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Transformation in technology, organization and location : the case from the clinical laboratory system.. 1985

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TRANSFORMATION IN TECHNOLOGY, ORGANIZATION AND LOCATION: THE CASE FROM THE CLINICAL LABORATORY SYSTEM OF BRITISH COLUMBIA By JAMES IAN MORRISON M.A.(Hons), The University of Edinburgh, 1974 B.Phil, The University of Newcastle-upon-Tyne, 1976 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY i n THE FACULTY OF GRADUATE STUDIES (Int e r - d i s c i p l i n a r y Program i n Urban Studies) •We accept t h i s thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA September 1985 ©James Ian Morrison, 1985 In presenting t h i s thesis i n p a r t i a l f u l f i l m e n t of the requirements for an advanced degree at the University of B r i t i s h Columbia, I agree that the Library s h a l l make i t f r e e l y available for reference and study. I further agree that permission for extensive copying of t h i s thesis for scholarly purposes may be granted by the head of my department or by his or her representatives. I t i s understood that copying or publication of t h i s thesis for f i n a n c i a l gain s h a l l not be allowed without my written permission. Department of MMhl StV^/eS The University of B r i t i s h Columbia 1956 Main Mall Vancouver, Canada V6T 1Y3 Date 3 <hfob& (985 -6 (3/81) - i i - AB5TRACT , Multi-unit, multi-location organization is one of the most salient characteristics of contemporary enterprise. The transformation in the structure of enterprise from the independent, small-scale operation to the complex, multi-unit, multi-location system has been an integral part of wider societal change. Yet the current functioning of these systems and the processes underlying their transformation is not well understood. Particular deficiencies exist in our understanding of the relationship among the technology, organization and location of multi-unit enterprise. A case study of transformation in the British Columbia laboratory system between 1954 and 1984 shows that the spatial and organizational structure of enterprise is not driven by any single variable and, in particular, technology is not the "prime mover" behind structural change. The process of structural change is a synergistic one in which external environmental factors and strategic choice have a more dominant influence on transformation than does technology. Thus organizational and location options are not dictated, rather they are perceived and selected as a purposeful response to environmental conditions. This conclusion is reached from a critical evaluation of literature drawn from organization theory, decision-theory, cybernetics and the geography of enterprise; and from the case study. In particular, i t is shown that in the 1950s and early 1960s, strategic decisions were taken that resulted in relative decentralization of laboratory activity, organizationally (down the hospital hierarchy) and geographically (towards the periphery). These decisions were taken - iil- in response to the changing political, social and medical environment. But these decisions clearly predate the availability of technologies that might encourage such dispersion, indicating that technology is not a necessary and sufficient condition for structural change. Technology can have an impact on the degree of centralization in multi-unit enterprise. In certain circumstances, the development and deployment of specific technologies coincides with a strategic decision to either centralize or decentralize activity. In such circumstances, equipment embodied technology can make a powerful contribution in transforming the relative centralization or decentralization of the system, but i t does not determine the choice between centralized or decentralized. Rather, i t amplifies the chosen direction. These findings have policy and research implications for society, for the urban system, for enterprise, in general, and for the future of the clinical laboratory system of B.C., in particular. - i i i l - TABLE OF CONTENTS PAGE ABSTRACT i i TABLE OF CONTENTS i i i l LIST OF TABLES xi LIST OF FIGURES x i i i i ACKNOWLEDGEMENTS xvi PART I - THE GENERAL MODEL CHAPTER 1 - INTRODUCTION 1.1 INTRODUCTION 1 1.2 TRANSFORMATION IN THE STRUCTURE OF ENTERPRISE: A SYNOPSIS 2 1.2.1 - The Pre-Industrial Enterprise 2 1.2.2 - The Industrial Enterprise 3 1.2.3 - The Post-Industrial Enterprise 5 1.3 DETERMINISTIC APPROACHES TO THE STUDY OF TRANSFORMATION 6 1.4 SYNERGISTIC APPROACHES TO THE STUDY OF TRANSFORMATION 8 1.5 A MODEL OF MULTI-UNIT ENTERPRISE 11 1.6 RESEARCH STATEMENT 20 1.7 RESEARCH OBJECTIVES 24 1.8 CHAPTER SUMMARY 24 CHAPTER 2 - PRECEDENTS FOR THE CONCEPTUAL FRAMEWORK 2.1 INTRODUCTION 26 2.2 THE FIVE PHASES OF DEVELOPMENT OF THE MODEL IN ORGANIZATION THEORY 28 2.2.1 - The Technological Imperative 28 2.2.2 - The Size Imperative 31 2.2.3 - Technology and the Environmental Imperative 33 - V - PAGE 2.2.A - Technology and Strategic Choice 36 2.2.5 - Technology and the Contingency Model - 38 2.3 CRITICISMS OF THE DETERMINISTIC AND CONTINGENCY APPROACHES 45 2.3.1 - Causality 45 2.3.2 - Limited Environmental Analysis 46 2.3.3 - Limitations i n the Concept of Technology 46 2.3.4 - Inadequate Integration of Geographic Phenomena 47 2.4 REFINEMENTS OF THE CONTINGENCY MODEL 50 2.4.1 - Scott's Taxonomy of Rational, Natural and Open Systems i n Organization Theory - 51 2.4.2 - TT Paterson and the Decision Band Method 54 2.4.3 - Stafford Beer's 5 Systems 56 2.4.4 - Amara and L i p i n s k i ' s Strategic Planning Model 57 2.4.5 - Summary and Conclusions 59 2.5 TRANSFORMATION IN OPEN SYSTEMS 61 2.5.1 - Boulding's Nine System Types 61 2.5.2 - Coming's Synergism Hypothesis 62 2.5.3 - Hage's View on Structural Transformation i n Enterprise 65 2.5.4 - Summary and Conclusions 66 CHAPTER 3 - CRITICAL PERSPECTIVES ON TRANSFORMATION OF ENTERPRISE 3.1 INTRODUCTION 67 3.2 PERSPECTIVES ON SOCIETAL TRANSFORMATION 68 3.2.1 - B e l l , Habermas and T r i s t : Post Industrialism or Advanced Capitalism? 69 3.2.2 - Reich: The Next American Frontier 76 3.2.3 - Gottman and Hardwick: The Quaternary Sector 77 3.2.4 - Tof f l e r : The Third Wave 78 3.2.5 - Criticisms of the Alternative Views of Societal Transformation 79 3.2.6 - Conclusions from the C r i t i c a l Review 85 a) From land through labour and c a p i t a l to knowledge 85 b) From goods to services and information 86 c) Transformation i n the nature of work 87 d) Internationalization of the economy 88 e) Placid to a turbulent environment 89 f) Transformation i n managerial philosophy 90 g) Transformation i n technology 91 3.2.7 - Summary and Conclusion on Societal Transformation 91 - V I - PAGE 3.3 PERSPECTIVES ON STRUCTURAL TRANSFORMATION IN THE URBAN SYSTEM 92 3.3.1 - Structural and Spatial Transformations i n Demography 95 3.3.2 - Social Transformation i n the Urban System 97 3.3.3 - Economic and Technological Transformation i n the Urban System 100 a) Economic restructuring of the urban system 101 b) Office location l i t e r a t u r e 111 c) Telecommunications and location 113 3.3.A - Summary and Conclusions on Urban Systems Transformation 116 a) Rust bowl to sun belt and the process of deconcentration 117 b) Increased competition between nations, regions and c i t i e s 117 c) Increased s p a t i a l d i v i s i o n of labour 118 d) The two-tiered economy i n the urban system 118 3.4 PERSPECTIVES ON THE TRANSFORMATION OF ENTERPRISE 119 3.4.1 - Transformation i n the Environment of Enterprise 119 3.4.2 - Transformation i n Strategic Decision 127 3.4.3 - Transformation i n the Structure of Multi-Unit Enterprise 131 a) The Relationship Between Organization and Control 131 b) Environment, Organization, Control and Technology 134 c) Integration of Location into the Relationship Among the Variables 140 3.5 CONCLUSIONS 145 3.5.1 - Methodological Conclusions 145 a) Synergistic Models of Structural Transformation 145 b) Case Study Approaches 146 3.5.2 - Substantive Conclusions 146 a) Transformation i s multi-dimensional and synergistic 146 b) Technology i s Neutral 147 c) Role of Environment and Strategic Choice . 147 d) Growth versus Restraint 147 PART II - CASE STUDY: TRANSFORMATION, TECHNOLOGY, ORGANIZATION AND LOCATION OF THE CLINICAL LABORATORY SYSTEM OF BRITISH COLUMBIA 1954-1984 PREFACE TO THE CASE STUDY 149 - v i i - PAGE CHAPTER A - TRANSFORMATION IN THE ENVIRONMENT OF CLINICAL LABORATORIES 1954-8A A.l INTRODUCTION 154 A.2 SOCIAL/DEMOGRAPHIC ENVIRONMENT , 156 4.3 POLITICAL/ECONOMIC ENVIRONMENT 159 A.3.1 - Health Care and the Economy 160 4.3.2 - Growth i n Laboratory Services and Costs 16A A.A MEDICAL ENVIRONMENT 17A A.A.I - Changing focus i n medicine 174 4.4.2 - Changing functional focus of the laboratory 178 A.A.3 - Policy and operational implications of the changing medical environment 183 a) Growth, Specialization and Centralization U n t i l the 1980s 183 b) Forces of Dispersion 186 c) Changing Functions and Emerging Structures 188 A.A.A - Section Summary 192 A.5 TECHNOLOGICAL ENVIRONMENT 19A 4.5.1 - A Model of Technological Development 195 A.5.2 - Development of Laboratory Technology 195A-198A 199 A.5.3 - Technological Diffusion at Each Time Horizon 202 A.5.A - Policy and Operational Implications of the Changing Technological Environment 205 a) Policy Implications 205 b) Operational Implications 208 i ) Automation, Computerization and Laboratory Tasks 208 i i ) Automation, Computerization and the Impact on Decision-Making Levels 212 i i i ) Automation, Computerization and Organizational Structure 216 A.5.5 - Section Summary 220 A.6 CHAPTER SUMMARY 221 CHAPTER 5 - CHANGING STRATEGIC PERCEPTION AND POLICY-MAKING FOR THE CLINICAL LABORATORY SYSTEM OF BRITISH COLUMBIA 195A-198A 5.1 INTRODUCTION 223 - v i LL- P/USE 5.2 A MODEL OF POLICY-MAKING FOR CLINICAL LABORATORIES 224 5.2.1 - I d e n t i f i c a t i o n of Structural Interests 225 5.2.2 - Ideology of Medical Technology and the Objectives of the Structural Interests 230 a) Dominant Interests 230 i ) C l i n i c a l Physicians 231 i i ) Diagnostic Service Professionals 232 i i i ) Academic Diagnostic Professionals 233 iv) Corporate Technology Providers 234 b) Challenging Interests 234 i ) Government 235 i i ) Hospital Administrators 235 c) Perplexed Interests 236 5.2.3 - Interaction of the Structural Interests: Coalitions and Constraints 237 5.2.4 - Section Summary 250 5.3 POLICY DEVELOPMENT IN CANADA AND BRITISH COLUMBIA 251 5.3.1 - Canadian P o l i c i e s for Laboratories 251 5.3.2 - B r i t i s h Columbian Laboratory F"olicy 254 a) Upgrading 255 b) Regional Laboratory Service 255 c) Technology 258 d) Funding and Reimbursement 259 e) Quality and Accreditation Issues 261 f) Cost and U t i l i z a t i o n 263 5.4 COMPARING THE SIMILARITIES AND DIFFERENCES IN THREE PROVINCES: ONTARIO, BRITISH COLUMBIA AND SASKATCHEWAN 265 5.4.1 - General Patterns of Growth 265 5.4.2 - Structural Differences 269 5.5 TRENDS IN CLINICAL LABORATORY POLICY AND THE IMPLICATIONS FOR STRUCTURES 5.5.1 - Reimbursement and Regulation 270 a) Ontario: The For P r o f i t Commercial Model 271 b) B.C.: Professionally Dominated Diagnostic Services 273 c) Saskatchewan: A Public Systems View 274 5.5.2 - Laboratory Technology: The Trends and Implications 275 5.5.3 - Manpower and Management: Trends and Implications 276 5.5.4 - Prospects for Control 277 5.6 CHAPTER SUMMARY 278 • • a • - V i l l i - PAGE CHAPTER 6 - TRANSFORMATION IN THE STRUCTURE AND PERFORMANCE OF THE CLINICAL LABORATORY SYSTEM OF BRITISH COLUMBIA 6.1 INTRODUCTION 6.2 B.C. CLINICAL LABORATORIES IN THE 1950s: THE NEED FOR UPGRADING 6.2.1 - Environment and Policy Context 6.2.2 - Technology, Organization and Location of Laboratories i n the 1950s 6.2.3 - Performance of the System 6.3 THE SIXTIES - THE NEED FOR EQUITY AND ACCESSIBILITY 6.3.1 - Policy and Environmental Context 6.3.2 - Technology, Organization and Location i n the S i x t i e s 6.3.3 - Performance of the System 6.A THE SEVENTIES - GROWTH, CONTROL AND RATIONALIZATION 6.4.1 - Environment and Policy Context 6.A.2 - Technology, Organization and Location i n the Seventies 6.4.3 - Performance of the Systems i n the Seventies 6.5 THE EIGHTIES - RESTRAINT AND SYSTEMS MAINTENANCE 6.5.1 - Environmental and Policy Context 6.5.2 - Technology, Organization and Location i n the Eighties 6.5.3 - Performance of the System i n the Eighties 6.6 SYNTHESIS - TRANSFORMATION IN SPATIAL STRUCTURE OF THE B.C. LABORATORY SYSTEM 6.6.1 - Approach 6.6.2 - Regional Distribution of Population and Laboratory A c t i v i t y i n 1961-84 6.6.3 - Regional Dynamics of Hospital Laboratory Services 6.6.A - Regional Dynamics of Private Laboratory Services 6.7 A SUMMARY OF TRANSFORMATION IN THE CLINICAL LABORATORY SYSTEM 195A-8A 6.7.1 - Summary of the Stages i n Transformation 6.7.2 - Summary of the Process of Transformation CHAPTER 7 - TRANSFORMATION IN TECHNOLOGY, ORGANIZATION AND LOCATION: CHOICE OR CONSEQUENCE? 7.1 INTRODUCTION 7.2 GENERAL CONCLUSIONS 7.2.1 - The Process of Structural Transformation 7.2.2 - Supply versus Demand x - PAGE 7.2.3 - Centralization versus Decentralization 359 7.2.4 - The Role of Technology i n Structural Change 361 7.2.5 - Central Control versus I n s t i t u t i o n a l Autonomy 362 7.3 GENERAL POLICY IMPLICATIONS 363 7.3.1 - Policy Implications at the Societal Scale 363 7.3.2 - Policy Implications at the Urban Systems Scale 364 7.3.3 - Policy Implications at the Level of Enterprise 367 7.4 FUTURE RESEARCH IMPLICATIONS 369 7.4.1 - Implications for Future Theoretical Research 370 7.4.2 - Implications for Future Empirical Resarch 371 7.4.3 - Implications for Future Applied Research 373 CHAPTER 8 - THE FUTURE OF THE CLINICAL LABORATORY SYSTEM IN BRITISH COLUMBIA 8.1 INTRODUCTION 375 8.2 FUTURE ENVIRONMENTAL CONDITIONS 375 8.3 POLICY OPTIONS FOR THE B.C. CLINICAL LABORATORY SYSTEM 379 8.3.1 - The Free Enterprise Model 380 8.3.2 - Medical Sub-Market Approaches 381 8.3.3 - Adjusting the Public/Private Mix of Laboratories 387 8.3.4 - Restrained Autonomy 389 8.3.5 - Centrally Directed Systems 392 8.4 CONCLUSION ' 3 9 4 BIBLIOGRAPHY 397 APPENDICES 414 A - Data Appendix 414 B - H i s t o r i c a l Review of Developments i n Laboratory Technology 419 C - B.C. Laboratory Referrals - Location of Lab Over Location 433 of Patient, 1983 D - C l a s s i f i c a t i o n of Regional Hospital D i s t r i c t s According to 435 Magnitude and Direction of Change i n a Laboratory Cost Index E - Hospital Laboratory Cost per Physician by Regional Hospital 438 D i s t r i c t for B.C. 1974 and 1981 F - F i r s t Order Difference Model 439 G - Reference Map of B r i t i s h Columbia 441 - X I - PAGE TABLES 1.1 The structure of the environment of enterprise 18 3.1 A typology of transformation i n the environment of enterprise 125 3.2 Transformation i n organizational design and control 133 4.1 Growth i n laboratory expenditures i n B r i t i s h Columbia 1970-1983, outpatient versus inpatient by type of provider i n constant (1971) dollars per capita 172 4.2 Real laboratory cost per patient admission (in constant 1973 d o l l a r s ) , for a l l acute care admissions (ACA) and acute adult leukemia patients (LEUK) at Vancouver General Hospital, 1973-1979 180 4.3 Summary of developments i n the functional focus of medicine and the laboratory 1940-1980 182 4.4 A summary of technological developments i n the c l i n i c a l laboratory 1950-1985 201 4.5 Estimated r e l a t i v e d i f f u s i o n of selected laboratory technologies throughout North America by type of i n s t i t u t i o n 204 4.6 Costs of computerization and automation for the c l i n i c a l laboratory 207 4.7 A model of laboratory functions 209 4.8 Laboratory functions - impact of technology on tasks 210 4.9 Laboratory functions - estimated decision band of laboratory tasks 213 5.1 Structural interests i n c l i n i c a l laboratory policy-making - ideology of medical technology, objectives and constraints 229 5.2 Total MSC expenditures, t o t a l laboratory and private laboratory share, 1970-1983 241 5.3 MSC expenditures on top ten laboratory fee items by sector i n constant dollars and as a share of a l l laboratory b i l l i n g s to MSC 245 - x i l - PAGE 5.4 MSC - number of different test types b i l l e d by laboratory sector i n metropolitan regions, 1979/80 - 1983/84 246 5.5 Number of laboratory physicians by practice s t y l e by region, 1984 249 5.6 Development of diagnostic services policy i n Canada 252 5.7 Growth i n laboratory services - average annual percentage change i n use and cost of services, Canada, Ontario, B.C. and Saskatchewan, 1961-1981 266 5.8 Legitimacy and f e a s i b i l i t y : s i m i l a r i t i e s and differences between the provinces 268 6.1 Federal laboratory and r a d i o l o g i c a l services grant to B.C. 1953/54 - 1955/56 285 6.2 Development of B r i t i s h Columbia's regional laboratory system 1955-75 287 6.3 B.C. and Canada laboratory manpower by category for 1954 ( f u l l time personnel only) 291 6.4 Hospital laboratory costs for Canada and B.C. 1954-1962 by size of hospital 292 6.5 Pathology as an insured medical service - outpatient laboratory costs by type of insurer 1957-1983 (selected years) 294 6.6 Laboratory costs as a share of a l l hospital costs 1962-1981/82 for a l l PGAS hospitals i n B.C. 301 6.7 Laboratory costs per patient day (in currant dollars) and share of a l l hospital patient days by size of hospital 1962-1982 303 6.8 Total adjusted laboratory expenditures, hospital laboratory 306 expenditures ( t o t a l and teaching) and teaching hospital's share of both t o t a l ajdusted laboratory expenditures and t o t a l hospital laboratory expenditure, B.C. 1966-1981/82 6.9 Laboratory cost per capita and annual growth rates i n constant 1971 dollars by sector, B.C. 1970-1983/84 313 6.10 Estimated laboratory equipment al l o c a t i o n to hospitals by region i n B.C. i n constant 1971 d o l l a r s , 1973-1980 315 - X l l i - PAGE 6.11 Number of chemistry instruments approved for B.C. hospitals, by size of hospital - Type I instruments (major analyzers $50,000 and above) 1973-1980 316 6.12 Number of chemistry instruments approved for B.C. hospitals, by size of hospital - Type II instruments (analyzers $20-50,000) 1973-1980 316 6.13 Number of hematology instrument approved for B.C. hospitals, by size of hospital - automated c e l l counters 1973-1980 317 6.14 Outpatient laboratory costs - costs versus fees and the "apparent" p r o f i t margin, 1970-1983/84 325 6.15 Number of chemistry instruments approved for B.C. hospitals, by size-of hospital - Type I instruments 1981/82 - 1984/85 327 6.16 Distribution of B.C. population by type of regional d i s t r i c t , for selected years 1961-1983 334 6.17 Distribution of hospital and private laboratory a c t i v i t y i n B.C. by type of regional hospital d i s t r i c t , selected years 1966-1981 336 6.18 Total private laboratory and hospital outpatient laboratory fees by regional hospital d i s t r i c t location of physician over location of patient for 1983-84 i n current dollars 338 6.19 Average menu of test available on an outpatient basis by type of region i n B.C. 1979-83 339 6.20 Summary of r e l a t i v e changes i n regional laboratory cost index for the periods 1966-71, 1971-74, 1974-81 346 6.21 Regions with private laboratory a c t i v i t y i n constant 1971 dollars per capita and as a share of a l l adjusted laboratory costs i n the region-1979-1983 351 6.22 A h i s t o r i c a l synthesis of the development of the B.C. c l i n i c a l 353 laboratory system, 1954-1984. 8.1 The environment of B.C c l i n i c a l laboratories i n 1995 - Possible 377 trends and structural s h i f t s 8.2 Policy options for the B.C. c l i n i c a l laboratory system i n 1995 384 - x i i i i - PAGE FIGURES 1.1 A model of multi-unit enterprise as a decision and information hierarchy n2 1.2 Multi-unit enterprise and the interaction with i t s environment 15 1.3 Technology, organization and location i n t h e i r strategic and environmental context 21 2.1 Synergy i n the relationship among technology, organization and location 27 2.2 Hierarchy of decision l e v e l s i n enterprise 27 2.3 The five phases of model development i n organization theory 29 2.4 John Child's model - the environmental imperative 35 2.5 John Child's model extended to incorporate strategic choice 37 2.6 Montanari's contingency model 39 2.7 Mintzberg's f i v e organizational components 42 2.8 Mintzberg's f i v e organizational designs 43 2.9 Jackson and Morgan's model of posited relationships with organization structure 48 2.10 Paterson and Hardwick's decision bands i n a decision hierarchy 56 2.11 Amara and Li p i n s k i ' s model of corporate strategic planning 58 3.1 A taxonomy of alternative views on structural transformation 70 3.2 Emerging organizational designs 136 4.1 Health care spending as a percentage of national income, Canada and the U.S., 1950-1982 161 4.2 Health, hospital and medical costs by the B.C. provincial government as a share of GPP, 1961-1980 163 4.3 Hospital and physician expenditures per capita, Canada and B.C., 1960-1982 163 - X V - FIGURES continued PAGE A. A Vancouver General Hospital laboratory, number of tests per patient day, 1957-1982 165 4.5 Laboratory growth i n Canada, hospital laboratory use per patient day, 1961-1981 168 4.6 Laboratory growth i n Canada, hospital laboratory cost per patient day, 1962-1981/82 168 A.7 B.C. pathology services, r e a l per capita cost per annum, 195A-1983/8A 171 A.8 B.C. pathology services, r e a l per capita cost per annum by sector, 1970/71-1983/8A 171 A.9 A model of technological development i n the c l i n i c a l laboratory 197 5.1 A model of dominant, challenging and perplexed s t r u c t u r a l interests i n policy-making for c l i n i c a l laboratories 227 5.2 The changing policy agenda for laboratories i n B.C. - 195A-198G 256 5.3 Laboratory eauipment expenditures i n B.C. - estimated value, 1973-198A 260 9 6.1 Laboratory cost per patient day by size of hospital for PGAS 30A hospitals (excluding CCABC and Children's) i n B.C., 1966-1981/82 6.2 Cumulative share of hospital laboratory a c t i v i t y by rank of 3A1 regional hospital d i s t r i c t i n B.C., selected years 1966 to 1981 6.3 Rank size analysis 1966-1981. Hospital laboratory cost against 3A1 rank of regional hospital d i s t r i c t 6.A Hospital laboratory cost per capita by type of region i n B.C., 3A2 selected years 1966-1981 6.5 Annual growth rates i n hospital laboratory cost per capita 3A2 by type of region i n B.C. 1966-1981 6.6 Hospital laboratory cost per capita - core versus periphery 3AA 1966-1981 - XVI - ACKNOWLEDGEMENTS This project has been made possible because of the i n t e l l e c t u a l , l o g i s t i c a l and emotional support of a number of people and agencies. The in t e r d i s c i p l i n a r y candidate i s p a r t i c u l a r l y dependent on his committee for guidance and support. The author has been extremely fortunate i n having a committee of high academic a u a l i t y . In pa r t i c u l a r , Professor W.G. Hardwick (Urban Geography) has acted as chair for the committee and has been generous with his time i n providing constructive c r i t i c i s m , i n t e l l e c t u a l stimulation and much needed deadlines. Dr. Walter Hardwick has an impressive record of guiding "unusual" graduate students through the vagaries of i n t e r d i s c i p l i n a r y research: the author i s fortunate to be one of them. Professor R.G. Evans (Economics) has contributed reasoned c r i t i c i s m ; has provided a fine example i n his scholarship and has produced some excellent one-liners. Professor J.D. Forbes (Commerce) not only helped lead the author through the dark valley of technological determinism to greener pastures of special i n t e r e s t , but he provided good counsel when the thesis and the author became unglued. F i n a l l y , the author wishes to acknowledge the special contribution that Professor D.F. Hardwick (Pathology) made to t h i s undertaking. Dr. David Hardwick reawakened my interest i n academic work, provided a research environment i n which that interest could f l o u r i s h and gave c r i t i c a l perspective to t h i s study. I n t e l l e c t u a l contributions were made to t h i s study over the l a s t few years by colleagues, faculty and friends. In pa r t i c u l a r , the author wishes to thank Dr. Ann Crichton (Health Care and Epidemiology), Dr. David Ley - x v i i - (Geography), Dr. John Milsum (Health Care and Epidemiology) and Dr. J i l l Graham (Commerce). The course work undertaken with these faculty i s reflected both d i r e c t l y and i n d i r e c t l y i n t h i s study. Many colleagues have commented on e a r l i e r drafts of t h i s and other related work, i n par t i c u l a r Paul Cassidy (VGH) and Jim Whitehead have provided insight and encouragement. . The author wishes to thank a number of individuals and agencies for thei r support i n data c o l l e c t i o n , analysis and document preparation. Mr. Larry Smook of the Ministry of Health's Equipment Secretariat, f a c i l i t a t e d access to h i s t o r i c a l records and provided guidance with the data approval process. Mr. Steven Kenney of the Medical Services Plan provided access to data, and his s t a f f : Glen N u t t a l l , Ramsey Handi and Bruce Hawks provided invaluable expertise and support i n preparing data abstracts and i n furnishing h i s t o r i c a l data. Dr. K i t Henderson (Ministry of Health) provided approval for access to h i s t o r i c a l data. Dr. Morris Barer and his colleagues i n the Division of Health Services Research and Development at UBC deserve special thanks for enabling computer access to hospital data. Margaret Hardwick was of tremendous assistance with data entry and microcomputer analyses. Jim Munro cast a canny Scottish editor's eye over several drafts of the manuscript and gave great encouragement. The author must pay special t r i b u t e to Mrs. Anne Bishop and her s t a f f i n the Department of Pathology for t h e i r contribution to the preparation of t h i s manuscript. In p a r t i c u l a r Laurie Trarup and Penny Ma deserve special thanks for t h e i r s k i l l and patience. - x v i i l - F i n a l l y , special thanks are due to family and friends who have endured t h i s process and helped me through i t . Nora deserves a medal for coping with a newborn and a thesis at the same time, throughout a l l of which she did not lose her sense of humour and she has learned to l i k e bibliographies. Baby David took my mind away from i t a l l , thanks. Doc. #1218F - 1 - Arc. #009Oa TRANSFORMATION IN TECHNOLOGY, ORGANIZATION AND LOCATION: THE CASE FROM THE CLINICAL LABORATORY SYSTEM OF BRITISH COLUMBIA CHAPTER 1 - INTRODUCTION 1.1 INTRODUCTION Multi-unit, multi-location organization i s one of the most s a l i e n t characteristics of contemporary enterprise. The transformation i n the structure of many enterprises from independent, simple, small scale operations to complex, multi-unit, multi-location systems has been an int e g r a l part of wider s o c i e t a l change ( B e l l (1976), Reich (1983), T r i s t (1980)). In recent years, an increasing number of questions have been raised about the ro l e , v i a b i l i t y and performance of multi-unit enterprise. F i r s t , the complex multi-unit enterprise i s facing greater uncertainty because of environmental turbulence associated with recession, deregulation, competition and technological change ( T r i s t 1980). Environmental turbulence requires great adaptability, but i t i s argued, many multi-unit enterprises have been f a i l i n g i n t h i s regard (Peters and Waterman (1982), Harris (1981)). A second and related matter i s that the current structure of many multi-unit enterprises has become dysfunctional, not only because of a turbulent environment but because of inherent 'design flaws' i n organization. In p a r t i c u l a r , analysts note the poor performance of some enterprises i n terms of e f f i c i e n c y , effectiveness, quality of worklife, s p a t i a l d i s t r i b u t i o n and lack of innovation (Schumacher (1973), Huber (1984), Harris (1981), Bluestone and Harrison (1982), Reich (1983)). - 2 - Thirdly, there are problems i n complex enterprises resulting from the explosion i n the a v a i l a b i l i t y of information technology. Technological change creates uncertainty, through widespread b e l i e f that information technology i s bringing about a transformation i n the way multi-unit systems are structured i n organizational and s p a t i a l terms (e.g., Toffler (1980), Bjorn-Anderson (1979)). P a r t i c u l a r l y , i t i s suggested that information technology has a propensity to change the degree of centralization/decentralization of a c t i v i t i e s and decision-making within enterprise. F i n a l l y , there are concerns i n academic c i r c l e s that the p o l i t i c a l , economic, organizational and geographic approaches to the study of contemporary complex, multi-unit enterprise lack both explanatory power and a b i l i t y to guide policy and management decisions in any meaningful way (e.g., Huber (1984), Goddard (1980), B e l l and K r i s t o l (1981), Kuttner (1985)). This thesis examines, i n general terms, the transformation i n the relationship among the technology, organization and location of multi-unit enterprise over the past t h i r t y years. I t draws together threads from complementary sets of l i t e r a t u r e on technology, organization and location and concludes about the relationships among these variables that are emerging i n contemporary enterprise. These conclusions are then tested i n a case study of the c l i n i c a l laboratory system of B r i t i s h Columbia. 