At what level is new value created, or, put differently, what is the locus of knowledge? While knowledge and capabilities-based researchers argue that the locus of new value and knowledge lies at the firm level, we challenge this conceptualization and theoretically build toward more individualist foundations. We explicate the underlying philosophical assumptions of extant knowledge and capabilities-based work and discuss attributional problems. Nested (individual-level, a priori) heterogeneity may provide a better explanation of collective heterogeneity. There is really no need for the firm to be the fundamental unit of organization in invention; there is plenty of reason to suppose that individual talents count for a good deal more than the firm as an organization (Arrow, 1962: 624). The knowledge and capabilities-based views (KBV) in strategy have largely extended resource-based reasoning by suggesting that knowledge is the primary resource underlying new value creation, heterogeneity, and competitive advantage (Barney, 1991; Grant, 1996; Kogut & Zander, 1992). However, despite the recent proliferation of research into knowledge-based arguments, a number of fundamental constructs and questions have yet to be clearly defined and explored (e.g., see Kaplan, Schenkel, von Krogh, & Weber, 2001, for a recent overview). A critical, implicit debate underlying much knowledge and capabilities-based work is whether the individual or the collective is the source of ne
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