Microfoundations of Organizational Capabilities and Knowledge Processes

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Micro-foundations of Organizational Capabilities
and Knowledge Processes
Copenhagen Business School, 1-2 December 2005

• Nicolai J Foss
• Center for Strategic Management and Globalization
• Copenhagen Business School

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Motivating Observations

• Capabilities and its numerous aliases represent
  dominant constructs for thinking about firm-level
  heterogeneity and outcomes (SCA, innovation,
  adaptation, etc.).
• Definitional problems, problems of measurement
  and operationalization.
• Micro-foundation problem.

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Black Boxes (Arrows)
Individual action and interaction
Firm-level outcomes
Firm-level capabilities
And what is going on there??
What is going on here??
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Felin/Foss Conference Credo This conference is
based on the conviction that research and
practice in management and economics on
capabilities and knowledge in firms in general
will strongly benefit from an explicit discussion
of micro-foundations.
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Which Microfoundations?
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Discussion of Microfoundations in the Base
Disciplines

• Debates on methodological (and ontological and
  political) individualism vs collectivism go back
  a long time in social science particularly in
  economics.

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Discussion of Microfoundations in the Base
Disciplines

• Notion of MI coined by an economist Joseph
  Schumpeter.
• Part of the Methodenstreit.
• Old institutionalism vs the emerging
  neoclassicism.
• Macroeconomics and microeconomics and the need
  to relate these.
• Econ usually taken to be the quintessential
  individualist social science

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Discussion of Microfoundations in the Base
Disciplines

• Sociology
• Durkheim
• Rational choice sociology/mathematical sociology
  vs structuralist approaches.
• Coleman.
• Giddens on agency/structure

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Discussion of Microfoundations in the base
disciplines

• Philosophy of science
• Long debate on reductionism.
• Hayek, Popper, Watkins, Agassi, Elster, Kincaid,
  etc.
• Related to debate on modes of explanation.

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Management

• Much less explicit debate in management studies.
• Often echoes (apes?) discussion in base
  disciplines.
• Strong collectivist claims e.g., that
  organizations are strong situations are
  prevalent in management studies.
• Constructs without clear micro-foundations such
  as capabilities, competencies, etc. prevail.

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Why a Microfoundations Discussion in Management?

• Clarifying relations between levels of
  analysis/link up with ongoing discussion of
  multi-level analysis?
• Identify mechanisms at lower level of analysis
  a perennial ambition of all science?
• Discuss usefulness of behavioral assumptions?
• Put collective constructs on a more secure
  footing?
• Advance managerial practice.

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Social Science Explanation
Social (macro) conditions
Social (macro) outcomes
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1
3
Conditions of individual (micro) actions
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Individual actions (micro)
James Coleman 1990 Foundations of Social Theory.
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Where is a micro-project relevant?
Social (macro) conditions
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Social (macro) outcomes
Macro-foundations for micro?
How do individual actions aggregate to collective
outcomes? Nature of mechanism
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Valid?
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Conditions of individual (micro) actions
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Individual actions (micro)
What should we assume about motivation and
cognition?
To what extent does conditions determine
actions?
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Some Discussion Issues

• If indeed we need micro-foundations, what do such
  foundations look like?
• Rational choice theory? Something more
  behavioral? Or, is this really a false
  oppostion?
• Motivation and/or cognition where should we
  begin?
• Does management as an inherently pluralistic
  discipline need to make a choice here?
• How much discretion do we have in our search for
  micro-foundations? Does anything go?

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Some Discussion Issues

• What are key processes of knowledge creation or
  learning both at the individual and collective
  levels?
• How do we aggregate from individual to the
  collective level knowledge? Can we make use of
  invisible hand-explanations?
• Wat are the points of overlap between social
  theorists and organizational scholars with regard
  to the micro-macro link?
• What about the rationalist behaviorist debate
  where does social theory stand?
• No particular academic discipline has a monopoly
  on the constructs of learning and knowledge
  what are unique/new insights coming from our
  respective disciplines in relation to others? Are
  we simply recycling concepts and theory between
  disciplines?