Learning and adaptation in decentralised business networks

In this paper we address two problems related to what can be claimed about the powers of decentralised business networks. The first concerns the role of tacit knowledge and proximity in securing competitive advantage. Recentl y, in a strand of the literature concerned with the differences between tac it and codified knowledge, it has begun to be claimed that the superiority of relational and geographic proximity (for example, intense face-to-face c ontact, local industrial clusters, and districts) over formally constituted and distantiated networks of knowledge and learning. In the first part of the paper we dissent from this interpretation by questioning the separabili ty of the two forms of knowledge and by suggesting that business networks l argely dependent on local tacit knowledge and incremental learning may prov e to be inadaptable in the face of radical shifts in markets and technologi es. The second problem regards the relationship between knowledge and the o ganisational structure of firms and business networks. In the second half o f the paper we focus on the challenge facing competence-based large firms w hich draw on localised sources of knowledge to argue that competitive advan tage is crucially influenced by the ability of firms to mobilise and integr ate diversified forms of knowledge (tacit and codified), rather than to spe cialise in one form. We also argue that the imperative to sustain continuou s learning is adding a new architecture of organisation and governance to t hat traditionally associated with the reduction of transaction costs, rathe r than replacing it, as is implied in the new literature which privileges t he firm as a nexus of competencies. Thus, a dual structure seems to be emer ging, which is composed of a decentralised network of reflexive and interac tive centres to advance core competencies and learning and overlaid upon a more traditional hierarchical structure for the regulation of noncore activ ities.