Geography Reference
In-Depth Information
hierarchy: various kinds of network, loosely linked organizations or groups.
However, these would always merely be hybrids of the two main forms. Powell
(1990) shows that in fact the network is a form
sui generis,
independent and
different from the others, and having its own origins in the old trading
companies, guilds and family organizations of Europe, as described, for
example, by Polanyi (1957b). Such networks have the advantages described in
the previous chapter, in terms of their flexibility and ability to react to changes in
markets, technology, and cost of the different factors of production. They rely
heavily on trust between the various elements of the network, and reciprocity of
favours and responsibilities among members. While the earlier part of this
chapter emphasized the small-scale firm and networks amongst craft firms, the
logic applies at higher levels. For example, most of the world's car
manufacturing firms indulge in network structures, as joint ventures to produce a
model or a series of models in conjunction with another firm. Such firms may
not abandon their traditional hierarchical structure, but enter into the joint
venture for one particular market, or for one set of products.
The use of such networks does involve some of the firms in a considerable
degree of embedding of their work into the locality. Sabel (1996) described such
a situation for the Republic of Ireland. Here, with the encouragement of the Irish
government, a variety of computer hardware and software companies, including
Apple, Microsoft, Intel and Amdahl, have set up local subsidiaries, which formed
strategic partnerships with many user firms and related manufacturers. The
partners in some cases have become involved in the design of models for the
market, pre-production development of these, and full-scale manufacture as well
as subcontracting of parts to further firms. Obviously, such a degree of linkage to
local firms has beneficial effects for local employment, and Sabel quotes the
setting-up of firms making manuals for the use of software as an example. In
such cases, a global manufacturer such as Apple uses its global reach to enhance
its local connections. The whole manufacturing process, for this firm, is done in
Ireland, while marketing is aided by use of the Apple advertising strength and
name. This kind of development can be regarded as an example, too, of
movement from economies of scale (the typical economies sought by the large
firm making thousands or millions of the same object, and dividing the
production system vertically from design to final assembly) towards “economies
of scope”. This involves production of items with a broad use across a range of
models, by the small firms which are manufacturing components or services for
the various computer companies, and where new designs can be implemented as
a result of bringing together different combinations from the range of alternatives
available. The networks allow also the optimization of choices, through
“benchmarking”, the identification of current best practice in the industry, and
through “continuous engineering” or “simultaneous engineering”, involving the
simultaneous design of all the components. These replace the more traditional
practices of a first general framework design, followed by design of components
to fit the overall specification, a slower and potentially less efficient procedure.
