Org Studies 2002 Paper Whitley

7/28/2019 Org Studies 2002 Paper Whitley

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The Institutional Structuring of Organisational Capabilities: The role of authority

sharing and organisational careers

By

Richard Whitley

(Manchester Business School, University of Manchester)

(Earlier versions of this paper have been presented to a conference on "ThePenrosian Legacy", held at INSEAD in May, 2001, the 17th EGOS Colloquium held inLyon in July 2001 and an ESRI workshop on "Changing Contextual Constructions of

Economic Rationality" held at Portoroz, Slovenia, 16-17 September, 2001. I amgrateful for the comments and suggestions received on these occasions, and am

especially indebted to Steven Casper for his detailed analysis and helpful remarks)


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The Institutional Structuring of Organisational Capabilities: The role of authoritysharing and organisational careers

Abstract

The development of competitive competences in firms involves the generation of coreemployee commitment to collective problem solving and the development of firm-specificcapabilities. Such commitment is often gained through authority sharing and providingorganisational careers that reward contributions to organisational problem-solving routinesand goals. However, firms vary considerably in how authoritative coordination of economicactivities - both within and between companies - is achieved, and in the extent and scopeof organisational careers. These differences affect their development of coordinating,

learning and reconfigurational organisational capabilities.

Owners and managers are encouraged to adopt varying degrees of authority sharing withgroups of employees and business partners, and to invest in organisational careers tovarying extents, by different institutional frameworks. In particular, variations in states'coordinating roles, the strength of business associations, the market for corporate controland the organisation of training systems affect firms' delegation of discretion and careertypes. As a result, firms in different institutional frameworks develop distinctive kinds ofcapabilities that influence how they compete in different sectors and technologies.

Keywords: Institutions; Authority; Organisational Careers; Employer-employeeCommitment; Capabilities.


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Introduction

Much recent work on firms' competitive competences has emphasised their organisational

and dynamic nature (see, e.g., Dosi et al., 2000; Foss and Knudsen, 1996; Lazonick andWest, 1998; Teece and Pisano, 1998). By organising human and material inputssystematically through firm-specific rules and procedures, managers generateidiosyncratic collective advantages that are not easily tradable. Firms, in the competenceor resource-based view, develop unique capabilities that enable them to competeeffectively through establishing collective routines and learning processes. These includecoordination and integration routines, organisational learning and reconfigurationalcapabilities (Teece et al., 2000).

The generation and improvement of these capabilities involves the coordinated integrationof skills and knowledge of different groups to achieve collective goals. This usually

depends on the exercise of authority to obtain compliance. As Hamilton and Feenstra(1997: 56) have emphasised, firms, and economic organisations in general, are "above allauthoritative organisations that structure relationships according to established rules ofconduct" in which participants recognise that they are bound to the authoritative norms ofthe organisation, and there are coercive means to enforce the collective rules.

The ability to direct employees to undertake specific tasks through delegated authorityfrom private property rights' holders is crucial to managers' development of distinctivecollective competences, not least because the flexibility that employment agreementsprovide enables firms to organise economic activities in different ways for varied purposes,and to change these to suit altered circumstances (Richardson, 1998). This flexibility

enables authority hierarchies to manage increasingly complex and uncertain activities,particularly innovation. As Lazonick (1991; Lazonick and West, 1998) and others havesuggested, the planned coordination of a specialised division of labour has enabled firmsto build distinctive organisational capabilities for developing process and productinnovations on a continuing basis.

The development of distinctive organisational capabilities relies to a considerable extenton the willingness of particular groups of employees to commit themselves to joint problemsolving and the improvement of employer-specific knowledge and skills, sometimes at theexpense of enhancing their own individual competences. The more complex and risky areproblem-solving activities, and the more they involve the coordination of complementary

activities and types of knowledge, the more important such commitment becomes. Criticalto gaining employee involvement in joint problem solving activities, and so developing thefirm's collective capacity to deal with complex issues, is the willingness of owners and topmanagers to share authority with them and to delegate considerable discretion. Becausethe degree of such authority sharing with different groups of employees and businesspartners varies greatly between companies, so too do their capabilities to integrate variedactivities and types of knowledge in dealing with complex problems, and to develop newroutines.

An additional means of developing continuing commitment to organisational goals in orderto enhance firm-specific problem solving capabilities is to offer long-term organisational


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careers to key groups of employees. This is especially significant when investment in suchcollective capabilities may limit the visibility and external labour market value of individuals.However, there are considerable differences in the longevity of the careers that are

offered, and the range of employees to whom they are available, between the largeJapanese firm, the US managerial hierarchy and small firms in local production systems.

Additionally, some new firms in emergent industries have used "high-powered" incentivessuch as stock options and bonuses to gain high levels of commitment to organisationalproblem solving under very tight time constraints, as in numerous companies in SiliconValley (see, e.g., Kenney, 2000; Jackson, 1997). These different mechanisms affect thesorts of organisational capabilities that firms develop.

The extent to which owners and managers decide to share authority with different groupsand offer organisational careers are greatly affected by societal institutions, especiallythose governing trust relations and skill formation and control. As a result, economies with

contrasting institutional frameworks vary significantly in the concentration or dispersion ofauthority over various kinds of decisions in work groups, organisational divisions, firms andbusiness associations, as well as the significance of organisational careers, and thesedifferences affect the sorts of collective capabilities that firms and other organisationalunits are able to generate in them. Consequently, firms' abilities to innovate and deal withuncertainty vary between types of market economy, and affect patterns of economicdevelopment.

Variations in these characteristics of firms therefore help to explain how differentinstitutional frameworks generate distinctive patterns of sectoral and technologicalspecialisation, such as those highlighted by Casper (2000), Soskice (1997; 1999) and

others. Because societal institutions encourage varying degrees of authority sharing anddifferently structured organisational careers in companies, firms develop distinctivecoordinating, learning and reconfigurational capabilities. These enable them to be more orless effective in dealing with particular kinds of problems and innovating in different ways.

As a result, market economies with contrasting institutional arrangements tend to displaydifferent kinds of economic development and specialisation.

In this paper I explore these relationships through a discussion of how institutionalframeworks are connected to variations in authority sharing and organisational careerssuch that firms in contrasting institutional contexts are encouraged to develop distinctivecapabilities. Initially, I consider the ways in which different patterns of authority sharing and

organisational careers are likely to affect the sorts of collective capabilities that firmsdevelop, and how these might influence their sectoral strategies. In the following section Iexplore the key features of different institutional frameworks that encourage divergentpatterns of authority sharing and career development, and help to explain how differentcountries and regions generate contrasting types of firms and organisational capabilities.

