''Managed'' informal information trading: the oil scout system in oil exploration firms
by Eric Von Hippel, Stephan Schrader
International Journal of Technology Management (IJTM), Vol. 11, No. 1/2, 1996

Abstract: Informal information trading is a very general form of information exchange. It involves reciprocal trades of proprietary information arranged and consummated by individual firm employees. It has been shown that such trading can be of significant economic benefit to firms whose employees engage in it. Nonetheless, many managers are reluctant to allow their employees to engage in truly informal information trading, because they fear that know-how trading without administrative oversight and without documentation could lead to losses if traders made mistakes or 'abused the system'. In this paper we begin to explore how one might resolve managers' concerns by investigating a form of managed informal information trading that has evolved in the oil exploration industry, a form called 'oil scouting'. We find that the administrative practices and trading norms associated with oil scouting can offer some protection to firms with respect to the risk of misjudgment or abuse of the trading process by employees. However, we also find that the oil scout model of managed informal information trading, which involves the insertion of oil scouts as specialist traders into the information flow, makes the system inappropriate for the trading of know-how between experts. Since the basic form of informal information trading is often used to trade know-how, this is a significant drawback. We suggest that additional variants on informal know-how trading be developed and/or explored in firm practice in order to identify still better solutions.

Online publication date: Fri, 22-May-2009

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