Foundations of International Business in the Age of Intellectual Capitalism
New Horizons in International Business series
Chapter 6: Common knowledge
Common knowledge is synonymous with common sense. It can be defined as a fact that can be assumed to be understood by two parties within a mutually interactive framework whereby interchanges of certain information are possible. It is something that is known mutually, as it were, even though both parties may not confirm the fact. In game theory, such a definition of common knowledge is known by economists as a condition that gives rise to the Nash Equilibrium. In a more general sense, common knowledge means a notion that is commonly understood by all the constituent members of a certain society. However, the common knowledge possessed by a speaker may not necessarily correspond with the expectations of someone listening to the speaker. There are many examples where the common knowledge differs between generations, between man and woman, and between regions. Regarding the spread of knowledge in society, as a classic theoretical consideration, there is the work of Tarde (1895). Tarde (1895) states that "advancement is a kind of collective thinking" (translation in Japanese, p. 217), and emphasizes that imitation gives rise to relations between individuals. Tarde (1895) discusses innovation in several places, and in that respect, has passages in common with Schumpeter (1926), whom he precedes. For instance, Tarde (1895) argued that in the course of the development of a production driven by the steam engine, various inventions and imaginative ideas would be triggered and that, before long, one definitive machine emerged.
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