From information asymmetry to knowledge asymmetry

Information and knowledge: A comparative analysis

The answer to what is information and how it is different from knowledge is discussed in Chapter 1. In our context, information refers to objective factual data, possession of which enhances individual and group capacities to take informed decisions. It is a commodity, the acquiring of which requires fixed cost and potential channels (Grant, 1996; Sharma, 1997). The importance of information as an intellectual resource has enabled many organizations to take action to manage their informational assets to boost performance (Stinchcombe, 1990). However, although various firms have undertaken the strategy of information management with the expectation of positive outcomes, we need to remember that equipping an individual/group with information does not necessarily guarantee interpreting abilities to process the information for practical benefits. From being possessors of information to interpreters of information, the process essentially entails following certain steps chronologically. In the initial phase an individual/group gains information, followed by developing skills to interpret the information, which subsequently leads to gaining experience and deriving capacities to use and disseminate created and acquired information on a large scale. It is when the target group derives evaluative abilities to process acquired information that their information repository is transformed into a dynamic knowledge pool.

Knowledge comprises factual information coupled with experiences, skills and attitude (Dellemijn, 2012). While the factual information, which can be codified and expressed numerically, accounts to be explicit knowledge (Polanyi, 1966), tacit knowledge is composed of human elements such as experience, skills and attitudes (Dellemijn, 2012). It is the human elements that mark the difference between information and knowledge, where the latter is no longer restricted to being a commodity, like the former. Lack of human element in information enables the same to get transferred mechanically between agents having the desired affordability power. Knowledge, on the other hand, cannot be mechanically transferred and has to be accomplished through collaborative creation and dissemination.

Access to relevant information addresses the inequality issue by ensuring availability of a standardized set of factual data to all who seek it. While it is possible to acquire information with desired affordability, acquiring knowledge is not simply about purchasing power and, instead, requires negotiation with one’s immediate social surrounding and a sound understanding of the same to develop a comprehensive knowledge pool. The human elements, which give a social flavour to knowledge, make it a concept more pertinent in the context of social development. The objective and factual nature of information, without the incorporation of human elements, remains an external imposition if the individual/group does not develop self-induced capacities to process the same in pursuit of benefit. While the discussion so far fleshes out the importance of knowledge over information as a resource in the context of holistic development, following we will try to articulate how and why sole target to mitigate information asymmetry falls short in addressing the real issue at stake.

From information asymmetry to knowledge asymmetry

In a social setup, where information has gained value as an asset, measures to mitigate information asymmetry and the striving for effective information management have been undertaken along multifarious axes. Various organizations have sought to use information management to boost performance by building transparent and informed relationships with related agencies. Interdependence, being intrinsic to production and distribution processes, urges organizations to collaborate with related agencies, where contracted agencies acquire and supply products and services among themselves, through increased interaction. However, in the context of such contract-bound formal collaborations, disputes arise with difference of interests. The resultant misalignment of goals between a principal and agent in a contract-bound relationship leads to loss of efficiency (Eisenhardt, 1989). Baiman (1982) identified information asymmetry as the root cause of agency problems in a contractual relationship when goals are incongruent. An agency relationship exists when one or more individuals (called principals) hire others (called agents) in order to delegate responsibilities to them (Baiman, 1990). Lack of information prevents the principal from discovering the true abilities and competencies of the agent (Akerlof, 1970). It is to address this problem that firms have undertaken informational management as a strategy for improving professional performance.

Information asymmetry can be defined as a “situation where the agent has private information that is relevant to the contractual agreements with, and is not revealed/available to the principal” (Dellemijn, 2012). The positive outcome derived from making available relevant information to concerned parties has been justified both by theoretical and practical evidences. The effectivity of information management in boosting efficiency has enabled social actors to invest the potential of the asset beyond organizational boundaries, and utilize it in pursuit of social development. The measures undertaken worldwide to address information divide have made serious attempts along multiple axes — such as civic, market and social domains - to address the issue of information asymmetry. As discussed in detail in the earlier chapter, the efforts have attempted to give access to diverse and relevant information to the target group, with a vision to enhance the latter’s awareness level by overcoming the marginalization they face owing to a dearth of information. It is nonetheless true that efforts undertaken to mitigate information asymmetry, both within and outside organizations, have been inspired to achieve effective management through addressing the inequality issue. Efforts with such an orientation make equal provision for all to access factual data. However, inculcating skills and creating opportunities to utilize the acquired information rest on cultivation of particular individual/ collective credentials. Granting transforming abilities to process the information does not fall within the purview of the schemes dedicated to mitigating informational asymmetry. Keeping these limitations in mind, now the question becomes how far the measures dedicated to mitigating information asymmetry have proven successful in bringing effective outcomes; to what extent is the factual and objective nature of information solely capable in improving performance by enhancing individual/collective credentials?