1.2 TRANSFORMATION IN THE STRUCTURE OF ENTERPRISE: A SYNOPSIS 1.2.1. The Pre-Industrial Enterprise In the pre-industrial mercantile world, the structure of most enterprise was shaped by the prevailing methods of production and d i s t r i b u t i o n - 3 - and by the philosophies underlying those methods. Thus the size and functioning of enterprise was shaped by trade guilds, l o c a l trade cartels and by highly l o c a l i z e d market conditions. The most prevalent organizational form was a simple structure with master and artisan working i n small, independent units. Spatial structure at t h i s time conformed to the random d i s t r i b u t i o n of resources and s i t e potential and was reinforced by the patterns of s p a t i a l interaction that were prevalent i n simple agrarian systems (Mumford (1961)). 1.2.2. The Industrial Enterprise With the advent of the i n d u s t r i a l age, there was a discovery of the productivity-inducing potential of the d i v i s i o n of labour. This set the stage for the enmeshing of technology and organization, i n which the sp e c i a l i z a t i o n of tasks and the coordination and synchronization of a c t i v i t i e s ( i . e . , organization) became closely related to the emerging forms of technology, i n particular the machine. Throughout the nineteenth and early twentieth centuries, the theories and underlying values of economics and mechanical engineering prevailed as the pri n c i p l e s on which the structure of organization was based (Reich (1983), B e l l (1976)). This organizing p r i n i c i p l e was given further embellishment and formalization with Taylor's i n f l u e n t i a l work on S c i e n t i f i c Management, Taylor (1911), i n which the engineering philosophy was carried to i t s l o g i c a l conclusion. Widespread acceptance of S c i e n t i f i c Management from the 1920s on had a major impact on enterprise i n North America and indeed i n the Soviet Union ( B e l l (1976)), that was reflected i n the r i g i d and hierarchical "machine bureaucracy" i n large scale public and private enterprise (Mintzberg (1979), (1983)). - 4 - From the 1930s on, Mayo and the Human Relations School provided insights about the need for human engineering i n large scale enterprise (e.g., Roethlisberger and Dickson (1939) and Mayo (1949)). The applied psychological t r a d i t i o n that followed i n organization theory was just as instrumentalist i n philosophy as S c i e n t i f i c Management i n i t s intent to improve e f f i c i e n c y , but i t did help to raise questions about the complexity of human behavior and interaction i n the enterprise. Despite an interest i n the human side of organization, machine bureaucracy continued as a common structure of enterprise. Indeed the prin c i p l e s of economies of scale and bureaucratic organization have been extended in the structure and management of the large d i v i s i o n a l i z e d , multi-national corporation (Taylor and T h r i f t (1983a), Mintzberg (1983)). In many cases, management has been standardized and formalized to the point where i t can be superimposed throughout the diverse businesses and multiple locations of the multi-national conglomerate but with mixed results (Reich (1983). The influence of economizing pri n c i p l e s on i n d u s t r i a l organizations i s also paralleled i n locational patterns of enterprise. Emphasis on economies of scale, minimizing costs of movement and maximizing the economic benefits of agglomeration ( i . e . , s p a t i a l clustering) seems to have developed a s p a t i a l calculus that dominated analysis of, and decision-making about, the s p a t i a l structure of the i n d u s t r i a l organization. The negative e x t e r n a l i t i e s of bureaucratic forms i n i n d u s t r i a l organizations have been long recognized (even by Max Weber himself i n his chapter on the Iron Cage (Weber 1947)) as they relate to questions of stress - 5 - and alienation. Over the l a s t twenty f i v e years however, a diverse range of observers have questioned the economic and functional virtues of bureaucracy and large scale organization. For example, the early work of Burns and Stalker (1961) i n organization theory, argued that 'mechanistic structures' (bureaucracy) were appropriate for r e p e t i t i v e operations i n stable environments but that i n more complex and dynamic environments, enterprise must adopt an 'organismic' form i f i t i s to be able to innovate and adapt. Si m i l a r l y the more recent popular management l i t e r a t u r e has questioned the effectiveness of bureaucratic structures for large corporations operating i n turbulent environments, e.g., Peters and Waterman (1982), Naisbitt (1982), Deal and Kennedy (1982), and Huber (1984). Marvin Harris, a c u l t u r a l anthropologist, i n his observations on 'America Now', Harris (1981) and Schumacher (1973), an economist, i n his thesis that 'Small i s Beautiful' both, i n t h e i r own way, question the performance of the large, mechanistic i n d u s t r i a l enterprise. 1.2.3. The Post-Industrial Enterprise Major changes i n enterprise have occurred since the Second World War but most s i g n i f i c a n t l y i n the l a s t two decades. The increasing turbulence and complexity of the environment and the explosion i n the c a p a b i l i t y and a v a i l a b i l i t y of information technology since the mid 1960s are c r i t i c a l components i n the transformation of enterprise, p a r t i c u l a r l y for those organizations whose p r i n c i p a l raw material i s information, e.g., banks, business services, education and health. The r a p i d i t y of technological change has stimulated interest i n i t s impact on the organizational structure of - 6 - enterprise, on the well being of employees and on the s p a t i a l organization of multi-unit systems, e.g., the c o l l e c t i o n of essays i n Bjorn-Anderson (1979), (1982), Bannon et a l (1982), and Marstrand (1984). A number of views have emerged. At one extreme there are those who argue that we are re-creating the factory of the past i n the o f f i c e of the future, Menzies (1981). These authors are determined to turn back the technological tide and forgo any benefits that technology can bring, because they are convinced technology causes unemployment, " d e s k i l l i n g " (a neologism coined by analysts to describe the reduction i n s k i l l reauirements brought about by automation) and cen t r a l i z a t i o n of decision-making, e.g., Marstrand (1984), Mather (1980). At the other extreme, there are those who argue for blind application of technology, seeing technological change as good i n i t s e l f . A s i m i l a r l y polarized l i t e r a t u r e i s developing with regard to s p a t i a l auestions, some are arguing that advances i n technology lib e r a t e remote settlements from the oppression of distance others argue that such technology increases the s p a t i a l c e n t r a l i z a t i o n of power, a c t i v i t y and opportunity (see Bannon et a l (1982) and Mandeville (1983) for reviews of these competing positions). 1.3 DETERMINISTIC APPROACHES TO THE STUDY OF TRANSFORMATION The process of transformation i n the technology, organization and location of enterprise i s not well understood. Efforts to date have suffered from an undue focus on determinism. Four broad forms of determinism can be i d e n t i f i e d : a) Technological determinism sees the role of technological change as paramount and normally concludes that technological change causes the organizational and s p a t i a l structure of enterprise to follow a par t i c u l a r trajectory. Elements of technological determinism can be seen i n a wide range of work from Marx, through Woodward (1965) to computer s c i e n t i s t s and pundits, e.g., Toffler (1970), (1980). b) Organizational Determinism i s a term that could be applied to the widely held assertion that i n any given context, organizations should be structured a par t i c u l a r way i f they are to be e f f e c t i v e . (See stru c t u r a l contingency theory discussed i n Chapter 2 and Mintzberg (1983)). This l i t e r a t u r e e x p l i c i t l y or i m p l i c i t l y regards s p e c i f i c organizational processes or environmental attributes as the "prime movers" i n determining the relationship among the technology, organization and s p a t i a l structure of enterprise. This determinism takes a number of forms. Scale of the enterprise, particular environmental c h a r a c t e r i s t i c s , s p e c i f i c technologies or strategic choices have each had t h e i r moment i n the sun as prime movers. c) Geographic Determinism i s reflected i n the overwhelming emphasis placed on geographic factors as determinants of organizational and s p a t i a l structure. Site and s i t u a t i o n a l factors may have had an important influence on location i n e a r l i e r times, but i n an age when the headquarters of many of the largest and most successful enterprises are located i n suburbs of medium sized c i t i e s , the geographic deterministic models become untenable, Pred (1977). d) Economic Determinism i s the broad term that could be applied to both s t r u c t u r a l i s t explanation and neoclassical economic analysis of the organization, technology and location of enterprise. The patterns that - 8 - emerge i n these models are determined either by the inevitable clockwork of p o l i t i c a l economy or by the aggregate effects of cost-minimizing and p r o f i t maximizing agents. Despite a host of analyses, there i s no coherent body of organizational, economic or location theory that allows us to deal s a t i s f a c t o r i l y with the relationship among technology, organization and location i n multi-unit enterprise (Taylor and Th r i f t (1983a)). Yet concerns about these relationships continue to be voiced. Indeed they have been brought to a head by the economic turmoil of the early eighties and by the increasing pervasiveness of information technology. These changes create new challenges and choices for the way enterprise i s to be organized. 1.4. SYNERGISTIC APPROACHES TO THE STUDY OF TRANSFORMATION Explaining the transformation i n the relationship among technology, organization and location of enterprise i s handicapped by the lack of theoretical models l i n k i n g these variables. I n s u f f i c i e n t attention has been paid to the interaction between these variables. Yet enormous investigative e f f o r t s have been made i n each and i n many cases there has been some insight gained by integrating two of the three variables. For example, organizational theory and i t s subcomponent st r u c t u r a l contingency theory, speaks to the l i n k s between technology and organization,'but completely ignores the s p a t i a l dimension, e.g., Mintzberg (1983). S i m i l a r l y , o f f i c e location theory has attempted to deal with either the relationship between technology and location, e.g., Goddard and Pye (1977) or the relationship between patterns of monitoring and control and location, e.g., Daniels (1979), but i t rarely - 9 - integrates technology, organization and location. Much of the geographic l i t e r a t u r e s t i l l demonstrates minimal understanding of organization and confines i t s e l f to s i m p l i s t i c economic or s t r u c t u r a l i s t - f u n c t i o n a l i s t r a t i o n a l i z a t i o n s of the loca t i o n a l behavior of the firm. (The precedents i n thi s l i t e r a t u r e w i l l be reviewed i n Chapters 2 and 3). Technology, organization and location are inter-related phenomena. Each of these variables has undergone transformation and the relationship among these variables has changed as a r e s u l t , yet the alternative approaches that have been put forward to understand these transformations; have suffered from an undue focus on determinism and causality. In t h i s thesis i t i s argued that transformation i n organization, technology and location of enterprise i s an i n t e g r a l part of wider s o c i e t a l change. The wider s o c i e t a l transformation, the transformation i n technology and organization and the transformation i n the location of enterprise are synergistic i n thei r relationship. For example, the environment has become more turbulent partly because of changes i n the structure and performance of enterprise, which i n turn have been p a r t i a l l y mitigated by the turbulence i n the environment, the increase i n scale and s p a t i a l complexity of organization and by a s h i f t i n the purpose of enterprise. There i s no single cause, no prime mover or unidirectional force that i s governing the relationships among these variables. The complexity of these relationships does not mean that we abandon any attempt at analysis, rather i t requires that a more synergistic and i n t e r d i s c i p l i n a r y approach be adopted i n the investigation of these relationships. There i s l i t t l e precedent for such an approach i n s o c i a l science. We - 10 - have few coherent conceptual approaches for the description of transformation i n complex systems, l e t alone the theoretical basis to explain such phenomena. Marxist l i n e s of analysis can claim to have some elements of holism but they are by no means devoid of determinism and fixed d i r e c t i o n a l i t y (see Duncan and Ley (1982)). Systems theoretic approaches have made some contribution to the understanding of the structure and processes operating i n complex systems, but i n t h e i r more mechanistic form they have become i n f l e x i b l e attempts at c a l i b r a t i n g the behavior of such complex systems (Crosby (1983)). Cybernetics has also provided a useful base for the investigation of complex, synergistic phenomena p a r t i c u l a r l y i n i t s inclusion of the concept of steersmanship as a central variable i n the transformation of complex systems (Corning (1983)) Peter Coming's "Synergism Hypothesis" i s an impressive attempt to develop a non-deterministic, general theory of socio-cultural evolution, Corning (1983). A theory that i d e n t i f i e s a number of synergistic phenomena pertinent to the process of transformation i n complex s o c i a l systems. Corning and other cybernetic views of enterprise, e.g., Beer (1966) can be applied to the process of s t r u c t u r a l transformation. When enterprise i s transformed, there i s a purposeful change i n behaviour (and s o c i a l and technological organization) generated partly by innate survival i n s t i n c t s (what Corning terms teleonomic selection) and partly by the interaction of perceived environmental conditions and the expected u t i l i t y of transformation. Thus there are elements of causality and choice operating i n the same process. There i s also an interaction between sub-processes operating i n t e r n a l l y i n the organization and externally i n the environment. - 11 - In considering transformation i n complex systems then, a number of variables and dimensions must be integrated. None of them can be considered as the necessary and s u f f i c i e n t condition for transformation, although each of them may play a role as a necessary condition i n certain circumstances. These factors are not neatly compartmentalized into dependent and independent variables rather they interact i n a non-linear, synergistic fashion. Such complexity makes i t d i f f i c u l t to operationalize conventional forms of econometric or s t a t i s t i c a l analysis. In t h i s thesis an alternative form of explanation i s sought. A model of multi-unit enterprise w i l l be presented that describes the nature of the hierarchy i n complex enterprise. This "prototype" w i l l then be used as a baseline for evaluating structural transformation. 1.5 A MODEL OF MULTI-UNIT ENTERPRISE Figure 1.1 shows diagrammatically a model of the multi-unit enterprise as a system of decision-levels and information flows. This model i s derived from the work of Beer (1966) and Paterson (1981) i n management cybernetics and decision hierarchies; from the open systems views i n organization theory (see Scott (1981), Mintzberg (1979), (1983)); from the new geography of enterprise (see Taylor and T h r i f t (1983 a,b)) and from the emerging views of s o c i a l systems as non-linear decision systems, e.g., Crosby (1983), Prigogine (1977) or evolving cybernetic systems, Corning (1983). The roots of t h i s model w i l l be described i n more d e t a i l in Chapter 2, but i t i s useful here to b r i e f l y describe the elements. I t i s suggested that enterprise operates within the context of a multi-faceted environment. The - 12 - FIGURE 1.1 A MODEL OF MULTI-UNIT ENTERPRISE AS A DECISION AND INFORMATION HIERARCHY STRATEGIC/POLICY LEVEL EXTERNAL ENVIRONMENT STRATEGIC DECISION ft I PROGRAMMING STRATEGIC/TACTICAL INTERFACE V ( GUIDANCE SYSTEMS OPERATIONS LEVEL 1 / FIRST-LINE MANAGEMENT \ I \ ĵT OPERA IONS 1 INTELLIGENCE FUNCTIONS MONITORING AND CONTROL INTERNAL ENVIRONMENT t: DECISION FLOWS T FORMAL INFORMATION ^ INFORMAL INFORMATION FLOWS I FLOWS I - 13 - enterprise takes strategic decisions based on self-generated goals and on the perception of the environment held by senior decision-makers as i t i s conditioned by the scanning and probing a c t i v i t i e s of the organization's int e l l i g e n c e functions, Huber (1984). These decisions are enacted through the programming choices that are made as to the l e v e l of a c t i v i t y and funding required by the organization's sub-units to meet the goals of the enterprise. The guidance systems i n multi-unit enterprise are defined as the systems involved i n "steering" the a c t i v i t i e s of the sub-units of the enterprise. These may or may not be d i r e c t l y related to the sub-units i n a geographic sense or i n a direct " l i n e reporting" sense. The a c t i v i t i e s at each l e v e l of enterprise are monitored and controlled to conform to the parameters developed at the strategic and guidance l e v e l s . The operations l e v e l may or may not require direct f i r s t l i n e management depending on the nature of the enterprise under study. In addition to t h i s decision hierarchy there i s a range of information flows both formal and informal that may exist i n different forms of enterprise. For example, the much vaunted "management by wandering around" i n which strategic managers interact on a casual basis with operations people i s an informal information flow. The direct transmission of daily performance reports from sub-units to the strategic decision-level (CEO or Board) i s a formal information flow. Exchange of information among a l l the levels can occur i n enterprise. P a r t i c u l a r l y , when the size of the enterprise allows the number of linkages to be manageable and the complexity of tasks involved requires a high degree of formal and informal coordination. However i t i s more common for a r e s t r i c t e d - 14 - subset of information flows to occur i n enterprise, because of the bounded information handling ca p a b i l i t y of the individuals (March and Simon (1958), Williamson (1975)). Even where perfect and complete information e x i s t s , each l e v e l w i l l view that information i n a selective way. This basic model can be used as a prototype for examining the relationship between each l e v e l of the decision hierarchy. Figure 1.2 shows that at each l e v e l , decisions are conditioned by the range and complexity of the environmental f i e l d (shown by the surfaces i n the diagram) that the decision-maker faces and by the executive constraints imposed from the l e v e l above. (The exact model of decisions cascading down a decision hierarchy i s drawn from Hardwick's (1982) extension of Paterson's Decision Bands, Paterson (1981) described i n more d e t a i l i n Chapter 2). Each l e v e l has some degree of in t e l l i g e n c e functions that are involved with probing and scanning the external environment and assimilating these findings within the executive constraints. S i m i l a r l y each l e v e l interacts with the i n t e r n a l environment through monitoring and control functions. The diagram shows that the environmental surfaces and the organizational options become progressively more prescribed as the hierarchy i s descended. This, however, i s not a universal tru t h , rather i t depends on the nature of the enterprise under study. Indeed i n many cases the environment being faced by the guidance levels or even the operations levels may be more complex than the levels above. This prototype can be used as a baseline case that can be examined i n order to evaluate the transformation i n the structure of enterprise. I t i s hypothesized that the structure of the multi-unit enterprise i n s p a t i a l , .1.2 MULTI-UNIT ENTERPRISE AND THE INTERACTION WITH ITS ENVIRONMENT. INTERNAL ENVIRONMENT - 16 - functional and organizational terms i s affected by the relationship among: a) External Environment - Although by no means an independent variable, the external environment i n which enterprise operates i s one of the c r i t i c a l elements i n the synergistic web of factors shaping the structure and performance of organizations. The relationship between environment, structure and performance i s neither clear Nor consistent. Just as s i m i l a r family and educational environments can "produce" junkies and Nobel prize winners, so s i m i l a r organizational environments can "produce" winners and losers. b) Strategic Decision - The role of goal setting, of purposeful action i s a c r i t i c a l variable recognized i n economics, organization theory, cybernetics and p o l i t i c a l science. Of a l l the variables considered, strategic decision factors or "purposefulness" seems to be the one necessary, but not s u f f i c i e n t , condition that must exist i f complex systems are to survive. I t i s important to recognize that goals are arrived at through a process of choice, they are not necessarily imposed by some superstructure of society (as the marxists would have us believe) or by some overarching r a t i o n a l i t y (of economizing, profit-maximizing man as the neo-classical economists i n f e r ) . The process through which goals are set i s a p o l i t i c a l one (e.g., Corning (1982)). A variety of informational inputs and performance c r i t e r i a are gathered, analyzed and synthesized by the i n t e l l i g e n c e function i n enterprise. These inputs are incorporated i n strategic goal setting and i n the c r i t i c a l decisions made by the enterprise. The c r i t e r i a used by the strategic decision and i n t e l l i g e n c e functions involve what could be - 17 - termed the five E's: e f f i c i e n c y , effectiveness, equity, employment and enjoyment (or well being). The resolution of these c r i t e r i a and interests i s achieved through a p o l i t i c a l process i n which the power of interest groups plays a c r i t i c a l r o l e , c) Internal Organizational Environment - The operating aspects of an organization, i . e . , the functions, technology, a c t i v i t i e s , culture and human factors of organizational behaviour, a l l contribute to the transformation i n the structure of enterprise and affect i t s performance. Organization theory, organizational behaviour, cybernetics and systems theoretic approaches to organization have i n certain cases defined the terms organization and organizational structure to include environment, goals and technology i n t h e i r d e f i n i t i o n s . For purposes of analysis here, certain attributes of the inte r n a l organizational environment have been separated out and the term organizational structure i s used to describe the residual set of factors and related measures. Table 1.1 shows the dimensions of the inte r n a l and external environment. The interaction among these variables i s synergistic and i t i s suggested that there are no causal chains that can be readily drawn out. I t i s also argued that the interaction between these environmental variables i s mediated by strategic choice and by the c r i t i c a l decisions that are made at each l e v e l of the decision hierarchy. In attempting to explore the transformation i n the relationship among technology, organization and location these three variables are simultaneously, factors that influence structural transformation and outcomes - 18 - TABLE 1.1 - THE STRUCTURE OF THE ENVIRONMENT OF ENTERPRISE DIMENSION EXTERNAL ENVIRONMENT INTERNAL ENVIRONMENT POLITICAL/ Degree of Turbulence ECONOMIC A v a i l a b i l i t y of Resources Degree of Competition Degree of Regulation Structural Interests Size A v a i l a b i l i t y of Resources Relative strength of power e l i t e s SOCIO-CULTURAL Demographic Factors Social Values Cultural Context Organizational Style Corporate Culture TECHNOLOGICAL Candidate technologies Change Rate R&D ef f o r t s Technologies that are Deployed - Operations Technologies - Co-ordinative technologies FUNCTIONAL Candidate A c t i v i t i e s Market type Task environment Size Product d i v e r s i t y GEOGRAPHIC Site Situation Markets B u i l t Environment constraints Physical space requirements - 19 - of that structural transformation. For example, i f the term organization i s thought of as the prevailing pattern of d i f f e r e n t i a t i o n and communication within the enterprise, then i t i s both a way of describing the functioning of the enterprise (a dependent variable) and a set of circumstances conditioning change (an independent variable). S i m i l a r l y , i t seems clear that technology can make a contribution to the process of transformation. However, as Nathan Rosenburg (1982) has pointed out, i t i s important to distinguish between the mere existence of a technology in the wider environment (invention) and the extent of i t s d i f f u s i o n , adoption and use i n the enterprise under study. I t i s technology i n operation that can enable system transformation. This requires a synergistic combination of appropriate conditions i n environment, organization and strategic decision to be present. Furthermore, i t could be argued that the r e a l l y powerful contributions that technological change has made to the transformation of enterprise and society have been where clusters of technology are involved. F i n a l l y , with regard to location, i t seems clear that the l i m i t s of the natural environment have lessened t h e i r constraints on the behaviour of multi-unit enterprise. Nevertheless, demographic and geographic factors s t i l l play an important role where services have to be delivered to people, where goods have to be distributed and where the s p a t i a l clustering of a c t i v i t i e s i s a necessity because of the need for face to face contact. To a large degree however, the s p a t i a l structure of enterprise can be viewed as an outcome of the interaction of the other factors. Technology, organization and location operate as both independent and - 20 - dependent variables i n the process of str u c t u r a l change.