Designing Management Control Systems to Foster Knowledge Transfer in Knowledge-Intensive Firms: A Network-Based Approach

Abstract:     
Research on management control has emphasized the relevance of controls for knowledge integration on a project-by-project basis. This work contributes to this field by proposing a framework to explain how management control systems foster knowledge transfer between organizational units in knowledge-intensive firms. By combining network theory and knowledge network research, this study suggests that the design of management control systems should consider various forms of relationships between individuals (strong/weak, direct/indirect) that these systems activate and that are necessary to transfer various forms of knowledge (process, outcome, technology, or opportunities) characterized by different levels of causal ambiguity and relatedness. An in depth empirical analysis of a software firm and three of its projects shows that management controls may act as important mechanisms of knowledge circulation and that some principles reinforce this function. In particular, to achieve organizational knowledge transfer, enforceability of manuals and procedures, scalability of reviews and decisions, mobility induction of individuals, and multiplicity of roles and accountabilities are indicated as desirable design properties of control systems in knowledge-intensive firms.

Keywords: knowledge network, knowledge management, knowledge-intensive firms, management control

JEL Classification: M40

Accepted Paper Series