Showing papers in "Industrial and Corporate Change in 1996"
TL;DR: An extended appendix by Massimo Egidi provides a lexicon of synonyms and opposites covering use of the word 'routine' in such areas as economics, organization theory and artificial intelligence.
Abstract: This paper reports and extends discussions carried out during a workshop held at the Santa Fe Institute in August 1995 by the authors. It treats eight major topics: (i) the importance of carefully examining research on routine, (ii) the concept of 'action patterns' in general and in terms of routine, (iii) the useful categorization of routines and other recurring patterns, (iv) the research implications of recent cognitive results, (v) the relation of evolution to action patterns, (vi) the contributions of simulation modeling for theory in this area, (vii) examples of various approaches to empirical research that reveal key problems, and (viii) a possible definition of 'routine'. An extended appendix by Massimo Egidi provides a lexicon of synonyms and opposites covering use of the word 'routine' in such areas as economics, organization theory and artificial intelligence. Coauthors are Roger Burkhart, Giovanni Dosi, Massimo Egidi, Suigi Marengo, Massimo Warglien, and Sidney Winter. Copyright 1996 by Oxford University Press.
717 citations
349 citations
TL;DR: In this article, it is argued that an organization's status is determined by two factors: past performance outcomes and the status of the organization's affiliates, and that the better the past performance outcome and the higher the status, the greater the organizational's growth in status.
Abstract: This paper examines the growth (and decline) of organizational status. It is argued that an organization's status is determined by two factors: past performance outcomes and the status of the organization's affiliates. The better the past performance outcomes and the higher the status of the affiliates, the greater the organization's growth in status. This basic proposition is tested in an examination of status changes among investment banks in the non-investment grade market between 1981 and 1987. Implications and extensions are discussed in the conclusion. Copyright 1996 by Oxford University Press.
320 citations
TL;DR: In this paper, the authors examine the models of employment relations espoused by company founders and examine how those models shaped the evolution of human resource management within their organizations, finding that the founders and others involved in designing and launching these companies had blueprints for the employment relation that varied along three key dimensions: the primary basis of employee attachment and motivation, the primary means for controlling and coordinating work, and the primary criterion emphasized in selection.
Abstract: Excerpt] Drawing on a unique archive of qualitative and quantitative data describing 100 Bay Area high technology firms within their first decade, this paper examines the models of employment relations espoused by company founders and bow those models shaped the evolution of human resource management within their organizations. Information gleaned from interviews suggests that founders and others involved in designing and launching these companies had blueprints for the employment relation that varied along three key dimensions: the primary basis of employee attachment and motivation, the primary means for controlling and coordinating work, and the primary criterion emphasized in selection. Based on combinations of these three dimensions, firms in our sample cluster fall into one of four distinct types, which we label the star, factory, engineering, and commitment models. Multivariate statistical analyses document how the founder's employment model shaped the subsequent adoption and timing of various human resource policies and documents over these companies' early histories, as well as the speed with which the first full-time human resource manager was appointed The findings are strongly suggestive of complementarities and a tendency toward internal consistency among dimensions of human resource management, and of strong path dependence in the evolution of employment systems in organizations. Some implications of these findings for transactions cost perspectives on the employment relationship are discussed.
277 citations
TL;DR: In this article, the authors examined the effects of a pair of initial conditions: the founders' models of the employment relation and their business strategies and found that these two features were well aligned when the firms were founded.
Abstract: This paper considers processes of organizational imprinting in a sample of 100 young, high technology companies. It examines the effects of a pair of initial conditions: the founders' models of the employment relation and their business strategies. Our analyses indicate that these two features were well aligned when the firms were founded. However, the alignment has deteriorated over time, due to changes in the distribution of employment models. In particular, the 'star model and 'commitment model are less stable than the 'engineering' model and the factory' model. Despite their instability, these two blueprints for the employment relation have strong effects in shaping the early evolution of these firms. In particular, firms that embark with these models have significantly higher rates of replacing the founder chief executive with a non-founder as well as higher rates of completing an initial public stock offering. Some implications of these findings for future studies of imprinting and inertia in organizations are discussed.
