knowledge management for corporate entrepreneurship and growth: a case study

Knowledge and Process Management

Volume 15 Number 1 pp 32–44 (2008)

Published online in Wiley InterScience

97
(www.interscience.wiley.com) DOI: 10.1002/kpm.2
& Research Article

Knowledge Management for CorporateEntrepreneurship and Growth:A Case Study

Fatima Guadamillas1*, Mario J. Donate2 and Jesus D. Sanchez de Pablo3

1Faculty of Law and Social Sciences, University of Castilla-La Mancha, Toledo, Spain2Faculty of Law and Social Sciences, University of Castilla-La Mancha, Ciudad Real, Spain3Faculty of Chemical Sciences, University of Castilla-La Mancha, Ciudad Real, Spain

*CorSociaPedrE-ma

Cop

This study presents a case of corporate entrepreneurship analyzed from a Knowledge-basedperspective as an extension of the Resource-based View (RBV) of the firm. This approachproposes that the development of knowledge can underpin the growth of the firm throughcorporate entrepreneurship. Following this perspective, we analyze the way an established firmuses resources and capabilities, especially its accumulated knowledge, as a foundation on whichto develop a growth strategy through diversification to related businesses in the fields ofelectronics and Information Technology (IT). Moreover, we identify some of the most importantfactors contributing to the success of this strategy, such as the internal development and integrationof relevant technological knowledge, human resources (HR) policies, organizational flexibility,knowledge management tools based on IT, and purchase of companies and cooperation agree-ments for the acquisition of external knowledge. Copyright # 2008 John Wiley & Sons, Ltd.

INTRODUCTION

In an increasingly competitive business environ-ment, senior managers continually search forinnovative ways of establishing competitive advan-tages. One way in which they can achieve thisis through the development and application ofvaluable knowledge (Grant, 1996), which can providefirms with new growth opportunities throughcorporate entrepreneurship (Ihrig et al., 2006).

In this paper, we focus on a Spanish firm,Tecnobit, and in particular its corporate diversifi-cation pattern and those factors which havecontributed to its success in the last few years. In

respondence to: Fatima Guadamillas, Faculty of Law andl Sciences, University of Castilla-La Mancha, Cobertizo Sano Martir s/n, 45071 Toledo, Spain.il: [email protected]

yright # 2008 John Wiley & Sons, Ltd.

particular, we argue that Tecnobit has successfullydeveloped a growth strategy through diversifica-tion, involving related businesses representing theaviation electronics and Information Technology(IT) industries, building on the application ofaccumulated knowledge developed by the organ-ization internally or obtained and subsequentlyintegrated as a result of its external acquisition.Moreover, our analysis provides a deep under-standing of the process of organizational growthby showing the principal success factors involvedin the process of creating and developing relevanttechnological knowledge and skills in order to turnthem into new products and services for the firm.Among these factors, we can highlight the devel-opment and integration of technological resourcesand capabilities, human resources (HR) policies,organizational flexibility, knowledge managementtools based on IT, and the purchase of companies,

Knowledge and Process Management RESEARCH ARTICLE

jointly with the successful governance of coopera-tive agreements with other firms and institutions forthe acquisition of external knowledge. Overall, theabove factors have, in our opinion, had a strongimpact on the growth strategy of the company bypromoting and facilitating its knowledge manage-ment processes in a dynamic manner.

The structure of this paper is as follows. Firstly,a theoretical framework is introduced, whichanalyzes corporate entrepreneurship from theResource-based View (RBV) of the firm andestablishes the importance of innovation and thecreation of new knowledge for company growth.Put simply, this process requires that the organ-ization encompasses the capacity to learn, toinnovate, and to adapt itself to the technologicalchanges of the market. Secondly, the implementationprocess for the growth strategy in Tecnobit, which isthe focus of this study, is analyzed, starting with thekey factors involved in this. Thus, we study howthese factors have been managed and how they havesuccessfully contributed to the growth and results ofthe firm. Finally, some practical implications andconclusions are drawn, which provide guidance forother firms seeking to develop similar strategies.

CORPORATE ENTREPRENEURSHIPBASED ON KNOWLEDGEMANAGEMENT

Corporate entrepreneurship involves the internaldevelopment of new products or services for a firmor the enhancement and extension of existingproducts or services and their exploitation throughnew business lines (Sharma and Chrisman, 1999).Moreover, the results of these entrepreneurialactivities in terms of new knowledge, whenintegrated and combined with existing knowledge,skills, and processes within the organization, yieldnew products or services or allow for the enhance-ment of existing products or services (Galunicand Rodan, 1998). The firm may also seek toacquire and develop resources at some point in thefuture where such resources are necessaryfor growth and development but lacking in thepresent organization (Falkenberg, 1996; Itami andNumagami, 1992).

The process of firm growth can be explainedusing the RBV, which essentially maintains that thedifferences in performance among firms and thebasis of competitive advantage can be explained bythe resources and capabilities that they possess(Barney, 1991; Hoskisson et al., 1999; Mahoney andPandian, 1992; Wernerfelt, 1984). To be specific, in

Knowledge Management for EntrepreneurshipDOI: 10.1002/kpm

the RVB a research stream exists which analyzes theexistence of dynamic interactions between strategyand resources, thus explaining the developmentand growth processes produced in the firm as aresult of the current and future positions of theresources that the company possesses or controls(Falkenberg, 1996; Foss et al., 1995; Kochar and Hitt,1998; Markides, 1999; Teece et al., 1997). It is possiblefor this to take place owing to the combination andintegration of resources (and capabilities) and thesearch for new strategies, for which new knowledgeis required—both internally developed and/orexternally acquired (Cohen and Levinthal, 1990;Galunic and Rodan, 1998; Grant, 1996).

