05_The Tacit Dimension in Knowledge Management.pmd


THE TACIT DIMENSION IN KNOWLEDGE MANAGEMENT:

THE IMPLICATIONS OF THE EPISTEMOLOGY OF MICHAEL

POLANYI

Mikhael Dua

Atma Jaya Catholic University, Jakarta

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Abstract

Socio-economists such as Peter Drucker and Alvin Toffler have

called our attention to the importance of knowledge as a management

resource and as power. This issue, however, raises question of how knowl-

edge can be creative, or better, how knowledge creation can be pro-

duced in a company? This article is intended to provide a philosophical

analysis of the creative dimension of human knowledge. Following the

Prajna Vihara, Volume 12, Number 1, January-June, 2011, 51-71 51

2000 by Assumption University Pressc

~



thought of Michael Polanyi who proposes the thesis that all knowledge is

based on personal or tacit elements, this article suggests the idea that

business is not a neutral and objective activity. To be creative, it must be

arranged as a social activity that has a relationship to cultural tradition.

From the perspective of tacit knowing, business is our way of being. We

still always dwell in our cultural tradition in doing business.

1.  Introduction

Michael Polanyi’s theory of tacit knowing has been considered at

large in many areas: science, economics, and business. For people who

dwell in these areas, Personal Knowledge (1958) and The Tacit Di-

mension (1966) are not only philosophical books but also the alternative

sources to understand science, human knowledge in general, and organi-

zational knowledge creation. Especially his explanation of creative dimen-

sion of human knowledge can be helpful to understand the capability of a

company as a whole to create new knowledge, to disseminate it through-

out the organization, and to embody it in products, services, and systems.

This tone of its relevance in the organizational knowledge creation has

been introduced for the first time by Ikujiro Nonaka and Hirotaka Tekeuchi

in their book entitled The Knowledge-Creating Company in 1995.1  The

book is a scientific report of their research on the success of Japanese

companies in the 1970s and 1980s. Started with the assumption that

knowledge creation is the source of the highest-quality power and the key

to powershift - as a translation of Western idiom “knowledge as power”
__ Nonaka and Takeuchi reach the conclusion that the great success of

Japanese companies in the 1970s and 1980s depends on how the man-

agement staffs and the workers dwell into the vision of company, their

commitment to company's problem, and their immersion into the company’s

tradition. All these are tacit dimension in knowledge creation.2

In the course of this study the tacit dimension is not just a fact in

human knowledge and knowledge management but also has its function in

the creative process in knowledge management. Regarding this contribu-

tion, scholars in organizational knowledge creation try to understand the

secret of tacit knowing with which the philosophers are concerned. This

52 Prajna Vihara



paper aims to introduce the meaning of tacit knowing and then tries to

examine its relevance for organizational knowledge creation. For this pur-

pose, this paper will divide this topic into two stages. At the first stage the

paper will take a look at the question how Michael Polanyi explains his

theory of tacit knowing and at the second stage it will try to find out its

implications in the knowledge creation in business.

2.  Michael Polanyi, a Philosopher

Michael Polanyi was born on March 11, 1891 in the talented and

intellectual family of Mihaly Pollacsek and Cecilia Wohl, in Budapest,

Hungary. His father was born between 1825 and 1830 in a small Jewish

settlement in the Hungarian mountains and, after participating in a Hungar-

ian revolt against the Habsburgs in 1848, he escaped to Switzerland where

he studied engineering.3  The mother was an anarchist Russian countess,

who had also fled to Switzerland in the aftermath of a bomb plot (for

which she had built the bomb in the chemistry laboratory of the Czar’s

School for Daughters of the Nobility).

Michael Polanyi had three brothers and one sister. The eldest

brother was Otto, who in the 1920s became a major industrialist in Italy,

where he changed his name to Otto Pol. Otto was known as a Marxist

and a financial backer of the socialist newspaper Avanti, of which Mussolini

was the editor. The next brother in age was Adolph who had emigrated to

Brazil, where he found an interracial society in which whites, blacks, and

Indians would meld into a new civilization __ modern yet tribal, free yet not

individualist. After Otto and Adolph came Michael’s sister, Mousie or

Laura, who around 1900, at the age of nineteen became a leader in the

Hungarian folk movement. The sister had an artistic side (Bartok and

Dohnanyi) as well as a political and social vision of a life centered in the

communal village. Mousie Polanyi was the editor of a magazine for this

movement and through this organ helped to define and direct it.

Between Laura and Michael in age came Karl who was the first

President of The Galilei Circle at the University of Budapest4 and eventu-

ally became a professor of history of economics at Bennington and Co-

lumbia University in 1946. After World War I, he edited the Austrian

Mikhael Dua 53



Economist in Vienna and lived in poverty while giving most of his income

to the relief of Hungarian refugees. Karl is now best known for his study

of the social and cultural effects of the rise of capitalist market economies

through his book The Great Transformation, which had been drafted in

1940 and was published in New York in 1944 and in London in 1945.5

Karl is known because of his criticism of the extensive application of the

market system and its law of supply and demand of goods and capital.

