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Transformation in technology, organization and location : the case from the clinical laboratory system.. Morrison, James Ian 1985-12-31

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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 in THE FACULTY OF GRADUATE STUDIES (Inter-disciplinary Program in Urban Studies) •We accept this thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA September 1985 ©James Ian Morrison, 1985 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the head of my department or by his or her representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. Department of MMhl StV^/eS The University of British Columbia 1956 Main Mall Vancouver, Canada V6T 1Y3 Date 3 <hfob& (985 -6 (3/81) - ii-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, it 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 it does not determine the choice between centralized or decentralized. Rather, it 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. - iiil-TABLE OF CONTENTS PAGE ABSTRACT ii TABLE OF CONTENTS iiil LIST OF TABLES xLIST OF FIGURES xiiii ACKNOWLEDGEMENTS xvPART 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 4 1.8 CHAPTER SUMMARYCHAPTER 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 22.2.2 - 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 42.3.2 - Limited Environmental Analysis 46 2.3.3 - Limitations in the Concept of Technology 42.3.4 - 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 in 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 Lipinski's Strategic Planning Model 57 2.4.5 - Summary and Conclusions 9 2.5 TRANSFORMATION IN OPEN SYSTEMS 61 2.5.1 - Boulding's Nine System Types 62.5.2 - Coming's Synergism Hypothesis 2 2.5.3 - Hage's View on Structural Transformation in Enterprise 65 2.5.4 - Summary and Conclusions 6 CHAPTER 3 - CRITICAL PERSPECTIVES ON TRANSFORMATION OF ENTERPRISE 3.1 INTRODUCTION 67 3.2 PERSPECTIVES ON SOCIETAL TRANSFORMATION 68 3.2.1 - Bell, Habermas and Trist: 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 - Toffler: The Third Wave 78 3.2.5 - Criticisms of the Alternative Views of Societal Transformation 79 3.2.6 - Conclusions from the Critical Review 85 a) From land through labour and capital to knowledge 85 b) From goods to services and information 86 c) Transformation in the nature of work 7 d) Internationalization of the economy 88 e) Placid to a turbulent environment 9 f) Transformation in managerial philosophy 90 g) Transformation in technology 91 3.2.7 - Summary and Conclusion on Societal Transformation 91 - VI-PAGE 3.3 PERSPECTIVES ON STRUCTURAL TRANSFORMATION IN THE URBAN SYSTEM 92 3.3.1 - Structural and Spatial Transformations in Demography 95 3.3.2 - Social Transformation in the Urban System 97 3.3.3 - Economic and Technological Transformation in the Urban System 100 a) Economic restructuring of the urban system 101 b) Office location literature 11c) 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 cities 11c) Increased spatial division of labour 118 d) The two-tiered economy in the urban system 118 3.4 PERSPECTIVES ON THE TRANSFORMATION OF ENTERPRISE 119 3.4.1 - Transformation in the Environment of Enterprise 119 3.4.2 - Transformation in Strategic Decision 127 3.4.3 - Transformation in the Structure of Multi-Unit Enterprise 131 a) The Relationship Between Organization and Control 13b) Environment, Organization, Control and Technology 4 c) Integration of Location into the Relationship Among the Variables 140 3.5 CONCLUSIONS 145 3.5.1 - Methodological Conclusions 14a) Synergistic Models of Structural Transformation 145 b) Case Study Approaches 146 3.5.2 - Substantive Conclusions 14a) Transformation is multi-dimensional and synergisticb) Technology is Neutral 147 c) Role of Environment and Strategic Choice . 147 d) Growth versus Restraint 14PART II - CASE STUDY: TRANSFORMATION, TECHNOLOGY, ORGANIZATION AND LOCATION  OF THE CLINICAL LABORATORY SYSTEM OF BRITISH COLUMBIA 1954-1984 PREFACE TO THE CASE STUDY 149 - vii-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 in Laboratory Services and Costs 16A A.A MEDICAL ENVIRONMENT 17A.A.I - Changing focus in 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 Until the 1980sb) Forces of Dispersion 186 c) Changing Functions and Emerging Structures 188 A.A.A - Section Summary 192 A.5 TECHNOLOGICAL ENVIRONMENT A 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 Implicationsb) Operational Implications 208 i) Automation, Computerization and Laboratory Tasks 20ii) Automation, Computerization and the Impact on Decision-Making Levels 212 iii) 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 - vi LL P/USE 5.2 A MODEL OF POLICY-MAKING FOR CLINICAL LABORATORIES 224 5.2.1 - Identification of Structural Interests 5 5.2.2 - Ideology of Medical Technology and the Objectives of the Structural Interests 230 a) Dominant Interestsi) Clinical Physicians 231 ii) Diagnostic Service Professionals 232 iii) Academic Diagnostic Professionals 233 iv) Corporate Technology Providers 234 b) Challenging Interests 23i) Government 235 ii) Hospital Administrators 23c) 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 Policies for Laboratories 255.3.2 - British Columbian Laboratory F"olicy 4 a) Upgrading 255 b) Regional Laboratory Service 25c) Technology 8 d) Funding and Reimbursement 259 e) Quality and Accreditation Issues 261 f) Cost and Utilization 263 5.4 COMPARING THE SIMILARITIES AND DIFFERENCES IN THREE PROVINCES: ONTARIO, BRITISH COLUMBIA AND SASKATCHEWAN 265 5.4.1 - General Patterns of Growth 265.4.2 - Structural Differences 9 5.5 TRENDS IN CLINICAL LABORATORY POLICY AND THE IMPLICATIONS FOR STRUCTURES 5.5.1 - Reimbursement and Regulation 270 a) Ontario: The For Profit 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 • - Villi -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 in 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 in the Sixties 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 in the Seventies 6.4.3 - Performance of the Systems in the Seventies 6.5 THE EIGHTIES - RESTRAINT AND SYSTEMS MAINTENANCE 6.5.1 - Environmental and Policy Context 6.5.2 - Technology, Organization and Location in the Eighties 6.5.3 - Performance of the System in 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 Activity in 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 in 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 in Structural Change 361 7.2.5 - Central Control versus Institutional Autonomy 362 7.3 GENERAL POLICY IMPLICATIONS 363 7.3.1 - Policy Implications at the Societal Scale 367.3.2 - 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 3 CHAPTER 8 - THE FUTURE OF THE CLINICAL LABORATORY SYSTEM IN BRITISH COLUMBIA 8.1 INTRODUCTION 375 8.2 FUTURE ENVIRONMENTAL CONDITIONS 378.3 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 '394 BIBLIOGRAPHY 397 APPENDICES 414 A - Data Appendix 41B - Historical Review of Developments in Laboratory Technology 419 C - B.C. Laboratory Referrals - Location of Lab Over Location 433 of Patient, 1983 D - Classification of Regional Hospital Districts According to 435 Magnitude and Direction of Change in a Laboratory Cost Index E - Hospital Laboratory Cost per Physician by Regional Hospital 438 District for B.C. 1974 and 1981 F - First Order Difference Model 439 G - Reference Map of British Columbia 441 - XI-PAGE TABLES 1.1 The structure of the environment of enterprise 18 3.1 A typology of transformation in the environment of enterprise 125 3.2 Transformation in organizational design and control 133 4.1 Growth in laboratory expenditures in British Columbia 1970-1983, outpatient versus inpatient by type of provider in constant (1971) dollars per capita 172 4.2 Real laboratory cost per patient admission (in constant 1973 dollars), for all acute care admissions (ACA) and acute adult leukemia patients (LEUK) at Vancouver General Hospital, 1973-1979 180 4.3 Summary of developments in the functional focus of medicine and the laboratory 1940-1980 182 4.4 A summary of technological developments in the clinical laboratory 1950-1985 201 4.5 Estimated relative diffusion of selected laboratory technologies throughout North America by type of institution 204 4.6 Costs of computerization and automation for the clinical 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 in clinical laboratory policy-making - ideology of medical technology, objectives and constraints 229 5.2 Total MSC expenditures, total laboratory and private laboratory share, 1970-1983 241 5.3 MSC expenditures on top ten laboratory fee items by sector in constant dollars and as a share of all laboratory billings to MSC 245 - xil-PAGE 5.4 MSC - number of different test types billed by laboratory sector in metropolitan regions, 1979/80 - 1983/84 246 5.5 Number of laboratory physicians by practice style by region, 1984 249 5.6 Development of diagnostic services policy in Canada 252 5.7 Growth in laboratory services - average annual percentage change in use and cost of services, Canada, Ontario, B.C. and Saskatchewan, 1961-1981 266 5.8 Legitimacy and feasibility: similarities and differences between the provinces 268 6.1 Federal laboratory and radiological services grant to B.C. 1953/54 - 1955/56 285 6.2 Development of British Columbia's regional laboratory system 1955-75 287 6.3 B.C. and Canada laboratory manpower by category for 1954 (full 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 all hospital costs 1962-1981/82 for all PGAS hospitals in B.C. 301 6.7 Laboratory costs per patient day (in currant dollars) and share of all hospital patient days by size of hospital 1962-1982 303 6.8 Total adjusted laboratory expenditures, hospital laboratory 306 expenditures (total and teaching) and teaching hospital's share of both total ajdusted laboratory expenditures and total hospital laboratory expenditure, B.C. 1966-1981/82 6.9 Laboratory cost per capita and annual growth rates in constant 1971 dollars by sector, B.C. 1970-1983/84 313 6.10 Estimated laboratory equipment allocation to hospitals by region in B.C. in constant 1971 dollars, 1973-1980 315 - Xlli-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 316.13 Number of hematology instrument approved for B.C. hospitals, by size of hospital - automated cell counters 1973-1980 317 6.14 Outpatient laboratory costs - costs versus fees and the "apparent" profit 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 district, for selected years 1961-1983 334 6.17 Distribution of hospital and private laboratory activity in B.C. by type of regional hospital district, selected years 1966-1981 336 6.18 Total private laboratory and hospital outpatient laboratory fees by regional hospital district location of physician over location of patient for 1983-84 in current dollars 338 6.19 Average menu of test available on an outpatient basis by type of region in B.C. 1979-83 339 6.20 Summary of relative changes in regional laboratory cost index for the periods 1966-71, 1971-74, 1974-81 346 6.21 Regions with private laboratory activity in constant 1971 dollars per capita and as a share of all adjusted laboratory costs in the region-1979-1983 351 6.22 A historical synthesis of the development of the B.C. clinical 353 laboratory system, 1954-1984. 8.1 The environment of B.C clinical laboratories in 1995 - Possible 377 trends and structural shifts 8.2 Policy options for the B.C. clinical laboratory system in 1995 384 - xiiii -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 its environment 15 1.3 Technology, organization and location in their strategic and environmental context 21 2.1 Synergy in the relationship among technology, organization and location 7 2.2 Hierarchy of decision levels in enterprise 22.3 The five phases of model development in 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 five organizational components 42 2.8 Mintzberg's five organizational designs 3 2.9 Jackson and Morgan's model of posited relationships with organization structure 48 2.10 Paterson and Hardwick's decision bands in a decision hierarchy 56 2.11 Amara and Lipinski'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 16-XV-FIGURES continued PAGE A. A Vancouver General Hospital laboratory, number of tests per patient day, 1957-1982 165 4.5 Laboratory growth in Canada, hospital laboratory use per patient day, 1961-1981 168 4.6 Laboratory growth in Canada, hospital laboratory cost per patient day, 1962-1981/82 16A.7 B.C. pathology services, real per capita cost per annum, 195A-1983/8A 171 A.8 B.C. pathology services, real per capita cost per annum by sector, 1970/71-1983/8A 17A.9 A model of technological development in the clinical laboratory 197 5.1 A model of dominant, challenging and perplexed structural interests in policy-making for clinical laboratories 227 5.2 The changing policy agenda for laboratories in B.C. - 195A-198G 256 5.3 Laboratory eauipment expenditures in 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) in B.C., 1966-1981/82 6.2 Cumulative share of hospital laboratory activity by rank of 3A1 regional hospital district in B.C., selected years 1966 to 1981 6.3 Rank size analysis 1966-1981. Hospital laboratory cost against 3A1 rank of regional hospital district 6.A Hospital laboratory cost per capita by type of region in B.C., 3A2 selected years 1966-1981 6.5 Annual growth rates in hospital laboratory cost per capita 3A2 by type of region in 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 intellectual, logistical and emotional support of a number of people and agencies. The interdisciplinary candidate is particularly dependent on his committee for guidance and support. The author has been extremely fortunate in having a committee of high academic auality. In particular, Professor W.G. Hardwick (Urban Geography) has acted as chair for the committee and has been generous with his time in providing constructive criticism, intellectual stimulation and much needed deadlines. Dr. Walter Hardwick has an impressive record of guiding "unusual" graduate students through the vagaries of interdisciplinary research: the author is fortunate to be one of them. Professor R.G. Evans (Economics) has contributed reasoned criticism; has provided a fine example in 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 interest, but he provided good counsel when the thesis and the author became unglued. Finally, the author wishes to acknowledge the special contribution that Professor D.F. Hardwick (Pathology) made to this undertaking. Dr. David Hardwick reawakened my interest in academic work, provided a research environment in which that interest could flourish and gave critical perspective to this study. Intellectual contributions were made to this study over the last few years by colleagues, faculty and friends. In particular, the author wishes to thank Dr. Ann Crichton (Health Care and Epidemiology), Dr. David Ley - xvii-(Geography), Dr. John Milsum (Health Care and Epidemiology) and Dr. Jill Graham (Commerce). The course work undertaken with these faculty is reflected both directly and indirectly in this study. Many colleagues have commented on earlier drafts of this and other related work, in particular Paul Cassidy (VGH) and Jim Whitehead have provided insight and encouragement. . The author wishes to thank a number of individuals and agencies for their support in data collection, analysis and document preparation. Mr. Larry Smook of the Ministry of Health's Equipment Secretariat, facilitated access to historical records and provided guidance with the data approval process. Mr. Steven Kenney of the Medical Services Plan provided access to data, and his staff: Glen Nuttall, Ramsey Handi and Bruce Hawks provided invaluable expertise and support in preparing data abstracts and in furnishing historical data. Dr. Kit Henderson (Ministry of Health) provided approval for access to historical data. Dr. Morris Barer and his colleagues in 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 tribute to Mrs. Anne Bishop and her staff in the Department of Pathology for their contribution to the preparation of this manuscript. In particular Laurie Trarup and Penny Ma deserve special thanks for their skill and patience. - xviil-Finally, special thanks are due to family and friends who have endured this process and helped me through it. Nora deserves a medal for coping with a newborn and a thesis at the same time, throughout all of which she did not lose her sense of humour and she has learned to like bibliographies. Baby David took my mind away from it all, 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 is one of the most salient characteristics of contemporary enterprise. The transformation in the structure of many enterprises from independent, simple, small scale operations to complex, multi-unit, multi-location systems has been an integral part of wider societal change (Bell (1976), Reich (1983), Trist (1980)). In recent years, an increasing number of questions have been raised about the role, viability and performance of multi-unit enterprise. First, the complex multi-unit enterprise is facing greater uncertainty because of environmental turbulence associated with recession, deregulation, competition and technological change (Trist 1980). Environmental turbulence requires great adaptability, but it is argued, many multi-unit enterprises have been failing in this regard (Peters and Waterman (1982), Harris (1981)). A second and related matter is 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' in organization. In particular, analysts note the poor performance of some enterprises in terms of efficiency, effectiveness, quality of worklife, spatial distribution and lack of innovation (Schumacher (1973), Huber (1984), Harris (1981), Bluestone and Harrison (1982), Reich (1983)). - 2 -Thirdly, there are problems in complex enterprises resulting from the explosion in the availability of information technology. Technological change creates uncertainty, through widespread belief that information technology is bringing about a transformation in the way multi-unit systems are structured in organizational and spatial terms (e.g., Toffler (1980), Bjorn-Anderson (1979)). Particularly, it is suggested that information technology has a propensity to change the degree of centralization/decentralization of activities and decision-making within enterprise. Finally, there are concerns in academic circles that the political, economic, organizational and geographic approaches to the study of contemporary complex, multi-unit enterprise lack both explanatory power and ability to guide policy and management decisions in any meaningful way (e.g., Huber (1984), Goddard (1980), Bell and Kristol (1981), Kuttner (1985)). This thesis examines, in general terms, the transformation in the relationship among the technology, organization and location of multi-unit enterprise over the past thirty years. It draws together threads from complementary sets of literature on technology, organization and location and concludes about the relationships among these variables that are emerging in contemporary enterprise. These conclusions are then tested in a case study of the clinical laboratory system of British 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 distribution - 3 -and by the philosophies underlying those methods. Thus the size and functioning of enterprise was shaped by trade guilds, local trade cartels and by highly localized market conditions. The most prevalent organizational form was a simple structure with master and artisan working in small, independent units. Spatial structure at this time conformed to the random distribution of resources and site potential and was reinforced by the patterns of spatial interaction that were prevalent in simple agrarian systems (Mumford (1961)). 