Technovation 25 (2005) 11291140 www.elsevier.

com/locate/technovation

Learning how to grow: resolving the crisis of knowing

Allan Macpherson*
HRM and OB Group, The Business School, Manchester Metropolitan University, Aytoun Street, Manchester M1 3GH, UK

Abstract Theories of rm growth suggest that managers must resolve sequential crises at key stages. Explicit in these models is the accumulation of resources, including knowledge, which must be applied and (re)congured in order to create new structures and systems in order to overcome the crises at each stage. What these models do not provide is an understanding of how, or why, particular knowledge resources are considered salient, how knowledge is applied, and how changes to systems of application are caused. By re-conceptualizing knowledge not as a resource, but as an activity, this provides an alternative perspective on growth models. This research, conducted in three case study SMEs, and using Activity Theory as a methodological framework, examines how the case companies managed transition and innovation in organizational systems in order to resolve specic crises and facilitate growth. The ndings indicate that rather than sequential crises, these rms were dealing with a number of crises concurrently, and solutions were signicantly dependent on existing experience and systems of organising, managers perception of the crises, and access to relevant knowledge. In these rms, growth was dependent on idiosyncratic solutions rather than on any prescriptive approach suggested by traditional growth models. q 2004 Elsevier Ltd. All rights reserved.
Keywords: Firm growth; Knowledge; Knowing; Innovation; Small rms; Activity theory

1. Introduction The topic of growth has been a persistent theme in small rm and wider organizational literature. Typically, life-cycle models have been particularly inuential such as those by Greiner (1972, 1998), Churchill and Lewis (1983), and Scott and Bruce (1987) who all propose ve stages, or phases of growth. Notwithstanding the variation in the choice of analytical constructs, and use of terminology, these models focus on accumulation of organizational resources and capabilities in response to crises as the rm grows over time. Several other authors have also made the link between organizational resources and a rms growth or innovation. For example, Penrose (1959) suggests rm growth needs managerial and entrepreneurial resources applied to create administrative systems and productive processes that exploit available opportunities. This suggests that managerial competences and abilities are paramount. Consequently, there is an increasing emphasis on issues of organizational knowledge and knowledge management within management research, and on systems and structures that facilitate knowledge acquisition. If a rms capabilities to congure and recongure knowledge provide it with opportunities to exploit
* Tel.: 44-161-247-3971; fax: 44-161-247-6304. E-mail address: a.macpherson@mmu.ac.uk (A. Macpherson). 0166-4972/$ - see front matter q 2004 Elsevier Ltd. All rights reserved. doi:10.1016/j.technovation.2004.04.002

competitive advantage (Teece et al., 1997), knowledge can be considered both a resource and an activity. Knowledge-based theories of the rm tend to concentrate on knowledge as an economic resource (for example, Grant, 1996). Research from this perspective attempts to theorize how knowledge can be created, integrated and transferred (for example, Nonaka and Takeuchi, 1995; Brusoni and Prencipe, 2001), and empirical research attempts to measure rates and directions of knowledge transfer (Schulz, 2001; Yli-Renko et al., 2001; Cohen and Levinthal, 1990). However, a growing number of organizational researchers argue that it is crucial to consider how knowledge is applied and how changes to systems of application are caused (Swan and Scarbrough, 2001; Blackler et al., 1993). This stream of research proposes that systems of knowing structure activity in organizations, and that they are dependent on recipes and routines of activity that legitimate what is appropriate in particular contexts (Winter, 1996; Levitt and March, 1996). To recongure systems, or competences, requires a re-conceptualization and alternative enactment of appropriate organizational activity (Weick, 1995). Consequently, the aim of this research is to examine how managers conceptions of particular crises were translated into systems and structures within organizations to facilitate growth. These issues are explored through three case studies conducted on small manufacturing companies in the North

1130

A. Macpherson / Technovation 25 (2005) 11291140

West of England. Small and medium sized enterprises (SMEs) provide a discrete and coherent location of managerial learning and change that can be tracked over time. However, they are an often ignored domain within organizational theory, despite being a particularly suitable site for managerial research (Laukkanen, 1998), and research design in the SME sector needs more robust theoretical and methodological approaches evident in other social science disciplines (Curran and Blackburn, 2001). This paper rst examines the importance of knowledge resources within popular growth models, before exploring the nature of organizational knowledge in more depth. Using an activity theory approach (Engestrom, 2000a; Blackler, 1993), the data are then presented in order to examine how particular contexts shaped the nature of growth within the case study companies.

2. Knowledge resources and growth Penrose (1959) argues that the productive activities within organizations are developed and co-ordinated through administrative procedures put in place by management. This design is shaped and inuenced by managerial reactions to past priorities in an attempt to create a rational organization. Consequently, productive activities are governed by what entrepreneurs envisage as the possibilities for economic advantage, given the limitations of known resources and abilities within the rm. Penrose is quite clear, then, that managerial and entrepreneurial resources, their human capital (in the form of experience, knowledge and competences), are the engine of growth. Greiner (1972, 1998), on the other hand, emphasises organizational systems, but also notes that managers must apply themselves to construct routines and processes that t with a particular phase of growth. He argues that the organizational systems, which support evolution and growth, will eventually limit expansion. In order to continue growing, revolution to organizational systems has to occur. Thus, each phase is both an effect of the previous phase and a cause for the next phase (Greiner 1972, p. 41, original italics). Greiners model implies that managerial competences, in the form of applied knowledge, will be essential to re-design and innovate routines and processes of organizing. However, while he suggests that crises of organizing stimulate change, he is essentially silent regarding the mechanisms through which new systems are judged to be important and are implemented in order to achieve revolution. In Churchill and Lewiss (1983) model, similar to Penroses theory, there is a recognition that physical, nancial and human resources are required for success, but more attention is given to how, during particular periods of growth, resource saliencies change. For example, they note that issues of people, planning and systems gradually increase in importance as the company progresses from