One of his central arguments is that if this system is applied to land and

labor, then the result is that people come to be considered as commodities

with a purely economic value. For Karl, the market system violently dis-

torts our views of man and of society. And to counteract this dehumaniz-

ing tendency, Karl advocates redistribution of wealth and reciprocity of

commitments and obligation according to social and political rather than

economic norms.

If Karl, like Otto and Laura, defined himself as a socialist, Michael

was looking for an alternative style of life, which he later calls in the Per-

sonal Knowledge, ‘the responsible person’.6 At first he was concerned

with the problem of society and social processes. He tries to find his own

way between a bourgeois capitalism that rejects the intervention of com-

munity in the individual life and a Marxist socialism that denies the indi-

vidual freedom and the claim to be an independent person. Opposing the

rationalism of the traditional ‘Liberal’ and anti-human collectivism of the

Socialist and Marxist, he builds up his own concept of man and social

processes under the formulation: “the freedom of the subjective person to

do as he pleases is overruled by the freedom of the responsible person to

act as he must”.7  With this position of a responsible person, he defends in

his writings the political and social implications of science with a genuine

intelligence and thereby opens a clearer path for the life of reason and

justice. To look for a solution to the problems that existed in his and his

father’s generations, he holds that only in co-operation with others in the

development of understanding and in responsible action can the full devel-

opment of human personhood take place.8

This difference between the socialism of his siblings and his own

responsible personalism which sought justice and freedom, resulted in

tensions within the family. One of these is that the relation between Michael

and Karl became very cool.9 At first, the brothers were brought up with

54 Prajna Vihara



the same world view. Both were members of The Galilei Circle and in this

circle both brothers shared the same ideas: they were free in spirit and

anti-materialist. By the end of the 1920s, both had moved from free-

thinking atheism to Tolstoyan Christianity based on the view that indi-

vidual self-completion could be the impetus for social change. Here, at

this period, however, the brothers began to diverge. While Karl took a

definite step beyond individualist ethics towards the societal one, and tried

to imbue sociology with moral imperatives, influenced by Kant’s categori-

cal imperatives and by Christianity, Michael seemed to keep insisting upon

the anti-materialist world view and shifted towards a theoretical philoso-

phy in which the theory of knowledge dominated the theory of society.

From here on, the brothers took divergent directions. Karl became a

socialist or more precisely a social democrat, while Michael, with his deep

understanding of the personal and social dimension of man, from the be-

ginning of his career as scientist and philosopher, engaged in a criticism of

Marxism.

The year 1935 marked the critical stage in the relationship when

Michael criticised USSR Economic policy in his essay, “USSR Econom-

ics - Fundamental Data, System and Spirit” which he wrote when we was

in the Manchester School of Economics and Social Studies.10 Karl ac-

cused Michael of not understanding social and economic problems and

contended that the working-class must be a starting point in Russia for the

sake of socialism.11  Thus, from their former common ground of Tolstoyan

religiosity, Karl had moved towards a community-oriented Christian soci-

ology which led him to celebrate the Russian experiment as the sole em-

bodiment of socialism, while Michael rejected it and went on to construct

a social theory based upon a theory of knowledge and of free society.

Accordingly, for Michael fascism was not a genuine monster in the twen-

tieth century, but only a consequence of Marxism.

But the cool relationship in the family did not last forever. In the

end, Karl knew that Michael was right. The Hungarian revolution in 1956

was the moment. Karl began to criticise Russian power politics; and the

emphasis he placed on moral considerations as a motive for the Hungar-

ian revolution brought the brothers closer. Whereas Karl held that the

Hungarian revolution was of great significance because it had torn Hun-

gary from its feudal hangovers, Michael set the events in the context of his

Mikhael Dua 55



theory of knowledge and anti-totalitarian social theory, in which he reas-

serted the need for “spiritual beliefs” in truth, in fairness and decency, in

beauty, in solidarity, and in justice.12  On this ground, Michael, more than

Karl, maintained that science, arts, religion, and jurisprudence, while be-

ing fields of independent thought, are yet allied to each other. If the inde-

pendence of one is taken away, then the freedom of others likewise will

be ended. Considering this position Harry Prosch points out: “the ultimate

(result) of Polanyi’s (Michael’s) efforts was to reinforce our traditional

beliefs in truth, justice, mercy and fellowship…for the continued existence

of a free society…. This will lend an ontological basis for man’s grasp of

his own dignity and high calling in the universe”.13 Through his emphasis

on spiritual beliefs, Michael moved away from the socialist spirit of his

own family and began to move toward the examination of the responsible

person in a free society.

