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Core Capability and Core Rigidity: Organizational Memory Perspective

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Core competence and core rigidity: Organizational memory perspective

Chen-Yi Tsai 1, Lin, Julia L. 2, Chen, Ching-Hsiang3

1. Doctoral student, Graduate School of Management, I-Shou University.

[email protected]

2. Professor, Graduate School of Management, I-Shou University. [email protected]

3. Doctoral student, Graduate School of Management, I-Shou University.

[email protected].


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Core competence and core rigidity: Organizational memory perspective

ABSTRACT

Organizations, in the hypercompetitive environment, continuously learn,

accumulate, and store knowledge to build organizational capability, and to sustain

competitive advantage. However, they do face the paradox of core capability and

core rigidity, which causes structure inertia and resistance to change. For capability

being embedded within organizational memory and different contents of

organizational memory, organizational memory perspective provides us more deeply

understanding of core capability and rigidity. Constructs of procedural and

declarative memory are adopted to explore the rationales underlying the paradox. We

also suggest that the trans-active memory system, an interactive learning system,

consolidates knowledge combination to facilitate endogenous change in the process

of capability evolution. After reviewing the nature of capability/rigidity and

organizational memory perspective, we infer propositions regarding the conceptual

framework. A discussion of implications and future research directions are included.

Key words:

Core capability; core rigidity; organizational memory; procedural memory;

declarative memory; transactive Memory System


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INTRODUCTION

Firms are viewed as repositories of knowledge, Organizational knowledge, being

institutionalized and embedded in organizational memory (Argote, 1999; Nonaka,

1994; Hubber, 1991; Kostova, 1999), becomes synonymous with organizational

capability. But the reversed-U relationship between slack resources and innovation

(Nohria and Gulati, 1996), negative relationship between performance and risk

preference (March and Shapira, 1987, 1992; Miller and Chen, 2004), indicates the

phenomenon of core capability and core rigidity (Prahalad and Hamel, 1990;

Leonard-Barton, 1992).

When learning needs to be distant, and radically new capabilities need to be

developed, firms often fall into competency traps, as core capability becomes core

rigidity (Nelson and Winter, 1982; Teece, Pisano, and Shuen, 1997; Tripsas and

Gavett, 2000). As capability may be deemed as collections of routines (Winter, 2000;

2003), the stability-providing effect of routines may lead to capability inertia. The

existing technological capabilities, codified in the routines, procedures, and

information processing capabilities of the firm, limit its adaptive intelligence.

We adopts metaphors of organizational memories to evaluate the paradox of core

capability and core rigidity. Organizational capability is embedded within

organizational memory (Nelson and Winter, 1982; Winter, 2000, 2003). The higher


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level of stored memory, the more organizational capability will exist. But organization

also ignores novel knowledge easily. We infer that different forms of accumulated

organizational memory have different relationship with capability.

When core capability becomes rigidity, organizations become resistance to

change. It’s necessary for organizations to combine existing and novel knowledge.

The trans-active memory system will be the mechanism bridging novel sources and

the existing knowledge base.

In the following section, we review the capability perspective to introduce the

paradoxical phenomenon of core capability and core rigidity, which refers to path of

capability evolution. Dimensions of capability are divided to novelty and speed. Then,

we build up conceptual framework. Discussion and conclusion are followed.

CAPABILITY AND RIGIDITY

Based on the resource-based view, firms can be seen as constituting a bundle of

resources (Wernerfelt, 1984). The resources determine an organization’s strength and

weakness to a greater degree than does industrial structure consideration (Rumelt,

1991; Gabriel, Venkat, and Paul, 2003). Capability approach deepens resource-based

perspective, offers rigorous definition of concepts, and continues to expand the

frontiers of understanding capability.

Core capabilities, embodied in employee knowledge, technical systems,


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managerial systems, and values, are institutionalized, and part of an organization’s

‘taken-for-granted’ reality. For the ‘taken-for-granted’ nature, routines economize

managerial cognitive resources, increase stability, and reduce uncertainty in

decision-making. For tacit ness nature, organizations sustain competitive advantage.