- Transformation i n the relationship among these variables can be viewed best by developing an understanding of the wider process that relates external environment, strategic decision and in t e r n a l environment of enterprise. Figure 1.3 shows the hypothesized relationship among these elements. The organizational structure, technology and location of enterprise are interacting sets of phenomena operating within the wider interaction among the external environment, the inte r n a l environment and strategic choice. 1.6 RESEARCH STATEMENT In the beginning of t h i s chapter some concerns were raised about the structure and performance of multi-unit enterprise and about the academic approaches to analyzing these problems. In the course of t h i s study i t w i l l be argued that the transformation that has occurred i n multi-unit enterprise i s the result of a complex, synergistic process of change. There i s no unidirectional force that i s shaping t h i s transformation. Rather, there i s an interaction among the broad variables of environment (internal and external) and strategic choice, that contributes to the changing relationship of technology, organization and location i n the multi-unit enterprise. The l i t e r a t u r e i n t h i s area i s incomplete. Either there has been an overwhelming emphasis placed on s i m p l i s t i c causal modelling, or the analysis f a i l s to include a l l three components. Technology has been singled out by many observers as the c r i t i c a l contextual variable of the post-war period. Consequently a good deal of geographic, economic and organizational l i t e r a t u r e has placed an undue focus on technological change as the necessary and - 21 - F I G U R E 1 . 3 TECHNOLOGY, ORGANIZATION AND L O C A T I O N IN I T S S T R A T E G I C AND ENVIRONMENTAL CONTEXT INTERNAL ENVIRONMENT - 22 - su f f i c i e n t condition for s t r u c t u r a l transformation. I t i s true that contemporary technology can enable a wide variety of organizational and locational options, but these options are not d i r e c t l y determined by technological c a p a b i l i t y . It i s hypothesized here that emerging technologies can enable both c e n t r a l i z a t i o n and decentralization within the multi-unit enterprise i n s p a t i a l and organizational terms. Indeed, i t i s further argued that processes of ce n t r a l i z a t i o n and decentralization can occur simultaneously. The role of environmental change, strategic decision and the p o l i t i c a l processes underlying the interaction of these variables are suggested here as important contributory factors that condition the relationship among technology, organization and location. Although both contextual factors and operational factors interact to produce structural transformation, the contextual and strategic choice factors are hypothesized as being the variables that condition the direc t i o n of structural change towards either c e n t r a l i z a t i o n or decentralization. Technological and organizational factors on the other hand, are hypothesized to condition the magnitude of these effects. In the chapters that follow an attempt w i l l be made to describe and evaluate the changing interaction of these variables over the l a s t 30 years and to Qualitatively and Quantitatively assess the r e l a t i v e contribution these factors have made. Clearly, i t would be overly ambitious to attempt a comprehensive explanation of transformation i n technology, organization and location for a l l types of enterprise. Therefore the evidence and analysis necessary to test these hypotheses must be drawn from a s p e c i f i c case study. But i t would also be remiss to evaluate transformation i n one type of - 23 - enterprise without placing such an analysis i n i t s wider context. This study i s consequently divided into two main parts. In the following chapter the conceptual framework used i n t h i s study w i l l be developed from a c r i t i c a l review of i t s precedents. In Chapter 3 the l i t e r a t u r e dealing with transformation i n technology, organization and location w i l l be evaluated to test broadly, the hypotheses outlined above and to draw some general conclusions. In the second part of the study, the conceptual framework w i l l be focused on the transformation of one s p e c i f i c multi-unit system: the c l i n i c a l laboratory system of B r i t i s h Columbia from 1954 to 1984. The c l i n i c a l laboratory system exists to provide information. I t operates on a mul t i - s i t e basis, i n a technologically complex and dynamic environment i n which a wide variety of organizational actors and interests have been involved i n decision-making. I t i s therefore representative of the complexity that i s associated with many emerging post-industrial enterprises. Thus i n Chapters' 4,5 and 6 the general conclusions and c r i t i c i s m s of the l i t e r a t u r e w i l l be more thoroughly explored i n a case study of transformation i n the c l i n i c a l laboratory system of B r i t i s h Columbia between 1954-1984. In Chapter 7 the conclusions from the case study w i l l be presented and the p o l i c i e s and research implications of the two levels of study w i l l be discussed. In Chapter 8 the conclusions that have been reached w i l l be incorporated i n the development and evaluation of a set of alternative futures for the c l i n i c a l laboratory system of B r i t i s h Columbia for 1995. - 24 - 1.7 RESEARCH OBJECTIVES The s p e c i f i c research objectives are: 1) To describe the stages and c r i t i c a l l y evaluate the process of transformation i n the relationship among technology, organization and s p a t i a l structure of multi-unit enterprise. 2) To assess the r e l a t i v e contribution that environment, strategic decision, technology, organization and geography made i n shaping t h i s transformation* 3) To focus s p e c i f i c a l l y on evaluating the apparently ambiguous role that technology has played i n shaping the organizational and s p a t i a l structure of enterprise. Thus t h i s thesis i s concerned with the two challenges alluded to e a r l i e r i n t h i s study. The f i r s t i s to develop a coherent framework for the description of structures and str u c t u r a l transformation, i . e . , a typology of different types and stages. The work of B e l l (1976), Reich (1983), T r i s t (1980) and others can a s s i s t i n developing a typology of transformation. The second challenge i s to c r i t i c a l l y evaluate the process of transformation. Coming's work i s a useful s t a r t i n g point i n helping to explain the interaction of a number of variables operating at a number of scales. 1.8 CHAPTER SUMMARY This chapter has introduced the topic of transformation i n the relationship among technology, organization and location of multi-unit enterprise. I t has been argued that the process of st r u c t u r a l transformation - 25 - i s not well understood and that analyses to date have suffered from an undue emphasis on determinism and s i m p l i s t i c causal modelling. An alternative synergistic model has been proposed i n which transformation i s seen as a result of the interaction of contextual and operational factors. I t i s hypothesized that technology acts as an enabling factor that can amplify the effects of other contextual variables, but technology does not dictate the choice between centralized and decentralized systems. I t has been proposed that the process of s t r u c t u r a l transformation i n technology, organization and location can be evaluated by a c r i t i c a l review of the l i t e r a t u r e and by the application of the model to a s p e c i f i c case study of the development of the c l i n i c a l laboratory system of BC from 1955-1985. - 26 - Doc. #1223F Archive 0023F CHAPTER 2 - PRECEDENTS FOR THE CONCEPTUAL FRAMEWORK 2.1 INTRODUCTION The conceptual framework outlined i n chapter 1 (in Figures 1.1, 1.2 and 1.3) i s derived from the open systems view i n organization theory, from cybernetics, from decision/theory, from the emerging geography of enterprise and from the work on socio-cultural evolution by Peter Corning. The approach represented diagrammatically i n Figure 1.3 i s an attempt to redress the inherent deterministic bias i n many l i n e s of inquiry i n t h i s area. Before we can j u s t i f y the selection of t h i s form of model i t i s necessary to review the evolution of research into the relationship among the variables outlined. This chapter c r i t i c a l l y reviews a wide range of l i t e r a t u r e to. demonstrate the precedents of the models outlined i n Chapter 1. The chapter i s structured into 6 sections. 2.1 Introduction 2.2 The Five Phases of Model Development i n Organization Theory 2.3 Critique of the Deterministic and Contingency Approaches 2.A Refinements of the Contingency Model 2.5 Transformation i n Open Systems 2.6 Chapter Summary This chapter starts with a review of the work i n organization theory on the relationship between organizational factors and technology. Criticisms and refinements to the early positions are made and these are then integrated within an open systems framework. - 27 - This chapter reviews a wide set of l i t e r a t u r e . In order to increase the coherence of the review the e a r l i e r phases of theory development are represented diagrammatically to r e f l e c t the emphasis of each p a r t i c u l a r phase of the l i t e r a t u r e . The two basic diagram elements are drawn from Figure 1.2 and Figure 1.3. These diagrams r e f l e c t the two c r i t i c a l concepts of synergy and hierarchy within enterprise. Figure 2.1 below r e f l e c t s the notion of synergy between a number of variables that was discussed i n Chapter 1.4 and was shown diagrammatically i n Figure 1.3. Figure 2.2 r e f l e c t s the concept of hierarchy and the in t e r a c t i o n between levels of the enterprise, that was discussed i n section 1.5 and shown diagrammatically i n Figure 1.2. - 28 - 2.2 THE FIVE PHASES OF DEVELOPMENT OF THE MODEL IN ORGANIZATION THEORY The research conducted i n organization theory over the l a s t three decades i s a useful s t a r t i n g point i n investigating the relationship among technology, organization and location. Inquiry i n t h i s area has developed through f i v e i d e n t i f i a b l e phases. (See Figure 2.3). The f i r s t phase i s that of the technological imperative where technology i s theorized to be the primary variable that determines the structure of organization. The second phase i d e n t i f i e s organizational size as a determining factor i n the structure of organizations (either as a single determining factor or j o i n t l y with technology). The t h i r d phase i d e n t i f i e s environmental or contextual factors as primary determinate variables. These f i r s t three phases have been labelled by Jackson and Morgan (1978) as the three imperatives. The fourth phase introduces the idea of strategic choice as a contributory factor i n determining organizational structure. The f i f t h phase i s the contingency model approach that recognizes the contribution of a number of different factors. Each of these phases w i l l be examined i n more d e t a i l . 2.2.1 Phase 1 - The Technological Imperative Most analysts of organizations agree that technology i s an important variable. But there has been a considerable debate as to whether technology i s the primary determinate or imperative that controls organization structure and performance. Before an alternative framework can be j u s t i f i e d , i t i s important to review b r i e f l y the debate on the technological imperative i n organizational theory. Gerwin (1979) has argued: Phase 4 - Technology and Strategic Choice Phase 5 - Technology and the Contingency Model - 30 - "the mid 1960's was probably the heyday of the technological imperative i n organization theory. The works of Galbraith (1967), and M i l l e r and Rice (1967), Perrow (1967), Woodward (1965) appeared to have demonstrated the c r i t i c a l impact of technology upon organization. By the late 1960's the battle with the anti-technologists have been joined and since then the tide seems to have turned i n the i r (the anti-technologists) favour". Gerwin d i f f e r e n t i a t e s between organization l e v e l and job l e v e l research. Organizational l e v e l research starts with the organization as the unit of analysis and considers the major product or service offered. This leads to a focus on the dominant conversion technology ( i . e . , the p r i n c i p a l methodology for producing output) as the ch a r a c t e r i s t i c technology of the organization. This technology i s then normally measured on a scale such as workflow integration. Workflow integration i s a composite measure of technology, developed by the Aston Group that includes such measures as the extent to which the workflow was automated, interdependent, measurable, and adaptable to other purposes. This scale, l i k e so many others i n t h i s school, i s r e a l l y focused on the operations technology (which i s defined as the eauipping and sequencing of a c t i v i t i e s i n the workflow). I t ignores other aspects of the technology such as the materials used or the knowledge required (or technical complexity) of the processes. This type of organizational l e v e l approach i s exemplified i n the work of Blau and Schoenherr (1971), Child and Mansfield (1972), Hickson et a l (1969), Pugh et a l (1969) and Woodward (1965). Job l e v e l analysis on the other hand sta r t s with the tasks performed by individual employees, which leads i t to consider the methods by which these tasks are accomplished. Gerwin goes on to suggest that the weak explanatory power of technological determinism at the organizational l e v e l can be - 31 - attributed to methodological inconsistencies between studies and i n p a r t i c u l a r to a "lack of a common conceptual d e f i n i t i o n of technology". His analysis of studies at the job l e v e l , where there has been greater methodological and d e f i n i t i o n a l consistency, leads him to suggest that technological determininism may s t i l l have some v a l i d i t y . Despite Gerwin's plea for a reappraisal of the technological imperative, i t i s clear that the mainstream of the technological imperative l i t e r a t u r e i . e . , the organization l e v e l studies, has received considerable c r i t i c i s m , which has led to a search for further explanatory variables. The technological imperative simply stated that technology dictates structure. This view was moderated somewhat by the Aston group's findings which did not replicate e a r l i e r results from the technological imperative school. They concluded that, "variables of operations technology w i l l be related only to those str u c t u r a l variables that are centred on the workflow. The smaller the organization, the wider the structural effects of technology; the larger the organization, the more such effects are confined to part i c u l a r variables and size and dependence and sim i l a r factors make the greater o v e r a l l impact." Jackson and Morgan, 1978 p.182. (For more detailed reviews of the technological imperative see Reimann and I n z e r e l l i (1981) and Scott (1981)). 2.2.2 Phase 2 -The Size Imperative This leads into the second phase studies where size of the organization i s thought to determine structure. Mintzberg (1983) summarizes much of the conventional l i t e r a t u r e on the st r u c t u r a l effects of organizational s i z e : "The larger the organization, the more elaborate i t s structure - that i s , the more specialized i t s tasks, the more dif f e r e n t i a t e d i t s sub-units and the more developed i t s administrative component" Mintzberg (1983:p 124) - 32 - The f i r s t element of t h i s hypothesized relationship, ( s p e c i a l i z a t i o n i s related to size) was a p r i n c i p a l finding of the Aston Group studies (Pugh, Hickson, Hinings (1969)). Second, Blau (1970) argued that increased structural d i f f e r e n t i a t i o n ( i . e . , increased number of levels i n the organization ( v e r t i c a l ) and increased divisions or departments (horizontal)) was affected by size. Blau suggested however that d i f f e r e n t i a t i o n increases more slowly as size increases. The t h i r d aspect of Mintzberg's hypothesis that size leads to a more developed administrative component, i s also derived from Blau's work. Paraphrasing both Mintzberg (1983) and Pfeffer (1983), there are two causal arguments behind t h i s finding. F i r s t , with increased s p e c i a l i z a t i o n ( d i v i s i o n of labour), there i s an increasing need for coordination between organizational sub-units - hence more supervisory and coordinating s t a f f . The second argument suggests that with increasing numbers of people to coordinate, direct supervision becomes problematic and impersonal methods of control, such as standardization through rules and procedures have to be used. Creation and maintenance of these rules requires a larger administrative component or techno-structure as Mintzberg terms i t . This l a t t e r view i s accepted by Corning (1982), but i t can be challenged. I t seems clear that t h i s s h i f t has occurred i n many enterprises as they grow but whether i t i s necessary for the e f f e c t i v e operation of organizations or whether i t r e f l e c t s a broad s o c i e t a l desire to participate i n administrative work i s not clear. Bertrand Russell foretold of these changes in 1935 when he said: "Work i s of two kinds,the f i r s t kind i s involved i n a l t e r i n g matter at or near the earth's surface, and the second i s involved i n t e l l i n g people to do so. The f i r s t i s unpleasant and poorly paid the second i s - 33 - pleasant and highly paid. The second i s capable of i n d e f i n i t e extension, there are not only those who give orders but those who give advice as to what orders should be given" The next size hypothesis put forward by Mintzberg (1983:125) i s that the larger the organization the larger the average size of i t s units. F i n a l l y , Mintzberg suggest that the larger the organization, the more formalized i t s behaviour. The argument being that i n large organizations the standardization of a c t i v i t i e s and the formalization of roles , allows the organization to decentralize decision-making by prescribing choices very closely. In terms of any interaction between size and technology, studies by Child and Mansfield concluded that "size has a much closer relationship to the aspects of structure (that were) measured, than does technology" (Jackson and Morgan (1978) p.184). S i m i l a r l y Blau et a l (1976) i n reviewing other size-technology studies as well as summarizing t h e i r own study of New Jersey factories stated that "organizational size rather than production technology appears to exert the more s i g n i f i c a n t influence on the d i v i s i o n of labour and the organization of work." (The size-technology debate i s s t i l l continuing and a more recent Japanese study (Marsh and Mannari (1981)) suggests there i s a r e v i v a l of support for the technological imperative school of Woodward). 2.2.3 Phase 3 - Technology and the Environmental Imperative In the the t h i r d phase of theory development, the notion of environmental factors or contextual constraints i s added to the size and technology imperatives. I t i s best i l l u s t r a t e d i n the model developed by Child (1973) shown i n Figure 2.4 and described below by Jackson and Morgan (p 185): - 34 - "In Child's model, increased s i z e , workflow integration and contact with outside groups leads to increased complexity i n organizations. On the other hand increases i n the number of operating s i t e s ( i . e . , geographical or s p a t i a l decentralization) tends to lower complexity. As complexity increases i t leads to increases i n formalization. Size also leads to pressure on top executives to decentralize authority. Decentralization and formalization are associated with each other i n a complementary way, reinforcing each other. Increases i n formalization are also encouraged by increases i n the size of the owning group. As he himself indicates, Child's model must be treated as hypothetical but i t i s one of the the f i r s t to show how several variables might affect organizational structure." Other environmental determining factors have been linked to technology by analysts such as Negandhi and Reimann (1979), who i d e n t i f i e d that the nature of an organization's concern for i t s consumers, employees, stockholders and government, had an impact on i t s organizational structure. V i r t u a l l y a l l of the imperative type studies mentioned to date focus on the operations technology of organizations. However alternative views of the role and meaning of technology have been suggested. For example, Thompson (1967) argued that since organizations are r a t i o n a l e n t i t i e s operating i n an uncertain environment, they seek to buffer or protect their."technical core" from t h i s uncertainity. The technical core i s defined as those parts and processes an organization uses to transform the materials i t a l t e r s as i t s primary function. Thompson (1967) i d e n t i f i e s three types of technology: i ) mediating (e.g., used by a bank as i t mediates between i t s customers and the services i t provides) i i ) intensive (e.g., used by a hospital as i t performs a l l of the necessary functions for the care of i t s patients) and i i i ) long-linked (e.g., used by a factory as various operations are linked i n a sequence). - 35 - FIGURE 2.A JOHN CHILD'S MODEL - THE ENVIRONMENTAL IMPERATIVE CHILD'S MODEL OF RELATIONSHIPS BETWEEN CONTEXTUAL VARIABLES A N D ORGANIZATIONAL STRUCTURE. Source: John Child, "Predicting and Understanding Organization Structure," Administrative Science Quarterly 18 (June 1973):183. Context % Complexity A Bureaucratic Control . K . Size of organization- Integration and automation + of technology Number of operating sites Specialization of roles Specialization of functions Level of specialist qualifications Decentralization X Formalization: Standardization of procedures Documentation Environmental Context Degree of contact across organizational boundaries: with other organizations, i.e., activities con- tracted out with owning group Size of owning group - 36 - In Thompson's model i t i s suggested that both environment and technology are important determinants of structure, but t h e i r impacts are di f f e r e n t . The primary impact of technology i s upon e f f o r t s to control and coordinate the buffered "technical core". The environment has i t s primary impact on the organization's structure, i n those aspects of structure that are created to respond to uncertainty. For example i n order to respond to uncertainty, units are created to monitor and survey what i s happening i n the environment, plan responses to i t , and develop a structure that i s appropriate for the degree of uncertainty present i n the environment. (The d i s t i n c t i o n Thomson makes between the strategic l e v e l and the technical core may explain why Gerwin asserts that organizational l e v e l research does not support determinism and job l e v e l research apparently does). This type of view, represents a departure from pure imperative type models and leads to the fourth phase where technology, size and environmental factors are integrated within a framework of strategic choice. 