MANAGING DIVERSITY AND COMPLEXITY IN INSTITUTIONAL SYSTEMS.ppt

8/10/2019 MANAGING DIVERSITY AND COMPLEXITY IN INSTITUTIONAL SYSTEMS.ppt

1/27

MANAGING DIVERSITY AND

COMPLEXITY ININSTITUTIONAL SYSTEMS:

THE PROBLEM OF

ORGANISATIONAL

COORDINATION


2/27

OUTLINEI. Understanding Interdependence: OPECs Oil Embargo.

II. From Hierarchy to Market to Networks.III. Models of Coordination

IV. The Inter-organizational Social Order

V. Theoretical Approaches to Understanding Complexity,

Coordination and InterdependenceVI. Case Studies: How neo-corporatist policy frameworks

work in practice. Experiences from Switzerland andMexico.

VII. Final Reflections: Institutional Environment andDevelopment Policy


3/27

Complexity is Unavoidable

Every place contains the seeds of complexity. Cannot think of

world as simple, linear place with no second-level connections.


4/27

Complexity is Unavoidable

How to devise institutional mechanisms to manage complex anddiverse relations of interdependency at different levels and differentpoints in time?


5/27

The Answer?

INTER-ORGANIZATIONAL COORDINATION

AND COOPERATION!!!


6/27

Understanding Interdependence: The OPEC Oil Embargo

and Its Systemic Effects

Oil Embargo: Prices increase

in the advent of oil supply shock

Economic Control taken by

countries who had been traditionally

excluded from international order

Part of income is dispensed in

the form of

aid to other

underdeveloped nations

Shock produces chaos in the West.

Oil-importing nations in the

industrial world see sudden inflation

and economic recession

Crisis borne by the

unemployed and the marginalized

social groups

The energy crisis leads to greater

interest in renewable energy. Companies seize

advantage to implement new

products and technologies

Western Oil companies

see profits grow

Traditional flow of capital

reverses as the oil

exporting nations

accumulate vast wealth

Much of it falls into the hands

of elites who reinvest it in the

West or enhanced

their own well-being


7/27

From Hierarchy to Market to

Systemic Networks.

Post-War Establishment: Welfare State and HighExpectations of Governmental Policy andPlanning.

Conventional Steering Perspective.

Vertical Integration as depicted by CommandStructures and high-levels of bureaucratization

Private Sector: Large and centralizedorganizational structures. Aim at controlling

consumer and small-scale suppliers Vertical Integration and monopolistic industrial

organization.


8/27


Systemic Networks.

1960s-1970s: Emergence of more complex problemsaffecting different agents and agencies.

Departure from the Steering-Government Perspective.

Market did not deliver most-optimal outcomes either.Market failures and externalities were ubiquitous.

Decentralization, de-bureaucratization, de-regulation:unavoidable overhaul of the state.

Endorsement of a network perspective on governance,

public management and economic reform. Policy Networks: Need to take into account the

dependencies of government on social and economicenvironment and interdependencies with social actors.


9/27


Systemic Networks. Firm Structure: Smaller, De-centralized, horizontally integrated

and vertically disintegrated.

Systemic Production Networks Established.

Obligational and incentive-based relationships as Sine Qua Non

for network to exist. The Rational-Actor notion that cooperative behaviour is not

possible when self-interest governs consumer and firmbehaviour, was replaced by trust in contractual relations, long-term alliances and mutual cooperation

Ultimate Outcome relates more to Tit-for-Tat scenarios ratherthan Nash-Equilibrium


10/27

Models of Coordination

Coordination implies the bringing into a relationshipotherwise disparate activities or events. In more colloquialterms, Putting all organizations involved in a system andmaking that system work.

What about the best way in which coordination is

achieved? Market: Automatic coordination thanks to pursuit of self-

interest by individually motivated and welfare-maximizingindividuals.

Hierarchy: Control exercised to bring about economic

organization and social coherence. Networks: Formal and Informal mechanisms that enable

markets, states, and societies to interact closely in differentissue-arenas and reach concerted solutions for all actorsinvolved.


11/27

Models of CoordinationNetwork/Community

HierarchyMarket

Many politicaland economic

systems fall

within this

region. Ample

scope for action

on all threefronts. There

may be great

degree of

overlap, yet on

the most part

models aremutually

exclusive


12/27

Models of Coordination

Hybrid cases

Plurality of

Interdependent

forms ofCoordinative

exchange.

Enables for

Community-

based solutions

as well.

