Organizational learning is a construct employed to depict a set of rational and non rational processes relevant to the creation, retention, and transmission of knowledge in organizations. The concept has been linked to organizational performance, sustainable competitive advantage, organizational transformation and corporate renewal, organizational and technological innovation, and entrepreneurship among other themes. Change, adaptation, and learning have all been used to denote the process by which organizations adjust to their environments; organizational change is often understood as a manifestation of learning. Various conceptions of learning have been advanced in the field; for instance, learning as improving, learning as recording knowledge, and learning as the evolution of knowledge. Research in the area seeks to understand how learning in formal organizations takes place, what its sources are, and what its effect is on the performance and maintenance of organizational stability. For quite some time organizational learning and learning organization were used interchangeably; lately, a somewhat tentative agreement has been established that the two terms are not to be confused. Whereas in the former the emphasis is on learning, and more specifically on the process of learning in organizations, the latter stresses the organization per se. Among the questions addressed by the scholars of organizational learning are: what are the essence and the bases for organizational learning – rational, subconscious, or experiential? Who is the agent of learning – the individual, the organization, or both? How does organizational learning manifest itself? How is knowledge in organizations acquired, retained, and transferred? What affects the ability of organizations to learn?
This field of organization studies developed in two discrete stages – a theoretical stage, which began in the 1950s and lasted until the late 1980s, and an empirical stage. The theoretical implications of organizational learning have been recognized ever since the notion was introduced in the 1950s with the work of March, Simon, and Cyert. The idea drew a lot of attention as it was regarded as a needed and viable alternative to the rational choice assumptions promoted by economists. It represented an attempt to explain how knowledge, structures, beliefs, and actions of an organization could affect, and in turn be affected by, not necessarily rational and yet critical institutionalization processes. In light of this, March and Simon argued in Organizations (1958) that the behavior of organizations is determined by complex and interconnected processes which introduce a significant degree of unpredictability into the decision making process. Organizations react to this challenge by developing highly elaborate, organized sets of responses and operating procedures and they resort to their usage when recurring decision situations arise. In A Behavioral Theory of the Firm (1963), Cyert and March advanced the understanding of the organizational learning process by depicting it as a ”learning cycle.” Organizations, they argued, respond to environmental upsets by fine tuning the probability of relying on specific operating procedures that have been used successfully in the past. In this view, organizational adaptation is attained through the application of a multi level hierarchy of specific procedures. Organizations use those to respond to externally imposed uncertainties and calamities and to offset them.
The early notions of organizational learning regarded the learning process as a by and large rational response of adaptation to the demands imposed on the firm by an unstable and unpredictable environment. This viewpoint was challenged by March and Olsen (1975), who argued that the assumption on which learning models were built was not viable since ambiguity is both unavoidable and ubiquitous. They proposed, instead, that under conditions of ambiguity, non rational forces – beliefs, interpretations, trust, and perceptions – shape outcomes. Therefore, improved performance, and positive outcomes in general, are not the only plausible consequences of organizational learning. Since then, researchers have acknowledged that learning could have unintended consequences which could be negative. In light of this insight, Levinthal and March (1981) contested the idea of learning as being rationally adaptive and introduced a formalized learning model under conditions of ambiguity.
Therefore, the origins of the field and its first developmental stages were theoretical. Since the late 1980s and early 1990s, however, particularly with a special issue being devoted to organizational learning by Organization Science in 1991, interest in the topic surged and attention shifted from theoretical to empirical investigation. Recent approaches to organizational learning tackle the notions of unlearning and emphasize the creation of routines as storage mechanisms of knowledge (Levitt & March 1988). According to this view, organizational learning is a process, in which new organizational routines are created and old ones are modified in response to experiences and environmental changes; thus, knowledge manifests itself in routines. Examples of organizational routines are organizational strategies, rules and procedures, roles, structures, technologies, as well as cultural practices. These mechanisms are used to record and store the knowledge that is gained from various sources: new insights, past experiences, from putting new structures or systems in place, from actions taken by the organization and by other organizations, as well as from experimentation and failure. Most recently, a new direction of empirical investigation has been under development whose concern is the creation of a community of learners.
Despite the widespread acceptance of the concept of organizational learning, no one theory or model has been generally adopted. Some agreement has been reached, though, on several of the early debates that characterized the field. Among those are: organizational learning is a process; there is a distinction between individual and organizational learning; and there is accord that contextual factors affect the plausibility of organizational learning taking place. For instance, empirical research has found that the following factors affect organizational learning: organizational and corporate culture, an organization’s strategy, and the structure and the degree of complexity and unpredictability of both internal and external environments.
Among the unresolved or partly resolved old debates two stand out in particular: (1) how to explain the linkage between the individual and organizational levels of learning and (2) whether organizational learning implies behavioral or cognitive change and how to reconcile the two.
