# Ontology-Amplified Distillation and Contextuality Auditing for Sovereign Enterprise Language Models: A Combined Proof-of-Mechanism and Negative-Results Method Study

arXiv: https://arxiv.org/abs/2607.11948 · HTML: https://mlsanity.com/paper/2607.11948/

## Key facts

- Cited by 1 papers in the map (data through 14 Oct 2026).
- Placed in On-policy and self-distillation for LLMs, one of 12 directions in Knowledge distillation.
- Builds on 15 of its 29 references that are in the map.
- First posted on arXiv 11 Jul 2026.

## Placed in

- Knowledge distillation / [On-policy and self-distillation for LLMs](https://mlsanity.com/distill/on-policy-and-self-distillation-for-llms/)

## Builds on (most cited first, 15 of 15)

- [Distilling the Knowledge in a Neural Network](https://mlsanity.com/paper/1503.02531/) (2015)
- [Direct Preference Optimization: Your Language Model is Secretly a Reward Model](https://mlsanity.com/paper/2305.18290/) (2023)
- [DistilBERT, a distilled version of BERT: smaller, faster, cheaper and lighter](https://mlsanity.com/paper/1910.01108/) (2019)
- [Deep reinforcement learning from human preferences](https://mlsanity.com/paper/1706.03741/) (2017)
- [Constitutional AI: Harmlessness from AI Feedback](https://mlsanity.com/paper/2212.08073/) (2022)
- [Improving Factuality and Reasoning in Language Models through Multiagent Debate](https://mlsanity.com/paper/2305.14325/) (2023)
- [Large Language Model based Multi-Agents: A Survey of Progress and Challenges](https://mlsanity.com/paper/2402.01680/) (2024)
- [Unifying Large Language Models and Knowledge Graphs: A Roadmap](https://mlsanity.com/paper/2306.08302/) (2023)
- [Zephyr: Direct Distillation of LM Alignment](https://mlsanity.com/paper/2310.16944/) (2023)
- [Neurosymbolic AI: The 3rd Wave](https://mlsanity.com/paper/2012.05876/) (2020)
- [LLMs4OL: Large Language Models for Ontology Learning](https://mlsanity.com/paper/2307.16648/) (2023)
- [OG-RAG: Ontology-Grounded Retrieval-Augmented Generation For Large Language Models](https://mlsanity.com/paper/2412.15235/) (2024)
- [DistilQwen2.5: Industrial Practices of Training Distilled Open Lightweight Language Models](https://mlsanity.com/paper/2504.15027/) (2025)
- [OntoTune: Ontology-Driven Self-training for Aligning Large Language Models](https://mlsanity.com/paper/2502.05478/) (2025)
- [Ontology-Constrained Neural Reasoning in Enterprise Agentic Systems: A Neurosymbolic Architecture for Domain-Grounded AI Agents](https://mlsanity.com/paper/2604.00555/) (2026)

## Built on by (most cited first, 1 of 1)

- [Auditing Question-Order Effects in Large Language Models with the QQ Equality: Mechanism Characterization and a Saturation Caveat](https://mlsanity.com/paper/2607.17219/) (2026)

## Abstract (arXiv)

Regulated financial institutions operating under data-residency rules need tenant-owned language models that can run inside the institution's perimeter. This paper combines two related FAOS studies into one mechanism-and-control article. First, it reports a reduced-power proof-of-mechanism study of ontology-amplified distillation: a Qwen3.6-27B student is adapted to the Foundation AgenticOS ontology through supervised fine-tuning on frontier-teacher trajectories and ontology-grounded direct preference optimization (DPO), trained locally on a single Apple M5 Max from 47 synthetic, English-language, cross-domain preference pairs. On 40 held-out Vietnamese financial-domain tasks, the distilled student grounds 36 of 40 tasks (grounded rate 0.90; mean ontology term-coverage r_onto = 0.95 on a metric floored at 0.50), equal to the GPT-5 frontier baseline, which also grounds 36 of 40. The outcome is underpowered to establish equivalence: the paired-difference 95% confidence interval spans +/-4 tasks, and the run does not test or show the pre-registered amplification prediction that the student should exceed the frontier. Second, the paper consolidates a contextuality-audit method for enterprise-agent routing. In a separate negative-results pilot, the corrected canonical Contextuality-by-Default degree is zero for all Phase 1.3 groups in both the local-Qwen run and an explicitly labeled Gemma replication check; the useful signal is direct influence and construct coupling, not surviving residual contextuality. Together, the studies pair an ontology-grounded model-building mechanism with a governance diagnostic for deciding when apparent disagreement should trigger prompt standardization, multi-agent synthesis, or human review. The evidence supports neither deployability, safety, superiority, statistical equivalence, nor a contextuality-positive routing rule.