slow initial growth (Churchill and Lewis, 1983, p. 42). In addition, similar to both Greiners and Penroses arguments, there is a recognition that path-dependent experience limits the repertoire of managerial and entrepreneurial resources available and can create barriers for change: [h]olding onto old strategies and old ways ill serves a company that is entering the growth stages and can even be fatal (Churchill and Lewis, 1983, p. 44 48). Again, however, there is a lack of attention to the difcult issue of how resource saliency is judged in order that new systems can be incorporated. Investigating the issue of resource saliency further, Lichtenstein and Brush (2001) conducted a study of three growing high-technology rms. They used Pfeffer and Salanciks (1978) denition of resource saliency to operationalize their research. Resources were considered particularly salient if they demonstrated high magnitude (being available from one supplier) and high criticality (they were considered an essential resource for growth). Lichtenstein and Brush (2001) contrast their own ndings with the conventional growth literature: [T]here is a distinction between the relevance of resources as theorised from earlier studies, and the salience of specic resources in real time. Growth typologies for small and new businesses emphasize tangible resources including capital, physical, technological and organizational systems, but these three rms seemed more concerned with intangible or soft resources (p. 51). What Lichtenstein and Brush conclude is that while organizational systems and routines are important for incremental change, they may become redundant during periods of transformative action, although new routines are selected and embedded over time. While this nding is still similar to the models and theories above, what is different is that Lichtenstein and Brush specically note the importance of business relationships and alliances that help owner-managers strengthen their business by providing access to scarce soft resources, including skills, information and knowledge that do not exist within the rm. In addition, their measures of saliency rely on managerial perception, which accords with Penroses (1959) theory that growth is dependent on envisioning new opportunities to restructure existing practices using available resources differently. While restructuring may be an intentionally rational act, any decisions are likely to rely on subjective judgement and be limited by bounded rationality (March and Simon, 1958). Ultimately, the design of organizational structures, systems and processes is an essentially political process in which constraints and opportunities are functions of the power exercised by decision makers (Child, 1972, p. 2). Innovation for organizational growth, then, requires access to salient resources at particular times, and the vision, capability and power to congure those resources

A. Macpherson / Technovation 25 (2005) 11291140

1131

appropriately. Since rms cannot evolve without acquiring and developing additional knowledge resources (Tsoukas, 1996; Chandler and Hanks, 1998), their growth is partly dependent on managers abilities to draw on public knowledge through the linkages they have with appropriate social and business networks. As such, learning to grow is situated in the day-to-day activities in which managers engage, and in the specic relationships that circumscribe the access to relevant knowledge resources. The entrepreneurial function is institutionally embedded in organizational systems that support the managerial and entrepreneurial ability to network and make connections (Cantwell, 2002). Moreover, the ability to identify and use new knowledge effectively is the key to organizational learning and the creation of relevant core capabilities (Powell et al., 1996). The entrepreneurs perception of the environment is fundamental to the context of any action within the rm. Understanding the source of ideas about what the rm can and cannot dothe subjective productive opportunity of the rmrequires an understanding of the entrepreneurs knowledge resources (Penrose, 1959, p. 42), and how perception is (re)shaped during periods of transformation.

3. Knowledge, knowing and enacting The review above suggests that knowledge is embedded in organizations through patterns of activity. This is similar to Nelson and Winters (1982) concept of organizational routines, where the collective memory is embedded in the day-to-day activities of those in organizations. Routines have historicity and create path dependencies which, in turn, limit conceptions of organizing to industry recipes that may not be transferable due to their context specicity (Spender, 1989). Such activities create asset positions from which economic rents ow depending on their inimitability and the ability of managers to recongure, combine or integrate knowledge (Teece et al., 1997; DeBoer et al., 1999). A rms competitive advantage is thus dependent on its dynamic capabilities of knowledge conguration, and the technical aspects of production-dened specialized knowledge domains that are the source of a rms core competences (Grant, 1996). However, there are opportunities for managers to specify routines for knowledge integration and the division of labour. Organizational design involves attention to structures and systems that allow integration and knowledge sharing within communities of practice (Lave and Wenger, 1991). The primary role of managers, Grant argues, is to devise and establish routines that achieve this knowledge integration. Consequently, routines and recipes are not only a potential source of organizational stability, but they are also a potential source of adaptability (Feldman and Rafaeli, 2002).

