the embedded firm in the global knowledge society

The Embedded Firm in the Global Knowledge Society

Presentation at theEAEPE Conference

Governing the Business Enterprise: Ownership, Institutions, and Society

Conservatoire National des Arts et Métiers – Paris 22-23 May 2008

Peer ZumbansenDirector, Critical Research Laboratory in Law & Society

Osgoode Hall Law School, York University Toronto

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


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:


• Keywords: path-dependency and innovation, institutional change and economic performance, evolution, legal origins, varieties of capitalism


• 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


(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…


(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)


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.


• Parallel Stories: STATE - CORPORATIONS

• A possible hero to illustrate the parallels: Karl Polanyi

• double movement: public policy

and liberalization of societal, individual powers

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)


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.


“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)


“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.)


“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)

From Embeddedness to Disembeddedness and back?

Contemporary Approaches:1.New Institutional Economics2.Varieties of Capitalism

Its ‘coming of age’- Diversification of political regulation- Comparative Economics and ‘Legal

Origins’- Refinement (e.g. R.Boyer’s ‘institutional

complementarity’)

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)

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

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

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

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.

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.

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

The New Embeddedness

Two tentative, concluding proposals:

1. Translation of Polanyi’s embeddedness

2. Rethinking CSR

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)


Functionalist Translation- Focus on structure of society to better

understand shape and role of its constituting partsThree characteristics of contemporary society:

1. Highly Differentiated2. Process/Experiment Driven3. Normatively open


The State and the Corporation: - conditions of extreme uncertainty have dramatic consequences for governance models in each

a. State becomes dependent on and involved in societal knowledge production

b. Corporations must facilitate, support and extract knowledge – role of labour, dispersed K, workers’ inventions etc – beyond Co-determination


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.

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

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.

K-Society Corporate GovernanceA functionalist and transnational concept:- beyond interest-pluralist models- beyond public-private institutions- Beyond traditional comparative

measurementsRole 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

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

the embedded firm in the global knowledge society

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