Network/

Associative-Corporative Order

Market

Hierarchy

Community

Yet, may encounter situation in which total coordination may be

undesirable when costs of advancing and implementing a particular policy

outweigh the positive benefits


13/27

The Inter-organizational Social Order

Growing necessity relating to changing market structures and increasingly

discerning consumer demands.

Rapid rates of technological change have made the strategies of horizontal

and vertical integration a liability for many business firms because they

cannot respond fast enough to change.

Both markets and organisational hierarchies as mechanisms require relatively

high rates of stability for success.

Shift from efficiency related to quantity to one associated with quality.

Increased knowledge and the creation of new occupations as well as new

organisations.

Specialisation is key in this sector.


14/27

Willingness to Cooperate

Need for Expertise

Need for Financial Resources and

Sharing of Risks

Need for Adaptive Efficiency

+

+

++

A Synthesis of Theories of Interorganisational

Collaboration


15/27

Polycentric Organisations

Organises coordination among independent authorities in order to produce a

service within an area.

In this manner, citizens are involved in several differing areas of governments,

depending upon the spheres in which they move

Typical model we have been discussinginvolves a farmer and his associations

relating to:

National and Local Governments

Irrigation Districts

Possible Farming Cooperatives?


16/27

Solidaristic Organisations

Includes:

Households, kinship or friendship networks, clans, churches,

clubs professional associations, political parties, community-

based organisations CBOs or NGOs.

Solidaristic institutions became prominent during colonialism, now

seen as relics.

Traditionally, progress is associated with with strong private firms

and states, where competition guaranteed efficiency and freedom.What these Institutions look like in:

Segmentary Societies

Communist, fascist, and/or authoritarian

Liberal Pluralistic Societies

Liberal theories assume that SOs will strengthen freedom by using

democratic processes for their internal decision-making processes

an free competition with other agencies.


17/27

Culture of Trust in Interorganisational Networks

Markets are inherently based on distrust, with the supplier takingadvantage of all opportunities to maximise profits.

Culture of trust, either present within the society or developed through

collaboration.

Research and development is likely to lead to the sharing of information

and the building of trust

Joint marketing ventures are more likely to create distrust and cheating

behaviour.

Increasing cognitive complexity enables individuals to break out of an

egoistic orientation and enter into partnerships to achieve collective


18/27

Rational Actor Model

A mono-actor model:

Central actor usually being thegovernment

Presupposes that the central steering

agent (the government) has all information

about existing problems, preferences, and

the available solutions.

Fails to listen to all voices present because

of the overriding authority of the central

agent.

Highly developed bureaucratic systems inorder to enforce policies, and lessening

efficiency farther down the chain of

command.

Central Actor:Government?

Policy

Decisions

Institutions

and Society


19/27

Multi-Actor Model

Retreat of central government from public domain.

Local actors assess their interests and purposes.The introduction of local

actors is considered fundamental to the formation and implementation of

policy.

Still draws on resources from the government for resources.

No cohesion though?

Independent

Actors

Local Council

DairyCooperative

CBOs


20/27

Network Model

Public policy making and governance take place in

networks consisting of various actors, including but not

limited to:

Individuals

Coalitions

Bureaucracies

Organisations

Actors exchange information about goals problems,

preferences and means, and trade off goals andresources.

Failures related to lack of incentives, vague or contentious

goals, and the relative commitment of agents within the

network.


21/27

Individual Demand for Joint Goods

Dependency of MembersEstablishment of

Controls for Monitoring

and Sanctioning

Member Costs

Extensiveness of Group Obligation

Probability ofGroup Compliance

Level of Group Solidarity!

Model of Group Solidarity


22/27

Private Interest Governments

Politics oscillated between state interventionism and market liberalism. Neither

extreme governmental control nor pure markets like Laissez Faire are able to

govern and induce market growth/ competition.

Instead we have Private Interest Governmentsbased on group self interest and

regulation.

Group interests emerge as a result of the interactions between collaborating social

and organisational structures.

Policy formation is based on the bargaining between private organisations and state

agents, with the majority of decisions being made within the private sphere. While

this can be construed as a lessening of state influence, with the group interests

being the key factor, transition into policy is conceptually relatively smooth (higher

implementation success) and accordingly there should be lower implementation

costs.

State is always involved within the private interest groups because of the possiblenecessity to intervene if the private groups fail to deliver or oversteps their role.

A strong state is a necessity for the formation of private interest governments to

provide this check!