3.  Polanyi and Gestalt Psychology

Polanyi offered his life to inquire human knowledge in which he

published Science, Faith and Society (1946), Personal Knowledge

(1958) and The Tacit Dimension (1966). His approach in those books

was a fresh one. Having rejected the positivistic notion of knowledge he

looks for a true epistemology which would constitute a totally new philo-

sophical beginning: tacit knowing. While his opponents, the positivists,

have a long time been attempting to derive the wholes from parts, in a very

explicit way, by identifying the parts and describing their mutual relation,

Polanyi turns to a position that says we know more the whole reality

although we cannot specify it. He explains that any attempt to specify the

particulars of the whole remains incomplete. In one way, there is always a

residue of particulars left unspecified; and in another way, even when par-

ticulars can be identified, isolation of the particulars can change their ap-

pearance. Polanyi, then, says that knowing is a process of comprehend-

ing: a grasping of disjoined parts into a comprehensive whole.14 The mu-

tual relationship between particulars can be grasped only by a sustained

effort of imagination.

In any event this position has been developed by Gestalt psy-

56 Prajna Vihara



chologists who had amassed in their attempts to show that we see objects

by supplying forms or patterns in terms of which the various bits and

pieces in our perceptual field tend to fall into meaningful place. It seems to

be clear from some of their experiments that we do not perceive objects

by inferring them from their given parts, nor by a process of induction.

Polanyi’s references to Gestalt psychology occurred for the first

time in his article in 1941: “The Growth of Thought in Society”,15 when he

was still struggling with the freedom of science and drew upon the ideas of

Gestalt to argue for decentralized control. He contends that there is more

than one form of order besides a predetermined one given by centralized

scientific planning. From the work of Wolfgang Kohler,16 Polanyi shows

that there can be an order of the highest complexity spontaneously achieved

by internal mutual adjustment. His interest in Gestalt psychology’s findings

in relation to creative intellectual endeavor becomes the foundation of his

major new insight.

Besides Gestalt psychology’s importance in the context of the

freedom of Science, Polanyi also saw its importance in his discussion of

knowledge generation. This can be found for the first time in his book

Science, Faith and Society, when Polanyi concentrates on the problem

of scientific discovery. He acknowledges that his reflection on the role of

scientific intuition in the process of scientific discovery is “akin to the rec-

ognition of shapes as analyzed by Gestalt psychology”.17  The Gestalt

psychology assumed that the perception of shapes is caused by the spon-

taneous reorganization of the physical traces made by sense __ impres-

sions inside our sense-organs. The capacity of scientists to guess the pres-

ence of shapes as tokens of reality does not essentially differ from the

capacity of our ordinary perception to establish the reality of things around

us. In Personal Knowledge Polanyi says that the finding of Gestalt psy-

chology was his first clue to his concept of tacit knowing. He clarifies:

“Scientists have run away from the philosophic implications of Gestalt; I

want to countenance them uncompromisingly”.18 The importance of Ge-

stalt psychology for Polanyi, therefore, lies in its thesis that “we may know

a physiognomy by integrating our awareness of its particulars without be-

ing able to identify these particulars”.19

For Polanyi, Gestalt psychology was response against the atomic

sensationalist theories of the nineteenth century which contended that sen-

Mikhael Dua 57

..



sory experience is the basis of all human knowing. In this controversy with

atomic sensationalism, the Gestalt theoreticians promoted a thesis that

derives from its name: the Gestalt, the whole. In the formulation of Kurt

Koffka they seemed to say: “The word Gestalt has the meaning of a con-

crete individual and characteristic entity, existing as something detached

and having a shape or form as one of its attributes. A Gestalt, therefore, is

a product of organization, [and] organization the process that leads to a

Gestalt”.20 In the process of organization what happens to a part of the

whole is determined by intrinsic laws inherent in this whole. All particulars

become meaningless if we lose sight of the pattern which they jointly con-

stitute.

Polanyi knows that Gestalt psychology tends to treat perception

and knowledge as a more or less passive affair and therefore failed to see

perception as a construction, in which we create a tacit integration of

sensations and feelings into a perceived object. “Such an interpretation”,

Polanyi says, “leaves no place for any intentional effort which prompts our

perception to explore and assess in the quest of knowledge the clues

offered to our senses”.21 Despite this critical defect Polanyi acknowledges

that his theory of knowledge uses some proofs from Gestalt psychology.

He says that Gestalt psychology has pushed him to build a kind of phe-

nomenology of knowledge. In this standpoint Polanyi formulates his am-

biguous attitude toward Gestalt psychology. He writes, “Yet my evalua-

tion of this material is so different from that of Gestalt theory, that I shall

prefer not to refer here to this theory, even though I shall continue to draw

on its domain and pursue some arguments on lines closely parallel to that

of its teachings”.22 With this attitude Polanyi promotes his own view on the

nature of knowledge using some data from Gestalt psychology.

