Knowledge as a Resource to Increase Competitive Edge of Firms
Differential firm performance is attributed to variance in resource endowment (Penrose, 1959). According to Resource-Based View, a firm achieves competitive advantage with its unique resource (Barney, 1991). Knowledge is regarded as the most significant resource of a firm (Alavi & Leidner, 2001). The ability to integrate the knowledge of firm’s employees is a distinctive capability (Grant, 1996) and a dynamic resource (Spender, 1996), thus improving firm performance and enhancing its competitive advantage (Bogner & Bansal, 2007; Connell, 2004; Gold et al., 2001; Kogut & Zander, 1992; Sharkie, 2003; Zack, 1999).
Explicit knowledge is “knowing what” that is codified and can easily be communicated, while tacit knowledge refers to “knowing how” in a subject matter which can only be revealed through application (Grant, 1996). Knowledge is created through dynamic interactions among individuals in the form of socialization, combination, externalization and internalization (Nonaka, 1994). Exchange of information may also generate knowledge (Nahapiet & Ghoshal, 1998). Information is converted to knowledge once it is processed in the mind of individuals (Alavi & Leidner, 2001).