Preface for the Third Edition - Read

5. Strategy 137
This section defines the concept of knowledge risk. The concept employs an
operational risk perspective that is focused on business processes and knowledge
assets that are affected by knowledge risks. Moreover, a process for management
of knowledge risks is defined in section 5.3.4. Section 5.3.5 then gives an outlook
to an explorative empirical study in this increasingly important research field
within KM.
Risk management has long been recognized as integral part of management, but
companies have embraced this topic only recently as consequence of e.g., dynamic
environments, networked IT-infrastructures, prominent bankruptcies and subsequent
regulations like Sarbanes-Oxley-Act, EU’s 8 th Directive, Basel II, HIPAA or
KonTraG. Despite the acknowledged importance of knowledge assets, predominantly
market, credit and operational risks are targeted, whereas risks that affect
knowledge assets, also called knowledge risks, are considered marginally at most.
From the perspective of strategic management, the knowledge-based view
which has been developed on the basis of the resource-based view 228 stresses the
importance of knowledge assets for competitive advantage. The term asset can be
defined “as firm-specific resources that are indispensable to create value for firms”
(Nonaka et al. 2000, 20). Tangible assets can be subdivided into physical assets
like plants or machines as well as in financial assets, whereas intangible assets lack
physical embodiment and include for example brands, reputation, licenses or
skills 229 . Knowledge assets are considered as the subset of intangible assets (Teece
2002, 15) that is based on knowledge.
Knowledge can reside on different media 230 (see Figure B-18). The primary
media knowledge resides on are employees who provide skills and experiences 231 .
Knowledge can be embedded in organizational routines, procedures and structures
232 . Organizational capabilities bundle knowledge assets in order to contribute
directly or indirectly to the creation of value (Grant 2001, 118). Knowledge can
also be incorporated into objects which comprise different forms of intellectual
property, e.g., patents, as well as products and services 233 . From the perspective of
the knowledge-based view, IT infrastructures can also be seen as knowledge assets
that support the incorporation of knowledge into products and services by helping
to document, by administrating and by providing access to documented, codified
knowledge (Marr et al. 2004, 562).
The term risk is discussed heterogeneously in management and economics and
focuses either on its causes or its impacts. As one of the pioneers, Knight (1921,
231) defined risk as “measurable uncertainty” whereas in Gallati’s view risk is “a
condition in which exists a possibility of deviation from desired outcome that is
228. See e.g., Wernerfelt 1984, Barney 1991, Grant 1991, 1996a, 1996b, Spender 1996a and
section 5.1.1 - “From market-based to knowledge-based view” on page 94.
229. E.g., Barney 1991, 110f, Hall 1992, 136ff, Grant 2001, 111ff, Lev 2005, 300.
230. E.g., Nonaka et al. 2000, 20ff, Cummings/Teng 2003, 43f.
231. E.g., Mentzas et al. 2003, 27, Marr 2004, 4.
232. E.g., Matusik 2002, 465, Szulanski/Jensen 2004, 348.
233. E.g., Sullivan 1999, 133, Contractor 2000, 245, Lev 2005, 200.