Authority Sharing, Organisational Careers and Capabilities

In analysing the connections between variations in authority sharing, organisationalcareers and the sorts of capability that are developed by different kinds of firms, it is usefulto follow Teece and Pisano (1998) in distinguishing three kinds of collective competences


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that may be particularly effective in different market situations. These vary in their flexibilityand ability to adapt to changing circumstances. First, coordinating capabilities involve thedevelopment of integrative routines that, for example, gather and process information

about internal and external processes, connect customer experiences with engineeringdesign choices and link production facilities with suppliers.

Second, organisational learning capabilities involve joint problem solving and improvementof production and related processes, both through experience and dedicated projects, aswell as continually developing the firm's understanding of business partners and otherexternal agents. firms with strong learning skills rapidly codify, diffuse and applythroughout the organisation new knowledge that is developed by individuals and groups,so that routines and procedures are continuously being updated in a process of cumulativeimprovement. Third, reconfigurational capabilities involve the transformation oforganisational resources and skills to deal with rapidly changing technologies and

markets. They enable companies to restructure their operations and routines quiteradically as knowledge changes, often by acquiring new skills and competences throughhiring on external labour markets or buying newly formed firms, as in the case of Cisco(Lee, 2000). Such transformations can destroy existing routines and competences.

Varying patterns of authority sharing and organisational careers are associated with thedevelopment of these different kinds of organisational capabilities. We can consider howdifferences in authority sharing impinge upon the development of collective competencesby contrasting three ideal types of delegation of control over activities and resources interms of how much authority over economic decisions and organisational issues is sharedby owners with managers and skilled staff. First, in what might be termed isolated

autocracies authority is highly concentrated in the hands of owner managers, delegation ofdiscretion to managers and skilled employees is usually very limited, and authority sharingrestricted to close family members. Second, there are managerially coordinatedcompanies where considerable authority is delegated to a managerial hierarchy,sometimes including senior technical staff, but not to the bulk of the labour force. Third,more cooperative hierarchies share considerable authority with technical staff and skilledworkers, especially over task performance and perhaps work organisation and direction. Insome European countries such authority sharing is enshrined in legal regulations andextended to broader issues.

Isolated autocracies are typically owner-controlled firms in economies where formal

institutions for generating and reproducing trust between economic actors are weaklyestablished. Usually funded from family resources, and often operating in environmentsthat are unsupportive of privately generated and controlled concentrations of wealth,owner-managers find it difficult to share authority beyond those with whom family-likeconnections have been established. Delegated discretion tends to be limited to a relativelynarrow range of activities whose outputs can be easily monitored, as in many businessesin Taiwan, Hong Kong and other parts of Pacific-Asia (Hamilton, 1997; Hamilton and Kao,1990; Redding, 1990).

Such high levels of centralised authority enable firms to make decisions rapidly, and toalter key features of the business such as the products and services offered, and the


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markets served, as exemplified by small firms in Hong Kong that switched from makingplastic flowers, to wigs, to toys etc in very brief time spans (Enright et al, 1997; Redding,1990). They do not, though, encourage the long term development of organisational

capabilities, since commitments by employees tend to be limited - or highly personal - andturnover among the more skilled and competent is often high as they leave to start theirown businesses.

Competitive competences accordingly are more dependent on the personal qualities of theowner-manager and his or her close associates rather than on the planned coordination ofdifferent kinds of skills and knowledge. They focus on flexibility and responsiveness tomarket changes than the systematic and continuous improvement of products andprocesses. These kinds of firms, then, do not readily develop strong organisationalcapabilities through collective routines. As a result, they tend not to be highly effective inmanaging complex technologies and introducing innovations that need highly skilled staff

to be motivated and coordinated to work together for substantial periods. Although highlyflexible and responsive to changes in market demand, their organisational ability tomobilise new skills and knowledge for dealing with uncertain and risky problems is limitedby their reluctance to delegate and involve specialist staff in joint problem solving.

In more predictable and rule-governed environments, owners are usually more willing todelegate authority to salaried managers who establish routines and procedures forcoordinating and controlling work and skills. However, in liberal market economies such asthe UK and USA (Soskice, 1999) this kind of delegation is often limited to the managerialhierarchy and rarely extended to skilled workers or business partners. In fact, as Lazonick(1990) and others have emphasised, such "Chandlerian" firms in the USA developed

distinctive organisational capabilities by taking control of production operations away frommanual employees and codifying work procedures in formal routines and managerialcontrol systems.

While investing in the establishment of complex hierarchies coordinating diverse activitiesand skills within production chains, and later across them, through systematic rules andformal processes, managerially coordinated firms have often been reluctant to extend suchinvestments in developing organisational capabilities to the bulk of the workforce or tosuppliers and customers. Indeed, they typically institutionalise a strong division betweenmanagerial and senior technical personnel and other employees such that only the formerare treated as belonging to, and constituting, the firm as a collective problem solving and

learning organisation. In contrast the latter are more or less disposable units of labourpower that can be hired and fired as business conditions alter.

Organisational competences are here embodied in managerial procedures that do notdepend greatly on the skills and knowledge of individual employees below themanagement group and senior technical staff, or on their long-term commitment to thisparticular organisation. Consequently, most staff, including some technical experts, havelittle incentive to contribute to the development of firm-specific competences at theexpense of developing their own skills, and will need considerable persuasion to commitlarge amounts of time and energy in resolving problems that require organisationalcooperation and collaboration across functional boundaries. Innovations, and


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organisational improvements more generally, that depend on such commitment for theireffective development and implementation are therefore not likely to be rapidly realised.

Rather, significant process and product changes will probably be decided by unilateralauthority and coordinated managerially, and may well involve changing the skills ofemployees by hiring and firing or acquiring new businesses with the desired skills, insteadof developing those of current staff. The limited extent of authority sharing and cooperationwith suppliers and customers likewise restricts the flow of new information and problemssolving routines from outside these kinds of firms, and discourages investment incustomer-specific innovations. The variety of information and knowledge coordinatedthrough such managerial hierarchies is therefore limited in these kinds of organisations.

While the managerial coordinating capabilities of such firms may be quite considerable,then, they usually do not involve much cooperation between skilled workers or direct

connections between operators, suppliers and customers. Organisational learning tendslikewise to be restricted to the managerial hierarchy and focused more on what Lazonick(1991: 199) terms adaptive than innovative strategies that do not greatly enhance theproductive capacities of the firm. Such strategies concentrate on improving the efficiencywith which material and human resources are used rather than enhancing their capabilitiesto produce new products and services at reduced costs. As Lazonick (1991: 200) puts it:"the adaptive organisation chooses to avoid productive uncertainty by investing only inthose process and product technologies for which the required productive capabilities areknown." This suggests that the transformation of assets and resources in these kinds offirms will be infrequent and disruptive, and may well involve destroying currentcompetences and routines. Reconfigurational capabilities depend considerably here on

the ability of senior managers to implement such restructuring without radically reducingmanagerial commitments.