In this setting, certain kinds of resources areespecially important, such as technological resources(Itami and Numagami, 1992) and certain types ofspecialized knowledge (Grant, 1996; Penrose, 1959).Itami and Numagami (1992), for example, point outthat the interaction between technological resourcesand business strategy can guide the developmentof the firm in three possible ways. Firstly, theexisting technological resources can guide thefuture strategy (e.g., new business lines throughexisting knowledge); secondly, the current strategyguides the development of future technologicalresources (e.g., to build new resources to enter intonew markets); and finally, current technologicalresources influence the existing strategy (e.g.,current technological developments modify theexisting strategy). Additionally, Falkenberg (1996)indicates that it is possible to establish anotherrelationship between the future technologicalresources and the future strategy, in which learningand path dependencies stand out as significantelements of the evolutionary process of develop-ment for the firm.

Penrose (1959) explained that the dynamicprocess of growth implies that the firm shouldspecialize in obtaining and developing a certainresource type (i.e., knowledge). This specializationleads to diversification in areas in which servicesfrom this resource can be released, extended, andexploited, so that the company can optimize them.The author, therefore, contended that the companygrows to take advantage of the surplus services ofthe resources it possesses, and can thus generatevalue. In turn, and from the dynamic viewpointpreviously indicated, in this diversification processthe firm would obtain new resources and capabili-ties. For example, a company specializing in somespecific technological capability (e.g., design, man-ufacturing) could enter into a number of newrelated markets (e.g., a new customer group, aservice or a product satisfying another necessity, oraccomplishing a new function) at which point the

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RESEARCH ARTICLE Knowledge and Process Management

accumulated expertise can be extended to createadditional value for the firm.

Recently, and due to the evolution and advancesin certain areas of IT, many opportunities havearisen for technological-based companies regardingcorporate entrepreneurship through diversification,cooperative agreements, and the creation of newproducts. Knowledge linked to these technologiescan produce new business opportunities andgrowth, and IT tools can be used in the managementof the knowledge of the organization, which isits main valuable strategic resource (Alavi andLeidner, 2001; Grant, 1996). As Grant (2002, p. 177)points out, from a strategic RBV point of view,knowledge is a particularly interesting resource,because many types of this resource are scarceand difficult to transfer, and complex forms ofknowledge—capabilities may be viewed as themanifestation of organizational knowledge—maybe very difficult to imitate. In this sense, knowledgemanagement tools based on IT help the organiza-tion to create, transfer, gather, and apply know-ledge, which allows the firm to survive and grow bytaking advantage of its exploitation within themarket.

For example, IT can facilitate the process ofknowledge creation as a support instrument both inthe individual learning process and when individ-uals collaborate, resulting in increased positiveinteractions among them (Alavi and Tiwana, 2003,p. 106). Also, certain systems based on IT (such asknowledge repositories, or instruments that allownetwork connectivity) can be employed to facilitateknowledge storage and certain transfer processes(Alavi and Leidner, 2001). IT can also facilitate theintegration and application of knowledge, thusreducing the need for communication and coordi-nation among people, by codifying and automatingcertain organizational routines1 (Grant, 1996), or bythe storage, recovery, and constant updating of theorganizational directives in certain structuredrepositories such as corporate intranets (Alavi andLeidner, 2001, p. 122). In this sense, knowledge,when it is structured and gathered in independentmodules, is easier to integrate, allowing for itsfuture use as well (Sanchez and Mahoney, 1996).

IT potentially plays an essential role in theseknowledge management activities because codifiedknowledge can be structured and more easilytransferred than tacit knowledge (Sanchez andMahoney, 1996; Zander and Kogut, 1995) and thuscan be widely used in the organizational net to gain

1For example, workflow systems help to apply knowledge fromautomated routines, which reduces the need for communicationamong different experts in the organization (Grant, 1996, p. 115).

34 F. Guada

its full potential (Argote and Ingram, 2000). Inparticular, both kinds of knowledge, explicit andtacit, in the form of new technological products andprocesses, and company routines and capabilitiesare responsible for firm growth through corporateentrepreneurship, as we show later on in the casestudy.

Apart from technical elements, other aspectshave a facilitating key role in the development ofknowledge management processes and the spread-ing of this into new markets through corporateentrepreneurship such as HR policies, flexibleorganizational structures, cooperation agreements,corporate culture, or the efforts made by internalR&D for the development of proprietary technol-ogy. Indeed, these have been factors that haveinfluenced the successful growth strategy of theTecnobit Company, based on the management of itsknowledge base. Next, we explain all these elementsand the way in which they have contributed to thefirm’s development and growth.

CASE STUDY FRAMEWORK:TECNOBIT’S PROFILE

In general, a case study aims to examine a‘‘contemporary phenomenon within its real lifecontext’’ (Yin, 1994, p. 13). As a research method, itis viewed as improving our knowledge of individ-ual and organizational phenomena (Van Maanen,1979; Yin, 1994). Case studies primarily involveresearchers undertaking an in-depth study of aparticular organization with a wide variety ofevidence being collected as a result. In our case,we collected multiple data and information frominterviews with one of the main firm’s directors andother company documents. In interviews, questionswere of an unrestricted nature in order to encouragethe manager to converse freely (Maykut andMorehouse, 1994). Extracts from internal reports,the company’s web page and other relevantdocumentation, were also used to elaborate thecase study.

