Patterns of Industrial Organisation Paolo Gurisatti Kingston, 1 June 2009

1. Patterns ofIndustrial OrganisationPaolo GurisattiKingston, 1 June 2009

2. Vertical Integration • The sequence of stages belonging to the same technical process may be vertically integrated either into a “private territory” (company) or into a “public/open territory” (industrial district or open source global network) • The integration choice is conditioned by “social agreements”, transactional costs (O.Williamson) and knowledge distribution

3. Integrated “Factory” • The first choice is oriented to a social agreement of asymmetric dependence: • Common property of industry assets and intellectual property (knowledge) reserved for company members “only” • Subordinate contracts and agreements • Organisation based on hierarchy and “distrust” • Centralisation of power, capital and surplus

4. Network Enterprise • The second choice is oriented to a social agreement of asymmetric cooperation: • Divided property of industry assets, but common property of artifacts, knowledge and brand • Exclusive sub-contracting (franchising) • Organisation based on “negotiation and contract” • Centralisation of power and knowledge (IP), asymmetric distribution of capital and surplus

5. Industrial District or Cluster • The third choice is oriented to a social agreement of generative relationship: • Divided property of industry assets, knowledge and artifacts, but shared local identity (trust) • Supply chain co-management and co-design • Organisation based on “trust” and common “narrative structures” • Decentralisation of power, capital and surplus

6. Patterns of industry organisation in footwear

7. District’s (Cluster) Peculiarities • In the district’s (cluster) pattern: • Artifact attributions and technology framework are shared by the stakeholders and knowledge is produced like as in an “open source” network • Head/Leading companies “do not” control all the available knowledge and “do not” plan providers’ supply (just design functional features of single components and services to be developed) • The value chain is composed by “accredited agents”

8. Advantages of District (Cluster) • District pattern exploits four advantages: • Flexibility: lower restructuring costs in front of unpredictable markets • Risk sharing: lower capital creation costs and benchmarking on investment processes • Profit sharing: surplus distribution and quick respons to incremental innovation needs • Knowledge sharing: knowledge production is not concentrated at the “top” of the value chain

9. Generative Relationships • District pattern reduces information and power asymmetries (transactional costs): • Independent social actors (neither friends, nor strangers... providers/partners co-designing work teams…) • Competition and cooperation (community participation to strategic issues of the territory, but transparent selection of competing solutions…)

10. Working Conditions • District pattern has to develop an efficient “market system”: • Commun history of local agents and knowledge, shared genealogy of independent units (spin offs and competence networks) • Commun institutions and rules promoting constitutional processes (rise of local specific intermediate structures – scaffolds – suited for supporting industrial evolution )

11. Market Systems • “By a market system we mean a set of agents that engage with one another in recurring patterns of interaction. These interactions are organised around an evolving family of artifacts.” (David Lane and Robert Maxfield, mimeo 2006) • Innovation, production of new knowledge and design of new artifacts (functional systems)