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The Embedded Firm in the Global Knowledge Society

The Embedded Firm in the Global Knowledge Society. Presentation at the EAEPE Conference Governing the Business Enterprise: Ownership, Institutions, and Society Conservatoire National des Arts et Métiers – Paris 22-23 May 2008 Peer Zumbansen

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The Embedded Firm in the Global Knowledge Society

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  1. The Embedded Firm in the Global Knowledge Society Presentation at the EAEPE Conference Governing the Business Enterprise: Ownership, Institutions, and Society Conservatoire National des Arts et Métiers – Paris 22-23 May 2008 Peer Zumbansen Director, Critical Research Laboratory in Law & Society Osgoode Hall Law School, York University Toronto

  2. The Changing Contours of Embeddedness • My topic: the evolving political economy of the business corporation • Three Theses: Thesis 1: Business corporations should be seen as hybrid

  3. The Changing Contours of Embeddedness Thesis 2: Corporate law [CL] as mirror of changing conditions of market regulation Related inquiry must be historical, comparative and interdisciplinary. CL reflects longstanding attempts at situating the regulation of corporate affairs within a particular framework of market regulation. Corporations as creatures of law (John Dewey 1926 – “Legal Personality” – and the ECJ in 1988 – “Daily Mail”). Keywords and theoretical/conceptual approaches on the one hand and maps/guides on the other:

  4. The Changing Contours of Embeddedness • Keywords: path-dependency and innovation, institutional change and economic performance, evolution, legal origins, varieties of capitalism

  5. The Changing Contours of Embeddedness • Maps and Guides: • (1) comparative political economy to enrich the currently still taught (if at all) canon of comparative law • (2) historically AND politically informed evolutionary theory by Paul David to complement Douglass North’s work

  6. The Changing Contours of Embeddedness (3) A historical-political-economic narrative to unfold the complex structure of contemporary capitalist organization: Boltanski/Chiapello’s three paradigms (individuals, organizations, networks) (4) Giovanni Arrighi’s analysis of the ‘long 20th century’: early stages of financialization as illustrating narrative of current transformations of corporate governance, distinction between industrious and industrial revolution This story again has to be complemented by…

  7. The Changing Contours of Embeddedness (5) Accounts of the evolution of the Knowledge Society(Peter Burke [2000]/Joel Mokyr [2002]/Dominique Pestre [2007]) Central: • Role of technology and information • Distinction between propositional/ prescriptive K to explore the notion of ‘useful’ K • Strong linkage between progress and economic performance • Role of institutions in fostering K’s role for economic and social progress (diffusion&migration) • Dramatically changed regulatory environment and ‘discursive order’ [governance, accountability, transparency, sustainability, precaution, risk, civil, K-society] • Ethical dimensions of K – good/bad/not neutral “La discussion politique est sans conclusion, bien qu’elle ne soit pas sans décision.” (Ricoeur)

  8. The Changing Contours of Embeddedness Thesis 3: Reformulated approach to corporate governance: Knowledge Society CG. Beyond risk and uncertainty about the future profitability and perhaps even sustainability of a business strategy as paradigms to analyze management decision-making. Exemplary Focus on CSR, which lies at the centre of the business firm in the K-society Constantly adapting its decision-making processes along an ongoing and evolving proceduralization of knowledge generation and application methods. Central: CSR’s conceptual enlargement from a focus on social (also environmental, labour etc) interests towards a theory of organizational rationality.

  9. The Changing Contours of Embeddedness • Parallel Stories: STATE - CORPORATIONS • A possible hero to illustrate the parallels: Karl Polanyi • double movement: public policy and liberalization of societal, individual powers

  10. Embeddedness and the ‘Great Transformation’ “The outstanding discovery of recent historical and anthropological research is that man’s economy, as a rule, is submerged in his social relationships. […] Neither the process of production nor that of distribution is linked to specific economic interests attached to the possession of goods; but every single step in that process is geared to a number of social interests which eventually will be very different in a small hunting or fishing community than those in a vast despotic society, but in either case the economic system will be run on noneconomic motives.” (46)

  11. Embeddedness and the ‘Great Transformation’ 3 famous market-structuring and –organizing principles: ‘reciprocity’ (related to family and kinship), ‘redistribution’ (central collection and dissemination of production and ‘householding’ (oeconomia), preceding rising levels of division of labor, as well as the role of money and credit.

  12. Embeddedness and the ‘Great Transformation’ “the control of the economic system by the market is of overwhelming consequence to the whole organization of society: it means no less than the running of society as an adjunct to the market. Instead of economy being embedded in social relations, social relations are embedded in the economic system.” (57)

  13. Embeddedness and the ‘Great Transformation’ “The vital importance of the economic factor to the existence of society precludes any other result. For once the economic system is organized in separate institutions, based on specific motives and conferring a special status, society must be shaped in such a manner as to allow that system to function according to its own laws. This is the meaning of the familiar assertion that a market economy can function only in market society.” (id.)