Tecnobit’s profile

The company was founded in 1976 as DOI-AssociateEngineers. Located in Madrid (Spain) its mainactivity centered on the control of industrialprocesses. In 1981, an industrial plant was createdin Valdepenas (Ciudad Real, Spain) and the firm’sname was changed to Tecnobit. Over the next fewyears, the company underwent considerable devel-opment: in 1983, a important contract was signedwith the Defence Office of Spain; in 1987, the

millas, M. J. Donate and J. D. Sanchez de PabloDOI: 10.1002/kpm

Figure 1 Tecnobit’s lines of activity. Source: Tecnobit Report (2007)

Table 1 Tecnobit’s main figures (evolution)

Concepta 2004 2005 2006 %D (2004–2006)

Equity 22.6 25.3 28.6 26.54Incomes 38.0 40.7 50.4 32.63EBITDA 9.2 10.4 12.2 32.60Net profit 2.5 2.6 3.5 40


command and control activities began; in 1992, thefirst EF-2000 contracts (avionics) were obtained; in2000, the Tecnobit Group was created; and in 2003,companies that made up the Tecnobit Group weremelted into a single legal entity. The current namefor the company is Tecnobit S.L., and its share-holders are: CCM Corporation (48%), IT Deusto(48%), and other shareholders (4%).

Tecnobit has five lines of activity (Figure 1), withthe following sales income distribution (2006):Avionics (49%); command and control systems(21%); simulation systems (14%); optronics (8%),and IT systems (8%).

It has two plants, Alcobendas (Madrid, Spain)and Valdepenas (Ciudad Real, Spain), with a totalextent of 20.300 m2. It has 330 employees, of which60% have a university degree in engineering orcomputer sciences. In relation to financial data, in2006 Tecnobit improved on the (good) results of2004 and 2005 (Table 1).

Tecnobit has also devoted, on average, 8.5% ofsales income to R&D. Moreover, it has improved itsefficiency due to the reduction of commercial andgeneral expenses, through a functional and organ-izational restructuring, all of which is reflected inthe financial performance of the company.

What is especially interesting about the evolutionof the company is how it has diversified its businesslines, beginning with its main activity of aviationelectronics (avionics) spreading to new simulationand training projects within the same industry,2 aswell as into the IT field, through the creation ofcommand and control systems, the development ofsoftware, and knowledge management projects.The diversification has been done through bothinternal development and knowledge acquisitionthrough cooperation agreements and the purchaseof certain companies. With the newly acquiredcompanies, Tecnobit extended its activities beyondthe electronics industry, to provide maintenanceand technical support to other companies within thesector. During the period 2003 and 2006, Tecnobit

2Some examples are: electro-optical sensors, command systems,naval control, and aviation operations control systems.


continued its expansion strategy, and currently, itcontinues to consolidate its position and growth inrelated industries. One important point worthmentioning here is the effort made by the companytoward its international expansion, which hasresulted in international sales by the group,representing an increasing proportion of its totalsales income, mainly as a consequence of itsreputation and the consolidation of its brand image.

Industries in which this company operates arerapidly changing because they are technologyintensive, and there is an increasing trend towardindustrial concentration to gain advantages as aresult of size. In this setting, and to face thesecompetitive conditions and the innovation chal-lenge, Tecnobit has designed a dynamic andaggressive growth strategy, with the objective ofgenerating synergies (essentially based on takingadvantages of the knowledge that it possesses) andimproving the value of the company throughinternal development and related diversification.Thus, Tecnobit has based its diversification patternon the application of available resources, and itsexpertise and knowledge in IT, internally developedor acquired, for the development of new productsand services.

Additionally, Tecnobit attaches great importanceto internal IT systems, and it tries to manage them inorder to take advantage of the great potential which,from a strategic and organizational viewpoint, thesetechnologies can offer in relation to certain criticalactivities for knowledge management—to easeaccess to, the transfer of, and the storage ofknowledge and information within the firm.

Clients’ portfolio 122.4 144.2 159.4 30.22

aMillion of s.

35


Next, we shall explain in depth how the companyhas developed its corporate entrepreneurship andgrowth strategy, and which are the elements andfactors that have contributed to make this processpossible to accomplish through its influence on theknowledge management of the firm.

CORPORATE ENTREPRENEURSHIPIN TECNOBIT

In this section, we focus on Tecnobit’s corporateentrepreneurship strategy and those factors thathave contributed to its success in allowing the firmto grow successfully. We present a dynamic modelthat identifies an array of factors which facilitate thegrowth process based on the management of itsknowledge base (Figure 2).

This model shows how the interaction of a groupof organizational and strategic factors facilitates thedevelopment of new knowledge and its incorpora-tion in products, services, technology, and processinnovations. These factors are: the use of IT tools forknowledge management and the development andintegration of IT and technological resources (Alaviand Leidner, 2001; Alavi and Tiwana, 2003); HRpolicies and practices (Ciborra and Andreu, 2001;Davenport, 1999; Nonaka, 1994; Nonaka andTakeuchi, 1995; Tannenbaum, 1997); organizationalflexibility (Grant, 2002); the purchase of companiesand the successful management of the cooperativeagreements with firms and institutions, in order toacquire external knowledge regarding IT-relatedopportunities, or to generate knowledge jointly

Figure 2 Factors of influence on corporate entrep

36 F. Guada

(Grant and Baden-Fuller, 2004; Kessler et al., 2000;Mowery et al., 1996).

