Core Capability and Core Rigidity: Organizational Memory Perspective

Core competence and core rigidity: Organizational memory perspective

Chen-Yi Tsai 1, Lin, Julia L. 2, Chen, Ching-Hsiang3

1. Doctoral student, Graduate School of Management, I-Shou University. lia05@ms57.hinet.net 2. Professor, Graduate School of Management, I-Shou University. julia@isu.edu.tw 3. Doctoral student, Graduate School of Management, I-Shou University. frank813@giga.net.tw.

Core Capability and Core Rigidity: Organizational Memory Perspective

Core competence and core rigidity: Organizational memory perspective

ABSTRACT

Organizations, in the hypercompetitive environment, continuously learn, accumulate, and store knowledge to build organizational capability, and to sustain competitive advantage. However, they do face the paradox of core capability and core rigidity, which causes structure inertia and resistance to change. For capability being embedded within organizational memory and different contents of organizational memory, organizational memory perspective provides us more deeply understanding of core capability and rigidity. Constructs of procedural and declarative memory are adopted to explore the rationales underlying the paradox. We also suggest that the trans-active memory system, an interactive learning system, consolidates knowledge combination to facilitate endogenous change in the process of capability evolution. After reviewing the nature of capability/rigidity and organizational memory perspective, we infer propositions regarding the conceptual framework. A discussion of implications and future research directions are included. Key words: Core capability; core rigidity; organizational memory; procedural memory; declarative memory; transactive Memory System

Core Capability and Core Rigidity: Organizational Memory Perspective

Core Capability and Core Rigidity: Organizational Memory Perspective INTRODUCTION Firms are viewed as repositories of knowledge, Organizational knowledge, being institutionalized and embedded in organizational memory (Argote, 1999; Nonaka, 1994; Hubber, 1991; Kostova, 1999), becomes synonymous with organizational capability. But the reversed-U relationship between slack resources and innovation (Nohria and Gulati, 1996), negative relationship between performance and risk preference (March and Shapira, 1987, 1992; Miller and Chen, 2004), indicates the phenomenon of core capability and core rigidity (Prahalad and Hamel, 1990; Leonard-Barton, 1992). When learning needs to be distant, and radically new capabilities need to be developed, firms often fall into competency traps, as core capability becomes core rigidity (Nelson and Winter, 1982; Teece, Pisano, and Shuen, 1997; Tripsas and Gavett, 2000). As capability may be deemed as collections of routines (Winter, 2000; 2003), the stability-providing effect of routines may lead to capability inertia. The existing technological capabilities, codified in the routines, procedures, and information processing capabilities of the firm, limit its adaptive intelligence. We adopts metaphors of organizational memories to evaluate the paradox of core capability and core rigidity. Organizational capability is embedded within organizational memory (Nelson and Winter, 1982; Winter, 2000, 2003). The higher
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Core Capability and Core Rigidity: Organizational Memory Perspective

level of stored memory, the more organizational capability will exist. But organization also ignores novel knowledge easily. We infer that different forms of accumulated organizational memory have different relationship with capability. When core capability becomes rigidity, organizations become resistance to change. Its necessary for organizations to combine existing and novel knowledge. The trans-active memory system will be the mechanism bridging novel sources and the existing knowledge base. In the following section, we review the capability perspective to introduce the paradoxical phenomenon of core capability and core rigidity, which refers to path of capability evolution. Dimensions of capability are divided to novelty and speed. Then, we build up conceptual framework. Discussion and conclusion are followed. CAPABILITY AND RIGIDITY Based on the resource-based view, firms can be seen as constituting a bundle of resources (Wernerfelt, 1984). The resources determine an organizations strength and weakness to a greater degree than does industrial structure consideration (Rumelt, 1991; Gabriel, Venkat, and Paul, 2003). Capability approach deepens resource-based perspective, offers rigorous definition of concepts, and continues to expand the frontiers of understanding capability. Core capabilities, embodied in employee knowledge, technical systems,