4.  The Subsidiary Awareness and the Focal Awareness

In the preface to his major book Personal Knowledge Polanyi

writes his epistemological position:

I regard knowing as an active comprehension of the

things known, an action that requires skill. Skilful know-

58 Prajna Vihara



ing and doing is performed by subordinating a set of par-

ticulars, as clues or tools, to shaping of a skilful achieve-

ment, whether practical or theoretical. We may then be

said to become subsidiarily aware of these particulars

within our focal awareness of the coherent entity that we

achieve.23

According to this epistemological encapsulation, the foundation

of knowing lies in the distinction between focal awareness and subsidiary

awareness. Focal awareness is an awareness of an object as our focus of

attention, while subsidiary awareness is an awareness of an object as a

clue to another.

His departure point of this thesis is the observation of the relation

of a set of particulars to a comprehensive entity in several kinds of know-

ing, namely, the understanding of physiognomy, the performance of skills,

and the mastery of tools and probes. In all these cases, Polanyi finds that

we can be aware of something in two mutually exclusive ways. “We can”,

he says, “be aware of particulars uncomprehendingly, i.e., in themselves,

or understandingly, in their participation in a comprehensive entity”.24  In

the first case we focus our attention on the isolated particulars and then

are aware of the particulars focally. But in the second, our attention is

directed beyond them to the entity to which they contribute; we notice

them subsidiarily in terms of their participation in the whole. Focal aware-

ness and subsidiary awareness, therefore, are definitely not two degrees

of attention but two kinds of attention given to the same particulars.

The critical factor distinguishing the two types of knowledge, how-

ever, lies not only in the content but primarily in the logical function of the

subsidiary elements. The subsidiary elements function as clues to enable

the knower to form a consistent perceptual or conceptual image of an

object being considered. Therefore, to clarify what he means by subsid-

iary awareness and focal awareness Polanyi gives more attention to the

evidences that are the results of the organization of sensory clues. In this

case Polanyi attempts to clarify that to see object is the result of learning a

skill, of learning how to attain a meaningful (but non-explicit) integration of

sensory clues.

To explain this Polanyi follows an exposition of the fact which had

Mikhael Dua 59



been demonstrated by Gestalt psychology, namely, what happens “when

I move my hand before my eyes”.25 So far as immediate givens are con-

cerned, I should only see my hand constantly changing its color, its size,

and its shape. But instead it appears that I informally “take into account a

host of rapidly changing clues, some in the field of vision, some in my eye

muscles and some deeper still in my body, as in the labyrinth of the inner

ear”,26 and so what I really perceive turns out to be a coherence among

these thousand varied and changing clues in the form of a single unchang-

ing object moving about, and therefore tacitly understood, in my percep-

tion, as being seen from continually different angles and distances and

under variable illuminations. But it is apparent that this coherence could

have been accomplished only tacitly, since I could not have been explicitly

aware at the moment of some of the clues that apparently have entered

into my coherent perception, those provided by my eye muscles, labyrinth

organ, etc.

Through this example Polanyi makes clear two points concerning

the distinction of subsidiary awareness and focal awareness. In one point

he says that one does not need to be consciously aware of all the clues he

integrates into a perception. With respect to this point Polanyi holds that

the physiologists have long ago established that the way we see an object

is determined by our awareness of certain efforts inside our body, some

efforts that we cannot feel in themselves. They proved that “we are aware

of these things going on inside our body in terms of the position, size,

shape, and motion of an object to which we are attending”.27

In the second point, Polanyi adds, it is also apparent that there

must exist a perceptual action enabling me to pick out “objects” from my

visual field and to retain them as integrated wholes even when their sense

quality changes. I perceive them to be entities in motion retaining their

integrity as objects, instead of perceiving them to be changing their char-

acter as objects. Given such a mechanism to start with, I could then learn

the skill of using it in more and more adequate ways as time went on.

With this analysis of the distinction of subsidiary awareness and

focal awareness we can conclude that knowledge is an activity which

would be better described as a process of knowing. It is tacit because all

the clues and particulars which are at work in our visual perception and

the use of tools and probes are unspecifiable. It is an experience that we

60 Prajna Vihara



have of our bodies and of our mental act as our own. But it is also a

consciousness of the intentional terms projected as externally distanced

whole, forms, objects, skills and more generally meanings, when forms,

objects, skills, and meanings are the object of our focal awareness. Know-

ing, therefore, involves the objective pole upon which subjective opera-

tion may be said to focus, but it also necessarily involves a non-focal

substratum experience and performance. It contains “components of which

we are subsidiarily aware in the focal content of our thinking, and that all

thought dwells in its subsidiaries, as if they were parts of our body”.28  No

knowledge, therefore, is wholly focal.

5.  The Subsidiaries

The remarkable thing of Polanyi’s theory of knowledge is that the

appearance of a thing at the centre of our knowing depends on clues to

which I am not directly attending. In the case of perception, there must be

certain sensory clues essential to what I am seeing, of which I am not

focally aware. The question arises as to what is the subsidiary? How can

it operate in our knowledge?

