Angel Investing in Finland: An Analysis Based on Agency Theory and the Incomplete Contracting Theory

Wealthy individuals - business angels who invest a share of their net worth in entrepreneurial ventures - form an essential part of an informal venture capital market that can secure funding for entrepreneurial ventures. In Finland, business angels represent an untapped pool of capital that can contribute to fostering entrepreneurial development. In addition, business angels can bridge knowledge gaps in new business ventures by means of making their human capital available. This study has two objectives. The first is to gain an understanding of the characteristics and investment behaviour of Finnish business angels. The strongest focus here is on the due diligence procedures and their involvement post investment. The second objective is to assess whether agency theory and the incomplete contacting theory are useful theoretical lenses in the arena of business angels. To achieve the second objective, this study investigates i) how risk is mitigated in the investment process, ii) how uncertainty influences the comprehensiveness of due diligence as well as iii) how control is allocated post investment. Research hypotheses are derived from assumptions underlying agency theory and the incomplete contacting theory. The data for this study comprise interviews with 53 business angels. In terms of sample size this is the largest on Finnish business angels. The research hypotheses in this study are tested using regression analysis. This study suggests that the Finnish informal venture capital market appears to be comprised of a limited number of business angels whose style of investing much resembles their formal counterparts’. Much focus is placed on managing risks prior to making the investment by strong selectiveness and by a relatively comprehensive due diligence. The involvement is rarely on a day-to-day basis and many business angels seem to see board membership as a more suitable alternative than involvement in the operations of an entrepreneurial venture. The uncertainty involved does not seem to drive an increase in due diligence. On the contrary, it would appear that due diligence is more rigorous in safer later stage investments and when the business angels have considerable previous experience as investors. Finnish business angels’ involvement post investment is best explained by their degree of ownership in the entrepreneurial venture. It seems that when investors feel they are sufficiently rewarded, in terms of an adequate equity stake, they are willing to involve themselves actively in their investments. The lack of support for a relationship between increased uncertainty and the comprehensiveness of due diligence may partly be explained by an increasing trend towards portfolio diversification. This is triggered by a taxation system that favours investments through investment companies rather than direct investments. Many business angels appear to have substituted a specialization strategy that builds on reducing uncertainty for a diversification strategy that builds on reducing firm specific (idiosyncratic) risk by holding shares in ventures whose returns are not expected to exhibit a strong positive correlation.

Essays on Stock Options, Incentives, and Managerial Action

Executive compensation and managerial behavior have received an increasing amount of attention in the financial economics literature since the mid 1970s. The purpose of this thesis is to extend our understanding of managerial compensation, especially how stock option compensation is linked to the actions undertaken by the management. Furthermore, managerial compensation is continuously and heatedly debated in the media and an emerging consensus from this discussion seems to be that there still exists gaps in our knowledge of optimal contracting. In Finland, the first executive stock options were introduced in the 1980s and throughout the last 15 years it has become increasingly popular for Finnish listed firms to use this type of managerial compensation. The empirical work in the thesis is conducted using data from Finland, in contrast to most previous studies that predominantly use U.S. data. Using Finnish data provides insight of how market conditions affect compensation and managerial action and provides an opportunity to explore what parts of the U.S. evidence can be generalized to other markets. The thesis consists of four essays. The first essay investigates the exercise policy of the executive stock option holders in Finland. In summary, Essay 1 contributes to our understanding of the exercise policies by examining both the determinants of the exercise decision and the markets reaction to the actual exercises. The second essay analyzes the factors driving stock option grants using data for Finnish publicly listed firms. Several agency theory based variables are found to have have explanatory power on the likelihood of a stock option grant. Essay 2 also contributes to our understanding of behavioral factors, such as prior stock return, as determinants of stock option compensation. The third essay investigates the tax and stock option motives for share repurchases and dividend distributions. We document strong support for the tax motive for share repurchases. Furthermore, we also analyze the dividend distribution decision in companies with stock options and find a significant difference between companies with and without dividend protected options. We thus document that the cutting of dividends found in previous U.S. studies can be avoided by dividend protection. In the fourth essay we approach the puzzle of negative skewness in stock returns from an altogether different angle than in previous studies. We suggest that negative skewness in stock returns is generated by management disclosure practices and find proof for this. More specifically, we find that negative skewness in daily returns is induced by returns for days when non-scheduled firm specific news is disclosed.

