Policy and the understanding the business landscape

Citation

Waluszewski, A. and Snehota, I. (2016), "Policy and the understanding the business landscape", IMP Journal, Vol. 10 No. 2. https://doi.org/10.1108/IMP-06-2016-055

Policy and the understanding the business landscape

Article Type: Editorial From: IMP Journal, Volume 10, Issue 2.

Few can recall when demands for effective economic policies, at varying levels, have been more pressing than in the last few years. At the same time, there are few instances that testify to economic policies being put to work at international, national or and local level that have produced desired effects. The quest for effective policies is urgent. It may therefore be timely to recall a statement from the first joint-IMP project carried out more than 30 years ago: “The actions taken by politicians in order to control the economic development in a country are often aimed at influencing the behaviour of firms. These actions must be based on realistic models of the behaviour of firms” (Håkansson, 1982, p. 6). Such a position is certainly easy to share. However, the question remains: To what extent the current economic policies are based on realistic assumptions about working of the business landscape that permit developing effective measures?

Until the last decade of the twentieth century, governmental policies concerning technological and industrial advances were mainly handled through direct policy-industry interaction, based on problems and opportunities identified in specific technological areas and businesses. Arguably, the most powerful instrument utilized at the time was the public procurement of potential technological solutions, both military and civil, that were not yet specified and available and which the involved commercial and institutional organizations were committed to develop and deliver. The emergence of new technologies and related commercial goods and services in fields such as communication technology, nuclear power, and defence technology benefited from more or less direct, but always substantial engagement, of the state as a “client” (Mirowski, 2011; Rider et al., 2013; Håkansson et al., 2009). Space programs and development of the Arpanet (at origin of the internet) are two spectacular cases in question.

The 1990s, the so-called “science and innovation policy regime” (Elzinga, 2004), marked a shift through the encouragement of a “forced marriage” between two publicly financed areas with respective policies until then not systematically related – academic research and innovation policy. The aim of the science and innovation policy regime emergent in the 1990s was to make the use of public investments in research more impactful by establishing and supporting a direct relationship between public research institutions and business and industry. With the OECD as a main backer, and with EU policy as an early adopter, a new doctrine came to dominate the policy debate about higher education and research; namely, the role of academic research as a critical, but underutilized source of innovation.

The understanding of the structure and function of the business and industry expected to transform research advances to innovation on which the emergent “science and innovation policy regime” was based on a picture of the business landscape that was very different from that emerging through findings of the IMP research. Rather, the economic landscape was assumed to conform to the characteristics of a “market” postulated in economic textbooks. It was, and still largely is, based on the conviction that the business landscape is populated by competing companies that are free to make decisions about what commercialized goods to exchange independently from other economic actors and from historical and contemporary social and material investments, interactions and relationships, The great obstacle to be overcome in connecting academic research and the market has been identified as the too narrow interface between the research and business. Academic research advances were considered “sticky information,” that is, difficult for the market to access and as a consequence, the main political commission to policy was to create a supporting organizational structure to facilitate information transfer from the public (research) to the private (business) setting. The effectiveness of policy measures based on such a view appears to be rather limited.

The early message from IMP research: to base policy actions on a more realistic understanding of the basic structures and dynamics of the business landscape, therefore seems more relevant than ever. The common denominator of the papers presented in this issue is the ambition to contribute in this direction.

In the first paper, Market policy and destructive network effects, Morten Abrahamsen and Håkan Håkansson stress that policy interventions in the business landscape require attention to the role of the “state” vs the role of the “market” and reflect the theoretical perspectives that are translated in the principles on which policy makers base and develop their actions. The paper analyzes how different policy perspectives affect network interaction, and in particular how the availability of resources is organized. Two case studies of the Norwegian seafood industry are presented; one characterized by an imposed “market-like” auction system, and one where no such restriction is imposed. The authors argue that when a resource is considered a commodity and the interaction is seen as a market mechanism, the policy measures might be beneficial for the actors directly involved, but these can have important, unintended negative consequences for indirect relationships. Hence, it is important for policy makers to broaden the perspective and to base analysis on a conceptual framework that permits the capture of consequences for both directly and indirectly involved and connected parties.