It is not surprising, therefore, that organization knowledge research has predominantly focused on issues of structure, or on measuring knowledge capacity (Spender and Grant, 1996). Research conducted by Schulz (2001), for example, attempted to measure knowledge ows within, and across, organizational boundaries. However, as he acknowledges, his research could not identify why, or how, certain knowledge was considered relevant, and how or why that knowledge was integrated. Such research generally ignores the active process through which managers create or innovate capacity (Swan and Scarbrough, 2001). There is an implied acknowledgement in most of these contributions that knowledge sharing, while signicantly dependent on procedures and processes, is also dependent on strategies of personal interaction to address issues of uncertainty and integration (Becker, 2001). Relationships are thus a signicant factor in knowledge ows (Bartlett and Ghoshal, 1989). They provide opportunities to build shared frameworks of understanding (Becker, 2001). However, tacit knowledge is difcult, if not impossible, to articulate (Polanyi, 1966) and its transfer is reliant on a deep understanding of its context and practice. This knowledge stickiness (Gherardi, 2000; Inkpen, 2000) makes depths of relationships and frequency of interactions important for knowledge acquisition (Cohen and Levinthal, 1990). Communication systemsthe language and mediating artefacts through which ideas are sharedare fundamental to all relationships. It is through these systems of meaning that managers articulate their knowledge and attempt to actively shape the systems of managing. From this perspective, knowledge, or knowing, is construed as an activity conducted in a social system through a process of interpretation and communication, and key organizational actors must have mechanisms to interpret ambiguous events and to provide meaning and direction to participants (Daft and Weick, 1984, p. 293). By envisaging managers as active agents within a social milieu, and not as objective practitioners of a scientic discipline, the investigation of management knowledge becomes focused around the act of knowledge creation through the communication and acceptance of new ideas. Knowledge management, or knowing, relies on the use of language (in all its forms) to build collective understandings of legitimate actions despite the many possibilities available. In this sense, then, knowledge creation is a shared sense making activity (Weick, 1995), but one where the manager attempts to convince others through negotiation or persuasionby an intentional presentation of his or her judgement about a specic state of affairs within a given context. When more varied interpretations are available, then it is more likely that there is potential to increase the range of available behaviours (Huber, 1991). It is within this context of negotiation and discussion that managers have the opportunity to shape outcomes through their powers of persuasion; knowledge work and knowledge management are ambiguous and rhetorical processes (Alvesson, 1993).

1132

A. Macpherson / Technovation 25 (2005) 11291140

Knowledge creation occurs through an interaction of individual and collective experiences in the social and physical world; expansive learning occurs from questioning standard practice and convincing others of the validity of proposed solutions to perceived problems (Engestrom, 2000a). If organizational structures are enacted by managerial activity (Giddens, 1984) during negotiated sense making (Weick, 1995), then understanding organizational growth requires a focus on how knowledge is both created and institutionalised. Research must be cognizant of how organizations identify and negotiate uncertainty and innovate to establish new ways of knowing (Blackler et al., 1993), thereby contributing to success, or growth. This reconceptualization of knowledge provides an opportunity to revisit our understanding of the role of knowledge within traditional growth models.

4. Researching knowing This research examines three manufacturing SMEs to establish how knowledge, or knowing, contributes to organizational growth. In doing so, analysis focuses on how managers interpret or map their reality through the activity of knowing. These issues are explored through an activity theory approach (Engestrom, 2000a; Blackler, 1995), using the analysis of critical incidents that inuence success within the case companies. Activity theory examines the interaction and enactment through which knowledge is negotiated, created and practised. This results in new conceptions of activity (Blackler, 1995) that are the basis for change, growth or survival. From this theoretical perspective, knowledge is seen as sustaining structures

and routines that guide activity, and the theory incorporates knowledge work as a contested activity involving interaction and dispute resulting in the reconguration of existing knowledge, and therefore structures and systems. Engestrom (2000a,b, 2001), Jarzabkowski (2003), Blackler (1993, 1995), Blackler et al. (2000) provide theoretical discussion and empirical examples of this approach. A generic activity system is included, Fig. 1, and the wavy lines indicate the potential conicts (or crises) within the activity system. It is through the resolutions of these that potential exists for expansive learning (Engestrom, 1990). Understanding SMEs activity systems requires consideration how SME owner-managers and directors conceptualize particular activities, and a review of actions they took to resolve challenges that they face. Understanding managers realities involves surfacing deep-seated values and assumptions that managers use to make sense of their contexts. Thus, in keeping with this aim, and the constructivist perspective, qualitative methods are appropriate to gather the empirical material that forms the basis of the research. Semi-structured interviews provide the main source of data, and focused on individual and group decisions related to specic learning episodes. The term episode conveys the fact that the managers revelations were in response to a series of related activities and decisions unfolding over time (Sole and Edmonson, 2002, p. S22). By investigating responses to critical incidents (start-up; nancial crisis; key staff exit; acquiring new customers; innovating new products; mergers) managers or management teams were encouraged to reect on the conception of activity that they used when managing uncertainty. Probing question techniques encouraged a focused response, and interviews adopted a laddering process to capture the values that underpinned the activities, which also encouraged

Fig. 1. Generic activity system.

A. Macpherson / Technovation 25 (2005) 11291140

1133

reections on key underlying reasons for particular responses (Eden and Ackermann, 1998). In addition, opportunities were taken to conduct observations within the organization context. The observations focused on layout and physical arrangements, dress codes, language, nature of interactions (between boss and subordinates), as well as other signicant events such as tensions within the organization. This data was incorporated with the ndings from the interviews. In order to add further clarity and reliability to the results the researchers interpretations of events and observations were checked with participants themselves at a second interview. This interview was also taped, transcribed and analysed. Thus, the researchers interpretive analysis of the managers conceptualization of how knowledge was acquired, adapted and enacted was conrmed and explored in an interactive process. The concepts that emerged during data analysis were mapped against the activity system constructs. The strength of this approach is that it is consistent with the epistemological assumption that knowledge is part of the constructed nature of reality. Knowledge creation, if it is considered to be a social process involving a multitude of voices, requires data analysis methods that cannot only incorporate different sources, but can also present the data for discussion and renement with research subjects. In this regard, mapping is increasingly being considered an important tool for understanding sense making in organizations (Clarke and Mackaness, 2001; Jenkins, 1998). Mapping is considered to be a particularly effective approach in representing the activity-orientated knowledge that managers use to explain and act in strategic situations (Laukkanen, 1998). Thus, while there will always be difculties within the qualitative research process in analysing, representing, and validating data, and although the research outcomes may not be objective, the approach taken provides reliability from within a constructivist perspective (Schwandt, 2003). In this sense, the data and the research conclusions will always be tentative, and open to new constructions or interpretations as further empirical material emerges. This encourages a reexive, open, or even critical, approach to research outcomes (Alvesson and Deetz, 2000). The three companies included in this study are all manufacturing companies in the North West of England. They manufacture and supply nished products, components for incorporation by the customer into nished products, or both. The organizations have all experienced periods of growth that are demonstrated in the expansion of both personnel and turnover over a number of years. The aim of the research is to understand how the managers enacted particular recipes of success. In particular, attention was directed to how the managers conceptions of their activity systems were structured by context and resulted in new conceptions of activity. Evidence of these new conceptions would be embedded in new processes, rules, divisions of

