Knowledge management and innovation

In recent years, there are a large number of academic articles, which have been focused on the topic of knowledge management and innovation. Both academic researchers and professions seem to agree that knowledge is the most valuable asset of a firm (García-Muiña et al., 2009). Moreover, Hsiangchu and Tsai-Hsin (2002) suggested that the corporation’s knowledge is the main competitive advantage for a corporation. Therefore, managing knowledge in organisations could be considered as a key factor for the success in today’s business world. There are four major elements in the knowledge process which includes creating knowledge, integrating knowledge, sharing knowledge and codifying knowledge (Newell et al. 2009). A study by Teece et al. (1997 cited Leiponen 2006) proposed that the creation of knowledge can have the important effects on performance of a corporation. While other researchers mentioned that creating knowledge is not great enough and comprehensive knowledge sharing and integration of an organisation are displayed its success (Okhuysen and Eisenhardt, 2002).

The goal of this paper is to review the existing literature on knowledge management and apply these theories in combination with some examples of other organisations to analyse main strategic knowledge purpose of an organisation by examining one specific case study of a biopharmaceutical company – Panther Biotech – The development of a radical new therapeutic for an acute inflammatory disease. It could be said that the case study provides a good example of managing knowledge and innovation in a knowledge intensive firm. Moreover, this paper will also provide an in-depth analysis of how Panther Biotech makes an effort to introduce good practices in knowledge sharing and knowledge integration in order to improve its new drug development process.

Definition

Knowledge

According to Davenport and Prusak (1998) the definition of knowledge is described as “Knowledge is a fluid mix of framed experience, values, contextual information, expert insight and grounded intuition that provides an environment and framework for evaluating and incorporating new experiences and information originates”. There are a number of definitions of knowledge but this definition could be one of the most referenced definitions in the literature of this field.

Moreover, different forms of knowledge such as tacit, explicit and implicit at the individual, social and organisational levels need to be considered in order to expose its potential contribution to the performance of the firm (Nonaka and Takeuchi 1995, Spender 1996).

Knowledge management

In today business, it could be said that most of firms show their effort to apply knowledge management in order to improve business performances or to promote innovation process. According to McIrnerney (2002), knowledge management is defined as an effort to increase useful knowledge within the firm by promoting communication, offering opportunities to learn, and promoting the sharing and transfer of appropriate knowledge.

Knowledge management can be defined as the set of activities that enable the creation, storage, distribution, and application of knowledge in organizations

(Chow et al. 2005).

Different definitions of knowledge and its management shows the diversity of the knowledge management processes ranging from knowledge creation, sharing, integration, codification, transfer, search, storage, use and so on.

Knowledge Intensive firms

A Knowledge intensive firm has been defined by Alvensson (2004) as an organisation which sell knowledge-based products or the use of knowledge to the market. It can be said that the core activities of this firm based on the knowledge of a large number of employees.

Innovation

Verloop (2004 cited Khiji et al., 2006) describes innovation as a new idea or concept created by R&D activities and successful innovation requires changes in organizational processes and transformation of an idea into a commercially useable product.

Other scholar defines innovation as a process: “the development and implementation of new ideas by people who over time engage in transactions with others in an institutional context” (Van de Ven, 1986).

Literature review of Knowledge management and Innovation

The emerging of the concept of knowledge-based societies, our societies have been shifting gradually to become knowledge societies (Hsiangchu and Tsai-Hsin 2002). Emerging countries like China and India are shifting their manufacturing-based economies to knowledge-based economies, and these two countries could be the main thread to the US and Western economies. For example, China and India are the two biggest markets for IT outsourcing. An industrial-based economy transforms to the information age or knowledge-based era and products of knowledge and knowledge works are becoming main sources for firms and nations to create profits and competitive advantages (Newell et al. 2009). The major advantage of China when compare with other nations could be a plentiful supply of cheap knowledge workers. For these reasons, it could be suggested that managing knowledge and the management of knowledge workers play an important role in the success of the firms and the nations as well.

During the last two decades, there has been a growing in the number of researchers which conduct their research in the field of knowledge and its management. Research on this field has been also received a successful history (Argote et al., 2003). These scholars also suggested that research on knowledge management spans many different areas such as economics, information systems and organisational behaviour and theory (Argote et al., 2003). The diversity of knowledge management research shows the great impact of this field in many disciplines thus biotechnology and pharmaceutical industry might not be stood out of this trend. Gans and Stern (2004 cited Khiji et al., 2006) suggested that biotechnology plays an important role in global industry and gradually rises with the encouragement of innovation to improve human heath and quality of life. Biotech firms may be unique among some reasons. Gans and Stern (2004 cited Khiji et al., 2006) also said that the development of a biotechnology company strongly depends on its science activities. It can be proposed that biotechnology companies are knowledge intensive firms. Nowadays, finding the answer for a question where and how knowledge is created and protected that is the challenge task for this industry and managing knowledge is also not as a basic task as before (Allarakhia and Walsh 2011). Pharmaceutical firms are more often driving partner relationships with biotech firms and research centres (Walsh et al., 2002 cited Allarakhia and Walsh 2011). Alliances between biotech companies, academic institutions and pharmaceutical companies may be the norm in this industry. It can be suggested that these alliances could help these firms get better access to fund and knowledge from their strategic partners and firms will respond to the new development and technology in faster and more flexible ways. According to Khiji et al., (2006), the average time for the whole biotech process from first investment for scientific discovery to sell product in the market can take up to 15 years. Biotech companies often try to attract capital and partnerships in the early stages of theirs development process and with numerous attempts to find the right company partners for the next steps which can include manufacturing, product design and marketing (Khiji et al., 2006). Unfortunately, most of them fail to deal with these tasks; Gassman et al. (2004 cited Khiji et al., 2006) showed a report of these decisions with a 90% failure rate among biotech companies. This can be suggested that biotechnology is a long-term investment with high risk and firms must highly consider the role of time-sensitive decision. Additionally, despite many people believe that biotech industry has showed immense potential for growth, not many firms can share in the success.

Case study

4.1 Background

Panther is a biopharmaceutical company this means it develops medical products using biotechnology. Developing therapeutic technologies to improve patients’ heath in order to gain outstanding benefits for shareholders is the main task of Panther. It is a publicly listed company with net cash and liquid resource of $400 million, and it also creates nearly 300 jobs on the West coast of the US. Its employees are experts in the early stage of the new drug development process. All R&D activities of Panther, except later stage of drug development are funded by itself. The purpose of this financial strategy is to ensure the operation of firm runs smoothly until it shows the successful of development drug in clinical trials. The funding for any later stage of drug development processes is carefully decided on a case-by-case basis. Until now Panther has taken only four development processes into clinical trials by itself.

4.2 Discussion