The Problem of Knowledge Transfer in Markets

Knowledge Transfer

While we know much about how organizations are designed to organize the collection and transfer of data within their boundaries, we know comparatively little about how information is organized and accessed in markets (Kogut 2000). Organization and financial theorists have speculated on how arm’s-length ties, which are low in embeddedness, increase an actor’s ability to access and transfer public information circulating in the market (Peterson and Rajan 1994, 2002; Uzzi 1999).

Arm’s-length ties reflect the conventional view of inter-firm ties and market learning described by Hirschman (1970) and Macneil (1980). In these ties, relationships are cool, impersonal, atomistic, and actors are motivated by instrumental profit seeking. In contrast, embedded ties embed their commercial transactions in social attachments. These relationships create behavioural expectations that are considered irrelevant in the atomistic view of transacting and market learning because they shift the logic of opportunism to a logic of trustful cooperative behaviour in a way that creates a new basis for knowledge transfer and learning across firm boundaries (Uzzi 1997, Arrow 1998).

Regarding retweets, acknowledge them when you do them and when they are done to you. What this means is if you like what someone tweeted, use “RT” and paste in their @name and the message. This gives them credit for the content. And, if someone retweets your content, thank them. These are simple courtesies.

Because arm’s-length ties require little investment in time or mutual obligation, they enable actors to economically maintain many ties to other actors who may be scattered throughout a market. Consequently, when public information is scattered unevenly among actors in a market, arm’s-length-ties should provide an effective means for acquiring it.

Knowledge Transfer in Markets

Blogging is a great example of social media marketing. Make sure that you take advantage of owning a blog to market your products and services to consumers. Post regularly on your blog so you can get exciting information out to the world, but also to remind people that you exist and so does your blog. People tend to forget about blogs that aren’t often updated as they lose interest and move on.

In addition, research has shown that even if public information is available through newspapers, job listings, or other freely available sources, people typically gather public information from their arm’s-length ties. Specifically, they initiate searches through networks, which often have lower transaction costs than other means of search (Granovetter 1974, Geertz 1978). For example, Granovetter (1974) found that job seekers typically discover novel public information about employment through acquaintances rather than close ties: While the job seeker and the job seeker’s close ties typically share comparable information, acquaintances tend to possess different information.

Tailor your posts to your target audience’s experiences. You should write about things your customers can relate to or they will not share your content with their friends. Take the time to read the status updates your customers are posting and identify recurring themes and issues you could mention in your own posts.

Knowledge TransferUzzi (1999) showed that arm’s-length ties between firms and banks promoted the flow of public information. Firms were better able to acquire knowledge about the range of standard loan terms of banks in a market through arm’s-length ties than they were through sources in the public domain. Similarly, Hansen (1999) found that managers in a large consulting firm were best able to search for information available in the company’s public records through weak ties.

The key to being successful using social media marketing is to have excellent content. This content has to be inspiring, educational, and interesting so that your followers will want to share it. When they share your content, you and your business are being exposed to new potential followers who may also share your content and build your social media presence.

In contrast, embedded ties have been argued to promote private knowledge transfer because expectations of trust and reciprocity provide assurances that the transfer will be used to the mutual benefit of both parties (Uzzi 1999). For example, Ingram and Roberts (2000) showed that hotel managers with close ties to one another transferred unpublicized client preference data that enabled them to learn how to better model the price of their rooms, giving them an advantage over hotel managers not linked to the network by embedded ties.

To get people to respond to the content you share, make it as easy as possible. Give them leading questions that ask for their feedback. Let them respond without saying a word by including a poll. Never require people to sign up or register to leave comments. Communication is the bread and butter of social media, and you want to make the feedback process as convenient as possible.

Both embedded ties and arm’s-length ties entail learning costs. While arm’s-length ties promote wide access to public information, this information can be of only limited novelty because it is not specific to an exchange partner and is not restricted to certain actors in the market. In contrast, when time and other resources are limited, the capital dedicated to creating an embedded tie constrains an actor’s ability to invest in other ties, thereby restricting the actor’s ability to access knowledge not possessed by the dyadic tie. This constraint poses a potentially serious obstacle to learning in markets, where it is infeasible for any single actor to know the full scope of information circulating in the market (Eccles and Crane 1988).

If you are considering using a consultant to assist you with your social media marketing campaign, make sure they use the sites they would recommend. If they truly believe and know how to utilize Facebook, Twitter, and others, they should have a page of their own. Do the research to verify this to be sure they are a company you want to use.

The complementary advantages and disadvantages of embedded and arm’s-length ties lead us to two conclusions. First, arm’s-length ties can act as conduits for gathering and transferring public information from a wide range of actors. Second, though embedded ties draw from a limited pool of knowledge, they are well suited for the transfer of novel and private information.

When using social media as a marketing tool, do not be afraid to block people from your page. While it is rare, there are bad seeds out there that will spend a great deal of time posting things on your page that are inappropriate and offensive to some. Give them a warning first, and block their access if they continue to insure that they do not cause your business harm.

These arguments suggest that types of exchange ties influence knowledge transfer and learning in markets, particularly in markets where knowledge is distributed widely and unevenly among actors, or where no central authority such as a firm is in place to organize the collection and distribution of knowledge (Udell 1999, Kogut 2000, Keister 2002).

 

Ref:

  • Arrow, K. 1998. What has economics to say about racial discrimination. J. Econom. Perspectives 12 91–100.
  • Eccles, R. G., D. B. Crane. 1988. Doing Deals: Investment Banks at Work. Harvard Business School Press, Boston, MA.
  • Geertz, C. 1978. The bazaar economy: Information and search in peasant marketing. Amer. Econom. Rev. 68 28–32.
  • Granovetter, M. 1974. Getting a Job: A Study of Contacts and Careers. Harvard University Press, Cambridge, MA.
  • Keister, L. 2002. Financial markets, money, and banking. Annual Rev. Soc. 28 39–61.
  • Kogut, B. 2002. The network as knowledge: Generative rules and the emergence of structure. Strategic Management J. 21 405–425.
  • Petersen, M. A., R. G. Rajan. 1994. The benefits of lending relationships: Evidence from small business data. J. Finance XLIX 3–37.
  • Hansen, M. T. 1999. The search-transfer problem: The role of weak ties in sharing knowledge across organization subunits. Admin. Sci. Quart. 44 82–111.
  • Hirschman, A. 1970. Exit, Voice, Loyalty. Harvard University Press, Cambridge, MA.
  • Ingram, P., P. Roberts. 2000. Friendships among competitors in the Sydney hotel industry. Amer. J. Soc. 106 387–423.
  • Macneil, I. 1980. The New Social Contract. Yale University Press, New Haven, CN.
  • Uzzi, B.1997. Social structure and competition in interfirm networks: The paradox of embeddedness. Admin. Sci. Quart. 42 35–67.
  • Udell, G. 1999. The small business lending relationship. J. Blanton, A. Williams, S. Rhine, eds. Business Access to Capital and Credit. Federal Reserve, Washington, D.C.
  • Uzzi, B. 1999. Social relations and networks in the making of financial capital. Amer. Soc. Rev. 64 481–505.