Knowledge Creation and Control in Organizations

Diego Puga and Daniel Trefler

No 3516, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The incremental innovations that underlie much of modern economic growth typically involve changes to one or more components of a complex product. This creates a tension. On the one hand, a principal would like an agent to contribute innovative components. On the other hand, ironing out incompatibilities between interdependent components can be a drain on the principal's energies. The principal can conserve her energies by tightly controlling the innovation process, but this may inadvertently stifle the agent's incentive to innovate. We show precisely how this tension between creating knowledge and controlling knowledge shapes organizational forms. The novel concepts introduced are illustrated with case studies of the flat panel cathode ray tube industry and Boeing's recent location decisions.

Keywords: Incremental innovation; Incomplete contracts; Imperfect substitutability; Appropriability (search for similar items in EconPapers)
JEL-codes: D23 L22 O31 (search for similar items in EconPapers)
Date: 2002-08
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Citations: View citations in EconPapers (29)

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Working Paper: Knowledge Creation and Control in Organizations (2002)
Working Paper: Knowledge creation and control in organizations (2002)
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