Creative Destruction and the Problems of Valorising Tacit Knowledge as an Asset Base in the Knowledge Economy

In this paper we first outline the distinction between Schumpeter’s theory of Creative Destruction and other theories of market mechanisms, both equilibrium and non-equilibrium. We then examine the concept of tacit knowledge, first in the specific form developed by Michael Polanyi, then in the wider senses of the term used by organization theorists, some of which are seen to be related to Granovetter’s 'embeddedness'. The 'tacit knowledge' of the market which is the basis of the action of the entrepreneur in Schumpeter’s first theory of creative destruction is contrasted with the corporate 'R&D' -led approach outlined in his second theory. Tacit knowledge is related to the questions of firms’ core competences and comparative advantage. In this context we examine developments in the investigation of implicit learning and distributed cognition as characteristic features of teamwork. We return to the question of the effects of 'creative destruction' and other forms of market-led or technology-led innovation on stocks of 'tacit knowledge' and other knowledge assets. Different theories of the working of competition also lead to different estimates of the importance and value of the tacit knowledge of entrepreneurs