Economic rationalism: short term gain for long term pain? A knowledge management analysis of the effect of organizational 'efficiency improvements' on competitive advantage

Knowledge is, arguably, the most critical organizational resource affecting an organization's ability to develop, and sustain, a competitive advantage in the marketplace. Economic rationalism, it has been argued, with its focus on economic efficiency, will result in an increase in skills, capacities, and quality of the human resources of organizations, and a substantial improvement in the organization's productivity overall. Economic efficiency is also often defined as 'doing more with less'. This paper argues that three commonly practised efficiency practices - process reviews; downsizing; and internal competition - may result in a reduction of the organization's ability to learn and use knowledge, and therefore in the organization's ability to compete.