229 citations
TL;DR: A careful reading of Schumpeter's writings reveals that there is no simple dichotomy between the 'old' and the 'young' as mentioned in this paper, and that entrepreneurship plays an active role in understanding the dynamics of innovation.
Abstract: In a large part of the literature on Schumpeter one finds that attention is paid to either his early contributions, with reference to the role of the entrepreneur as the personification of innovation, or to his later contributions, stressing the role of large companies as main drivers of innovation. This paper complements some recent contributions to the assessment of the influence of Schumpeter on economics and social sciences in general. It demonstrates that a careful reading of his writings reveals that there is no simple dichotomy between the 'old' and the 'young'. Entrepreneurial activities play an active role in understanding the dynamics of innovation throughout Schumpeter's theory. Copyright 1996 by Oxford University Press.
188 citations
TL;DR: In this article, the authors examined the development of the telecommunications network as a large technical system, dealing with the ways in which innovation is behind the rate and direction of system growth and argued that an explanation of innovation in large technical systems'has to account for the economic drive to realize economies of scale and scope.
Abstract: Drawing upon a framework of analysis developed by Thomas Hughes, this paper examines the development of the telecommunications network as a large technical system, dealing with the ways in which innovation is behind the rate and direction of system growth. It focuses on developments in the USA and in Europe since the 1960s in a period when a cluster of radical innovations changed the traditional technical and institutional setup of the telephone network. The paper argues that an explanation of innovation in large technical systems'has to account for the economic drive to realize economies of scale and. scope. However, a new concept of economy of system is required to explain the reductions in cost which stem from innovations that improve the control of traffic, or load, through the telecommunications network and other large technical systems. The argument of the paper is not that economic forces take priority over issues of social and political choice but, rather, that a framework is required which accounts far the ways in which technology and economics mix with politics in the development of telecommunications and other large systems. 1 An emerging body of literature has contributed much to an explanation of the process of innovation within large technical systems, such as electric power, t technical, economic and political factors at work within large technical systems which initiate innovative activity in particular directions. Drawing 1 upon concepts developed by Thomas P Hughes (1983, 1987, 1992), the ^ historian of technology who has pioneered research into electric power and • I other large technical systems, the objective of this paper is to present a new 2 '
156 citations
TL;DR: In this article, transaction-cost economics has been partially translated in the more mathematical language of game theory, and understanding of the costs of transactions has been deepened, refined and extended.
Abstract: Over the past decade transaction-cost economics has been partially translated in the more mathematical language of game theory, and understanding of the costs of transactions has been deepened, refined and extended. But the translation is incomplete: a great deal of human behaviour is missed, and doing game theory with more life-like models of individuals will bring theory closer to phenomena. Transaction-cost economics, particularly the economics of relational contracts, provides a major arena for these developments, since the important issues of bounded rationality and individual behavior are central to the topic. Copyright 1996 by Oxford University Press.
154 citations
TL;DR: In this paper, a transaction costs-cum-positive political theory approach is developed, with a focus on the role of institutions and their implications for regulatory commitment, to understand the roles institutions play in society.
Abstract: The thrust of this paper is that to understand the roles institutions play in society, a deep analysis of opportunism and its implications is necessary. For that purpose, a transactions costs-cum-positive political theory approach is developed, with a focus on the role of institutions and their implications for regulatory commitment. A major issue is restraining political opportunism. Countries that have succeeded in developing a healthy private sector are those that have developed institutions that restrain governmental decision-making. But such restraining is itself a political choice. Countries with electoral and legislative systems that bring about decentralized government have stronger chances of developing equilibria where government discretion is restrained. Copyright 1996 by Oxford University Press.
150 citations
133 citations
TL;DR: In this article, the authors use non-cooperative game theory to provide a foundation for the study of convergent expectations and argue that the incentive to free-ride on the contributions of others is not a necessary condition for generating a lack of convergence expectations.