2.2.A Phase A - Technology and Strategic Choice C l a s s i c a l management theorists of the s c i e n t i f i c management school recognized the c r i t i c a l importance of senior management i n determining organizational structure. This view was largely neglected u n t i l Chandler's study i n 1962 of top US firms, that concluded that an organization's str u c t u r a l configuration i s influenced by prior strategic decisions of the top executive team, i . e . , structure follows strategy. John Child (1972) develops t h i s idea further to suggest a concept of strategic choice, i . e . , top executives have "freedom of maneuver" (or range of FIGURE 2.5 JOHN CHILD'S MODEL EXTENDED TO INCORPORATE STRATEGIC CHOICE Environmental Characteristics Strategic Choice Organizational Factors - Size - Technology - Structure - Human Resources Organizational Effectiveness - 38 - J discretion) with respect to organizational factors such as scale of operations, technology, structure and human resources. This range of discretion i s thought i n turn to be defined primarily by conditions present i n the firm's environment, as shown i n Figure 2.5. Child's model i s somewhat d i f f i c u l t to operationalize as an empirical t o o l . Anderson and Paine (1975) hypothesized that the response patterns of policy makers i s influenced by t h e i r perceptions of uncertainty i n the environment and the i r perceived need for change. In r e a l i t y they found that only when environmental conditions are perceived as problematic do they encourage structural responses by the executive. I t could be argued that Child's conception i s i t s e l f a form of imperative. However a study by Montanari (1976) found a codeterminant role for contextual and managerial discretion factors, i . e . , for certain structural dimensions, managerial discretion emerged as the dominant predictor, i n others i t was contextual factors and for others i t was technology and si z e . These findings lead Montanari (1978 and 1979) and Mintzberg (1979, 1983), among others, to the development of the f i f t h type of model: the contingency model. 2.2.5 Phase 5 - Technology and the Contingency Model In one form of t h i s model (shown diagrammatically i n Figure 2.6) Montanari (1979) extends st r u c t u r a l determination theory (phases 1 to 3 above) on three fronts: 1) Incorporating managerial influences into the model 2) Proposing a moderating role for technology 3) E x p l i c i t l y recognizing the multi dimensionality of organization structure - 39 - IGURE 2.6 MONTANARI»S CONTINGENCY MODEL Causal factors Moderating' factors Organizational structure 'Organization*! outcomos Contextual factors Size Environment I Managerial factors Strategic choice Perceived power position Standard bureaucratic 1. Vertical span 2. Span of control ^ 3. Formalization 4. Standardization 5. Vertical differentiation 6. Horizontal differentiation 7. Centralization 8. Integration 9. Administrative ratio 10. Structuring of activities 11. Specialization Locus of managerial decisions 1. Delegation of authority 2. Autonomy 3. Centralization 4. Profcssionalization 5. Integration Organization unit performance - 40 - Montanari integrates the contextual factors of size and environment (phases 2 and 3) with the managerial factors (phase 4) but he extends managerial factors to include perceived power of managers. In t h i s framework Montanari sees technology as a moderating factor rather than a deterministic one. The dependent factors of organizational structure are those recurring measures i n the l i t e r a t u r e (see Montanari (1979) and Pfeffer (1982)). Montanari's contingency theory hypothesizes that: "the causal factor mix and the strength of relationships (between causal and dependent variables) depend on which dimension (of organizational structure) i s being analyzed. In addition the moderating effect of technology i s present for the standard bureaucratic dimensions but not for the managerial decision aspects of structure. Managerial discretion factors ( i . e . , strategic choice) are proposed as the primary predictors of the locus of the managerial related dimensions (e.g., delegation of - authority, autonomy)." This approach does have thoeretical appeal and preliminary empirical evidence offered by Montanari (1979), suggests i t has some operational v a l i d i t y . S i m i l a r l y , Mintzberg (1979 and 1983) t r i e s to integrate the findings from the str u c t u r a l contingency t r a d i t i o n i n organizational theory i n his book "Structure i n Fives". Mintzberg's approach i s very much i n the "if - t h e n " t r a d i t i o n of Burn and Stalker (1961), Child (1972), Jay Galbraith (1973), Montanari (1979) and others. He asserts b a s i c a l l y that organizational structure can be "designed" to best s u i t the environment of enterprise, the type of tasks i t has to accomplish and the type of resources (both human and technological) that i s employs. He uses a very interesting organizational "logo" that i d e n t i f i e s the five basic components of the organization. (Figure 2.7) - 41 - i ) Strategic Apex - This i s the board l e v e l functions of Beer (1979) or the Strategic Decision (F Band) of Paterson (1981). i i ) Middle Line - The hierarchy of middle management that mediates between the goal setting "strategic apex" and the operation of the enterprise. i i i ) The Operating Core - Where the p r i n c i p a l a c t i v i t i e s of the enterprise are carried out - the shop f l o o r , the patient care ward, etc. iv) The Technostructure - Where the rules and operating procedures of the enterprise are designed and monitored. v) The Support Structure - Where support a c t i v i t i e s , unrelated to the primary goals of the enterprise, are carried out, e.g. p a y r o l l , cafeteria functions, mailroom, etc. Mintzberg uses these f i v e organizational components and a host of other f i v e dimensional terms, that draw heavily on the Aston parameters outlined e a r l i e r , to describe f i v e generic organizational designs (Figure 2.8): i ) The Simple Structure - Is the common form of the small, owner/manager operation where the operating core i s supervised d i r e c t l y from the strategic apex with l i t t l e or no technostructure, support structure or middle l i n e . This structure i s preferred for small scale enterprise operating i n simple but dynamic environments. i i ) The Machine Bureaucracy - Where the enterprise i s broken down into highly specialized but routinized tasks and formalized through written rules and procedures developed by the technostructure.  - 43 - FIGURE 2.8 MINTBERG'S FIVE ORGANIZATIONAL DESIGNS e) Adtiocracy - 44 - This form of structure, s i m i l a r to Weber's (1947) "bureaucracy" or Burn's and Stalker's (1961) "mechanistic structure" i s deemed by Mintzberg to be functional for r e l a t i v e l y simple, stable and technically uncomplicated environments. i i i ) The Professional Bureaucracy - Where highly specialized "operators" are co-ordinated through educational and s k i l l requirements rather than rules. This type of organization i s compatible with complex but stable environments such as those i n health and education. i v ) The Divisionalized Form - Is the closest Mintzberg comes to addressing the issue of multi-unit enterprise. In t h i s form the co-ordinating mechanism i s through standardization of outputs, e.g., p r o f i t performance. Mintzberg sees t h i s form as: "not so much an integrated organization as a set of quasi-autonomous e n t i t i e s coupled together by a central administrative structure." (Mintzberg (1983:p 215)) The key linkage i s between headquarters and the middle l i n e managers i n each d i v i s i o n . There i s a greater degree of formalization and standardization than i f each d i v i s i o n was completely autonomous. This form i s "suited" for large, established, d i v e r s i f i e d enterprise both public and private working i n r e l a t i v e l y stable environments. v) Adhocracy - In t h i s organizational form there i s a sophisticated operating core working i n loose association, e.g., the think tank, f i l m company or consulting firm. The adhocracy can be an - 45 - "operating adhocracy" which solves problems on behalf of i t s c l i e n t s or an "administrative adhocracy": an organization designed to innovate but one where the operating core i s truncated either by contracting out (e.g., developers) or through automation (e.g., certain hi-tech companies). There i s a blurring of roles and r e s p o n s i b i l i t i e s between s t a f f and l i n e i n the adhocracy. I t i s best suited as an organizational form to complex and dynamic environments. This typology w i l l be used i n Chapter 3 when we discuss the transformation i n the structure of enterprise. 2.3 CRITICISMS OF THE DETERMINISTIC AND CONTINGENCY APPROACHES Technology, s i z e , environment and strategic choice have been variously regarded as driving variables i n the development of research into the determinants of organizational structure. There are a number of flaws i n t h i s l i t e r a t u r e that need attention i f we are to apply successfully any of these concepts i n t h i s study. 2.3.1 Causality Organizational structure and operations technology are not i n some cause and effect relationship to be proved or disproved by technological determinists and thei r opponents. But rather these two factors are complementary and to some degree substitutable as a means to an end. The selection of organization and technology w i l l be constrained by both strategic choice and by contextual or environmental factors (Aldrich (1979), Mintzberg (1983), Montanari (1979)) such as the economic, s o c i o - p o l i t i c a l or c u l t u r a l - 46 - factors acting for and against the adoption of pa r t i c u l a r forms of technology and/or organization. Mintzberg's analysis emphasizes the notions of design and f i t , which draws on the ecological idea that p a r t i c u l a r l i f e forms are better suited to certain environments. Although he attempts to avoid deterministic relationships, one i s l e f t with the impression that there i s certai n l y a best f i t , i . e . , tasks and environments v i r t u a l l y "dictate" form i f the designer i s r a t i o n a l (which i s a very major assumption, as Pfeffer (1982), Weick (1979) and others suggest). 2.3.2 Limited Environmental Analysis The second major c r i t i c i s m that can be made of many of the studies i n th i s body of "structure research" i s that the models use a limited range of environmental factors. (The conventional study i s i n the form of regression analysis using technological and environmental factors as independent variables and measures of organizational structure as dependendent variables). Limitation of environmental factors to one single scale such as the "Lawrence and Lorsch Environmental Uncertainty Subscale" (Lawrence and Lorsch (1967)), may be methodologically convenient but i t seems to suppress the range of environmental factors i d e n t i f i e d by Emery and T r i s t (1965), Aldrich (1979), Huber (1984) and others. 2.3.3 Limitations i n the Concept of Technology The t h i r d major c r i t i c i s m i s i n terms of the methods used to c l a s s i f y and categorize technology. "Dominant technology" i s a phrase often used i n the l i t e r a t u r e , referring to the dominant operations technology the observers could i d e n t i f y i n an organization (or i n the technical core of an - 47 - organization). To the analyst of information technology t h i s i s an unhelpful focus for two reasons. F i r s t , i t i s unusual for information technology to be the "dominant technology" of an organization. I t i s much more l i k e l y that information technology i s used i n a secondary r o l e , i . e . , for a subset of tasks i n the organization. Second, i t i s unlikely that information technology w i l l always be used as an operations technology i n the true sense of the term (although increasingly many industries can be viewed as involved i n information processing as a primary function, e.g., f i n a n c i a l services, health and education). A more common use of information technology i s as a co-ordinative technology, i . e . , as a means of enhancing the production and communication of information i n an organization. This has led some analysts to add computer usage as a separate contextual factor i n models of the relationships affecting organizational structure. (See Figure 2.9 from Jackson and Morgan (1978)). 2.3.A. Inadequate Integration of Geographic Phenomena The f i n a l c r i t i c i s m that can be l e v e l l e d at the "structural research" i s that i s -does not adequately relate geographical and organizational phenomenon. However there are signs that geographers and others are encroaching on the middle ground between organizational and s p a t i a l analysis. For example, i n terms of the debate over the impact of information technology on the s p a t i a l and organizational structure of enterprise, there has been considerable focus on the centralization/decentralization question. Three broad areas of inquiry are being undertaken. F i r s t , there are those who define c e n t r a l i t y primarily i n physical space - 48 - FIGURE 2.9 JACKSON AND MORGAN'S MODEL OF POSITED RELATIONSHIPS WITH ORGANIZATION STRUCTURE Managerial Factors Context Complexity A Bureaucratic Control . A. . Strategic business decisions \ -Firm goals and plans Administration decisions and plans- Values and cause/effect belief systems of the dominate coalition -Organization size- —Spat ia l dispersion- + Specialization: + roles and functions Level of specialist Sc qvaliftcations -Computer usage + Formalization: standardization and documentation Decentralization Environmental Context ' Degree of contact across organizational boundaries Growth phase: growth: + decline:- —Size of owning group —Autonomy 7 - 49 - terms and who have focused on the tele-communications - transport trade-off ("T* as i t i s sometimes c a l l e d ) , or the convergence of time and space, e.g., De Sola (1977), Abler (1975), Alber and Falk (1981). This inauiry has focused freauently on developing abstract mathematical models of the dynamics of sp a t i a l interaction, e.g. Harkness (1973), Isard (1979). The general conclusion here i s that communications technology i n par t i c u l a r w i l l allow man to overcome the "tyranny of distance" and lead inevitably to decentralization. The evidence that i s cited ranges from the increases i n relocation of head o f f i c e s of large corporations from large c i t i e s to small c i t i e s , to the p o s s i b i l i t i e s of telecommuting, where communications w i l l be substituted for the journey to work (Mitre Corp (1978); Abler (1975)). The second school examines c e n t r a l i t y i n functional, organizational and sp a t i a l terms. The conclusions from t h i s group are less clear cut. Some argue that face-to-face linkages are of paramount importance i n many a c t i v i t i e s and therefore the decentralizing impact of technology w i l l be limited to a r e s t r i c t e d subset of these a c t i v i t i e s and functions, Gad (1979), Goddard and Pye (1977). Others have argued that i t i s necessary to recognize the organizational context of lo c a t i o n a l decisions. These researchers have argued that the structure of decision making within an organization w i l l affect l o c a t i o n a l decisions, i . e . , the structure or organizations i s represented i n geography, Massey (1979), Pred (1977), Goddard (1980), Edwards (1983), Taylor and T h r i f t (1983). Pred (1977,1979) i n part i c u l a r has argued that i n advanced economies, the s p a t i a l hierarchy of many enterprises i s conditioned by the structure of decision-making. Theoretical developments i n the geography of enterprise w i l l be discussed further i n Chapter 3. - 50 - The t h i r d school of inquiry (which i s being conducted by a broader group including economists,' organizational theorists and management scholars) focuses primarily on the functional and organizational context and i s to some extent a s p a t i a l . This group i s more concerned with the cen t r a l i z a t i o n of decision making and control regardless of location. As such i t deals with questions of ef f i c i e n c y , autonomy, equity, and power, e.g., Simon (1979), Beer (1966), Pfeffer (1981). Much of t h i s work i s from a value laden position that states that c e n t r a l i z a t i o n i s bad (E.F. Schumacher (1973)). For analysts from t h i s t h i r d t r a d i t i o n , the impact of technology on c e n t r a l i t y i s viewed as a function of the d e s i r a b i l i t y of ce n t r a l i z a t i o n on the one hand and the f e a s i b i l i t y on the other. Simon (1979) has suggested that "any change i n technology that makes i t cheaper and easier either to centralize or to decentralize decisions w i l l t i p the balance i n that d i r e c t i o n . " (These three schools w i l l be reviewed more thoroughly i n Chapter 3 when environmental and structural transformation i s discussed. The best conclusion that can be drawn at t h i s stage with regard to technology, organization, location and the degree of ce n t r a l i z a t i o n i s provided by Goddard (1980) discussing the o f f i c e sector: "Technological development i s a permissive factor - e.g., f a c i l i t a t i n g the growth of large enterprises. I t i s a necessary, though not s u f f i c i e n t , condition for loc a t i o n a l change. In consequence the impact of new technology i n the o f f i c e sector needs to be seen i n the broader context of the factors influencing organizational structure and strategy i n a s p a t i a l setting ... In order to avoid naive technological determinism i t i s necessary to consider the functions of the o f f i c e and the factors influencing t h e i r geographical spread." 2.A REFINEMENTS OF THE CONTINGENCY MODEL The f i r s t three concerns outlined above ( i . e . , concerns with causality, environmental analysis and the d e f i n i t i o n of technology) r e f l e c t the more - 51 - general c r i t i c i s m s being voiced i n organization theory. I t i s useful here to review b r i e f l y the change i n focus i n organizational theory and the contributions that these c r i t i c i s m s have made to ref i n i n g our model. Chapter 1 described the early roots of organization theory i n the work of Weber on bureacracy (Weber (1947)), Taylor (1911) on s c i e n t i f i c management and Mayo and the Human Relations School (Mayo (1949)). Over the l a s t three decades a number of conceptual developments have occured drawing from both the primary t r a d i t i o n s of organization theory, sociology and psychology, and from secondary or emerging t r a d i t i o n s , systems/cybernetics, social-ecology, economics, p o l i t i c a l science and decision theory. A number of attempts have been made recently to synthesize, c l a s s i f y and c r i t i a u e what i s now an enormous l i t e r a t u r e . Four useful syntheses are presented i n the works of Scott (1981), Hage (1980), Mintzberg (1983) and Pfeffer (1982). The typology of Scott i l l u s t r a t e s three competing positions. 2.4.1 Scott's Taxonomy of Rational, Natural and Open Systems i n Organization Theory Scott (1981) attempts a "coherent introduction to the soc i o l o g i c a l study of organization." He has suggested that organization theory f a l l s into three general theoretical prespectives, 1) A Rational Systems Perspective 2) A Natural Systems Perspective 3) An Open Systems Perspective From a rati o n a l systems perspective: - 52 - "an organization i s a c o l l e c t i v i t y , oriented to the pursuit of r e l a t i v e l y s p e c i f i c goals and exhibiting a r e l a t i v e l y highly formalized s o c i a l structure." Within t h i s t r a d i t i o n f a l l S c i e n t i f i c Management, Simon's work on Administrative Behaviour and Weber's work on Bureaucracy among others. From a natural systems perspective: "an organization i s a c o l l e c t i v i t y whose participants are l i t t l e affected by the formal structure of o f f i c i a l goals but who share a common interest i n the s u r v i v a l of the system and who engage i n c o l l e c t i v e a c t i v i t i e s informally structured to secure t h i s end." Within t h i s t r a d i t i o n f a l l Mayo (1949) and the Human relations school, McGregor of theory X and Y fame (1962), and Parsons (1951). Scott (1981, p 175) i d e n t i f i e s the essential differences between the two schools along a number of dimensions. 1) "Rationalist" analysts were usually p r a c t i c a l men, practitioners of management whereas "natural systems" analysts were focused more on academic inquiry. 2) They d i f f e r i n the case study focus of t h e i r i n q u i r i e s : r a t i o n a l systems views prevail i n i n d u s t r i a l and bureaucratic environments. Whereas open systems views pre v a i l i n not for p r o f i t , service and professional organizations, such as schools and hospitals. 3) I t has been suggested that the r a t i o n a l i s t systems view i s more suited to the stable environment whereas the natural system view i s suited to dynamic environments. 4) The moral viewpoint of the organizational participant d i f f e r s i n the rat i o n a l viewpoint where the employee i s viewed primarily as one who performs tasks, from the natural systems viewpoint i n which the employee's functioning i s considered from a h o l i s t i c perspective. - 53 - 5) The philosophical t r a d i t i o n s underlying these views are d i f f e r e n t . The r a t i o n a l systems model stems from an instrumentalist, mechanistic perspective. The natural systems perspective stems from an a n t i r a t i o n a l , organic philosophy of s o c i a l systems. More recently, Scott points out, we have seen the development of an approach to organizations as open systems. From an open systems perspective: "an organization i s a c o a l i t i o n of s h i f t i n g interest groups that develop goals by negotiation; the structure of the c o a l i t i o n , i t s a c t i v i t i e s and i t s outcomes are strongly influenced by environmental factors." (Scott (1981) p: 178) Within t h i s t r a d i t i o n Scott places cybernetic models or organization, contingency theory, natural selection models of organization, and Karl Weick's theory of organizing (Weick (1979)). There have, according to Scott, been attempts at integrating these three perspectives on organization. For example, Etzioni's (1958) s t r u c t u r a l i s t model, Lawrence and Lorsch's contingency model (1967) and Thomson's Levels model. The ideas of Thomson (touched on e a r l i e r ) can be usefully integrated with Mintzberg (1983) and with some of the perspectives on decision-making and organization put forward by TT Paterson (1981) and with the management cybernetics of Stafford Beer (1966, 1979). Scott (1982, p:127)provides a useful synthesis of Thomson's work: "Thomson's model i n a nutshell i s that organizations s t r i v e to be r a t i o n a l although they are natural and open systems. I t i s i n the interest of administrators - those who design and manage organizations - that the work of the organization be carried out as e f f e c t i v e l y and e f f i c i e n t l y as possible. Since technical r a t i o n a l i t y presumes a closed system, Thomson argues that organizations w i l l attempt to seal o f f t h e i r technical l e v e l protecting i t from external uncertainties to the extent possible. Thus, i t i s at the l e v e l of the core technology - the assembly l i n e i n the automobile factory, the patient care wards and treatment rooms i n the hospital - that we would expect the r a t i o n a l - 54 - system perspective to apply with most force. At the opposite extreme, the i n s t i t u t i o n a l l e v e l , i f i t i s to perform i t s functions must be open to the environment. I t i s at t h i s l e v e l where the environment must be enacted or adapted to, that the open systems perspective i s most relevant. In the middle i s the managerial l e v e l s , which i s required to mediate between the r e l a t i v e l y open i n s t i t u t i o n a l and closed technical l e v e l s . To do so e f f e c t i v e l y requires the f l e x i b i l i t y that i s associated with the less formalized and more p o l i t i c i z e d a c t i v i t i e s depicted by the natural system theorists. I t i s also the managers - whose power and status are most intimately linked to the fate of the organization - who have the greatest stake i n the s u r v i v a l of the organization as a system." Thomson's work provides a more complex view of the large organization, one i n which there i s an i d e n t i f i a b l e hierarchy of behaviour that i s both motivated and constrained by the functional needs and the nature of the sub-systems of the enterprise. 2.4.2 T.T. Paterson and the Decision Band Method T.T. Paterson (1982) has developed a s i m i l a r h i e r a r c h i a l notion of enterprise that suggests that variation i n behaviour, r e s p o n s i b i l i t i e s (and thus pay) can be d i s t i l l e d down to one c r i t i c a l variable: the decision. Paterson suggests that there are four components of a decision, operating as a "decision making procedure" at 6 h i e r a r c h i a l scales i n enterprise. The decision making procedure comprises a four c e l l matrix i n which a lin e a r sequence i s followed. c + D i + 1) The Information Stage (I) - gathers data and recognizes hypotheses or problems. - 55 - 2) The Conclusion Stage (C) - consists of assessing alternatives for action and rating them on an optimality scale against a part i c u l a r context or frame. 