Categorically, the non-focal clues or better the subsidiary clues

must be of two kinds:29 (1) There are those clues which Polanyi called

subliminal: those events in my body, such as eye-muscles movements,

movements inside my labyrinth organ, and neural traces in my cortex that

I cannot ever directly perceive as part of my visual field when they are

functioning in an act of perception. But (2) there are also clues that I do

see, but only from the corner of my eyes. These clues he called "marginal

clues." I can observe directly these clues if I choose, but it is obvious I do

not attend to them directly when I am viewing an object focally. I merely

attend from them to a focal object. Thus my awareness of both kinds of

these clues must only be subsidiary to my focal awareness of an object.

The marginal clues can also be broken down into two kinds. Be-

sides what we see “at the corner of our eye:”, there is another type of

clues which also functions marginally in perception, that is, the way we

have been used to seeing in the past. Perception is contextual and histori-

cally conditioned and what we see is often a function of what we have

Mikhael Dua 61



learned to see. It is a habituation. Polanyi in this case explains that if we

irresistibly see a room as having a normal shape that is because of another

act of tacit knowing involving a subsidiary awareness at the back of our

mind of a great many normal rooms that we have seen in the past.30  So,

not only what is at the corner of our eyes, but also what is at the back of

our mind that functions as a background in perception. The weight of

these memories at the back of our mind functions as a marginal clue, as

part of a background upon which we see the objects. This background, in

Polanyi’s thought, is so important for the perception of objects because it,

like a landscape, includes an infinite range of particulars to which we are

paying no special attention, but nevertheless makes it possible to see, for

example, a cow strolling in a field. Polanyi seems to mean that since the

background fills up the field of our vision, it strikes us perceptually as

unlimited in its extent, i.e., as infinite. And because what fills up our field of

vision cannot be seen to be moving against a further background, it has to

appear to us to be at absolute rest.

With this concept Polanyi appears to be holding that the concep-

tions and general notions we have formed on the basis of the past experi-

ence enter only tacitly and as further specifications of what already has

become our perceptual background by the operation of our visual mecha-

nisms. The Humean notion that our past experiences automatically condi-

tion us to feel certain expectations for the future must therefore be in error

from Polanyi’s point of view. From what Polanyi says, it would seem to

mean that our cognitive expectations, or what Dewey called our “funded

experience” are not effective in determining the background in perception

when our visual mechanisms provide us with a background that contra-

dicts this funded experience, our knowledge.31

Harry Prosch also informs that “as for our tendency to integrate

some of our sensory fields into stable objects in the first place __ objects

that retain their integrity while moving against a stationary background -

Polanyi rejects references to ‘equilibrations’ in our nervous systems, or to

any other sort of automatic nervous mechanisms”.32  It seems to him,

Polanyi holds rather that this tendency to integrate some of our sensory

field into stable objects comes from our “craving to find strands of perma-

nence in the tumult of changing appearances”, which “is the supreme or-

ganon for bringing our experiences under intellectual control”.33  We should

62 Prajna Vihara



note here that for Polanyi, an intention to bring “our experiences under

intellectual control” begins to operate already in basic perception, so that

even the basic mechanisms of visual perception are held by him to be

teleologically oriented toward the attainment of an intended intellectual

coherence. Physiological mechanisms themselves are therefore thought

by him to be structured to function toward the goal of attaining meaning,

although functioning only mechanically toward such a goal, not deliber-

ately. Thus, they sometimes present us with illusions, i.e., are in error.

Yet, in spite of the mechanical operation of basic perceptual mecha-

nisms, Polanyi holds that our perceptions are not heteronomously caused.

Rather, he maintains, “we are performing one single mental act in jointly

seeing an object against its background”. Such a mental act has a focus in

terms of which the background functions in a subsidiary way, and so “we

are aware of the background only in terms of the object’s appearance __

e.g., of its being in motion”.34 He holds that both focal awareness and

subsidiary awareness exist functionally related in a single, purposive act of

mental awareness. But since we cannot discover in our consciousness all

the subsidiary clues that we integrate into a perceived object (we admit-

tedly are unable to infer the object explicitly from all our consciously known

sense data), Polanyi’s contention is that a perception as a single mental act

must rest upon a reiterated supposition that some physiological events in

our body that we can never take note of focally by means of introspection

are nevertheless elements used by us in a subsidiary way in structuring an

integrated object of focal perception - and are not simply causes of such

integration. In other words, he holds that subsidiary awareness may func-

tion at all levels of consciousness from the subliminal to the fully conscious
__ that some “functions inside our body at levels completely inaccessible

to experience by the subject” are elements of which we take account in

the total economy of our awareness.35 We truly do, therefore, “know

more than we can tell”.36

With the clarification of the nature and the status of the subsidiar-

ies Polanyi, then, says that the act of knowing involves an intentional change

of being: the pouring of ourselves into the subsidiary awareness of par-

ticulars which function as the elements of the observed comprehensive

whole. Polanyi calls his theory of knowledge tacit knowing or the tacit

dimension because the grounds of all knowing are subsidiary, or tacit com-

Mikhael Dua 63



ponents, items or particulars. Tacit knowing, then, although an intentional

act, is one in which we are only in subsidiary fashion.

