Inspiring Economics

Inspiring Economics

Human Motivation in Political Economy

Bruno S. Frey

Bruno S. Frey illustrates what he perceives to be the inspirational quality of economics and how this differs from the type of economics studied in many academic institutions. He introduces insights into economics from a psychological perspective, dealing with issues such as transformation of anomalies, identification in democracy and crowding effects, and focuses on intrinsic motivation and how it is undermined.

Chapter 7: Motivation, Knowledge Transfer and Organizational Forms with Margit Osterloh

Bruno S. Frey

Subjects: economics and finance, economic psychology


KNOWLEDGE AS A SOURCE OF COMPETITIVE ADVANTAGE Knowledge generation and transfer is an essential source of a firm’s sustainable competitive advantage. The question is, which organizational form is most conducive to knowledge generation and transfer? The most prominent suggestion for organizing firms is to introduce market elements and prices through such methods as profit centres, spin-offs, or holdings. We intend to show that such organizational forms are suitable only under special circumstances defined by specific aspects of knowledge and motivation. In line with the knowledge-based view of the firm, we distinguish explicit knowledge from tacit knowledge. We ask what kinds of motivation are needed to generate and transfer tacit knowledge, as opposed to explicit knowledge. To explore this question, we resort to the well-established and widely empirically supported social psychological theory of the interaction between intrinsic and extrinsic motivation, extensively drawn upon in Chapters 5 and 6. Intrinsic motivation is not simply additive to the motivation induced by prices (extrinsic incentives). Rather, under certain conditions, the use of the price system undermines intrinsic motivation (crowding-out effect), making motivation endogenous to organizational forms. We argue that knowledge transfer is intimately connected to motivation, and that sustainable competitive advantage requires corresponding motivation management. We will demonstrate which organizational forms are suitable for generating and transferring tacit knowledge, as well as explicit knowledge. In addition, we will show the type of motivation, whether intrinsic or extrinsic, these organizational forms should engender for effective knowledge transfer and sustainable competitive advantage to...

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