In the contemporary wave organizations face different kinds of challenges than during previous waves
and as a result the requirements for leadership are different (Barkema et al., 2002; Schneider, 2002).
In the industrial economy, the challenge was inside the firm (internal), i.e. coordinating the physical
assets produced by employees. In other words, during the Industrial Wave those organizations that
could optimize their physical production well were considered successful (Boisot, 1998; Schneider,
2002). In the 21st century, the landscape turned very competitive, due to trends of globalization,
democratization and technology (Halal & Taylor, 1999), putting strain on the very boundaries and
structures of organizations. The external environment drew more and more attention.
This new landscape resulted in organizations organizing themselves horizontally LQ³FRQVWHOODWLRQV ́
(Bamford et al., 2003). At macro level, horizontally connecting organizations created what some have
called the ³&RQQHFWLRQLVW(UD ́(Halal & Crocker, 1998; Miles, 1998). Organizations face the need to
exhibit speed, flexibility and adaptability (Eisenhardt, 1989). Sustainable superior performance
requires faster learning (Child & McGrath, 2001). Many organizational theorists hence champion the
³learning organization ́ (Senge, 1990), in which knowledge is the currency used.
People in organizations have always sought, used, and valued knowledge, at least implicitly.
However, explicitly recognizing knowledge as an organizational asset is relatively new, as is
understanding the need to manage, lead and invest in knowledge with the same care paid to getting
value from other, more tangible assets. ³The need to make the most of organizational knowledge, to
get as much value as possible from it, is greater today than in the past ́ (Davenport & Prusak, 1998,
p.12). Hence, this age has also been called the ³Knowledge Era ́ (Uhl-Bien et al., 2007).
Unlike previous factors of production such as land and labor that are subject to decreasing returns,
knowledge is not bounded. Knowledge operates in terms of increasing returns. In other words, using
knowledge generates more knowledge. Thus, the nature of knowledge suggests that knowledge should
be shared and used in order to generate more knowledge. But how do organizations create such an
environment that knowledge can be shared at low costs. A tentative answer is that organizations do
not only rely on the intelligence of a few top-level leaders (Heckscher, 1994), but that they enable the
intelligence distributed throughout the entire organization (Miles et al., 1999). As such, it is argued
that in this Knowledge era, organizations rely on their corporate intelligence and capacity to learns
rather than on their physical assets (McKelvey, 2001; Zohar, 1997).