6.  Tacit Knowledge: Its Role in Business

Polanyi’s theory of tacit knowing reached its highest development

in 1966, when he published The Tacit Dimension. In this publication,

Polanyi defends his position that science is an art of knowing that is devel-

oped according to the principle of spontaneous coordination of indepen-

dent initiatives under the criterion of plausibility, scientific values and origi-

nality.37 Both the criteria of plausibility and of scientific value tend to en-

force conformity, while the value attached to originality encourages dis-

sent among scientists. All these criteria are tacit dimensions.

Thirty years later Ikujiro Nonaka and Hirotaka Takeuchi applied

this theory in business. The resulting book is entitled The Knowledge-

Creating Company. The book is not so much one of philosophical re-

flection, but a management book that focuses on the problem of knowl-

edge creation in Japanese companies. As suggested in the title of the book,

Nonaka and Takeuchi were attempting to show that the success of Japa-

nese companies is due to knowledge creation. Following Peter Drucker,

Alvin Toffler, James Brian Quinn and Robert Reich, Nonaka and Takeuchi

agree that “the economic and producing power of a modern corporation

lies more in its intellectual and service capabilities than in its hard assets,

such as land, plant, and equipment”.38 Knowledge creation, then, be-

comes the new competitive resource in business. But the questions arise

as to what kind of knowledge the Japanese opt to create? Which knowl-

edge is more preferable? How could this kind of knowledge be devel-

oped?

It takes for granted in management that a good organization is one

which has the capability to process explicit knowledge. Nonaka and

Takeuchi describe this kind of knowledge as formal and systematic, can

be expressed in words and numbers, and can be easily communicated

and shared in the form of hard data, scientific formulae, and codified pro-

cedures. This concept, however, is very different from implicit knowledge

as understood by Japanese companies. This kind of knowledge is prima-

64 Prajna Vihara



rily tacit, something not easily visible and expressible, includes subjective

insights, intuitions, and hunches and is deeply rooted in an individual's

action and experience, as well as in the ideals, values, or emotions he or

she embraces.39

In Polanyi’s perspective this kind of knowledge consists of two

kinds of subsidiaries. The first is the technical dimension, which encom-

passes the kind of informal and hard-to-pin-down skills or crafts cap-

tured in the term knowing how. Like a master of craftsman, the Japanese

managers develop a wealth of expertise at his fingertips after years of

experience. This kind of knowledge is hard to be articulated in words.

The second is the cognitive dimension. It consists of schemata, mental

models, beliefs, and perceptions so ingrained that we take them for granted.

This aspect of tacit knowledge reflects our image of reality and our vision

of the future. Though they cannot be articulated, these implicit models

shape the way we perceive the world around us. This aspect of tacit

knowledge contains also our knowledge of the history of a company and

the way how this company looks for solutions in facing its problem.

According to Nonaka and Takeuchi, this vision of knowledge has

its roots in the Japanese intellectual tradition influenced by Buddhism and

Confucianism. According to these traditions, the Japanese perception is

oriented toward objects in nature that are subtle, but, at the same time,

visual and concrete. Knowledge does not mean to grasp the objects, but

includes the way of being to participate in the way of other being. It means

knowledge includes wisdom that is the way of being to discover the real-

ity. If Western philosophy is dominated by Cartesian dualism between

subject and object, mind and body, or mind and matter, the Japanese

intellectual tradition is concerned with the idea of oneness of humanity and

nature,40 oneness of body and mind,41 and oneness of self and other.42 In

the context of such a tradition, it can be thought that almost all of the highly

visionary knowledge of the top president of a Japanese company consists

of subjective insight, intuitions, and hunches. This kind of knowledge can-

not be easily processed in a mechanical way (like a computer creating a

database). One should dwell in it and have a feeling to what they have in

mind. Like a child who learns things with his body, not only by his mind, to

understand the implicit knowledge of the top president one should delve

into history, into the way the company is organized, and even into the

Mikhael Dua 65



speech that is spoken in the ceremonial events of company.