23/27

Case Study: The Swiss Dairy Industry

One of the most strictly regulated

sectors of the economyIndividuals organised into 6

associations that can be divided into 2

groups based on institution size and

goods production.

Both groups organise almost all potential members. The high number of

members (more than 1000 in the cheese group) has given rise to a

complex internal structure with many regional subgroups.

Legally, the regulations focus on rules of price fixing, quality control, milk

processing, and the marketing of milk and related products.

Of course there are some legitimate worries about price-fixing and

monopolies, but these issues come in to play with many network

arrangements and seem to be one of the main criticisms.


24/27

Fachausschuss

Milch

Cheese

Union

BUTRYA Milch

kommission

Producers Orgs

Central Association of Milk Producers

Regional Associations of Co-ops

X

X

X X X

Processors Orgs

Association of Milk Buyers

Association of Soft Cheese Manufacturers

Milk Group of the Association of the Swiss

Processing Industry

Association of Box Cheese Manufactures

Association of Ice Cream Manufactures

X

X

X

X X

X

X

Retailers Orgs

MIGROS

COOP

X

X

X

X

X

X

Interest Organisations in the Swiss Dairy Market

Table of the relationships between cooperative bodies and their respective

association memberships. Note the only organisation present within each of the

four unions is the Central Association of Milk Producers.


25/27

Case Study: The Mexican Coffee Sector

Before 1989: Extensive intervention in production and marketing of coffee by INMECAFEa state-owned enterprise. Yet coffee economy mostly governed by landed elites.

Neo-liberal Reform: Curb production supports, price controls and government

mechanisms of marketing. Coffee-growing states respond to INMECAFEs exit by launching their own regulation

projects.

Neo-corporatist strategy in Oaxaca and Guerrero: Opportunity to resurrect weakenedcorporatist institutions of political control in the coffee sector. Interest representation to official (i.e. supporters of PRI) coffee-growing organizations

Transfer of INMECAFEs resources to small producers.

Construction of new mechanisms for regulating distribution of credit.

Crony-Capitalist Strategy in Chiapas and Puebla: Designed to benefit the coffee oligarchy. Resurrection of monopoly control by local elites over coffee processing and marketing.

Mexicos federal regime institutions gave incentives to reregulate policy areas vacated byneo-liberal reforms.

Yet societal forces and policy repertoires explained why governments reregulated.

Participatory frameworks that gave organizations of small producers central roles in policy makingin Oaxaca and Guerrero

Exclusionary policy frameworks generating spoils for political and economic elites in Puebla andChiapas.

Neo-liberal policies paved way for the construction of new institutions for marketgovernance.

Interactions between state governments and producer organizations resulted in a diversearray of new institutions for market governance across Mexicos coffee-producing states.

Politics of ReRegulation led to participatory policy frameworks that gave smaller producerscentral roles in policy making.


26/27

Economic Development and Reform

Devise systems in which a superior form of organization can be set up.

Ensure that proposed alternatives enjoy the requisite political support

to be implemented.

Modes of organization: May be remediably inefficient in economic

terms but still may qualify as efficient when politics is introduced.

Developed Developing

Above Threshold I II Guerrero, Oaxaca

Below Threshold III IV Puebla Chiapas

Economy

Polity

The polity does not possess the requisite de jure democratic features.

The requisite de jure and embededness features are present but theconditions of embededness to support de facto democracy are

lacking.

The requisite de jure and embedededness features are present but

have been defeated by corruption, rent-seeking and cony capitalism

(E.g Mexico).


27/27

Final Reflections: Institutional Environment

and Development Policy

In instances in which there is a shift from a command socio-political order to a

more pluralist, integrative one, the idea of coordination and cooperationbecomes attractive for efficiency purposes. Nevertheless, the embedded

modus operandi of some societies may work contrary to this notion. Rather

than leading to efficient allocation of resources and allowing different societal

actors to participate actively in policy-making, this shift may instead yield

markets that generate monopoly and social exclusion.

Rather than explaining which institutional arrangement (e.g. hierarchy, market

or associative order) provides a better framework for the understanding

cooperation and participatory governance, we should first think whether

cooperation and participatory governance are at all a feasible alternative.

Is it possible to think of institutional equilibrium in cases where the state does

not enable agents the right to cooperative interdependence? How is autonomy

and competition achieved in such scenario?

MANAGING DIVERSITY AND COMPLEXITY IN INSTITUTIONAL SYSTEMS.ppt

Documents

Transcript of MANAGING DIVERSITY AND COMPLEXITY IN INSTITUTIONAL SYSTEMS.ppt