1.2.2. The Industrial Enterprise With the advent of the industrial age, there was a discovery of the productivity-inducing potential of the division of labour. This set the stage for the enmeshing of technology and organization, in which the specialization of tasks and the coordination and synchronization of activities (i.e., organization) became closely related to the emerging forms of technology, in particular the machine. Throughout the nineteenth and early twentieth centuries, the theories and underlying values of economics and mechanical engineering prevailed as the principles on which the structure of organization was based (Reich (1983), Bell (1976)). This organizing priniciple was given further embellishment and formalization with Taylor's influential work on Scientific Management, Taylor (1911), in which the engineering philosophy was carried to its logical conclusion. Widespread acceptance of Scientific Management from the 1920s on had a major impact on enterprise in North America and indeed in the Soviet Union (Bell (1976)), that was reflected in the rigid and hierarchical "machine bureaucracy" in 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 in large scale enterprise (e.g., Roethlisberger and Dickson (1939) and Mayo (1949)). The applied psychological tradition that followed in organization theory was just as instrumentalist in philosophy as Scientific Management in its intent to improve efficiency, but it did help to raise questions about the complexity of human behavior and interaction in the enterprise. Despite an interest in the human side of organization, machine bureaucracy continued as a common structure of enterprise. Indeed the principles of economies of scale and bureaucratic organization have been extended in the structure and management of the large divisionalized, multi-national corporation (Taylor and Thrift (1983a), Mintzberg (1983)). In many cases, management has been standardized and formalized to the point where it 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 principles on industrial organizations is also paralleled in locational patterns of enterprise. Emphasis on economies of scale, minimizing costs of movement and maximizing the economic benefits of agglomeration (i.e., spatial clustering) seems to have developed a spatial calculus that dominated analysis of, and decision-making about, the spatial structure of the industrial organization. The negative externalities of bureaucratic forms in industrial organizations have been long recognized (even by Max Weber himself in his chapter on the Iron Cage (Weber 1947)) as they relate to questions of stress - 5 -and alienation. Over the last twenty five 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) in organization theory, argued that 'mechanistic structures' (bureaucracy) were appropriate for repetitive operations in stable environments but that in more complex and dynamic environments, enterprise must adopt an 'organismic' form if it is to be able to innovate and adapt. Similarly the more recent popular management literature has questioned the effectiveness of bureaucratic structures for large corporations operating in turbulent environments, e.g., Peters and Waterman (1982), Naisbitt (1982), Deal and Kennedy (1982), and Huber (1984). Marvin Harris, a cultural anthropologist, in his observations on 'America Now', Harris (1981) and Schumacher (1973), an economist, in his thesis that 'Small is Beautiful' both, in their own way, question the performance of the large, mechanistic industrial enterprise. 1.2.3. The Post-Industrial Enterprise Major changes in enterprise have occurred since the Second World War but most significantly in the last two decades. The increasing turbulence and complexity of the environment and the explosion in the capability and availability of information technology since the mid 1960s are critical components in the transformation of enterprise, particularly for those organizations whose principal raw material is information, e.g., banks, business services, education and health. The rapidity of technological change has stimulated interest in its impact on the organizational structure of - 6 -enterprise, on the well being of employees and on the spatial organization of multi-unit systems, e.g., the collection of essays in Bjorn-Anderson (1979), (1982), Bannon et al (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 in the office 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, "deskilling" (a neologism coined by analysts to describe the reduction in skill reauirements brought about by automation) and centralization 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 in itself. A similarly polarized literature is developing with regard to spatial auestions, some are arguing that advances in technology liberate remote settlements from the oppression of distance others argue that such technology increases the spatial centralization of power, activity and opportunity (see Bannon et al (1982) and Mandeville (1983) for reviews of these competing positions). 1.3 DETERMINISTIC APPROACHES TO THE STUDY OF TRANSFORMATION The process of transformation in the technology, organization and location of enterprise is not well understood. Efforts to date have suffered from an undue focus on determinism. Four broad forms of determinism can be identified: a) Technological determinism sees the role of technological change as paramount and normally concludes that technological change causes the organizational and spatial structure of enterprise to follow a particular trajectory. Elements of technological determinism can be seen in a wide range of work from Marx, through Woodward (1965) to computer scientists and pundits, e.g., Toffler (1970), (1980). b) Organizational Determinism is a term that could be applied to the widely held assertion that in any given context, organizations should be structured a particular way if they are to be effective. (See structural contingency theory discussed in Chapter 2 and Mintzberg (1983)). This literature explicitly or implicitly regards specific organizational processes or environmental attributes as the "prime movers" in determining the relationship among the technology, organization and spatial structure of enterprise. This determinism takes a number of forms. Scale of the enterprise, particular environmental characteristics, specific technologies or strategic choices have each had their moment in the sun as prime movers. c) Geographic Determinism is reflected in the overwhelming emphasis placed on geographic factors as determinants of organizational and spatial structure. Site and situational factors may have had an important influence on location in earlier times, but in an age when the headquarters of many of the largest and most successful enterprises are located in suburbs of medium sized cities, the geographic deterministic models become untenable, Pred (1977). d) Economic Determinism is the broad term that could be applied to both structuralist explanation and neoclassical economic analysis of the organization, technology and location of enterprise. The patterns that - 8 -emerge in these models are determined either by the inevitable clockwork of political economy or by the aggregate effects of cost-minimizing and profit maximizing agents. Despite a host of analyses, there is no coherent body of organizational, economic or location theory that allows us to deal satisfactorily with the relationship among technology, organization and location in multi-unit enterprise (Taylor and Thrift (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 is to be organized. 1.4. SYNERGISTIC APPROACHES TO THE STUDY OF TRANSFORMATION Explaining the transformation in the relationship among technology, organization and location of enterprise is handicapped by the lack of theoretical models linking these variables. Insufficient attention has been paid to the interaction between these variables. Yet enormous investigative efforts have been made in each and in many cases there has been some insight gained by integrating two of the three variables. For example, organizational theory and its subcomponent structural contingency theory, speaks to the links between technology and organization,'but completely ignores the spatial dimension, e.g., Mintzberg (1983). Similarly, office 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 it rarely - 9 -integrates technology, organization and location. Much of the geographic literature still demonstrates minimal understanding of organization and confines itself to simplistic economic or structuralist-functionalist rationalizations of the locational behavior of the firm. (The precedents in this literature will be reviewed in 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 result, yet the alternative approaches that have been put forward to understand these transformations; have suffered from an undue focus on determinism and causality. In this thesis it is argued that transformation in organization, technology and location of enterprise is an integral part of wider societal change. The wider societal transformation, the transformation in technology and organization and the transformation in the location of enterprise are synergistic in their relationship. For example, the environment has become more turbulent partly because of changes in the structure and performance of enterprise, which in turn have been partially mitigated by the turbulence in the environment, the increase in scale and spatial complexity of organization and by a shift in the purpose of enterprise. There is no single cause, no prime mover or unidirectional force that is governing the relationships among these variables. The complexity of these relationships does not mean that we abandon any attempt at analysis, rather it requires that a more synergistic and interdisciplinary approach be adopted in the investigation of these relationships. There is little precedent for such an approach in social science. We - 10 -have few coherent conceptual approaches for the description of transformation in complex systems, let alone the theoretical basis to explain such phenomena. Marxist lines of analysis can claim to have some elements of holism but they are by no means devoid of determinism and fixed directionality (see Duncan and Ley (1982)). Systems theoretic approaches have made some contribution to the understanding of the structure and processes operating in complex systems, but in their more mechanistic form they have become inflexible attempts at calibrating the behavior of such complex systems (Crosby (1983)). Cybernetics has also provided a useful base for the investigation of complex, synergistic phenomena particularly in its inclusion of the concept of steersmanship as a central variable in the transformation of complex systems (Corning (1983)) Peter Coming's "Synergism Hypothesis" is an impressive attempt to develop a non-deterministic, general theory of socio-cultural evolution, Corning (1983). A theory that identifies a number of synergistic phenomena pertinent to the process of transformation in complex social systems. Corning and other cybernetic views of enterprise, e.g., Beer (1966) can be applied to the process of structural transformation. When enterprise is transformed, there is a purposeful change in behaviour (and social and technological organization) generated partly by innate survival instincts (what Corning terms teleonomic selection) and partly by the interaction of perceived environmental conditions and the expected utility of transformation. Thus there are elements of causality and choice operating in the same process. There is also an interaction between sub-processes operating internally in the organization and externally in the environment. - 11 -In considering transformation in complex systems then, a number of variables and dimensions must be integrated. None of them can be considered as the necessary and sufficient condition for transformation, although each of them may play a role as a necessary condition in certain circumstances. These factors are not neatly compartmentalized into dependent and independent variables rather they interact in a non-linear, synergistic fashion. Such complexity makes it difficult to operationalize conventional forms of econometric or statistical analysis. In this thesis an alternative form of explanation is sought. A model of multi-unit enterprise will be presented that describes the nature of the hierarchy in complex enterprise. This "prototype" will 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 is derived from the work of Beer (1966) and Paterson (1981) in management cybernetics and decision hierarchies; from the open systems views in organization theory (see Scott (1981), Mintzberg (1979), (1983)); from the new geography of enterprise (see Taylor and Thrift (1983 a,b)) and from the emerging views of social systems as non-linear decision systems, e.g., Crosby (1983), Prigogine (1977) or evolving cybernetic systems, Corning (1983). The roots of this model will be described in more detail in Chapter 2, but it is useful here to briefly describe the elements. It is 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 \ j^T OPERATIONS 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 it is conditioned by the scanning and probing activities of the organization's intelligence functions, Huber (1984). These decisions are enacted through the programming choices that are made as to the level of activity and funding required by the organization's sub-units to meet the goals of the enterprise. The guidance systems in multi-unit enterprise are defined as the systems involved in "steering" the activities of the sub-units of the enterprise. These may or may not be directly related to the sub-units in a geographic sense or in a direct "line reporting" sense. The activities at each level of enterprise are monitored and controlled to conform to the parameters developed at the strategic and guidance levels. The operations level may or may not require direct first line management depending on the nature of the enterprise under study. In addition to this decision hierarchy there is a range of information flows both formal and informal that may exist in different forms of enterprise. For example, the much vaunted "management by wandering around" in which strategic managers interact on a casual basis with operations people is an informal information flow. The direct transmission of daily performance reports from sub-units to the strategic decision-level (CEO or Board) is a formal information flow. Exchange of information among all the levels can occur in enterprise. Particularly, 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 it is more common for a restricted - 14 -subset of information flows to occur in enterprise, because of the bounded information handling capability of the individuals (March and Simon (1958), Williamson (1975)). Even where perfect and complete information exists, each level will view that information in a selective way. This basic model can be used as a prototype for examining the relationship between each level of the decision hierarchy. Figure 1.2 shows that at each level, decisions are conditioned by the range and complexity of the environmental field (shown by the surfaces in the diagram) that the decision-maker faces and by the executive constraints imposed from the level above. (The exact model of decisions cascading down a decision hierarchy is drawn from Hardwick's (1982) extension of Paterson's Decision Bands, Paterson (1981) described in more detail in Chapter 2). Each level has some degree of intelligence functions that are involved with probing and scanning the external environment and assimilating these findings within the executive constraints. Similarly each level interacts with the internal environment through monitoring and control functions. The diagram shows that the environmental surfaces and the organizational options become progressively more prescribed as the hierarchy is descended. This, however, is not a universal truth, rather it depends on the nature of the enterprise under study. Indeed in 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 in order to evaluate the transformation in the structure of enterprise. It is hypothesized that the structure of the multi-unit enterprise in spatial, .1.2 MULTI-UNIT ENTERPRISE AND THE INTERACTION WITH ITS ENVIRONMENT. INTERNAL ENVIRONMENT - 16 -functional and organizational terms is affected by the relationship among: a) External Environment - Although by no means an independent variable, the external environment in which enterprise operates is one of the critical elements in the synergistic web of factors shaping the structure and performance of organizations. The relationship between environment, structure and performance is neither clear Nor consistent. Just as similar family and educational environments can "produce" junkies and Nobel prize winners, so similar organizational environments can "produce" winners and losers. b) Strategic Decision - The role of goal setting, of purposeful action is a critical variable recognized in economics, organization theory, cybernetics and political science. Of all the variables considered, strategic decision factors or "purposefulness" seems to be the one necessary, but not sufficient, condition that must exist if complex systems are to survive. It is 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 rationality (of economizing, profit-maximizing man as the neo-classical economists infer). The process through which goals are set is a political one (e.g., Corning (1982)). A variety of informational inputs and performance criteria are gathered, analyzed