Learning in Firms: Knowledge-Based and Property Rights Perspectives

Proponents of the knowledge-based approach to the firm argue that organizational economics put all the burden on the allocation of incentives and property rights in the explanation of organizational phenomena, and neglects firm-specific knowledge and processes of learning. We argue that there is no inherent reason why organizational economics should be cut off from treating learning and exploring its organizational implications. More specifically, we demonstrate that it is possible to adopt an approach to learning that is consistent with rational choice methodology and stresses economizing, puts the emphasis on learning as a means of realizing efficiencies, is micro-analytic, and contains implications for economic organization. We concentrate on the role of experimentation as a means of finding solutions to coordination problems in complex production systems (e.g., finding the optimal sequence of activities) and the transaction costs learning-by-experimenting may create. Such transaction costs help determine the existence, boundaries and internal organization of the firm, and has implications for the understanding of competitive advantage.