Knowledge Management in China

China’s high-priority effort to become a more knowledge-based economy and society means that knowledge management (KM) is increasingly important. For example, the timely transfer and use of business knowledge can provide a competitive advantage in practically any given industry. Despite its enormous promise in business and science, effective KM also faces formidable obstacles. Here, we explore the most notable ones in the China context.

We have used surveys, interviews, focus groups, longitudinal case studies, and anecdotal information for more than a decade to develop an understanding of how knowledge is managed in China and its role in the country’s drive for global competitiveness. KM in China is distinctive, constrained somewhat by technological limitations, but influenced more significantly by psychological factors (such as cultural values) among groups and social levels. Here, we describe the distinctive aspects of knowledge generation, documentation, transfer, and use that prevail in China today, highlighting the key factors influencing Chinese KM.

It is helpful to first understand the KM approaches that prevail in the U.S. and Japan. “In the U.S., most knowledge practices emphasize the collection, distribution, reuse, and measurement of existing codified knowledge and information” [3]. Empirical studies of KM find support for the idea that the U.S. emphasizes the measurement and management of explicit knowledge. Within this rational and technocratic paradigm, workers are expected to capture the essence of their experience, decide what is relevant and hence worth codifying, and spread it throughout their organizations. Practitioners “often look to information technology to capture and distribute this explicit knowledge” [3]. In particular, corporate investment in IT commonly supports knowledge warehousing, data mining, and knowledge dissemination. The U.S. approach to KM has enabled unprecedented innovation and productivity across the country’s private and public sectors.

The Japanese have adopted the English-derived phrase “noreji managemento” to represent the rational KM process, approximating the one widely employed in the U.S. However, their own national tendency is to create, transfer, and use contextual knowledge as an integral part of a broader socialization process. The indigenous term “chishiki keiei” reflects the Japanese emphasis on cognition and tacit knowledge. Focusing on group interaction to create and elaborate knowledge supports continuous improvement (see Figure 1) [10]. Workers, as well as managers, in practically every Japanese company are involved in knowledge creation. Middle managers are expected to bridge the ideals of top executives and the messy reality faced by workers. The prevailing approach to KM in Japan has contributed to outstanding levels of quality and productivity, particularly in such process-rich manufacturing industries as automobiles and consumer electronics.

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Knowledge Generation in China

China has a rapidly growing stock of scientific knowledge that parallels its social and economic development over the past 25 years. Chinese businesses have acquired knowledge from a variety of domestic and foreign sources while also beginning to create knowledge of their own. Huge flows of foreign investment capital into the Chinese economy since the early 1980s have been accompanied by the parallel flow of knowledge into the country. Much of it has come from the public domain or through authorized transfers as a result of joint-venture agreements or licensing arrangements in a range of industries.

Much of it is also unauthorized and uncompensated. Deficiencies in the rule of law, particularly concerning intellectual property rights, trouble those in technology-based industries seeking to protect their knowledge and/or be compensated for sharing it. More transparent and stable rules promulgated by the Chinese government and regulatory agencies, as well as stricter and less arbitrary enforcement, are needed to move from a compensatory to a punitive perspective with respect to intellectual property.

Nevertheless, the recent government-sponsored economic and social reforms have encouraged domestic knowledge creation in terms of both research and development activities in Chinese universities and entrepreneurial activities in the business sector. Growing numbers of both state-owned and private enterprises are also seeking to improve their performance by learning from their own experience.

Codification is essential to knowledge processing in U.S. business and society. Consistent with their cultural traditions, the Chinese favor informal and implicit forms of communication [7], preferring to transfer knowledge through interpersonal contact rather than through formal and/or written means. This reliance on interpersonal contact inhibits codification and restricts information access much more than technological factors [8].

Explicit knowledge is comparatively rare in China due to the strong cultural preference for personal social and economic relationships. The prevalence of this tacit knowledge, or how we do things, has frustrated the government’s effort to systematically develop nationwide knowledge bases. Information systems designed to capture reusable and transferable knowledge are also rare, as are data warehouses and intranets for enabling widespread access to organization-specific knowledge. Despite the increasingly widespread application of IT across China, personal interaction remains the preferred form of knowledge transfer.