and synthesized by the intelligence function in enterprise. These inputs are incorporated in strategic goal setting and in the critical decisions made by the enterprise. The criteria used by the strategic decision and intelligence functions involve what could be - 17 -termed the five E's: efficiency, effectiveness, equity, employment and enjoyment (or well being). The resolution of these criteria and interests is achieved through a political process in which the power of interest groups plays a critical role, c) Internal Organizational Environment - The operating aspects of an organization, i.e., the functions, technology, activities, culture and human factors of organizational behaviour, all contribute to the transformation in the structure of enterprise and affect its performance. Organization theory, organizational behaviour, cybernetics and systems theoretic approaches to organization have in certain cases defined the terms organization and organizational structure to include environment, goals and technology in their definitions. For purposes of analysis here, certain attributes of the internal organizational environment have been separated out and the term organizational structure is used to describe the residual set of factors and related measures. Table 1.1 shows the dimensions of the internal and external environment. The interaction among these variables is synergistic and it is suggested that there are no causal chains that can be readily drawn out. It is also argued that the interaction between these environmental variables is mediated by strategic choice and by the critical decisions that are made at each level of the decision hierarchy. In attempting to explore the transformation in 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 Availability of Resources Degree of Competition Degree of Regulation Structural Interests Size Availability of Resources Relative strength of power elites SOCIO-CULTURAL Demographic Factors Social Values Cultural Context Organizational Style Corporate Culture TECHNOLOGICAL Candidate technologies Change Rate R&D efforts Technologies that are Deployed - Operations Technologies - Co-ordinative technologies FUNCTIONAL Candidate Activities Market type Task environment Size Product diversity GEOGRAPHIC Site Situation Markets Built Environment constraints Physical space requirements - 19 -of that structural transformation. For example, if the term organization is thought of as the prevailing pattern of differentiation and communication within the enterprise, then it is both a way of describing the functioning of the enterprise (a dependent variable) and a set of circumstances conditioning change (an independent variable). Similarly, it seems clear that technology can make a contribution to the process of transformation. However, as Nathan Rosenburg (1982) has pointed out, it is important to distinguish between the mere existence of a technology in the wider environment (invention) and the extent of its diffusion, adoption and use in the enterprise under study. It is technology in operation that can enable system transformation. This requires a synergistic combination of appropriate conditions in environment, organization and strategic decision to be present. Furthermore, it could be argued that the really powerful contributions that technological change has made to the transformation of enterprise and society have been where clusters of technology are involved. Finally, with regard to location, it seems clear that the limits of the natural environment have lessened their constraints on the behaviour of multi-unit enterprise. Nevertheless, demographic and geographic factors still play an important role where services have to be delivered to people, where goods have to be distributed and where the spatial clustering of activities is a necessity because of the need for face to face contact. To a large degree however, the spatial 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 in the process of structural change.- Transformation in the relationship among these variables can be viewed best by developing an understanding of the wider process that relates external environment, strategic decision and internal 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 internal environment and strategic choice. 1.6 RESEARCH STATEMENT In the beginning of this 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 this study it will be argued that the transformation that has occurred in multi-unit enterprise is the result of a complex, synergistic process of change. There is no unidirectional force that is shaping this transformation. Rather, there is 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 in the multi-unit enterprise. The literature in this area is incomplete. Either there has been an overwhelming emphasis placed on simplistic causal modelling, or the analysis fails to include all three components. Technology has been singled out by many observers as the critical contextual variable of the post-war period. Consequently a good deal of geographic, economic and organizational literature has placed an undue focus on technological change as the necessary and - 21 -FIGURE 1.3 TECHNOLOGY, ORGANIZATION AND LOCATION IN ITS STRATEGIC AND ENVIRONMENTAL CONTEXT INTERNAL ENVIRONMENT - 22 -sufficient condition for structural transformation. It is true that contemporary technology can enable a wide variety of organizational and locational options, but these options are not directly determined by technological capability. It is hypothesized here that emerging technologies can enable both centralization and decentralization within the multi-unit enterprise in spatial and organizational terms. Indeed, it is further argued that processes of centralization and decentralization can occur simultaneously. The role of environmental change, strategic decision and the political 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 direction of structural change towards either centralization 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 will be made to describe and evaluate the changing interaction of these variables over the last 30 years and to Qualitatively and Quantitatively assess the relative contribution these factors have made. Clearly, it would be overly ambitious to attempt a comprehensive explanation of transformation in technology, organization and location for all types of enterprise. Therefore the evidence and analysis necessary to test these hypotheses must be drawn from a specific case study. But it would also be remiss to evaluate transformation in one type of - 23 -enterprise without placing such an analysis in its wider context. This study is consequently divided into two main parts. In the following chapter the conceptual framework used in this study will be developed from a critical review of its precedents. In Chapter 3 the literature dealing with transformation in technology, organization and location will 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 will be focused on the transformation of one specific multi-unit system: the clinical laboratory system of British Columbia from 1954 to 1984. The clinical laboratory system exists to provide information. It operates on a multi-site basis, in a technologically complex and dynamic environment in which a wide variety of organizational actors and interests have been involved in decision-making. It is therefore representative of the complexity that is associated with many emerging post-industrial enterprises. Thus in Chapters' 4,5 and 6 the general conclusions and criticisms of the literature will be more thoroughly explored in a case study of transformation in the clinical laboratory system of British Columbia between 1954-1984. In Chapter 7 the conclusions from the case study will be presented and the policies and research implications of the two levels of study will be discussed. In Chapter 8 the conclusions that have been reached will be incorporated in the development and evaluation of a set of alternative futures for the clinical laboratory system of British Columbia for 1995. - 24 -1.7 RESEARCH OBJECTIVES The specific research objectives are: 1) To describe the stages and critically evaluate the process of transformation in the relationship among technology, organization and spatial structure of multi-unit enterprise. 2) To assess the relative contribution that environment, strategic decision, technology, organization and geography made in shaping this transformation* 3) To focus specifically on evaluating the apparently ambiguous role that technology has played in shaping the organizational and spatial structure of enterprise. Thus this thesis is concerned with the two challenges alluded to earlier in this study. The first is to develop a coherent framework for the description of structures and structural transformation, i.e., a typology of different types and stages. The work of Bell (1976), Reich (1983), Trist (1980) and others can assist in developing a typology of transformation. The second challenge is to critically evaluate the process of transformation. Coming's work is a useful starting point in 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 in the relationship among technology, organization and location of multi-unit enterprise. It has been argued that the process of structural transformation - 25 -is not well understood and that analyses to date have suffered from an undue emphasis on determinism and simplistic causal modelling. An alternative synergistic model has been proposed in which transformation is seen as a result of the interaction of contextual and operational factors. It is 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. It has been proposed that the process of structural transformation in technology, organization and location can be evaluated by a critical review of the literature and by the application of the model to a specific case study of the development of the clinical 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 in chapter 1 (in Figures 1.1, 1.2 and 1.3) is derived from the open systems view in 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 in Figure 1.3 is an attempt to redress the inherent deterministic bias in many lines of inquiry in this area. Before we can justify the selection of this form of model it is necessary to review the evolution of research into the relationship among the variables outlined. This chapter critically reviews a wide range of literature to. demonstrate the precedents of the models outlined in Chapter 1. The chapter is structured into 6 sections. 2.1 Introduction 2.2 The Five Phases of Model Development in Organization Theory 2.3 Critique of the Deterministic and Contingency Approaches 2.A Refinements of the Contingency Model 2.5 Transformation in Open Systems 2.6 Chapter Summary This chapter starts with a review of the work in 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 literature. In order to increase the coherence of the review the earlier phases of theory development are represented diagrammatically to reflect the emphasis of each particular phase of the literature. The two basic diagram elements are drawn from Figure 1.2 and Figure 1.3. These diagrams reflect the two critical concepts of synergy and hierarchy within enterprise. Figure 2.1 below reflects the notion of synergy between a number of variables that was discussed in Chapter 1.4 and was shown diagrammatically in Figure 1.3. Figure 2.2 reflects the concept of hierarchy and the interaction between levels of the enterprise, that was discussed in section 1.5 and shown diagrammatically in Figure 1.2. - 28 -2.2 THE FIVE PHASES OF DEVELOPMENT OF THE MODEL IN ORGANIZATION THEORY The research conducted in organization theory over the last three decades is a useful starting point in investigating the relationship among technology, organization and location. Inquiry in this area has developed through five identifiable phases. (See Figure 2.3). The first phase is that of the technological imperative where technology is theorized to be the primary variable that determines the structure of organization. The second phase identifies organizational size as a determining factor in the structure of organizations (either as a single determining factor or jointly with technology). The third phase identifies environmental or contextual factors as primary determinate variables. These first 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 in determining organizational structure. The fifth phase is the contingency model approach that recognizes the contribution of a number of different factors. Each of these phases will be examined in more detail. 2.2.1 Phase 1 - The Technological Imperative Most analysts of organizations agree that technology is an important variable. But there has been a considerable debate as to whether technology is the primary determinate or imperative that controls organization structure and performance. Before an alternative framework can be justified, it is important to review briefly the debate on the technological imperative in 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 in organization theory. The works of Galbraith (1967), and Miller and Rice (1967), Perrow (1967), Woodward (1965) appeared to have demonstrated the critical 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 in their (the anti-technologists) favour". Gerwin differentiates between organization level and job level research. Organizational level 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 principal methodology for producing output) as the characteristic technology of the organization. This technology is then normally measured on a scale such as workflow integration. Workflow integration is 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, like so many others in this school, is really focused on the operations technology (which is defined as the eauipping and sequencing of activities in the workflow). It 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 level approach is exemplified in the work of Blau and Schoenherr (1971), Child and Mansfield (1972), Hickson et al (1969), Pugh et al (1969) and Woodward (1965). Job level analysis on the other hand starts with the tasks performed by individual employees, which leads it 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 level can be - 31 -attributed to methodological inconsistencies between studies and in particular to a "lack of a common conceptual definition of technology". His analysis of studies at the job level, where there has been greater methodological and definitional consistency, leads him to suggest that technological determininism may still have some validity. Despite Gerwin's plea for a reappraisal of the technological imperative, it is clear that the mainstream of the technological imperative literature i.e., the organization level studies, has received considerable criticism, 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 earlier results from the technological imperative school. They concluded that, "variables of operations technology will be related only to those structural 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 particular variables and size and dependence and similar factors make the greater overall impact." Jackson and Morgan, 1978 p.182. (For more detailed reviews of the technological imperative see Reimann and Inzerelli (1981) and Scott (1981)). 2.2.2 Phase 2 -The Size Imperative This leads into the second phase studies where size of the organization is thought to determine structure. Mintzberg (1983) summarizes much of the conventional literature on the structural effects of organizational size: "The larger the organization, the more elaborate its structure - that is, the more specialized its tasks, the more differentiated its sub-units and the more developed its administrative component" Mintzberg (1983:p 124) - 32 -The first element of this hypothesized relationship, (specialization is related to size) was a principal finding of the Aston Group studies (Pugh, Hickson, Hinings (1969)). Second, Blau (1970) argued that increased structural differentiation (i.e., increased number of levels in the organization (vertical) and increased divisions or departments (horizontal)) was affected by size. Blau suggested however that differentiation increases more slowly as size increases. The third aspect of Mintzberg's hypothesis that size leads to a more developed administrative component, is also derived from Blau's work. Paraphrasing both Mintzberg (1983) and Pfeffer (1983), there are two causal arguments behind this finding. First, with increased specialization (division of labour), there is an increasing need for coordination between organizational sub-units - hence more supervisory and coordinating staff. 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 it. This latter view is accepted by Corning (1982), but it can be challenged. It seems clear that this shift has occurred in many enterprises as they grow but whether it is necessary for the effective operation of organizations or whether it reflects a broad societal desire to participate in administrative work is not clear. Bertrand Russell foretold of these changes in 1935 when he said: "Work is of two kinds,the first kind is involved in altering matter at or near the earth's surface, and the second is involved in telling people to do so. The first is unpleasant and poorly paid the second is - 33 -pleasant and highly paid. The second is capable of indefinite 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) is that the larger the organization the larger the average size of its units. Finally, Mintzberg suggest that the larger the organization, the more formalized its behaviour. The argument being that in large organizations the standardization of activities 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). Similarly Blau et al (1976) in reviewing other size-technology studies as well as summarizing their own study of New Jersey factories stated that "organizational size rather than production technology appears to exert the more significant influence on the division of labour and the organization of work." (The size-technology debate is still continuing and a more recent Japanese study (Marsh and Mannari (1981)) suggests there is a revival of support for the technological imperative school of Woodward). 