We adopt a dynamic perspective to explain howthe organization successfully manages the balancebetween the resources and the capabilities it pos-sesses concerning IT, especially those based onspecific knowledge which are necessary to developits current activities (i.e., its knowledge base), andthe way other resources (i.e., new knowledge)are externally acquired, internally developed, andcombined and integrated with existing knowledge tocarry out new activities and business lines.

Based on the relationships represented in themodel, we analyze next how these factors have beenmanaged by Tecnobit, and how they have con-tributed to the growth of the firm.

Information technologies forknowledge management

The continuous innovation in Tecnobit is based onthe appropriate use of the capabilities and knowl-edge regarding IT that it develops and applies toprojects and products. All of these have significanttechnological content derived from its principalactivity of defense electronics, as well as techno-logical developments in aviation (avionics), electro-optical sensors, simulation and training tools,command and control systems, software develop-ment, and other specific knowledge related to IT. Allof this requires continuous and significant invest-ment in R&D to ensure that existing products areup-to-date and support the development of newproducts. It is also important to observe that quality

reneurship based on knowledge management



specifications related to products are continuouslybeing enhanced too.

IT resources and skills in Tecnobit have been builtup since the SIDOCOR Company was incorporatedinto the firm in 2000. This company was initiallyfounded in 1988 and was dedicated to IT andknowledge management tools and systems devel-opment. The reason for the acquisition of this firmwas to obtain complementary knowledge and skillswhich were difficult and time consuming forTecnobit to develop and that were not easilytransferable through other methods (e.g., by hiringindividual experts or groups, or through strategicalliances), because the knowledge was highlyspecific and context dependent.3 Due to this, whenit was acquired, this company initially worked withalmost total independence and it was slowly andprogressively integrated in Tecnobit’s managementsystems, culture, and structure.

Tecnobit’s current IT tools for knowledge man-agement, apart from being oriented toward externalmarkets, are widely used in the organization aswell. They are based on the use of web technologiesin open and multi-platform systems, jointly withthe development of applications and content withinternational standards through the use of docu-ment management tools. Overall, these tools havebeen designed to assist in the creation, storage,retrieving, transfer, and application processes ofknowledge management.4 They are shown inTable 2, and their usefulness is explained next.

Information and control systems were developed bythe ELCO Company. This company, like SIDOCOR,was acquired to obtain complementary knowledgebased on simulation systems. These systems havebeen based on IT and communication technologies,adapted to the commercial, security, and defensesectors. Among these, the Incidence ManagementSystems (IMS) stand out, which are applied to

Table 2 IT tools for knowledge management inTecnobit

- Information and control systems- Document management tools- Storage systems- Other archive systems

3At this time, Tecnobit was oriented toward hardware manufac-turing, while SIDOCOR specialized in software development anddesign. The acquisition of this kind of specialized knowledgegave Tecnobit the possibility to enter into new markets and toimprove its position in established markets.4Among these tools, those that are dedicated to storage andtransfer of knowledge stand out as being the most importantones.


unify and relate, with the help of the client-firm,operational, and technical control information.5

This is important because it allows the system todetect problems or incidents in the development ofthe client-firm activities.6 Also, specific controlsystems have been developed to integrate differentairport systems, such as the Air Operations ControlSystem, capable of quickly integrating very diverseinformation and explicit knowledge on air traffic,incidents, etc. Moreover, Decision Support Systemshave been developed, which facilitate the creationand application of new knowledge. These are basedon the use of databases and simulation proceduresto build scenarios, making the decision takingeasier.

Document management systems support knowledgestorage activities, such as digitalization, structuring,filing according to selected standards, control ofauthorship of documents, and the management andelectronic editing of databases. Since 2000, theseactivities have been used by public organizations indifferent countries, and they are also applied withinthe company.

Systems to store and to relate information andaccumulated knowledge have also been developed.The main goal of these systems is to make knowl-edge transfer and the users’ access easier, so thatthe organizational knowledge base is more widelyaccessible and runs more smoothly and quickly. Tomake this possible, its contents are incorporatedinto a structured web site, where authorized userscan access all knowledge and updated informationwhich the company possesses in one domain, andimprove it through their contribution of new dataor information. Another use of these systems isto make electronic training for employees easier(e-learning). Overall, Tecnobit has developed sys-tems adapted to the user’s needs, through theapplication of Intra/Extranet solutions and SGML/XML document databases.

Finally, Tecnobit exclusively commercializes andimplements the HYPERWAVE tool, which offersknowledge management solutions, electronic learn-ing, and supports the creation and maintenance ofcorporate sites. Through this technology, Tecnobitcontinues its related diversification strategy, secur-ing its strategic positioning in the aeronautical

5These systems are essentially technological developments whichhave been used in the military field and later applied to the civilfield. Moreover, these technologies are applied in projects underrequest, where the interaction between the client-firm and thesupplier (designer) firm is very important.6The Incidence Management System (IMS) is linked to the FailureReview and Correction Actions System (FRACAS), which is adatabase that compiles all the problems that arise and it includessolutions and all the possible actions to correct these.

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military field and introducing itself into the civilcommercial field. It is a help tool for operationsrelated to document management (indexation, author-ship control, versions control, etc.), web contentmanagement (linking, presentation, upgrading,security, etc.), the creation and management of acorporate site, information search in a structuredmanner, workflow management, assistance for teamwork, and assistance for distance learning (courses,forums, libraries, searches, course support, etc.).

