Organisational focus needs to be tight, in the sense of allowing for little ambiguity and variety of meanings and standards, if the productive system of a firm, for the sake of exploitation, is 'systemic', as opposed to 'standalone' (Langlois & Robertson, 1995). Exploitation is systemic when there is a complex division of labour, with many elements and a dense structure of relations between them, with tight constraints on their interfaces. An example is an oil refinery. In more stand-alone systems, elements of the system are connected with few other elements, and connections are loose, allowing for some ambiguity and deviation from standards on interfaces. An example is a consultancy firm. An intermediate system, between systemic and standalone, is a modular system. Here, there are also multiple, connected elements, as in the systemic case, but the standards on interfaces allow for variety, where different modules can be plugged into the system.
Since cognition is a wide concept, with several aspects (perception, interpretation, evaluation), organisational focus can have a variety of contents, for which the focus may have different width, sharpness and tightness. Mintzberg (1983) distinguished five forms of coordination in organisations: direct supervision, standardisation of processes, outputs or skills, and mutual adaptation. Later, he added coordination by values/norms, for 'missionary organisations' (such as the church). The focus can be directed at one or more of these forms of coordination. When processes are standardised, as in an assembly line, workers need to understand instructions, but may not need to be able to talk to each other. In professional organisations, where processes and outputs are difficult to standardise and monitor, one often resorts to standardisation of skills. When that is problematic, or insufficient, one may have to resort to mutual adjustment. Here, people need to share certain values and norms for doing that. In the development of economies that are more service oriented and more based on professional workers, there has been a shift towards coordination by standardisation of skills, mutual adaptation and 'missionary' goals, values and norms.
One aspect of entrepreneurship, which links with Schumpeter's (and Weber's) notion of the entrepreneur as a charismatic figure, is that it is his central task to achieve this: to align perceptions, understandings, goals and motives. Related to this, perhaps, Adam Smith also recognised 'authority' next to utility, in politics and organisation, to establish allegiance to joint goals, as discussed by Khalil (2002). In this context, I was struck by a comment, at the conference, by professor Edelman, that evolutionary selection can take place only in a space constrained by values.
A puzzle is how a leader can contribute to coordination if this cannot be achieved by canonical rules that pretend to completely specify required conduct. One problem is how such a leader would know such rules, since the people he sets out to constrain and guide in their actions know better, in their interaction with customers, suppliers and technology, what could be done. A second problem, recognised in the business literature on 'communities of practice' (Brown & Duguid, 1996; Lave & Wenger, 1991;
Wenger & Snyder, 2000), is that such pre-specified rules cannot deal with the complexity and variability of situated action, in specific action contexts. This is in line with the argument, developed above, concerning the indeterminacy of reference and the context-dependence of meaning.
Here, I note the role of prototypes or 'exemplars' in language and categorisation (Rosch, 1978; Nooteboom, 2000). Since definitions can seldom offer necessary and sufficient conditions for categorisation, and meaning is context-dependent and open-ended, allowing for variation and change, we need prototypes. Prototypes are salient exemplars of a class that guide categorisation by assessing similarity to the prototype. This, I suggest, goes back to Aristotle's notion of'mimesis'. The root meaning of a 'paradigm', in science' is 'exemplar'. From this follows the role, in organisation, of leaders setting exemplars or prototypes of conduct, embodied in myths and stories of 'heroes' that do not specify conduct and yet guide it.
The process of focusing, in an organisation, is related, I suggest, to the decision heuristic, recognised in social psychology, of 'anchoring and adjustment' (Bazerman, 1998). According to this heuristic, judgment is based on some initial or base value ('anchor') from previous experience or social comparison, plus incremental adjustment from that value. People have been shown to stay close even to random anchors that bear no systematic relation to the issue at hand. First impressions can influence the development of a relation for a long time. This is conducive to both coordination and myopia.
An implication of the notion of a firm as a focusing device is that the need to achieve a focus entails a risk of myopia: relevant threats and opportunities to the firm are not perceived. To compensate for this, people, and firms, need complementary sources of outside intelligence, to utilise 'external economy of cognitive scope' (Nooteboom, 1992). This yields a new perspective on inter-organisational relationships, next to the usual considerations, known from the alliance literature, such as economies of scale and scope, risk spreading, complementarity of competence, flexibility, setting market standards, and speed and efficiency of market entry (Nooteboom, 1999, 2004). This perspective is consonant with the notion of double em-beddedness, indicated before, of minds in organisation, and organisations in outside networks. It also fits well with the prevalent idea in the literature on innovation systems that innovation derives primarily from interaction between firms (Lundvall, 1988). Here again the trade-off arises between cognitive distance, for the sake of novelty, and cognitive proximity, for the sake of understanding and coordination.
The notion of a firm as a focusing device yields an alternative to TCE, for an explanation of the boundaries of the firm. The present theory yields a prediction that is opposite to that of classical transaction cost economics: with increasing uncertainty, in terms of volatility of technology and markets, firms should not integrate activities more, as transaction cost theory predicts, but less, because the need to utilise outside complementary cognition is greater. Here, the prediction is that firms will engage less in mergers and acquisitions and more in intensive alliances at some cognitive distance, but with sufficient durability and intensity to achieve mutual understanding and cooperation. This prediction has been confirmed empirically by Colombo and Garrone (1998).
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