Towards Explaining the Use of Control Mechanisms in Foreign Subsidiaries of MNCs (summary section only)

Control is central to management and there is already a considerable body of research on control. However, the emergence and growth of multinational corporations (MNCs) has renewed the interest in control, as MNCs are complex (often large) organizations that face circumstances beyond those of national business organizations. The geographical dispersion of MNC activities means that the headquarters controls subsidiaries that differ with regard to power and that are embedded in different cultural, political, legal and educational systems. Foreign subsidiary control also takes place across language boundaries and physical (i.e. geographical) distances. In face of these challenges, how are foreign subsidiaries controlled? The thesis explores different types of control mechanisms and attempts to explain the degree to which they are used to control foreign subsidiaries. It contributes to existing knowledge on control by exploring how five different control mechanisms are related to each other. Previous research has tended to focus only on one or two control mechanisms and seldom has their effect on each other been explored. The thesis also contributes by including two central aspects of the MNC that have been neglected in much of the research on foreign subsidiary control: language competence of subsidiary staff and physical distance between the headquarters and its subsidiaries. The findings indicate that specific control mechanisms should not be studied in isolation as there are intricate relationships among the different control mechanisms. Language competence of the subsidiary staff can furthermore affect the type and degree of control that the headquarters can exercise over a subsidiary. The findings also indicate that changes in the physical distance between subsidiaries and its headquarters (i.e. a relocation of the headquarters as part of a restructuring process) can have great consequences for the headquarters-subsidiary relationship.

Factors Driving Stock Option Grants - Empirical Evidence from Finland

This study contributes to the executive stock option literature by looking at factors driving the introduction of such a compensation form on a firm level. Using a discrete decision model I test the explanatory power of several agency theory based variables and find strong support for predictability of the form of executive compensation. Ownership concentration and liquidity are found to have a significant negative effect on the probability of stock option adoption. Furtermore, I find evidence of CEO ownership, institutional ownership, investment intensity, and historical market return having a significant and a positive relationship to the likelihood of adopting a executive stock option program.

From Habits to Social Structures : Pragmatism and Contemporary Social Theory

Pragmatism has sometimes been taken as a catchphrase for epistemological stances in which anything goes. However, other authors argue that the real novelty and contribution of this tradition has to do with its view of action as the context in which all things human take place. Thus, it is action rather than, for example, discourses that should be our starting point in social theory. The introductory section of the book situates pragmatism (especially the ideas of G. H. Mead and John Dewey) within the field and tradition of social theory. This introductory also contextualizes the main core of the book which consists of four chapters. Two of these chapters have been published as articles in scientific journals and one in an edited book. All of them discuss the core problem of social theory: how is action related to social structures (and vice versa)? The argument is that habitual action is the explanation for the emergence of social structures from our action. Action produces structures and social reproduction takes place when action is habitualized; that is, when we develop social dispositions to act in a certain manner in familiar environments. This also means that even though the physical environment is the same for all of us, our habits structure it into different kinds of action possibilities. Each chapter highlights these general insights from different angles. Practice theory has gained momentum in recent years and it has many commonalities with pragmatism because both highlight the situated and corporeal character of human activity. One famous proponent of practice theory is Margaret Archer who has argued that the pragmatism of G. H. Mead leads to an oversocialized conception of selfhood. Mead does indeed present a socialized view of selfhood but this is a meta-sociological argument rather than a substantial sociological claim. Accordingly, one can argue that in this general sense intersubjectivity precedes subjectivity and not the other way around. Such a view does not indicate that our social relation would necessarily "colonize" individual action because there is a place for internal conversations (in Archer s terminology); it is especially in those phases of action where it meets obstacles due to the changes of the environment. The second issue discussed has the background assumption that social structures can fruitfully be conceptualized as institutions. A general classification of different institution theories is presented and it is argued that there is a need for a habitual theory of institutions due to the problems associated with these other theories. So-called habitual institutionalism accounts for institutions in terms of established and prevalent social dispositions that structure our social interactions. The germs of this institution theory can be found in the work of Thorstein Veblen. Since Veblen s times, these ideas have been discussed for example, by the economist Geoffrey M. Hodgson. His ideas on the evolution of institutions are presented but a critical stance is taken towards his tendency of defining institutions with the help of rules because rules are not always present in institutions. Accordingly, habitual action is the most basic but by no means the only aspect of institutional reproduction. The third chapter deals with theme of action and structures in the context of Pierre Bourdieu s thought. Bourdieu s term habitus refers to a system of dispositions which structure social fields. It is argued that habits come close to the concept of habitus in the sense that the latter consists of particular kinds of habits; those that are related to the reproduction of socioeconomic positions. Habits are thus constituents of a general theory of societal reproduction whereas habitus is a systematic combination of socioeconomic habits. The fourth theme relates to issues of social change and development. The capabilities approach has been associated with the name of Amartya Sen, for example, and it underscores problems inhering in economistic ways of evaluating social development. However, Sen s argument has some theoretical problems. For example, his theory cannot adequately confront the problem of relativism. In addition, Sen s discussion lacks also a theory of the role of the public. With the help of arguments derived from pragmatism, one gets an action-based, socially constituted view of freedom in which the role of the public is essential. In general, it is argued that a socially constituted view of agency does not necessarily to lead to pessimistic conclusions about the freedom of action.