3) The Decision Stage (D) - consists of examining the alternatives, selecting one and making a committment to achieve a p a r t i c u l a r l y end or objective. A) The Execution Stage (E) - consists of choosing the correct means of achieving the ends. Paterson argues that there i s "feed forward" from the E stage to the I stage i n which the executive implementers communicate the f e a s a b i l i t y of alternatives. Paterson asserts that these decision procedures are related through a cascade of decisions down a hierarchy of decision-bands. The hierarchy of Decision Bands i s : Band Administrative (Policy and Planning) F Policy-making decisions (goal-setting for the enterprise) E Programming decisions ("strategic planning") D Interpretive decision ( " t a c t i c a l planning") Instrumental (Operations) C Process decisions (selection of process) B Operations decisions (on operations) A Element decisions (on elements) The cascade of decisions refers to the l i n k s between the ends set by one le v e l (E Box) as an input into the conclusions (C Box) of the l e v e l below. - 56 - Fig. 2.10. This concept of a cascade of decisions was developed by Hardwick (1982) i n his notion of co-management i n education. At a l l scales there i s interaction with the environment by the I Box, i. e . data i s gathered and synthesized i n the decision procedure. FIGURE 2.10 PATERSON AND HARDWICK'S DECISION BANDS IN A DECISION HIERARCHY F Policy E Program e D I E Environment Interpretive Operations Elements 2.4.3 Stafford Beer's 5 Systems S i m i l a r l y , Stafford Beer, i n his physiologically-derived, management cybernetic models, argues that there are only 5 sub-systems i n enterprise or i n any complex system. The 5 sub-systems i n a Beerian model are: System 1) - Operations System 2) - Management (direct supervision and organization of operations) System 3) - Monitoring and Control Functions - 57 - System 4) - The Development Directorate (responsible for "corporate planning" or "strategic planning" a c t i v i t i e s ) System 5) - The Board Function (responsible for steering the enterprise by setting the goals) 2.4.4 Amara and L i p i n s k i : Strategic Planning Model F i n a l l y , Amara and L i p i n s k i (1983: p 39) offer a useful corporate planning framework that i d e n t i f i e s 6 stages i n the planning process. "A number of s p e c i f i c features of t h i s framework should be noted: 1) The upper (analyzing) half of figure 2.11 includes the f i v e p r i n c i p a l stages of planning, stages 1 to 5; the lower (implementing) half includes the bas i c a l l y operational loops, stage 0. 2) From l e f t to r i g h t , the upper framework r e f l e c t s the three p r i n c i p a l components of any planning framework: the probable (environment), the possible (options), and the preferable (values); or, a l t e r n a t i v e l y , what do we know, what can we do, what do we prefer? 3) The management function i s the centerpiece of the framework, straddling the l i n e between the upper "strategic" and lower " t a c t i c a l " half of the framework. This positioning graphically i l l u s t r a t e s the essential unity and inseperability of t a c t i c a l decision making and strategic planning. 4) The i t e r a t i v e nature of the basic planning process i s i l l u s t r a t e d by lower t a c t i c a l and upper strategic feedback loops, joined within the management function. 5) The p r i n c i p a l flow between the upper and lower halves of t h i s figure i s information: options that inform decisions or resource allocations from - 58 - FIGURE 2.11 AMARA AND LIPINSKI'S MODEL OF CORPORATE STRATEGIC PLANNING •WHAT \ f ^ P* *SO WHAT" - 59 - top to bottom, results that monitor the outcomes of decisions previously made from bottom to top. 6) Symbolically, the upper strategic loop may be viewed as representing the " l e f t brain" r a t i o n a l component of management while the lower t a c t i c a l loop represents the "right brain" i n t u i t i v e component. 7) F i n a n c i a l l y , the upper ha l f of Figure 2.11 generally deals with choices that are l i k e l y to impact the balance sheet, the lower half with decisions more l i k e l y to impact the profit-and-loss statement. 8) Any r e a l decision-making s i t u a t i o n w i l l be an amalgam of the fi v e stages shown and described e a r i l e r . " 2.4.5 Summary and Conclusions Thomson, Beer, Paterson, and Amara and L i p i n s k i a l l view .organization to some extent as open systems. The contribution of Thomson's work for our purposes i s i n the recognition of the p o l i t i c i z a t i o n of middle management behaviour and that different levels of the enterprise behave d i f f e r e n t l y . Thomson however underestimates the interaction with the environment that the lower levels of the hierarchy might have i n certain types of enterprise, e.g., professional bureaucracy or sales and marketing aspects of organization and his theory ( l i k e most of even open systems organization theory) i s s t i l l somewhat instrumentalist. The contribution that Paterson makes i s i n recognizing that hierarchy i s (or at least should be) fundamentally related to decision-making, therefore i n attempting to understand s p a t i a l and organizational hierarchy i t i s important to "locate" types of decision-making i n the multi-unit enterprise. - 60 - Stafford Beer's contribution is in providing insight about the interaction of goals, steering and monitoring and control in enterprise. He suggests that bureaucratic forms of enterprise tend to over-develop their monitoring and control system (Systems 3) by duplicating these functions at a number of levels. Beer also argues that the development directorate or intelligence functions (System 4) have tended, historically, to become staff functions, separated from the hierarchy of decision and authority in the large scale enterprise. Beer advocates a form for complex enterprise that conforms more to a flattened, "intelligent" hierarchy than a pyramid-shaped bureaucratic one, a point that will be returned to in Chapter 3. Finally the Amara and Lipinski model provides us with a framework of how strategic choices can be developed and enacted in a complex environment, and emphasizes the importance (as do both Beer and Paterson) of the need for interaction between strategic planning and operational management activities. These roots can be seen in the model outlined in Chapter 1 and Figures 1.1, 1.2, and 1.3. The separation of strategic decision, strategic planning (or intelligence), and monitoring and control as critical activities in the structure of enterprise mirror Paterson's F, E, and D bands, Beers Systems 5, 4, and 3 and Amara and Lipinski's Stages 5, 4 and 3. The relationship between strategic decision, organization, environment and technology (shown in Figure 1.3) has roots in the open systems view in organization theory (in particular, cybernetics) and to a lesser extent in structural contingency theory (discussed earlier). However these approaches s t i l l , do not fully explain the non-deterministic, synergistic phenomena that characterize the relationship among the variables in the conceptual framework outlined in Chapter 1. Indeed - 61 - i t could be argued that the theoretical bases touched upon here are s t i l l predominantly either descriptive or prescriptive of the relationship among the variables of concern. Further, i t could be argued that much of organizational theory i s s t i l l somewhat s i m p l i s t i c i n i t s explanation, and has an overwhelming focus on causality even when an open systems view i s adopted. Furthermore as Hage (1980) has pointed out there are weaknesses i n organization theory i n the handling of the concept of st r u c t u r a l transformation. 2.5 TRANSFORMATION IN OPEN SYSTEMS The models described so far adhere essent i a l l y to the notion of s t a t i c equilibrium, an idea that s t i l l c arries much weight i n the minds of neo-classical economists and others. The theories outlined above have developed from line a r deterministic approaches to more complex open systems models. However, even the open systems models outlined do not as yet deal with the dynamics of system transformation i n any meaningful way. Instead, l i k e neo-classical economic analysis, they tend to view any change as the s h i f t towards the equilibrium state that the contextual conditions dictate. To deal e f f e c t i v e l y with transformation i n open systems i t i s necessary to have some understanding of how complex s o c i a l systems transform themselves. 2.5.1 Bouldings' Nine System Types Before we can deal e f f e c t i v e l y with transformation i n complex open systems i t i s useful to consider a taxonomy of system complexity. Kenneth Boulding (1969) has i d e n t i f i e d 9 systems types: - 62 - "1) Frameworks - simple structures. 2) Clockworks - simple dynamic structures with predetermined motions. 3) Cybernetic Systems - capable of self-regulation to meet an externally prescribed goal e.g., a thermostat. 4) Open Systems - a self-maintaining system, e.g., a c e l l . 5) Blue Printed Growth Systems - capable of genetic reproduction, e.g., a plant. 6) Internal Image Systems - capable of perceiving and organizing i t s perception of environment, e.g., animals. 7) Symbol Processing Systems - possessing self-consciousness and ' language a b i l i t y , e.g., humans. 8) Social Systems - "multi-cephalous" systems of actors sharing values or culture, e.g., s o c i a l organizations. 9) Transcendental Systems - systems comprised of the "absolutes and the inescapable unknowables". These are arranged i n a nested hierarchy of systems within systems. The value of Boulding's insight and the magnum opus of M i l l e r (1978) i s not only i n demonstrating the complexity and in t e r relatedness of systems i n the world, but i n emphasizing the v a l i d i t y of using one lower order l e v e l as a model and a means of understanding, higher l e v e l s : "much valuable information and insights can be obtained by applying low l e v e l systems to high-level subject matter" Boulding i s also quick to point out that: "most of the theoretical schemes of the s o c i a l sciences are s t i l l at l e v e l 2, just r i s i n g now to 3, although the subject matter c l e a r l y involves l e v e l 8" Boulding (1966:208) - 63 - 2.5.2 Coming's Synergism Hypothesis Peter Corning (1983) has made an impressive attempt to develop a theory of socio-cultural transformation (or evolution as he terms i t ) i n his "Synergism Hypothesis" that t r i e s to go beyond simple clockwork i n the form of analysis. In his own area, Corning recognizes weaknesses i n causal and deterministic models. In reviewing the l i t e r a t u r e on socio-cultural evolution Corning concludes that: "Technoeconomic determinism as a general methodological stance i s outdated by the accumulated evidence of a more complex r e a l i t y . Similar technologies do not necessarily c a l l forth s i m i l a r s o c i a l organizations or s i m i l a r ideologies. They may c a l l forth a l t n e r a t i v e l y , an Athens or a Sparta, a Victorian England or an Imperial Germany, a United States or a S t a l i n i s t Russia. Likewise a s t e e l m i l l can be operated by a lai s s e z f a i r e c a p i t a l i s t , a worker's c o l l e c t i v e , or a s o c i a l i s t state bureaucracy. The differences are s i g n i f i c a n t . Furthermore the causal arrows do not run i n only one dir e c t i o n . The blanket assumption that technoeconomic causes w i l l predominate over p o l i t i c a l / m i l i t a r y causes i s an assumption that has become dogma." Corning (198a:p 224) Corning also has emphasized that a l l the "prime movers" of socio-cultural evolution are s i m p l i s t i c . Corning c i t e s Elman Service's c r i t i q u e of c u l t u r a l evolutionism (terms i n parentheses have been added by the author to emphasize the thrust of the argument here): "Down with prime-movers! There i s no single magical formula that w i l l predict the evolution of every society (enterprise). The actual evolution of the culture (organization) of pa r t i c u l a r societies (enterprises) i s an adaptive process whereby the society (enterprise) solved problems with respect to the natural and the socio-cultural (organizational) environment. These environments are so diverse, the problems so numerous, and the solutions p o t e n t i a l l y so various that no single determinant can be equally pqwerful for a l l cases." Corning (1983:p 226) Corning brings together 6 c r i t i c a l concepts i n what he terms a Social Triad Scenario of socio c u l t u r a l evolution._ These are: - 64 - "1) The Interactional Pardigm which requires a multifaceted view of the basic survival challenge to which our evolving ancestors were exposed. 2) The teleonomic selection model of causation which posits that behavioural changes are l i k e l y to have been the pacemaker; that i s , the natural selection of morphological changes tracked the process of behavioural and s o c i a l change (rather than vice versa). 3) The cybernetic model of s o c i a l organization which makes decision-making, communications and behavioural control processes ( p o l i t i c a l processes) i n t e g r a l parts of organized (purposeful) s o c i a l behaviour. 4) The Synergism hypothesis which focuses on the functional consequences of various combinational processes, including s o c i a l cooperation. 5) A bio-economic (benefit-cost) approach to assessing the p l a u s i b i l i t y of alternative choices and strategies. 6) A r e v i v a l (with modification) of the Darwinian hypothesis that human so c i a l evolution may have been the re s u l t of three mutually reinforcing selective processes: a) kin selection for a l t r u i s t i c and group-serving behaviours among closely related individuals; b) individual selection for mutually b e n e f i c i a l forms of co-operative behaviours (egoistic co-operation or enlightened s e l f - i n t e r e s t ) ; and, c) group selection among functionally interdependent groups of co-operators." Corning (1983:p 275) The u t i l i t y of Coming's ideas for our purposes here, l i e s i n his recognition of the complexity of the process of transformation i n s o c i a l organization and i n the i d e n t i f i c a t i o n of key variables and sub-processes involved i n transformation. Extrapolating Coming's ideas back to the l e v e l of the enterprise i t i s clear that transformation i s a process i n which s u r v i v a l , adaptation, behavioural change and goal-setting are interacting factors underlying transformation. On the other hand, synergism and bio-economic performance are both c r i t e r i a i n decision-making and attributes of the outcomes of transformation. (Outcomes, as Corning emphasizes, that are - 65 - not inherently b e n e f i c i a l , i . e . , synergism i s not a good i n i t s e l f ) . Is t h i s approach an unnecessarily complex " f u z z i f i c a t i o n " of r e a l i t y ? I t would be much easier from a research point of view, to draw the causal model out i n Chapter 1, gather the data, load the arrays and s p i t out regression analyses u n t i l we found one with s t a t i s t i c a l significance. But as Evans (1982a) has suggested: "For every complex problem there i s a simple answer: and i t ' s wrong." 2.5.3 Hage's View on Structural Transformation i n Enterprise Corning provides us with a broad conceptual explanation as to how and why complex systems transform themselves. The auestion of stages i n the structural transformation of enterprise has been examined more closely by organization theorists. Hage (1980:p 208) synthesizes a variety of studies when he describes four stages i n the process of change: 1) Evaluation 2) I n i t i a t i o n 3) Implementation 4) Routinization In the evaluation stage enterprise evaluates how well i t i s maintaining i t s r e l a t i v e position against a set of performance c r i t e r i a , e.g., p r o f i t , prestige or market share. I f a "performance gap" i s i d e n t i f i e d then a change may be i n i t i a t e d , the search here i s for funding to support such a change. The implementation stage i s involved i n closing the performance gap by introducing the innovation. F i n a l l y as Hage points out: "the routinization stage refers to the integration problem. On the one hand dominant c o a l i t i o n s must decide whether to re t a i n or reject the - 66 - innovation. On the other hand special procedures must be routinized. There i s a need to reintegrate the organization." Hage (1980:p 209) The importance of Hage's work for our purposes i s f i r s t i n the recognition that the enactment of structural change i n enterprise involves strategic perception and strategic choice (the C and D boxes of Paterson's decision process) and second i n emphasizing the underlying power relations and p o l i t i c a l nature of strategic decisions about change. These views tend to suggest that the process of transformation i n complex s o c i a l systems i s not a result of clockwork progress towards a prescribed equilibrium, not a trajectory of change determined by technology or environment and not a random process of evolution. Rather s t r u c t u r a l transformation i s a synergistic process of change that i s conditioned by environmental circumstances, i n t e r n a l operation and behaviour and strategic decision-making. In s o c i a l systems, given t h e i r "multi-cephalous" nature, the choices made by individuals and groups have a c r i t i c a l r o l e to play i n the process of transformation. Thus the analyst of str u c t u r a l transformation must look at interest groups, power and p o l i t i c s as much as technology, economics and environment. 2.5.4 Summary and Conclusions Investigation of transformation i n complex systems involves i d e n t i f i c a t i o n and explanation of both structure and process. A range of precedents for our model have been reviewed i n the work of Mintzberg, Beer, Paterson and the structural contingency school. These authors provide us with useful models of enterprise and a vocabulary for the examination of _ 66a - transformation i n structure. They also contribute to our understanding of the interaction between environment, decision making, organizational structure and technology. Recent developments i n the theory of organizing (Weick 1979), i n the theory of organizational power and-politics ( F a r r e l l (1982), Culbert and McDonough (1980) and Pfeffer (1981 and 1982); i n strategic decision-making under uncertainty (Amara and L i p i n s k i (1983) and Huber (1984)); and i n socio-cultural evolution i n complex systems (Corning (1983)) provide us with some understanding of how the process of systems change operates. The conclusion that can be drawn i s that any approach to the analysis of transformation i n multi-unit enterprise must recognize the complexity of interaction between a wide variety of variables. In p a r t i c u l a r , i t i s clear that the nature of the environment facing enterprise i s an important factor that helps shape the structure of enterprise. S i m i l a r l y , strategic decision making, int e l l i g e n c e functions and the inherently p o l i t i c a l processes underlying these a c t i v i t i e s are c r i t i c a l to both the structure of enterprise and the process of transformation. Technology, organizational and s p a t i a l structure are an interacting web of variables that both influence strategic choice and are influenced by i t . In the following chapter transformation i n these variables w i l l be c r i t i c a l l y reviewed and conclusions w i l l be drawn about the relationship among them. - 67 - Doc. #1230F Archive 0073F CHAPTER 3 - CRITICAL PERSPECTIVES ON STRUCTURAL TRANSFORMATION 3.1 INTRODUCTION There i s widespread agreement that advanced nations are undergoing a period of structural transformation, even though analysts disagree about the causes and effects of t h i s transformation. The transformation i s thought to occur i n a number of dimensions: demographic, p o l i t i c a l , economic, organizational, socio-cultural and technological; and at a number of le v e l s : s o c i e t a l level-, urban systems l e v e l and at the l e v e l of the enterprise. Some observers have labelled these transformations as the emerging Post-Industrial society, B e l l (1976), the Global Economy, and the International Economy, s t i l l others have termed them the s h i f t to an Information Society or an Information Economy, Porat (1976). This l a t t e r group have focused p a r t i c u l a r l y on the role of information technology, i . e . , computer and communications technology, as the driving variable behind s t r u c t u r a l change i n the economy and i n enterprise. In examining a complex synergistic process of transformation i t i s d i f f i c u l t to develop an organizing p r i n c i p l e for such an exposition. I f there are no prime movers and no higher order causes then how should such analysis be organized and where should i t begin? The choice made i n organizing t h i s l i t e r a t u r e review of structural transformation i s an arbitrary one. This review of s t r u c t u r a l transformation i s divided into 3 l e v e l s : the s o c i e t a l l e v e l , urban systems l e v e l and the - 68 - l e v e l of enterprise. The purpose of d i f f e r e n t i a t i n g between the s o c i e t a l scale and the urban systems scale i s twofold. F i r s t , i t i s clear that the more general s o c i e t a l transformations have been analyzed i n a r e l a t i v e l y aspatial way. In order to integrate e f f e c t i v e l y s p a t i a l phenomena into the analysis of transformation, the urban systems l i t e r a t u r e must be considered. Secondly, the urban systems l i t e r a t u r e provides a useful bridge between the broad s o c i e t a l change and the manifestations of these changes i n c i t i e s and enterprises. Structural transformation of the enterprise i s both reflected i n and affected by those wider environmental transformations found at the so c i e t a l and urban systems scale. I t i s also conditioned by some of the s p e c i f i c c haracteristics of the immediate environment facing enterprise. As pointed out e a r l i e r , i t i s d i f f i c u l t to i s o l a t e the three levels because s h i f t s i n the behaviour of enterprise are an i n t e g r a l part of broad s o c i e t a l transformation. Thus the organization of t h i s review i s for a n a l y t i c a l convenience and does not imply that a higher order of importance i s to be attached to soc i e t a l transformation, or that causality flows from higher to lower order. 3.2 PERSPECTIVES ON SOCIETAL TRANSFORMATION In t h i s section, a range of views on broad scale socio-economic transformation w i l l be c r i t i c a l l y examined. The intention here i s to derive some conclusions about socio-economic transformation that can illuminate both the stages and process of transformation i n the relationships among technology, organization and location of the multi-unit enterprise. - 69 - Figure 3.1 i d e n t i f i e s s i x basic schools or approaches that are prevalent i n the analysis of s t r u c t u r a l transformation at the macro socio-economic or s o c i e t a l l e v e l . These are: 1) P o l i t i c a l Economy 2) Organizational 3) Ecological/Systems 4) Post-Industrial 5) Geographic 6) Technological/Futurist Each of these schools has produced leaders and followers and a good deal of sniping and c r i t i c i s m between the schools has been generated. The i n t r i c a c i e s of these debates can be more sharply focused at the urban systems l e v e l , because i t would be impossible to adequately review here the broad spectrum of views on socio-economic change. However a b r i e f comparison can be made between representative of each of the schools across a number of dimensions. The 6 representatives are Jurgen Habermas, Robert Reich, Daniel B e l l , Eric T r i s t , Jean Gottman and Alvin T o f f l e r . Since B e l l ' s Post-Industrial thesis represents somewhat of a middle ground between these views i t can be used as a basis for comparison. 3.2.1. B e l l , Habermas and T r i s t : Post-Industrialism or Advanced Capitalism? Daniel B e l l i s the father of the term, "post-industrial society", an extension of the p r e - i n d u s t r i a l , i n d u s t r i a l typology. He states in the very f i r s t page of his foreword to the 1976 edition that: F i g . 