Core Capability and Core Rigidity: Organizational Memory Perspective

managerial systems, and values, are institutionalized, and part of an organizations taken-for-granted reality. For the taken-for-granted nature, routines economize managerial cognitive resources, increase stability, and reduce uncertainty in decision-making. For tacit ness nature, organizations sustain competitive advantage. But core capability may become rigidity (Gilbert, 2005). Too much slack resources reduce re-investment and are bad for innovation (Nohria & Gulati, 1996). Existing routines for providing satisficing solutions prevent organizations from outsourcing or initiating changes. That local learning leads core capability towards rigidity and become competence trap. Thereby, core capability can be something of a double-edge sword: neglect it and you forgo an important source of competitive advantage; hold on to it too long and you incur a strategic opportunity cost (Boisot et al., 1997 cited by ODroscoll et al., 2001).

Dimensions of capability
Within hyper-competitive environment, we define two dimensions of organizational capability, novelty, and speed and propose a conceptual framework of organizational memory and capability. Christensen and Foss (1997) suggested dynamic capability as the appropriate balance between exploitation and exploration (March, 1991). Novelty will be critical in term of exploration. The novelty is usually referred to characteristic of capability

Core Capability and Core Rigidity: Organizational Memory Perspective

(Ford and Gioia, 2000; Moorman and Miner, 1998; Subin and Workman, 2004). To explore the past experience, being embedded within organizational memory, we define novelty, a divergence from the norm, refers to the degree of deviation from prior routine. Secondly, speed refers to the time required to plan and execute an action. In a hyper-competitive era, only dynamic entry barriers can outperform the competitors. The speed of innovation will be the necessary condition to establish dynamic entry barriers. WHAT IS ORGANIZATIONAL MEMORY? When it comes to storage of organizational capability, and various effects on capability and rigidity, the constructs of organizational memory provide us with a deeper understanding and rationale underlying the conceptual framework. Memory is the faculty of retaining and recalling things past, which will influence subsequent individual behavior. The organization self does not possess memory. However, there is a growing consensus that organizations have frames of references, shared beliefs, values, norms, routines, structures, and other physical artifacts that reflect the presence of organizational capability (Anand et al., 1998; Moorman and Miner, 1997; 1998; Nelson and Winter, 1982; Walsh and Ungson, 1991). Organizational memories have different forms, levels, contents (Walsh and Ungson,

Core Capability and Core Rigidity: Organizational Memory Perspective

1991; Moorman and Miner, 1997), and are related to information management (Anand et al., 1998), improvisation (Moorman and Miner, 1998; Vera and Crossan, 2005), new product development (Moorman and Miner, 1997, Kriakopoulos. and Ruyter, 2004), organizational buying process (Park, and Bunn, 2003) and routines (Cohen and Bacdayan, 1994). Why metaphor of organizational memory is related to core capability and core rigidity? Firstly, organizational capability is embedded within organizational memory. An organizational capability is a collection of routines. Routine leads to the accumulation of knowledge and the routinization of activity in an organization constitute the most important form of storage. Although organizational remembering is achieved largely through routines (procedural memory), organizations keep formal memories, and these formal memories play an important role (Nelson and Winter, 1982). Thus, determining the consequences of different memory forms on capability proves of interest, and constitutes the second issue, as follows. Secondly, various levels and forms of organizational memory influence capability differently. Mooreman and Miners (1997) empirical results indicated that higher organizational memory levels enhanced the short-term financial performance of new products, while greater memory dispersion increased both the performance and capability of new product. After Moorman and Miners (1997) findings,

Core Capability and Core Rigidity: Organizational Memory Perspective

Kyriakopoulos and Ruyters (2004) isolated the effects of different memory types, and suggested that the greater the amount of procedural memory, the greater the capability will be. But when a certain level of memory is achieved, local learning prevents organizations from accruing novel knowledge, and becomes an obstacle or rigidity. They proposed internal and external information flow as boundary condition, but failed to verify the argument empirically. There may be other situational variables. That is the third reason that we argue. Finally, novel knowledge should be incorporated to existing memory to facilitate endogenous change and to prevent competence tap. What is the facilitator? Kyriakopoulos and Ruyter (2004) tried to extend the work of Moormen and Miner (1997), which examined the moderating role of environmental factors, to the role of information flow. They inferred that internal and external information flow improves the relationship between organizational memory and capability. But the empirical study failed to have significant results. This paper argues Transactive memory system (TMS), as divergent shared mental model (Lewis, 2003), will help to consolidate information flow and existing knowledge base. Characteristics of organizational memory Level, dispersion and content of memory, which are relevance to our conceptual framework, will be discussed here. The level of organizational memory refers to the

