Designing Management Control Systems to Foster Knowledge Transfer in Knowledge-Intensive Firms: A Network-Based Approach

Abstract

Research on management control has emphasised the relevance of controls for knowledge integration on a project-by-project basis. This work contributes to this field by proposing a framework to explain how management control systems foster knowledge transfer between organisational units in knowledge-intensive firms. By combining network theory and knowledge network research, this study suggests that the design of management control systems should consider various forms of relationships between individuals (strong/weak, direct/indirect) that these systems activate and that are necessary to transfer various forms of knowledge (process, outcome, technology or opportunities) characterised by different levels of causal ambiguity and relatedness. An in-depth empirical analysis of a software firm and three of its projects shows that management controls may act as important mechanisms of knowledge circulation and that some principles reinforce this function. In particular, to achieve organisational knowledge transfer, enforceability of manuals and procedures, scalability of reviews and decisions, mobility induction of individuals, and multiplicity of roles and accountabilities are indicated as desirable design properties of control systems in knowledge-intensive firms.

Acknowledgements

The author is grateful to the editor, Salvador Carmona, and to two anonymous referees for their helpful comments and suggestions received during the review process. The author thanks Ariela Caglio and Antonio Davila for helpful discussions. The author would like also to express invaluable gratitude to Professor Anthony Hopwood, with whom he originally exchanged ideas in this area of research.

Notes

For the purpose of this study, consistent with Morris and Empson (1998) and Ditillo (2004), we maintain that KIFs are organisations that trade immaterial responses to customer requirements because of intellectual rather than physical activities and of ideas or symbols development. They use their knowledge to develop a differentiated range of innovative solutions to address customers' varied problems (Grant, 1996a, 1996b; Kusunoki et al., 1998; Ravasi and Verona, 2001).

In this work, the words ‘knowledge transfer’, ‘knowledge sharing’ and ‘knowledge exchange’ are used interchangeably because authors refer to ‘knowledge transfer’ while including ‘knowledge sharing’ and/or ‘knowledge exchange’ in their discussion, or consider ‘knowledge transfer’ as the final result of the ‘knowledge sharing’ process (Foss et al., 2010). Knowledge sharing can be defined as the provision or receipt of task information, knowledge repositories, know-how and feedback concerning a product, a service or a process (Hansen, 1999; Foss et al., 2009).

The reason for adopting this classification of control systems is related to the fact that being concentrated on the object of control (results, action and personnel) allows us to reflect upon the knowledge embodied in these objects (Grant, 1996a, 1996b) and in this way to create clearer connections among knowledge, its characteristics and management controls.

For confidentiality reasons this is a pseudonym.

Gupta and Govindarajan (2000) have described this concept and its relevance.

Additional information

Notes on contributors

Angelo Ditillo

Paper accepted by Salvador Carmona