The development of these tools based on IT andthe accumulated knowledge about them is a basicfactor for the development of its growth strategythrough related diversification, as they have beensuccessfully applied in new business and markets.On the one hand, Tecnobit commercializes high-technology solutions to satisfy multiple customerneeds for which it has developed strategic capa-bilities based on highly valuable knowledge. On theother hand, several IT solutions such as databases ordecision management systems are internally used inTecnobit, which allow this company to manage itsknowledge processes to generate, integrate, gather,transfer, and apply knowledge, and improve theirown tools to make them more reliable and valuablefor the customer. Additionally, all this leads tonew technological applications. Therefore, this is adynamic process which forms the basis of thesurvival and growth of this company.

Organizational structure

The growth of the firm since 2000 has brought withit new management problems, due to the significantincrease in its size and changes in its strategy,owing to the need to coordinate and integratedifferent companies with distinct backgrounds,path-dependencies, and cultures.7 One difficultthing for the company was to integrate firms thatshowed some overlap in certain activities, andtechnological asymmetries, even if important comp-lementary factors in their value chains wereidentified too. Firstly, and to gain efficiency, someemployees (in overlapping jobs) were fired.Secondly, and with the objective of enhancingefficiency and integration even further and to givehigher flexibility to its innovative activities andchange, the organization has been structured byprojects, with some functions centralized, such ascontrol and finances, training and HR. However, thedecision-making process is decentralized, on the

7The two Companies, ELCO and SIDOCOR, were acquired in2000. Until 2003, they both maintained an independent juridicalform and Tecnobit worked as a Group. Afterwards, Tecnobit wastransformed into just one legal entity.

38 F. Guada

basis that the closer the decision unit is the betterplaced it will be to take decisions.

The organization of projects is as follows: in eachline of activity a line director exists, and in eachproject the firm appoints a program director(economic and financial management, scheduledtime, etc.), a project (technical) director, and fourexperts (quality, proofs, manufacturing, anddesign). Among the experts, a team directorwill be answerable to the project director. A highflexibility exists because the employees are assignedto diverse projects within different lines of activityto cover the firm’s needs, attempting to develop a‘‘concurrent engineering’’ where employees ‘‘canthink about everything,’’8 by having a global visionof the company. Therefore, the employees movewithin all lines of activity, which promotes thesharing of knowledge and ideas, and stimulatescreativity (Nonaka and Takeuchi, 1995). Thisorganizational structure also allows Tecnobit torapidly respond to changing customer needs andpreferences, which ultimately permits Tecnobit toadjust to the dynamic and complex conditions ofits competitive environment.

Cooperative agreements andpurchase of companies

Strategic alliances and the purchase of companieshave been used by Tecnobit to acquire knowledgethat the company did not possess and that it wasdifficult and costly to develop internally. Some-times, the acquired knowledge has been comp-lementary to existing knowledge, with which it hasbeen successfully integrated, considering that thefirm has a good level of absorptive capacity (Cohenand Levinthal, 1990), and occasionally, suchknowledge has directly been used to enter intonew markets.

Alliances have been developed by Tecnobit tocover different objectives, both to exploit andexplore knowledge in different areas (Grant andBaden-Fuller, 2004; Rothaermel and Deeds, 2004).Alliances are frequently an option for Tecnobit togrow technologically because they have less finan-cial risk compared to other alternatives, such ascompany acquisitions, or are appropriate whentechnological capabilities are too difficult to developinternally and the firm would spend too much timein doing so.9 Tecnobit, apart from technological

8Interview with Tecnobit’s plant Director (Valdepenas, Spain,2007).9For example, joint ventures have been occasionally used byTecnobit in order to reduce risk and generate a new technologyin a short period of time.



alliances, has entered into cooperation with otherfirms and institutions in financial, commercial,services, manufacturing, and industrial domains.10

Some cooperative agreements entered into byTecnobit have particular significance, even if theyare of a very different nature. On the one hand, inthe avionics area, it has established an explorationalliance with the Israeli Rafael DM company for thejoint development of a laser indicator.11 It has alsobeen working with the American companies Lock-heed Martin and Cubic Defence Electronics, in thedevelopment of diverse simulators. For example, itis trying to adapt Cubic’s air simulator (in whichthis company is the world’s technological leader)for the terrestrial domain, such as in combat cars.Moreover, cooperative agreements have beendeveloped with public institutions, such as theUniversity of Castilla-La Mancha, for the developmentof various technological projects. On the other hand,Tecnobit has signed an agreement with the Germanfirm Hyperwave for the exploitation through com-mercialization of its computer tool—also referred toas Hyperwave, as previously point out—in Spainand Latin America. In general, Tecnobit is satisfiedwith all these alliances, in terms of the attainment ofobjectives, acquisition of complementary techno-logical knowledge through learning, and thepossibilities this gives to Tecnobit of growingthrough the exploration and exploitation of newmarkets and products.8 Moreover, Tecnobit haschanneled some of its cooperative projects throughits participation in official R&D programs,12 forwhich it has received financial support. Forexample, it has participated in the TechnologicalAeronautic Plan II, which includes important finan-cial support for carrying out these investmentprojects. Also, it maintains collaboration projectsin technological matters with other governmentresearch centers, such as the R&D Army Center(CIDA).