Core Capability and Core Rigidity: Organizational Memory Perspective

amount of stored knowledge an organization has about a particular phenomenon. High level of memory provides base of organizational absorptive capability, which enhances learning and accumulates more knowledge. Fortune (always) favors the prepared firm (Cohen and Levinthal, 1990). But the greater the prior experience, the less likely organizations engage in information searching activities (Weiss and Heide, 1993). This may influence flexibility, causes competence trap or core rigidity. Dispersion: Becker (2004) cited Hayer (1945) and distinguished different meaning of distribution and dispersion. One means knowledge or information distributed and shared among various knowledge retention bins. The more highly organizational memory is distributed, the more shared norm, value, or routines among various individuals, groups or organizational units. The convergent nature of organizational memory enhances organizational coherence, which enhances the efficiency of exchange. But the consistent min-set implied by convergence lessens the diverse opinions and perspective essential to new knowledge creation (McFadyen and Cannella, 2004; Nahapiet and Ghoshal, 1998). The dispersion of knowledge means specialization and complementarities which can provide various domain and novel knowledge to prevent local learning and enhance capability. Content: There are two types of organizational memory: procedural and declarative memory. Procedural memory is distinguished from declarative memory.

Core Capability and Core Rigidity: Organizational Memory Perspective

Procedural memory refers to process memory, which is similar to routines (Nelson and Winter, 1982) and mades the performance faster and more reliable over time (Cohen and Bacdayan, 1994). Declarative memory refers to the memory of concepts, facts, or events. In organizational context, declarative memories may refer to knowledge about customers requirement, commercial specification, product specification, production capability, bill of materials, and scheduling rules. They can be found across different organizational units, databases, or intranet. Riding a bike is a good example. Riding a bike involves procedural memory, but it is contrasted to the declarative memory of the mechanics underlying riding a bike (Cohen, 1991; Moorman and Miner, 1997; 1998, Kyriakopolos and Ruyter, 2004). Another example, concurrent engineering is the involvement of a

cross-functional team in a process to plan product, process, and manufacturing, simultaneously (Koufteros, Vonderembse, Doll, 2002). Concurrent engineering process involves various organization units of marketing, product engineering, process engineering, manufacturing planning, material and inventory handling. While concurrent process becomes organizational routines as procedural memories shared norms and value within various units, the declarative memories, i.e. knowledge of customers requirement, commercial specification, product specification, production

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Core Capability and Core Rigidity: Organizational Memory Perspective

capability, bill of materials, and scheduling rules, are dispersed and specialized within various units and individuals. Each unit specialize distinct domain of declarative memory.

THE TRANSACTIVE MEMORY SYSTEM

In example of concurrent engineering process, each organizational unit self doesnt own all knowledge. They rely on other units knowledge and interact with each other to complete whole process successfully. For example, its not necessary for department of product engineer to gather consumer requirement. They know marketing department can do it and store such knowledge. They interact with marketing unit and combine consumer requirement with production capacity to design product specification. We use metaphor of transactive memory system (TMS) to refer to such mechanism. TMSs construct, developed by Wegner and his colleagues (Wegner, 1986; Wegner, Erber, and Raymond, 1991), is a cooperative division of labor for learning, remembering, and communicating knowledge needed to complete a joint task (Hollingshead, 1998; Wegner, 1995). This system combines the knowledge possessed by individual group members with a shared awareness of who knows what. So, when group members need information, but cannot remember it on their own, or doubt that their own memories are accurate, they can turn to one another for help. A transactive

