Catching the Baton: Exploring relational factors that elicit tacit knowledge transfer

In Canada, 71% of small business owners plan on transferring ownership of their respective companies or relinquishing control of their businesses in the next few years. As such, the aging of small business owners has emerged as one of the most salient policy issues, posing great challenges to the economic and social fabric of industrialized nations. Clearly, passing the baton to the next generation will generate great opportunity for a younger cohort; however, it is not without its challenges. One of the many obstacles facing the transfer of business ownership lies in the ability of the owner to transfer industry knowledge to his or her successor. More specifically, it is the owner’s tacit knowledge that must be passed on to the successor in order for the firm to maintain its competitive advantage.

Tacit knowledge is grounded in experience and action and is embedded within a specific social context. It encompasses both a technical and cognitive component. For example, a sales person draws upon her tacit knowledge when determining what type of sales approach, she should use with a particular customer. It is her tacit knowledge that dictates whether or not a soft or hard sell would be the most effective strategy to make the sale. Such knowledge can be difficult to convey or teach to a new person as it extensively relies on experience and intuition and may be quite difficult for the experienced person to articulate.

In light of these issues, this study sought to explore the relational factors that facilitate tacit knowledge transfer. The study consisted of extensive interviews with the founder and the executive team of a small Canadian firm in the entertainment industry. Storytelling and frequent communication and interaction between the founder and his executive team are hypothesized to result in the development of domain specific cognitive schemas, which in turn are anticipated to facilitate the transfer of tacit knowledge. Such knowledge is believed to be essential for accurate executive decision-making and successful succession.