Knowledge-based theory of the firm

The knowledge-based theory of the firm, or knowledge-based view (KBV), considers knowledge as an essentially important, scarce, and valuable resource in a firm. According to the knowledge-based theory of the firm, the possession of knowledge-based resources, known as intellectual capital, is essential in dynamic business environments. These resources contribute to lower costs, foster innovation and creativity, improve efficiencies, and deliver customer benefits. Collectively, they are considered key drivers of overall organizational performance. The proponents of the theory argue, that because knowledge-based resources are usually complex and difficult to imitate, different sources of knowledge and intellectual capital can be seen as the main sources for a sustainable competitive advantage.

This knowledge is embedded and carried through multiple entities including organizational culture and identity, policies, routines, documents, systems, and employees. Originating from the strategic management literature, this perspective builds upon and extends the resource-based view of the firm (RBV) initially promoted by Penrose (1959) and later expanded by others (Wernerfelt 1984, Barney 1991, Conner 1991).

Although the resource-based view of the firm recognizes the important role of knowledge in firms that achieve a competitive advantage, proponents of the knowledge-based view argue that the resource-based perspective does not go far enough. Specifically, the RBV treats knowledge as a generic resource, rather than having special characteristics. It therefore does not distinguish between different types of knowledge-based capabilities. Information technologies can play an important role in the knowledge-based view of the firm in that information systems can be used to synthesize, enhance, and expedite large-scale intra- and inter-firm knowledge management.

Whether or not the Knowledge-based theory of the firm actually constitutes a theory has been the subject of considerable debate. According to one notable proponent of the knowledge-based view of the firm (KBV), "The emerging knowledge-based view of the firm is not a theory of the firm in any formal sense". The research on the knowledge-based view of the firm is a sub-discourse on resources and capabilities, which is part of the broader research on strategy