INSTITUTIONAL CHANGEAND ORGANIZATIONAL

DIVERSITYSeven issues and a Japan- Germany

comparison

Robert Boyer

INCAS Conference, Waseda University,September 16th, 2016

SYNOPSIS1.Do institutions and organizations follow the samelogic?

2.Is organizational diversity a specificity of thecontemporary world?

3. How do institutions shape the organizations ?

4.When institutions change, how do organizationsadapt?

5.Can a major institutional change imply anorganizational innovation?

6.Conversely, can a series of organizational changesfoster an institutional innovation?

7.Why and how do various capitalisms coevolve?

I. DO INSTITUTIONS ANDORGANIZATIONS FOLLOW

THE SAME LOGIC?

Variety of Capitalism: YES from a representativefirm to macro-economic institutions (Hall &Soskice, 2001)

Régulation School: YES fordism as a homologybetween an accumulation regime and a typical firm(Coriat, 1980)

Business models and brands of capitalism: YES thesame indicators in comparative analyses (Whitley,1999).

Two common hypotheses: a representative organizationfor firms and organizational/institutional isomorphism

Definitions of the links

Two different conceptions of the causality

VOC: from the firm to society wideinstitutions:

Technical complementarity at the firm level+

isomorphism organizations / institutions =institutional complementarity.

Régulation Theory: from institutional formsto firms organization:

Institutional complementarity+

isomorphism institutions / organizations =

organizational complementarity.

The need for precise definitions of the various institutional entities

NATURE

COMPONENTDEFINITION PRINCIPLE OF

ACTIONFACTORS OF CHANGE

CONSTITU-TIONALORDER

A set of general rules toset lower level conflictsamong institutions,organizations, individuals

Legitimacyvia deliberation

Large inertia in democraticstates

Role of political process inthe redesign.

INSTITUTIONAn immaterial methodfor structuringinteractions amongorganizations

Reduces or removes theuncertainty associated tostrategic behavior

Structural crises Low efficiency is not a

sufficient reason forchange

ORGANIZATION

A structure of power anda series of routines toovercome coordinationfailures among agents ortheir opportunisticbehaviors

Carrot and stick (i.e. thepay system and control)are related to externalinstitutions orconventions

Poor outcomes in thecompetition with otherorganization.

Major crises triggerredesign

ROUTINE

A set of rules of actionsderived from theconversion from tacit tocodified knowledge, thatcan be shared by severalactors belonging to thesame entity.

Standardization makessimpler complexprocesses, thus allowsshared understandingand reaction.

Adverse evolution of theenvironment.

Inconsistency among aseries of routine or shiftfrom techné to epistémé.

CONVENTION

A Self enforcing set ofshared expectations andbehaviors, emergingfrom decentralizedinteractions.

Lost memory of theorigins of the conventionwhich seems « natural »

General crisis, invasion,translation, ....

Efficiency is rarely aselection criteria

HABITUS

A set of embodiedpatterns of behavior,forged during thesocialization process ofan individual.

Adaptation to a givenfield, possibledisequilibria out of thisfield

Shift to a new field of anhabitus forged into another

New learning, even ifquite difficult

II. IS ORGANIZATIONALDIVERSITY A SPECIFICITY OF

THE CONTEMPORARY WORLD?

NO, for conceptual reasons institutions andorganizations differ.

NO, the history of industrial census shows thecoexistence of quite different firms organizations.

NO, within the same industry, in spite of acutecompetition, different productive organizations still existvarious.

The distinction betweena growth regime andorganizational choicesof firms

International regime

Mode of growthand income distribution

Finance Competition/product Labor

Profitstrategy

Product policy

Productiveorganization

CORPORATE

GOVERNANCE

COMPROMISE

Employmentrelationship

Source: adapted from Boyer, Freyssenet[2000: 24].

One set of macro-institutions, variousfirms’ organizationswithin the samesector (the carindustry)

Source: adapted from Boyer,Freyssenet [2000: 24].

The heterogeneity of contemporary economies hassignificantly increased.

The old Fordist paradigm has been challenged byICT emerging paradigm.

The dynamism of FDI has built productive systemsdifferent from the domestic ones.

De facto, productivity increases have been veryheterogeneous even at the sectoral level.