labour and mediating artefacts-the context and outcomes of managerial knowing when managing uncertainty. To maintain condentiality, different names have been used for the rms studied. The background information on each of the companies is included in Table 1. Thereafter, there is a description of the way changes were enacted within the organization in order to facilitate the success achieved.

5. Review of the cases 5.1. Case 1FumeCo Ltd The managing director of FumeCo Ltd has experience of manufacturing management gained in three large companies. This includes formal development training and a university management education, as well as experience in the development and implementation of standard management systems. His experience was broadened through a second career in sales, where he achieved the role of sales director (see (1) in Fig. 2). This background has further strengthened his belief in good manufacturing practice and the importance of sales for success: I regard the salesman as a centre forward who scores goals. Now the people who play mideld and the people who play in goal are just as important; everybodys got an important role to play, but without him scoring goals youre never going to win a game. (FumeCo Ltd MD) Thus, customer satisfaction through high quality sales and production were at the heart of his agenda for growth (2). The MD has created a sales team within the business and appointed a sales director. Ability, potential, and attitude to opportunity, not age or experience, were the determining factors for selection. There has also been an emphasis on staff training to raise levels of staff competence and to recognise potential. This has provided promotion opportunities for staff. For example, the current foreman started as a labourer. He maintains divisions of labour along functional lines to allow personnel to be located within their area of preference and to develop expertise. He encourages participation, and delegates responsibility (3). Drawing on his previous experience and management education, he has installed standard project management procedures. This ensures consistency in design and standards, facilitates delegation, and provides easy access to project information ensuring quick and consistent responses to customer queries. Standards of quality management are maintained by new procedures, supported by quality training and skills training, in order to raise an awareness of quality standards. Personnel are encouraged to challenge standard practices to create continuous improvement in quality and reduce production costs. The treatment of staff suggests a paternalistic approach,

1134 Table 1 Company Backgrounds Company FumeCo Ltd Products Manufacture and design of bespoke fume cupboards

A. Macpherson / Technovation 25 (2005) 11291140

Customers Mainly large pharmaceutical companies and universities

Interviewee/s MDnot the owner. Hired in 1994 when the organization was trading in the red, and with a mandate for change

Organizational Success Between 1994 and 2002 the company has grown from a turnover of 800 K to 4.5 M. Cash reserves have grown from 200 K in the red to 300 K in the black. Employees have increased from 15 to 48 during this period Despite their rural location, the company grew from 820 K to 4 M turnover between 1998 and 2002. The company also grew from 15 to 32 employees, and outsourced non-core activities. They also won and retained a single source supply contract with BNFL, despite national competition from major large organizations in 2002 Rapid growth in the period 19972001 from 15 employees to 35. Turnover expanded from 500 K to 2 M in the same period. Reduced reliance on aerospace from 90 to 60% of turnover

RWL

Manufacture and supply personal protective equipment (PPE). Provide innovation and value engineering within customers supply chain

Main large customer is BNFLsingle source supplier of their PPE. Contract won through competitive tendering

The commercial director responsible for the administration and marketing of the business. The technical director responsible for product development. These directors are the majority shareholders

PrecEng Ltd

Precision engineered components using CNC machines, and production of kits for online assembly

Products used within any larger machine assembly, but main customer is in the aerospace industry

MD who is the majority shareholder. He bought the company in 1981

Fig. 2. FumeCo Ltd activity map.

A. Macpherson / Technovation 25 (2005) 11291140

1135

with formal control mediated by a concern for welfare and development (4). The MD considers reputation as the key to new and repeat business. He draws on his previous social capital though his business networks, and he has re-branded the rm by buying out a competitor with a good reputation. He believes that product quality, the customers perception of the factory environment and the levels of customer service help to create an impression and improve the reputation of the rm. He seeks to collaborate with customers and suppliers and encourages open relations in order to establish long-term relationships, measuring success through the amount of repeat business (5). His network includes contact with local universities, as potential sources of new talent, and a representative interest in sector trade associations, who set or advise on legislative standards for the sector. He considers his most important network, in terms of information and business opportunities, to be the informal business contacts developed through his sales experience (6). 5.2. Case 2RWL The technical director has technical design qualications and experience and the commercial director has formal managerial training (1) (Fig. 3). The directors possess relatively little knowledge of the high-technology end of the nuclear industry, and, initially, they had a limited social and business network due to the remote nature of their location. The initial drive was unequivocally entrepreneurial, which focused on innovation and growth. The company started as a small manufacturer of low-technology goods for British Nuclear Fuel Laboratories (BNFL), but gradually extended its technological competences and proved their innovative capabilities to BNFL through the development of