Abstract: Management literature focuses on two modes of coordination: formal and informal
structures. Informal structure grants significant discretion to individual actions. Yet
two impediments are related to such flexibility, those created by opportunism and those
created by convergent expectations. Impediments arising from convergent expectations
exist when the expectations of all members of an interdependent system are not properly
aligned. We use non-cooperative game theory to provide a foundation for the study of
convergent expectations. We argue that the incentive to free-ride on the contributions of
others is not a necessary condition for generating a lack of convergent expectations, and
apply the issue of convergent expectations to both the organizational issues of optimal
group and firm boundaries and to the role of managerial practices such as Total
Quality Management (TQM). Building on research from organization theory, social
psychology and game theory, the paper ties the idea of convergent expectations to the
grouping dilemma of the trade-off between higher coordination within groups and
lower coordination between groups. We argue that this grouping dilemma can serve as a basis for determining the actual boundaries of both groups in organizations and the
organization itself. Examining the role of fads in business practices, we conclude that, however suspect their underlying value as decision aids may be, these practices can serve as useful coordination mechanisms.
TL;DR: In this paper, the authors discuss two ways in which convergence is generally discussed: (i) the convergence of voice, video and data in telecommunications markets; and (ii) convergence of the telecommunications an computer industries.
Abstract: Convergence means different things to different people This paper discusses two ways in which convergence is generally discussed: (i) the convergence of voice, video and data in telecommunications markets: and (ii) the convergence of the telecommunications an computer industries In order to understand what types of new services will be offered and how industry structure will evolve, it is also necessary to understand the drivers of convergence Although technological change has played a key role, it is just as important to emphasize other forces, such as regulatory factors Finally, wbile some aspects of convergence should lead to increased competition, others may not Copyright 1996 by Oxford University Press
TL;DR: In this paper, the authors focus on three mechanisms of corporate governance to illustrate the analytical usefulness of transaction cost economics for corporate law: the board of directors, relational investing, and the choice of law governing shareholder-manager relations.
Abstract: We have seen a revival in interest in corporate law and corporate governance since the 1980s, as researchers applied the tools of the new institutional economics and modern corporate finance to analyze the new transactions emerging in the 1980s takeover wave. This article focuses on three mechanisms of corporate governance to illustrate the analytical usefulness of transaction cost economics for corporate law. They are the board of directors; relational investing, a form of block ownership in which a large shareholder is more actively involved in firm management than is ordinarily expected of non-management shareholders; and the choice of law governing shareholder-manager relations, referred to in the literature as state competition for corporate charters. Each of the three sections in the article sketches first the theory of the corporate governance mechanisms from the perspective of transaction cost economics and then addresses the question whether corporate governance matters, by discussing the empirical evidence on whether the mechanism is effective. In addition to limning Williamson's contribution, the objective is to relate theory and data, to ascertain where we are, 20 years after Williamson's fundamental contribution was the first articulated in Markets and Hierarchies, and over a decade after the corporate law applications were first explicitly worked out.
TL;DR: In this article, the authors examined the effect of technical innovation on the failure rates of American automobile producers from 1885 to 1981 and found that the risks of innovation may on occasion outweigh benefits.
Abstract: A hotly debated question of organizational theory--especially evolutionary theories of organization--asks how inert are organizational structures. Answering the question requires analysis of not only organizational change but also of the consequences of change for organizational survival. This study examines one such organizational change--technical innovation--and its effects on the failure rates of American automobile producers from 1885 to 1981. Technical innovations are shown to generate primarily beneficial effects for the firms spawning them and primarily detrimental effects for competitor firms. However, analysis of certain organizational contexts--large organizations in particular--suggests that the risks of innovation may on occasion outweigh benefits. The findings imply that some theories of strategic management need rethinking. Copyright 1996 by Oxford University Press.
TL;DR: In this paper, a study of the comparative evolution of several major high-tech industries in the US, Japan and Western Europe is presented, examining similarities and differences in the ways these industries developed in different countries, and the factors explaining those differences.
Abstract: This paper is a preliminary report on a study of the comparative evolution of several major high tech industries in the US, Japan and Western Europe. In general the paper examines similarities and differences in the ways these industries developed in different countries, and the factors explaining those differences. The project especially focused on understanding the instances when firms in a particular country gained a strong competitive advantage over firms based in other countries. The industries studied are: organic chemical products, computers, semiconductors, software, numerical controlled machine tools, pharmaceuticals in the age of biotechnology and medical devices. Copyright 1996 by Oxford University Press.