In some cases, and due to the difficulties ofincorporating certain capabilities and tacit knowl-edge into the organization through strategic alli-ances or other means (imitation, hiring of technicalexperts, etc.), technology-intensive firms that hadthe required capabilities were directly acquired.Basically, the explanation for these acquisitions is

10Obviously, in order to develop these alliances, the firm musthave alliance government abilities, because the success of thealliance, in terms of objectives achievement strongly depends onthis (Ireland et al., 2002).11In this sense, the increase of Tecnobit’s facilities to adequatelyface the cooperative projects with this company is currently beingcarried out.12Among these programs, we can highlight ATICA, PATI,CEDETI, and PROFIT.


based on the knowledge characteristics to betransferred; that is to say, by problems of causalambiguity, high specificity, and context depen-dency, which make the transfer or replication ofknowledge and capabilities difficult to carry out(DeCarolis and Deeds, 1999; Grant, 1996; Reed andDe Fillipi, 1990).

These acquisitions, through which the companyhas been configured, have allowed Tecnobit tointroduce itself into new markets, supporting itsgrowth strategy, and consolidating its currentcompetitive situation. As previously pointed out,SIDOCOR and ELCO were purchased becausethey possessed valuable knowledge that was notpossible to replicate and which was complementaryto Tecnobit’s existing knowledge base. Althoughtheir incorporation into Tecnobit was difficult tomake due to important differences in relation tomanagement systems or culture and structure,among others aspects, nowadays they are com-pletely integrated into the firm’s structure, and theassessment in financial and strategic terms of theseacquisitions is highly positive for the company’smanagers and shareholders.8

Human resources practices for organizationalknowledge management

The employees’ knowledge is one of the mainresources for the firm, because experience, ex-pertise, abilities, skills, and the ‘‘know-how’’ ofindividuals are the essence of a firm’s competitiveadvantage when it is coordinated, combined, andapplied for creating value (Grant, 1996; Kogut andZander, 1992). Also, as a result of this combinationand coordination, new valuable knowledge iscreated, both in an individual and in a collectivesense as well (Grant, 1996; Spender, 1996). How-ever, the generation and integration of knowledgeamong individuals need practices that encouragethe socialization and externalization of tacit knowl-edge, access and availability to the knowledge ofexperts, or the training of the firm’s employees(Nonaka and Takeuchi, 1995; Quinn et al., 1996). Inthis case, the main HR practices that support theknowledge management processes and the devel-opment of technological capabilities of Tecnobit are:the contracting of highly qualified employees, theimplementation of appropriate and extensive train-ing practices, the use of teamwork, and the designand implementation of various incentive systems topromote specific aspects in the organization, such asknowledge sharing or the extensive use of IT. It isimportant to note that these practices allow for somedegree of individual and group autonomy whileensuring the achievement of organizational goals.

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Firstly, due to the high technological level of theindustries in which the company operates and thecontinuous innovation activities that it carries out,it is essential that employees are highly qualifiedtechnically, for which two HR policies are essential,the selection and contracting of qualified employeesand the continuous training and updating ofemployees’ knowledge. In relation to selectionand contracting issues, various initiatives havebeen developed. For example, an employmentexchange exists, which is available on Tecnobit’sweb site, and the presence of Tecnobit at universityemployment fairs is common practice as well.However, in the opinion of Tecnobit’s managers,the supply of technical personnel for some of thefirm’s working positions is lower than the demand.In this sense, Tecnobit has developed a strategy of‘‘making’’ a great part of its HR, with a number ofemployees being contracted on a basic technicallevel who are then specifically trained by the firm tocarry out their roles. This strategy, alongside otherpolicies, indirectly motivates the employees, whomconsider training as a part of their remuneration, allof which affects their levels of satisfaction at work.13

The firm also carries out continuous trainingprograms. The HR department organizes theseprograms in a flexible form, because the employees(through a request to their directors) are giventraining on specific themes, either of a technical ormanagerial nature (quality, risks at work, logistics,office applications, process management, orbusiness administration, among others). Any ofthe employees can participate in them, and this factmakes the enhancement and updating of theirknowledge and the development of their abilitieseasier. In many cases, to promote participation,distance courses are given, through computersystems (e-learning). Also, the department givestraining on topics concerning quality to all employ-ees, specifically concerning quality policies, pro-cedures, or control methods. Another initiativerecently carried out by Tecnobit has been theimplementation of the so-called ‘‘Tecnobit class-room,’’ where training on technical and manage-ment areas is developed on a continuous basis.14 Ingeneral, training plans allow employees to develop

13One of the indicators that shows the working satisfaction ofemployees is the turnover rate, which is very low in Tecnobit(over 2% per year). Retention of employees also impacts on theirproductivity and indirectly, on the firm’s knowledge protection(Liebeskind, 1996).14Tecnobit have tried to implement an assessment system forall training initiatives. For example, a questionnaire on theeffectiveness of the training course is filled out by the employeeswhen the course is over; afterwards, the department’s directorfills out another questionnaire to check out the implementation ofthe concepts learned by the employees.

40 F. Guada

an individualized career plan, and are critical inachieving the consolidation of knowledge, technicalknow-how, and the improvement of work in allorganizational areas.

Overall, both employees’ qualifications andcontinuous training allow Tecnobit to face techno-logical challenges by quickly responding to theenvironmental changes, while giving them theopportunity to professionally develop themselves,which makes their socialization and identificationwith the firm’s values and culture possible. More-over, all this should influence productivity andmake the process of knowledge sharing easier(Argote and Ingram, 2000).