2.2.3 Phase 3 - Technology and the Environmental Imperative In the the third phase of theory development, the notion of environmental factors or contextual constraints is added to the size and technology imperatives. It is best illustrated in the model developed by Child (1973) shown in Figure 2.4 and described below by Jackson and Morgan (p 185): - 34 -"In Child's model, increased size, workflow integration and contact with outside groups leads to increased complexity in organizations. On the other hand increases in the number of operating sites (i.e., geographical or spatial decentralization) tends to lower complexity. As complexity increases it leads to increases in formalization. Size also leads to pressure on top executives to decentralize authority. Decentralization and formalization are associated with each other in a complementary way, reinforcing each other. Increases in formalization are also encouraged by increases in the size of the owning group. As he himself indicates, Child's model must be treated as hypothetical but it is one of the the first 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 identified that the nature of an organization's concern for its consumers, employees, stockholders and government, had an impact on its organizational structure. Virtually all 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 rational entities operating in an uncertain environment, they seek to buffer or protect their."technical core" from this uncertainity. The technical core is defined as those parts and processes an organization uses to transform the materials it alters as its primary function. Thompson (1967) identifies three types of technology: i) mediating (e.g., used by a bank as it mediates between its customers and the services it provides) ii) intensive (e.g., used by a hospital as it performs all of the necessary functions for the care of its patients) and iii) long-linked (e.g., used by a factory as various operations are linked in a sequence). - 35 -FIGURE 2.A JOHN CHILD'S MODEL - THE ENVIRONMENTAL IMPERATIVE CHILD'S MODEL OF RELATIONSHIPS BETWEEN CONTEXTUAL VARIABLES AND 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 it is suggested that both environment and technology are important determinants of structure, but their impacts are different. The primary impact of technology is upon efforts to control and coordinate the buffered "technical core". The environment has its primary impact on the organization's structure, in those aspects of structure that are created to respond to uncertainty. For example in order to respond to uncertainty, units are created to monitor and survey what is happening in the environment, plan responses to it, and develop a structure that is appropriate for the degree of uncertainty present in the environment. (The distinction Thomson makes between the strategic level and the technical core may explain why Gerwin asserts that organizational level research does not support determinism and job level 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 Classical management theorists of the scientific management school recognized the critical importance of senior management in determining organizational structure. This view was largely neglected until Chandler's study in 1962 of top US firms, that concluded that an organization's structural configuration is influenced by prior strategic decisions of the top executive team, i.e., structure follows strategy. John Child (1972) develops this 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 is thought in turn to be defined primarily by conditions present in the firm's environment, as shown in Figure 2.5. Child's model is somewhat difficult to operationalize as an empirical tool. Anderson and Paine (1975) hypothesized that the response patterns of policy makers is influenced by their perceptions of uncertainty in the environment and their perceived need for change. In reality they found that only when environmental conditions are perceived as problematic do they encourage structural responses by the executive. It could be argued that Child's conception is itself 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, in others it was contextual factors and for others it was technology and size. These findings lead Montanari (1978 and 1979) and Mintzberg (1979, 1983), among others, to the development of the fifth type of model: the contingency model. 2.2.5 Phase 5 - Technology and the Contingency Model In one form of this model (shown diagrammatically in Figure 2.6) Montanari (1979) extends structural 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) Explicitly 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 this framework Montanari sees technology as a moderating factor rather than a deterministic one. The dependent factors of organizational structure are those recurring measures in the literature (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) is being analyzed. In addition the moderating effect of technology is 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 it has some operational validity. Similarly, Mintzberg (1979 and 1983) tries to integrate the findings from the structural contingency tradition in organizational theory in his book "Structure in Fives". Mintzberg's approach is very much in the "if-then" tradition of Burn and Stalker (1961), Child (1972), Jay Galbraith (1973), Montanari (1979) and others. He asserts basically that organizational structure can be "designed" to best suit the environment of enterprise, the type of tasks it has to accomplish and the type of resources (both human and technological) that is employs. He uses a very interesting organizational "logo" that identifies the five basic components of the organization. (Figure 2.7) - 41 -i) Strategic Apex - This is the board level functions of Beer (1979) or the Strategic Decision (F Band) of Paterson (1981). ii) Middle Line - The hierarchy of middle management that mediates between the goal setting "strategic apex" and the operation of the enterprise. iii) The Operating Core - Where the principal activities of the enterprise are carried out - the shop floor, 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 activities, unrelated to the primary goals of the enterprise, are carried out, e.g. payroll, cafeteria functions, mailroom, etc. Mintzberg uses these five organizational components and a host of other five dimensional terms, that draw heavily on the Aston parameters outlined earlier, to describe five generic organizational designs (Figure 2.8): i) The Simple Structure - Is the common form of the small, owner/manager operation where the operating core is supervised directly from the strategic apex with little or no technostructure, support structure or middle line. This structure is preferred for small scale enterprise operating in simple but dynamic environments. ii) The Machine Bureaucracy - Where the enterprise is 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, similar to Weber's (1947) "bureaucracy" or Burn's and Stalker's (1961) "mechanistic structure" is deemed by Mintzberg to be functional for relatively simple, stable and technically uncomplicated environments. iii) The Professional Bureaucracy - Where highly specialized "operators" are co-ordinated through educational and skill requirements rather than rules. This type of organization is compatible with complex but stable environments such as those in health and education. iv) The Divisionalized Form - Is the closest Mintzberg comes to addressing the issue of multi-unit enterprise. In this form the co-ordinating mechanism is through standardization of outputs, e.g., profit performance. Mintzberg sees this form as: "not so much an integrated organization as a set of quasi-autonomous entities coupled together by a central administrative structure." (Mintzberg (1983:p 215)) The key linkage is between headquarters and the middle line managers in each division. There is a greater degree of formalization and standardization than if each division was completely autonomous. This form is "suited" for large, established, diversified enterprise both public and private working in relatively stable environments. v) Adhocracy - In this organizational form there is a sophisticated operating core working in loose association, e.g., the think tank, film company or consulting firm. The adhocracy can be an - 45 -"operating adhocracy" which solves problems on behalf of its clients or an "administrative adhocracy": an organization designed to innovate but one where the operating core is truncated either by contracting out (e.g., developers) or through automation (e.g., certain hi-tech companies). There is a blurring of roles and responsibilities between staff and line in the adhocracy. It is best suited as an organizational form to complex and dynamic environments. This typology will be used in Chapter 3 when we discuss the transformation in the structure of enterprise. 2.3 CRITICISMS OF THE DETERMINISTIC AND CONTINGENCY APPROACHES Technology, size, environment and strategic choice have been variously regarded as driving variables in the development of research into the determinants of organizational structure. There are a number of flaws in this literature that need attention if we are to apply successfully any of these concepts in this study. 2.3.1 Causality Organizational structure and operations technology are not in some cause and effect relationship to be proved or disproved by technological determinists and their 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 will be constrained by both strategic choice and by contextual or environmental factors (Aldrich (1979), Mintzberg (1983), Montanari (1979)) such as the economic, socio-political or cultural - 46 -factors acting for and against the adoption of particular forms of technology and/or organization. Mintzberg's analysis emphasizes the notions of design and fit, which draws on the ecological idea that particular life forms are better suited to certain environments. Although he attempts to avoid deterministic relationships, one is left with the impression that there is certainly a best fit, i.e., tasks and environments virtually "dictate" form if the designer is rational (which is a very major assumption, as Pfeffer (1982), Weick (1979) and others suggest). 2.3.2 Limited Environmental Analysis The second major criticism that can be made of many of the studies in this body of "structure research" is that the models use a limited range of environmental factors. (The conventional study is in 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 it seems to suppress the range of environmental factors identified by Emery and Trist (1965), Aldrich (1979), Huber (1984) and others. 2.3.3 Limitations in the Concept of Technology The third major criticism is in terms of the methods used to classify and categorize technology. "Dominant technology" is a phrase often used in the literature, referring to the dominant operations technology the observers could identify in an organization (or in the technical core of an - 47 -organization). To the analyst of information technology this is an unhelpful focus for two reasons. First, it is unusual for information technology to be the "dominant technology" of an organization. It is much more likely that information technology is used in a secondary role, i.e., for a subset of tasks in the organization. Second, it is unlikely that information technology will always be used as an operations technology in the true sense of the term (although increasingly many industries can be viewed as involved in information processing as a primary function, e.g., financial services, health and education). A more common use of information technology is as a co-ordinative technology, i.e., as a means of enhancing the production and communication of information in an organization. This has led some analysts to add computer usage as a separate contextual factor in 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 final criticism that can be levelled at the "structural research" is that is -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 spatial analysis. For example, in terms of the debate over the impact of information technology on the spatial and organizational structure of enterprise, there has been considerable focus on the centralization/decentralization question. Three broad areas of inquiry are being undertaken. First, there are those who define centrality primarily in 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-—Spatial 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 it is sometimes called), 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 spatial interaction, e.g. Harkness (1973), Isard (1979). The general conclusion here is that communications technology in particular will allow man to overcome the "tyranny of distance" and lead inevitably to decentralization. The evidence that is cited ranges from the increases in relocation of head offices of large corporations from large cities to small cities, to the possibilities of telecommuting, where communications will be substituted for the journey to work (Mitre Corp (1978); Abler (1975)). The second school examines centrality in functional, organizational and spatial terms. The conclusions from this group are less clear cut. Some argue that face-to-face linkages are of paramount importance in many activities and therefore the decentralizing impact of technology will be limited to a restricted subset of these activities and functions, Gad (1979), Goddard and Pye (1977). Others have argued that it is necessary to recognize the organizational context of locational decisions. These researchers have argued that the structure of decision making within an organization will affect locational decisions, i.e., the structure or organizations is represented in geography, Massey (1979), Pred (1977), Goddard (1980), Edwards (1983), Taylor and Thrift (1983). Pred (1977,1979) in particular has argued that in advanced economies, the spatial hierarchy of many enterprises is conditioned by the structure of decision-making. Theoretical developments in the geography of enterprise will be discussed further in Chapter 3. - 50 -The third school of inquiry (which is being conducted by a broader group including economists,' organizational theorists and management scholars) focuses primarily on the functional and organizational context and is to some extent aspatial. This group is more concerned with the centralization of decision making and control regardless of location. As such it deals with questions of efficiency, autonomy, equity, and power, e.g., Simon (1979), Beer (1966), Pfeffer (1981). Much of this work is from a value laden position that states that centralization is bad (E.F. Schumacher (1973)). For analysts from this third tradition, the impact of technology on centrality is viewed as a function of the desirability of centralization on the one hand and the feasibility on the other. Simon (1979) has suggested that "any change in technology that makes it cheaper and easier either to centralize or to decentralize decisions will tip the balance in that direction." (These three schools will be reviewed more thoroughly in Chapter 3 when environmental and structural transformation is discussed. The best conclusion that can be drawn at this stage with regard to technology, organization, location and the degree of centralization is provided by Goddard (1980) discussing the office sector: "Technological development is a permissive factor - e.g., facilitating the growth of large enterprises. It is a necessary, though not sufficient, condition for locational change. In consequence the impact of new technology in the office sector needs to be seen in the broader context of the factors influencing organizational structure and strategy in a spatial setting ... In order to avoid naive technological determinism it is necessary to consider the functions of the office and the factors influencing their geographical spread." 2.A REFINEMENTS OF THE CONTINGENCY MODEL The first three concerns outlined above (i.e., concerns with causality, environmental analysis and the definition of technology) reflect the more - 51 -general criticisms being voiced in organization theory. It is useful here to review briefly the change in focus in organizational theory and the contributions that these criticisms have made to refining our model. Chapter 1 described the early roots of organization theory in the work of Weber on bureacracy (Weber (1947)), Taylor (1911) on scientific management and Mayo and the Human Relations School (Mayo (1949)). Over the last three decades a number of conceptual developments have occured drawing from both the primary traditions of organization theory, sociology and psychology, and from secondary or emerging traditions, systems/cybernetics, social-ecology, economics, political science and decision theory. A number of attempts have been made recently to synthesize, classify and critiaue what is now an enormous literature. Four useful syntheses are presented in the works of Scott (1981), Hage (1980), Mintzberg (1983) and Pfeffer (1982). The typology of Scott illustrates three competing positions. 2.4.1 Scott's Taxonomy of Rational, Natural and Open Systems in Organization  Theory Scott (1981) attempts a "coherent introduction to the sociological study of organization." He has suggested that organization theory falls into three general theoretical prespectives, 1) A Rational Systems Perspective 2) A Natural Systems Perspective 3) An Open Systems Perspective From a rational systems perspective: - 52 -"an organization is a collectivity, oriented to the pursuit of relatively specific goals and exhibiting a relatively highly formalized social structure." Within this tradition fall Scientific Management, Simon's work on Administrative Behaviour and Weber's work on Bureaucracy among others. From a natural systems perspective: "an organization is a collectivity whose participants are little affected by the formal structure of official goals but who share a common interest in the survival of the system and who engage in collective activities informally structured to secure this end." Within this tradition fall Mayo (1949) and the Human relations school, McGregor of theory X and Y fame (1962), and Parsons (1951). Scott (1981, p 175) identifies the essential differences between the two schools along a number of dimensions. 1) "Rationalist" analysts were usually practical men, practitioners of management whereas "natural systems" analysts were focused more on academic inquiry. 2) They differ in the case study focus of their inquiries: rational systems views prevail in industrial and bureaucratic environments. Whereas open systems views prevail in not for profit, service and professional organizations, such as schools and hospitals. 3) It has been suggested that the rationalist systems view is more suited to the stable environment whereas the natural system view is suited to dynamic environments. 