The Emergent Firm: Knowledge, Ignorance and Surprise in Economic Organisation PDF
Preview The Emergent Firm: Knowledge, Ignorance and Surprise in Economic Organisation
THE EMERGENT FIRM Also by Neil M. Kay THE INNOVATING FIRM: a Behavioural Theory of Corporate R&D THE EVOLVING FIRM: Strategy and Structure in Industrial Organisation THE EMERGENT FIRM Knowledge, Ignorance and Surprise in Economic Organisation Neil M. Kay M MACMILLAN ©Neil M. Kay 1984 All rights reserved. No part of this publication may be reproduced or transmitted, in any form or by any means, without permission First published 1984 by THE MACMILLAN PRESS LTD London and Basingstoke Companies and representatives throughout the world Typeset by Wessex Typesetters Ltd Frome, Somerset British Library Cataloguing in Publication Data Kay, Neil M. The emergent firm. 1. Corporate planning I. Title 658.4'012 HD30.28 ISBN 978-0-333-36362-1 ISBN 978-1-349-17517-8 (eBook) DOI 10.1007/978-1-349-17517-8 FOR COLETIE Alice laughed 'there's no use trying' she said, 'one can't believe impossible things'. 'I daresay you haven't had much practice' said the queen. Lewis Carroll, Through the Looking-Glass 'Economics, the science of the quantification of the unquantifiable and the aggregation of the incompatible.' G.L.S. Shackle, Epistemics & Economics Contents Preface IX 1 Introduction 1 2 The Problem 9 3 Entrepreneurial Salome 32 4 More Salome 43 5 Risk, Uncertainty and Chance 56 6 Industrial Organisation and Bounded Rationality 84 7 Multinational Enterprise 111 8 Public Policy and Bounded Rationality 128 9 Synthesis and Antithesis 144 10 Ingredients and Recipes 160 Notes 190 References 209 Index 221 VII Preface I have a genuine affection for prefaces. In many cases they are the most interesting part of a book, often cloaking miniature dramas of frustration, tedium and disappointment. After months or years of toil the writer has to set the context to his or her work in a tone which custom dictates must be, at worst, one of graciousness and humility and, at best, one of such gratuitous servility as would shame Uriah Heep. The preface world is an idyll peopled by super-intelligent conscientious colleagues, sweet-natured understanding families, and hyper-efficient telepathic typists.* They all have a sense of humour which is 'unfailing' in the case of secretaries, and only the author ever makes mistakes. It is curious that the standards of verisimilitude expected of scholarly analysis in general can be suspended by tacit agreement in the case of the preface. In fact, the convention defends both public and writer; raw honesty in prefaces could shatter reputations and careers, unleash a storm of literary litigation and divorce petitions, and drag academics up into the same insurance risk bracket as North Sea oil divers. Coyness and restraint in prefaces is a professional defence mechanism whose advantageous natural selection properties have helped species academia go forth and procreate throughout the known world. At their best, prefaces are constructively disingenuous providing harmless entertainment that may be spiced by personal knowledge of authors and their true circumstances. The problem with economics is that creating unreal worlds can be infectious and economists have been notoriously reluctant to stop at the preface, frequently pursuing the theme into the body of the text. However, in this context, unreality has the air of tragicomedy. Humour may be found in a situation in which phalanges of economists have spent man-years running into man millenia building economic worlds which do not, will not, and cannot exist. The tragedy is that much of this is bad science; technique has overrun the discipline and become an end in itself rather than a simple * Heriot-Watt University and the University of California are the only institutions known to employ telepathic secretaries. IX X Preface means. Conventional neoclassical economics is a self-sealing closed system which has successfully insulated itself from empirical reality. Such criticism has been made before, and from a number of quarters both inside and outside the profession. Some would allege that the straw man of neoclassical theory has been put to the torch so often that further disinterment and incediarism would be an unnecessary embar rassment. It can also be argued that many objections to neoclassical theory go only halfway in this respect; they criticise and identify failings, but do not provide an alternative approach. This book was written with both objections in mind. It is essential to conduct a critical audit of neoclassical theory, because in the reasons for its failure are to be found the clues necessary for any useful reconstruction of theory. As far as the second objection is concerned, it is true that the performance of a theory must be judged on empirical grounds. Consequently, empirical explanation is the major objective of this work just as with its two predecessors, The Innovating Firm and The Evolving Firm. Most of the book was written in the course of a two year leave of absence as visiting faculty in the University of California, Irvine. My thanks to Charles Lave, head of the economics department for bringing me over for the first year and Lyman Porter, dean of the Graduate School of Management (GSM) for keeping me on for the second. My extended stay was also partly due to Susan Sills, GSM administrator, who thought the MBA students deserved the aural challenge of a Celtic accent, and to Craig Galbraith in GSM with whom I started working during my first year. Part of our joint work is reflected in Chapter 7 which is co-authored with Craig, and I owe Craig and the Galbraith family - Jean, Devon and godson Scott - for contributing so much to my stay. I also took the opportunity to try out extracts from earlier drafts of the book on economics undergraduates and MBA postgraduates. I thoroughly enjoyed the teaching and the text has benefited from the exposure. The reader is entitled to some warning as to what is to follow. It is curious that academics typically find schools of thought easy to assign in the third person, but too narrow a measure to define the richness and variety of their own thinking. It would be presumptuous to break with tradition, but some hints might be given. The basic position taken here is that all non-trivial problems in economics arise from knowledge imperfections and the form such imperfection takes is the fundamental determinant of economic behaviour. It is the antithesis of the position
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