Firms,markets+economic Change

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Innovating successfully is one of the key challenges facing modern managers, firms, and governments. The rise to prominence of Japanese keiretsu in recent years has called into question the effectiveness of traditional western forms of corporate organization. Will the future favour networks of small innovative firms as in California's Silicon Valley, or will giant integrated firms dominate? Should governments play a role in directing the innovation process or should decisions be left to private enterprise? Firms, Markets and Economic Change draws on industrial economics, business strategy, and economic history to illuminate these topics. The authors first develop a dynamic theory of organizational boundaries that draws on both transaction-cost economics and the dynamic-capabilities or resource-based approach to strategy. They use this theory to propose an alternative explanation for vertical integration, and they emphasize the interplay of organizational form and product design, putting forward the theory of modular systems. In addition to offering detailed case studiesof the early American automobile industry, the stereo-components industry, and the microcomputer industry, the book also turns its attention to the causes of industrial inertia and to the normative questions of organizational form and innovation. The authors argue that innovation is a complex process that defies neat categorization. Different organizational forms may be approporiate depending on teh specific circumstances of technology, organizational competence and consumer knowledge. As a result, government policy needs to faciltate change in a broad way rather than to prescribe organizational forms to attempt to direct innovation.