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Core Capability and Core Rigidity: Organizational Memory Perspective

memory system can thus provide the groups members with more and better information than any of them could remember alone (Argote and Moreland, 2000). A series of laboratory researches (Hollingshead, 1998; Moreland, 1999; Liang, Moreland, and Argote, 1995; Moreland, Argote, Krishnan, 1996) looked for group dynamics that were suggestive of the existence of a TMS. These dynamics included: specialization of tasks, task coordination activities, and task credibility actions (evidence that group members trusted each others expertise) (Austin, 2003). Not only laboratory research, but also field studies were conducted to measure dimensions of TMS (Lewis, 2003; Austin, 2003). Dimensions of TMS According to Wegner and his colleagues definition, transactive memory includes two parts: (1) a combination of the knowledge possessed by each individual, and (2) a collective awareness of who knows what (Wegner, 1986; Wegner et al., 1991) or interpersonal awareness of others knowledge (Austin, 2003). Lewiss field study suggested a 15-item self-report scale, developed by a series of laboratory researches, designed to measure dimensions of TMS, including specialization, credibility, and coordination. Lewis (2003) elaborated them as follows:
Transactive memory exists when a person understands what another person knows, and uses that

understanding to develop different but complementary knowledge. Specialized knowledge alone is

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Core Capability and Core Rigidity: Organizational Memory Perspective

not sufficient for defining TMS because members may develop distinctly different knowledge for other

reasons. Members will only develop different knowledge if they can rely on others to remember other

task-critical information. Absent this, members would likely develop overlapping or redundant

knowledge instead of differentiated expertise. In addition to members specialization and credibility,

TMS includes the process members use to combine their transactive knowledge (Wegner, 1987). The

three proposed manifestations do seem to tap the essence of the TMS construct, implying that

inferences about TMS can be made from evidence of specialization, credibility, and coordination (Lewis,

2003; 590).

Building upon Wegners definition and the previous conceptualizations of transactive memory, Anstin (2003) conceptualized transactive memory as a combination of four dimensions. These dimensions are group knowledge stock (combination of individual knowledge), consensus about knowledge sources, specialization of expertise, and accuracy. Drawing from the above theory development and contributions, we suggest four dimensions of TMS, including specialization, consensus, accuracy, and credibility. In a transactive memory system, members who have special skills will be accordingly assigned to particular tasks. When TMS relies on their profession, they become experts, and specialized. Rather than collective or redundant specialization, members have various knowledge domains. Secondly, consensus of TMS means shared

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Core Capability and Core Rigidity: Organizational Memory Perspective

understanding about the distribution of knowledge within a group, organization, or knowledge network, which is similar to the mental model. Transactive consensus is a team mental model of the distribution of knowledge (Austin, 2003). Shared understanding may become group thinking. In order to coordinate and combine distributed/various domains of knowledge, its necessary that TMS members display accuracy, which involves the extent to which individuals identified by others in the TMS, as possessing particular knowledge actually posses that knowledge (Austin, 2003). Finally, credibility is to extend which TMS members have faith in other people, trust other peoples knowledge. Thereby, they are comfortable accepting procedure. CONCEPTUAL FRAMEWORK Figure 1 shows the conceptual framework of relationship between constructs of organizational memory and dimensions of organizational capability. After reviewing the nature of various forms of organizational memory, we infer the propositions regarding the conceptual framework. ------------------------------Insert figure 1 about here ------------------------------Procedural memory and organizational capability

Procedural memory refers to memory on how things are done or things you can do. It means process memory or memory underlying skills needed for performing

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Core Capability and Core Rigidity: Organizational Memory Perspective

tasks. It becomes embodied in organizational routines, standard operating procedures. Therefore, procedural memory has close links to notions of individual skills, habits and organizational routines (Nelson and Winter, 1982). The nature of routines, being both automatic and inarticulate (Cohen and Bacdayan, 1994; Kyriakopolos and Ruyter, 2004), are both good and ill. The repetitive patterns of routines enhance efficiency by decreasing the effort spent on decision-making and implementation. Thus, the automatic routines facilitate reliability and speed. However, more institutionalized routines become resistant to change, and hamper the absorption of novel information that is a critical component of capability. So, routines are a two-sided sword. On the positive side, they speed up execution, reduce costs, and ensure reliable organizational action. On the other hand, procedural memories or routines act as perceptual filters that may hinder meeting turbulent changes in environment. In this way, the procedural memory will hurt organizational capability; the deeper that the practices and routines of procedural memory become institutionalized, the greater the possibilities of core rigidity will be. The phenomenon becomes an obstacle for organizations ability to adapt to changes in its environment. According to the rationales explained above, the influence of procedural memory on the components of capability (speed, and novelty) will be presented as follows.