But core capability may become rigidity (Gilbert, 2005). Too much slack

resources reduce re-investment and are bad for innovation (Nohria & Gulati, 1996).

Existing routines for providing satisficing solutions prevent organizations from

outsourcing or initiating changes. That local learning leads core capability towards

rigidity and become competence trap. Thereby, core capability can be something of a

double-edge sword: “neglect it and you forgo an important source of competitive

advantage; hold on to it too long and you incur a strategic opportunity cost” (Boisot et

al., 1997 cited by O’Droscoll et al., 2001).

Dimensions of capability

Within hyper-competitive environment, we define two dimensions of

organizational capability, novelty, and speed and propose a conceptual framework of

organizational memory and capability.

Christensen and Foss (1997) suggested dynamic capability as the appropriate

balance between exploitation and exploration (March, 1991). Novelty will be critical

in term of exploration. The novelty is usually referred to characteristic of capability


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(Ford and Gioia, 2000; Moorman and Miner, 1998; Subin and Workman, 2004). To

explore the past experience, being embedded within organizational memory, we

define novelty, a divergence from the norm, refers to the degree of deviation from

prior routine.

Secondly, speed refers to the time required to plan and execute an action. In a

hyper-competitive era, only dynamic entry barriers can outperform the competitors.

The speed of innovation will be the necessary condition to establish dynamic entry

barriers.

WHAT IS ORGANIZATIONAL MEMORY?

When it comes to storage of organizational capability, and various effects on

capability and rigidity, the constructs of organizational memory provide us with a

deeper understanding and rationale underlying the conceptual framework.

Memory is the faculty of retaining and recalling things past, which will influence

subsequent individual behavior. The organization self does not possess memory.

However, there is a growing consensus that organizations have frames of references,

shared beliefs, values, norms, routines, structures, and other physical artifacts that

reflect the presence of organizational capability (Anand et al., 1998; Moorman and

Miner, 1997; 1998; Nelson and Winter, 1982; Walsh and Ungson, 1991).

Organizational memories have different forms, levels, contents (Walsh and Ungson,


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1991; Moorman and Miner, 1997), and are related to information management

(Anand et al., 1998), improvisation (Moorman and Miner, 1998; Vera and Crossan,

2005), new product development (Moorman and Miner, 1997, Kriakopoulos. and

Ruyter, 2004), organizational buying process (Park, and Bunn, 2003) and routines

(Cohen and Bacdayan, 1994).

Why metaphor of organizational memory is related to core capability and core

rigidity? Firstly, organizational capability is embedded within organizational memory.

An organizational capability is a collection of routines. Routine leads to the

accumulation of knowledge and the routinization of activity in an organization

constitute the most important form of storage. Although organizational ‘remembering’

is achieved largely through ‘routines (procedural memory)’, organizations keep

formal memories, and these formal memories play an important role (Nelson and

Winter, 1982). Thus, determining the consequences of different memory forms on

capability proves of interest, and constitutes the second issue, as follows.

Secondly, various levels and forms of organizational memory influence

capability differently. Mooreman and Miner’s (1997) empirical results indicated that

higher organizational memory levels enhanced the short-term financial performance

of new products, while greater memory dispersion increased both the performance

and capability of new product. After Moorman and Miner’s (1997) findings,


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Kyriakopoulos and Ruyter’s (2004) isolated the effects of different memory types,

and suggested that the greater the amount of procedural memory, the greater the

capability will be. But when a certain level of memory is achieved, local learning

prevents organizations from accruing novel knowledge, and becomes an obstacle or

rigidity. They proposed internal and external information flow as boundary condition,

but failed to verify the argument empirically. There may be other situational variables.

That is the third reason that we argue.

Finally, novel knowledge should be incorporated to existing memory to facilitate

endogenous change and to prevent competence tap. What is the facilitator?

Kyriakopoulos and Ruyter (2004) tried to extend the work of Moormen and Miner

(1997), which examined the moderating role of environmental factors, to the role of

information flow. They inferred that internal and external information flow improves

the relationship between organizational memory and capability. But the empirical

study failed to have significant results. This paper argues Transactive memory system

(TMS), as divergent shared mental model (Lewis, 2003), will help to consolidate

information flow and existing knowledge base.