TL;DR: The contrast between American Legal Realism and the law and economics movement, which is perhaps the most important development in legal thought in the last quarter century as discussed by the authors, is dramatic, and it can be explained in large measure by the absence of an intellectual framework for legal realism.
Abstract: The contrast between American Legal Realism, which “ran itself into the sand” (Schlegel, 1979, p. 459), and the law and economics movement, which is “perhaps the most important development in legal thought in the last quarter century” (Posner, 1986, p. xix), is dramatic. That the one foundered while the other flourished is explained in large measure by the absence of an intellectual framework for Legal Realism and the use by law and economics of the powerful framework of neoclassical economics.
TL;DR: In this paper, the authors argue that established firms, including industry incumbents and diversifying entrants, play vital all underemphasized roles as the sources of major innovations in many industries.
Abstract: We argue that established firms, including industry incumbents and diversifying entrants, play vital all underemphasized roles as the sources of major innovations in many industries The study presents empirical evidence showing that established firms are often sources of major innovations in the telecommunications and medical sectors. We conduct an exploratory investigation of how variation in the types of technical and market change influence whether industry incumbents, diversifying entrants or nets companies are the sources of major innovations Copyright 1996 by Oxford University Press.
TL;DR: In this article, the authors offer an interpretation of the social and institutional context that promoted the development and evolution of the pharmaceutical manufacturing industry in the mid-Atlantic region of the United States.
Abstract: In this paper we offer an interpretation of the social and institutional context that promoted the development and evolution of the pharmaceutical manufacturing industry. Our interest is in defining the historical circumstances that led to the geographic concentration of the pharmaceutical manufacturing industry in the Mid-Atlantic region. Our focus is both geographic and institutional as we seek to understand the forces behind geographic localization and the ways in which geographic localization may contribute to the advancement of science and to the evolution of industries. In this paper, we describe the general development of the industry in the Mid-Atlantic region of the nineteenth and early twentieth centuries. Copyright 1996 by Oxford University Press.
TL;DR: In this article, a longitudinal study illustrates, on the basis of a plant survey, the automation strategy of Fiat Auto, one of the world's largest auto producers, tracing its evolution from the experiments of the 19 70s driven by industrial relations pressures, to the 'pan-technologist' philosophy underlying the highly automated factory of the 1980s, to more realistic concepts inspiring the 'Fabbrica Integrata'organizational model of the 1990s.
Abstract: The search for competitiveness in automobile assembly is tending towards more cautious and selected investment inflexible automation technology. During the 1980s a number of car makers were lured by the myth of computer-integrated manufacturing, but recent surveys show that approaches to automation (especially in final assembly) have changed. This longitudinal study illustrates, on the basis of a plant survey, the automation strategy of Fiat Auto, one of the world's largest auto producers, tracing its evolution from the experiments of the 19 70s driven by industrial relations pressures, to the 'pan-technologist' philosophy underlying the 'highly automated factory' of the 1980s, to the more realistic concepts inspiring the 'Fabbrica Integrata'organizational model of the 1990s. The paper shows that the implementation of automation techniques and the development of related know-how have a cumulative and path-dependent nature. Furthermore, it is argued that the technologies used in a firm's plants result from a non-linear learning process, based on & the internal development, external acquisition, imitation, analogical replication, *> combination and selection of capabilities. The knowledge incorporated into technologies \ becomes an integral part of a firm's repertoire of capabilities. Parts of this knowledge can z be retrieved over time, to become modules of original technological solutions. Similarly, the "2 necessity to imitate competitors who have successfully implemented organizational | paradigms based on lean manufacturing in order to respond to the 'regime of variety' can cause a mismatch between the existing and the desired technological trajectory of a firm.
TL;DR: In this paper, the authors extend the transaction cost economics framework to examine the contractual hazards that arise in the course of technological innovation and identify three main strategic hazards related to future technological opportunities that may develop in business transactions: loss of technological pacing possibilities on the technological frontier, loss of control at or behind the frontier, and design omissions.
