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Organisational Aligment in Knowledge Based Industries

Organisational Aligment in Knowledge Based Industries

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Published by: Carlos Aguiló Santamaría on Jun 17, 2013
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Science, Technology & Innovation Studies Vol. 2 (March 2006)ISSN: 1861-3675
Institutions Matter but …Organisational Alignment in Knowledge-Based Industries
Petra Ahrweiler
(University of Hamburg)
 Nigel Gilbert
(University of Surrey)
 Andreas Pyka
(University of Augsburg)
received 21 October 2005, received in revised form 6 February 2006, accepted 13 February 2006
 A comparison of the current structures and dynamics of UK and German biotech-nology-based industries reveals a striking convergence of industrial organisationsand innovation directions in both countries. This counteracts propositions fromtheoretical frameworks such as the varieties-of-capitalism hypothesis and the na-tional innovation systems approach which suggest substantial differences betweenthe industrial structures of the countries due to differing institutional frameworks.In this paper, we question these approaches and show that the observed structuralalignment can be explained by the network organisation of research and produc-tion in knowledge-based industries.
This work was partially supported by the German DAAD and the British Council within athree-year research project, Innovation networks in biotechnology-based industries. Wethank our referees for their valuable comments.
Corresponding author: ahrweiler@sozialwiss.uni-hamburg.de
 STI Studies 2006: 3-18
1 Introduction
In knowledge-based economies themechanisms of knowledge creationand utilisation are changing. Industrialeconomics and new innovation theory consider the increasing complexity of knowledge, the accelerating pace of the creation of knowledge, and theshortening of industry life cycles to beresponsible for the rising importanceof innovation networks. Knowledge-intensive industries such as IT andbiotechnology have already undergonestructural changes towards thesecollective modes of knowledge produc-tion and application. Such networksseem to be an important component of the emerging knowledge-based econo-mies in which knowledge is crucial foreconomic growth and competitiveness.For some authors, the omni-presentnetworks even "constitute the newsocial morphology of our societies”(Castells 2000: 500) which are accord-ingly labelled as
 network societies
.However, this suggests that networkformation follows some global anduniversal trend affecting, unifying, andarranging all parts of society in "vari-able geometries” (Castells 2000) whereheterogeneity and diversity is sacri-ficed for a single over-powering pat-tern of development. As we havementioned elsewhere (Pyka/Ahrweiler2004), this view does not take intoaccount the complex reality of eco-nomic phenomena deeply intertwined with cognitive, institutional, organisa-tional and political aspects, i.e. a worldof institutional variety, historicity andpath-dependence.In this article, we argue that the rela-tion between knowledge, networksand heterogeneous institutionalframeworks is much more complicatedthan acknowledged by the protago-nists of "globalisation” or the so-callednetwork society. Network formation is,on the one hand, closely linked to theknowledge-intensity of a few indus-tries and, on the other, not substitut-ing but complementing the influenceof institutional frameworks in order toco-ordinate economic action. The nextparagraphs will work out these propo-sitions in more detail.
2 Institutions matter
"At the start of the twenty-first century the role of institutions and the condi-tions for institutional change are at thecore of the economic debate inEurope” (Amable 2003: 1). Neo-institutional approaches (e.g. North1981; Olson 1984) claim that institu-tions shape the structure and dynam-ics of societies: they emphasise thateach national society has developed acontext and path dependent institu-tional infrastructure (politics, law,economy, culture). Economic actionsare strongly influenced by these spe-cific infrastructures, which accordingly lead to different national industrialstructures and performances.
2.1 Varieties of Capitalism
 Although, as the sociological "varietiesof capitalism” (VoC) thesis states,national industries do look different,each formation can offer a particularcomparative institutional advantageenabling economic success within thedifferent national frameworks(Hall/Soskice 2001). VoC studies (e.g.Petit/Amable 2001; Amable 2003)maintain that UK and Germany havecompletely different institutionalinfrastructures: while the UK is la-belled as a "liberal market economy”,Germany is deemed to be a "co-ordinated market economy”. Thedifferences are traced back to nationalregulations of labour and corporatelaw, to institutional differences incompetence development and tech-nology transfer, and to differences infinancial systems. Considering these wide-ranging differences in the institu-tional frameworks in UK and Germany,summarised in Table 1, it seems rea-sonable to expect substantial differ-ences in the organisation of theirnational industries. Generally, Ger-
 Ahrweiler/Gilbert/Pyka: Institutions matter but ...
many is considered to be burdened with an "old” institutional infrastruc-ture compared to the UK. Germanindustrial society contains nationally unified institutions such as largeindustrial corporations, bureaucraticorganisations, professional manage-ment, dual professional educationsystems, social security systems,labour unions and formal regulation,hierarchical co-ordination and ataylorised structure of work. As Hei-denreich states: "There are no signsthat Germany and other ContinentalEuropean economies will follow theBritish lead and will get rid of theirinstitutional structures developed overdecades. These particular institutionalsettings cannot be dismissed as the
old garbage of industrial society
” (Heiden-reich/Toepsch 1998: 14; own transla-tion).Compared to the UK, some require-ments of modern knowledge societies(see e.g. OECD 1996) are less likely tobe fulfilled by the institutional infra-structure in Germany. Focussing onknowledge creation, knowledge trans-fer and the commercialisation of knowledge, knowledge-based econo-mies require permanent access acrossborders between nations and firms asa pre-condition for economic action.This is needed to achieve, for example,quick commercialisation of scientificresults from basic research, easy access to finance for risk-intensiveprojects, the motivation of scientificentrepreneurs, and the availability of participative management skills. Tosatisfy project requirements, highly-qualified and flexible staff have to beable to migrate without the hindrancesresulting from firm and educationbarriers (for German difficulties in thisarea see Soskice 1997, EPOHITE 2000).Table 1 summarises the issues.The VoC literature would seem topredict that innovative industries,characterised by a high researchintensity, extensive capital needs, andhigh risk and uncertainty, would facedifficult development conditions inGermany and would be far less devel-oped than the UK's – and that this willstay as it is because institutionschange slowly, if at all. Compared tothe UK, the comparative advantage of Germany would be best maintained by concentrating its strength in the con- ventional industrial sectors.
Table 1- National institutional frameworks in Germany and the UK
Germany UK 
Labour Law
regulative (coordinated sys-tem of wage bargaining;constraints on employeedismissals)liberal (decentralised wagebargaining; fewer barriers toemployee turnover)
Company law
stakeholder system (two tierboard system plus codetermi-nation rights for employees)shareholder system (minimallegal constraints on company organisation)
Skill formationand technol-ogy transfer
organised apprenticeshipsystem with substantial in- volvement from industry.Close links between industry and technical universities indesigning curriculum andresearchno formal apprenticeshipsystem for vocational skills.Links between universitiesand firms almost exclusively limited to R&D activities andR&D personnel
primarily bank-based withclose links to stakeholdersystem of corporate govern-ance; no hostile market forcorporate controlprimarily capital marketsystem, closely linked tomarket for corporate controland financial ownership andcontrol of firmsSource: Casper/Kettler 2001: 14

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