Globalisation and after

The Cultural Crisis of the Firm - Pattern in Corporate Evolution
November 21, 1997

Studies of the corporation and of corporate strategy have proliferated in recent years. Several - perhaps far too many - represent a poorly disguised attempt to drum up consultancy business. Others, usually with gaudy jackets, float an established business guru's latest piece of fashionable prescription. Even the more serious works are all too often written in a peculiar mix of globalised English and technical jargon. The business and management studies literature is rarely labouring under a surfeit of good style.

However, Erica Schoenberger and Neil Kay have, in different ways, managed to produce two rather good books on the modern, international corporation. Schoenberger is more overtly rooted in the case study method within an overall analytic framework; Kay's approach is more formally academic, building a set of arguments based on a dissection of the deficiencies of the classic theories of the firm. Schoenberger uses sociological and social psychological insights, Kay's work is more informed by economic methodology. Both, thankfully, exhibit some wit.

The context is well known. Globalisation, however defined, has set problems for management and analyst alike. While neither author spends too much time on the nature and effects of globalisation, this is the implicit text.

They both pose similar questions. What is the nature of the modern firm? What are its boundaries? What drives its inhabitants? How have companies responded to the challenges set by internationalised and integrated markets and production systems? What are the dynamics of change, especially those affecting the production process? What is the appropriate role of the state in managing the social as well as economic consequences of such fundamental corporate change? What are the best routes for corporate survival - questions which set a sort of capitalist "What is to be done?" agenda. And, of course, what direction should economic and business theory take better to explain these events and to inform the search for answers? Neither Schoenberger nor Kay claim to have the answer or answers. Indeed Kay ends his book with a list of further research questions.

Schoenberger begins by asserting that much of the current uncertainty facing many large corporations stems from the loss of US industrial hegemony and the related shift from Fordist mass production to more complex forms of business structure and process. Not a new thesis - and in some respects it may be dangerous to write-off US hegemony too rapidly; however, Schoenberger provides an excellent analysis of why firms have found it difficult to change and how the best have managed the transition.

Schoenberger's book targets the culture of the firm and how complex social attitudes help to shape the production of corporate strategies. In turn, she seeks to show how drastically altered competitive environments constitute a cultural crisis for the firm, often rendering it unable to respond effectively.

The three parts of her book cover, respectively, the nature of modern competition, the corporate culture and finally, the "cultural crisis" of the firm and its effects. The arguments are studded with references to specific examples which in the second part become formal case studies of corporate transitions (specifically, Lockheed's belated and traumatic move into missiles and space in the 1950s, and Xerox's almost fatally delayed response to Japanese competition in the 1970s).

While the use of historical cases underpins the general thesis linking cultural resistance to problems in coping with change, the result is to propel a modern book into the past. The choice of two American firms also reminds us that this is an essentially US-centred analysis. However, as the changes that have swept corporate America have been especially problematic in cultural terms, this is understandable. In any case, readers with the appropriate background will be well able to relate the US experience to a European context.

Kay offers a more strictly academic approach to corporate strategy. The approach is to take a cluster of authors and theories in order to build a composite picture of the modern firm and the strategies available to survive in the face of Schumpeter's "forces of creative destruction".

Like Schoenberger, Kay aims to get well beyond the "black box" of the neo-classical theory of the firm. He examines in turn the purpose and operation of vertical integration, the links and patterns exhibited by specialised and conglomerate structures before moving on to consider survival strategies. Here Kay follows a reasonably conventional course, analysing diversification, multi-nationalisation, joint ventures and the more recent strategies of alliance and network formation. A central theme is the impact and consequences of technology and technological change. Throughout, he uses well-constructed figures to illustrate relationships and structures. Although references are made to real cases, the bulk of his examples are hypothetical. While this increases the pedagogic value of the text, it does tend to introduce a rather dry tone in some of the discussion. On the other hand, in places Kay does demonstrate a mordant wit, describing at one point the structure of economics texts from Adam Smith to Samuelson as "a highly sub-optimal device bearing all the hallmarks of path dependency and lock-in".

On balance, both authors have produced good texts on their subject that will also inform corporate strategists seeking sound advice and lessons from recent history.

Kay's will probably suit the business school academic rather more than Schoenberger's - the careful summaries and re-iterations at various points in the book will be especially useful for the tutor. Schoenberger is the better read overall and has less formal economics and fights less shy of coming to prescriptive conclusions.

From a political economics perspective, both tend to underplay the role of the state in shaping the behaviour and strategy of the very large corporation, especially of internationalised, high-technology firms. However, this is a minor caveat in respect of two very useful and well-written books.

Keith Hayward is professor of international relations, Staffordshire University.

The Cultural Crisis of the Firm

Author - Erica Schoenberger
ISBN - 1 55786 637 6 and 638 4
Publisher - Blackwell
Price - £50.00 and £14.99
Pages - 258

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