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Core Capability and Core Rigidity: Organizational Memory Perspective

Firstly, within a hyper-competitive environment, there are radical changes and their attendant uncertainty. Organizational managers can search, filter more information for their decision-making, but owing to bounded rationality (human behavior is intended to be rational, but bounded by limited cognitive capability), managers can not obtain all of the necessary information. Thereby, satisficing solutions will substitute for the optimal ones (Simon, 1947). Routines provide another solution; they can satisfy the criteria of decision-making, and reduce the complexity of the information searching process. Due to the repetitive patterns of routines, procedural memories enhance the decision-making of capability-based actions. The institutionalized practice or innovation process will reduce the amount of information needed. The lower the cost, the more efficiently decision-making facilitates the speed of capability. Therefore, the paper proposes the following: Proposition 1: The procedural memory will promote the speed of organizational capability: the greater the level of procedural memory, the higher the speed of the organizational capability. The procedural memory, i.e. standard operation procedures, provides structures or platforms for organization members to exchange innovative information and knowledge. Knowledge-sharing, facilitated via communication channels of

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Core Capability and Core Rigidity: Organizational Memory Perspective

procedural memory, will also increase the information level of capability actions. But fine-tuned routines and processes can become obstacles for knowledge searching and reception. When high levels of procedural memory can provide satisfactory solutions, external knowledge will not be needed. The problem of local learning occurs, and exploitation drives out exploration. Accruing novel knowledge is inhibited. Core capability becomes core rigidity or competence trap. Becker (2004) also indicated that routines (due to the interactions they are composed of) enable feedback, but the feedback is ignored. That is, procedural

memories, acting as perceptual filters, filters out novel information and knowledge. Therefore, the proposition of novelty is proposed. Proposition 2: The procedural memory will decelerate the novelty of organizational capability: the greater the level of procedural memory, the less novelty the organizational capability will be. Declarative memory and organizational capability Unlike the repeated action and core rigidity of procedural memories, the declarative memory tells another story. Declarative memory refers to the memory of concepts, facts, or events (Anderson, 1983; Cohen, 1991), including know-what, know-why or know-when (Huber, 1991; Moorman and Miner, 1997; 1998). It can be used in a variety of applications (Singley and Anderson, 1989 cited by Moorman and

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Core Capability and Core Rigidity: Organizational Memory Perspective

Miner, 1998) or more general. Declarative memory can be applied to numerous situations in countless ways, thereby encouraging greater novelty (Moorman and Miner, 1998). Kyriakpopoulos and Ruyter (2004) also indicated that the conscious application of declarative memory increases chance of using prior knowledge in a less standard fashion, using general principles to find innovative solutions. In the example of concurrent engineering, memories of customers preference can be applied to numerous situations. The higher level of memories of customers preference, the higher level of novelty will be. Proposition 3: The declarative memory will promote novelty of organizational capability: the greater the level of declarative memory, the higher the novelty of the organizational capability. Although declarative memory can enhance novel capability, the speed of capability actions may be impeded for information-searching problems. Because declarative knowledge is not committed to a particular issue, vast amounts of it are potentially relevant in any problem-solving situation. And this leads to serious problems for information searching (Singley and Anderson, 1989, cited by Moorman and Miner, 1998). In the example of concurrent engineering process, its difficult to detect actual preference of consumers. Product specification is not committed to a particular consumer requirement, but various matches. Other thing being equal,

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Core Capability and Core Rigidity: Organizational Memory Perspective

bundle of commercial specification, product specification resided in various files, or information system, causes information searching ineffectively and inefficiently. Not only amount of them decrease speed, the accuracy of where are they, caused by dispersed nature of declarative memory, also slow down speed. Therefore, the paper proposes the following: Proposition 4: The declarative memory will influence the speed of organizational capability: the greater the level of declarative memory, the slower the speed of the organizational capability. Moderating roles of TMS Effect on relationship between procedural memory and capability After capability accumulation, core rigidity arises from organizational local learning and knowledge filtering as mentioned above. Members of TMSs who are more specialized and who possess various domains of dispersed knowledge, provide more novel information and knowledge to reduce local learning. On the one hand, specialization characteristic of transactive memory system provides novel knowledge. On the other hand, it also reduces the effect of core rigidity on local learning. But various domain of knowledge available is not sufficient; members of teams or units of organization must trust the content of knowledge is valuable, and the reliability of knowledge source.

