Learning by Interaction: Absorptive Capacity, Cognitive Distance and Governance

This article analyses problems and solutions in thegovernance of knowledge exchange and joint knowledgeproduction. The analysis is based on a theory whichcombines elements of transaction cost economics,social exchange theory and theory of knowledge. Thetheory of knowledge yields an analysis of absorptivecapacity, communicative capacity and learning byinteraction. In that setting, the paper analysesproblems of governance: hold-up problems as a resultof specific investments in setting up knowledgeexchange, spill-over problems, a trade-off betweenstability and change of exchange relations, and atrade-off between novelty and understandability(`cognitive distance'). A survey is given ofcontingencies that affect the size of problems and theefficacy of instruments for their governance. Copyright Kluwer Academic Publishers 2000