Knowledge, Performative Ties, and the Theory of the Firm S. S. Levine The Wharton School University of Pennsylvania Knowledge1 has grown to occupy a major role in the discussion on firm performance (Dosi, Nelson, & Winter, 2000). In the management literature, it has been recognized as a valuable resource (Kogut & Zander, 1995), a source of lasting competitive advantage (Teece, Pisano, & Shuen, 1997), and even a the very foundation for the existence of the firm (Grant, 1996). But unlike other economic resources, such as capital2 or land, knowledge is a social entity. It resides in individuals and groups and can be appropriated by them (Cohen & Bacdayan, 1994; Nelson & Winter, 1982). It cannot be force-fed nor can it be extracted against one’s will. Knowledge is intangible, difficult to directly measure or observe in use (Hansen & Haas, 2001), complex in nature and challenging to transfer (Szulanski, 1996; Winter & Szulanski, 2001). Even if transfer is attempted, it is difficult to determine if an individual is exerting full effort in transferring knowledge to others, or just pretends to do so (Argote, 1999; Hansen, 1999:82-83). Thus, knowledge-intensive corporations are dependent on a resource that cannot be directly controlled by management. Social network theory has contributed to our general understanding of economic phenomena, and seems germane to understanding knowledge processes between and within corporations. Networks, it is thought, play an important role in job seeking (Granovetter, [1974] 1995) , formations of alliances (Gulati, 1998), creation of innovations (Tushman, 1977; von Hippel, 1987), strengthening of supplier-buyer relations (Khanna & Rivkin, 1999; Uzzi, 1997), and explaining industry concentration (Saxenian, 1996). Researchers who examined knowledge transfer argued that outcomes can be attributed, at least partly, to network structure and tie characteristics (Hansen, 1999; Hansen, 2002; Nobel & Birkinshaw, 1998; Szulanski, 1996).

Knowledge can be defined in more than one way, but it is always different from information (Boisot, 1998; Winter, 1987). Knowledge is less codified or articulated, more embedded in people and routines, and more difficult to learn and transfer. Knowledge, for instance, would be how to approach and analyze a problem, rather than the specific facts that are needed to formulate a solution. 2 In microeconomics, the term “capital” refers to physical assets that are used to produce goods and services, such as machinery, equipment, and buildings. In other uses, “capital” often means money. 1

Much of the knowledge literature uses a firm or division as the unit of analysis, rather than networks of individuals. However, individual ties and networks were shown to have significant effects on some intra-organizational processes, such as employee recruitment and retainment (Fernandez, Castilla, & Moore, 2000). Ties between individuals are also thought to influence decisions about alliance partners (Rosenkopf, Metiu, & George, 2001) and lead to trust networks among firms (Uzzi, 1997). It seems that since knowledge is a social entity, it flows through social interaction. Hence, examining individual networks can be informative in understanding processes of knowledge search and transfer. We currently know little about the micro-processes involved in an intraorganizational search and transfer of knowledge. Even research that looked into knowledge transfer (e.g.Hansen, 1999; Hargadon, 2001; Hargadon & Sutton, 1997; Szulanski, 1996) is parsimonious on the minutia: how the needed knowledge was found and how the carrier was persuaded to participate in transfer. We aim to supply some preliminary answers in understanding this process, and especially on the nature of novel ties extended to allow knowledge transfer. We continue by detailing the method used to generate the data. Followed is presentation of the findings and analysis. We then point out the observed importance of performative tie – ties extended ad-hoc to an unacquainted individual – and present two circumstantial conditions: affiliation and status similarity. We conclude by discussing some theoretical and practical implications of performative ties. Data were gathered for two years in multiple sites of a top-tier, multinational professional services firm. The company has several thousand professional employees, and its annual revenues place it among the top three companies in its segment. Data collection was designed following a qualitative maximum variation sampling approach (Guba & Lincoln, 1989), which samples from potentially different sub-populations, in order to identify differences and increase inter-site reliability. Data have been collected across multiple dimensions: organizational positions (professional & support staff), hierarchal levels (from junior employees to directors), offices (small, medium and large), and world regions (US and Europe). A variety of collection data approaches is used, including observation, repeated depth interviews, semi-structured surveys, document analysis, and informal chatting (Maxwell, 1996). So far, I have conducted about sixty interviews in four offices, including the three largest offices of the firm. Observations and chatting field notes have filled hundreds of pages.

Based on preliminary findings, we suggest two mechanisms that facilitate knowledge search and transfer within a corporation. First, ad-hoc, PERFORMATIVE TIES can be extended to exchange with others that are unacquainted with ego. Such ties are different from direct or indirect ties, for they do not appear on an individual's network diagram, and cannot be predicated from previous ties. They serve to extend the scope of search, increasing the chances of finding useful knowledge. Second, the social dilemma of kindness is mitigated through a regime of GENERALIZED EXCHANGE. Since help often flows from the resource-rich to the resource-poor, and reciprocity can be unlikely, direct exchange will severely limit transfer. Generalized exchange alleviates this problem by allowing access to resources even to those who can offer little in return for them. These findings suggest that the corporation might play a role in defining distinctive regimes of socio-economic behavior. When interacting with members of the firm, individuals behave in ways that are different than those enacted when an outsider is involved. Employees can create a network tie with previously unknown others, and use that tie to gain resources they need. Thus they are able to search for the resources on a much wider scope: Not only among those they know well (strong tie) or just acquainted with (weak ties), but also among those that they have never met. The wider the search, the more likely it is that the relevant knowledge can be found. Once the knowledge is found, the regime of generalized exchange allows transaction without direct reciprocity. It facilitates transactions between unequal players, and enable resource-poor individuals to receive resources from those who posses them, without extensive bargaining. Thus, the mechanisms of performative ties and generalized exchange enable better processes of knowledge share and transfer within the firm, allowing it to pursue its goals. “Where do network ties come from” is a question that is not completely answered by contemporary theory. While comprehensive answer may be far, the findings here may shed some light on how individuals create new ties. It seems that affiliation serve as a platform on which ties can be created with little effort. Affiliation may serve as a precursor or a favorable condition for the creation of new ties. This is reminiscent of the mutual help observed among engineers from competing firms (Saxenian, 1996; von Hippel, 1987; von Hippel & Schrader, 1996), where shared professional affiliation transgresses formal organizational

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