As we have previously indicated (Section‘‘Organizational Structure’’), the organization ofwork (projects) is based on multidisciplinary teams.They constitute one of the continuous and intensivecollaboration and coordination tools among differ-ent professionals and experts, who possess verydifferentiated knowledge. This fact characterizesthe process of innovation by the creation, accumu-lation, integration, and transfer of knowledge in thefirm. The knowledge creation is facilitated by theinteractions produced among team members, whichstimulates creativity and knowledge sharing (Alaviand Leidner, 2001). Multidisciplinary teams alsoallow the integration of different types of knowl-edge through the application of specific rules,routines, and the use of a common language andprinciples provided by the organization (Grant,1996; Kogut and Zander, 1992). In addition, work inteams at Tecnobit is a key component of the cultureof the firm. Moreover, and due to the considerationof some policies in relation to teamwork, such asfinancial incentives based on team results or themobility among different projects, Tecnobit’semployees have great motivation and areacquainted in depth with the productive processesof the firm.8

Some particularly important HR practices thatsupport the development of knowledge processesare those which imply the use of IT. For example, toencourage the effective storage and transfer ofknowledge, some databases have been especiallydesigned: the good practices and the failures data-bases. The latter is used more when the objectiveis to learn from former mistakes and to minimizefuture failures. In these databases, the mainobjective is transforming tacit knowledge intoexplicit knowledge, to be applied in the practiceof activities by combining it with existing knowl-edge (Nonaka, 1994). Also, some forums have beencreated on the corporate site to promote debatesamong employees, and to compile any type ofsuggestions and ideas. Overall, the challenge is to



develop a computer tool where all the employeescan provide their own knowledge, such as the WIKIdatabases, for example. However, the key aspectwhich will make all these systems useful—andsuccessful—is that employees use them frequently,because this enriches their content and utility. Thedevelopment of policies to make employees usethese tools will be an important objective forTecnobit in the near future.

In relation to incentives, Tecnobit has establishedsome systems to promote the improvement of workand knowledge transfer, especially with respect totacit knowledge. Firstly, monetary incentives existwhich involve 2–3% of the company’s profits, whichis distributed among the different departmentsof the firm. The department head decides theamount that goes to each person based on theircontribution to the improvement of work in thefirm, and participation in knowledge management.The latter aspect is very important in Tecnobit, so amonetary incentive for the best suggestion of themonth has been set, which can refer to any technicalor administrative subject. Incentive systems moti-vate employees to share their knowledge, eventhough it entails an additional cost in the manage-ment process. However, in the opinion of Tecnobit’smanagers, additional efforts must be made in thisarea, as they do not believe that knowledge is sharedsufficiently.

Finally, it is important to underline the role ofsome mechanisms that are used to protect Tecno-bit’s knowledge, which are linked to certain HRpractices. Firstly, the employees are obliged to sign aconfidentiality clause in their contract to avoid theuse of strategic knowledge in the event that theyleave the firm and go to work for a rival firm,15

although the low turnover rate of the firm avoidsan important number of problems in relation tothis issue. Secondly, a number of limitations areestablished in order to limit access to project knowl-edge. So, project databases are managed by a‘‘need-to-know’’ (NTK) system, which means thatthe project director decides who can gain access to theknowledge of the project in any given moment. Thus,a project member only has access to the knowledge ofthe project in which he/she participates but not toother projects. Nevertheless, the position of thecompany on this point is changing, because theobjective at some point in the future will be toachieve a wide transfer and sharing of knowledge in

15Moreover, Tecnobit has contracted a consultancy services com-pany in order to manage all the issues related to intellectualproperty protection, such as patents management, contractsdrafting for specific employees, and the government of strategicalliances, etc.


the firm. In the opinion of Tecnobit’s plant Director,‘‘excessive internal protection of knowledge withinthe firm is not necessary, because employees do notcompete amongst themselves in relation to theknowledge that they can possess.’’

All the aspects analyzed concerning HR practicesand knowledge management are supported by astrong corporate culture. This is one of the mostimportant organizational elements, due to itsinfluence on the functioning of the company. Inthis sense, efforts have to be made in adapting theculture to the evolution of the firm in order to facefuture challenges. This fact, among others, willbe commented in the next section.

TECNOBIT’S CHALLENGESFOR THE NEAR FUTURE

Undoubtedly, to continue with its positive evol-ution in terms of performance and growth, someimportant challenges have to be faced by Tecnobit inthe near future. In relation to its growth strategy,Tecnobit will try to improve its current competitiveposition through internal development. In thissense, Tecnobit faces new growth challenges fromthe success of its internal R&D projects: to developsufficient financial strength and industrial size toenable it to take on important projects. Externalgrowth through purchases is not a consideration butTecnobit will establish the cooperative agreementsthat are required in order to develop its differentactivities and projects. Moreover, the internationalexpansion of the company shall continue, althoughit will focus on European countries instead of otherless profitable areas. Moreover, in the lines ofactivity where the company is a technological leader(optronics and naval command and control) theaim is to be an ‘‘excellent’’ company, focusing onspecialization and niche strategies in relationto these technologies. Developing new productsand technologies is also an important objective forTecnobit. To make possible to accomplish theseobjectives, the company must reinforce its repu-tation in order to obtain new projects and contractsand contact with new partners, while finding asolution for internal weaknesses detected in theprevious analysis, related to the way which knowl-edge is managed within the organization.

Thus, one important challenge for the company isto encourage the sharing of knowledge amongemployees. In this sense, the firm’s orientationtoward ‘‘excessive’’ knowledge protection has to bechanged—a change which will mean adapting itsculture accordingly. Hence, the employees shouldperceive that sharing knowledge is important for

41


the firm and that it is an essential part of their work;that to share knowledge does not make them lessvaluable for the firm; and also, that access toknowledge is not restricted (except certain knowl-edge of a strategic nature). In other words, Tecnobitwill have to resolve cultural problems and the fearof employees to share their tacit knowledge.