Women and their Agency in the Neo-Assyrian Empire

Tämä pro gradu-työ käsittelee naisten toimijuutta uusassyrialaisessa imperiumissa. Toisin sanoen työssä tutkitaan naisten vaikutusmahdollisuuksia assyrialaisessa, patriarkaalisessa yhteiskunnassa – aihe, johon ei aiemmin ole juurikaan kiinnitetty huomiota. Täydennän työssä assyriologista näkökantaa kulttuuritieteiden ja antropologian käsitteistöllä ja teorioilla. Työn teoreettinen viitekehys liittyy yksilön, yhteiskunnan ja vallan välisiin suhteisiin, jotka kohtaavat toimijuuden käsitteessä. Vaikka työssä esittelen toimijuuden käsitettä laajemminkin, päädyin aineiston asettamien rajoitusten takia määrittelemään toimijuuden seuraavasti: toimijoita ovat ne naiset, jotka toimivat aktiivisina subjekteina yhteiskunnassa. Näin määritellyt toimijat jaoin vielä kahteen ryhmään, eksplisiittisiin (explicit agents) ja implisiittisiin (implicit agents) toimijoihin. Ensimmäisen ryhmän jäsenet selkeästi toimivat teksteissä jollain tavalla, jälkimmäisen ryhmän jäsenten toimijuus on pääteltävä asiayhteydestä. Pro graduni perustuu laajan tekstiaineiston analyysiin. Jaan imperiumin toimijanaiset kolmeen laajaan ryhmään: palatsissa, temppelissä ja niiden ulkopuolella toimineisiin naisiin. Jokaisen näistä kolmesta ryhmästä jaan vielä useisiin alaryhmiin, useimmiten ammattinimikkeen tai arvonimen mukaan. Suurimmaksi ryhmäksi osoittautuivat palatsissa toimineet naiset. Heistä erityisen aktiivisia olivat šakintut, jotka hoitivat vastuullisia hallinnollisia tehtäviä palatseissa. Myös kuningatarten ja muiden kuninkaallisten naisten rooli toimijoina oli uusassyrialaisella kaudella merkittävä. Temppeleissä toimineista naisista merkittävin ryhmä toimijuuden kannalta olivat naispuoliset profeetat, jotka toimivat aktiivisissa rooleissa ainakin toimittaessaan jumalallisia sanomia. Palatsien ja temppelien ulkopuolelle jäi vain vähän naistoimijoita: omaksi selkeäksi ryhmäkseen erottuivat ainoastaan harimtut, prostituoidut. Lopuksi pohdin jokaisen ryhmän toimijuutta ensin taulukkomuodossa (taulukot 9, 10 ja 11) sitten lyhyessä analyysikappaleessa.

Reading the Texture of Reality : Chaos Theory, Literature and the Humanist Perspective