Characteristics of organizational memory

Level, dispersion and content of memory, which are relevance to our conceptual

framework, will be discussed here. The level of organizational memory refers to the


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amount of stored knowledge an organization has about a particular phenomenon. High

level of memory provides base of organizational absorptive capability, which

enhances learning and accumulates more knowledge. Fortune (always) favors the

prepared firm (Cohen and Levinthal, 1990). But the greater the prior experience, the

less likely organizations engage in information searching activities (Weiss and Heide,

1993). This may influence flexibility, causes competence trap or core rigidity.

Dispersion: Becker (2004) cited Hayer (1945) and distinguished different

meaning of distribution and dispersion. One means knowledge or information

distributed and shared among various knowledge retention bins. The more highly

organizational memory is distributed, the more shared norm, value, or routines among

various individuals, groups or organizational units. The convergent nature of

organizational memory enhances organizational coherence, which enhances the

efficiency of exchange. But the consistent min-set implied by convergence lessens the

diverse opinions and perspective essential to new knowledge creation (McFadyen and

Cannella, 2004; Nahapiet and Ghoshal, 1998). The dispersion of knowledge means

specialization and complementarities which can provide various domain and novel

knowledge to prevent local learning and enhance capability.

Content: There are two types of organizational memory: procedural and

declarative memory. Procedural memory is distinguished from declarative memory.


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Procedural memory refers to process memory, which is similar to routines (Nelson

and Winter, 1982) and mades the performance faster and more reliable over time

(Cohen and Bacdayan, 1994).

Declarative memory refers to the memory of concepts, facts, or events. In

organizational context, declarative memories may refer to knowledge about

customers’ requirement, commercial specification, product specification, production

capability, bill of materials, and scheduling rules. They can be found across different

organizational units, databases, or intranet.

Riding a bike is a good example. Riding a bike involves procedural memory, but

it is contrasted to the declarative memory of the mechanics underlying riding a bike

(Cohen, 1991; Moorman and Miner, 1997; 1998, Kyriakopolos and Ruyter, 2004).

Another example, concurrent engineering is the involvement of a

cross-functional team in a process to plan product, process, and manufacturing,

simultaneously (Koufteros, Vonderembse, Doll, 2002). Concurrent engineering

process involves various organization units of marketing, product engineering,

process engineering, manufacturing planning, material and inventory handling. While

concurrent process becomes organizational routines as procedural memories shared

norms and value within various units, the declarative memories, i.e. knowledge of

customers’ requirement, commercial specification, product specification, production


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capability, bill of materials, and scheduling rules, are dispersed and specialized within

various units and individuals. Each unit specialize distinct domain of declarative

memory.

THE TRANSACTIVE MEMORY SYSTEM

In example of concurrent engineering process, each organizational unit self

doesn’t own all knowledge. They rely on other unit’s knowledge and interact with

each other to complete whole process successfully. For example, it’s not necessary for

department of product engineer to gather consumer requirement. They know

marketing department can do it and store such knowledge. They interact with

marketing unit and combine consumer requirement with production capacity to design

product specification. We use metaphor of transactive memory system (TMS) to refer

to such mechanism.

TMS’s construct, developed by Wegner and his colleagues (Wegner, 1986;

Wegner, Erber, and Raymond, 1991), is a cooperative division of labor for learning,

remembering, and communicating knowledge needed to complete a joint task

(Hollingshead, 1998; Wegner, 1995). This system combines the knowledge possessed

by individual group members with a shared awareness of who knows what. So, when

group members need information, but cannot remember it on their own, or doubt that

their own memories are accurate, they can turn to one another for help. A transactive


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memory system can thus provide the group’s members with more and better

information than any of them could remember alone (Argote and Moreland, 2000).