Third, where collaboration between economic actors is more encouraged by dominantinstitutions, owners and managers are more likely to delegate authority to skilled technicaland manual workers. These cooperative hierarchies also tend to develop closerrelationships with customers and suppliers, and cooperate with competitors in settingtechnical standards, deciding skill definitions and managing union negotiations. This ispartly because they are more able to rely on employees and business partners in adjustingto external changes and integrating information from a wide variety of sources than inmore adversarial environments. Commitment to dealing with organisational problems

across skill boundaries is likely to be easier to elicit in these contexts, and, once changehas been agreed, it should be introduced faster and more effectively than elsewhere.

A key characteristic of such firms is their ability to incorporate individual learning and skilldevelopment into organisational routines. Typically, this involves engaging coreemployees in continuous improvement activities and codifying their suggestions so thatthese can be systematically incorporated into work processes throughout the organisation- including suppliers and customers where appropriate, as in Toyota (Fujimoto, 2000). Inother words, organisational learning occurs on a much broader scale in collaborative firmsbecause it builds on the contributions of all long-term employees and closely alliedbusiness partners, and is diffused to a much wider range of groups within and beyond the


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formal boundaries of the firm. Whereas the US Chandlerian enterprise typically restrictslearning to the problem solving activities of the narrowly circumscribed managerialhierarchy, and modifying work routines within the formal organisation accordingly, here the

organisation incorporates most long term employees, business partners and competitorsinto a collective endeavour in such as way that the whole ensemble "learns" by integratingnew knowledge and skills into codified routines and problem solving practices.

In principle, then, these kinds of companies should be able to learn faster and moreeffectively from a wider range of sources and activities than more isolated managerialhierarchies. As Lazonick (1990; 1991) and Best (1990) have argued, this means that theywould be more effective at innovating continuously, and mobilising diverse resources todeal with technical and market uncertainty. Authority sharing - while varying in degree andlongevity between different groups - here facilitates coordination of knowledge and skillsby encouraging joint commitments to growth through continual improvements of processes

and products as employees and business partners become locked-in to the authoritativeorganisation's development of distinctive collective competences. This lock-in leads to jointinvestments in enhancing firm-specific capabilities rather than individual and group skillsand reputations.

Consequently, innovations produced by such firms tend to be incremental, building onexisting skills and knowledge, and focused on particular kinds of customers rather thanbeing generic across a mass market. Competition between firms here is based more onquality and differentiating products and markets than on price and cost reduction (Soskice,1997). As a result, both coordinating and learning capabilities of these kinds of firms areconsiderable, but their ability to restructure operations and competences radically is

restricted by these lock-ins.

This kind of employer-employee interdependence is greatly enhanced by the provision oflong-term organisational careers for those who demonstrate commitment to, and successin, organisational problem solving and collaboration. Such careers are important incentivesfor skilled staff to commit themselves to the growth of a particular employer and so investin developing firm-specific knowledge and skills at the possible expense of improving theirown generic skills that are more valuable on external labour markets. Given the risks ofbeing fired or having employment conditions unilaterally changed, we would expectemployees in general to prefer to demonstrate their prowess in using generally applicableskills to deal with specialist problems than to focus on improving employer-specific

capabilities. Organisational careers therefore have to be relatively stable over businesscycles to convince staff that it is worth taking these risks by improving their internalorganisational reputations (Miller, 1992).

Where such internal careers are highly significant, employees seek to demonstrate theircommitment to organisational goals and contribution to company success through, forexample, working effectively in cross-functional teams and welcoming rotations acrossdepartments and divisions. Knowledge of organisation-specific activities, skills,technologies, and markets - including major customers - will be highly valued byemployees in such situations, and they will focus on improving their internal reputations foreffective organisational problem solving rather than enhancing their external visibility.


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Firms that create such strong organisational careers for skilled staff encourage long termcommitments to organisational problem solving and are more likely to develop distinctiveand effective coordinating capabilities and collective learning than are those that do not do

so.

However, just as authority sharing varies between firms - and economies with differentinstitutional frameworks - so too do the extent and scope of organisational careers. Manysmall firms that rely on the commitment and skills of specialist workers, for example, areunable to offer long-term careers because of both their economic vulnerability and theirlack of a hierarchy of positions that could reward organisational success throughpromotion. In addition, the structure of organisational careers varies as firms organise theirhierarchies in different ways, especially in terms of the importance of functionaldepartments and publicly certified expertise.

We can, then, distinguish between types of organisational careers in terms of threecharacteristics. First, the longevity of commitments between employers and employees,and in particular the willingness of companies to establish long term careers for those whodemonstrate high levels of organisational commitment. Second, the range of staff coveredby such careers, especially their extension to skilled workers beyond the managerialhierarchy. Third, the functional specificity of organisational careers in terms of how far upthe formal hierarchy of managerial positions successful staff remain in the same broadfunctional field of expertise. At least four distinct types of skilled employees' careers thathelp to develop distinctive organisational capabilities can be distinguished in terms ofthese dimensions. In order of increasing organisational commitment, these can bedescribed as, first, professional team careers, second, managerial careers, third,

functionally specialised careers and, fourth, organisational generalist careers. Their keycharacteristics are summarised in table 1 and will now be discussed.

TABLE 1 ABOUT HERE

Considering first professional team careers, these consist of a series of memberships inteams of specialists with varied skills tackling complex and often highly uncertainproblems. Successful careers of this kind depend on reputations in both employingorganisations and external technical communities for dealing with more and more complexand difficult problems, often under tight time constraints. As well as being able todemonstrate high levels of technical excellence, an additional important requirement for

such careers is the ability to work together with other specialists in teams to achieve visiblesuccess in complex problem solving. Because of the highly risky and uncertain nature ofmany projects undertaken by such teams, these kinds of careers do not usually involvelengthy commitments to particular employers, especially in emerging industries where newtechnologies are being developed. Labour mobility is typically quite high, although oftenterritorially restricted, as in Silicon Valley (Almeida and Kogut, 1999).

Even where engineers are locked-in to individual firms through programmes of rollingshare options and bonuses, as at Intel (Jackson, 1997), organisational careers arefrequently structured around a series of relatively discrete projects in which specialist staffcompete to demonstrate their technical excellence and contribution to collective success.


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A similar emphasis on project-based careers was found in one firm studied by Gunz andWhitley (1985), International Systems Engineering, where senior managers identified keystages in their careers in terms of the development of separate projects, many of which led

to the establishment of new businesses, rather than progress up a functional hierarchy.Project team membership and success is often more important for employees in thissituation than building company-wide organisational capabilities. As a result, thedevelopment of coordination and learning competences at the organisational level can belimited by individual and group mobility where labour markets are highly fluid andstructured around publicly certified skills.