Tutkimuksessa analysoidaan kaaosteorian vaikutusta kaunokirjallisuudessa ja kirjallisuudentutkimuksessa ja esitetään, että kaaosteorian roolia kirjallisuuden kentällä voidaan parhaiten ymmärtää sen avaamien käsitteiden kautta. Suoran soveltamisen sijaan kaaosteorian avulla on käyty uudenlaisia keskusteluja vanhoista aiheista ja luonnontieteestä ammennetut käsitteet ovat johtaneet aiemmin tukkeutuneiden argumenttien avaamiseen uudesta näkökulmasta käsin. Väitöskirjassa keskitytään kolmeen osa-alueeseen: kaunokirjallisen teoksen rakenteen teoretisointiin, ihmisen (erityisesti tekijän) identiteetin hahmottamiseen ja kuvailemiseen sekä fiktion ja todellisuuden suhteen pohdintaan. Tutkimuksen tarkoituksena on osoittaa, kuinka kaaosteorian kautta näitä aiheita on lähestytty niin kirjallisuustieteessä kuin kaunokirjallisissa teoksissakin. Väitöskirjan keskiössä ovat romaanikirjailija John Barthin, dramatisti Tom Stoppardin ja runoilija Jorie Grahamin teosten analyysit. Nämä kirjailijat ammentavat kaaosteoriasta keinoja käsitteellistää rakenteita, jotka ovat yhtä aikaa dynaamisia prosesseja ja hahmotettavia muotoja. Kaunokirjallisina teemoina nousevat esiin myös ihmisen paradoksaalisesti tunnistettava ja aina muuttuva identiteetti sekä lopullista haltuunottoa pakeneva, mutta silti kiehtova ja tavoiteltava todellisuus. Näiden kirjailijoiden teosten analyysin sekä teoreettisen keskustelun kautta väitöskirjassa tuodaan esiin aiemmassa tutkimuksessa varjoon jäänyt, koherenssia, ymmärrettävyyttä ja realismia painottava humanistinen näkökulma kaaosteorian merkityksestä kirjallisuudessa.

Contributions to the Theory of Finite-State Based Grammars

This dissertation is a theoretical study of finite-state based grammars used in natural language processing. The study is concerned with certain varieties of finite-state intersection grammars (FSIG) whose parsers define regular relations between surface strings and annotated surface strings. The study focuses on the following three aspects of FSIGs: (i) Computational complexity of grammars under limiting parameters In the study, the computational complexity in practical natural language processing is approached through performance-motivated parameters on structural complexity. Each parameter splits some grammars in the Chomsky hierarchy into an infinite set of subset approximations. When the approximations are regular, they seem to fall into the logarithmic-time hierarchyand the dot-depth hierarchy of star-free regular languages. This theoretical result is important and possibly relevant to grammar induction. (ii) Linguistically applicable structural representations Related to the linguistically applicable representations of syntactic entities, the study contains new bracketing schemes that cope with dependency links, left- and right branching, crossing dependencies and spurious ambiguity. New grammar representations that resemble the Chomsky-Schützenberger representation of context-free languages are presented in the study, and they include, in particular, representations for mildly context-sensitive non-projective dependency grammars whose performance-motivated approximations are linear time parseable. (iii) Compilation and simplification of linguistic constraints Efficient compilation methods for certain regular operations such as generalized restriction are presented. These include an elegant algorithm that has already been adopted as the approach in a proprietary finite-state tool. In addition to the compilation methods, an approach to on-the-fly simplifications of finite-state representations for parse forests is sketched. These findings are tightly coupled with each other under the theme of locality. I argue that the findings help us to develop better, linguistically oriented formalisms for finite-state parsing and to develop more efficient parsers for natural language processing. Avainsanat: syntactic parsing, finite-state automata, dependency grammar, first-order logic, linguistic performance, star-free regular approximations, mildly context-sensitive grammars

Space in Musical Semiosis : An Abductive Theory of the Musical Composition Process

Space in musical semiosis is a study of musical meaning, spatiality and composition. Earlier studies on musical composition have not adequately treated the problems of musical signification. Here, composition is considered an epitomic process of musical signification. Hence the core problems of composition theory are core problems of musical semiotics. The study employs a framework of naturalist pragmatism, based on C. S. Peirce’s philosophy. It operates on concepts such as subject, experience, mind and inquiry, and incorporates relevant ideas of Aristotle, Peirce and John Dewey into a synthetic view of esthetic, practic, and semiotic for the benefit of grasping musical signification process as a case of semiosis in general. Based on expert accounts, music is depicted as real, communicative, representational, useful, embodied and non-arbitrary. These describe how music and the musical composition process are mental processes. Peirce’s theories are combined with current morphological theories of cognition into a view of mind, in which space is central. This requires an analysis of space, and the acceptance of a relativist understanding of spatiality. This approach to signification suggests that mental processes are spatially embodied, by virtue of hard facts of the world, literal representations of objects, as well as primary and complex metaphors each sharing identities of spatial structures. Consequently, music and the musical composition process are spatially embodied. Composing music appears as a process of constructing metaphors—as a praxis of shaping and reshaping features of sound, representable from simple quality dimensions to complex domains. In principle, any conceptual space, metaphorical or literal, may set off and steer elaboration, depending on the practical bearings on the habits of feeling, thinking and action, induced in musical communication. In this sense, it is evident that music helps us to reorganize our habits of feeling, thinking, and action. These habits, in turn, constitute our existence. The combination of Peirce and morphological approaches to cognition serves well for understanding musical and general signification. It appears both possible and worthwhile to address a variety of issues central to musicological inquiry in the framework of naturalist pragmatism. The study may also contribute to the development of Peircean semiotics.