A series of laboratory researches (Hollingshead, 1998; Moreland, 1999; Liang,

Moreland, and Argote, 1995; Moreland, Argote, Krishnan, 1996) looked for group

dynamics that were suggestive of the existence of a TMS. These dynamics included:

specialization of tasks, task coordination activities, and task credibility actions

(evidence that group members trusted each other’s expertise) (Austin, 2003). Not only

laboratory research, but also field studies were conducted to measure dimensions of

TMS (Lewis, 2003; Austin, 2003).

Dimensions of TMS

According to Wegner and his colleague’s definition, transactive memory includes

two parts: (1) a combination of the knowledge possessed by each individual, and (2) a

collective awareness of who knows what (Wegner, 1986; Wegner et al., 1991) or

interpersonal awareness of others’ knowledge (Austin, 2003). Lewis’s field study

suggested a 15-item self-report scale, developed by a series of laboratory researches,

designed to measure dimensions of TMS, including specialization, credibility, and

coordination. Lewis (2003) elaborated them as follows:

Transactive memory exists when a person understands what another person knows, and uses that

understanding to develop different but complementary knowledge…. Specialized knowledge alone is


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not sufficient for defining TMS because members may develop distinctly different knowledge for other

reasons. Members will only develop different knowledge if they can rely on others to remember other

task-critical information. Absent this, members would likely develop overlapping or redundant

knowledge instead of differentiated expertise. In addition to members’ specialization and credibility,

TMS includes the process members use to combine their transactive knowledge (Wegner, 1987). The

three proposed manifestations do seem to tap the essence of the TMS construct, implying that

inferences about TMS can be made from evidence of specialization, credibility, and coordination (Lewis,

2003; 590).

Building upon Wegner’s definition and the previous conceptualizations of

transactive memory, Anstin (2003) conceptualized transactive memory as a

combination of four dimensions. These dimensions are group knowledge stock

(combination of individual knowledge), consensus about knowledge sources,

specialization of expertise, and accuracy.

Drawing from the above theory development and contributions, we suggest four

dimensions of TMS, including specialization, consensus, accuracy, and credibility. In

a transactive memory system, members who have special skills will be accordingly

assigned to particular tasks. When TMS relies on their profession, they become

experts, and specialized. Rather than collective or redundant specialization, members

have various knowledge domains. Secondly, consensus of TMS means shared


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understanding about the distribution of knowledge within a group, organization, or

knowledge network, which is similar to the mental model. Transactive consensus is a

team mental model of the distribution of knowledge (Austin, 2003). Shared

understanding may become group thinking. In order to coordinate and combine

distributed/various domains of knowledge, it’s necessary that TMS members display

accuracy, which involves the extent to which individuals identified by others in the

TMS, as possessing particular knowledge actually posses that knowledge (Austin,

2003). Finally, credibility is to extend which TMS members have faith in other people,

trust other people’s knowledge. Thereby, they are comfortable accepting procedure.

CONCEPTUAL FRAMEWORK

Figure 1 shows the conceptual framework of relationship between constructs of

organizational memory and dimensions of organizational capability. After reviewing

the nature of various forms of organizational memory, we infer the propositions

regarding the conceptual framework.

------------------------------- Insert figure 1 about here -------------------------------

Procedural memory and organizational capability

Procedural memory refers to memory on “how things are done” or “things you can

do”. It means process memory or memory underlying skills needed for performing


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tasks. It becomes embodied in organizational routines, standard operating procedures.

Therefore, procedural memory has close links to notions of individual skills, habits

and organizational routines (Nelson and Winter, 1982).

The nature of routines, being both automatic and inarticulate (Cohen and

Bacdayan, 1994; Kyriakopolos and Ruyter, 2004), are both good and ill. The

repetitive patterns of routines enhance efficiency by decreasing the effort spent on

decision-making and implementation. Thus, the automatic routines facilitate

reliability and speed. However, more institutionalized routines become resistant to

change, and hamper the absorption of novel information that is a critical component

of capability. So, routines are a two-sided sword. On the positive side, they speed up

execution, reduce costs, and ensure reliable organizational action. On the other hand,

procedural memories or routines act as perceptual filters that may hinder meeting

turbulent changes in environment. In this way, the procedural memory will hurt

organizational capability; the deeper that the practices and routines of procedural

memory become institutionalized, the greater the possibilities of core rigidity will be.