a lightweight and exible suit with high performance materials they sourced from plastics manufacturers (2). The technical director set the materials specications, and they tested a variety of products. They also proved their capability by developing other protective equipment, production technologies, and met the high standards of quality required in the nuclear industry (3). In order to achieve this level of innovation, they had to access technical knowledge and expertise from outside the rm. They brokered relationships between suppliers, and between the suppliers and BNFL. The owner-managers created a business network built on trust that allowed close collaboration and knowledge exchange, facilitating innovation in products and processes. There have been a number of collaborative product developments between RWL, supplier network companies and BNFL. Their success was rewarded with a single-source contract for protective equipment for BNFL, which was renewed in 2003 (4). The company also underwent signicant review and restructuring prior to entering the bid for the new contract. To ll the gaps in available competences, and to reduce the load on the owner-managers, three line managers were recruiteda sales manager, a purchasing manger, and a production and quality managerto create a more structured organization and to takeover responsibility for these business functions. This new structure increases the managerial capacity and creates entrepreneurial space for the directors to consider the strategic direction of the organization. The technical director comments: If youd met me twelve months ago I was thinking, God Im going to have to go and sort this. Im enjoying it again now; its fun again because when a supplier comes now Lesley [Purchasing Manager] meets them and organises

Fig. 3. RWL activity map.

1136

A. Macpherson / Technovation 25 (2005) 11291140

the prices and sorts out all that whereas previously I was seeing the suppliers, I was sorting out labour problems and the warehouse, everything. (TD) (5). By providing just-in-time delivery of goods, services and technical help to their prime customer, BNFL, the owners have been successful in winning a new contract. In addition, a key factor was the trust displayed by the directors in encouraging face-to-face discussions between supplier companies, and between suppliers and BNFL. This activity increased the level and depth of interactions in the network and speeded up product innovations, as well as increasing access to wider knowledge resources (6). 5.3. Case 3PrecEng Ltd When the MD took over the company, he only had practical milling experience. He spent the rst year learning the ropes of business administration. Successive quality audits from customers put pressure on the company to improve internal management systems, culminating in the MD attending a formal customer supply chain support initiative in 1997 1998. Here, he gained knowledge of cutting edge quality and continuous improvement systems (1) Fig. 4. The experiences of being audited by his customer, and the training and support provided by them, convinced the MD of the need to professionalize the business processes. He recognised that continuous improvement needed to be embedded throughout the rm, including both processes and attitudes to production (2). Thus, customer expectations were an important pressure for change. He also enlisted his main aerospace customer to sell the concept and nature of change to the workforce, and he employed a consultant to train the workforce in continuous improvement techniques (4). Encouraging the workforce to

take responsibility for continuous improvement demonstrated a shift to a more democratic, or participative, management style. In addition, he restructured the management, introducing a quality manager and a production manager. Delegation allowed him space to take a more strategic overview of the organization (3). Continuous improvement practices and culture are actively encouraged through the implementation of quality and continuous improvement systems. Information from these formal manufacturing and quality systems is captured and used as a management aid to review and control quality, cost and production problems (5). In the MDs opinion, the information provided by the systems and the formal procedures create a professional image, which has been essential to attract new customers. In addition, the continuous improvement culture that the workforce has adopted is considered so crucial that, following business slowdown in the aerospace industry in 2001, he retained his workforce, demonstrating both pragmatism and loyalty for their hard work in achieving change: I could have laid people off and yes, it would have made us more protable, but I knew the work would come back and Ive got a highly trained workforce. It would have been difcult to replace them and even [with a skilled machinist] it would take me six months or nine months to get them to the way I want them to be and doing the things that we do in here. During the strategic sourcing initiatives, the MD was made aware that size, in terms of turnover and employees, was considered an important criterion in supplier selection. He considers growth to be extremely important for the long-term survival of the business (6).

Fig. 4. PrecEng Ltd activity map.

A. Macpherson / Technovation 25 (2005) 11291140 Table 2 Comparison of case studies Company FumeCo Ltd RWL PrecEng Ltd Directors Inuence Perspective maker Perspective shaper Perspective taker Crisis solution Leadership and direction to encourage the group to accept new practices Encourage innovation by collaboration and integration Training in the customers and colleges conception of activity Knowledge Resource Previous experience and training of the MD

1137

Technical knowledge distributed between organizations Codied procedures adapted to context

6. Discussion In each of the case studies, the directors have achieved success, and have overseen periods of growth, both in turnover and employees. That the organizational contexts are signicantly different is not surprising. However, this context is a major inuence on the conceptions of activity and the way problems are resolved. For example, the managing directors conceptions of the problems differ between quality, innovation and strategic sourcing. These conceptions are clearly inuenced by path-dependencies, such as past experience and current systems of organization. It is also clear that issues of context seem to be important in facilitating change and for providing validity to new conceptions of activity. While delegation of responsibility and organizational systems are two consistent themes, the inuences and conceptions of knowing how to achieve growth differ signicantly. At FumeCo Ltd, it is the new MDs managerial experience that creates tensions within the activity system, and which provides the template of knowing. In this sense, he takes the role of perspective maker; the conception of activity is embedded into the company through leadership and group integration (Blackler et al., 2000). At RWL the directors seek to establish the managerial space to return to their innovative roots. However, their position as a rst-tier supplier to BNFL, and their lack of technical knowledge across the range of products, mean that they have to create a network of similarly innovative companies. Thus, they take the role of perspective shapers and create inter-organizational activity through collaboration to encourage innovation. Their role as the rst-tier supplier enables them to gather knowledge across organizations, and act as a knowledge integrator (Brusoni and Prencipe, 2001). They provide a general interpretation of priorities for innovation and to guide problem-solving between organizations in the network (Blackler et al., 2000). At PreEng Ltd, external organizations create tension within the activity system. The external organization sets the standards of good manufacturing practice. In doing so, it provides an alternative conceptualization that triggers a change in the way manufacturing practice is perceived within the organization. The MD has to accept and embed a new conception of organizational activity within his rm. The MD here is a perspective taker, where his conception of organizing is adapted to t with the model

