Abstract
This concept revolves around differences of embeddedness of organizations in the macro patterns of routines (economic policy regimes), which in turn may differentially provide them–and the system as a whole–with ‘procedural rationality’ in dealing with identified problems in their relevant complex environment. Regularities of interdependence are specified between different regime patterns and the variety of coordination routines between and inside micro organizations. Corresponding regularities are also observed for internal governance routines of organizations, which in turn determine the behavioral adaptation by self-organization that may be rationally in a local perspective, but–contingent on the organization’s embeddedness in the coordination structure–not necessarily so in a comprehensive one.
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Notes
The number of levels of these hierarchies exceeded by far the often mentioned number six, which experts such as consultants consider as the recommendable maximum for Western firms.
Jena was the most important supplier of range-finding devices for Soviet tanks and satellites and for multi-spectral camera map-making of the earth surface with highest resolving power by satellites.
It should be underscored that an organization is seen here as an open subsystem through the lens of the resource dependency approach. By bringing forward more transparency about, and a fair balancing between inducements and contributions, monitoring may assure the potential entrants as well as the incumbents of the attractiveness of an organization. This is the more necessary the wider is the span of variety in terms of professional specialization.
In larger enterprises and administrative hierarchies, these benefits may play a more important or even crucial role as a career incentive. This holds true in particular the less useful are pecuniary incentives due to phenomena of goods famine and queuing under spread abroad governmental directed regimes. In the Soviet-type system, for instance, distinct rules have evolved concerning exclusive access to gradually arranged amenities for medium and higher echelon personnel−of course, dependent on party-membership. Examples are private telephone connections, certain brands of cars and other user-goods, quality shops and restaurants, holiday places and hotels with higher standards, hunting preserves and so on. Hence in this sense, fringe-benefits become core benefits the more the spread of governmental directed regimes and in turn the decreasing role of the currency as an exchange medium over the economy goes on.
Early critics of Williamson's stance such as Gregory Dow (1987) have expressed their doubts about the contracting scepticisms of Williamson and his followers, arguing that in hierarchies the incentives for opportunistic aberrations are somewhat underestimated by transaction cost adepts. The latter may even mislead the higher and highest echelons of the supervisory pyramid. This is the crucial argument to which the capability and embeddedness argument presented here is held to offer a different explanation.
Cohen and Levinthal (1990) point out that any formal organization can only deal with a limited amount of variety. For this reason, managerial strategies amount often to reducing a firm’s variety by relying on the economizing and standardizing effects of routines, particularly after acquisitions and mergers. However for a system as a whole, a considerable degree of inter-organizational specialization is called for to cover a sufficient part of the spheres of reality which are relevant from Ashby's point of view with respect to arising chances. The position taken here is that, first, Ashby's law specifically requires a fairly appropriate variety and composition of coordination routines, and, second, that these limits may depend crucially on how this requirement can be met by the very routines (links) which an organization is able to apply. This depends specifically on its embeddedness in the system pattern and in addition on its relevant complex environment.
This observation about lock-in is relevant to multi-level administrations and empirically well founded (Nove 1961, p.156; Schenk 2003, p. 78). It is relevant for state-directed hierarchies, yet is also true for higher interfaces than just for those direct supervisors of the operating level of administrative organizations. It pertains, for example, to the Soviet-type industry hierarchies by which production and trade have been pursued (nearly exclusively) under regimes of governmental direction coupled with target planning governance by subordinate administrations rather than firms (understood in the narrower Western sense). For the latter, it had utmost priority in focusing attention on lobbying for easy plans instead of the monitoring of subordinates. This strategy was most promising and supported by the fact that it was much easier for the managers to distort plan-relevant information towards the supervising levels of the industry administration than to monitor subordinates (Schenk, 2003). The same strategy invited and repeated itself not only on the enterprise level but also on the supervisor's and all other ones (given the typical multi-level governance structure). Thus two opposite levels had a problem, those at the top and at the grassroots: The former were confronted with a ‘truth problem’ and the enterprise managers with its complement, the ‘authority problem’ of making reasonable decisions (Schenk 2003, p. 106). Hence what the Soviet-type firms really had turned out to be rather useless for the job they were supposed to do by the political leaders, the ultimate residual claimants.
In the former Soviet-type countries, it was supported by the fact that, from outside the enterprise, it was nearly impossible to detect hidden reserves and to recognize the true state of a given industry. These tendencies reinforce each other and contribute to the spread of the seller’s market syndrome, typical of state directed industries. The pertinent queuing-phenomenon is not only empirically well-established for the former Soviet-type but also for telecommunications and other earlier state-monopolized or regulated services in industrialized Western countries (Schenk 2003, pp. 126–127 and 114–115).
Some further syndromes of such degenerate adaptive behavior should be mentioned, which are typical for government directed industries. Examples are (former) telephone services in the West and even more so industries of Soviet-type countries: the phenomena of queuing and lobbying for government-distributed (and implicitly rationed) goods. Reportedly the seller’s market syndrome and the persistent goods famine induced many enterprises in the USSR to become self-providers for the most important inputs. This happened with silent acceptance of these illegal practices by their supervising ministry, focusing attention (as with the enterprises) on plan fulfilment (Schenk 2003). As a consequence, the division of labor was substantially inhibited by this kind of conglomerate building (with machine enterprises acquiring their own foundry works and furniture producers their own forests). These conglomerate tendencies have been repeatedly criticized and contended with reforms by the political leaders of the USSR but without serious consequences. Needless to say, conglomerate-building is also a well-known tendency, often driven by managerial selfish ambitions in Western industrialized countries (Boston Consulting Group 2003).
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Schenk, KE. Complexity of economic structures and emergent properties. J Evol Econ 16, 231–253 (2006). https://doi.org/10.1007/s00191-005-0003-3
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DOI: https://doi.org/10.1007/s00191-005-0003-3
Keywords
- Multi-level structures
- Coordination variety
- Embeddedness
- Self-organization
- Emergent procedural rationality