old & new ecologies of enterprise EB434 ENTERPRISE + GOVERNANCE

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Alan Barber
5 years ago
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1 old & new ecologies of enterprise EB434 ENTERPRISE + GOVERNANCE

2 varieties of capitalism much national and even regional variance unique mixtures of laws & institutions, histories, industries, cultures mechanisms for trust in business dealings are important everywhere when trust is lacking the economy is less likely to grow sustainably strong laws (fair courts, and enforcement) allow strangers with no basis for personal trust to have confidence in business transactions if such laws are lacking (or unfairly applied) then business opportunities will be taken by those who can create networks of trust, or who have enough power (financial, political, violence etc) to enforce cooperation

3 case study: Southeast Asia + ethnic Chinese business influence

4 Southeast Asia context In Southeast Asia dominance of business by ethnic Chinese is a significant feature (founding family-dominated firms) Fragile social consensus over role of businesses in society This leads Chinese entrepreneurs to partner with influential non-chinese (eg. Bumiputra in Indonesia and Malaysia) and to avoid transparent accounting which reveals the financial position of the firm Relationship-based business has been predominant as a way of reducing transaction risks Partly this reflects historically weak legal and regulatory systems BUT also the positive dynamism of business based upon personal networks

Yet the predominance of Chinese in business has been an acutely politically sensitive issue since independence Chinese

5 example: Malaysia Malaysia s history as a British colony meant that it had a legacy of a good formal legal system and key institutions of economic governance British and other commonwealth legal and regulatory precedents have influence in Malaysia Yet the predominance of Chinese in business has been an acutely politically sensitive issue since independence Chinese founding families closely guard control of the firm through pyramidal ownership structures & have avoided equity finance as much as possible

6 Evolving models of capitalism a national model of capitalism may suit a certain stage of economic development, and given international and technological conditions, but become less suitable over time sustainable economic systems show adaptive efficiency (Douglas North) during high growth periods (using surplus labour, adding technologies, meeting basic human needs) societies can bear many inefficiencies lower rates of growth with economic maturity mean less room for waste aging populations, and public expectations of government services, make public and private sector inefficiency even more difficult to bear

7 pressures for change costs of inefficient economic systems can accumulate, creating pressures competition from foreign firms puts pressure on domestic firms to perform domestic firms need a business-friendly operating environment protectionism - eg trade tariffs and foreign investment controls - can be costly to a country s own citizens transparent and accountable politics makes special favors to companies more difficult as citizens and other firms will object international trade agreements build mutual trust in openness, compel governments to maintain it, but bring criticism from those affected

8 Chart 2: GDP per capita (Per cent of OECD-15 average) Source: The Treasury, Australia source: The Economist

9 new ecologies of enterprise global production networks supported by efficient low-cost technologies of communications and transport causes DISPERSION of production BUT even stronger clusters of new industries following the logic of agglomeration seen in the past (eg. apparel in Italy, Hollywood) finance industry clustering in London, New York etc Silicon Valley efficiencies in a larger talent pool in one place, in knowledge-sharing, collaboration

10 unbundling the company between the 1970s and the 1990s the 100 largest companies share of GDP and of employment roughly halved more went bankrupt or disappeared through mergers & takeovers top managers were expect to downsize, restructure, streamline, strategically focus firms (moving away from the old conglomerate model) focus on core competencies decision hierarchies were also made flatter - fewer middle managers many new firms were created from old divisions of large companies, or by people providing products & services to firms out-sourcing

11 SILICON VALLEY + San Francisco (San Jose Mercury News, January 1, 2011)

13 source: Brookings Institution Spatiality of Incomes

14 Thanks for your attention this semester!

Market Openness & The Labor Market

Market Openness & The Labor Market ADB-ILO-OECD Joint Conference: Trade and Employment in a Globalized World 10-11 December 2012 International Collaborative Initiative on Trade and Employment Niny Khor,