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Core Capability and Core Rigidity: Organizational Memory Perspective

With greater credibility among members of TMSs, they are comfortable and confident relying on the information that other members brought to the decision (Lewis, 2003). Consensus and accuracy characteristics also enhance combination of dispersed knowledge. Therefore, the paper proposes the following. Proposition 5: The greater the effectiveness of TMS, the lower the likelihood that procedural memory will hamper the novelty of capability. For speed of decision making, procedural memory economizes cognitive resource. TMS, a cooperative division of labor, provides reliable and specific alternatives, which can also facilitate decision making. Therefore, the paper proposes the following. Proposition 6: The greater the effectiveness of TMS, the higher the likelihood that procedural memory will promote the speed of capability. Effect on relationship between declarative memory and capability We argue that information-searching problems reduce the speed of

decision-making. There are two dimensions of the information/knowledge-searching problem: (1)quantity of declarative memory, and (2)the extent of accuracy concerning where the knowledge is dispersed. The greater the understanding of the dispersion of

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Core Capability and Core Rigidity: Organizational Memory Perspective

knowledge (consensus), the more easily the quantity of memory will be categorized. The greater the extent of identifying locations of memory (accuracy), the less the time required for knowledge searching. The extent of knowledge searching problem will be reduced. Therefore, we propose the following. Proposition 7: The greater the effectiveness of TMS, the lower the likelihood that declarative memory will hamper the speed of capability. When declarative memory provides dispersed knowledge, TMS facilitates knowledge combination and enhance novelty of existing capability. Therefore, we propose the following. Proposition 8: The greater the effectiveness of TMS, the higher the likelihood that declarative memory will promote the novelty of capability. DISSCUSSION We offer conceptual framework, which adopts procedural (know-how) and declarative memory (know what) to explain the phenomenon of core capability and rigidity, and to presents transactive memory (know who is good at what) as a mechanism to promote endogenous change by facilitating knowledge combination. The conceptual framework indicates that procedural memory can speed organizational capability (P1). Although procedural memory provides structure for novel innovation, however, higher level of knowledge, evolved and institutionalized

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Core Capability and Core Rigidity: Organizational Memory Perspective

routines, make procedural memory become rigidity (P2). In P3, P4, declarative memory tells different stories, but similar inference. High level of declarative memory provides novel sources of capability, but leave searching problem that lower down speed of capability. In sum, the above propositions infer the constructs and rationales, which cause effects of organizational memories on organizational capabilities. Secondly, the framework proposes moderating effect of TMS. Other than know how (procedural memory), know what and know why (declarative memory), transactive memory system, which refers to who know where, provides specialization, credibility, consensus, and accuracy to enact and facilitate knowledge learning and transferring. Specialization of TMS provides various domain of knowledge, and credibility ensures motivation and confidence of sender and receiver of knowledge transfer. Both of them increase effectiveness of knowledge learning. For the nature of knowledge dispersion, consensus and accuracy of TMS decrease informationsearching problem and increase the speed of knowledge learning and transferring. The propositions (P5, P7) may explain a part of reason why is non-significance of information flows which test in Kyriakopoulos and Ruyter, 2004). Organization can scan environment turbulences and benefit from novel information flow. But organization cant absorb novel information or knowledge with existing memory, until applicable mechanisms. TMS can act as interactive learning mechanism that