3.1 ALTERNATIVE VIEWS OF STRUCTURAL TRANSFORMATION POLITICAL ORGANIZATIONAL ECOLOGICAL/ POST- GEOGRAPHIC TECHNOLOGICAL/ ECONOMY SYSTEMS INDUSTRIAL FUTURIST SOCIO- ECONOMIC SCALE Marxist Neo- c l a s s i c a l Habermas I n d u s t r i a l Organization Org. Theory Reich S o c i a l Ecology Cyber- net i c s T r i s t PI Thesis Service Economy B e l l Quaternary Sector Gottinan Technological P o s s i b i l i s m F u t u r i s t T o f f l e r URBAN SYSTEMS SCALE Simmie Economic Planning Theory Bluestone/ Harrison Gershuny Stanback/ Noyelle P o s t - I n d u s t r i a l Planning Theory Pred Hardwick Gottman Stephens/ Holly Ley Technological Planning Theory T r i s t Goddard Pye T3 - 71 - "The idea of a post - i n d u s t r i a l society i s not a point-in-time prediction of the future, but a speculative construct, an as i f based on emergent features, against which the so c i o l o g i c a l r e a l i t y could be measured decades hence, so that i n comparing the two one might seek to determine the operative factors i n effecting s o c i e t a l change." I t i s then, i n Be l l ' s view, a theoretical construct - a benchmark against which we can evaluate s o c i e t a l change. He i s not suggesting that post-industrial society displaces a l l aspects of i n d u s t r i a l society, just as i n d u s t r i a l society did not displace the agrarian sectors of the economy. This i s a point he returns to i n his concluding chapters, namely, that s o c i a l systems take a long time to change: "To predict the close demise of capitalism i s a risky business and barring the breakdown of the p o l i t i c a l s h e l l of that system because of war, the s o c i a l forms of managerial capitalism - the corporate business enterprise, private decision on investment, the d i f f e r e n t i a l p r i v ileges based on control of property - are l i k e l y to remain for a long time." B e l l (1976:p 372) I f capitalism i s s t i l l going to be with us, what are the new dimensions that help d i f f e r e n t i a t e or distinguish post i n d u s t r i a l society. B e l l emphasizes that he i s not advocating the abandonment of exi s t i n g theoretical dimensions i n the analysis of post - i n d u s t r i a l society. Instead he suggests that: "Like palimpsests the new developments ove r l i e the previous layers, erasing some features and thickening the texture of society as a whole." ( B e l l 1976 :p.xvi) What are these new developments? In his foreword, he summarizes eleven basic attributes of post-industrial society that he considers to be indicati v e of emerging trends. These are: 1) The Centrality of Theoretical Knowledge B e l l has argued that knowledge or human c a p i t a l i n a post - i n d u s t r i a l - 72 - society, w i l l play as central a role as physical c a p i t a l did i n i n d u s t r i a l society. He i s arguing at a theoretical l e v e l for adoption of a knowledge, rather than a labour theory of value. He sees knowledge as a c o l l e c t i v e good that i s much more d i f f i c u l t to p r i v a t i z e than labour and i t s surplus value. His evidence of the c e n t r a l i t y of theoretical knowledge, includes the observation that the emerging and important industries of the la t e 20th Century are predicated on theoretical developments, rather than the results of empiricism and tinkering as was the case i n i n d u s t r i a l society. The two sal i e n t examples are the chemical industry - requiring a theoretical understanding of the composition and behaviour of macro molecules and the recent developments i n s i l i c o n chip technology that are based on e a r l i e r advances i n theoretical physics. The Creation of a New I n t e l l e c t u a l Technology Computer modelling, simulation and systems analysis i s being used increasingly to "chart more e f f i c i e n t 'rational' solutions to economic, engineering, i f not s o c i a l , problems" according to B e l l . This comment should be viewed i n the l i g h t of the time. The la t e 1960s and early 1970s, when B e l l was formulating his thesis, saw the height of positivism and quantification i n the s o c i a l sciences, but how pervasive i s Markov Chain Analysis i n publications today? What B e l l correctly forecasted was the growth i n extent and importance of information technology and information functions i n contemporary society. The Spread of a Knowledge Class The growth of the technical and professional class has been seen by B e l l - 73 - (1976) and Gouldner (1979) as an important c h a r a c t e r i s t i c of the changes occurring i n modern society. A) The Change from Goods to Services This point w i l l be discussed extensively i n subsequent sections of the chapter, but i t i s important to recognize here that B e l l sees the increasing role of human services (health and education) and professional and t e c h n i c i a l services as the hallmark of the post-industrial society. B e l l sees these services as "a constraint on economic growth and a source of persistent i n f l a t i o n . " 5) Change i n the Character of Work Work has changed from a game against fabricated nature, i . e . machines, to a more pl a y f u l game between persons. The "rhythm of l i f e " i s different and the work environment has changed substantially. (This idea can be compared to Gottman's notion of the quaternary sector i n a transactional society - the patterns of s o c i a l behaviour and the physical environment of work are very different from an i n d u s t r i a l world). 6) The Role of Women B e l l recognizes that the changing structure of the labour force (in p a r t i c u l a r , increased p a r t i c i p a t i o n by women) and i t s related effects on households has had considerable impact on patterns of production and consumption. 7) Science as the Imago B e l l suggests that the relationships between science, technology, i t s c l i e n t s and society w i l l be central ones i n post-industrial society and - 74 - increasingly these relationships may become a source of problems and concerns. 8) Situses as P o l i t i c a l Units Situses - are defined by B e l l as a set of v e r t i c a l orders. He i d e n t i f i e s four functional situses: S c i e n t i f i c , Technological, Administrative, Cu l t u r a l ; and fi v e i n s t i t u t i o n a l situses: economic enterprises, government bureaus, u n i v e r s i t i e s and research complexes, s o c i a l complexes (e.g., hospitals, s o c i a l service centres) and the m i l i t a r y . His argument i s that s o c i e t a l c o n f l i c t w i l l be variously organized between these orders and t h i s might prevent the consolidation and organization of a new class. 9) Meritocracy Education and s k i l l versus inheritance of property are seen as a means of awarding place i n society. B e l l defines a "just meritocracy" based on achievement and through the respect of peers. 10) The End of Scarcity? B e l l recognizes that scarcity w i l l s t i l l be with us but suggests the new s c a r c i t i e s w i l l be of information and time. A point that warrants some c r i t i c i s m . 11) The Economics of Information F i n a l l y , B e l l suggests that information i s a c o l l e c t i v e , not a private good and t h i s requires therefore a "co-operative" rather than a "competitive" strategy towards s o c i a l r e l a t i o n s . I t i s interesting that two Noble Laureates i n Economics have addressed the issues of the Economics of Information. Kenneth Arrow (1979) and George S t i g l e r - 75 - (1961). The two themes seem to be information as cost e.g., S t i g l e r ' s work on the costs of search, S t i g l e r (1961) and information as value, e.g., Arrow's work on information as a saleable commodity or as an innovative force, Arrow (1979). In summary then, the two most important dimensions of change that B e l l i s emphasizing are f i r s t , the c e n t r a l i t y of theoretical knowledge and the i n s t i t u t i o n s that produce and recreate i t , i . e . , the university and the research i n s t i t u t e . Second, he i s pointing to the change from a manufacturing to a service economy as being a fundamental re-orientation of economic a c t i v i t i e s . David Ley (1980) has pointed to the s i m i l a r i t y between such diverse scholars as B e l l (1976) and Jurgen Habermas (1975) i n t h e i r conception of post-industrial society. Ley argues that i n the realms of economy, p o l i t i c s and culture there i s a complementarity i n the views of B e l l and Habermas i n that they both see changes i n the nature of work, the role of the state and the growth of aesthetic values and consumption as being in d i c a t i v e of the s h i f t from early to advanced capitalism (in the case of Habermas) or from i n d u s t r i a l to post-industrial society (in the case of B e l l ) . A further extension to Ley's melding of disparate academic perspectives i s offered by the analysis of T r i s t (1970). He compared the c r i t i c a l s t r u c t u r a l differences between U.S. society i n the t h i r t i e s and the s i x t i e s and labelled these differences as "comparative saliences". His conclusions are very s i m i l a r to Ley's synthesis of B e l l and Habermas. A number of dimensions were considered and T r i s t , too, suggested the growing importance of theoretical knowledge, the s h i f t from goods to services, the change i n employment structure from blue to - 76 - white c o l l a r , the s h i f t i n employment hours towards increased l e i s u r e time, changes i n family structure and changing attitudes towards the environment. 3.2.2 Robert Reich: The Next American Frontier Reich argues that there are 2 p r i n c i p a l sub-systems i n North American society: the business system and the c i v i c system. Each system has alternated as leader through the development of the American economy. Reich suggests that the US has gone through two major phases of economic development and i s about to enter a t h i r d . The f i r s t phase was the mobilization phase where owner/entrepreneurs tinkered with new products and b u i l t moderately large and powerful enterprises by mobilizing technology, c a p i t a l and labour. This phase ended around the f i r s t world war. Reich argues that the needs of war, the separation of ownership from control and the potential for s o c i a l and economic abuses i n an owner/operator world led to a focus on s c i e n t i f i c management. From 1920 u n t i l 1970 s c i e n t i f i c management pri n c i p l e s were applied not only to the management of large scale production processes, but also to the management of the t o t a l economy i t s e l f . The same principles that were used to produce cheaper goods i n large batch processes were used to police the oligopoly arrangements i n most American industries. In the 1970s, Reich argues, t h i s s i t u a t i o n reached an impasse. The American economy faltered, not solely because of OPEC or the excesses of monopoly labour, but because of the f a i l u r e of management to adjust i t s s t y l e and orientation to the concerns of auality of product and quality of worklife. Reich suggests that during t h i s impasse, the American economy embarked on an unproductive binge of paper entrepreneurialism, which created no new r e a l wealth, but - 77 - provided the multi-nationals with the i l l u s i o n of growth. In addition, both labour and c a p i t a l attempted to hold back st r u c t u r a l change through protectionism. According to Reich, the U.S. economy has entered a t h i r d major stage i n which enterprise must recognize the value of human c a p i t a l i n creating new wealth through " f l e x i b l e system" production and the related need on the part of government, business and labour to bring together the business system and the c i v i c system to work towards a j o i n t economic purpose. A variety of recent texts echo Reich's argument e.g., Harris (1981), Ayres (1984), and Lewis and A l l i s o n (1982). 3.2.3 Gottmann and Hardwick: The Quaternary Sector Just as Daniel B e l l has been heavily c r i t i c i z e d since coining the term post-industrial so Jean Gottmann has suffered s i m i l a r l y at the hands of c r i t i c s since coining the term "quaternary sector" i n 1961. Gottman (1961, 1983) suggests that modern society i s transactional i n nature, concerned more with the exchange of information, and with decision-making, rather than with the production of goods. Gottmann proceeds to i d e n t i f y a quaternary sector of the economy that i s an extension of Colin Clark's scheme of primary, secondary and t e r t i a r y industry. Within t h i s quaternary sector, argues Gottmann, the transactional a c t i v i t i e s are conducted by the professional, managerial, technical and c l e r i c a l workers. This i s grossly overstating the quaternary sector. Just as B e l l has been c r i t i c i z e d for f a i l i n g to distinguish between different dynamics i n the service sector - so Gottmann has been c r i t i c i z e d by B e l l ( i r o n i c a l l y ) and by Hardwick (1974, 1983) because much of the a c t i v i t y of t h i s sector i s r e a l l y - 78 - involved with production and d i s t r i b u t i o n of information (See also Stanback (1981)). To lump together a l l white c o l l a r work as quaternary i s to f a i l to recognize, according to B e l l (1979): "the thrust i m p l i c i t i n the o r i g i n a l Colin Clark scheme, with i t s emphasis on d i f f e r e n t i a l productivity as the mechanism for the t r a n s i t i o n of one society to another." Hardwick (1983) however has suggested that although greater productivity has indeed been wrested from f i r s t agriculture and then manufacturing, t h i s productivity has emerged from a c t i v i t i e s of the quaternary sector, i . e . , the very small sector of the economy that has always existed, which through i t s innovative and entrepreneurial s k i l l has enabled or "catalyzed" productivity improvement and s o c i a l change. In the contemporary economy these elements represent a very small share of the labour force (probably less than 5%) compared to 40% - 50% using Gottmann's conception. Yet i t i s on the v i a b i l i t y of t h i s (redefined) quaternary sector that society largely depends for stimulation of the economy. This includes the a c t i v i t i e s of the entrepreneur, the researcher, the senior government and business policy makers and the merchant banker. Viewed i n t h i s l i g h t the economy i s much less quaternary i n nature than Gottmann would have us believe. 3.2.4 Alvin T o f f l e r : The Third Wave A f i n a l view i s presented by Toffler (1980) who has argued that the i n d u s t r i a l or second wave society i s being replaced by a t h i r d wave. The second wave according to Toffler was dominated by s i x p r i n c i p l e s : 1) Specialization - the d i v i s i o n of labour - 79 - 2) Standardization - of rules and procedures 3) Synchronization - of a c t i v i t i e s 4) Concentration - of a c t i v i t i e s and authority 5) Maximization - bigger i s better 6) Centralization - s p a t i a l concentration The t h i r d wave w i l l bring about decentralized systems producing a more diverse range of customized goods and services and resulting i n what Toffler c a l l s a demassification of our i n s t i t u t i o n s . 3.2.5 C r i t i c i s m of the Alternative Views of Societal Transformation The term "view" has been used rather than theory because i t i s not clear whether these various approaches have consituted a body of theory. The marxist and s t r u c t u r a l i s t views have cert a i n l y followed a theoretical t r a d i t i o n . S i m i l a r l y , the ecological/systems views are rooted i n the application of general systems theory and s o c i a l ecology to socio-economic phenomena. The economic views are p a r t i a l l y related to conventional neo-classical analysis - although i n many cases the arguments are developed more from an empirical than theoretical standpoint. Robert Reich draws more from i n d u s t r i a l economics and organization theory than from neo-classical economics (see Kuttner (1985)). The post-industrial thesis i s described by B e l l as a "theoretical construct" ... a benchmark against which we can compare emerging r e a l i t y , rather than a theory that explains r e a l i t y . The information and f u t u r i s t views are more scenario generations of emerging r e a l i t y and/or utopia than they are theories that can be tested. The value of each of these approaches i s not so much i n t h e i r academic purity but i n the insights they - 80 - can provide about s t r u c t u r a l transformation and the powerful effect they can have on policy, planning and action. Each of these views can be seen as flawed i n some way. Recognizing these flaws can ass i s t i n synthesizing an ove r a l l view of str u c t u r a l transformation. i ) P o l i t i c a l Economy The marxist view i s that nothing fundamentally has altered except for a further step on the inevitable h i s t o r i c a l march of capitalism, i . e . , a s h i f t towards advanced or managerial capitalism. This view seems to be incredibly narrow and naive. Everyone recognizes that capitalism i s a s i g n i f i c a n t component of the advanced state and many analysts agree that the behaviour of large enterprise can be characterized, to some degree, as self-serving. There i s , however, a great deal of evidence to suggest that i n modern society the actions of individuals and groups can dramatically a l t e r the structure of our i n s t i t i t i o n s and the behaviour of our corporations. (Thus marxist analysis underestimates the role of p o l i t i c s , interest groups and strategic choice.) There i s a great deal of d i f f i c u l t y i n adequately c r i t i q u i n g marxist theory i n a paragraph, because i t requires, a reappraisal of the underlying ideology of marxist thought. The basis of the theory i s b e l i e f , and so c r i t i c a l exchange about the h i s t o r i c a l trajectory of capitalism becomes almost as d i f f i c u l t as discussing the i n e v i t a b i l i t y of Armageddon with Jerry F a l l w e l l . However, the mechanistic macro models of s t r u c t u r a l i s t - f u n c t i o n a l i s t thinking do serve a useful role i n modelling some of the motivations of some of the players but they do not adequately incnrporate the role of ind i v i d u a l choice i n a democratic society. - 81 - i i ) Conventional Economic Views Criticisms of the economic views of structural transformation are as various as the range of economic views themselves. Much of the r i g i d neo-classical analysis of st r u c t u r a l change i s very close i n vocabulary and st y l e to s t r u c t u r a l i s t - f u n c t i o n a l i s t thinking. Conventional neo-classical analysis has f a i l e d to explain adequately the socio-economic changes over the l a s t few years ( B e l l and K r i s t o l (1981), Kuttner (1985)). This i s largely because the fundamental i n s t i t u t i o n a l structures of advanced nations - oligopolies, regulated monopolies, professional practices, hospitals, u n i v e r s i t i e s , schools and producer services - do not f i t well into the established body of economic theory. "New" theory i s beginning to emerge i n the areas such as the economics of regulation, health and energy but we s t i l l suffer under the rhetoric and econometrics of perfectly competititve markets and macro-economic "laws", even though they are d i f f i c u l t to apply d i r e c t l y i n the advanced nations or anywhere else (Kuttner (1985)). Perhaps the most si g n i f i c a n t contribution that the various economic views have made to our understanding of st r u c t u r a l transformation i s i n the empirical evidence that has been provided. Although such empirical analysis rarely comes from " r e a l " economists but from economic geographers and planners, Kuttner (1985). There i s however a s p l i t between those economists and economic planners who argue that the data show no change e.g., Gershuny (1978), versus those that try to interpret the evidence as part of a broader process of economic transformation, e.g., Reich (1983). i i i ) Ecological and Systems Views The Ecological and Systems views tend to suffer from a s i m i l a r flaw to - 82 - that of certain s t r u c t u r a l marxist and economic views. Whereas structuralism leads to devlopment of macro-mechanical models moving to an inevitable clockwork conclusion (Boulding (1956)) there i s a tendency i n the ecological view to develop supra-organic process models that suggest that individuals and i n s t i t u t i o n s are reacting/adapting inevitably to changes i n habitat and environment. Although t h i s view allows for a wider range of actions, these actions seem to be t i g h t l y constrained by ecological or even b i o l o g i c a l p r i n c i p l e s . On balance, however, these models provide a useful conceptual framework for generalizations about changing environments and the potential organizational reactions to these changes, iv) Post-Industrial Views The Post-Industrial thesis has been heavily c r i t i c i z e d by marxist and economic scholars. Three p r i n c i p a l c r i t i c i s m s have been made (e.g., Walker and Greenburg (1983) and Lasch (1979)). F i r s t , there have been suggestions that the thesis i s poorly framed and i s imprecise because i t does not adequately explain the "causal mechanisms or s t r u c t u r a l relations which give r i s e to sensible phenomena". Second, there has been considerable c r i t i c i s m of the notion of an expanding service sector with analysts suggesting instead that the service sector i s r e a l l y d i v e r s i f i c a t i o n and s p e c i a l i z a t i o n i n production (e.g., Gershuny-(1978), Walker and Greenburg (1983)). The t h i r d p r i n c i p a l c r i t i c i s m put forward by t h i s group, i s the i r rejection of B e l l ' s concept that we are witnessing a s h i f t from a labour theory to a knowledge theory of value. The c r i t i c i s m that B e l l ' s thesis i s vague, seems to be an argument i n favour of reductionist s i m p l i c i t y , rather than a plea for c l a r i f i c a t i o n of - 83 - B e l l ' s presentation. However, urging for more care i n the taxonomy of the service sector of the economy i s a v a l i d c r i t i c i s m . Indeed, others who subscribe to the post-industrial thesis have been more careful i n t h e i r taxonomy, e.g., Hardwick (1984), Davis and Hutton (1981). As for the i r f i n a l point, there i s considerable empirical and theoretical evidence to suggest that knowledge rather than labour i s becoming the p r i n c i p a l component that adds value, e.g., Reich (1983), Dennison (1975) and the l i t e r a t u r e on innovation. This point w i l l be returned to i n greater depth i n the discussion of the transformation of enterprise. B e l l ' s thesis i s not however above c r i t i c i s m . In addition to the taxonomy problems of the goods to services transformation, there are three further c r i t i c i s m s that can be applied to B e l l ' s arguments. F i r s t and perhaps most importantly, B e l l does not deal adequately with questions of sca r c i t y . This may be a function of when B e l l was writing, i . e . , at the end of the post war boom and before o i l - c r i s e s , s t a g f l a t i o n and recession. B e l l sees only s c a r c i t i e s of time and information as being important, rather than s c a r c i t i e s of energy, raw materials, c a p i t a l or jobs. This point has received much c r i t i c i s m by Gershuny (1978) and Simmie (1983) i n pa r t i c u l a r . In his l a t e r essays on information technology, B e l l (1979) recognizes that the s t r u c t u r a l l y unemployed may be with us for a very long time as automation takes hold i n c l e r i c a l , technical and knowledge occupations, but he offers no substantial integration of these phenomena into his e a r l i e r thesis. A second c r i t i c i s m i s that B e l l , to a large extent, may have chronicled the recent past, rather than the emerging future. This i s not to suggest that - 84 - his thesis i s not useful as a benchmark for assessing s o c i e t a l change - which was his stated purpose - rather i t i s i n the l i g h t of changing economic conditions and reactionary s h i f t s i n ideology i n the la t e seventies and early eighties, that his thesis must be reappraised, i f i t i s to be relevant for purposes of analysis and policy design. A t h i r d c r i t i c i s m i s that the post-industrial thesis i s an i n t e l l e c t u a l l y e l i t i s t and possibly egocentric one. I t could be argued that i t i s a conception of emerging society written by a university professor for university professors. This conception underestimates the role of the entrepreneur and the p o l i t i c i a n i n human a f f a i r s . To some extent these c r i t i c i s m s have been answered i n subsequent works. Reich (although no self-proclaimed d i s c i p l e of Bell's) has addressed some of the economic and i n s t i t u t i o n a l inconsistencies of B e l l ' s thesis a l b e i t within a different formulation of economic change i n America. The ecological/systems view rearticulated by T r i s t (1980) follows i n the Post-Industrial t r a d i t i o n and resolves some of the concerns about the emerging turbulent environment of the 1980s that were not forseen i n B e l l ' s work. On balance, however, the concept of Post-Industrial society s t i l l f u l f i l l s i t s stated purpose as a benchmark against which we can plot s o c i e t a l change, i n p a r t i c u l a r , the conception of a knowledge theory of value which runs through much of contemporary thinking on the economy and organization. v) Technological/Futurist Views F i n a l l y , a b r i e f comment should be made about the contribution of the Informational/Futurist l i t e r a t u r e . This l i t e r a t u r e i s wide ranging and includes, f i r s t l y , useful empirical analyses of the information economy such - 85 - as Porat's (1976). Second, i t encompasses technological determinism from technology "freaks" who fantasize about what technology can do and then attempt to r a t i o n a l i z e that "technology's w i l l be done". Third, there i s a set of more balanced studies on technological "possibilism" where the potentials of the technology are c a r e f u l l y examined and the p o s s i b i l i t i e s of alternative futures are explored, e.g., Tydeman et a l (1982). Fourth, there are a series of synthetic overviews of change (what B e l l terms Future Schlock) i n the Toffler mode. F i n a l l y , there i s pure science f i c t i o n . One of the c r i t i c i s m s of these strands of l i t e r a t u r e i n t h i s area i s that i t i s sometimes d i f f i c u l t to t e l l them apart. Opinions that border on science f i c t i o n are often given the same legitimacy i n the media and popular business press as more careful technology assessment studies. S i m i l a r l y , the studies that take an overtly deterministic l i n e seem to either be incredibly self-serving on the part of those sponsoring and performing the studies, or incredibly naive i n assuming that what can be done, w i l l be done. The value of t h i s l i t e r a t u r e i s i n i d e n t i f y i n g the c a p a b i l i t i e s of information technology and i n formulating alternative visions of the future (scenario generation) that can be assessed i n strategic decision making for enterprise, Amara and L i p i n s k i (1983). 