Abstract: This paper extends the transaction cost economics framework to examine the contractual hazards that arise in the course of technological innovation. We identify three main strategic hazards related to future technological opportunities that may develop in business transactions: loss of technological pacing possibilities on the technological frontier, loss of technological control at or behind the frontier, and design omissions. In examining these hazards we focus on the increasingly common phenomenon of vertically integrated firms supplying downstream competitors. We then analyze how constellations of safeguards, particularly relational safeguards, can augment transaction-specific safeguards in many instances to ensure high-powered incentives are maintained. We also consider under what conditions downstream divestiture is a desirable economizing option. Supportive illustrations are drawn from the desktop laser printer and telecommunications industries.
TL;DR: In this article, a free sample copy of Industrial and Corporate Change (ICC) is sent along with a cheque for payment to Oxford University Press (OUP) in the UK and Canada.
Abstract: F Please send me a free sample copy D Please enter my 1996 subscription to Industrial and Corporate Change D I enclose a cheque payable to Oxford University Press D Please debit my Mastercard / American Express / Diners/ Visa / JCB Card Card Number DD[L-Z-L00LZ1D-• Exp. --n 8 Name................................... Address ................... ............. ............ Signature.......................... *Please note: ? sterling rates appy in UK and Europe, US$ rates elsewhere. Customers in City/State......................................... the EU and in Canada re subject to their local sales tax. Zip........... .....................
TL;DR: In this paper, the authors used new institutional economics to support strategic analysis in industries, where the production of goods and services requires the pooling of the assets of several firms, and the type of assets owned by these firms has an impact on their bargaining power; this consequently influences the firms' ability to be involved in specific organizational arrangements.
Abstract: This paper uses new institutional economics to support strategic analysis in industries, where the production of goods and services requires the pooling of the assets of several firms. The type of assets owned by these firms has an impact on their bargaining power; this consequently influences the firms‘ ability to be involved in specific organizational arrangements. With the objective of conceiving optimal strategies for firms involved in these agreements, our study seeks to bring to light the relationships between the nature of organizational arrangements, the role of the firms in these arrangements and their competitive position in the industry in which the cooperation is formed. This analysis uncovers three principal forms of organizational arrangements: core firm with a network of subcontractors, homogeneous alliance and complementary alliance. With the support of various statistical methods, this framework is applied to the telecommunications industry
TL;DR: In this article, the authors evaluate the effectiveness of several pricing rules intended to promote entry into a network industry dominated by an incumbent carrier, and develop a model of competition between two inter connected networks.
Abstract: This paper evaluates the effectiveness of several pricing rules intended to promote entry into a network industry dominated by an incumbent carrier. Drawing on the work of Cournot an d Hotelling, we develop a model of competition between two inter connected networks. In a symmetric equilibrium, the price of cross-network calls exceeds the price of internal calls. This “calling circle discount” tends to “tip” the industry to a monopoly equilibrium as would a network externality. By equalizing charges for terminating calls, reciprocity eliminates differences between internal and crossnetwork prices and makes monopoly less likely. Imputation counteracts an incentive by the dominant network to “price squeeze” a rival by eliminating differences in the wholesale price of termination and the implicit price for internal use. By increasing profits of rival networks and increasing thei r subscribers’ surplus, imputation supports additional entry. Finally, an unbundling rule reduces termination fees charged by a dominant network that was engaging in pure bundling. Again, entry will be facilitated as rival networks offer potential subscribers a more attractive rate schedule.
Journal Article•
TL;DR: In this paper, a game theoretical analysis of the factors that led to the emergence of the late medieval family firm in the Latin, rather than the Muslim, world is presented, and various organizational innovations related to the family firm, evaluating their sources and the ability to combine game theory and evolutionary economics for the study of organizational evolution.
Abstract: Despite the diversity of economic environments and organizations utilized throughout history, historical studies of organizations and organizational innovations, by and large, have concentrated on the very recent past. Arguably, this reflects the perception that historical records are not rich enough, with respect to the more remote past, and organizational problems in past economics are irrelevant to contemporary organizational analysis. This paper combines historical information and game theory to demonstrate that the study of past organizations is both feasible and relevant. Specifically, it presents a game theoretical analysis of the factors that led to the emergence of the late medieval family firm in the Latin, rather than the Muslim, world. Furthermore, it explores various organizational innovations related to the family firm, evaluating their sources and the ability to combine game theory and evolutionary economics for the study of organizational evolution. Copyright 1996 by Oxford University Press.