Firms that are dependent on the success of such teams limit the provision of long termorganisational careers because the high levels of technical and market uncertainty restrictfinancial and employment commitments, and results have to be achieved relatively quickly.Competitive advantages and competences here derive from flexible and speedy

responses to new knowledge and skills, and the ability to integrate new kinds ofinformation and expertise to generate disruptive products and processes, especially inwinner-takes-all competitions where network externalities and economies of scale ofdemand are high (Shapiro and Varian, 1999).

For instance, the role of new firms founded by highly trained and experienced engineersand scientists in the development of the US biotechnology and computer industries hasshown how relatively small and quickly formed organisations of specialist researchers anddesigners can play a major role in developing significant innovations. Such firms dependgreatly upon the skills and knowledge of project leaders and their teams of specialist staffto develop innovations, as distinct from developing distinctive collective competences that

are more organisational and institutionalised into managerial routines. Their cumulativelearning capabilities are accordingly limited, but they are able to reconfigure their skills andcapabilities relatively quickly precisely because they do not have long term commitmentsto their current skill base.

Similarly limited commitments to long-term organisational careers are found in manyprofessional service firms and some investment banks engaged in capital market work.These often engage in relatively high risk/high return activities dealing with discreteproblems involving only limited coordination with complementary activities (Flood, 2001).Commitment to organisational problem solving and improving collective capabilities at theexpense of enhancing individual skills and external visibility cannot be easily achieved

through organisational careers in these kinds of companies, and is often developedinstead through more "high-powered" incentives tied to shorter term and more visibleindividual and team achievements. Accordingly, they do not usually engage in long-termorganisation-specific learning, except perhaps by storing and disseminating codifiedinformation.

Innovations in these markets are frequently easier to imitate than are those in manyemerging technologies and industries, as is illustrated by the spread of "structuredproducts" for moving debt off balance sheets after a team at CSFB developed them forEnron (Chaffin and Fidler, 2002). Similarly, the use of mathematical models to exploitarbitrage opportunities in bond prices by Long Term Capital Management in the mid-1990s


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was quickly imitated by investment banks who hired their own "rocket scientists" from MITand elsewhere (Lowenstein, 2001). This encourages investment in complementary assets(Teece, 1986), especially customer specific applications, but the limited level of employer-

employee commitments in many of these companies restricts the development oforganisational knowledge about specific customers. In capital market activities this is partlyovercome through establishing managerial hierarchies and routines, strong corporatereputations and sheer size that together constitute significant barriers to entry. Morerecently, many investment banks have become more integrated with commercial ones,and the rate of financial innovation seems to have increased. Many business servicecompanies have also attempted to develop complementary skills and assets, as well asincreasing the rate of innovation and trying to retain key staff.

More managerial careers consist of a series of hierarchical positions within an employerbased upon success in dealing with significant organisational problems. They are, then,

more firm specific than professional team careers and usually involve greater commitmentto key employees. However, these careers are usually restricted to managers, engineersand other technical experts who demonstrated success in dealing with organisation-specific problems and were willing to acquire knowledge of different functions andactivities through job rotation and management development programmes (Lazonick andWest, 1998; Lazonick and O'Sullivan, 1997). In particular, they typically have not beenavailable to non-college educated staff in the USA and elsewhere, and were also subjectto corporate restructuring, especially since the 1970s.

As a result, organisation-specific knowledge development and learning in these kinds offirms tend to be limited to the managerial hierarchy and reified in formal procedures and

routines that often limit flexibility and adaptive ness to changing technologies and markets.Although these kinds of organisational careers are often available for specialist staff withinfunctional departments, they typically involve relatively early moves from such functionalfields to more general managerial posts that integrate a number of complementaryactivities and skills in distinct profit centres, especially in companies that decentralise suchgeneral profit responsibility below top management. Demonstrating a commitment todeveloping general managerial competences across fields of functional specialisation isthus an important requirement for success in such careers.

Companies where these career types dominate are able to generate strong coordinatingcapabilities, particularly of different functions and expertise, but tend to be less effective in

learning how to implement continuous improvements to work processes, especially whenthat involves the skilled labour force. The restriction of organisational careers andcommitments to managers and potential managers seems likely to discourage manyemployees from making great efforts to improve firm-specific knowledge and skills, and solimits organisational learning capabilities. It may, though, enable such firms to restructureresources and activities by changing personnel, depending on the rigidity of theirmanagerial routines and their ability to gain the commitment of new staff to contribute toorganisational objectives.

Functionally specialised careers extend further down organisational hierarchies toencompass most skilled employees, and so encourage widespread commitment to joint


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problem solving and organisation-specific knowledge development. Such a broadening oflong-term commitments to nonmanagerial groups enables firms that establish these kindsof careers to improve product functions and production processes through continuous

cumulative innovations by gaining the active cooperation of core employees incoordinating complementary activities and enhancing collective organisational capabilities(Lazonick, 1991; Soskice, 1999; Streeck, 1992).

However, by structuring organisational careers largely around functional departments, atleast up to senior management levels as in many German companies (Stewart et al.,1994), success may be based as much on contributions to departmental problem solvingactivities as on those to more general organisational issues. Skilled workers, technicalexperts and managers may accordingly develop quite strong departmental loyalties thatcan inhibit cross-functional cooperation and the development of organisation-widecollective capabilities, as Herrigel and Sabel (1999) have suggested is happening in parts

of Germany. Coordinating and learning capabilities are likely to be quite strong here, then,but organisation wide learning may be restricted by departmental boundaries. Whileinnovation capabilities within existing technological trajectories and skill bases can bequite considerable, more radical transformations of resources and activities are unlikely infirms with these kinds of careers because of the long-term commitments to existing skillsand competences.

More generalist organisational careers encourage greater mobility across functions anddepartments, and reward employees who learn new organisation-specific knowledge andskills in a variety of jobs over the course of their working lifetime. Comparing engineers'more generalist careers in Japanese firms with those in German firms, for instance, Sorge

(1996: 82) suggests that: "The Japanese engineer is more of a multi-specialist, theGerman engineer a specialist who extends his domain into other specialisms".

Success in companies with more generalist careers depends on demonstrating significantcontributions to organisational problem solving in different teams and different fields.Flexibility and continuous learning are therefore key qualities for ambitious employees, aswell, of course, as dedication to their employer's growth and success. Because staff arestrongly locked-in to the long-term fate of their employer through the firm-specificity of theirknowledge and skills, they are highly committed to improving organisational problemsolving capabilities, including knowledge of key customers' processes and needs.

Additionally, the generalist nature of organisational careers here facilitates the

development and introduction of new products as employees rotate between departments.As a result, such companies are able to develop very effective coordination and learningcapabilities within the enterprise.