3.2.6 Conclusions From the C r i t i c a l Review on Socio-Economic Transformation From the l i t e r a t u r e on s o c i e t a l transformation some general conclusions can be drawn that can be integrated into a coherent pattern, that sets part of the context for the s t r u c t u r a l transformation of enterprise, a) From Land Through Labour and Capital to Knowledge The f i r s t theme stems from the t r a n s i t i o n i n what constitutes and - 86 - creates value. In pr e - i n d u s t r i a l societies land (or what grazed on i t ) was both the symbol of and the means of producing wealth. In i n d u s t r i a l society wealth was created by the organized application of labour and c a p i t a l to produce more goods. In a pos t - i n d u s t r i a l society labour and c a p i t a l continue to play an important role i n the creation of wealth but increasingly i t i s knowledge that adds value. This reauires some elaboration. I t could be argued that knowedge and organization have always been c r i t i c a l factors i n producing new wealth. The n e o l i t h i c farmers developed new knowledge through research and experimentation. This enabled the creation of s u f f i c i e n t surplus to allow the development of settlements devoted to exchange functions. The innovations i n organization of agriculture i n B r i t i a n i n the 17th and 18th centuries greatly f a c i l i t a t e d the growth of urban populations. S i m i l a r l y , the immense increases i n productivity i n agriculture since the turn of the 20th century have been achieved through improved knowledge and organization. Land has become more productive largely through the application of knowledge. The productive capacities of the i n d u s t r i a l age too have been brought about through the application of knowledge and organization. Adam Smith's pinmakers, i n i t i a l l y , had no new tools or new c a p i t a l , only innovation i n the way they were organized. The d i v i s i o n of labour f a c i l i t a t e d the development of s p e c i f i c eauipment-embodied technologies, but i t was, the organizational innovation that spurred i n i t i a l improvements i n productivity and wealth creation, not solely technological change. Thus a s i g n i f i c a n t change that has occurred i n the transformation to a post-industrial society i s the recognition that knowledge and organization are c r i t i c a l factors i n creating new wealth. Information i s a c r i t i c a l factor of y - 87 - production and i n i t s accumulated form, i . e . , as knowledge or human c a p i t a l , i t i s as effective i n creating value as c a p i t a l . b) The Transformation from Goods to Services and Information The second transformation i s that increasingly, products are i n the form of information or experiences rather than physical artefacts. Various empirical attempts have been made to measure the s h i f t i n the economy from goods to services and information. The proportion of s o c i e t a l e f f o r t expended on services, experiences and other intangibles i s increasing. I t has been argued that many of these a c t i v i t i e s are involved i n the management, monitoring and control of the production, consumption and d i s t r i b u t i o n of goods (e.g., Gershuny (1978), Reich .(1983)). Such a c t i v i t i e s f a l l into the category of business services and growth i n t h i s sector i s perfectly consistent with a knowledge theory of value. Improving productive capacity depends as much on improved education, organization and management as on c a p i t a l . Improving productivity i n t h i s way involves the gathering, processing, dissemination and application of knowledge. S i m i l a r l y , the corollary of the Gershuny argument i s that much of the goods producing sector i s involved i n the production and d i s t r i b u t i o n of equipment and supplies that generate and transfer information. (Hence Porat's (1976) conclusions that more than 40% of the U.S. economy i s i n the information sector, the largest compared to agriculture, manufacturing and services). F i n a l l y , i t i s undeniable that there has been growth i n the human services such as health and education over the l a s t three decades, e.g., Simmie (1983), Gershuny (1978) and B e l l (1976). A drastic reduction i n r e l a t i v e l e vels of employment i n agriculture did - 88 - not equate to a drop i n a g r i c u l t u r a l output, quite the contrary. Some have suggested i t i s reasonable to expect that the application of organization and technology to manufacturing and service a c t i v i t i e s can y i e l d s i m i l a r r e s u l t s , c) Transformation i n the Nature of Work There has been a transformation i n the occupational structure of the advanced nations. There are a number of dimensions to t h i s change. F i r s t , there has been an increasing role for women i n the workplace. For example between 1971 and 1981 i n Canada, the female labour force grew more than the male labour force. Although much of the change came i n so c a l l e d pink c o l l a r work ( i . e . , sales and c l e r i c a l occupations) women also made increasing gains i n the management, teaching and health occupations. These s h i f t s have s i g n i f i c a n t implications for household structure, consumption patterns and public policy. The second p r i n c i p a l s h i f t was from blue-collar occupations to white, c o l l a r occupations. This includes two effects: f i r s t , the general s h i f t from goods to services, and second within the "goods producing" sectors the s h i f t towards o f f i c e work, most notably c l e r i c a l , advisory, systems monitoring and control functions. Interestingly, however, the large r e l a t i v e and absolute growth i n white c o l l a r work i s not paralleled by growth i n share of general managers (strategic decision makers) i n the workforce (a point that w i l l be returned to below). The t h i r d p r i n c i p a l transformation i n occupational structure i s the re l a t i v e increase i n the number of employees involved i n public sector a c t i v i t i e s (including health and education). F i n a l l y , there has been a s h i f t i n the number and share of the population who derive income not from work but - 89 - from transfer payments including unemployment insurance, pension and investment income etc. A l l these s o c i e t a l trends r e f l e c t changes i n the way enterprise i s organized and i n the way wealth i s created and d i s t r i b u t e d , d) Internationalization of the Economy A wide range of analysts have recognized that the North American economy has been brought into a more global and a more competitive world economy p a r t i c u l a r l y i n the l a s t decade e.g., Harris (1981), Reich (1983), Lewis and A l l i s o n (1982) and Ayres (1984). Many economists from both marxist and neo-classical t r a d i t i o n s argue that t h i s i s a direct r e s u l t of the restructuring of c a p i t a l markets to exploit competitive advantages, e.g., accessible raw materials and lower labour rates i n the t h i r d world, Soja (1982), Hymer (1979). Reich argues that we have exported the technology of large scale production through the investment decisions of multi-nationals and suggests that there i s an economic rationale i n making these decisions. But i t i s not solely a f l i g h t of c a p i t a l that has rendered North American manufacturing industries non-competitive, nor i s i t solely the excesses of organized labour i n extracting wage increases or the Arabs i n creating o i l price increases. America exported organization. In t h e i r search for new markets the multi-nationals took high volume production technology and organization to countries where the other factors of production were less expensive. Inevitably these producers became more competitive. The challenge remaining for North American industry was and i s to develop the innovative products, organization and technology to create new wealth. Yet there i s considerable concern that North American industries have not matched the Japanese or Europeans i n t h e i r commitment to either education or research and development, Ayres (1984). - 90 - e) The Transformation from a Placid to a Turbulent Environment T r i s t (1980) has developed a very succinct typology to describe the change i n the type of environment faced by enterprise. He sees four phases of development: Pl a c i d random, placid clustered, disturbed reactive and turbulent. They have t h e i r economic analogies (or "market analogues" as T r i s t terms them) i n perfect competition, imperfect competition, oligopoly and "macroregulation". A turbulent environment i s emerging, according to T r i s t , from three sources. F i r s t , "large numbers of large organizations (are) pursuing independent (short-term) goals i n societies based on continuous growth and expansion i n a f i n i t e planet with R & D accelerating the change rate." Second, the communications revolution i s reducing the response time and increasing information overload. T h i r d , regulatory mechanisms are unable to cope with unanticipated consequences i n interdependent sectors ( e x t e r n a l i t i e s ) . T r i s t argues that i n response to such turbulence we must develop organic purposeful systems based on people's capacity to envisage a preferred future and work cooperatively towards that future, i . e . , a focus on planning, steering and cooperation. f) Transformation i n Managerial Philosophy Throughout the various views i n the l i t e r a t u r e at the s o c i e t a l scale there i s reference to the development of a two-tiered economy and society. Concern i s expressed at the occupational scale, regional scale and the international scale. I t i s suggested that society i s undergoing a process that creates winners and losers ( i . e . , people, c i t i e s and nations) and encourages the separation of command functions from production functions. Reich (1983) and T r i s t (1980) would characterize these developments as the - 91 - height of managerialism, Reich (1983) or competitive, technocratic bureaucracy, T r i s t (1980). They both argue that the managerial philosophy has to change to deal with the other transformations outlined above. The nature of the change that i s required i s discussed below i n the section on the enterprise. I t should however, be stated here that there i s a considerable body of opinion now emerging i n the academic and popular management l i t e r a t u r e suggesting change w i l l involve the recognition that human c a p i t a l has to be organized d i f f e r e n t l y and the pattern of decision-making w i l l inevitably have to change, i n order to cope with the str u c t u r a l transformations that are occurring i n society. g) Transformation i n Technology Lastly, a theme that i s brought out i n a l l the l i t e r a t u r e on so c i e t a l scale transformation i s the emergence of information technology. I f we are entering a new order where knowledge and information play an increasingly important role compared to c a p i t a l and labour, then tools for the c o l l e c t i o n , organization and dissemination of information w i l l be very powerful ones indeed. Information has some very peculiar c h a r a c t e r i s t i c s as a commodity, as B e l l and other have pointed out, which render redundant some of our conventional notions of economies of scale, nature of an economic good and the transportation and transmission of information through space. Many analysts are recognizing that these changing cha r a c t e r i s t i c s create new potential for organization and location. 3.2.7 Summary and Conclusions on Societal Transformation The relevance of these s o c i e t a l s h i f t s for t h i s analysis i s that they - 92 - suggest a fundamental transformation i n the c r i t i c a l resources and functions of enterprise. I f society i s moving towards a knowledge theory of value there w i l l be a p a r a l l e l emphasis on human c a p i t a l , on education, on innovation and on decision-making i n enterprise. This s h i f t from the tangible to the intangible has s i g n i f i c a n t organizational and s p a t i a l conseauences. In organizational terms the whole notion that, "bigger i s better", must be auestioned when the c r i t i c a l flows are of ideas and information rather than products. Similarly i n s p a t i a l terms, a s h i f t towards intangible flows fundamentally a l t e r s the f r i c t i o n of distance. Ideas and information as flows of commodities do not necessarily conform to the physical laws i n h i b i t i n g s p a t i a l interaction (Abler and Falk (1981)). Further, increased turbulence and complexity i n the environment requires that enterprise must develop methods of coping with uncertainty. Reduction i n uncertainty can be mathematically defined as information, consequently uncertain environments require enterprise to be "information-rich" i n order the "create the variety" necessary for s u r v i v a l . 3.3. PERSPECTIVES ON STRUCTURAL TRANSFORMATION IN THE URBAN SYSTEM In t h i s second major section of the chapter we w i l l discuss the demographic, economic, organizational and technological s h i f t s that have occurred over the l a s t several decades and l i n k them to changes i n the structure of the urban system. In pa r t i c u l a r , we w i l l focus on the degree of sp a t i a l c e n t r a l i z a t i o n of the system because t h i s i s a useful aggregate measure of s p a t i a l structure. This measure i s also of par t i c u l a r importance for t h i s study because we are concerned here with the relationships among - 93 - organization, technology and location of enterprise. Questions about cent r a l i z a t i o n have been c r i t i c a l ones i n the l i t e r a t u r e investigating these relationships. Consequently, we should begin t h i s discussion with a restatement of the d e f i n i t i o n of c e n t r a l i t y and i t s related measures. Centrality refers to the state of being central and brings with i t notions of the r e l a t i v e degree of concentration of human a c t i v i t i e s i n s p a t i a l terms. Centrality however, i s not merely a s p a t i a l concept, rather i t can be defined to include the functional, organizational and p o l i t i c a l aspects of ce n t r a l i t y . i ) Spatial c e n t r a l i t y refers to the r e l a t i v e concentration of events or phenomena i n geographic space, r e l a t i v e to i t s surrounding area. i i ) Functional c e n t r a l i t y refers to the r e l a t i v e degree of concentration and interconnection of a c t i v i t i e s i n a network. This may or may not involve physical proximity. i i i ) Organizational c e n t r a l i t y i s a measure of the r e l a t i v e degree of concentration of authority and decision-making within enterprise. iv ) P o l i t i c a l c e n t r a l i t y i s a measure of the degree to which p o l i t i c a l power i s concentrated or dispersed among constituencies or participants. In t r a d i t i o n a l geographic theory these alternative d e f i n i t i o n s and measures of c e n t r a l i t y have ess e n t i a l l y been treated as synonymous or at least coincident with one another, i n s p a t i a l terms. This i s not surprising, because much of the early work on location theory came from Europe where the correlation between these measures was, and s t i l l i s to some extent, very high (e.g., i f your model i s London or Paris then you might have a very different view of the linkage between c e n t r a l i t y measures than i f you are considering - 94 - the United States). S i m i l a r l y , at the time of development of early theory such as C h r i s t a l l e r (1933), Losch (1954), Alonso (1960), etc. the c i t i e s and c i t y systems under consideration demonstrated a marked correlation between the s p a t i a l , p o l i t i c a l , organizational and functional aspects of c e n t r a l i t y . Contemporary urban systems, and p a r t i c u l a r l y those of advanced economies, are very different from those a g r i c u l t u r a l based and early i n d u s t r i a l urban systems i n which central places displayed c e n t r a l i t y i n most, i f not a l l , i t s defined dimensions. This i s , of course, an over-simplification of early location theory. Georgraphers have long recognized that different c i t i e s perform different types of functions that are not t o t a l l y determined by size and catchment area factors. However, t h i s hyperbolic argument raises the c r u c i a l point, that the major st r u c t u r a l transformations that are occurring i n the advanced nations lead us to question the degree of consonance between these alternative forms of c e n t r a l i t y i n our urban systems. A perfect example of t h i s d i s t i n c t i o n between attributes of c e n t r a l i t y i s provided by Gottman (1982) when he analyses the differences between "old" and "new" c a p i t a l c i t i e s . "New" c a p i t a l c i t i e s ( i . e . i n countries who have elected to change the seat of government) have v i r t u a l l y a l l been on v i r g i n s i t e s close to the geographic "centre" of the country but away from the existing "centre" of a c t i v i t y , decision-making, and population, e.g., B r a z i l , Australia and Nigeria. In t h i s section of the chapter, we c r i t i c a l l y discuss how s t r u c t u r a l transformations i n the environment of c i t i e s and c i t y systems have tended to affect these various attributes of c e n t r a l i t y . Attempts to unravel the effects of these st r u c t u r a l transformations on - 95 - c i t i e s and c i t y systems are many and varied. This large and growing l i t e r a t u r e ranges from casual empirical observations i n the business l i t e r a t u r e and popular press to deep, theoretical fabrications of the underlying processes at work, and the effects they create. Much of the theoretical l i t e r a t u r e suffers from an ideological constipation, i n that i t i s rooted i n mechanistic conceptions of p o l i t i c a l economy or i n s i m p l i s t i c conceptions of economic behaviour, that belong i n another time. However, i n the course of t h i s discussion we w i l l draw on t h i s wide range of evidence, commenting where appropriate on the assumptions made and the positions taken. Thus the remainder of t h i s section i s structured into four parts: 3.3.1 Structural and s p a t i a l transformation i n demography. 3.3.2 Social transformation i n the urban system. 3.3.3 Economic and technological transformation i n the urban system. 3.3.4 Summary and conclusions on urban systems transformation. 3.3.1 Structural and Spatial Transformations i n Demography The census of 1980 i n the US and 1981 i n Canada, and the analyses derived from i t e.g., Hauser (1981), Long and DeAre (1983) and Bradbury and Downs (1982), documents major transformations i n the demography of North America. These studies show that i n the 1970s the r u r a l population growth rate exceeded the urban growth rate and that r e l a t i v e deconcentration of population resulted i n a demographic s h i f t from the North East United States to the South and West of the country. Within urban areas, a decentralization of population was observed s h i f t i n g from c i t y cores to suburban areas. For example, the Bradbury and Downs (1982) study c l a s s i f i e d c i t i e s into clusters - 96 - based on whether they had growing, declining or stagnant c i t y populations versus whether they were i n growing, declining or stagnant SMSA's. The results provice a fascinating picture of demographic dynamics i n the U.S. (and i n Canada, i f t h e i r method i s extended to Canadian Census Data). Similar studies have been conducted i n Europe e.g., Hall (1984). Most notably i n the United States the group of c i t i e s i n the cluster - growing c i t y i n growing SMSA's - were a l l i n the South and West ( i . e . , sunbelt c i t i e s ) with the exception of Sp r i n g f i e l d , Mass one of the "high-tech" areas outside Boston. At the other extreme, declining c i t i e s were predominately i n declining SMSA's, though declining c i t i e s could be found i n either growing of stagnant SMSA's. I t i s important to note that no c i t y i n either Canada or the United States was placed i n the category of growing c i t y i n declining or even stagnant SMSA's, suggesting at the metropolitan scale that no c i t y core grew without concomitant population growth i n i t s SMSA. In Canada, c i t i e s of the West were a l l c l a s s i f i e d as (growing c i t y i n growing CMA) as were some of the second order c i t i e s of Ontario. At the other end of the scale c i t i e s i n a declining - declining state were notably Montreal, St. John's, Sudbury and Sydney - Glace Bay. These changes have profound implications for the present discussion. F i r s t i t i s clear that c i t y growth i s related to growth i n the SMSA generally, although c i t y core's i n declining areas usually fare r e l a t i v e l y better than thei r SMSA's. However, i t would seem that absolute growth has not been compatible with declining or stagnant SMSA's. Second, these demographic s h i f t s present a key element of the context of s o c i a l and economic changes discussed below, namely, there are demographic winners and losers. Third, - 97 - they have s i g n i f i c a n t implications for p o l i t i c a l c e n t r a l i t y . The old saying "people vote with t h e i r feet" has a corollary i n that feet carry votes with them, p a r t i c u l a r l y i n the United States, where the census population i s the basis for apportioning both representation to the United States House of Representatives and Federal taxation (Houser (1980)). Thus these demographic s h i f t s represent a s h i f t of p o l i t i c a l power to the growth regions, and consequently a s h i f t i n the r e l a t i v e p o l i t i c a l c e n t r a l i t y of the metropolises of these regions. For as Mollenkopf (1983) has pointed out " p o l i t i c s runs on votes as well as money". Indeed, his study provides an interesting analysis of the interplay of demographic s h i f t s and p o l i t i c a l fortunes and p o l i c i e s of the Democratic Party's "pro-growth c o a l i t i o n s " . The f i n a l comment to be made with regard to demography i s the impact of the baby boom generation. This bulge carries with i t tastes, preferences and be l i e f s that have been cultivated i n an age of r e l a t i v e affluence, and which have s i g n i f i c a n t implications for the factors discussed below and for the p o l i t i c a l c e n t r a l i t y of in d i v i d u a l c i t i e s . Evans (1984) has suggested that the baby boom w i l l move through the health care system l i k e a pig through an anaconda. This graphic simile can be applied to the other aspects of so c i e t a l tranformation. On balance then, demographic changes have increased the dispersion of population i n North America, set part of the context for other environmental changes, and affected the p o l i t i c a l c e n t r a l i t y of certain urban locations. 3.3.2 Social Transformation i n the Urban System Daniel B e l l (1976) has characterized the transformations i n society as a - 98 - s h i f t from i n d u s t r i a l to post-industrial society. Although B e l l ' s thesis was discussed e a r l i e r i t i s important to rei t e r a t e here, three related aspects of post-industrial society. F i r s t , B e l l argues that we are now dealing with a society that i s based on knowledge rather than a labour theory of labour. Second, he emphasizes the s h i f t from a goods producing manufacturing society to a service consuming society. Third, he i d e n t i f i e s the potential for the emergence of a "new cl a s s " who are the knowledge workers of the "new" i n s t i t u t i o n s , hospitals and educational complexes, or the PMTS group (Professional, Managerial, Technical s t a f f ) , as they are sometimes termed. One can argue as to whether t h i s group has an i d e n t i f i a b l e class consciousness, or auestion whether i t i s indeed a class (see Gouldner (1979) B e l l (1976), Ley (1980)). What seems clear, however, i s that these three factors have profoundly affected North American Society. In p a r t i c u l a r , for t h i s discussion of c e n t r a l i t y , i t i s important to recognize a number of eff e c t s . F i r s t , as our transactions become more knowlege and information embodied, rather than embodied i n the production and exchange of goods, there i s more potential for alternative sets of s o c i a l and economic relations to exi s t , than those conventionally described by c l a s s i c a l and neo-classical p o l i t i c a l economists. I t i s equally possible for these transactions to become asp a t i a l , since information and knowledge can be moved through space more readily than physical objects. The potential for a change i n s o c i a l and economic relations as a result of a s h i f t from physical to knowledge work suggests the potential for decentralization of p o l i t i c a l power. B e l l indeed suggests that many of our s o c i a l relations have become increasingly - 99 - democratized. The r i s e of consumerism and challenges to t r a d i t i o n a l authority i n the 60s and 70s decentralized power to interest groups and networks of co a l i t i o n s . Although i n the 1980s there may be blocks to t h i s process with the reaffirmation of t r a d i t i o n a l and conservative values i n s o c i a l and economic l i f e . Second, the emergence of "a new class", that has become an increasing proportion of the population and electorate, has dictated a s h i f t i n tastes of the population, i n terms of how they spend t h e i r disposable income, where they locate and how they choose to organize t h e i r enterprises. The s h i f t i n consumer preferences from goods to services and experiences has been discussed i n the context of Vancouver by Hardwick (1974, 1984) and Ley (1981). This "new cl a s s " i s a c h i l d of affluence, mass media and r e l a t i v e hedonism and t h i s has affected patterns of consumption and location e.g., the role of amenity i n determining population movement or location, of the early work of Ullman (1954). S i m i l a r l y , t h e i r exposure to and understanding of other places through the media and education has encouraged t r a v e l as a form of consumption and changed our perceptions and tastes i n , for example, gourmet dining (see Ley (1981)). These changes influence the views that people hold about s p e c i f i c c i t i e s and the environment they want for t h e i r c i t i e s . I f "status i n a large, far flung network of transactional c i t i e s " i s a variable affecting c e n t r a l i t y then to some degree i t must be recognized that status i s s o c i a l l y constructed in that the image of the c i t y , as held by dominant groups, w i l l influence the way i n which locational decisions are made about residence and enterprise. A c i t y that sees i t s e l f as post-industrial and acts to reinforce that view i s - 100 - more l i k e l y to a t t r a c t population and enterprise that can enhance i t s v i a b i l i t y . Hence flow the attempts made by the Bostons, Baltimores and Philadelphias of the world to emphasize t h e i r aesthetic attributes (slums not withstanding). Thus, i n summary, changes i n demography, i n the nature of work and i n the education and tastes of society have contributed to the emergence of a "new c l a s s " that, because of i t s increasing s i z e , because of i t s education and actions, and because of i t s r i s e through the decision hierarchy i s wresting a greater degree of p o l i t i c a l control i n enterprise and i n the community at large. The behaviour of t h i s group increasingly affects the consumption and loc a t i o n a l decisions of households and enterprise. The views of t h i s group are to some extent challenged by the actions and ideologies of the Reagan's, Fa l l w e l l ' s and Bennet's of the world, who seem to be a r t i c u l a t i n g and enacting a v i s i o n of the past rather than a v i s i o n of the future. This phenomenon i s consistent with the idea that there are times of multi-parametric change i n society when i t seems ready to accept s i m p l i s t i c hindsight as i t s c o l l e c t i v e vision of the future e.g., the romantic notion of r u r a l l i f e i n B r i t a i n that was propagated at the beginning of the i n d u s t r i a l revolution. 