Understanding the failure of internal knowledge markets: A framework for diagnosis and improvement

In writing this paper, our objective was to use the concept of internal market failure to explain why many knowledge management initiatives fall short of expectations. We re-examined the conventional view of knowledge as a pure public good and developed a typology of knowledge as a heterogeneous public good. This permitted us to identify the different sources of internal market failure that impeded knowledge creation and sharing within firms. We then analyzed generic managerial responses to internal market failure and showed how the effectiveness of each response was limited by the nature of knowledge as a tradable commodity. We concluded by presenting a preliminary framework for knowledge management based on the enforcement of dynamic internal property rights. The objective of a dynamic response to internal knowledge market failure was seen as an attempt to balance individual incentives with the need to create and share knowledge throughout the organizational.