provided by a signicant and more powerful inuence (Blackler et al., 2000). It is also interesting to note that knowledge resources used within all three rms also differ. At FumeCo Ltd, the MD seeks to establish organizational activity based on formal and experiential learning, accumulated over time. At RWL, the key knowledge resource is technical knowledge that exists in other individuals and organizations. At PrecEng Ltd, knowledge is provided in the form of codied procedures that are adapted and embedded into the rm. Thus, the importance given to a particular type of knowledge resource is also part of the context of innovation within the activity system. The differences between these three case studies are shown below in Table 2. The reconguration of recipes or routines within the case study organizations is both active and intentional, but issues of structure and rationality are mediated by interactions that occur within the activity system. Consequently, it is necessary to reconsider these issues against the concepts of organizational knowledge, or knowing, and the growth theories previously discussed.

7. Knowing how to grow Organizational growth is generally seen as a linear process dependent on the accumulation of resources over time to resolve sequential crises (Greiner, 1972, 1998; Churchill and Lewis, 1983; Scott and Bruce, 1987). However, at PrecEng Ltd, the continuous improvement processes and quality management systems create opportunities for the MD to explore the strategic direction of the organization while maintaining control; they provide systems that facilitate leadership, co-ordination, and control. At RWL, a crisis of delegation is actually causing difculties in collaboration, while at FumeCo Ltd, standardised procedures facilitate organizational co-ordination and collaboration, but also allow the MD to delegate responsibilities for quality and customer service, leaving him free to continue to develop collaboration in his business networks. These systems do not just provide solutions to one organizational crisis; they also inuence managerial activity in a number of directions. Rather than sequential crises as the rms transit between stages of growth, this is a multi-layered

1138

A. Macpherson / Technovation 25 (2005) 11291140

and context-dependent process. The crises that these organizations face include multiple elements from Greiners model of rm growth: they require systems of leadership to provide strategic direction; systems of creativity to provide innovative activity; systems of delegation and co-ordination to ensure consistent performance; and systems of collaboration to gain access to new conceptions of activity when crises occur. This suggests that, while crises occur, their nature and solution will be dependent on the context, the available experience embedded in organizational systems that sustain current activity, and on relationships that provide access to alternative knowledge resources through business or social networks. Lichtenstein and Brush (2001) noted in their research that relationships and knowledge were considered to be salient resources. It is not surprising, then, that the ndings within this study should be similar. That is, relationships and knowledge are salient resources for these case study organizations, and are signicant in the development of alternative conceptions of organizational systems. However, it is not just knowledge that is important; it is the application of knowledge that results in alternative systems and structures to overcome idiosyncratic problems. The directors search for alternative theories to resolve the difculties they face could involve reconstituting or adapting existing knowledge that exists within the organization, or seeking new communities that may provide salient knowledge resources. Knowledge is then constituted, or reconstituted, from the knowledge resources available through interactions and activities within and between communities of practice. Learning is created in the contested space that exists when historical experiences fail to provide solutions to crises occurring in current contexts (Tsoukas, 1996). In this scenario, resource saliency is not a given. It is a sense making process where the enactment of new systems depends on the reective and experiential activity undertaken by individuals within a given context, reacting to cues available in the environment (Weick, 1995). The directors make strategic choices (Child, 1972), but these choices, and the job of management reects sense making; they make decisions and create plausible solutions from the data available to them through their organizational processes and interaction (Daft and Weick, 1984). Organizational growth, then, relies on knowing how to act in a given context in order to provide solutions to particular crises facing organizations. The important competences for organizational development may be a balance between systems of knowledge exploitation and systems of knowledge exploration; this is both within and between organizations (Holmqvist, 2003; Dyer and Singh, 1998). Success or failure may have little to do with access or adoption of specic resources, at particular times, but more to do with the managerial and organizational competencesthe experience, skills or systems that can provide organizations with the ability to explore and adapt, and break out of, existing path dependencies. The nature of

the interactions and relationships within and between organizations, and the sense managers make of them, may either sustain existing paths, or create new paths. It is access to new knowledge resources, in whatever form, that stimulates adaptation and creates opportunities for organizations to challenge existing practices (Huber, 1991). A crisis of knowledge or perhaps more accurately, knowing, appears to be inherent in all the crises faced by these companies, which were resolved through access to diverse knowledge (re)sources. Within communities of practice, or activity systems, the generative dance between knowledge (as a resource) and the act of knowing (as practical activity) may create opportunities for innovation (Cook and Brown, 1999).

8. Conclusion While it is not possible to generalize widely from case study research, the outcomes of this study show how particular crises are negotiated and how contexts and relationships are important in establishing the saliency of particular knowledge resources by the managers as they negotiate change. We can also see that crises are not linear and sequential. Issues of leadership, co-ordination, control, delegation and collaboration are not (re)solved, but are recurring problems that require managers and communities involved to conceptualize, or re-conceptualize, how these issues will be addressed within the organization. Why a particular issue is given prominence at a particular time depends on how actors involved make sense of cues available to them (Weick, 1995). A crisis is both the result of how past solutions were applied, and the nature of conceptualization of current and future activity. That is, in these cases, organizational growth is ultimately dependent on satisfactory resolution to the crisis of knowing. Here, we see the embedded nature of organizational systems that structure activity in the organization, and consequently, such systems also inuence the nature of interactions both within and between organizations. Moreover, the inability to resolve crisis from within available resources may trigger a search for alternativesa shift from knowledge exploitation to knowledge exploration (Holmqvist, 2003). Thus, identifying and classifying knowledge resources are active processes, but they are ultimately experimental, improvised and negotiated practices (Tsoukas and Vladimirou, 2001). Managers in these companies displayed acts of intentionality, or rationality, resulting from individual acts of sense making. Thus, what this research highlights is the highly contextual nature of strategic practice, but also that individuals through their day-to-day activities provide forces for change. They provide a link between the micro practices of strategizing and macro structures of organizing (Grand and MacLean, 2003). As such, activity theory has signicant potential as an integrative methodological