3.3.3 Economic and Technological Transformation i n the Urban System Since the second world war, a variety of academic analyses have t r i e d to explain and/or describe the changes that were taking place i n the economic environment and i t s implications for c i t i e s . The only d e f i n i t e agreement that can be found i n t h i s l i t e r a t u r e i s a clear recognition that profound changes have occurred. In t h i s section we review the more recent l i t e r a t u r e dealing - 101 - with economic and technologic transformations and draw from i t some conclusions about the relationship between these changing circumstances and the attributes of c e n t r a l i t y . This section deals with three relevant areas of the l i t e r a t u r e , Fig. 3.1). F i r s t , a review i s made of the studies undertaken by economists, economic geographers and planners who attempt to describe, evaluate and understand the s t r u c t u r a l s h i f t s i n the economy i n terms of the move from goods to services and the associated s p a t i a l reorganization of enterprise. This l i t e r a t u r e encompasses both theoretical and empirical perspectives on the problem that could be termed the economic planning l i t e r a t u r e . Second, we review b r i e f l y , the o f f i c e location l i t e r a t u r e , which has emerged from the United Kingdom i n p a r t i c u l a r , and which was conceived from a more applied perspective, to deal with the role of o f f i c e s i n regional development. Third, we w i l l review the l i t e r a t u r e that evaluates the implications of technological developments - p a r t i c u l a r l y telecommunications - for s p a t i a l interaction within organizations, c i t i e s and c i t y systems. Each of these analyses of economic and technological change provides some insights into the measures of c e n t r a l i t y , outlined e a r l i e r . 3.3.3 a) Economic Restructuring of the Urban System A number of analysts i n the 1970s began to evaluate the economies of advanced nations, i n order to understand the observable decline i n manufacturing as a share of employment and the apparent r e l a t i v e increase i n service a c t i v i t i e s . B e l l ' s comprehensive concept of p o s t - i n d u s t r i a l i z a t i o n - 102 - and Gottmann's notion of quaternary services or a c t i v i t i e s were discussed e a r l i e r , but i t should be recognized that they were early observers of these changes. A f l u r r y of a c t i v i t y occurred i n the mid 1970s much of i t from colleagues of Ginzberg at Columbia, who sought to document and explain the s h i f t s i n metropolitan economies. Their work provides a useful s t a r t i n g point e.g., Stanback (1981), Noyelle (1983). A current summary of t h e i r findings i s that through analysis of a number of metropolitan economies i n the U.S., i t i s clear that: a) There has been a s t r u c t u r a l transformation of the U.S. economy associated with increasing i n t e r n a t i o n a l i z a t i o n of economic a c t i v i t y , the growth of the multi-national firm and a s p a t i a l d i v i s i o n of labour between nations. b) Similar structural transformations have occurred i n the system of c i t i e s i n the U.S. featuring a s h i f t from manufacturing to producer services, a s h i f t i n location from NE to SW and the development of a new urban hierarchy comprised of: F i r s t t i e r - nodal or command c i t i e s . Second t i e r c i t i e s - focused on the management of specialized production. Third t i e r c i t i e s - that are primarily involved i n the production i . e . manufacturing and provision of consumer services. c) These analysis argue that because there has been a p a r a l l e l restructuring of labour markets, we are witnessing the emergence of a dual economy at a number of l e v e l s : - 103 - - At the job l e v e l - between high paid managers and low paid service workers. - At the metropolitan scale between executive core and blue c o l l a r suburbs. - At the regional and national scales between centres of decision-making and production. They predict d i f f i c u l t s o c i a l and economic circumstances i n the U.S. as a r e s u l t , because the t r a d i t i o n a l setting of upward economic mobility, i . e . , the corporate heirarchy, i s being altered, and because high paid, blue-collar jobs are i n decline (cf, Bluestone and Harrison (1982)). Similar analysis has been conducted by Bergman and Golstein (1983) who examined st r u c t u r a l changes i n the metropolitan economies and attempted to relate the impact of c y c l i c a l changes i n the national economy to the changing d i v i s i o n of labour and pattern of control i d e n t i f i e d by Noyelle (1983) and Stanback (1981). They i d e n t i f y what they c a l l c y c l i c a l or structural ratchet effects; which i n simple terms refers to the varying a b i l i t i e s of metropolitan economies to weather national economic storms. Their argument and empirical evidence suggest that about hal f the urban economies studied were conformant to national business cycles, whereas some such as Chicago were subject to strong negative ratchet e f f e c t s , and others such as Stamford, Connecticut had powerful positive ratchet e f f e c t s , i . e . , i n successive booms, th e i r employment base b u i l t up s u f f i c i e n t momentum to counteract any negative effects i n national downturns. This i s an economic statement of the winners and losers argument seen e a r l i e r i n demographic terms. Other investigators such as P h i l i p s and Vidal (1983) support the - 104 - apparent dominance of producer services and FIRE a c t i v i t i e s (Finance, Insurance and Real Estate) as a key explanatory i n predicting economic v i t a l i t y of urban centres. What emerges from the analysts considered so far i s that there i s considerable empirical evidence for a s p a t i a l d i v i s i o n of labour, i n international, national and metropolitan terms. Second, that growth i n the size of corporations and the development of the multinational, multilocation enterprise has had a profound effect on the s p a t i a l d i s t r i b u t i o n of a c t i v i t i e s i n the urban hierarchy. In terms of the attributes of c e n t r a l i t y defined e a r l i e r , the findings so far suggest that there i s a s p l i t between s p a t i a l , functional and organizational c e n t r a l i t y . The s p a t i a l d i v i s i o n of labour ( i . e . , different functions i n different locations) and the tendency for the growth of producer services as a separate entity from corporations, are important factors i n explaining changes i n the functional c e n t r a l i t y of a metropolis. The growth of the multi location enterprise presents a further s p l i t between the degree of functional c e n t r a l i t y and organization c e n t r a l i t y , e.g., Noyelle's d i f f e r e n t i a t i o n between command, specialized management and consumer or production centres. It i s c l e a r l y useful here to dig deeper into the behaviour of these large enterprises to determine what effects t h e i r decisions have on the re l a t i v e s p a t i a l , functional and organizational c e n t r a l i t y of large c i t i e s . Pred (1977) has argued that c i t i e s are enmeshed i n networks of multilocational organizations. S i m i l a r l y , Stephens and Holly .(1981) i n an excellent analysis of changes i n headquater location behaviour of the Fortune - 105 - 500 companies, conclude that the largest c i t i e s , regardless of th e i r location, tend to be steering points i n the economic system: "although corporate headquarters have been decentralizing to the suburbs, they are able to do so without surrendering t h e i r a c c e s s i b i l i t y to specialized contact networks, a n c i l l a r y business services and in t e r metropolitan transportation networks". Their analysis confirms the dominance of major strategic decision centres i n the U.S. They also i d e n t i f y a number of additional factors of importance. F i r s t , they i d e n t i f y that the apparent r e d i s t r i b u t i o n of headquarter a c t i v i t y from the north-east to the south and west of the U.S. can only be p a r t i a l l y attributed to actual movement of firms between these regions. Rather they suggest the spectacular growth of industries in the sub-belt (such as aero-space, telecommunications etc.) has pushed many of the native industries already headquartered i n the south and west, into the top 500. Thus, these changes r e f l e c t the success of post-industrial enterprises rather than a " f l i g h t of c a p i t a l " . Secondly, they find confirmation for Pred's thesis that: "City systems i n advanced economies have h i s t o r i c a l l y maintained s t a b i l i t y i n the national population rank of t h e i r leading metropolitan areas, because according to Pred these metropolitan 'complexes' offer corporate head off i c e s and other high-level administrative a c t i v i t i e s with specialized information advantages usually not available i n smaller urban centres. They are: i ) greater propensity for interorganizational face-to-face contacts; i i ) a v a i l a b i l i t y of specialized business services and i i i ) high levels of inter-metropolitan a c c e s s i b i l i t y " . - In the course of t h e i r analysis Stephens and Holly provide a very useful table derived from Warneryd (1968) that unites conceptually, for each l e v e l of a three l e v e l organizational hierarchy (head o f f i c e , group head o f f i c e and plant) the following attributes: - 106 - 1) Organization - environment interaction - which they l a b e l orientation processes, planning processes, programmed processes for the 3 levels above. (There i s s t r i k i n g s i m i l a r i t y here between t h i s framework and the Beer, Paterson and Amara and L i p i n s k i formulations outlined e a r l i e r ) . 2) Contact Networks - the three levels had progressively less external and progressively more in t e r n a l communication going down the hierarchy. 3) Functions - ranging from decision-making, planning and product development at headauarters; via control and direc t i o n of production at group head o f f i c e to routine o f f i c e work and production at plant l e v e l , (again the s i m i l a r i t i e s to Paterson are c l e a r ) . A) Position i n urban hierarchy - headquarters i n national metropolis, group headquarters i n regional centres, manufacturing plants i n l o c a l centres. This formulation brings together the concepts of s p a t i a l , functional and organizational c e n t r a l i t y i n one framework. I t i s i n effect back to a central place theory of the firm.'! In that l i e s i t s major flaw, because t h i s l o g i c a l conception does not explain why some c i t i e s get plants or regional headquarters and others do not. Pred has found for example that various a c t i v i t i e s i n the corporate structure, while possessing pa r t i c u l a r locational requirements, are not always found at the same l e v e l of the urban hierarchy. This fact led Stephens and Holly to follow Pred's use of rank-size analysis as a means of deriving the conclusions outlined e a r l i e r . The reason for including the Warneryd derived model i n the discussion here i s that i t - 107 - presents an attempted theoretical model of organizational functioning i n the mult i - s i t e enterprise and i t t r i e s to l i n k i n t e r n a l organizational structure to location. However s i m p l i s t i c t h i s model, i t i s a useful conceptual base for further research, since i t does speak to issues of s p a t i a l , functional and organizational c e n t r a l i t y . This model i s i n sharp contrast to the s t r u c t u r a l i s t analysis of Simmie (1983) and Scott (1982) who try to derive alternative explanations for the phenomena described here using methods of p o l i t i c a l economy. Simmie follows on from Gershuny (1978) i n being c r i t i c a l of the notion of post-industrialism and suggests that we are witnessing i n advanced economies - the process of "corporatism" which he defined as: "A politico-economic system characterized by the exercise of power through functionally d i f f e r e n t i a t e d organizations seeking to achieve compromises i n economically and p o l i t i c a l l y approved actions which are as favourable to t h e i r p a r t i c u l a r interests as possible, and which are often legitimized by t h e i r incorporation in the objective of the state". Simmie (1983:p 61) Simmie's (1983) empirical analysis of the San Francisco and San Jose SMSA's i n the context of the U.S. economy i s a r i c h source of data on employment and organizational changes, that would take too long to comment on here. Suffice i t to say that the data generated i s interpreted i n a way that attempts to argue down the effects of post-industrialism and to cast the metropolitan economies of these two dynamic SMSA's as being rooted i n manufacturing of goods by large corporations. He also adopts Gershuny's r a t i o n a l i z a t i o n that, apart from health and education, there has been no r i s e i n share of services, rather consumers have substituted c a p i t a l for labour i n their households. Perhaps the most serious flaw i n his interpretation, i s his - 108 - conclusion that the majority of the workforce i s employed i n large corporations. The data for 1979 are as follows: Size of San Francisco Santa Clara Employment % Units % Emp. % Units % Emp 0-9 73 11 72 10 10-99 23 31 25 28 100 or over 3 58 3 63 Because the majority of employment ( i . e . just over half) was i n firms of 100 + employees, Simmie feels safe i n concluding that: "The majority of both the most s i g n i f i c a n t and general employment i n both areas i s controlled and structured by large corporations". Such corporations, he argues, are immune to competition because of monopoly and oligopoly. While recognizing that monopoly and oligopoly are c r i t i c a l components of many areas i n the American economy, Simmie appears to have his theory and empirical evidence a l i t t l e muddled. He i s kind enough to provide a l i s t of some of these large corporations i n the Santa Clara case: they include the "dark satanic m i l l s " of Apple computers, I n t e l , Measurex, Sil c o n i x , Syntex, etc., etc. How many of these large corporations were large corporations 20 years ago or even 5 years ago. Simmie seems to ignore the fact that v i r t u a l l y a l l employment growth i n the l a s t decade has been i n small business that grew to be medium sized or even large businesses i n competitive environments (see Birch (1981) and the early comment on Stephens and Holy (1981)). As a v i s i t o r from London to Berkeley, Simmie can probably be excused for not knowing the basic rule of S i l i c o n Valley, which i s that any company whose name ends i n -ex i s probably: - 109 - i ) less than f i v e years old i i ) founded, owned and run by 2-ex Stanford engineers who wear running shoes and i i i ) going to be sold out to a large multi national when i t has 300 employees and proceed slowly but inevitably into bankruptcy e.g., A t a r i . (Meanwhile the guys i n running shoes have started another company with 10 people and a name ending i n -tech). The point of t h i s somewhat facetious attack, i s f i r s t to i d e n t i f y the lack of appreciation that entrepreneurial s k i l l and the application of human ca p i t a l i n innovative and competitive industries are the major contributory factors to employment growth and the dynamic nature of firms (which i s at least recognized by Scott). Second, i n terms of our discussion of c e n t r a l i t y , Simmie's paper r e f l e c t s the attitudes of much of the marxist and structural l i t e r a t u r e i n t h i s area i n that organizational c e n t r a l i t y and p o l i t i c a l c e n t r a l i t y are treated as one and the same process. Scott's (1982) analysis attempts to explain the regional decentralization as a process of dispersal caused by c a p i t a l "deepening" ( i . e . , higher capital/labour r a t i o s ) , restructuring and reorganization of productive a c t i v i t i e s . Scott's model i s e s s e n t i a l l y cast i n the mould of functionalism but there i s a useful l o g i c explaining s p a t i a l decentralization of manufacturing processes. He sees four elements i n the model. 1) More e f f i c i e n t production techniques l e t firms grow. 2) Increased use of technology ( c a p i t a l equipment) encourages standardization of processes and linkages within the firm. 3) Increased c a p i t a l and process 2) above leads to "secular d e s k i l l i n g " - 110 - A) Capital deepening and restructuring leads to mergers and international geographic s p e c i a l i z a t i o n i n the in t e r n a l workings of the firm. Three comments should be made. F i r s t , Scott does not recognize the findings of Dennison's (1975) study that demonstrated the r e l a t i v e l y small effect that c a p i t a l eauipment has on productivity improvement i n U.S. industry, compared to the contribution of increased worker education and innovation i n organization. Second, there are alternative explanations of merger a c t i v i t y that stem from the dominance of accounting professionals and business school management practices employed i n organizations i n the 1970s . (Peters and Waterman (1982) and Reich (1983)). Third, the model i s another unidirectional causal chain that leads to s i m p l i s t i c conclusions. In summary then, there have been substantial economic transformations i n the U.S. economy, that have s p a t i a l , functional and organizational dimensions and therefore effects on the c e n t r a l i t y of the metropolis. Attempts to model these changes have ranged from rank-size conceptions of organizational and functional c e n t r a l i t y , to s t r u c t u r a l i s t / f u n c t i o n a l i s t explanations of change as part of an inherent process of c a p i t a l deepening or corporatism. What i s clear i s that i n the North American and international context we are indeed dealing with a "far-flung network of transactional c i t i e s " that are dominated by information processing functions and o f f i c e work. What i s also clear i s that t h i s network has certain properties of a complex system - notably the notion of hierarchy a l b e i t an asymmetric one, Pred (1979), and the idea of linkages and flows between elements i n t h i s hierarchy. - I l l - 3.3.3 b) Office Location Literature The o f f i c e has been demonstrated to be an important element i n a transactional economy, Cohen (1979). I t i s also an important element i n the employment system, and as such a potentially valuable policy instrument, Daniels (1979). Whereas the economic l i t e r a t u r e discussed above had a predominantly U.S. focus, and i n many cases a s t r u c t u r a l i s t theoretical base, the o f f i c e location l i t e r a t u r e , i n contrast, i s U.K. based, and concerned more with empirical description and regional development auestions (Daniels 1979, Daniels 1982). In a recent e d i t o r i a l of an issue of Environment and Planning devoted to the o f f i c e location l i t e r a t u r e , Taylor and T h r i f t (1983b) argue for a more socio l o g i c a l approach to the geography of enterprise as a means of understanding the behavior of firms as active agents of change and not simply as reactive cogs i n the machinery of the macro economy. The o f f i c e location l i t e r a t u r e has relevance to the discussion of c e n t r a l i t y because i t has attempted to i d e n t i f y patterns of communication and linkage within enterprise and between enterprise, e.g., Gad (1979), Goddard and Pye (1977). I t has also helped to i d e n t i f y the " i n d u s t r i a l o f f i c e " , i . e . those a c t i v i t i e s involved i n the routine processing of information on a r e l a t i v e l y large scale, that can be more readily separated both functionally and s p a t i a l l y , to other locations i n the urban system. Indeed, relocation of the i n d u s t r i a l o f f i c e i n the U.K., e.g., the income tax centres in East Kil b r i d e and Newcastle and the motor vehicle licensing centre i n Swansea, Wales, was the p r i n c i p a l policy outcome of such insights. (However, senior bureaucrats i n the Ministry of Defence could not be induced to flock to - 112 - Glasgow from t h e i r comfortable Surrey suburbs or from the corridors of power i n Whitehall). Despite such attempts at using o f f i c e relocation as a policy instrument, o f f i c e concentration continued i n London throughout the 1970s, leading the o f f i c e location analysts to argue for a more thorough understanding of the internal operations of the organization and for recognition of the processes of dispersion and concentration of decision-making outlined e a r l i e r , e.g., Pred (1977,1979), Stephens and Holly (1981). The l i t e r a t u r e on o f f i c e location has provided important insights on the way i n which the c i t y system i s transformed by the behaviour of enterprise. There i s s t i l l a f a i r degree of confusion i n the minds of analysts as to whether the inherent processes that influence o f f i c e location are processes of concentration or dispersion. The argument i s analogous to the debate over the changing demographics of c i t i e s . The best conclusion that can be drawn i s that higher order decision-making i n large multi-national enterprise appears to require access to advanced corporate services that i s afforded by only the very largest metropolises, sometimes termed the global c i t i e s (e.g., Hymer (1979) and Stephens and Holly .(1981)). However, such access can be secured by suburban locations i n these global c i t i e s (Dunning and Norman (1983)). At the other extreme, there seems to be considerable potential for the dispersion of the " i n d u s t r i a l o f f i c e " a c t i v i t i e s of the multi-nationals to the lower order c i t i e s and to suburban locations i n these c i t i e s . In between, there are a variety of second-order command centres that sustain headquarter functions for very large firms. Most often these enterprises are indigenous to the region, - 113 - e.g., the o i l companies i n Houston or the Hi-Tech firms of S i l i c o n Valley, Birch (1981) and Stephens and Holly (1983). Such firms have grown to be large i n that location. A more infreauent phenomenon, but one that receives much p u b l i c i t y , i s the relocation of headquarters from the Rust-Bowl to the Sun-Belt. In t h i s case the senior decision-makers have opted for an alternative location because of access to c a p i t a l , markets, labour (sometimes specialized, sometimes cheap), i n t e l l i g e n c e functions or amenity. These firms have overcome the considerable i n e r t i a that exists i n the b u i l t environment and made a wholesale change i n t h e i r s p a t i a l organization. Although l i t t l e clear evidence e x i s t s , an alternative explanation for such moves may be that these enterprises experienced pressure favouring corporate restructuring either through acquisition, merger or through the need for l i q u i d a t i o n of r e a l estate assets. 3.3.3 c) Tele-communications and Location Research on o f f i c e location has made a major contribution to the question of the impact of tele-communications on the s p a t i a l , functional and organizational structure of enterprise. Melvin Webber (1963) suggested, i n an early paper, that there was potential for telecommunications to provide both households and enterprise with "community without propinquity". Heady talk of global v i l l a g e s , and time space convergence was common in the early and mid 1970s as technological developments i n computers and communication increased exponentially. Everybody, apparently, was going to work at home or in the backwoods. Such technologically determinist positions have not come to pass, which leads Gottman (1983) to conclude that: - 114 - "Despite a l l the propaganda by the technologists offering dispersal, especially of places of non-manual work, the conclusions reached (by other geographers) are i n agreement with mine: there may be decentralization i n some aspects but b a s i c a l l y transactional a c t i v i t i e s are not l i k e l y to be scattered throughout r u r a l t e r r i t o r y just because technology i s becoming able to overcome distance". Gottman (1983:p 24) What Gottmann does not r e a l l y emphasize i s the way i n which telecommunications enables enterprise to consider alternative organizational, functional and s p a t i a l patterns. For example, o f f i c e location analysts such as Pye (1979) i d e n t i f i e d that approximately 40 percent of meetings i n certain types of enterprise studied, could be replaced by telecommunications (mainly by r e l a t i v e l y inexpensive voice, data and graphics systems transmission). Abler and Falk (1981) suggest that telecommunications have both organizing and co-ordinating power ( i . e . feedback