The second paper, Clustering or interacting for knowledge? – towards an entangled view of knowledge in regional growth policy, by Jens Eklinder-Frick focusses on the EU’s Lisbon strategy and the ambitious goal to make the EU area the world’s most competitive, dynamic, and knowledge-based economy. With national innovation system and cluster approaches as conceptual guidelines, policy measures to achieve such goal were aiming at creating more than 1,000 cluster initiatives in Europe. However, tangible effects on innovation and growth in the EU area have been so far difficult to identify. In order to get a deeper insight into how knowledge is created and enacted within a policy-supported cluster, this paper – with the IMP interaction approach as theoretical point of departure – investigates the interactions between actors involved in a specific innovation process. In the concluding discussion the author stresses that the cluster approach reflects a “disentangled” view of knowledge (Eklund and Waluszewski, 2015). In such a view, knowledge is seen as universal and possible to disentangle from the context in which it was initially produced. The study evidences that, in practice, knowledge is “entangled” in the specific context in which it is enacted and produced. The author argues that the mismatch between strategy and outcome and the limited impact of policy on regional growth can be related to the policy’s perspective on knowledge.

In the third paper, A Black Swan in the district? An IMP perspective on immigrant entrepreneurship and changes in industrial districts, Matilde Milanesi, Simone Guercini and Alexandra Waluszewski draw attention to how different a certain change can appear when investigated from a perspective close to the traditional market assumptions, in this case the Industrial District Approach and IMP, respectively. The “Black Swan” metaphor is used to address the question of whether a change observed in the Prato textile industry represents an unexpected, unpredictable phenomenon, difficult to explain from a Marshallian-district point of view. The empirical phenomenon is the dramatic restructuring of the textile industry of the Italian Prato district, through the establishment of Chinese immigrant companies and their interaction with suppliers across spatial borders. The concluding discussion stresses that IMP thinking proposes a learning process and knowledge base that goes beyond the local context and links the involved companies’ investigations of opportunities and threats to interactions across spatial borders. It highlights that the location-specific features of several different places can be combined and utilized to renew resources and activities. This has some important consequences for policy, as it requires analyzing resources and activities across organizational and spatial borders in order to understand relational and network dynamics, which have the power to affect directly and indirectly related companies, as well as the local economies.

The fourth paper, To be independent or balance interdependence? – policy implications for micro and small enterprises in the context of their relationships with foreign entities, by Milena Ratajczak-Mrozek and Magdalena Herbe, draws attention to how policy should stimulate micro and small companies engaged in contexts dominated by large foreign companies as customers. The contemporary policy perspective considers dependency largely as unidirectional and implies that micro and small firms should be sustained by policy actions aimed to increase their independence, for example through the promotion of industry common export activities. The aim of the paper is to identify in what way micro and small enterprises dependence on large foreign customers can derive benefits from such relationships, and furthermore, in what way policy can support small firms in getting such benefits. The authors argue that an alternative explanation can be achieved by using the IMP approach to dependency as a mutual phenomenon that appears in different light at each side of the supplier-customer interface. The discussion is illustrated by a case study of a small enterprise, which, on the customer side, is dominated by a large foreign customer but where both parties benefit from utilizing each other’s different capabilities. The concluding discussion underlines the need for policy to be aware of both the dark and bright sides of interdependencies between micro and small firms and their foreign customers, and to identify what interactions can improve the small companies’ resources and activities.