4) The moral viewpoint of the organizational participant differs in the rational viewpoint where the employee is viewed primarily as one who performs tasks, from the natural systems viewpoint in which the employee's functioning is considered from a holistic perspective. - 53 -5) The philosophical traditions underlying these views are different. The rational systems model stems from an instrumentalist, mechanistic perspective. The natural systems perspective stems from an antirational, organic philosophy of social 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 is a coalition of shifting interest groups that develop goals by negotiation; the structure of the coalition, its activities and its outcomes are strongly influenced by environmental factors." (Scott (1981) p: 178) Within this tradition 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) structuralist model, Lawrence and Lorsch's contingency model (1967) and Thomson's Levels model. The ideas of Thomson (touched on earlier) 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 in a nutshell is that organizations strive to be rational although they are natural and open systems. It is in the interest of administrators - those who design and manage organizations -that the work of the organization be carried out as effectively and efficiently as possible. Since technical rationality presumes a closed system, Thomson argues that organizations will attempt to seal off their technical level protecting it from external uncertainties to the extent possible. Thus, it is at the level of the core technology - the assembly line in the automobile factory, the patient care wards and treatment rooms in the hospital - that we would expect the rational - 54 -system perspective to apply with most force. At the opposite extreme, the institutional level, if it is to perform its functions must be open to the environment. It is at this level where the environment must be enacted or adapted to, that the open systems perspective is most relevant. In the middle is the managerial levels, which is required to mediate between the relatively open institutional and closed technical levels. To do so effectively requires the flexibility that is associated with the less formalized and more politicized activities depicted by the natural system theorists. It is also the managers -whose power and status are most intimately linked to the fate of the organization - who have the greatest stake in the survival of the organization as a system." Thomson's work provides a more complex view of the large organization, one in which there is an identifiable hierarchy of behaviour that is 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 similar hierarchial notion of enterprise that suggests that variation in behaviour, responsibilities (and thus pay) can be distilled down to one critical variable: the decision. Paterson suggests that there are four components of a decision, operating as a "decision making procedure" at 6 hierarchial scales in enterprise. The decision making procedure comprises a four cell matrix in which a linear sequence is 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 particular context or frame. 3) The Decision Stage (D) - consists of examining the alternatives, selecting one and making a committment to achieve a particularly end or objective. A) The Execution Stage (E) - consists of choosing the correct means of achieving the ends. Paterson argues that there is "feed forward" from the E stage to the I stage in which the executive implementers communicate the feasability 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 is: Band Administrative (Policy and Planning) F Policy-making decisions (goal-setting for the enterprise) E Programming decisions ("strategic planning") D Interpretive decision ("tactical 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 links between the ends set by one level (E Box) as an input into the conclusions (C Box) of the level below. - 56 -Fig. 2.10. This concept of a cascade of decisions was developed by Hardwick (1982) in his notion of co-management in education. At all scales there is interaction with the environment by the I Box, i.e. data is gathered and synthesized in 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 Similarly, Stafford Beer, in his physiologically-derived, management cybernetic models, argues that there are only 5 sub-systems in enterprise or in any complex system. The 5 sub-systems in 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" activities) System 5) - The Board Function (responsible for steering the enterprise by setting the goals) 2.4.4 Amara and Lipinski: Strategic Planning Model Finally, Amara and Lipinski (1983: p 39) offer a useful corporate planning framework that identifies 6 stages in the planning process. "A number of specific features of this framework should be noted: 1) The upper (analyzing) half of figure 2.11 includes the five principal stages of planning, stages 1 to 5; the lower (implementing) half includes the basically operational loops, stage 0. 2) From left to right, the upper framework reflects the three principal components of any planning framework: the probable (environment), the possible (options), and the preferable (values); or, alternatively, what do we know, what can we do, what do we prefer? 3) The management function is the centerpiece of the framework, straddling the line between the upper "strategic" and lower "tactical" half of the framework. This positioning graphically illustrates the essential unity and inseperability of tactical decision making and strategic planning. 4) The iterative nature of the basic planning process is illustrated by lower tactical and upper strategic feedback loops, joined within the management function. 5) The principal flow between the upper and lower halves of this figure is 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 "left brain" rational component of management while the lower tactical loop represents the "right brain" intuitive component. 7) Financially, the upper half of Figure 2.11 generally deals with choices that are likely to impact the balance sheet, the lower half with decisions more likely to impact the profit-and-loss statement. 8) Any real decision-making situation will be an amalgam of the five stages shown and described eariler." 2.4.5 Summary and Conclusions Thomson, Beer, Paterson, and Amara and Lipinski all view .organization to some extent as open systems. The contribution of Thomson's work for our purposes is in the recognition of the politicization of middle management behaviour and that different levels of the enterprise behave differently. Thomson however underestimates the interaction with the environment that the lower levels of the hierarchy might have in certain types of enterprise, e.g., professional bureaucracy or sales and marketing aspects of organization and his theory (like most of even open systems organization theory) is still somewhat instrumentalist. The contribution that Paterson makes is in recognizing that hierarchy is (or at least should be) fundamentally related to decision-making, therefore in attempting to understand spatial and organizational hierarchy it is important to "locate" types of decision-making in 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 still, 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 -it could be argued that the theoretical bases touched upon here are still predominantly either descriptive or prescriptive of the relationship among the variables of concern. Further, it could be argued that much of organizational theory is still somewhat simplistic in its explanation, and has an overwhelming focus on causality even when an open systems view is adopted. Furthermore as Hage (1980) has pointed out there are weaknesses in organization theory in the handling of the concept of structural transformation. 2.5 TRANSFORMATION IN OPEN SYSTEMS The models described so far adhere essentially to the notion of static equilibrium, an idea that still carries much weight in the minds of neo-classical economists and others. The theories outlined above have developed from linear 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 in any meaningful way. Instead, like neo-classical economic analysis, they tend to view any change as the shift towards the equilibrium state that the contextual conditions dictate. To deal effectively with transformation in open systems it is necessary to have some understanding of how complex social systems transform themselves. 2.5.1 Bouldings' Nine System Types Before we can deal effectively with transformation in complex open systems it is useful to consider a taxonomy of system complexity. Kenneth Boulding (1969) has identified 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 cell. 5) Blue Printed Growth Systems - capable of genetic reproduction, e.g., a plant. 6) Internal Image Systems - capable of perceiving and organizing its perception of environment, e.g., animals. 7) Symbol Processing Systems - possessing self-consciousness and ' language ability, e.g., humans. 8) Social Systems - "multi-cephalous" systems of actors sharing values or culture, e.g., social organizations. 9) Transcendental Systems - systems comprised of the "absolutes and the inescapable unknowables". These are arranged in a nested hierarchy of systems within systems. The value of Boulding's insight and the magnum opus of Miller (1978) is not only in demonstrating the complexity and inter relatedness of systems in the world, but in emphasizing the validity of using one lower order level as a model and a means of understanding, higher levels: "much valuable information and insights can be obtained by applying low level systems to high-level subject matter" Boulding is also quick to point out that: "most of the theoretical schemes of the social sciences are still at level 2, just rising now to 3, although the subject matter clearly involves level 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 it) in his "Synergism Hypothesis" that tries to go beyond simple clockwork in the form of analysis. In his own area, Corning recognizes weaknesses in causal and deterministic models. In reviewing the literature on socio-cultural evolution Corning concludes that: "Technoeconomic determinism as a general methodological stance is outdated by the accumulated evidence of a more complex reality. Similar technologies do not necessarily call forth similar social organizations or similar ideologies. They may call forth altneratively, an Athens or a Sparta, a Victorian England or an Imperial Germany, a United States or a Stalinist Russia. Likewise a steel mill can be operated by a laissez faire capitalist, a worker's collective, or a socialist state bureaucracy. The differences are significant. Furthermore the causal arrows do not run in only one direction. The blanket assumption that technoeconomic causes will predominate over political/military causes is an assumption that has become dogma." Corning (198a:p 224) Corning also has emphasized that all the "prime movers" of socio-cultural evolution are simplistic. Corning cites Elman Service's critique of cultural evolutionism (terms in parentheses have been added by the author to emphasize the thrust of the argument here): "Down with prime-movers! There is no single magical formula that will predict the evolution of every society (enterprise). The actual evolution of the culture (organization) of particular societies (enterprises) is 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 potentially so various that no single determinant can be equally pqwerful for all cases." Corning (1983:p 226) Corning brings together 6 critical concepts in what he terms a Social Triad Scenario of socio cultural 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 likely to have been the pacemaker; that is, the natural selection of morphological changes tracked the process of behavioural and social change (rather than vice versa). 3) The cybernetic model of social organization which makes decision-making, communications and behavioural control processes (political processes) integral parts of organized (purposeful) social behaviour. 4) The Synergism hypothesis which focuses on the functional consequences of various combinational processes, including social cooperation. 5) A bio-economic (benefit-cost) approach to assessing the plausibility of alternative choices and strategies. 6) A revival (with modification) of the Darwinian hypothesis that human social evolution may have been the result of three mutually reinforcing selective processes: a) kin selection for altruistic and group-serving behaviours among closely related individuals; b) individual selection for mutually beneficial forms of co-operative behaviours (egoistic co-operation or enlightened self-interest); and, c) group selection among functionally interdependent groups of co-operators." Corning (1983:p 275) The utility of Coming's ideas for our purposes here, lies in his recognition of the complexity of the process of transformation in social organization and in the identification of key variables and sub-processes involved in transformation. Extrapolating Coming's ideas back to the level of the enterprise it is clear that transformation is a process in which survival, adaptation, behavioural change and goal-setting are interacting factors underlying transformation. On the other hand, synergism and bio-economic performance are both criteria in decision-making and attributes of the outcomes of transformation. (Outcomes, as Corning emphasizes, that are - 65 -not inherently beneficial, i.e., synergism is not a good in itself). Is this approach an unnecessarily complex "fuzzification" of reality? It would be much easier from a research point of view, to draw the causal model out in Chapter 1, gather the data, load the arrays and spit out regression analyses until we found one with statistical significance. But as Evans (1982a) has suggested: "For every complex problem there is a simple answer: and it's wrong." 2.5.3 Hage's View on Structural Transformation in Enterprise Corning provides us with a broad conceptual explanation as to how and why complex systems transform themselves. The auestion of stages in 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 in the process of change: 1) Evaluation 2) Initiation 3) Implementation 4) Routinization In the evaluation stage enterprise evaluates how well it is maintaining its relative position against a set of performance criteria, e.g., profit, prestige or market share. If a "performance gap" is identified then a change may be initiated, the search here is for funding to support such a change. The implementation stage is involved in closing the performance gap by introducing the innovation. Finally as Hage points out: "the routinization stage refers to the integration problem. On the one hand dominant coalitions must decide whether to retain or reject the - 66 -innovation. On the other hand special procedures must be routinized. There is a need to reintegrate the organization." Hage (1980:p 209) The importance of Hage's work for our purposes is first in the recognition that the enactment of structural change in enterprise involves strategic perception and strategic choice (the C and D boxes of Paterson's decision process) and second in emphasizing the underlying power relations and political nature of strategic decisions about change. These views tend to suggest that the process of transformation in complex social systems is 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 structural transformation is a synergistic process of change that is conditioned by environmental circumstances, internal operation and behaviour and strategic decision-making. In social systems, given their "multi-cephalous" nature, the choices made by individuals and groups have a critical role to play in the process of transformation. Thus the analyst of structural transformation must look at interest groups, power and politics as much as technology, economics and environment. 2.5.4 Summary and Conclusions Investigation of transformation in complex systems involves identification and explanation of both structure and process. A range of precedents for our model have been reviewed in 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 in structure. They also contribute to our understanding of the interaction between environment, decision making, organizational structure and technology. Recent developments in the theory of organizing (Weick 1979), in the theory of organizational power and-politics (Farrell (1982), Culbert and McDonough (1980) and Pfeffer (1981 and 1982); in strategic decision-making under uncertainty (Amara and Lipinski (1983) and Huber (1984)); and in socio-cultural evolution in complex systems (Corning (1983)) provide us with some understanding of how the process of systems change operates. The conclusion that can be drawn is that any approach to the analysis of transformation in multi-unit enterprise must recognize the complexity of interaction between a wide variety of variables. In particular, it is clear that the nature of the environment facing enterprise is an important factor that helps shape the structure of enterprise. Similarly, strategic decision making, intelligence functions and the inherently political processes underlying these activities are critical to both the structure of enterprise and the process of transformation. Technology, organizational and spatial structure are an interacting web of variables that both influence strategic choice and are influenced by it. In the following chapter transformation in these variables will be critically reviewed and conclusions will be drawn about the relationship among them. - 67 -Doc. #1230F Archive 0073F CHAPTER 3 - CRITICAL PERSPECTIVES ON STRUCTURAL TRANSFORMATION 3.1 INTRODUCTION There is widespread agreement that advanced nations are undergoing a period of structural transformation, even though analysts disagree about the causes and effects of this transformation. The transformation is thought to occur in a number of dimensions: demographic, political, economic, organizational, socio-cultural and technological; and at a number of levels: societal level-, urban systems level and at the level of the enterprise. Some observers have labelled these transformations as the emerging Post-Industrial society, Bell (1976), the Global Economy, and the International Economy, still others have termed them the shift to an Information Society or an Information Economy, Porat (1976). This latter group have focused particularly on the role of information technology, i.e., computer and communications technology, as the driving variable behind structural change in the economy and in enterprise. In examining a complex synergistic process of transformation it is difficult to develop an organizing principle for such an exposition. If there are no prime movers and no higher order causes then how should such analysis be organized and where should it begin? The choice made in organizing this literature review of structural transformation is an arbitrary one. This review of structural transformation is divided into 3 levels: the societal level, urban systems level and the - 68 -level of enterprise. The purpose of differentiating between the societal scale and the urban systems scale is twofold. First, it is clear that the more general societal transformations have been analyzed in a relatively aspatial way. In order to integrate effectively spatial phenomena into the analysis of transformation, the urban systems literature must be considered. Secondly, the urban systems literature provides a useful bridge between the broad societal change and the manifestations of these changes in cities and enterprises. Structural transformation of the enterprise is both reflected in and affected by those wider environmental transformations found at the societal and urban systems scale. It is also conditioned by some of the specific characteristics of the immediate environment facing enterprise. As pointed out earlier, it is difficult to isolate the three levels because shifts in the behaviour of enterprise are an integral part of broad societal transformation. Thus the organization of this review is for analytical convenience and does not imply that a higher order of importance is to be attached to societal transformation, or that causality flows from higher to lower order. 