The phenomenon becomes an obstacle for organization’s ability to adapt to changes in

its environment.

According to the rationales explained above, the influence of procedural memory

on the components of capability (speed, and novelty) will be presented as follows.


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Firstly, within a hyper-competitive environment, there are radical changes and

their attendant uncertainty. Organizational managers can search, filter more

information for their decision-making, but owing to bounded rationality (human

behavior is intended to be rational, but bounded by limited cognitive capability),

managers can not obtain all of the necessary information. Thereby, satisficing

solutions will substitute for the optimal ones (Simon, 1947). Routines provide another

solution; they can satisfy the criteria of decision-making, and reduce the complexity

of the information searching process.

Due to the repetitive patterns of routines, procedural memories enhance the

decision-making of capability-based actions. The institutionalized practice or

innovation process will reduce the amount of information needed. The lower the cost,

the more efficiently decision-making facilitates the speed of capability. Therefore, the

paper proposes the following:

Proposition 1: The procedural memory will promote the speed of

organizational capability: the greater the level of procedural memory,

the higher the speed of the organizational capability.

The procedural memory, i.e. standard operation procedures, provides structures

or platforms for organization members to exchange innovative information and

knowledge. Knowledge-sharing, facilitated via communication channels of


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procedural memory, will also increase the information level of capability actions. But

fine-tuned routines and processes can become obstacles for knowledge searching and

reception. When high levels of procedural memory can provide satisfactory solutions,

external knowledge will not be needed. The problem of local learning occurs, and

exploitation drives out exploration. Accruing novel knowledge is inhibited. Core

capability becomes core rigidity or competence trap.

Becker (2004) also indicated that routines (due to the interactions they are

composed of) enable feedback, but the feedback is ignored. That is, procedural

memories, acting as perceptual filters, filters out novel information and knowledge.

Therefore, the proposition of novelty is proposed.

Proposition 2: The procedural memory will decelerate the novelty of

organizational capability: the greater the level of procedural memory,

the less novelty the organizational capability will be.

Declarative memory and organizational capability

Unlike the repeated action and core rigidity of procedural memories, the

declarative memory tells another story. Declarative memory refers to the memory of

concepts, facts, or events (Anderson, 1983; Cohen, 1991), including know-what,

know-why or know-when (Huber, 1991; Moorman and Miner, 1997; 1998). It can be

used in a variety of applications (Singley and Anderson, 1989 cited by Moorman and


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Miner, 1998) or more general.

Declarative memory can be applied to numerous situations in countless ways,

thereby encouraging greater novelty (Moorman and Miner, 1998). Kyriakpopoulos

and Ruyter (2004) also indicated that the conscious application of declarative memory

increases chance of using prior knowledge in a less standard fashion, using general

principles to find innovative solutions. In the example of concurrent engineering,

memories of customers’ preference can be applied to numerous situations. The higher

level of memories of customers’ preference, the higher level of novelty will be.

Proposition 3: The declarative memory will promote novelty of

organizational capability: the greater the level of declarative memory,

the higher the novelty of the organizational capability.

Although declarative memory can enhance novel capability, the speed of

capability actions may be impeded for information-searching problems. Because

declarative knowledge is not committed to a particular issue, vast amounts of it are

potentially relevant in any problem-solving situation. And this leads to serious

problems for information searching (Singley and Anderson, 1989, cited by Moorman

and Miner, 1998). In the example of concurrent engineering process, it’s difficult to

detect actual preference of consumers. Product specification is not committed to a

particular consumer requirement, but various matches. Other thing being equal,


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bundle of commercial specification, product specification resided in various files, or

information system, causes information searching ineffectively and inefficiently. Not

only amount of them decrease speed, the accuracy of “where are they”, caused by

dispersed nature of declarative memory, also slow down speed. Therefore, the paper

proposes the following:

Proposition 4: The declarative memory will influence the speed of

organizational capability: the greater the level of declarative

memory, the slower the speed of the organizational capability.