Significant numbers of scholars, who have researched the impact of efforts undertaken to mitigate information asymmetry in the organizational sector, have concluded that possession of relevant information by the principal does not necessarily guarantee understanding of the behaviours and actions/results of agents (Dellemijn, 2012). The principal, in a contractual relationship, might possess relevant information about the agents. However, possessing such information is not tantamount to understanding the same (Sharma, 1997). It is here that knowledge comes into context, where the human elements (experience, skills and attitudes) play a crucial part in translating possession of information to understanding of information. The principal can have little knowledge to interpret the information supplied by the agent or gathered by the principal, or the principal can lack adequate knowledge to assess which information should be gathered or is missing/invalid. This proves that the principal is subjected to agency problems, even when formally no information asymmetry exists (Sharma, 1997).

In the case of efforts undertaken to mitigate information asymmetry for the cause of social development, similar limitations are witnessed owing to the factual nature of information. Following a uni-directional dissemination mode from formal institutions to citizens in need, the measures, while imparting important information to target group, have also fallen far short in nurturing the supplementary human elements necessary to translate acquired information in pursuit of practical benefits. In the context of social development, concentrating simply on mitigation of information asymmetry brings additional challenges than those experienced by firms. Organizations are primarily homogenous, comprising members with similar affiliations and interests. Bridging information asymmetry can only be effective if parties sharing equal footing get access to relevant information and use it to attain desired results. Possession of similar credentials enables them to process the acquired factual data following a similar pace, thereby enabling mitigation of information divide to yield effective outcomes. However, in a social context, the formal institutions (for example, government or development agents) who are entrusted to mitigate extant information divide, and the marginalized target group who are expected to benefit from the resultant mitigation, are inherently placed in different social footing. Linear dissemination of information from formal institutions, although targeting multiple domains, remains externally imposed on the target group and is only theoretically capable of addressing the issue of inequality. Non-alignment of the measures with the requirements of the target group thereby thrusts factual data on the latter without enabling them to develop the knowledge pool necessary to interpret acquired information. This proves that bridging information asymmetry is not enough, because even if the target groups are equipped with necessary information they need to simultaneously develop the human elements (experience, skills and attitudes) to process the same and derive benefits.

Our primary goal is attaining rural empowerment from within, where members of our target group are already placed in a disadvantageous location because of the hindrances intrinsic to their territorial and social location. As we have mentioned earlier, our research context has primarily urged us to advocate for knowledge over information. Our advocacy for equipping marginalized rural community with necessary knowledge instead of information is followed by attempting to mitigate knowledge asymmetry (Dellemijn, 2012) of rural community, instead of information asymmetry, to enhance individual and collective capacities of rural members. Our formulation of knowledge asymmetry is a realistic and useful evaluation of information asymmetry, which is thought to allow for more accurate modelling and analysis of persistent social isolation. The Oxford dictionary defines asymmetry as “lack of equality or equivalence of a combination of information, experience, skills and attitude between two entities in a relationship”. This holistic vision compels attempts to address issues of knowledge asymmetry with a dual target; addressing informational issues along with nurturing human elements (experiences, skills, attitudes).

Mitigation of knowledge asymmetry not only yields benefits along individual lines but also cultivates collective opportunities. Knowledge asymmetry can only be mitigated through effective inter- and intra-group knowledge transaction. In other words, community formation and communitarian knowledge exchange are intrinsic to the process of mitigating knowledge asymmetry. It is only through mitigation of knowledge asymmetry that rural members will develop the credentials to nurture their capability in pursuit of generating concrete opportunity.

While this section highlights the importance of knowledge over information and justifies the importance of mitigating knowledge asymmetry, instead of information asymmetry in the context of rural empowerment, we need to remember that possessing knowledge is not the end in itself. The following section will flesh out that it is not just the possession, but the usability, of knowledge that grants individuals/groups the power to take informed decisions, one of the crucial prerequisites in the process of mitigating overall knowledge asymmetry of rural target group.

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