This chapter provides some emphasis to the influence of markets on the growth and use of individual knowledge and explains how knowledge within firms may benefit from market relationships. It identifies some basic elements of human cognition to provide a credible psychological basis for economic reasoning. The chapter also explains the effectiveness of marketing institutions which match cognitive needs. Market institutions are an important part of consumers' external organisation: the rules and conventions form part of their interpretative system and their framework for decision making. New products may require the creation of new market institutions, and the possibility of creating new market institutions may suggest product redesign. Business customers may have stronger incentives than do their suppliers to simplify the process of transacting, and this may not merely be a matter for the purchasing department, for production is closely linked with purchasing as well as marketing.
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