For all this to happen, some HR practices andother tools have to be developed or promoted. Forexample, monetary and/or non-monetary incen-tives might help to encourage the use of IT tools andcontributions in the form of suggestions and ideasby employees. The adaptation of databases so thatthey are easier (and more productive) to use isalso another important challenge, although somesolutions have already been considered for theirimplementation, such as a computer tool wherebyall the employees can contribute their knowledge(in the form of WIKI software). Thus, electronicmanuals and good practices codes could bedeveloped, where the information and explicitknowledge would have to be frequently updatedand put in order, hence achieving a high agility inknowledge management.

CONCLUSIONS: KNOWLEDGEMANAGEMENT AS A KEY FACTOR FORCORPORATE ENTREPRENEURSHIP ANDGROWTH SUCCESS

This study has been developed from a knowledge-based perspective and it has tried to analyze howa firm can develop a growth strategy by relateddiversification and corporate entrepreneurship,successfully managing the balance between theresources and capabilities that it possesses and thenew abilities and skills that the firm acquires ordevelops, especially those based on IT knowledge.A dynamic perspective has been adopted to explainhow the company develops its capabilities andanalyze the way in which some aspects havecontributed to the firm’s growth and performanceby their involvement in the knowledge manage-ment of the company.

The analyzed company is competing in verydynamic sectors, such as the IT industries andelectronics. These environments tend to be veryvolatile and complex in terms of competitiveconditions, having permeable and uncertain bound-aries, a structure that is poorly defined, andtherefore, intense competition in innovation takesplace (Grant, 2002). These facts imply that thesecompanies are knowledge intensive and thatcompetitive advantage is difficult to maintainbecause knowledge evolves rapidly and flows

42 F. Guada

easily (DeCarolis and Deeds, 1999). All this turnsknowledge into the key strategic resource for theorganization (Grant, 1996). Hence, the case study isbased on the recognition that the management of theprocesses through which knowledge is created andapplied in the organization is an essential competi-tive tool which managers should recognize anddevelop as a basis for establishing their strategy inorder to achieve competitive advantages.

In particular, we have studied the Tecnobit’sgrowth strategy, which is mainly based on theexploration and exploitation of its accumulatedknowledge, derived from: (1) its internal develop-ment (R&D); (2) its acquisition (purchase ofcompanies and strategic alliances); and (3) theintegration of both types of knowledge in theknowledge base of the organization. In turn, all thishas resulted in the development of new processesand product technologies, the entry into newmarkets, the broadening of some technologies intoother related markets, international expansion, thepossibility to develop new strategic alliances and, ingeneral, the improvement of its corporate strategicposition and performance.

Moreover, the case study shows the way Tecnobithas handled certain factors of influence in knowl-edge management and innovation such as IT,cooperative agreements and acquisitions, organiz-ational flexibility, and HR policies. Bearing all thisin mind, knowledge management is a dynamicprocess, according to which the creation of newproducts and processes gives rise to the develop-ment of new technological capabilities, and these inturn sustain the strategic growth process (Itami andNumagami, 1992). All these factors make it possibleto take advantage of important synergies in orderto exploit the knowledge that the organizationalready possessed by the organization and to spreadcreativity to efficiently explore valuable new knowl-edge. It even implies successfully managing somecontradictory forces, such as competition andexternal cooperation, to use existing knowledgeand create new knowledge, as well as developingand using creativity while simultaneously focusingon efficiency.

Although each firm must develop and implementits strategy considering its specific circumstancesand the proposed model might not be applicableto all companies (e.g., non-technology-intensivefirms), the analysis of this case shows how, in orderto face the strong competitive requirements of thecurrent environment, it is possible to successfullyimplement a corporate entrepreneurship strategy,based on: the exclusivity and complementarydomains of strategic knowledge, the creation ofnew knowledge, and the appropriation of profits



derived from these through the exploitation oftechnology in a rapid and continuous way togenerate value. In order to achieve this, the factorsshown in the model are essential, which each firmshould manage and adapt, in order to establish itsown strategy and goals. Thus, managers of eachfirm should ask themselves certain questions suchas: how can we develop new knowledge and whatare the factors that influence this process? For eachconsidered factor, what kinds of mechanisms areavailable for the company and how can we use themto make knowledge management easier? In thissense, is the existing organizational flexibilityadequate? How can we make better use of IT toolsto manage knowledge? What kind of HR practiceswould facilitate the sharing of knowledge, mini-mizing the risk of the poaching of our strategicknowledge?

To conclude, this case shows how a significantnumber of opportunities are emerging for firms todiversify by creating new products (based on ITknowledge) and to extend the existing technologiesto new markets and businesses through knowledgemanagement. Thus, the conversion of technicalideas into new business, products, services, andsolutions is based on the understanding of thesynergies and interactions between the differentknowledge possessed by the firm, their technol-ogies, and their internal organization. Nonetheless,knowledge management and the understanding ofthe possibilities that it gives to the firm in terms ofinnovation, growth, and improvement of perform-ance will be key aspects for the survival andstrategic success of technology-intensive companiesin the near future.

ACKNOWLEDGEMENTS

Authors wish to thank Antonio Cuquerella (Tecnobit’splant director at Valdepenas, Spain) for his support in thedevelopment of this research. We also thank two anon-ymous reviewers for their helpful comments and sugges-tions, and Rachel Davy for her assistance in preparing thepaper for publication.

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knowledge management for corporate entrepreneurship and growth: a case study

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