3.2 PERSPECTIVES ON SOCIETAL TRANSFORMATION In this section, a range of views on broad scale socio-economic transformation will be critically examined. The intention here is to derive some conclusions about socio-economic transformation that can illuminate both the stages and process of transformation in the relationships among technology, organization and location of the multi-unit enterprise. - 69 -Figure 3.1 identifies six basic schools or approaches that are prevalent in the analysis of structural transformation at the macro socio-economic or societal level. These are: 1) Political 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 criticism between the schools has been generated. The intricacies of these debates can be more sharply focused at the urban systems level, because it would be impossible to adequately review here the broad spectrum of views on socio-economic change. However a brief 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 Bell, Eric Trist, Jean Gottman and Alvin Toffler. Since Bell's Post-Industrial thesis represents somewhat of a middle ground between these views it can be used as a basis for comparison. 3.2.1. Bell, Habermas and Trist: Post-Industrialism or Advanced Capitalism? Daniel Bell is the father of the term, "post-industrial society", an extension of the pre-industrial, industrial typology. He states in the very first page of his foreword to the 1976 edition that: Fig. 3.1 ALTERNATIVE VIEWS OF STRUCTURAL TRANSFORMATION POLITICAL ORGANIZATIONAL ECOLOGICAL/ POST- GEOGRAPHIC TECHNOLOGICAL/ ECONOMY SYSTEMS INDUSTRIAL FUTURIST SOCIO ECONOMIC SCALE Marxist Neo classical Habermas Industrial Organization Org. Theory Reich Social Ecology Cyber netics Trist PI Thesis Service Economy Bell Quaternary Sector Gottinan Technological Possibilism Futurist Toffler URBAN SYSTEMS SCALE Simmie Economic Planning Theory Bluestone/ Harrison Gershuny Stanback/ Noyelle Post-Industrial Planning Theory Pred Hardwick Gottman Stephens/ Holly Ley Technological Planning Theory Trist Goddard Pye T3 - 71 -"The idea of a post-industrial society is not a point-in-time prediction of the future, but a speculative construct, an as if based on emergent features, against which the sociological reality could be measured decades hence, so that in comparing the two one might seek to determine the operative factors in effecting societal change." It is then, in Bell's view, a theoretical construct - a benchmark against which we can evaluate societal change. He is not suggesting that post-industrial society displaces all aspects of industrial society, just as industrial society did not displace the agrarian sectors of the economy. This is a point he returns to in his concluding chapters, namely, that social systems take a long time to change: "To predict the close demise of capitalism is a risky business and barring the breakdown of the political shell of that system because of war, the social forms of managerial capitalism - the corporate business enterprise, private decision on investment, the differential privileges based on control of property - are likely to remain for a long time." Bell (1976:p 372) If capitalism is still going to be with us, what are the new dimensions that help differentiate or distinguish post industrial society. Bell emphasizes that he is not advocating the abandonment of existing theoretical dimensions in the analysis of post-industrial society. Instead he suggests that: "Like palimpsests the new developments overlie the previous layers, erasing some features and thickening the texture of society as a whole." (Bell 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 indicative of emerging trends. These are: 1) The Centrality of Theoretical Knowledge Bell has argued that knowledge or human capital in a post-industrial - 72 -society, will play as central a role as physical capital did in industrial society. He is arguing at a theoretical level for adoption of a knowledge, rather than a labour theory of value. He sees knowledge as a collective good that is much more difficult to privatize than labour and its surplus value. His evidence of the centrality of theoretical knowledge, includes the observation that the emerging and important industries of the late 20th Century are predicated on theoretical developments, rather than the results of empiricism and tinkering as was the case in industrial society. The two salient examples are the chemical industry - requiring a theoretical understanding of the composition and behaviour of macro molecules and the recent developments in silicon chip technology that are based on earlier advances in theoretical physics. The Creation of a New Intellectual Technology Computer modelling, simulation and systems analysis is being used increasingly to "chart more efficient 'rational' solutions to economic, engineering, if not social, problems" according to Bell. This comment should be viewed in the light of the time. The late 1960s and early 1970s, when Bell was formulating his thesis, saw the height of positivism and quantification in the social sciences, but how pervasive is Markov Chain Analysis in publications today? What Bell correctly forecasted was the growth in extent and importance of information technology and information functions in contemporary society. The Spread of a Knowledge Class The growth of the technical and professional class has been seen by Bell - 73 -(1976) and Gouldner (1979) as an important characteristic of the changes occurring in modern society. A) The Change from Goods to Services This point will be discussed extensively in subsequent sections of the chapter, but it is important to recognize here that Bell sees the increasing role of human services (health and education) and professional and technicial services as the hallmark of the post-industrial society. Bell sees these services as "a constraint on economic growth and a source of persistent inflation." 5) Change in the Character of Work Work has changed from a game against fabricated nature, i.e. machines, to a more playful game between persons. The "rhythm of life" is different and the work environment has changed substantially. (This idea can be compared to Gottman's notion of the quaternary sector in a transactional society - the patterns of social behaviour and the physical environment of work are very different from an industrial world). 6) The Role of Women Bell recognizes that the changing structure of the labour force (in particular, increased participation by women) and its related effects on households has had considerable impact on patterns of production and consumption. 7) Science as the Imago Bell suggests that the relationships between science, technology, its clients and society will be central ones in post-industrial society and - 74 -increasingly these relationships may become a source of problems and concerns. 8) Situses as Political Units Situses - are defined by Bell as a set of vertical orders. He identifies four functional situses: Scientific, Technological, Administrative, Cultural; and five institutional situses: economic enterprises, government bureaus, universities and research complexes, social complexes (e.g., hospitals, social service centres) and the military. His argument is that societal conflict will be variously organized between these orders and this might prevent the consolidation and organization of a new class. 9) Meritocracy Education and skill versus inheritance of property are seen as a means of awarding place in society. Bell defines a "just meritocracy" based on achievement and through the respect of peers. 10) The End of Scarcity? Bell recognizes that scarcity will still be with us but suggests the new scarcities will be of information and time. A point that warrants some criticism. 11) The Economics of Information Finally, Bell suggests that information is a collective, not a private good and this requires therefore a "co-operative" rather than a "competitive" strategy towards social relations. It is interesting that two Noble Laureates in Economics have addressed the issues of the Economics of Information. Kenneth Arrow (1979) and George Stigler - 75 -(1961). The two themes seem to be information as cost e.g., Stigler's work on the costs of search, Stigler (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 Bell is emphasizing are first, the centrality of theoretical knowledge and the institutions that produce and recreate it, i.e., the university and the research institute. Second, he is pointing to the change from a manufacturing to a service economy as being a fundamental re-orientation of economic activities. David Ley (1980) has pointed to the similarity between such diverse scholars as Bell (1976) and Jurgen Habermas (1975) in their conception of post-industrial society. Ley argues that in the realms of economy, politics and culture there is a complementarity in the views of Bell and Habermas in that they both see changes in the nature of work, the role of the state and the growth of aesthetic values and consumption as being indicative of the shift from early to advanced capitalism (in the case of Habermas) or from industrial to post-industrial society (in the case of Bell). A further extension to Ley's melding of disparate academic perspectives is offered by the analysis of Trist (1970). He compared the critical structural differences between U.S. society in the thirties and the sixties and labelled these differences as "comparative saliences". His conclusions are very similar to Ley's synthesis of Bell and Habermas. A number of dimensions were considered and Trist, too, suggested the growing importance of theoretical knowledge, the shift from goods to services, the change in employment structure from blue to - 76 -white collar, the shift in employment hours towards increased leisure time, changes in family structure and changing attitudes towards the environment. 3.2.2 Robert Reich: The Next American Frontier Reich argues that there are 2 principal sub-systems in North American society: the business system and the civic 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 is about to enter a third. The first phase was the mobilization phase where owner/entrepreneurs tinkered with new products and built moderately large and powerful enterprises by mobilizing technology, capital and labour. This phase ended around the first world war. Reich argues that the needs of war, the separation of ownership from control and the potential for social and economic abuses in an owner/operator world led to a focus on scientific management. From 1920 until 1970 scientific management principles were applied not only to the management of large scale production processes, but also to the management of the total economy itself. The same principles that were used to produce cheaper goods in large batch processes were used to police the oligopoly arrangements in most American industries. In the 1970s, Reich argues, this situation reached an impasse. The American economy faltered, not solely because of OPEC or the excesses of monopoly labour, but because of the failure of management to adjust its style and orientation to the concerns of auality of product and quality of worklife. Reich suggests that during this impasse, the American economy embarked on an unproductive binge of paper entrepreneurialism, which created no new real wealth, but - 77 -provided the multi-nationals with the illusion of growth. In addition, both labour and capital attempted to hold back structural change through protectionism. According to Reich, the U.S. economy has entered a third major stage in which enterprise must recognize the value of human capital in creating new wealth through "flexible system" production and the related need on the part of government, business and labour to bring together the business system and the civic system to work towards a joint economic purpose. A variety of recent texts echo Reich's argument e.g., Harris (1981), Ayres (1984), and Lewis and Allison (1982). 3.2.3 Gottmann and Hardwick: The Quaternary Sector Just as Daniel Bell has been heavily criticized since coining the term post-industrial so Jean Gottmann has suffered similarly at the hands of critics since coining the term "quaternary sector" in 1961. Gottman (1961, 1983) suggests that modern society is transactional in nature, concerned more with the exchange of information, and with decision-making, rather than with the production of goods. Gottmann proceeds to identify a quaternary sector of the economy that is an extension of Colin Clark's scheme of primary, secondary and tertiary industry. Within this quaternary sector, argues Gottmann, the transactional activities are conducted by the professional, managerial, technical and clerical workers. This is grossly overstating the quaternary sector. Just as Bell has been criticized for failing to distinguish between different dynamics in the service sector - so Gottmann has been criticized by Bell (ironically) and by Hardwick (1974, 1983) because much of the activity of this sector is really - 78 -involved with production and distribution of information (See also Stanback (1981)). To lump together all white collar work as quaternary is to fail to recognize, according to Bell (1979): "the thrust implicit in the original Colin Clark scheme, with its emphasis on differential productivity as the mechanism for the transition of one society to another." Hardwick (1983) however has suggested that although greater productivity has indeed been wrested from first agriculture and then manufacturing, this productivity has emerged from activities of the quaternary sector, i.e., the very small sector of the economy that has always existed, which through its innovative and entrepreneurial skill has enabled or "catalyzed" productivity improvement and social 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 it is on the viability of this (redefined) quaternary sector that society largely depends for stimulation of the economy. This includes the activities of the entrepreneur, the researcher, the senior government and business policy makers and the merchant banker. Viewed in this light the economy is much less quaternary in nature than Gottmann would have us believe. 3.2.4 Alvin Toffler: The Third Wave A final view is presented by Toffler (1980) who has argued that the industrial or second wave society is being replaced by a third wave. The second wave according to Toffler was dominated by six principles: 1) Specialization - the division of labour - 79 -2) Standardization - of rules and procedures 3) Synchronization - of activities 4) Concentration - of activities and authority 5) Maximization - bigger is better 6) Centralization - spatial concentration The third wave will bring about decentralized systems producing a more diverse range of customized goods and services and resulting in what Toffler calls a demassification of our institutions. 