The breaking down of past coordinationmechanisms has implied a larger dispersion ofremunerations:• Japan: the end of the Shunto.• Germany: the erosion of sectoral collective

agreements after reunification.

III. HOW DO INSTITUTIONSSHAPE THE ORGANIZATIONS ? A common international shocks, different

macroeconomic outcomes The 1973 and 1979 oil shock: speeding up of

innovation in Japan, reduction in Europe The 1990s financial crisis: flexible exchange

rate in Asia, march to the Euro in Europe. The 2008 world crisis: recession in US,

resilient growth in China, stagnation in EU. The 2011 crisis: stable unemployment in

Germany, rising in southern Europe.

A common national macroeconomicshock, different firms behaviors The 1973 and 1979 oil shock: stability of

employment of regular workers in the exportsector, adjustment of non regular workers inthe services (Japan).

The 1990s financial crisis: a drift towardfinance, des-industrialization in UK and US.

The 2008 world crisis: more credit to Staterelated firms, few to other sectors in China.

The 2011 crisis: subsidies to export firmsemployment, lower wage in the servicesheltered sector in Germany.

IV. WHEN INSTITUTIONSCHANGE, HOW DO

ORGANIZATIONS ADAPT? A first level adaptation: a change in the

distribution of firms: Japan: after the bursting out of the 1990

bubble, a rationalization in the “lifelongemployment” (Boyer, Juillard 1996)

Korea: after financial liberalization and crisis,explosion of flexible employment contracts

Germany: after reunification, delocalizationof firms.

V. CAN A MAJOR INSTITUTIONALCHANGE IMPLY AN

ORGANIZATIONAL INNOVATION?

A second level adaptation: innovations, neworganizational forms: Japan: the invention of an hybrid firm, Japanese

employment style, partial shareholder value(Aoki, Jackson, Miyajima, 2007)

Korea: after the 1997 crisis, a redefinition ofchaebol (Kim & alii, 2012).

Germany: the invention of low paid jobs in thesheltered service sector (Frachon, 2015).

The US: air traffic liberalization and theinvention of low cost companies.

The US and then the World: urban transportsliberalization and Uber.

A new global international system: amultinational organizing global Value Chains(Gereffi, Humphrey, Sturgeon, 2005).

Germany: after 2010 crisis, new policy ofemployment subsidies for hours reduction.

VI. CAN A SERIES OFORGANIZATIONAL CHANGESFOSTER AN INSTITUTIONAL

INNOVATION? A two sided causality: A change in institutional forms imply an

alteration in the distribution of firms andpossibly the invention of new organizationalforms.

Conversely the adding up of seeminglymarginal transformations of firms maygenerate a new institutional architecture andrégulation mode.

The Yin and the Yang: institutional and organizational changes

Socialtransformations

Conflict betweenstatus quo and

innovation

Filtering by theconstitutional order

NATIONALINSTITUTIONS

Government’s decisionsabout reforms

FIRMS’ORGANIZATI

ONS

Redefinition of firms’comparative advantage

Change in thedistribution of firms /

innovativeorganizational forms

Feedback on polity

Incentives

and constraints

Numerous examples US in 1990s: how low costs air travel

companies generate a new pattern for priceformation.

US in the 2000s: how the strategy of largefinancial firms triggers the crisis of financeled accumulation (Boyer, 2011).

OECD economies: how the progressivedomination of export led firms andmultinationals has induced a change fromwage led to profit led demands (Boyer,Bowles, 1990).

European economies: how the extension ofatypical jobs has changed the labor marketproperties, hence the growth regimes(Palier & alii, 2014; Baccaro, 2016).

China: how the allocation of credit to Staterelated companies triggers a financial crisis.Hence the need for a new regulation (in theAmerican meaning) (Boyer, 2016).

VII. WHY AND HOW DOVARIOUS CAPITALISM

COEVOLVE?

From the micro to the macro level:

Redefinition, layering and reconfiguration:how to evolve from one system to another one?(Streeck, Thelen, 2005; Mahomey, Thelen,2010).

The adding up of small changes tilts thedynamic property of a socioeconomic regime(Lordon, 1997).

Tentatively importing a system triggers anhybridization process that may fail orsucceed and define a new configuration(Boyer, Charron, Jürgen, Tolliday, 1998).