However, this focus on continuously improving organisation-specific knowledge and skillscan inhibit learning from external sources, especially if those are organisationally andcognitively remote such as academic science or radically new industries. While absorptionof new information and skills in areas close to current activities and competences is likelyto be straightforward in such companies, greater difficulty may be involved in searching forand using effectively knowledge and expertise that is more distant, as has arguably been


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the case of many firms in the Japanese pharmaceutical industry (Kneller, 1999; Thomas,2001; Whitley, 2001; see also Nooteboom, 2000).

These different degrees of authority sharing and types of organisational careers areencouraged to develop and be reproduced by varied institutional frameworks. Where thedominant institutions governing authority and trust, the allocation of capital, and thedevelopment and organisation of skills, as well as state structures and policies, differsignificantly, owners and managers are likely to adopt varying degrees of authority sharingand investment in organisational careers. These connections will now be explored.

Institutional Frameworks, Authority Sharing and Organisational Careers

One of the most important factors affecting owners' willingness to share authority in marketeconomies is the extent to which they trust the formal institutions governing economic

transactions, and economic activities more generally. Where this is so low that they feelunable to rely on the legal system, accounting conventions and formal systems forassessing competence and contractual compliance to control the behaviour of customers,suppliers and employees in predictable ways, they are less likely to delegate substantialamounts of authority to relative strangers with whom they do not have strong personalbonds of loyalty and reciprocity. Additionally, in paternalist political cultures that justifyleadership more in terms of elites' superior abilities to look after the best interests of thepopulation than through their formally credentialled expertise or by success in formallygoverned electoral competitions (Beetham, 1991), owners tend to consider employees asunqualified to exercise discretion.

Such low levels of trust in formal institutions are often associated with predatory states andunpredictable financial systems. Where state elites are unwilling to allow the growth oflarge concentrations of privately controlled capital and/or seek to extract substantialamounts of surplus for their own benefit, owners are faced with a highly uncertain politicaland economic context in which personal connections are often the only reliable means ofensuring trust and predictable behaviour. The legal system in such countries is either verylimited in its ability to resolve disputes, or liable to render capricious and unpredictable

judgements.

Many industrialising countries, and those undergoing radical institutional change such asthe former state socialist societies of Eastern Europe in the early 1990s, exemplify this

kind of institutional context (Fafchamps, 1996; Humphrey and Schmitz, 1998; Menkhoff,1992; Redding, 1990; Whitley and Czaban, 1998; Whitley et al., 1996). When businessowners do develop alliances and partnerships in such economies, these are usually basedon personal ties, and are family-like if not actually based on close kinship links, as inTaiwan and other Pacific-Asian societies (Gates, 1996; Hamilton, 1997; Hamilton and Kao,1990). They also tend to be quite limited in scope, so that owner-managers are notexposed to high levels of risk by such shared commitments.

In these relatively particularisticbusiness environments, authority tends to remain highlyconcentrated and personal, and commitments to impersonal collective enterprises verylimited. Organisational structures are usually fluid, without a stable set of positions that


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could constitute a career for ambitious skilled workers and managers, and highlydependent on the personal decisions and judgements of the owner-manager, as in manyChinese family businesses (see, e.g. Redding, 1990; Silin, 1976). Incentives for long-term

organisational commitment are dependent on personal ties and often restricted to theimmediate family or those with whom family-like connections have been developed.Collective problem solving is therefore dependent on the direct authority of the owner-manager, and limited to a small proportion of the workforce. Firms will tend to beorganised as isolated autocracies in such market economies.

In contrast, where the dominant institutions governing economic activities are more reliableand patterns of authority are less paternalistic, owners are more likely to feel able to shareauthority with some employees and business partners and establish organisationalcareers. However, how much they do so, and with whom, varies considerably betweenmarket economies with different political, financial and labour market institutions. As a

result, the sorts of organisations and the nature of their capabilities that becomeestablished in societies with contrasting institutional frameworks vary considerably.

The key features of these institutional frameworks have been identified and contrasted in anumber of comparative analyses of business systems (e.g. Whitley, 1999), social systemsof production (e.g. Hollingsworth and Boyer, 1997) and varieties of capitalism (e.g. Halland Soskice, 2001) amongst other discussions of different political economies (e.g.Crouch and Streeck, 1997). From the point of view of explaining variations in authoritysharing and organisational careers, and so the kinds of organisational capabilities thatfirms are encouraged to develop in different kinds of market economies, their crucialaspects concern the support they provide for firms to enter into continued commitments

with business partners, including employees, and their limitation of rapid exit from them. Ingeneral, the more financiers, managers and skilled workers are locked-in to each others'destinies the less likely they are to act opportunistically and seek short-term advantagesthrough changing business partners. Institutional frameworks that encourage such lock-intherefore reduce the risks associated with long-term commitments and so facilitate bothauthority sharing and the development of organisational careers. They also, though, caninhibit firms' ability to adapt to radical technological and market change.

There are four main features of institutional frameworks that help to explain variations inauthority sharing and organisational careers across industrialised market economies. First,the extent of the state's coordinating role in economic development. Second, the cohesion

and organisational basis of business associations. Third, the strength of the market forcorporate control. Fourth, the organisation and effectiveness of the public training system.These affect employers' willingness to delegate discretion to employees and to developlong term organisational careers for them as summarised in table 2. Here, four distinctcombinations of authority sharing and career types have been identified in terms of thedegree of delegated discretion to employee groups and the scope and structure oforganisational careers. The first combines high levels of discretion over task organisationand performance with professional careers that limit organisational commitment. Thesecond restricts delegation and long term organisational careers to managerial and expertemployees, while the other two extend both discretion and careers to skilled employees,but organise careers differently.


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TABLE 2 ABOUT HERE

Considering first the role of the state in coordinating economic development, this can varyquite considerably across market economies in ways that affect the extent of cooperationbetween firms and their ability to share risks, both with state agencies and with each other.The contrast of developmental and regulatory states (Johnson, 1982) highlights a numberof important variations, especially the degree of involvement of states in steering firms'strategies through preferential access to cheap credit, technology licences, foreignexchange and controlling market entry and exit for the achievement of long term economicgoals. "Market-rational" states are primarily concerned with maintaining a stable andpredictable framework for managing economic activities, while "plan-rational" onesdevelop and implement economic policies aimed at achieving particular paths of economicdevelopment and often establish agencies to promote favoured industries (Johnson, 1982:

19). Operating largely at arms' length from firms' strategic decisions, the former focus onestablishing a regulatory framework that reduces transaction costs in labour and capitalmarkets in general rather than seeking to develop specific sectors. The latter becomemore involved in risk sharing and encouraging joint development of new industries andmarkets, often through consortia and business associations.

