2.2.3 Embedded Knowledge

2.2.3 Embedded Knowledge

Embedded knowledge is commonly referred to the knowledge that is locked in such elements as:

  • Experience
  • Internalisation
  • Common practice, systemic routines, organizational culture, conventions, tradition, codes of conduct, common sense ethics, etc
  • History, rules, laws, principles, etc.
  • Contextual issues related to ethical, legislative and policy-related considerations processes, products, artifacts, structures, rules, (Horvath 2000; Gamble & Blackwell 2001).

This knowledge is embedded either formally, such as through a management initiative to formalize a certain beneficial routine, or informally as the organization uses and applies the other two knowledge types. Such knowledge is dynamic, contextual and dispersed; it is also capable of supporting complex patterns of interaction in the absence of written rules. It is important to note, that while embedded knowledge can exist in explicit sources (i.e. a rule can be written in a manual), the knowledge itself is not explicit, i.e. it is not immediately apparent why doing something this way is beneficial to the organization.

            The notion of  ‘embeddedness’ got momentum in 1985 when Mark Granovetter made an impassioned plea to economists and sociologists to theorize economic action in ways that acknowledge its strong linkages to social structure. The economy, he argued, is structurally embedded in social networks that affect its functioning. Granovetter's focus on embeddedness has deep roots in social science, tracing back to Economic Anthropologist Karl Polanyi who argued "The human economy ... is embedded and enmeshed in institutions, economic and noneconomic. The inclusion of the noneconomic is vital" (Polanyi, Arensberg, and Pearson [1957] 1971: 250).

            The concept of embeddedness, which is central to contemporary research in Economic Sociology (Smelser and Swedberg, 1994), is typically treated as synonymous with the notion that organizations and the economy are part of a larger institutional structure. Granovetter (1985) uses the term in a more specific way to mean that economic action takes place within the networks of social relations that make up the social structure. In criticism of this narrow conception, DiMaggio (1990, 1994) has argued that economic action is embedded not only in the social structure but also in culture which has a very significant impact of organizational performance. 

            DiMaggio (1990) makes further distinctions between different kinds of embeddedness, including cognitive (i.e., structured regularities of mental processes used for reasoning), cultural (i.e., the role of shared collective understandings in shaping organizational strategies and goals), political (i.e., the role of social, political, and other nonmarket factors shaping of organizational decisions), as well as structural embeddedness (i.e., Granovetter's contextualization of economic exchange in patterns of ongoing interpersonal relations). Supporting these further distinctions, psychologists Kahneman and Tversky (1973, 1979) have demonstrated the cognitive embeddedness of individual decision-making in a range of fundamental heuristic biases. Biggart and Hamilton (1992), Hamilton and Biggart (1988), and Orru, Biggart, and Hamilton (1991) have shown that Asian economic action is culturally embedded in different principles of social action developed through the historical experience of Asian nations. Hirsch (1975) has shown how economic actions and outcomes are politically embedded within government regulation and legislation. And, relatedly, Burt (1982, 1983, 1992) has shown how economic action and outcomes are politically embedded within inter-organizational networks of power.

            Economists' analytical and methodological individualism assumes that all social phenomena (their structure and change) are explicable in terms of individuals--their properties, goals and beliefs (Hodgson, 1994). In this asocial conception of economic action, meaningful social relations are unimportant to competitive outcomes and lead only to anticompetitive results (Biggart and Hamilton, 1992). To be fair, some New Institutional Economists (e.g., North, 1990; Williamson, 1994) have begun to acknowledge the importance of socio-cultural embeddedness, not surprisingly, however, they tend to emphasize its regulatory function (i.e., constraints on actors' pursuit of self-interest through customs, habits, or norms) over its constitutive function (i.e., influence of customs, habits, or norms on actors' definition of interests in the first place) (DiMaggio, 1994).

            Nevertheless, as Granovetter (1985:487) reminds us: "A fruitful analysis of human action requires us to avoid the atomization implicit in the theoretical extremes of under- and oversocialized conceptions. Actors do not behave or decide as atoms outside a social context, nor do they adhere slavishly to a script written for them by the particular intersection of social categories that they happen to occupy. Their attempts at purposive action are instead embedded in concrete, ongoing [social] systems..."

            Considering such actions as embedded knowledge, Badaracco (1991) argues that embedded knowledge explores the significance of relationships between material resources, technologies, roles, formal procedures, and emergent routines. Hence, the analysis of embedded knowledge helps managers to analyze organizations’ capabilities (Nelson and Winter, 1982). Nelson and Winter (1982) maintain that an individual's skills are composed of sub-elements which become co-ordinated in a smooth execution of the overall performance, impressive in its speed and accuracy with conscious deliberation being confined to matters of overall importance. In addition to the physical and mental factors that comprise individual skills however, organizational skills are made up of a complex mix of interpersonal, technological and socio-structural factors.

            Levitt and March's (1988) develop a similar notion of organizational routines which, they suggest, make the lessons of history accessible to subsequent organizational members; while other writers refer to 'organizational competencies' (Prahaled and Hamel 1990). A related orientation has been proposed by Henderson and Clark (1990) who distinguish between the knowledge of specialist elements in an organization ('component knowledge') and knowledge about how such elements interact ('architectural knowledge'). Architectural knowledge is often submerged within an organization's taken-for-granted routines and interactions, yet is central to an understanding of its strengths and weaknesses (Blackler, 1995).

            In above paragraphs we have tried to cover some of the multifaceted aspects of embedded knowledge. It is obvious from this discussion that culture and routines are the two important pillars of embedded knowledge; nevertheless both are difficult to understand. Vorwerk (2004) has proposed four broad categories or types of knowledge as the basis for defining embedded knowledge:


Also called


1. Know-What


Explicit information, rules,

principles based on language


2. Know-How


Actions, responses, ways, options, often tacit or embodied knowledge

3. Know Why


Causes and effects, symptoms,


4. Know About


familiarity with people, situations,

contexts and even cultures,

acquaintance with

            While embedded knowledge itself is an unobservable construct and managing embedded knowledge is a challenging and complex task; but the organizations that succeed in managing embedded knowledge effectively may enjoy a significant competitive advantage (Madhavan & Grover, 1998).