Endometabolism and hybridization shapenational trajectories

The US and Japan: interacting endometabolismand hybridization processes

HenryFord’svision

Obstacles to itsimplementation

(1913)

United-

States

ActualAmericanFordism

Rise…andmaturation

STRUCTURAL

CRISIS OFAMERICAN

FORDISMFinancialisation

Crisisof afinance-ledgrowth

regime

Endometabolism Endometabolism

Hybridization Obstacles totheadoption

ExacerbatesAmerican

crisis

Hybridization ExacerbatesJapanese

crisis

Hybridization

Adaptationprocess

Japan Inventionof

Toyotism

Riseand

success

STRUCTURAL

CRISISOF

TOYOTISM

Slowanduncertaingrowth

Endometabolism

1900’s WorldWarI WorldWarII Oil shocks Financialglobalization

2000’s

The surprising consequences ofhybridization: the proximity of Germanywith respect to Japan

Work council, codetermination and collectivebargaining: the complementarity of Germanindustrial relations, before reunification

CODETERMINATION

Investment inskills

Search for an equilibriumbetween capital and labour

Incentive to focusupon firm level issues

Voice andbargaining power

Changes theallocation of rent

WORK COUNCIL COLLECTIVE BARGAINING

Voice more than exit Removes wage issues from shop-floor Industry wage formation

OUTCOME

More value addedMore employment stability

Financial regime and industrial relations: thecomplex German evolution since 1989

A possible theme for INCAS collaborativeresearch

Similarities and differences in the long runtrajectories of Japanese and Germantrajectories and firms organizations.

Survey the past literature on the issue ofilliberal capitalisms.

What is new since the 2000s?

Consult: The End of Diversity ? Prospects forGerman and Japanese Capitalism,Yamamura Kozo, Streeck Wolfgang (eds),Cornell University Press, Ithaca, 2003

CONCLUSIONC1 – Firms’ organizations and national

institutional forms are to be conceptuallydistinguished: they display contrastedlogics and they operate at different levels(micro, meso, macro).

C2 – Economic history (the successiveindustrial census) and sectoral studies(the car industry) falsify therepresentative firm hypothesis, since asignificant variety of firms’ organizationscoexist in the long run.

C3 – The same international change or worldcrisis, has a different impact upon eachnational economy. The synergy betweenInstitutions and organizations matters.

C4 – In many configurations, when nationalinstitutional forms evolve, thedistribution of firms’ organizationschange too. Institutions andorganizations co-evolve.

C5 – Epochal institutional change may fosterorganizational and technologicalinnovations. During the last two decades,liberalization, globalization, andfinancialization have been strongincentives for private innovations.

C6 – Conversely, the accumulation ofseemingly minor changes in firms’organization distribution may reach atipping point in the macroeconomicregime.

C7 – Two generic mechanisms explain theups and downs, the similarity and thedivergence of capitalist economiestrajectories: endometabolism andhybridization.

FURTHER READINGS

Boyer Robert, Charron Elsie, Jürgens Ulrich, Steven Tolliday Eds (1998) BetweenImitation and Innovation, Oxford University Press.

Boyer Robert, Freyssenet Michel (2001), Productive models, Palgrave.

Hollingsworth Rogers and Boyer Robert (1997), Contemporary capitalism: TheEmbeddedness of Institutions, Cambridge University Press, Cambridge.

Jackson Gregory (2016), “Toward a conceptual framework for understandinginstitutional change in Japanese capitalism: Structural transformations andorganizational diversity”, INCAS discussion Paper Series 2016#04.

Lechevalier Sébastien (2010), “Inter-firm heterogeneity: nature, sources andconsequences for industrial dynamics” (avec G. Dosi and A. Secchi), Industrialand Corporate Change, Volume 19, Issue 6, Special issue edited by G. Dosi, S.Lechevalier and A. Secchi, p. 1867-1890.

Lordon Frédéric (1997), “Endogenous structural change and crisis in a multipletime-scales growth model”, Journal of Evolutionary Economics, Vol. 7, n° 1.

Thanks for your attentionand patience

Robert BOYER

INSTITUT DES AMERIQUES

60 Boulevard du Lycée – 92170 Vanves (France)

e-mail: r.boyer2@orange.fr

web sites: http://robertboyer.org/http://www.jourdan.ens.fr/~boyer/