Knowledge throughout Chinese society is shared primarily with fellow in-group members. But business innovation and coordination can be hindered by in-group rivalries, as well as by the few opportunities (such as quality circles) and incentives (such as suggestion bonuses) employees are offered to share their knowledge.

Knowledge transfer requires donors and recipients alike to be willing and capable. Given a natural tendency in most societies to hoard knowledge, knowledge sharing must be encouraged and rewarded [4]. Chinese employees in some privately owned firms have responded positively to changes in performance evaluations and rewards. Other firms, notably Lenovo, the largest IT enterprise in China (www.lenovo.com), and Yum! China, a quick-service restaurant operator (www.yum.com), have developed a knowledge-sharing ethos through systematic efforts to recruit, select, and socialize their workers. A focus on selecting and socializing individual workers tends to be more effective in China than in the U.S., whereas the development of a supportive company culture is more difficult due to the strong respect for tradition in and hierarchical structure of Chinese society [2].

At the organizational level, China resembles Japan in that substantial learning occurs through the observation and benchmarking of competitors, but knowledge sharing among companies and universities is weak due to a lack of both incentives and infrastructure. However, status-based hierarchies in China restrict the kind of vertical transfer of knowledge that is common in Japan; Chinese managers rarely acquire or accept knowledge from their subordinates [7]. We’ve commonly observed a unidirectional flow of knowledge from foreign firms to their Chinese partners, rarely the reverse. Knowledge transfer between partners in Sino-Western joint ventures is also limited by competing interests, lack of trust, and large cultural distances [6]. We foresee greater KM difficulties as more Chinese business activity crosses organizational and national boundaries.

Each of the three main stages in the organizational knowledge-use process [1] is constrained by Chinese cultural factors (such as acceptance of status differences) (see Figure 2). Senior managers tend to rely on trusted advisors to analyze and interpret the external environment, limiting overall corporate sense-making while encouraging a groupthink mentality that makes it difficult to comprehend novel or foreign situations. The creation of new knowledge is hampered by senior managers restricting external inputs and unidirectional (top-down) information flows within Chinese companies [7]. For example, new product development is typically viewed as an engineering rather than as a marketing function, and customer knowledge about desirable product features tends to be ignored.

More generally, Chinese decision making by corporate managers, as well as by government officials, is comparatively implicit, relying on analogical and correlative thinking, rather than on rational and analytic thinking [9]. This narrow view of available business and technological options tends to favor incremental rather than groundbreaking innovation, and requires outsiders to read the tea leaves in order to understand the thinking and tacit knowledge of those in power. This difficulty interpreting messages and signals has impeded economic modernization and constrained technological innovation in China.

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Implications

We have explored how the distinctive approach to KM that prevails in China reflects the country’s prevailing management systems and culture [6]. To some extent, the Chinese integrated the technological, market-oriented processes used to manage knowledge in the U.S. with the social elaboration of knowledge common in Japan (see Table 1).

IT often provides a platform for KM (wuli) in China, but knowledge tends to be managed in context (shili) rather than as a process, depending on relationships (renli) more than rules. KM activities in Chinese organizations are also influenced by the desire of both managers and employees to avoid conflict and loss of face, to respect hierarchical status, and to achieve “collective” goals (often determined by the “big boss”).

Nevertheless, many of the obstacles to good KM in China closely resemble those in the U.S. The three most frequently reported problems in China mirror those identified by a survey by consulting firm KPMG [5]. These problems are exacerbated by a lack of trust (of workers by management as well as of managers by workers) within Chinese firms. In addition, social hierarchies circumscribe the opportunities for creating and sharing knowledge. Chinese firms seeking to compete in global markets wisely employ boundary spanners to partially overcome these limitations (see Table 2), an approach that has been effective when dealing with non-Chinese partners and organizations. However, internal opportunities for capturing and enriching organizational learning are still overlooked by most Chinese firms, especially state-owned ones. To compete and succeed globally, the Chinese must draw on their relative strengths and overcome their own inherent cultural constraints.

The ability to harness available knowledge is not just a potential source of competitive advantage. Effective KM today is a competitive necessity in technology-based and information-intensive industries.

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