Given assumptions about the characteristics of knowledge and the knowledge requirements of
production, the firm is conceptualized as an institution for integrating knowledge. The primary
contribution of the paper is in exploring the coordination mechanisms through which firms
integrate the specialist knowledge of their members. In contrast to earlier literature, knowledge
is viewed as residing within the individual, and the primary role of the organization is
knowledge application rather than knowledge creation. The resulting theory has implications
for the basis of organizational capability, the principles of organization design (in particular,
the analysis of hierarchy and the distribution of decision-making authority), and the determinants
of the horizontal and vertical boundaries of the firm. More generally, the knowledge-based
approach sheds new light upon current organizational innovations and trends and has farreaching
implications for management practice.
A survey involving 114 firms operating in China was conducted for hypothesis testing.
The empirical results provide strong support and advance the knowledge of organizational innovativeness development for firms in Asia's emerging economies.