While not all developmental states encourage such collective organisation of businesses,especially the more dirigiste ones, what might be termed coordinating ones often workthrough powerful business associations as well as promoting their policies directly, andactively encourage such intermediary associations to regulate market behaviour andcoordinate firm strategies. In some of the more corporatist societies, of course, these

states develop and implement economic policies with peak associations of capital andlabour on a continuing basis.

An important aspect of such state support for industrial development is the implementationof what Ergas (1987) has termed "diffusion" technology policies that encouragewidespread diffusion of new knowledge and practices throughout an industry so that allfirms can engage in technological upgrading. Through state support for collaborativeresearch projects, subsidy of public and quasi-public laboratories, joint setting of technicalstandards and the dissemination of new information, such policies attempt to improve thegeneral standard of technological competence rather than leaving it to individual firms todevelop new knowledge and appropriate rewards as separate entities. Sometimes, states

delegate considerable authority to business associations to organise research projectsand gain access to public support for technology development on behalf of their members,as in Germany (Abramson et al., 1997).

In general, the stronger states' coordinating roles are in this sense, the more firms arelikely to work together in developing new technologies and opportunities and to plan longterm investments. Owners and managers thus share more authority between themselvesand reduce risks of opportunistic behaviour in economies with coordinating states. Thisprovides a relatively stable basis for establishing organisational careers for skilled staff andinvesting in their training. Because the state here encourages cooperation and mutualcommitment between firms, they are more likely to feel able to enter into commitments


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with many employees than in societies where the state operates more at arms' length fromcompanies and opportunistic behaviour remains considerable.

Strong business associations, particularly employers' associations, are also significantfeatures of the business environment that encourage employer-employee commitment, asSoskice (1999) has emphasised. As well as controlling opportunistic behaviour by membercompanies, and so encouraging longer-term investments in technology and employees,such organisations restrict employee opportunism, whether collective through unions orindividual. Particularly if wage rates and other aspects of employment relationships areagreed centrally, either at the industry or national level, and firms are constrained frompoaching skilled staff by offering higher wages, employers are encouraged to developquite long term commitments to employees. In contrast, economies with weak employers'groups and fragmented bargaining practices have few institutional constraints on employeror employee opportunism and so do not encourage long term commitments between them.

Additionally, where there are strong legal restraints on unilateral employer actions andstrategies, such as the Works Constitution Acts in Germany and European legislation onworks councils' rights, employees are more likely to believe in employers' commitmentsand themselves engage in long term joint problem solving and firm-specific knowledgedevelopment. According to Streeck (1992), the expansion of co-determination in Germanyhas encouraged continuous retraining and redeployment of the quite stable labour force asboth managers and workers become more committed to the success of the firm andinternal labour markets dominate external ones. In his words (1992: 163): "Acceptance bythe workforce of rapid technological change, flexible work organisation and high internalmobility is required to ensure the competitive edge and the economic success of the

enterprise on which, in the last instance, the realization of the employment guaranteedepends". The importance of organisational careers for most employees has hence beenincreased by the expansion of such formal joint governance structures.

The third feature of institutional frameworks that is likely to affect authority sharing andemployer-employee commitments is the nature of the financial system and in particularwhether it facilitates a strong market for corporate control. The usual contrast is drawnbetween capital market and credit based systems, or outsider-insider control types, thatdiffer primarily in their lock-in of investors and managers (Tylecote and Conesa, 1999;Zysman, 1983). In the former, large and liquid capital markets allocate investment fundslargely by price competition, where investors typically favour liquidity over commitment and

manage assets through diversified portfolios. Banks rarely own shares in firms or act aslong-term partners, preferring to limit their exposure to individual clients. Such financialmarkets do, however, facilitate the award of stock options to provide relatively high-powered incentives for skilled staff to work intensively and cooperatively on specific firmobjectives.

The combination of liquid capital markets, legal and other restrictions on managers' abilityto develop strong defensive measures against hostile takeovers, and fragmentedshareholdings in these kinds of financial systems results in a strong market for corporatecontrol that limits investor-manager commitments and reduces the credibility of long termcareer incentives. Where capital is impatient and volatile it is difficult to convince skilled


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employees to become committed to the long-term development of a particular firm'sorganisational capabilities.

In contrast, credit based financial systems are characterised by relatively small and illiquidcapital markets and much greater concentrations of shareholder control over largecompanies. Here it is much more difficult to transfer ownership and change direction,especially if significant proportions of firms' shares are held by strategic investors and/orare effectively controlled by top managers, as is the case in many European countries(Barca and Becht, 2001) and Japan (Sheard, 1994). Such stability encourages longer-termemployer-employee commitments, and indeed other long-term strategies. In general,where firms are committed to long term alliances with suppliers, customers and othermembers of enterprise groups through mutual shareholdings, links with banks and otherfinancial institutions, and regular exchanges of information and personnel, as in thealliance capitalism of Japan (Gerlach, 1992), they are more likely to make credible long

term commitments to employees. Such alliances additionally of course facilitate collectivecontrol of labour markets and restrict employee opportunism.

Finally, the education and training systems of market economies vary considerably in waysthat affect the kinds of skills developed, social identities and organisational commitments.

At least three distinct kinds of education and training systems can be distinguished thatencourage increasing levels of employer-employee commitment in conjunction with otherfeatures of labour market control. First, the relatively unstandardised and variouslycontrolled skill development and certification system found in many liberal or arms' lengthsocieties. Second, the much more standardised and wide ranging public training systemsof many continental European societies, and third the highly selective educational system

and "segmented", employer-based training practices developed on Japan and some othercountries (Crouch et al., 1999; Finegold and Wagner, 1999; Thelen and Kume, 2001).

In the first kind of education and training system, general educational success is morevalued than the acquisition of practical skills, which are developed and controlled by avariety of public and private agencies including professional elites. Certified practical skillstend to be "owned" and developed by individuals who invest in particular trainingprogrammes provided by relatively autonomous educational institutions without muchinvolvement of employers or unions. Skills are often generic across firms , and sometimesindustries as in the case of accountancy and some other business services, and are rarelytied to specific organisational arrangements. In terms of the problems they deal with,

though, they can be quite specialised, especially when controlled by practitioners. In suchcases, workers identify strongly with their professional expertise, particularly whenoccupational associations combine trade union functions with those of technical societies,as in the UK.