A Literary Turn : Rethinking the Roles of Generalization and Theory in Anglo-American Moral Philosophy

This work investigates the role of narrative literature in late-20th century and contemporary Anglo-American moral philosophy. It aims to show the trend of reading narrative literature for purposes of moral philosophy from the 1970 s and early 80 s to the present day as a part of a larger movement in Anglo-American moral philosophy, and to present a view of its significance for moral philosophy overall. Chapter 1 provides some preliminaries concerning the view of narrative literature which my discussion builds on. In chapter 2 I give an outline of how narrative literature is considered in contemporary Anglo-American moral philosophy, and connect this use to the broad trend of neo-Aristotelian ethics in this context. In chapter 3 I connect the use of literature to the idea of the non-generalizability of moral perception and judgment, which is central to the neo-Aristotelian trend, as well as to a range of moral particularisms and anti-theoretical positions of late 20th century and contemporary ethics. The joint task of chapters 2 and 3 is to situate the trend of reading narrative literature for the purposes of moral philosophy in the present context of moral philosophy. In the following two chapters, 4 and 5, I move on from the particularizing power of narrative literature, which is emphasized by neo-Aristotelians and particularists alike, to a broader under-standing of the intellectual potential of narrative literature. In chapter 4 I argue that narrative literature has its own forms of generalization which are enriching for our understanding of the workings of ethical generalizations in philosophy. In chapter 5 I discuss Iris Murdoch s and Martha Nussbaum s respective ways of combining ethical generality and particularity in a philosophical framework where both systematic moral theory and narrative literature are taken seriously. In chapter 6 I analyse the controversy between contemporary anti-theoretical conceptions of ethics and Nussbaum s refutation of these. I present my suggestion for how the significance of the ethics/literature discussion for moral philosophy can be understood if one wants to overcome the limitations of both Nussbaum s theory-centred, equilibrium-seeking perspective, and the anti-theorists repudiation of theory. I call my position the inclusive approach .

Theory and Analysis of Classic Heavy Metal Harmony

This thesis explores melodic and harmonic features of heavy metal, and while doing so, explores various methods of music analysis; their applicability and limitations regarding the study of heavy metal music. The study is built on three general hypotheses according to which 1) acoustic characteristics play a significant role for chord constructing in heavy metal, 2) heavy metal has strong ties and similarities with other Western musical styles, and 3) theories and analytical methods of Western art music may be applied to heavy metal. It seems evident that in heavy metal some chord structures appear far more frequently than others. It is suggested here that the fundamental reason for this is the use of guitar distortion effect. Subsequently, theories as to how and under what principles heavy metal is constructed need to be put under discussion; analytical models regarding the classification of consonance and dissonance and chord categorization are here revised to meet the common practices of this music. It is evident that heavy metal is not an isolated style of music; it is seen here as a cultural fusion of various musical styles. Moreover, it is suggested that the theoretical background to the construction of Western music and its analysis can offer invaluable insights to heavy metal. However, the analytical methods need to be reformed to some extent to meet the characteristics of the music. This reformation includes an accommodation of linear and functional theories that has been found rather rarely in music theory and musicology.

