The purpose of this paper is to examine the ways in which scholars have proposed organizational forms combining elements of markets and hierarchies. These hybrid forms are based on networked connections and bottom‐up entrepreneurship, fostering knowledge sharing among semi‐independent units. Despite their suitability to knowledge‐intensive companies, scholars are divided on their views on governance in internal hybrids. While knowledge management scholars emphasize soft community‐like dimensions, organizational economists seek to reduce opportunism through hard hierarchical governance. Because these views act as complementaries, this paper synthesizes them to present organizational governance in internal hybrids.
A case study with 56 interviews describes the functioning of soft and hard governance mechanisms in the Japanese company Maekawa Manufacturing Ltd.
The case study indicates that soft and hard governance mechanisms work in complementary ways in a successfully implemented internal hybrid.
Internal hybrids tend to function most efficiently with a mix of soft knowledge management practices and hard control devices.
Instead of taking an “either/or” perspective, this paper seeks to synthesize contrasting views of knowledge management and organizational economics.
