities that couple teaching with research, for example, will be pushed towards the more fully ‘manifest’ region of the state space.  This consideration will be important in studies of the economics of science, and of the institutional organization of academic research activities more generally. [22]

The positioning of the endogenously determined boundary separating the codified from the uncodified states of knowledge activities will be governed by the following three sets of forces, which we examine at greater length below.  For the present it is sufficient simply to note that these include: (i) costs and benefits of the activity of codification; (ii) the costs and benefits of the use of the codified knowledge (data compression, transmission, storage, retrieval, management, etc.); and (iii) feedbacks that arise because of the way codified knowledge is used to generate further codified knowledge.

A given discipline’s age (or the stage of development reached in the life cycle of a particular area of specialization) affects both of the boundaries.  The evolution of a discipline, a technological domain (or of a research group or a community of practitioners) may now be described as a movement in the two-dimensional plane of the tableau in Figure 2.  Let us illustrate this by taking a lead from Kuhn (1962) and begin, early in the life cycle of a research program, with activities centered in the south-east corner of the array: a disparate collection of individual researchers and small teams, working without any commonly accepted procedural authority, generating knowledge that remains highly idiosyncratic and uncodified, and having only a very restricted scope for transmission of its findings beyond the confines of the immediate work-group(s).  Subsequently, if and when these investigations

22. A recent exemplification of the application of the approach formalized here is available in Geuna’s (1999) studies of the economics of university funding for research in science and engineering, and how different funding structures affect the types of activity within the modern European university system.


have begun bearing fruit, work in the field coalesces around a more compact set of questions and the locus of its knowledge activities shifts westward, as agents make their discoveries and inventions manifest either in physical artifacts, conference presentations and published papers.  This is where the codification process begins.  But even though scholarly texts may be produced, because the concepts involved and language in which these reports are couched have not yet been thoroughly standardized, codification must still be considered very incomplete.  Thenceforward, the emerging discipline’s course follows a northerly track, spreading towards the north-east as disputes arise from inconsistencies in description and interpretation, and conflicts emerge over the specifics of the way the language is to be standardized.  As these debates are resolved and closure on a widening range of issues is achieved, the characteristic activities migrate eastward in the space of Figure 2, landing up in the region where most of the actual research activity is carried on within the ‘latent-codified’ and ‘manifest-partially codified’ domains that typify normal science.


next page