Management's Key Responsibility

Abstract

Management’s key responsibility is to advance a firm’s knowledge-building proficiency—the critical determinant of its survival and prosperity, i.e., its long-term firm performance. Competitive advantage and intangible assets are best viewed as the result of a firm’s knowledge-building proficiency, which offers a new angle of thinking about economic growth by concentrating on improving the management of firms. The task is to better coordinate knowledge-building with the core management activities of organizing work, innovation, and resource allocation. Innovation can be classified as process insights, performance-improving insights, and scale insights. This classification is useful for understanding how firms perform and their impact on overall economic growth. While all three types of insights are undeniably important, scale insights will most likely lead to substantial gains in new jobs. An important idea is that a firm’s knowledge-building proficiency is intimately related to its organizational structure; so advancing understanding of that relationship will lead to higher economic growth that lifts all boats.

Keywords: Knowledge, Innovation, Organizational Structure, Life Cycle, Excess Return

JEL Classification: D21, G10, G12, G30, G34, G38, L21, M10, M41