Moderating roles of TMS

Effect on relationship between procedural memory and capability

After capability accumulation, core rigidity arises from organizational local

learning and knowledge filtering as mentioned above. Members of TMS’s who are

more specialized and who possess various domains of dispersed knowledge, provide

more novel information and knowledge to reduce local learning. On the one hand,

specialization characteristic of transactive memory system provides novel knowledge.

On the other hand, it also reduces the effect of core rigidity on local learning. But

various domain of knowledge available is not sufficient; members of teams or units of

organization must trust the content of knowledge is valuable, and the reliability of

knowledge source.


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With greater credibility among members of TMS’s, they are comfortable and

confident relying on the information that other members brought to the decision

(Lewis, 2003). Consensus and accuracy characteristics also enhance combination of

dispersed knowledge. Therefore, the paper proposes the following.

Proposition 5: The greater the effectiveness of TMS, the lower the

likelihood that procedural memory will hamper the novelty of

capability.

For speed of decision making, procedural memory economizes

cognitive resource. TMS, a cooperative division of labor, provides reliable

and specific alternatives, which can also facilitate decision making.

Therefore, the paper proposes the following.

Proposition 6: The greater the effectiveness of TMS, the higher the

likelihood that procedural memory will promote the speed of

capability.

Effect on relationship between declarative memory and capability

We argue that information-searching problems reduce the speed of

decision-making. There are two dimensions of the information/knowledge-searching

problem: (1)quantity of declarative memory, and (2)the extent of accuracy concerning

where the knowledge is dispersed. The greater the understanding of the dispersion of


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knowledge (consensus), the more easily the quantity of memory will be categorized.

The greater the extent of identifying locations of memory (accuracy), the less the time

required for knowledge searching. The extent of knowledge searching problem will be

reduced. Therefore, we propose the following.

Proposition 7: The greater the effectiveness of TMS, the lower the

likelihood that declarative memory will hamper the speed of capability.

When declarative memory provides dispersed knowledge, TMS facilitates

knowledge combination and enhance novelty of existing capability. Therefore,

we propose the following.

Proposition 8: The greater the effectiveness of TMS, the higher the

likelihood that declarative memory will promote the novelty of capability.

DISSCUSSION

We offer conceptual framework, which adopts procedural (know-how) and

declarative memory (know what) to explain the phenomenon of core capability and

rigidity, and to presents transactive memory (know who is good at what) as a

mechanism to promote endogenous change by facilitating knowledge combination.

The conceptual framework indicates that procedural memory can speed

organizational capability (P1). Although procedural memory provides structure for

novel innovation, however, higher level of knowledge, evolved and institutionalized


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routines, make procedural memory become rigidity (P2). In P3, P4, declarative

memory tells different stories, but similar inference. High level of declarative memory

provides novel sources of capability, but leave searching problem that lower down

speed of capability. In sum, the above propositions infer the constructs and rationales,

which cause effects of organizational memories on organizational capabilities.

Secondly, the framework proposes moderating effect of TMS. Other than know

how (procedural memory), know what and know why (declarative memory),

transactive memory system, which refers to who know where, provides specialization,

credibility, consensus, and accuracy to enact and facilitate knowledge learning and

transferring. Specialization of TMS provides various domain of knowledge, and

credibility ensures motivation and confidence of sender and receiver of knowledge

transfer. Both of them increase effectiveness of knowledge learning. For the nature of

knowledge dispersion, consensus and accuracy of TMS decrease information-

searching problem and increase the speed of knowledge learning and transferring. The

propositions (P5, P7) may explain a part of reason why is non-significance of

information flows which test in Kyriakopoulos and Ruyter, 2004). Organization can

scan environment turbulences and benefit from novel information flow. But

organization can’t absorb novel information or knowledge with existing memory,

until applicable mechanisms. TMS can act as interactive learning mechanism that


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promotes endogenous change to prevent core capability from becoming rigidity.

Theoretical implication of Evolution of organizational capability

According the conceptual framework, we propose two theoretical implications:

the evolution of organizational capabilities and the roles of procedural, declarative

memory and transactive memory system.

