Managerial Authority When Knowledge is Distributed: A Knowledge Governance Perspective

A critical knowledge governance problem concerns the consequences for the use of the authority if the knowledge that is essential in a work setting is partially unknown to the person who is to exercise authority. Is it possible to rationally direct work and activities and efficiently utilize knowledge under such conditions? Recently, many scholars have given negative answers to this question, arguing that authority relations are becoming strained by the increasingly distributed nature of knowledge in and between firms. We analyze this argument on the basis of definitions of “authority” and “distributed knowledge.” This allows us to show that ⎯ while intuitively appealing ⎯ the argument that authority cannot be an efficient coordination mechanism in the presence of distributed knowledge is at best problematic. The argument is based on the flawed inference that because the holder of authority is ignorant about some of the knowledge held by employees, he cannot rationally direct them. However, it is correct that the quality of centralized direction (planning, authority) may be compromised by distributed knowledge, leading to choices of other governance mechanisms and structures.