Kusunoki et al. (1998) illustrated the criticality of knowledge creation activities on product development performance in Japanese manufacturing firms. Their study showed differential effects of different types of organizational knowledge-based capabilities on different types of product development performance. The central message from their analysis is that process capabilities emerging from dynamic interaction of knowledge play a crucial role as core capabilities for product development of Japanese firms in the system-based industries in which Japanese firms are relatively competitive.
Hence, knowledge management embeds an open systems viewpoint that stresses the reciprocal ties that bind and relate the organization with those organizations that surround it and penetrate it. The environment is perceived as the ultimate source of materials, energy, and information, all of which are vital to the continuation of the system. However, how well an organization performs in this competitive environment depends on its specific inventory of intellectual assets and how they are utilized.