Drawing inspiration from Penrose (1959)’s influential book on “The theory of the

growth of the firm”, Wenerfelt (1984), Barney (1991), and many scholars made great

contribution to competence perspective (Williamson, 1999). Idiosyncratic resources

contribute to firms’ sustainable competitive advantage. When firms’ internal factors

are the focus (Gabriel et al, 2003; Powell, 1996; Rumelt, 1991; Barney, 1991;

Wernerfelt, 1984), slack resources facilitate firm’s endogenous growth (Penrose,

1959). Firms with coherence outperform less coherent firms (Teece, Rumelt, Dosi,

and Winter, 1994). As capability, being path dependence and embedded within

organizational routines (Nelson and Winter, 1982), becomes competence trap

(Lenard-Barton, 1992), dynamic capability, collectively set of routines (Winter, 2000,

2003), focus on balance between capability exploitation and exploration (Christensen

and Foss, 1997; Ghoshal, Hahn and Moran, 2000; March, 1991). This paper’s

contribution to the evolution of organizational capabilities details as followed:

Why core capability becomes core rigidity?


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In trajectory of capability evolution, slack resources (Penrose, 1959) and genies

of routines (Nelson and Winter, 1982) play critical role. The concept of coherence is

path dependent and local learning, which is embedded in tacit routines (Teece et al.,

1994). Firms with coherence will outperform less coherent firms. But accumulation

of slack resources and nature of routines only tell partial story, which core capability

becomes core rigidity. For capability, result of organizational learning (Huber, 1991),

not only resided in routines (procedural memory), but also embodied within

declarative memory. While stability-inertia of routines, that economizes

decision-making, prevails, reversed-U shape between slack resources and innovation

emerges. Declarative memories, while decrease speed, bring novel knowledge,

which is source of organizational dynamic capability.

Drawing from Nelson and Winter (1982)’s concept, routines as organizational

memory, we offer different effects of distinctive form of organizational memory on

capability evolution. That is, organizational capabilities are not only embodied

within routines. Routines can be as organizational memory, but only one of

organizational memory types. In the process of organization capability evolution,

different level and forms of organization memory produce different effects. When

higher level of distributed procedural memory may push routines to be rigidity,

dispersed declarative memory pulls another direction.


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This paper suggests distinctive effects of different forms of organization

memory on organizational capability. The relative strength between procedural and

declarative memories needs future research work.

What conditions promote endogenous change?

Coherent firms outperform less coherent firms, but coherent firms may become

inertia, which inhibit firms’ continuous growth. Organizational scholars suggest

dynamic capability to balance of exploitation and exploration (Christen and Foss,

1997; Ghoshal et al., 2000; March, 1991). Not only endogenous slack resources,

accounting for organizational capability accumulation, but also novel knowledge,

stored in external storage bin, contribute firm’s growth. The above statement argues

that turbulence of external environment promote organizational change.

But under environment complexity, organizations have different choices.

Organizational routines may be still habitual regardless of environmental turbulence.

A few organizations may modify routines to absorptive environmental complexity.

Some organizations will select robust transformation to reduce complexity

(Lengnick-Hall and Beck, 2005). Feldman and Pentland (2003) propose agency

perspective to account for the choice. But the question, what conditions promote

endogenous change, still need future research. This paper’s framework suggests TMS

as the facilitator, in which mediates novel and existing knowledge.


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CONCLUSION

Organizational memory perspective provides insight to expand existing

knowledge of core capability and core rigidity. For the conceptual paper, we propose

conceptual framework to evaluate rationales and theoretical implication. When

opposite effects of novelty and speed of organizational capability, the relative

strength between procedural and declarative memories needs future research work.

In process of capability accumulation, adaptive fit or robust transformation, the

relations among “Know-how (procedural memory), know-what (declarative

memory), and know-where (Transactive memory) remain future direction. Finally,

empirical research is needed in the future.

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Figure 1: Conceptual framework

Procedural memory Speed

Novelty Declarative memory

Transactive memory system

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