A. Macpherson / Technovation 25 (2005) 11291140

1139

framework for examining emergent and subjective processes through which organizational activities are constructed (Jarzabkowski, 2003). Through the activity system framework, it is possible to highlight how organizational innovation and growth is partly structural (dependent on systems, routines and divisions of labour already embedded within the organization), partly social (dependent on modes of interaction and relationships), and partly intentional (where a rational actor is making sense of available cues by improvising to enact in a process of knowing). The activity theoretical framework highlights the contextual, negotiated and transient nature of knowing within organizations. By re-conceptualizing knowledge as both a resource and an activity, we can see that resource dependencies do not create linear changes, as suggested by growth models. The recipes of managers are inuenced both by historical experiences and their role within a community of practice. As such, attention to stage of growth will be less important than sensitivity to specic social contexts, and particularly to the social structures and relations that dene possibilities for learning. The concept of knowing suggests that learning how to grow requires idiosyncratic and not prescriptive solutions to crises found in current growth models.

Acknowledgements I would like to acknowledge the contribution of Professor Ossie Jones who provided helpful comments and guidance on earlier drafts of this paper. This research is part of the ESRC Evolution of Business Knowledge Research Programme, Res-334-25-0015. As such, the methodological and conceptual approach to this paper is informed by the research undertaken with my colleagues Professor Richard Thrope, Professor Ossie Jones, Dr Sudi Sharif, Dr Robin Holt and Dr Michael Zhang.

References
Alvesson, M., 1993. Organizations as rhetoric: knowledge-intensive rms and the struggle with ambiguity. Journal of Management Studies 30(6), 9971015. Alvesson, M., Deetz, S., 2000. Doing Critical Management Research, Sage, London. Bartlett, C.A., Ghoshal, S., 1989. Managing across borders: the transnational solution, Harvard Business School Press, Boston. Becker, M., 2001. Managing dispersed knowledge: organizational problems. Managerial strategies, and their effectiveness. Journal of Management Studies 38(7), 10371051. Blackler, F., 1993. Knowledge and the theory of organizations: organizations as activity systems and the reframing of management. Journal of Management Studies 30(6), 863884. Blackler, F., 1995. Knowledge, Knowledge work and organizations: an overview and interpretation. Organization Studies 16(6), 10211046.

Blackler, F., Reed, M., Whitaker, A., 1993. Editorial introduction: knowledge workers and contemporary organizations. Journal of Management Studies 30(6), 851 862. Blackler, F., Crump, N., McDonald, S., 2000. Organizing processes in complex activity networks. Organization 7(2), 277 300. Brusoni, S., Prencipe, A., 2001. Managing knowledge in loosely coupled networks: exploring the links between product and knowledge dynamics. Journal of Management Studies 38(7), 10191035. Cantwell, J., 2002. Innovation, prots and growth: penrose and schumpeter. In: Pitelis, C., (Ed.), The Growth of the Firm: the Legacy of Edith Penrose, Oxford University Press, Oxford, pp. 215 248. Chandler, G., Hanks, S.H., 1998. An examination of the substitutability of founders human and nancial capital in emerging business ventures. Journal of Business Ventures 13(5), 353 370. Child, J., 1972. Organizational structure, environment and performance: the role of strategic choice. Sociology, 6(1), 122. Churchill, N.C., Lewis, V.L., 1983. The ve stages of small business growth. Harvard Business Review 61(3), 30 39. Clarke, I., Mackaness, W., 2001. Management intuition: an interpretative account of structure and content of decision schemas using cognitive maps. Journal of Management Studies 38(2), 147 1172. Cohen, W., Levinthal, D., 1990. Absorptive capacity: a new perspective on learning and innovation. Administrative Science Quarterly 35, 128 152. Cook, S.D.N., Brown, J.S., 1999. Bridging epistemologies: the generative dance between organizational knowledge and organizational knowing. Organization Science 10(4), 381400. Curran, J., Blackburn, R., 2001. Researching the small enterprise, Sage, London. Daft, R., Weick, K., 1984. Toward a model of organizations as interpretation systems. Academy of Management Review 9(2), 284 295. DeBoer, M., Van Den Bosch, F., Volberda, H., 1999. Managing organizational knowledge integration in the emerging multimedia complex. Journal of Management Studies 36(3), 379 397. Dyer, J., Singh, H., 1998. The relational view: cooperative strategy and sources of interorganizational competitive advantage. Academy of Management Review 23(4), 660 679. Eden, C., Ackermann, F., 1998. Analysing and comparing idiographic causal maps. In: Spender, C.E.a.J.C., (Ed.), Managerial and Organizational Cognition: Theory Methods and Research, Sage, London, pp. 192 209. Engestrom, Y., 1990. Learning, working and imagining: twelve studies in activity theory, Orienta-Konsultit Oy, Helsinki. Engestrom, Y., 2000a. Activity theory as a framework for analyzing and redesigning work. Ergonomics 43(7), 960974. Engestrom, Y., 2000b. Comment on Blackler et al. Activity theory and the social construction of knowledge: a story of four umpires. Organization 7(2), 301310. Engestrom, Y., 2001. Expansive learning at work: toward an activity theory reconcetpualization. Journal of Education and Work 14(1), 133 156. Feldman, M., Rafaeli, A., 2002. Organizational routines as sources of connections and understandings. Journal of Management Studies 39(3), 309 331. Gherardi, S., 2000. Practice-based theorizing on learning and knowing in organizations. Organization 7(2), 211223. Giddens, A., 1984. The constitution of society: outline of the theory of structuration, Polity Press, Cambridge. Grant, R., 1996. Toward a knowledge-based theory of the rm. Strategic Management Journal 17(Winter SI), 109122. Grand, S., MacLean, D., 2003. Creative destruction and creative action: path dependence and path creation in innovation and change, 19th EGOS Colloquium, 3 5 July.