Central to the topic of learning in organizations is the issue of the level of analysis. In other words, who is the learning agent – the individual or the organization? While the old debate between individual and organization levels of analysis has abated, the role of the group level has become more prominent. In addition, research has expanded to examine learning not only within organizations but also between organizations. The scholarship on technological innovation is a case in point. In this venue, the effect of social networks has received great attention in terms of learning both within and between organizations.
Learning in organizations presupposes that individuals gain knowledge and that which they learn is retained, i.e., stored in routines developed not by organizations but by individual organizational members. Thus, the individuals create and carry out the routines, but the latter acquire a life of their own as they endure even when those who have created them leave the organization. Individual learning, therefore, is a necessary but not a sufficient condition for organizational learning. Institutional processes must be put in place to store and transfer what has been learned by individual members to the organization and back to all organizational members. Furthermore, there has been an agreement that organizational learning is not just the cumulative knowledge possessed by individuals (Fiol & Lyles 1985). Thus, the question that any cross level model needs to provide an answer to is how individual knowledge is shared and how the organizational knowledge, codified in routines and the firm’s culture, is trans mitted to new and old individual members.
The importance of formal and informal organizational socialization processes through training and mentoring, organizational rituals and ceremonies, and storytelling has been well understood and acknowledged. However, a definitive answer to this question has yet to be found. A model proposed recently by Crossan et al. (1999) – the 4I framework – addresses several of the above mentioned cross level challenges: it is a multilevel model which aims at bridging the individual, group, and organizational levels of analysis throughout the four processes that constitute organizational learning: Intuiting, Interpreting, Integrating, and Institutionalizing; hence the name – 4I. It is dynamic in the sense that it specifies the mechanisms through which learning occurs and knowledge is created, stored, and transferred at each level as well as between levels. Furthermore, it addresses the question of the nature of organizational learning as conscious, experiential, or subconscious. The model also considers what has been known in the literature as the critical challenge to an organization’s strategic renewal – the tension between exploration (novelty, new learning) and exploitation (continuity, using what has been learned).
While the first debate in the field of organizational learning concerns the levels of analysis, the second one looks at the content of organizational learning and adaptation. In this regard, a distinction has been drawn between cognition and behavior. Fiol and Lyles (1985) depict the difference in a sense that learning reflects changes in cognition whereas adaptation reflects changes in behavior. The cognitive approach emphasizes content at the individual level; it focuses upon the production and sharing of beliefs, as well as on the preservation and dissemination of knowledge. From this perspective, organizational learning is understood as changes in the belief systems. Most of the research in this perspective is based on interpretive methodologies, such as case studies. In contrast, the behavioral approach concentrates on the development of new responses or actions at the organizational level. Examined behaviorally, the focus of learning is on those changes that the organizations create and implement as a response to their own experiences and the environmental conditions. Researchers study organizations in this perspective by examining the changes in organizational structures, technologies, systems, and routines. The most often used methods of inquiry are those of quantitative studies and simulations.
The tension between these two aspects of learning comes as a result of the fact that cognition and behavior do not necessarily occur in parallel. In other words, it is plausible that changes in behavior may take place without the development of cognitive associations and changes. Vice versa, learning may or may not lead to changes in behavior or organizational performance. For instance, small and incremental behavioral changes do not necessarily result in important learning. At the same time, there is no empirical evidence that suggests that large scale behavioral changes would lead to proportionally large changes in cognitive associations. Fiol and Lyles (1985) illustrate this point by using the example of the wave of mergers in the 1960s when rapid and profound changes were taking place in the forms of acquisition and yet in the absence of learning. When studying organizational behavior under conditions of immense uncertainty and crisis, Starbuck and colleagues (1978) found that the firms’ response was to keep introducing various changes in the hope that one will eventually work. The issue that scholars in the field grapple with is how and in what ways might this tension be resolved and the two perspectives integrated. In recent years the debate about it has subsided as researchers have been more willing to accommodate both aspects under a broader definition of organizational learning.
At present, there are several challenges that are either taking place or beginning to appear in the field and which contain potential for future research. Further exploration and successful reconciliation of the strenuous linkage between behavior and cognition is one. Yet another link remains grossly underexplored -that between organizational learning and power, leadership, and the politics of institutionalization. The question of the nature of organizational learning – whether it is a rational solitary experience or is based on daily social interaction – needs a more definitive answer too. Other unresolved issues are those of methodology – whether quantitative or interpretive studies are more likely to provide answers to the main questions in the field -and where the boundary of organizational learning as a field of organization studies lies. These issues reflect the growing uncertainty of the distinction between organizational learning and knowledge management.
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