Knowledge Flow Audit: Indentifying, Measuring and Managing Knowledge Asset Dynamics

Knowledge Flow Audit: Indentifying, Measuring and Managing Knowledge Asset Dynamics

Harri Laihonen (Tampere University of Technology, Finland) and Matti Koivuaho (Tampere Power Utility Ltd, Finland)
DOI: 10.4018/978-1-60960-054-9.ch002


The purpose of this chapter is twofold. Theoretically it hybridizes two management concepts: Intellectual capital (IC) and knowledge flows. By combining these two concepts, the authors seek to illustrate the dynamics of organizations’ intellectual capital. In addition to the theoretical and conceptual contribution, this chapter introduces an empirical setting for testing the framework. The purpose of the empirical illustration is not to provide exhaustive and hands-on guidelines for managing knowledge flows but to increase managers’ awareness of this highly relevant issue and to offer some suggestions for possible development measures. The knowledge flow audit helps to pinpoint the processes in which IC transforms into value or into some other form. It is based on a fundamental assumption; the dynamics of IC can be demonstrated by examining knowledge flows. Empirical results from the conducted case studies indicate that the knowledge flow audit as a whole and especially the related knowledge flow survey can be successfully used for recognizing and mapping out the dynamics of knowledge assets within a short time period. According to the feedback received from the case studies, the audit provides important information for management purposes by describing the status and accumulation of knowledge assets.
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It has been argued in the literature that knowledge assets are dynamic in nature; they interact and depend on each other to create value (e.g. Moustaghfir, 2008; Roos & Roos, 1997). Earlier literature has also acknowledged the important role of learning mechanisms and knowledge management processes as enablers of this interconnectivity (Moustaghfir, 2008; Carlucci et al., 2004; McGaughey, 2002; Marr & Schiuma, 2001). One central starting point of this chapter is the need for a better understanding of knowledge asset dynamics (cf. Schiuma, 2009). This chapter contributes to the existing literature by proposing that the dynamics of knowledge assets can be demonstrated by examining knowledge flows. Knowledge flows are seen as the concrete embodiments of interaction through which data, information and knowledge are transferred from one entity to another. The knowledge flow approach is moreover supported by the earlier literature on intellectual capital, which has proposed that IC is concerned with the management of human and non-human knowledge flow across organizational levels in order to create value for organizations (Kong & Prior, 2008; Petty & Gutherie, 2000; Choo & Bontis, 2002).

Another starting point for this chapter is the fact that in modern organizations, knowledge flows constitute complex networks and the efficient management of these networks becomes a crucial success factor for any organization. This paper takes a holistic view of organizations’ knowledge processes instead of concentrating on only certain functions such as knowledge creation, accumulation or utilization. The ultimate goal of the knowledge flow approach proposed is to understand how knowledge flows as the concrete embodiments of knowledge transfer and interaction could be used for understanding and improving the efficiency and productivity of organizations.

Theoretically, this chapter presents a conceptualization which supports the processes of identification, measurement and management of knowledge asset dynamics. In practice, the chapter hybridizes the concepts of “intellectual capital” and “knowledge flows” into a single framework. It is argued that by combining these two concepts it is possible to gain an understanding of the dynamics of the organizations’ knowledge assets. This argument is based on the idea that knowledge flows emerge from the organizations’ need to utilize, develop and transfer knowledge. Similar thinking has been suggested by Kong and Prior (2008), although they have approached the issue more from the angle of IC, whereas this paper has its main focus on knowledge flows.

It is suggested that new knowledge is gained through knowledge acquisition processes that can be interpreted as inbound knowledge flows from the viewpoint of a given organization. The newly acquired knowledge is then processed, transferred and analyzed within an organization in several ways. These processes are enabled by internal knowledge flows. Individuals process and assimilate the information and finally the new knowledge will be incorporated into organizations’ internal structures such as organization culture, values, processes and information systems. Finally, the external utilization of knowledge takes place through outward knowledge flows. These flows constitute all those knowledge products that organizations produce as solutions to their customers’ needs.

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