Codification, Abstraction, and Firm Differences: A Cognitive Information‐based Perspective
Codification, Abstraction, and Firm Differences: A Cognitive Information‐based Perspective
The resource-based view shares with population ecology, organizational systematics, organizational cladistics, and institutional theory a concern with why firms differ and with what keeps them different. These two questions only have meaning if — as has been the case in the neoclassical theory of the firm — similarities between firms are taken as the default assumption. This chapter distinguishes between ontological heterogeneity — differences in the world — and epistemic heterogeneity — differences in the way that the world is construed. Focusing on the latter, it puts forward an argument for taking epistemic heterogeneity between firms as the default assumption. It starts with a general analysis of how living systems make sense of the world. It then goes on to identify the cognitive activities of codification and abstraction as key sources of epistemic heterogeneity. The findings are applied to those systems called firms where a dominant logic allows epistemic heterogeneity to persist. In some case, this leads to competitive advantage, in others to a debilitating inertia. The implications for a knowledge-based theory of the firm are briefly explored.
Keywords: neoclassical theory, firm heterogeneity, resource-based view, information asymmetry, knowledge-based theory
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