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Core Capability and Core Rigidity: Organizational Memory Perspective

promotes endogenous change to prevent core capability from becoming rigidity. Theoretical implication of Evolution of organizational capability According the conceptual framework, we propose two theoretical implications: the evolution of organizational capabilities and the roles of procedural, declarative memory and transactive memory system. Drawing inspiration from Penrose (1959)s influential book on The theory of the growth of the firm, Wenerfelt (1984), Barney (1991), and many scholars made great contribution to competence perspective (Williamson, 1999). Idiosyncratic resources contribute to firms sustainable competitive advantage. When firms internal factors are the focus (Gabriel et al, 2003; Powell, 1996; Rumelt, 1991; Barney, 1991; Wernerfelt, 1984), slack resources facilitate firms endogenous growth (Penrose, 1959). Firms with coherence outperform less coherent firms (Teece, Rumelt, Dosi, and Winter, 1994). As capability, being path dependence and embedded within organizational routines (Nelson and Winter, 1982), becomes competence trap (Lenard-Barton, 1992), dynamic capability, collectively set of routines (Winter, 2000, 2003), focus on balance between capability exploitation and exploration (Christensen and Foss, 1997; Ghoshal, Hahn and Moran, 2000; March, 1991). This papers contribution to the evolution of organizational capabilities details as followed: Why core capability becomes core rigidity?

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Core Capability and Core Rigidity: Organizational Memory Perspective

In trajectory of capability evolution, slack resources (Penrose, 1959) and genies of routines (Nelson and Winter, 1982) play critical role. The concept of coherence is path dependent and local learning, which is embedded in tacit routines (Teece et al., 1994). Firms with coherence will outperform less coherent firms. But accumulation of slack resources and nature of routines only tell partial story, which core capability becomes core rigidity. For capability, result of organizational learning (Huber, 1991), not only resided in routines (procedural memory), but also embodied within declarative memory. While stability-inertia of routines, that economizes

decision-making, prevails, reversed-U shape between slack resources and innovation emerges. Declarative memories, while decrease speed, bring novel knowledge, which is source of organizational dynamic capability. Drawing from Nelson and Winter (1982)s concept, routines as organizational memory, we offer different effects of distinctive form of organizational memory on capability evolution. That is, organizational capabilities are not only embodied within routines. Routines can be as organizational memory, but only one of organizational memory types. In the process of organization capability evolution, different level and forms of organization memory produce different effects. When higher level of distributed procedural memory may push routines to be rigidity, dispersed declarative memory pulls another direction.

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Core Capability and Core Rigidity: Organizational Memory Perspective

This paper suggests distinctive effects of different forms of organization memory on organizational capability. The relative strength between procedural and declarative memories needs future research work. What conditions promote endogenous change? Coherent firms outperform less coherent firms, but coherent firms may become inertia, which inhibit firms continuous growth. Organizational scholars suggest dynamic capability to balance of exploitation and exploration (Christen and Foss, 1997; Ghoshal et al., 2000; March, 1991). Not only endogenous slack resources, accounting for organizational capability accumulation, but also novel knowledge, stored in external storage bin, contribute firms growth. The above statement argues that turbulence of external environment promote organizational change. But under environment complexity, organizations have different choices. Organizational routines may be still habitual regardless of environmental turbulence. A few organizations may modify routines to absorptive environmental complexity. Some organizations will select robust transformation to reduce complexity (Lengnick-Hall and Beck, 2005). Feldman and Pentland (2003) propose agency perspective to account for the choice. But the question, what conditions promote endogenous change, still need future research. This papers framework suggests TMS as the facilitator, in which mediates novel and existing knowledge.

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Core Capability and Core Rigidity: Organizational Memory Perspective

CONCLUSION Organizational memory perspective provides insight to expand existing knowledge of core capability and core rigidity. For the conceptual paper, we propose conceptual framework to evaluate rationales and theoretical implication. When opposite effects of novelty and speed of organizational capability, the relative strength between procedural and declarative memories needs future research work. In process of capability accumulation, adaptive fit or robust transformation, the relations among Know-how (procedural memory), know-what (declarative memory), and know-where (Transactive memory) remain future direction. Finally, empirical research is needed in the future.

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Transactive memory system P6 P5 Procedural memory P7 P4 P8 Declarative memory P3 P2 Novelty P1 Speed

Figure 1: Conceptual framework

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