As a result, managers can find it difficult to develop cooperation across functionalboundaries tied to such skills, and to develop organisational career paths (Child et al.,1973). Because most skilled staff in these sorts of economies owe their primary loyalty totheir profession, they will be reluctant to invest in developing firm-specific skills andacquiring firm-specific knowledge. Even when employers establish internal labour marketsand organisational careers, if these require professionals to abandon their technical


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identity in favour of a more managerial one - as arguably happened to engineers andaccountants in the development of large US firms (Layton, 1986; Lazonick, 1991) - manymay prefer to remain technical specialists. Such attitudes and behaviour limit employers'

willingness to share authority with professional employees, which of course further restrictsthe latters' commitment to develop firm specific knowledge and skills, as well as otherstaff. While innovative firms rely on the specialist skills of these staff to develop newproducts and improve process technologies, they cannot assume that professionals willreadily transfer across functions and dilute their specialist skills by working in cross-functional teams to deal with organisation specific problems.

Second, in more solidaristic training systems, such as that developed in Germany (Thelenand Kume, 2001), employers, unions and state agencies together organise and controlstrong skill formation systems that develop highly valued standardised skills for a majorityof the labour force. These form the basis for strong occupational identities in both large

and small companies. Here, pride in one's publicly certified expertise is considerable, andencourages loyalty as much to horizontally defined occupational groups as to verticalauthority hierarchies constituting firms. Such skills additionally facilitate mobility betweencompanies and the institutionalisation of active labour markets within particularoccupational boundaries (Hinz, 1999). However, in many continental European countriesthis mobility is restrained by strong employers' associations and centralised wagebargaining organised on a sectoral basis, as well as by legal constraints on unilateralemployer actions.

Overall, the systematic involvement of sectorally based employers in the standardisedsystem of skill formation here ensures that skills are valued by firms and fit into their

particular systems for organising and coordinating work. This means that skills are asmuch designed around current organisational divisions of labour as the latter arestructured by certified skill boundaries. Consequently, firms should find it easier to use andcoordinate specialist skills in such economies than when they are controlled solely by stateagencies or practitioner elites. Together with barriers to firing staff in market turndowns,and industry wide barriers to hiring new skills from competitors, these factors mean thatboth firms and workers here have strong incentives to improve individual and collectiveskills within current technological trajectories and industry boundaries. Organisationalcareers are here encouraged by extensive employer-union collaboration within eachindustry that ties firms and workers into a common destiny.

Employers in these circumstances are encouraged to establish organisational career pathsfor skilled employees to advance along, building firm-specific knowledge and skills on topof their standardised expertise. Careers and identities are accordingly structured by bothcertificated skills and organisational hierarchies. Because of the widespread diffusion ofnew knowledge, technologies and skills throughout each sector, firms in these kinds ofcoordinated market economies seek to differentiate themselves in terms of products andmarket niches, and to construct distinctive competences through the organisationalcoordination and development of skilled staff. They therefore invest considerably indeveloping skilled workers' commitments to construct such capabilities, but the strongcommitment to certified professional expertise in these societies often restricts the amount


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of job rotation across major departments and cross-functional integration that can beimplemented easily.

While gaining commitment to solving complex, organisation-specific problems should beeasier in such environments than in arms' length ones, skilled workers may well resisttransfers across occupational labour markets. Accordingly, developing highly firm-specificcapabilities on a long-term basis that threaten established occupational identities will bedifficult in such societies. As Herrigel and Sabel (1989: 93) suggest in the case ofGermany: "the craft system itself involves hierarchy and fragmentation: divisions betweenseparate Berufe are considered to be virtually natural division within the productionprocess and in the system of social differentiation in society. Masters, moreover, are thesuperiors of apprentices and of newer and younger skilled workers within theirBeruf."Similarly, Crouch et al (1999: 148) suggest that: "today ...... the training which equipsworkers with this kind of occupational identity is providing a static concept of the

occupation that can run counter to the flexibility required of new forms". However, someGerman firms faced with intense foreign competition and technological change havemanaged, with considerable difficulty, to break down these kinds of boundaries (see alsoFinegold and Wagner, 1989).

Third, in coordinated market economies where the educational system strongly selectschildren and young adults for different positions in the labour market through academicexaminations, and the public training system is relatively poorly developed and/or low inprestige, skill based occupational identities are weaker. Firms here rely on the educationalsystem to select and train workers in general competences that they can build upon duringthe course of a working lifetime. Because the strong business associations characteristic

of such societies restrict poaching and limit free riders' ability to appropriate skillsdeveloped by competitors, both employers and employees make considerable investmentsin collective competence development through organisational careers, especially in thelarger firms. Authority sharing in the larger firms in these kinds of collaborative institutionalframeworks is considerable because both managers and workers are highly dependent onthe growth of the firm, and jointly develop distinctive competitive capabilities. Suchinterdependence is, however, often lower in smaller firms where labour turnover is greaterand skills less organisation specific.

The lack of strong horizontal occupational identities based on certified expertise herefacilitates job rotation across functional groups, as well as cooperation between them, so

that innovation development and implementation are, in principle, faster and moreeffective than where functional boundaries are reinforced by publicly standardised skills.Expertise therefore becomes highly firm specific in large companies in such economies asboth managers and core workers invest in the long-term development and improvement ofdistinctive organisational capabilities. Firms thereby develop strong organisational culturesbut also share authority with business partners and other organisations to ensurecontinuous acquisition and use of new knowledge and cooperation with firms possessingcomplementary capabilities.

Innovation tends here to be continuous, incremental and differentiated as large companiesbuild competitive advantages through the organisational coordination of activities and skills


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based on long-term commitments and alliances. Such authority sharing and organisationalcareers are less evident in smaller firms, however, except where local governments andother agencies have established entry barriers and support skill upgrading in particular

territories, as in the Japanese machine tool industry (Friedman, 1988).

Conclusions: Institutional Frameworks and Organisational Capabilities

This analysis suggests that market economies with different combinations of theseinstitutional features will encourage firms to share authority and develop organisationalcareers to varied extents, and so generate different kinds of organisational capabilities thatare likely to be more or less effective in different kinds of industries. For example, firmswith strong competences in the integration of complex forms of knowledge and advancedskills to develop and commercialise systemic technologies are unlikely to be successfullyestablished in societies where trust in formal institutions is low and the state is antagonistic

to independent control of major economic activities. Rather, companies in these sorts ofcontexts are more likely to compete by being highly flexible to be able to deal with anuncertain environment, and responding rapidly to changing customer requirementsthrough centralised decision-making. In particular, they will reluctant to make substantialinvestments in developing organisational competences through long-term commitments toskilled staff, or to institutionalise managerial routines that might inhibit flexibility.

More systematic coordinating capabilities are more likely to be developed by firms in arms'length institutional frameworks that combine regulatory states with liquid capital markets.These features encourage owners to delegate some authority to salaried managers byproviding a more predictable environment for investments than where the legal system is

unreliable and/or corrupt, as well as an educational system that identifies the moreacademically able and offers a range of publicly certified skills. However, the weakbusiness associations and strong market for corporate control in these kinds of marketeconomy provide few incentives for long-term inter-firm cooperation or widespreadinvestment in developing firm-specific problem solving skills and knowledge. The largelyadversarial and fragmented relationships between economic actors in these sorts ofsocieties prevent lock-in effects and limit the effectiveness of attempts to sanctionopportunistic behaviour. In particular, the focus on professional careers and lowinstitutional support for long-term employer-employee commitment here limit professionals'willingness to subsume their specialist identities under more organisationally specificgroupings and activities.