  14. Embeddedness and the ‘Great Transformation’ “With every step that the state took to rid the market of particularist restrictions, of tolls and prohibitions, it imperiled the organized system of production and distribution which was now threatened by unregulated competition and the intrusion of the interloper who ‘scooped’ the market but offered no guarantee of permanency.” (66)

  15. From Embeddedness to Disembeddedness and back? Contemporary Approaches: 1.New Institutional Economics 2.Varieties of Capitalism Its ‘coming of age’ • Diversification of political regulation • Comparative Economics and ‘Legal Origins’ • Refinement (e.g. R.Boyer’s ‘institutional complementarity’)

  16. Institutional Framework and Volatility • …“[m]ost of the institutions that are today perceived as complementary, were in fact created for distinct purposes and only the succession of crises, experiments and sequential innovations finally delivered the complementarity that is recognized at the end of a rather long historical process.” (64)

  17. VoC Reloaded 3 RESULTS of Boyer’s work: • complementarity, among other factors, provides the glue that holds together a global institutional architecture • even in an era of globalization, financialization and knowledge-based competitiveness, national economies still exhibit contrasted institutional configurations • capitalism diversity is not a matter of pure historical legacy, inertia or irrationality – since at least two mechanisms (hybridization and endometabolism) permanently drive institutional change

  18. Critique of ‘legal origins’ • Frozen in time • Overstates differences between ‘common law’ and ‘civil law’ • Mixes different regulatory areas – despite the fact of their varying evolutionary patterns (corporate – labour) • Failing to provide reliable tools in legal aid and law reform programs

  19. Polanyi today? Link between embeddedness analysis and globalization • testimony: Joseph Stiglitz’ foreword to new edition of GT • Central inquiry: relevance and explanatory force of ‘double movement’ idea • Three observations: • State vs Society different than 19th/20th century • Mixed, hybrid governance: neither market nor its actors and functions are private • Public-private now matters as normative yardstick, not as sociological description

  20. Intertwined Facts and Discourses 1 Growing influence, power and role of corporations is not only a fact, but becomes an argument against political control and intervention. The transformation of political governance occurs, thus, both factually and discursively.

  21. Intertwined Facts and Discourses 2 Privatization of public services is embedded in discourse of - individualism - responsibilization - empowerment, regardless of the actual framework, in which such claims are made.

  22. The new Face of the Political Private, Public, Hybrid Actors situated in experimental forms of governance, regulation and self-regulation Challenge: • the unavailability of either Polanyi’s or the Legal Realists’ return to a deconstruction of market freedoms as political freedoms, and • the necessity of having to translate the institutional and normative underpinning of embeddedness into this new context

  23. The New Embeddedness Two tentative, concluding proposals: • Translation of Polanyi’s embeddedness • Rethinking CSR

  24. 1. Translating Embeddedness Required: an enlargement of a theory of political economy that remains governed by domestically defined, comparatively assessed models of institutionally fixed and interest-group driven analysis of socio-economic and political conditions - Integration of context analysis (new types of competition and markets; historical-comparative analysis; new forms of regulation [‘new governance’]; types of company organization)

  25. The New Embeddedness Functionalist Translation • Focus on structure of society to better understand shape and role of its constituting parts Three characteristics of contemporary society: • Highly Differentiated • Process/Experiment Driven • Normatively open

  26. The New Embeddedness The State and the Corporation: - conditions of extreme uncertainty have dramatic consequences for governance models in each • State becomes dependent on and involved in societal knowledge production • Corporations must facilitate, support and extract knowledge – role of labour, dispersed K, workers’ inventions etc – beyond Co-determination

  27. The New Embeddedness Transnational Translation: TL as method asks for both the comparison and translation of domestically experienced regulatory periods, forms, successes and failures towards a transnational, border-crossing understanding of the evolution of facts and discourse in different historically grown political economies.

  28. 2. Rethinking CSR Starting with the critique of CSR from the right: CSR as misguiding (in providing an over-simplified account of the world – suggesting that problems have ‘solutions’ and that we can know what is in society’s [best] interests) and that this extends from social to environmental to fundamental organizational components of the global makeup

  29. Experimental K - CSR CSR aims at an improvement of • human rights, • labor rights and workplace safety in advanced industrialized as well as in dramatically industrializing societies. • protection of the environment. Today, CSR is more comprehensive, but less totalitarian. CSR: not straight-forward anti-capitalist, nor camouflage for indiscriminatory company bashing. Instead: enlarged approach to the identification and improvement of corporate responsibilities.

  30. K-Society Corporate Governance A functionalist and transnational concept: • beyond interest-pluralist models • beyond public-private institutions • Beyond traditional comparative measurements Role of the Firm: “Innovative Firm” New forms of R&D (Decentred; outsourced, networked, no longer “on the hill”, but immersed in marketing groups; R&D by M&A) IF is always embedded – focus on 3 elements: strategy, finance, organization

  31. K-Society Corporate Governance Role for (legal) regulation: learning, adaptive, integration of law and non-law in a critical analysis of the limits of regulation

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