An empirical study of the relationship between organizational controls, capabilities, and performance: The management of knowledge

This dissertation examines how differing control mechanisms within a firm affect its ability to form unique capabilities, and ultimately, performance. A model is developed and tested that shows (a) how various control systems differentially affect the flow of distinct types of knowledge within the firm and (b) how these different types of knowledge affect the ability to develop specific capabilities and achieve particular levels of performance. In particular, the differential effect that bureaucratic and clan control mechanisms have on tacit, diverse, process-related and outcome-related knowledge is examined. The types of performance examined relate to quality and productivity. This research used a multifaceted methodology to examine the control mechanisms, knowledge management and performance within a given firm. The data is collected from an auto supplier, which utilizes the two forms of control under investigation. In this regard, the methodology employed was a quasi-experiment in a real-world setting. Data regarding the control configuration in place was collected from various levels of management within the plant. In addition, 220 line workers participated in a card sorting technique to capture the different types of knowledge. Performance data for 10 departments over a three-year period was also collected. The results show support for the model and indicate that the use of clan controls is associated with significantly higher amounts of shared tacit and diverse knowledge than with bureaucratic controls. In addition, a larger amount of shared process-related knowledge is associated with higher levels of productivity and more shared outcome-related knowledge is associated with higher levels of quality. This research has been able to contribute to the literature on controls and the knowledge-based view by highlighting how an examination of the control system allows one to infer the type of knowledge emphasized in the firm and thus, the type of capabilities that can be developed.