The limited authority sharing characteristic of these kinds of market economy restrictsskilled workers' contributions to problem solving and hence the ease of developingcontinual improvements to production processes and innovating by upgrading products ona continuing basis. The Chandlerian firm is, of course, a typical product of such anenvironment in which coordination of specialists takes place through the managerialhierarchy and its routines, rather than at the project level, and unilateral decision making ismore common than joint problem solving and development. Accordingly, the ability of firmsto develop strong organisational learning capabilities seems quite restricted by this kind ofbusiness environment.


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However, the strong market for corporate control here enables firms to buy and sell unitsrelatively easily, and the fluid labour markets pose few restrictions on managers hiring andfiring people to change their skills and capabilities. Depending on the rigidity of managerial

routines and procedures, as well as the significance of managerial loyalties, then, this kindof institutional framework can facilitate considerable restructuring of firms' assets andresources, although these obviously take some time to generate novel organisation-specific capabilities.

These kinds of institutional frameworks also enable firms to develop radical, transformativeinnovations and technologies when the state and other agencies, such as universities,invest in producing new technological knowledge and research skills on a large scale.Where states pursue "mission-oriented" science and technology policies (Ergas, 1987;Doremus et al, 1998) that coordinate and subsidise R&D projects aimed at fulfilling majorpublic policy goals, usually in the defence and health fields, they help to integrate formal

knowledge production with new product development and commercialisation. In the caseof the US biotechnology and computer hardware and software industries, direct andindirect state support was critical to their rapid development (see, e.g. Ferguson, 1999;Kenney, 1986; Langlois and Mowery, 1996; Leslie, 2000; McKelvey, 1996; Saxenian,1994).

The combination of mission-oriented state technology development policies, strongprofessional identities, weak intermediary associations and the general features of liberalmarket economies facilitates the development of project based firms that focus ongenerating radical, if not competence destructive, innovations in the short to medium term(Whitley, 2000). Decomposable technologies and institutionalised standards governing

inter-component operability, as well as strong appropriability conditions, are crucialrequirements for such firms to flourish since they enable niche markets to develop, andreduce entry barriers by limiting the need to produce new technological systems and investin complementary assets (Chesbrough, 1999). Together with a large and flexible publicscience system that enables researchers and managers to mover relatively easily betweenacademia and commercial companies (Whitley, 2001), this combination has helped manyfirms to develop quite novel technologies in emerging industries in the USA (Soskice,1999).

More coordinated institutional frameworks restrict opportunism to a greater extent andencourage higher levels of authority sharing within and between companies. As a result,

owners, managers and skilled employees become more willing to invest in the relativelylong-term development of organisation-specific problem solving skills and knowledge. Inthese circumstances skilled workers are more likely to pursue organisation-specificcareers than to concentrate on enhancing individual expertise for external labour marketsbecause employers are more inhibited from adopting very short term labour managementstrategies. Coordinated market economies with these kinds of institutions, coupled withcredit-based financial systems that encourage close ties between capital providers andusers as well as supportive state policies, therefore tend to develop collaborative types oflarge firms that have strong coordinating and learning capabilities. Such firms are likely tobe quite effective in sectors where the precise coordination of complementary activities


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and the continuous improvement of production and development processes are crucial totheir competitive success, as in the car assembly industry.

Firms in these sorts of societies, however, are less likely to be effective where technicaland market uncertainty are high, so that neither the outcomes of development projects,nor the nature of skills required to undertake them, can be reliably predicted in advance,because their ability to reconfigure their skills radically is restricted. As a result, manycompanies in countries such as Germany focus on developing incremental, cumulativeinnovations that depend on employee commitment and firm-specific knowledge in newindustries such as biotechnology and internet software (Casper, 2000; Casper andGlimstedt, 2001). In contrast, UK and US companies in the same sectors often pursuemore radical innovation strategies.

Variations in skill formation and certification systems between these kinds of coordinated

market economies affect the strength of occupational identities and the institutionalisationof occupational labour markets. Consequently, the ease of obtaining skilled workers'commitment to collective competence development that threatens such identities andreputations for high levels of individual expertise is likely to be lower in countries withstrong public training systems and powerful expertise-based unions. This may affect thespeed with which knowledge, skills and activities can be integrated across functionaldepartments, and so the rate of new product development and introduction.

Continuing job rotation across functions and use of cross-functional problem solving teamsto build firm-specific knowledge and capabilities should be more straightforward insocieties where practical skills are largely developed inside companies and unions are

either weak or predominantly based on enterprises, as in postwar Japan. If individualshave few externally certified skills that are generic across employers, they become highlydependent upon the growth of their firm and so are much more willing to invest in gainingknowledge of all a company's operations and contributing across specialist boundaries inorder to progress. However, such generalist organisational careers may inhibit theacquisition and use of new knowledge and skills from cognitively distant sources.

In summary, variations in authority sharing and organisational careers connect differencesin institutional frameworks to the generation of distinct kinds of organisational capabilities.These capabilities in turn affect firms' competitive effectiveness in different sub sectors,especially their ability to develop cumulative or radical innovations, such that economies

with contrasting institutional arrangements develop relative strengths and weaknesses indifferent kinds of industries. In particular, employers' establishment of distinctive types oforganisational careers in variously coordinated market economies influence employees'willingness to commit themselves to the continuous improvement of firms' knowledge andcollective problem solving capacities, and hence enhance companies' learning capabilities.


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TABLE 1

Organisational Careers and Organisational Capabilities

Types of Organisational Careers

Character-istics

ProfessionalTeam

Careers

ManagerialCareers

Functionally-specialised

Careers

OrganisationalGeneralist

careers

Organisat-ional

Longevity

Low Considerable Considerable High

Range ofEmployees

Covered

Most skilledstaff, but forshort periods

Limited toManagersand Senior

Experts

Considerable High

FunctionalSpecificity

Technicallyspecialised

careers

Limited toroles within

profit centres

High, up tosenior

management

Limited

AssociatedOrganis-ational

Capabilities

Coordin-ating

Limited toteams

Considerable Considerable High

CollectiveLearning

Limited toteams

Limited tomanagerialhierarchy

Considerablewithin

functionaldepartments

High within andacross

departments

Reconfigur-ational

High Limited bymanagerial

routines

Considerablewithin currentcompetences,

low beyondthese

Considerablewithin currentcompetences,

low beyondthese

Org Studies 2002 Paper Whitley

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