3.2.5 Criticism of the Alternative Views of Societal Transformation The term "view" has been used rather than theory because it is not clear whether these various approaches have consituted a body of theory. The marxist and structuralist views have certainly followed a theoretical tradition. Similarly, the ecological/systems views are rooted in the application of general systems theory and social ecology to socio-economic phenomena. The economic views are partially related to conventional neo-classical analysis - although in many cases the arguments are developed more from an empirical than theoretical standpoint. Robert Reich draws more from industrial economics and organization theory than from neo-classical economics (see Kuttner (1985)). The post-industrial thesis is described by Bell as a "theoretical construct" ... a benchmark against which we can compare emerging reality, rather than a theory that explains reality. The information and futurist views are more scenario generations of emerging reality and/or utopia than they are theories that can be tested. The value of each of these approaches is not so much in their academic purity but in the insights they - 80 -can provide about structural transformation and the powerful effect they can have on policy, planning and action. Each of these views can be seen as flawed in some way. Recognizing these flaws can assist in synthesizing an overall view of structural transformation. i) Political Economy The marxist view is that nothing fundamentally has altered except for a further step on the inevitable historical march of capitalism, i.e., a shift towards advanced or managerial capitalism. This view seems to be incredibly narrow and naive. Everyone recognizes that capitalism is a significant 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 is, however, a great deal of evidence to suggest that in modern society the actions of individuals and groups can dramatically alter the structure of our instititions and the behaviour of our corporations. (Thus marxist analysis underestimates the role of politics, interest groups and strategic choice.) There is a great deal of difficulty in adequately critiquing marxist theory in a paragraph, because it requires, a reappraisal of the underlying ideology of marxist thought. The basis of the theory is belief, and so critical exchange about the historical trajectory of capitalism becomes almost as difficult as discussing the inevitability of Armageddon with Jerry Fallwell. However, the mechanistic macro models of structuralist-functionalist thinking do serve a useful role in modelling some of the motivations of some of the players but they do not adequately incnrporate the role of individual choice in a democratic society. - 81 -ii) Conventional Economic Views Criticisms of the economic views of structural transformation are as various as the range of economic views themselves. Much of the rigid neo-classical analysis of structural change is very close in vocabulary and style to structuralist-functionalist thinking. Conventional neo-classical analysis has failed to explain adequately the socio-economic changes over the last few years (Bell and Kristol (1981), Kuttner (1985)). This is largely because the fundamental institutional structures of advanced nations -oligopolies, regulated monopolies, professional practices, hospitals, universities, schools and producer services - do not fit well into the established body of economic theory. "New" theory is beginning to emerge in the areas such as the economics of regulation, health and energy but we still suffer under the rhetoric and econometrics of perfectly competititve markets and macro-economic "laws", even though they are difficult to apply directly in the advanced nations or anywhere else (Kuttner (1985)). Perhaps the most significant contribution that the various economic views have made to our understanding of structural transformation is in the empirical evidence that has been provided. Although such empirical analysis rarely comes from "real" economists but from economic geographers and planners, Kuttner (1985). There is however a split 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). iii) Ecological and Systems Views The Ecological and Systems views tend to suffer from a similar flaw to - 82 -that of certain structural marxist and economic views. Whereas structuralism leads to devlopment of macro-mechanical models moving to an inevitable clockwork conclusion (Boulding (1956)) there is a tendency in the ecological view to develop supra-organic process models that suggest that individuals and institutions are reacting/adapting inevitably to changes in habitat and environment. Although this view allows for a wider range of actions, these actions seem to be tightly constrained by ecological or even biological principles. 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 criticized by marxist and economic scholars. Three principal criticisms have been made (e.g., Walker and Greenburg (1983) and Lasch (1979)). First, there have been suggestions that the thesis is poorly framed and is imprecise because it does not adequately explain the "causal mechanisms or structural relations which give rise to sensible phenomena". Second, there has been considerable criticism of the notion of an expanding service sector with analysts suggesting instead that the service sector is really diversification and specialization in production (e.g., Gershuny-(1978), Walker and Greenburg (1983)). The third principal criticism put forward by this group, is their rejection of Bell's concept that we are witnessing a shift from a labour theory to a knowledge theory of value. The criticism that Bell's thesis is vague, seems to be an argument in favour of reductionist simplicity, rather than a plea for clarification of - 83 -Bell's presentation. However, urging for more care in the taxonomy of the service sector of the economy is a valid criticism. Indeed, others who subscribe to the post-industrial thesis have been more careful in their taxonomy, e.g., Hardwick (1984), Davis and Hutton (1981). As for their final point, there is considerable empirical and theoretical evidence to suggest that knowledge rather than labour is becoming the principal component that adds value, e.g., Reich (1983), Dennison (1975) and the literature on innovation. This point will be returned to in greater depth in the discussion of the transformation of enterprise. Bell's thesis is not however above criticism. In addition to the taxonomy problems of the goods to services transformation, there are three further criticisms that can be applied to Bell's arguments. First and perhaps most importantly, Bell does not deal adequately with questions of scarcity. This may be a function of when Bell was writing, i.e., at the end of the post war boom and before oil-crises, stagflation and recession. Bell sees only scarcities of time and information as being important, rather than scarcities of energy, raw materials, capital or jobs. This point has received much criticism by Gershuny (1978) and Simmie (1983) in particular. In his later essays on information technology, Bell (1979) recognizes that the structurally unemployed may be with us for a very long time as automation takes hold in clerical, technical and knowledge occupations, but he offers no substantial integration of these phenomena into his earlier thesis. A second criticism is that Bell, to a large extent, may have chronicled the recent past, rather than the emerging future. This is not to suggest that - 84 -his thesis is not useful as a benchmark for assessing societal change - which was his stated purpose - rather it is in the light of changing economic conditions and reactionary shifts in ideology in the late seventies and early eighties, that his thesis must be reappraised, if it is to be relevant for purposes of analysis and policy design. A third criticism is that the post-industrial thesis is an intellectually elitist and possibly egocentric one. It could be argued that it is a conception of emerging society written by a university professor for university professors. This conception underestimates the role of the entrepreneur and the politician in human affairs. To some extent these criticisms have been answered in subsequent works. Reich (although no self-proclaimed disciple of Bell's) has addressed some of the economic and institutional inconsistencies of Bell's thesis albeit within a different formulation of economic change in America. The ecological/systems view rearticulated by Trist (1980) follows in the Post-Industrial tradition and resolves some of the concerns about the emerging turbulent environment of the 1980s that were not forseen in Bell's work. On balance, however, the concept of Post-Industrial society still fulfills its stated purpose as a benchmark against which we can plot societal change, in particular, the conception of a knowledge theory of value which runs through much of contemporary thinking on the economy and organization. v) Technological/Futurist Views Finally, a brief comment should be made about the contribution of the Informational/Futurist literature. This literature is wide ranging and includes, firstly, useful empirical analyses of the information economy such - 85 -as Porat's (1976). Second, it encompasses technological determinism from technology "freaks" who fantasize about what technology can do and then attempt to rationalize that "technology's will be done". Third, there is a set of more balanced studies on technological "possibilism" where the potentials of the technology are carefully examined and the possibilities of alternative futures are explored, e.g., Tydeman et al (1982). Fourth, there are a series of synthetic overviews of change (what Bell terms Future Schlock) in the Toffler mode. Finally, there is pure science fiction. One of the criticisms of these strands of literature in this area is that it is sometimes difficult to tell them apart. Opinions that border on science fiction are often given the same legitimacy in the media and popular business press as more careful technology assessment studies. Similarly, the studies that take an overtly deterministic line seem to either be incredibly self-serving on the part of those sponsoring and performing the studies, or incredibly naive in assuming that what can be done, will be done. The value of this literature is in identifying the capabilities of information technology and in formulating alternative visions of the future (scenario generation) that can be assessed in strategic decision making for enterprise, Amara and Lipinski (1983). 3.2.6 Conclusions From the Critical Review on Socio-Economic Transformation From the literature on societal transformation some general conclusions can be drawn that can be integrated into a coherent pattern, that sets part of the context for the structural transformation of enterprise, a) From Land Through Labour and Capital to Knowledge The first theme stems from the transition in what constitutes and - 86 -creates value. In pre-industrial societies land (or what grazed on it) was both the symbol of and the means of producing wealth. In industrial society wealth was created by the organized application of labour and capital to produce more goods. In a post-industrial society labour and capital continue to play an important role in the creation of wealth but increasingly it is knowledge that adds value. This reauires some elaboration. It could be argued that knowedge and organization have always been critical factors in producing new wealth. The neolithic farmers developed new knowledge through research and experimentation. This enabled the creation of sufficient surplus to allow the development of settlements devoted to exchange functions. The innovations in organization of agriculture in Britian in the 17th and 18th centuries greatly facilitated the growth of urban populations. Similarly, the immense increases in productivity in 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 industrial age too have been brought about through the application of knowledge and organization. Adam Smith's pinmakers, initially, had no new tools or new capital, only innovation in the way they were organized. The division of labour facilitated the development of specific eauipment-embodied technologies, but it was, the organizational innovation that spurred initial improvements in productivity and wealth creation, not solely technological change. Thus a significant change that has occurred in the transformation to a post-industrial society is the recognition that knowledge and organization are critical factors in creating new wealth. Information is a critical factor of y - 87 -production and in its accumulated form, i.e., as knowledge or human capital, it is as effective in creating value as capital. b) The Transformation from Goods to Services and Information The second transformation is that increasingly, products are in the form of information or experiences rather than physical artefacts. Various empirical attempts have been made to measure the shift in the economy from goods to services and information. The proportion of societal effort expended on services, experiences and other intangibles is increasing. It has been argued that many of these activities are involved in the management, monitoring and control of the production, consumption and distribution of goods (e.g., Gershuny (1978), Reich .(1983)). Such activities fall into the category of business services and growth in this sector is perfectly consistent with a knowledge theory of value. Improving productive capacity depends as much on improved education, organization and management as on capital. Improving productivity in this way involves the gathering, processing, dissemination and application of knowledge. Similarly, the corollary of the Gershuny argument is that much of the goods producing sector is involved in the production and distribution of equipment and supplies that generate and transfer information. (Hence Porat's (1976) conclusions that more than 40% of the U.S. economy is in the information sector, the largest compared to agriculture, manufacturing and services). Finally, it is undeniable that there has been growth in the human services such as health and education over the last three decades, e.g., Simmie (1983), Gershuny (1978) and Bell (1976). A drastic reduction in relative levels of employment in agriculture did - 88 -not equate to a drop in agricultural output, quite the contrary. Some have suggested it is reasonable to expect that the application of organization and technology to manufacturing and service activities can yield similar results, c) Transformation in the Nature of Work There has been a transformation in the occupational structure of the advanced nations. There are a number of dimensions to this change. First, there has been an increasing role for women in the workplace. For example between 1971 and 1981 in Canada, the female labour force grew more than the male labour force. Although much of the change came in so called pink collar work (i.e., sales and clerical occupations) women also made increasing gains in the management, teaching and health occupations. These shifts have significant implications for household structure, consumption patterns and public policy. The second principal shift was from blue-collar occupations to white, collar occupations. This includes two effects: first, the general shift from goods to services, and second within the "goods producing" sectors the shift towards office work, most notably clerical, advisory, systems monitoring and control functions. Interestingly, however, the large relative and absolute growth in white collar work is not paralleled by growth in share of general managers (strategic decision makers) in the workforce (a point that will be returned to below). The third principal transformation in occupational structure is the relative increase in the number of employees involved in public sector activities (including health and education). Finally, there has been a shift in 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. All these societal trends reflect changes in the way enterprise is organized and in the way wealth is created and distributed, 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 particularly in the last decade e.g., Harris (1981), Reich (1983), Lewis and Allison (1982) and Ayres (1984). Many economists from both marxist and neo-classical traditions argue that this is a direct result of the restructuring of capital markets to exploit competitive advantages, e.g., accessible raw materials and lower labour rates in the third 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 is an economic rationale in making these decisions. But it is not solely a flight of capital that has rendered North American manufacturing industries non-competitive, nor is it solely the excesses of organized labour in extracting wage increases or the Arabs in creating oil price increases. America exported organization. In their 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 is to develop the innovative products, organization and technology to create new wealth. Yet there is considerable concern that North American industries have not matched the Japanese or Europeans in their commitment to either education or research and development, Ayres (1984). - 90 -e) The Transformation from a Placid to a Turbulent Environment Trist (1980) has developed a very succinct typology to describe the change in the type of environment faced by enterprise. He sees four phases of development: Placid random, placid clustered, disturbed reactive and turbulent. They have their economic analogies (or "market analogues" as Trist terms them) in perfect competition, imperfect competition, oligopoly and "macroregulation". A turbulent environment is emerging, according to Trist, from three sources. First, "large numbers of large organizations (are) pursuing independent (short-term) goals in societies based on continuous growth and expansion in a finite planet with R&D accelerating the change rate." Second, the communications revolution is reducing the response time and increasing information overload. Third, regulatory mechanisms are unable to cope with unanticipated consequences in interdependent sectors (externalities). Trist argues that in 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 in Managerial Philosophy Throughout the various views in the literature at the societal scale there is reference to the development of a two-tiered economy and society. Concern is expressed at the occupational scale, regional scale and the international scale. It is suggested that society is undergoing a process that creates winners and losers (i.e., people, cities and nations) and encourages the separation of command functions from production functions. Reich (1983) and Trist (1980) would characterize these developments as the - 91 -height of managerialism, Reich (1983) or competitive, technocratic bureaucracy, Trist (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 is required is discussed below in the section on the enterprise. It should however, be stated here that there is a considerable body of opinion now emerging in the academic and popular management literature suggesting change will involve the recognition that human capital has to be organized differently and the pattern of decision-making will inevitably have to change, in order to cope with the structural transformations that are occurring in society. g) Transformation in Technology Lastly, a theme that is brought out in all the literature on societal scale transformation is the emergence of information technology. If we are entering a new order where knowledge and information play an increasingly important role compared to capital and labour, then tools for the collection, organization and dissemination of information will be very powerful ones indeed. Information has some very peculiar characteristics as a commodity, as Bell 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 characteristics create new potential for organization and location. 3.2.7 Summary and Conclusions on Societal Transformation The relevance of these societal shifts for this analysis is that they - 92 -suggest a fundamental transformation in the critical resources and functions of enterprise. If society is moving towards a knowledge theory of value there will be a parallel emphasis on human capital, on education, on innovation and on decision-making in enterprise. This shift from the tangible to the intangible has significant organizational and spatial conseauences. In organizational terms the whole notion that, "bigger is better", must be auestioned when the critical flows are of ideas and information rather than products. Similarly in spatial terms, a shift towards intangible flows fundamentally alters the friction of distance. Ideas and information as flows of commodities do not necessarily conform to the physical laws inhibiting spatial interaction (Abler and Falk (1981)). Further, increased turbulence and complexity in the environment requires that enterprise must develop methods of coping with uncertainty. Reduction in uncertainty can be mathematically defined as information, consequently uncertain environments require enterprise to be "information-rich" in order the "create the variety" necessary for survival. 