With this concept in mind, Nonaka and Takeuchi anticipate that in

business it is not the thing that we have knowledge of, but how we create

knowledge: “Once the importance of tacit knowledge is realized, then one

begins to think about innovation in a whole new way”.43  They explain that

in business, knowledge is not just about putting together diverse bits of

data and information. It is a highly individual process of personal and

organizational self-renewal. In Polanyi words, the task of management is

searching the way to discovery or innovation.44 In such pursuit “we are

guided by sensing the presence of a hidden reality toward which our clues

are pointing; and the discovery which terminates and satisfies this pursuit

is still sustained by the same vision”.45 The essence of innovation is to re-

create the world according to a particular vision. This means to create the

company and everyone in it in an ongoing process of personal and orga-

nizational self-renewal.46

To have an insight that is highly personal is of little value to the

company unless the individual can convert it into explicit knowledge, thus

allowing it to be shared with others in the company. Nonaka and Takeuchi

tell us that Japanese companies are especially good at realizing this transi-

tion from tacit knowledge to explicit knowledge. They take Honda as a

case. Before 1975 Honda produced sedan which has a large and long

body. The prototype of this product is Honda Civic and Honda Accord.

In 1978, Hiro Watanabe, the top management at Honda, inaugurated the

development of a new-concept car with the slogan, ‘Let’s gamble’ which

received a positive response from the young engineers and designers (the

average age was 27). Mr. Watanabe only had a vision that the revolution-

ary car should be called ‘tall boy’ with ‘man-maximum, machine mini-

mum’ principle. The mission might sound vague, but in fact it provided the

team with an extremely clear sense of direction. The result was called

“Honda City”.

From this example Nonaka and Tekeuchi explain that the tacit

knowledge is not a solitary fact. It can be understood because it can be

made explicit in three ways.47 First, it can be expressed in figurative or

metaphorical language. A metaphor such as “automobile evolution” “man-

maximum, machine-minimum”, “tall boy” is a distinctive method percep-

tion. It is a way for individuals grounded in different contexts and with

66 Prajna Vihara



different experiences to understand something intuitively through the use

of imagination and symbols, both metaphor and analogy.  Through meta-

phors, people put together what they know but cannot yet say. As such,

metaphor is highly effective if fostering direct commitment to the creative

process in the early stages of knowledge creation.

Second, it can be disseminated into team work. The story of

Honda City suggests how new knowledge always starts with an individual
__ Mr. Hiroo Watanabe in this case __ and how an individual’s personal

knowledge is transformed into organizational knowledge valuable to the

company as a whole. In this case the organization cannot create knowl-

edge on its own without the initiative of the individual and the interaction

that takes place within the group. Knowledge can be amplified at the

group level through dialogue, discussion, experience sharing, and obser-

vation.

Third, although it can be expressed, implicit knowledge is born in

the midst of ambiguity and redundancy. The story of the Honda City sug-

gests how certain organizational conditions can enhance the knowledge-

creation process. It may sound paradoxical, but the confusion created

within the product development team by the ambiguity of the mission

handed down by Honda’s top management provided an extremely clear

sense of direction to the team. Ambiguity can prove useful at times not

only as a source of a new sense of direction, but also as a source of

alternate meanings and a fresh way of thinking about things. It also invites

redundancy. To Western managers, redundancy has connotation of un-

necessary duplication and waste. Yet, in case of Honda City, redundancy

is important because it encourages frequent dialogue and communication.

This helps create a common cognitive ground among employees and thus

facilitates the transfer of tacit knowledge.

7.  Closing Remarks

“Knowledge is an important factor in economic phenomena”. This

is one of the basic thoughts of neoclassical economics and has been taken

for granted by many contemporary scholars such as Marshall, Hayek and

Schumpeter. But what is important here is the way knowledge is treated.

Mikhael Dua 67



This depends upon the emphasis we put on knowledge, the type of knowl-

edge to which attention is paid, and the ways we acquire and utilize it.

What needs to be recognized is the fact that not all knowledge is explicit.

The greater part of knowledge is still implicit and can only be expressed in

figurative ways.

Looking at the way it is produced and communicated; two things

concerning tacit knowing can be deduced in these closing remarks. First,

tacit knowing is social-psychological fact, in a sense that it is based on

personal or national experiences of things. Human beings acquire knowl-

edge by actively creating and organizing their experiences. Being different

from traditional epistemology that derives knowledge from the separation

of the subject and object of perception, we contend that human beings

create knowledge by involving themselves with objects. Polanyi calls this

process ‘indwelling’.

Two, tacit knowing is an ontological fact, in a sense that tacit

knowing presents different worldviews: the individual world and the orga-

nizational world. Tacit knowing suggests that at first stage knowledge is

created only by individuals. An organization cannot create knowledge

without individuals. The organization supports creative individuals or pro-

vides contexts for them to create knowledge. Organizational knowledge

creation, therefore, should be understood as a process that organization-

ally amplifies the knowledge created by individuals and crystallizes it as

part of the knowledge network of organization. This process takes place

within an expanding community of interaction, which crosses inter-organi-

zational level and boundaries. My knowledge, then, means my world,

because only through my knowledge do I dwell in my world. With this

perspective, I can say that a company is not only a neutral organization,

but a knowledge-sharing organization. It is not determined by its goal, but

by its basis, which is the process of sharing-knowledge of those who

dwell in a common tradition.