In the fifth paper, The role of owners in industrial networks – the case of a steel producer, Björn Axelsson and Håkan Håkansson propose a wider perspective on ownership focussing on different roles that owners fulfill in business network settings. The authors analyze how ownership relationships develop over time and how they differ from those of other actors, such as buyers and sellers. The purpose of the paper is to investigate direct and indirect relationships related to the role of owners. The study is based on an extensive empirical investigation of the role of owners in the development of a steel-producing company in the course of its 75-year history. The study looks at ownership relationships against the backdrop of the development of the focal company’s business network. In contrast to the assumption in contemporary policy theories, the study reveals a multifaceted and heterogeneous role of the owners. In the case investigated, the most important role of the owners does not appear to be the one as financier, but rather as network designer who affects single business relationships as well as the combined network of those relationships. The analysis draws attention to two topics: the ways in which owners contribute to the development of the firm during different phases of its development, and the similarities and differences between the various types of ownership (an entrepreneur-owner, a customer firm, a bank, a family industrial sphere).

In the sixth paper, State actors’ mobilisation of resources for innovation: a case study of a Chinese vaccine, Tommy Shih and Åse Linné focus on policy actions of an emerging economy based on the logic of an hierarchical regime. The paper explores how Chinese state actors – with a particularly strong position in coordinating industrial development – contribute to the mobilizing of resources in industrial networks to support the technological and industrial development. With the IMP framework and the 4R model as theoretical foundation, the paper explores how state actors support the mobilizing of resources in the development, production and use of a new vaccine. The concluding discussion draws attention to the special role that Chinese state actors play in the innovation process as provider of a number of resources, such as long-term financial support and legitimacy to science projects, something which business actors are often not able to do, particularly at an early stage of the innovation process.

In the seventh paper, Interactive resource development: implications for innovation policy, Lars-Erik Gadde and Frida Lind address the mismatch between the underlying assumptions of contemporary policy of innovation processes and the reality of how firms involved in innovation actually operate. The paper explores this issue based on a review of the literature and two case studies. The authors underline the importance of achieving embeddedness in a producer and user setting: through a firm’s interaction with its business partners in time and space. The attention is directed to what can be achieved in a particular interaction process, which is always contingent on prior interactions and on the expectations regarding future interactions, as well as on the connections between the interacting parties. The message is that policy has to consider the central role of inter-organizational interaction for the outcome of innovation processes and the need for joint efforts of several organizations, over time and space to make innovation happen.

The eighth paper, Bridging gaps between policies for sustainable markets and market practices, by Lars-Gunnar Mattson discusses how policies to promote sustainable development may be implemented in practice of markets. Since the Brundtland report was published in 1987, the term “sustainable development” has been widely adopted by transnational and national policy and the author asks how are policy activities aimed to stimulate or discourage specific activities have actually affected what happens in markets. The problem addressed by the author is how policies to promote sustainable development are related to market practices; how is compliance achieved and how incentives/disincentives encourage specific behaviors? The paper starts out with a discussion of the concepts sustainable development and sustainable markets and how it is translated in policy initiatives. With business network-oriented research on sustainable market issues the author discusses how the new institutional economics and institutionalism on one hand, and market practice perspective on the other hand, provide conceptual and empirical support for analysis of sustainability phenomena. The author concludes by suggesting a research agenda to investigate how sustainability policies translate in sustainable market practices inspired by business network perspective of the IMP research.

Alexandra Waluszewski and Ivan Snehota

References

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Elzinga, A. (2004), “The new production of reductionism in models relating to research policy”, in Grandin, K., Wormbs, N. and Widmalm (Eds), The Science-Industry Nexus, History, Policy, Implications, Science History Publications, MA, pp. 277-304

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Mirowski, P. (2011), Science Mart. Privatizing American Science, Harvard University Press, Cambridge, MA

Rider, S., Hasselberg, Y. and Waluszewski, A. (Eds) (2013), Transformations in Research, Higher Education and the Academic Market. The Breakdown of Scientific Thought, Springer Science & Business Media, Dordrecht