1140

A. Macpherson / Technovation 25 (2005) 11291140 Schulz, M., 2001. The uncertain relevance of newness: organizational learning and knowledge ows. Academy of Management Journal 44(4), 661 681. Schwandt, T., 2003. Three epistemological stances for qualitative human inquiry. In: Denzin, N., Lincoln, Y. (Eds.), The Landscape of Qualitative Research, Sage, London, pp. 292 331. Scott, M., Bruce, R., 1987. Five stages of growth in small business. Long Range Planning 20(3), 45 52. Sole, D., Edmonson, A., 2002. Situated knowledge and learning in dispersed teams. British Journal of Management 13(SI), S17S34. Spender, J.C., 1989. Industry Recipes: the Nature and Source of Management Judgement, Basil Blackwell, Oxford. Spender, J.C., Grant, R., 1996. Knowledge and the rm: overview. Strategic Management Journal 17, 59. Swan, J., Scarbrough, H., 2001. Knowledge management: concepts and controversies. Journal of Management Studies 38(7), 913 921. Teece, D., Pisano, G., Shuen, A., 1997. Dynamic capabilities and strategic management. Strategic Management Journal 18(7), 509 533. Tsoukas, H., 1996. The rm as a distributed knowledge system: a constructionist approach. Strategic Management Journal 17(Winter SI), 11 25. Tsoukas, H., Vladimirou, E., 2001. What is organizational knowledge. Journal of Management Studies 38(7), 973974. Weick, K., 1995. Sensemaking in Organizations, Sage, Thousand Oaks, CA. Winter, S.G., 1996. Organizing for continuous improvement: evolutionary theory meets the quality revolution. In: Cohen, M.D., Sproull, L. (Eds.), Organizational Learning, Sage, London, pp. 460 483. Yli-Renko, H., Erkko, A., Sapienza, H., 2001. Social capital, knowledge acquisition, and knowledge exploitation in young technology-based rms. Strategic Management Journal 22, 587 613.

Greiner, L.E., 1972. Evolution and revolution as organizations grow. Harvard Business Review 50(4), 3746. Greiner, L.E., 1998. Evolution and revolution as organizations grow. Harvard Business Review 76(3), 5568. Holmqvist, M., 2003. A dynamic model of intra- and interorganizational learning. Organization Studies 24(1), 95123. Huber, G., 1991. Organizational learning: the contributing processes and the literatures. Organization Science 2(1), 88 115. Inkpen, A., 2000. Learning through joint ventures: a framework of knowledge acquisition. Journal of Management Studies 37(7), 10191043. Jarzabkowski, P., 2003. Strategic practices: an activity theory perspective on continuity and change. Journal of Management Studies 40(1), 2355. Jenkins, M., 1998. The theory and practice of comparing causal maps. In: Eden, C., Spender, J.C. (Eds.), Managerial and Organizational Cognition: Theory, Methods and Research, Sage, London, pp. 231 249. Laukkanen, M., 1998. Conducting causal mapping research: opportunities and challenges. In: Eden, C., Spender, J.C. (Eds.), Managerial and Organizational Cognition: Theory, Methods and Research, Sage, London, pp. 168 191. Lave, J., Wenger, E., 1991. Situated learning, Legitimate Peripheral Participation, Cambridge University Press, Cambridge. Levitt, B., March, J.G., 1996. Organizational learning. In: Cohen, M.D., Sproull, L. (Eds.), Organizational Learning, Sage, London, pp. 516 540. Lichtenstein, B.M.B., Brush, C.G., 2001. How do resource bundles develop and change in new ventures? A dynamic model and longitudinal exploration. Entrepreneurship: Theory and Practice 25(3), 3759. March, J.G., Simon, H., 1958. Organizations, Organizations, Wiley, New York. Nelson, R., Winter, S., 1982. An Evolutionary Theory of Economic Change, Harvard University Press, Cambridge, MA. Nonaka, I., Takeuchi, H., 1995. The Knowledge Creating Company, Oxford University Press, Oxford. Penrose, E.T., 1959. The Theory of the Growth of the Firm, Basil Blackwell, Oxford. Pfeffer, J., Salancik, G., 1978. The External Control of Organizations, Harper and Row, New York. Polanyi, M., 1966. The Tacit Dimension, Doubleday, Garden City, NY. Powell, W.W., Koput, K.W., Smith Doerr, L., 1996. Interorganizational collaboration and the locus of innovation: networks of learning in biotechnology. Administrative Science Quarterly 4, 11161145.

Allan Macpherson is a senior lecturer in HRM and Organizational Behaviour at MMU Business School. He has worked on a number of European Social Fund projects concerned with improving management development and network learning within SMEs. Current research activity involves an ESRC funded project on the Evolution of Business Knowledge. Publications include contributions on supply chain management, management development, and learning and innovation in SMEs.