Kuvan ja tekstin välissä : Kuvateksti uutiskuvan ja lehtijutun elementtinä

The study focuses on picture captions: their grammar and interplay with photographs and their position as semi-independent elements of the news stories. The research was conducted in the framework of critical discourse analysis, social semiotic visual theory and fennistic syntactical research. The data consist of 441 press photographs, 1,815 captions and a number of news items from Finnish dailies. The generic structure potential of the caption includes the caption headline, the caption proper, i.e. the verbalization of the picture content, and the frame. In the data, 41 per cent of the captions have a headline, and 44 per cent contain a caption proper. Characteristic of the caption proper is omission of the finite verb and the use of the present tense, both of which have decreased in Finnish papers during the 20th century. The caption proper is typically a main clause, and both subordinate clauses and participal phrases occur mostly in the frame. While comparing caption variants attached to the same pictures, the processes and their participants proved to be identified considerably identically, following the news agency captions. Instead, the reader?s interpretations of a picture could be directed by framing it in different ways. For example, the caption may focus on the only person depicted, deal with a whole group, or give an abstract account of the situation. The caption is a paratext, a typographically marked, semi-independent element of a news story. Between the headline and the caption, four semantic relations have been identified. The caption may be a paraphrase of the headline, or a close-up illustrating an abstract headline with a concrete example. If the name of the person depicted is their only common factor, the relation between the caption and the headline is additive. A specifying caption will give more details than the headline. The caption may complete, repeat, or summarize the body copy. Naturally, most captions completing the story verbalize the content of the picture. As the caption is often based on the story, it may even repeat the body copy verbatim. The summarizing function is probably becoming increasingly important, as most Finnish newspapers have abandoned the use of a separate standfirst.

Oppimisen kohteen ja oppijan vastavuoroinen kehitys : Teleyrityksen asiakaspalvelun työyhteisöjen oppimiskäytäntöjen uudistaminen osana teknologis-taloudellista kumousta

Reciprocal development of the object and subject of learning. The renewal of the learning practices of front-line communities in a telecommunications company as part of the techno-economical paradigm change. Current changes in production have been seen as an indication of a shift from the techno-economical paradigm of a mass-production era to a new paradigm of the information and communication technological era. The rise of knowledge management in the late 1990s can be seen as one aspect of this paradigm shift, as knowledge creation and customer responsiveness were recognized as the prime factors in business competition. However, paradoxical conceptions concerning learning and agency have been presented in the discussion of knowledge management. One prevalent notion in the literature is that learning is based on individuals’ voluntary actions and this has now become incompatible with the growing interest in knowledge-management systems. Furthermore, commonly held view of learning as a general process that is independent of the object of learning contradicts the observation that the current need for new knowledge and new competences are caused by ongoing techno-economic changes. Even though the current view acknowledges that individuals and communities have key roles in knowledge creation, this conception defies the idea of the individuals’ and communities’ agency in developing the practices through which they learn. This research therefore presents a new theoretical interpretation of learning and agency based on Cultural-Historical Activity Theory. This approach overcomes the paradoxes in knowledge-management theory and offers means for understanding and analyzing changes in the ways of learning within work communities. This research is also an evaluation of the Competence-Laboratory method which was developed as part of the study as a special application of Developmental Work Research methodology. The research data comprises the videotaped competence-laboratory processes of four front-line work communities in a telecommunications company. The findings reported in the five articles included in this thesis are based on the analyses of this data. The new theoretical interpretation offered here is based on the assessment that the findings reported in the articles represent one of the front lines of the ongoing historical transformation of work-related learning since the research site represents one of the key industries of the new “knowledge society”. The research can be characterized as elaboration of a hypothesis concerning the development of work related learning. According to the new theoretical interpretation, the object of activity is also the object of distributed learning in work communities. The historical socialization of production has increased the number of actors involved in an activity, which has also increased the number of mutual interdependencies as well as the need for communication. Learning practices and organizational systems of learning are historically developed forms of distributed learning mediated by specific forms of division of labor, specific tools, and specific rules. However, the learning practices of the mass production era become increasingly inadequate to accommodate the conditions in the new economy. This was manifested in the front-line work communities in the research site as an aggravating contradiction between the new objects of learning and the prevailing learning practices. The constituent element of this new theoretical interpretation is the idea of a work community’s learning as part of its collaborative mastery of the developing business activity. The development of the business activity is at the same time a practical and an epistemic object for the community. This kind of changing object cannot be mastered by using learning practices designed for the stable conditions of mass production, because learning has to change along the changes in business. According to the model introduced in this thesis, the transformation of learning proceeds through specific stages: predefined learning tasks are first transformed into learning through re-conceptualizing the object of the activity and of the joint learning and then, as the new object becomes stabilized, into the creation of new kinds of learning practices to master the re-defined object of the activity. This transformation of the form of learning is realized through a stepwise expansion of the work community’s agency. To summarize, the conceptual model developed in this study sets the tool-mediated co-development of the subject and the object of learning as the theoretical starting point for developing new, second-generation knowledge management methods. Key words: knowledge management, learning practice, organizational system of learning, agency