Endnotes

1Ikujiro Nonaka and Hirotaka Takeuchi, The Knowledge-Creating Com-

pany, How Japanese Companies Create the Dynamics of Innovation (New York:

68 Prajna Vihara



Oxford University Press 1995).
2Ibid., p. 8.
3Peter Drucker, Adventures of a Bystander (New York: Harper and Row,

1978), pp. 127-138. Citation is taken from Eugene Webb, Philosophers of Con-

sciousness (Seattle: University of Washington Press, 1988), pp. 26-30.
4The Galilei Circle, formed in 1908, was made up of progressive students.

Michael was also one of the founders and members of this circle. Ilona Duczynsk,

Karl’s wife, has described its motif in these terms: “Let it be free in spirit, let it keep

away from party politics, let it be dedicated and decent. Let it appeal to the students

who live in poverty in their thousands. Let it be a movement aiming to learn and to

teach”. Its mission: “to mobilise against clericalism, corruption, against the privi-

leged, against bureaucracy - against the morass ever-present and pervasive in this

semi-feudal country”. Harry W. Pearson (ed.), The Livelihood of Man: Karl Polanyi

(London: Academic Press, 1977), p. xi.
5Ibid., pp. xi-xii.
6Personal Knowledge, p. 309.
7Ibid.
8Michael Polanyi, The Study of Man (Chicago: The University of Chicago

Press, 1959), p. 60.
9Endre J. Nagy, “After Brotherhood’s Golden Age: Karl and Michael

Polanyi” in Humanity, Society, and Commitment, edited by Kenneth McRobbie

(London: Black Rose Books, 1994), pp. 88-109.
10Michael Polanyi, “USSR Economics __ Fundamental Data, System, and

Spirit”, The Manchester School of Economic and Studies, 6 (November 1935), pp.

67-89. This essay was published also as the third essay in The Contempt of Free-

dom, 1940.
11Ibid., p. 99.
12Knowing and Being, p. 34.
13Harry Prosch, Michael Polanyi: A Critical Exposition (Albany: State of

University of New York Press 1986), p. 197.
14Knowing and Being, pp. 123-124 and The Study of Man, p. 28.
15Michael Polanyi, “The Growth of Thought in Society”, Economica 8

(November 1941), p. 432.
16Polanyi refers to Wolfgang Kohler, The Mentality of Apes (London: Kegan

Paul, Trench, Trubner & Co., Ltd., 1925).
17Science, Faith and Society, p. 33.
18Personal Knowledge, p. vii.
19The Tacit Dimension, p. 6.
20Kurt Koffka, The Principles of Gestalt Psychology (London: Routledge,

1999), p. 682.
21Personal Knowledge, pp. 97-98.
22Personal Knowledge, p. 55.

Mikhael Dua 69

..



23Ibid., p. vi.
24Knowing and Being, p. 128.
25Knowing and Being, p. 139.
26Ibid.
27The Tacit Dimension, p. 13.
28The Tacit Dimension, p. x.
29Knowing and Being, pp. 139-140.
30Ibid., p. 140.
31Harry Prosch, Michael Polanyi, a Critical Exposition, Op. Cit., p. 60.

Harry Prosch is one of Polanyi’s assisstant who becomes  co-writer of the book

Meaning.
32Ibid.
33Knowing and Being, p. 114, Personal Knowledge, pp. 18, 73, 103-104,

132-133.
34Knowing and Being, pp. 111-112.
35Michael Polanyi, “Logic and Psychology”, The American Psychology

23 (January 1968), p. 31.
36The Tacit Dimension, p. 4.
37Knowing and Being, pp. 49-55.
38Ikujiro Nonaka and Hirotaka Tekeuchi, The Knowledge-Creating Com-

pany, Op. Cit., p. 7.
39Ibid., p. 8.
40Examples of this trait include: the sympathy to nature depicted in the

Man-yohshu, the notion of change and transition described in the famous Tale of

Genji, delicate sentiment conveyed by the Kokin-wakashu. Yujiro Nakamura, a

contemporary Japanese philosopher called this style as emotional naturalism.
41In the Meiji era (1868-1912), Kitaro Nishida built up a philosophy that

focuses on the fact of human-being-in-the-world as originally having the character

of action. In this mode of act, there is separation between body and mind, subject

and object.
42It assumes that the Japanese view is collective and organic. While West-

ern philosophy promotes the realization of the individual self as the goal of life, the

Japanese ideal of life is to exist among others harmoniously as a collective self.
43Ibid., p. 10.
44Knowing and Being, p. 118.
45The Tacit Dimension, p. 23-24.
46Ikujiro Nonaka and Hirotaka Takeuchi, The Knowledge Creating Com-

pany, Op. Cit.,  p. 10.
47Ibid., p. 13-15.

70 Prajna Vihara



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Nagy, Endre J. “After Brotherhood’s Golden Age: Karl and Michael

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Polanyi, Michael. Knowing and Being, Chicago: The Chicago University

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Mikhael Dua 71