3.3. PERSPECTIVES ON STRUCTURAL TRANSFORMATION IN THE URBAN SYSTEM In this second major section of the chapter we will discuss the demographic, economic, organizational and technological shifts that have occurred over the last several decades and link them to changes in the structure of the urban system. In particular, we will focus on the degree of spatial centralization of the system because this is a useful aggregate measure of spatial structure. This measure is also of particular importance for this study because we are concerned here with the relationships among - 93 -organization, technology and location of enterprise. Questions about centralization have been critical ones in the literature investigating these relationships. Consequently, we should begin this discussion with a restatement of the definition of centrality and its related measures. Centrality refers to the state of being central and brings with it notions of the relative degree of concentration of human activities in spatial terms. Centrality however, is not merely a spatial concept, rather it can be defined to include the functional, organizational and political aspects of centrality. i) Spatial centrality refers to the relative concentration of events or phenomena in geographic space, relative to its surrounding area. ii) Functional centrality refers to the relative degree of concentration and interconnection of activities in a network. This may or may not involve physical proximity. iii) Organizational centrality is a measure of the relative degree of concentration of authority and decision-making within enterprise. iv) Political centrality is a measure of the degree to which political power is concentrated or dispersed among constituencies or participants. In traditional geographic theory these alternative definitions and measures of centrality have essentially been treated as synonymous or at least coincident with one another, in spatial terms. This is not surprising, because much of the early work on location theory came from Europe where the correlation between these measures was, and still is to some extent, very high (e.g., if your model is London or Paris then you might have a very different view of the linkage between centrality measures than if you are considering - 94 -the United States). Similarly, at the time of development of early theory such as Christaller (1933), Losch (1954), Alonso (1960), etc. the cities and city systems under consideration demonstrated a marked correlation between the spatial, political, organizational and functional aspects of centrality. Contemporary urban systems, and particularly those of advanced economies, are very different from those agricultural based and early industrial urban systems in which central places displayed centrality in most, if not all, its defined dimensions. This is, of course, an over-simplification of early location theory. Georgraphers have long recognized that different cities perform different types of functions that are not totally determined by size and catchment area factors. However, this hyperbolic argument raises the crucial point, that the major structural transformations that are occurring in the advanced nations lead us to question the degree of consonance between these alternative forms of centrality in our urban systems. A perfect example of this distinction between attributes of centrality is provided by Gottman (1982) when he analyses the differences between "old" and "new" capital cities. "New" capital cities (i.e. in countries who have elected to change the seat of government) have virtually all been on virgin sites close to the geographic "centre" of the country but away from the existing "centre" of activity, decision-making, and population, e.g., Brazil, Australia and Nigeria. In this section of the chapter, we critically discuss how structural transformations in the environment of cities and city systems have tended to affect these various attributes of centrality. Attempts to unravel the effects of these structural transformations on - 95 -cities and city systems are many and varied. This large and growing literature ranges from casual empirical observations in the business literature and popular press to deep, theoretical fabrications of the underlying processes at work, and the effects they create. Much of the theoretical literature suffers from an ideological constipation, in that it is rooted in mechanistic conceptions of political economy or in simplistic conceptions of economic behaviour, that belong in another time. However, in the course of this discussion we will draw on this wide range of evidence, commenting where appropriate on the assumptions made and the positions taken. Thus the remainder of this section is structured into four parts: 3.3.1 Structural and spatial transformation in demography. 3.3.2 Social transformation in the urban system. 3.3.3 Economic and technological transformation in the urban system. 3.3.4 Summary and conclusions on urban systems transformation. 3.3.1 Structural and Spatial Transformations in Demography The census of 1980 in the US and 1981 in Canada, and the analyses derived from it e.g., Hauser (1981), Long and DeAre (1983) and Bradbury and Downs (1982), documents major transformations in the demography of North America. These studies show that in the 1970s the rural population growth rate exceeded the urban growth rate and that relative deconcentration of population resulted in a demographic shift from the North East United States to the South and West of the country. Within urban areas, a decentralization of population was observed shifting from city cores to suburban areas. For example, the Bradbury and Downs (1982) study classified cities into clusters - 96 -based on whether they had growing, declining or stagnant city populations versus whether they were in growing, declining or stagnant SMSA's. The results provice a fascinating picture of demographic dynamics in the U.S. (and in Canada, if their method is extended to Canadian Census Data). Similar studies have been conducted in Europe e.g., Hall (1984). Most notably in the United States the group of cities in the cluster -growing city in growing SMSA's - were all in the South and West (i.e., sunbelt cities) with the exception of Springfield, Mass one of the "high-tech" areas outside Boston. At the other extreme, declining cities were predominately in declining SMSA's, though declining cities could be found in either growing of stagnant SMSA's. It is important to note that no city in either Canada or the United States was placed in the category of growing city in declining or even stagnant SMSA's, suggesting at the metropolitan scale that no city core grew without concomitant population growth in its SMSA. In Canada, cities of the West were all classified as (growing city in growing CMA) as were some of the second order cities of Ontario. At the other end of the scale cities in a declining - declining state were notably Montreal, St. John's, Sudbury and Sydney - Glace Bay. These changes have profound implications for the present discussion. First it is clear that city growth is related to growth in the SMSA generally, although city core's in declining areas usually fare relatively better than their SMSA's. However, it would seem that absolute growth has not been compatible with declining or stagnant SMSA's. Second, these demographic shifts present a key element of the context of social and economic changes discussed below, namely, there are demographic winners and losers. Third, - 97 -they have significant implications for political centrality. The old saying "people vote with their feet" has a corollary in that feet carry votes with them, particularly in the United States, where the census population is the basis for apportioning both representation to the United States House of Representatives and Federal taxation (Houser (1980)). Thus these demographic shifts represent a shift of political power to the growth regions, and consequently a shift in the relative political centrality of the metropolises of these regions. For as Mollenkopf (1983) has pointed out "politics runs on votes as well as money". Indeed, his study provides an interesting analysis of the interplay of demographic shifts and political fortunes and policies of the Democratic Party's "pro-growth coalitions". The final comment to be made with regard to demography is the impact of the baby boom generation. This bulge carries with it tastes, preferences and beliefs that have been cultivated in an age of relative affluence, and which have significant implications for the factors discussed below and for the political centrality of individual cities. Evans (1984) has suggested that the baby boom will move through the health care system like a pig through an anaconda. This graphic simile can be applied to the other aspects of societal tranformation. On balance then, demographic changes have increased the dispersion of population in North America, set part of the context for other environmental changes, and affected the political centrality of certain urban locations. 3.3.2 Social Transformation in the Urban System Daniel Bell (1976) has characterized the transformations in society as a - 98 -shift from industrial to post-industrial society. Although Bell's thesis was discussed earlier it is important to reiterate here, three related aspects of post-industrial society. First, Bell argues that we are now dealing with a society that is based on knowledge rather than a labour theory of labour. Second, he emphasizes the shift from a goods producing manufacturing society to a service consuming society. Third, he identifies the potential for the emergence of a "new class" who are the knowledge workers of the "new" institutions, hospitals and educational complexes, or the PMTS group (Professional, Managerial, Technical staff), as they are sometimes termed. One can argue as to whether this group has an identifiable class consciousness, or auestion whether it is indeed a class (see Gouldner (1979) Bell (1976), Ley (1980)). What seems clear, however, is that these three factors have profoundly affected North American Society. In particular, for this discussion of centrality, it is important to recognize a number of effects. First, as our transactions become more knowlege and information embodied, rather than embodied in the production and exchange of goods, there is more potential for alternative sets of social and economic relations to exist, than those conventionally described by classical and neo-classical political economists. It is equally possible for these transactions to become aspatial, since information and knowledge can be moved through space more readily than physical objects. The potential for a change in social and economic relations as a result of a shift from physical to knowledge work suggests the potential for decentralization of political power. Bell indeed suggests that many of our social relations have become increasingly - 99 -democratized. The rise of consumerism and challenges to traditional authority in the 60s and 70s decentralized power to interest groups and networks of coalitions. Although in the 1980s there may be blocks to this process with the reaffirmation of traditional and conservative values in social and economic life. Second, the emergence of "a new class", that has become an increasing proportion of the population and electorate, has dictated a shift in tastes of the population, in terms of how they spend their disposable income, where they locate and how they choose to organize their enterprises. The shift in consumer preferences from goods to services and experiences has been discussed in the context of Vancouver by Hardwick (1974, 1984) and Ley (1981). This "new class" is a child of affluence, mass media and relative hedonism and this has affected patterns of consumption and location e.g., the role of amenity in determining population movement or location, of the early work of Ullman (1954). Similarly, their exposure to and understanding of other places through the media and education has encouraged travel as a form of consumption and changed our perceptions and tastes in, for example, gourmet dining (see Ley (1981)). These changes influence the views that people hold about specific cities and the environment they want for their cities. If "status in a large, far flung network of transactional cities" is a variable affecting centrality then to some degree it must be recognized that status is socially constructed in that the image of the city, as held by dominant groups, will influence the way in which locational decisions are made about residence and enterprise. A city that sees itself as post-industrial and acts to reinforce that view is - 100 -more likely to attract population and enterprise that can enhance its viability. Hence flow the attempts made by the Bostons, Baltimores and Philadelphias of the world to emphasize their aesthetic attributes (slums not withstanding). Thus, in summary, changes in demography, in the nature of work and in the education and tastes of society have contributed to the emergence of a "new class" that, because of its increasing size, because of its education and actions, and because of its rise through the decision hierarchy is wresting a greater degree of political control in enterprise and in the community at large. The behaviour of this group increasingly affects the consumption and locational decisions of households and enterprise. The views of this group are to some extent challenged by the actions and ideologies of the Reagan's, Fallwell's and Bennet's of the world, who seem to be articulating and enacting a vision of the past rather than a vision of the future. This phenomenon is consistent with the idea that there are times of multi-parametric change in society when it seems ready to accept simplistic hindsight as its collective vision of the future e.g., the romantic notion of rural life in Britain that was propagated at the beginning of the industrial revolution. 3.3.3 Economic and Technological Transformation in the Urban System Since the second world war, a variety of academic analyses have tried to explain and/or describe the changes that were taking place in the economic environment and its implications for cities. The only definite agreement that can be found in this literature is a clear recognition that profound changes have occurred. In this section we review the more recent literature dealing - 101 -with economic and technologic transformations and draw from it some conclusions about the relationship between these changing circumstances and the attributes of centrality. This section deals with three relevant areas of the literature, Fig. 3.1). First, a review is made of the studies undertaken by economists, economic geographers and planners who attempt to describe, evaluate and understand the structural shifts in the economy in terms of the move from goods to services and the associated spatial reorganization of enterprise. This literature encompasses both theoretical and empirical perspectives on the problem that could be termed the economic planning literature. Second, we review briefly, the office location literature, which has emerged from the United Kingdom in particular, and which was conceived from a more applied perspective, to deal with the role of offices in regional development. Third, we will review the literature that evaluates the implications of technological developments - particularly telecommunications - for spatial interaction within organizations, cities and city systems. Each of these analyses of economic and technological change provides some insights into the measures of centrality, outlined earlier. 3.3.3 a) Economic Restructuring of the Urban System A number of analysts in the 1970s began to evaluate the economies of advanced nations, in order to understand the observable decline in manufacturing as a share of employment and the apparent relative increase in service activities. Bell's comprehensive concept of post-industrialization - 102 -and Gottmann's notion of quaternary services or activities were discussed earlier, but it should be recognized that they were early observers of these changes. A flurry of activity occurred in the mid 1970s much of it from colleagues of Ginzberg at Columbia, who sought to document and explain the shifts in metropolitan economies. Their work provides a useful starting point e.g., Stanback (1981), Noyelle (1983). A current summary of their findings is that through analysis of a number of metropolitan economies in the U.S., it is clear that: a) There has been a structural transformation of the U.S. economy associated with increasing internationalization of economic activity, the growth of the multi-national firm and a spatial division of labour between nations. b) Similar structural transformations have occurred in the system of cities in the U.S. featuring a shift from manufacturing to producer services, a shift in location from NE to SW and the development of a new urban hierarchy comprised of: First tier - nodal or command cities. Second tier cities - focused on the management of specialized production. Third tier cities - that are primarily involved in the production i.e. manufacturing and provision of consumer services. c) These analysis argue that because there has been a parallel restructuring of labour markets, we are witnessing the emergence of a dual economy at a number of levels: - 103 -- At the job level - between high paid managers and low paid service workers. - At the metropolitan scale between executive core and blue collar suburbs. - At the regional and national scales between centres of decision-making and production. They predict difficult social and economic circumstances in the U.S. as a result, because the traditional setting of upward economic mobility, i.e., the corporate heirarchy, is being altered, and because high paid, blue-collar jobs are in decline (cf, Bluestone and Harrison (1982)). Similar analysis has been conducted by Bergman and Golstein (1983) who examined structural changes in the metropolitan economies and attempted to relate the impact of cyclical changes in the national economy to the changing division of labour and pattern of control identified by Noyelle (1983) and Stanback (1981). They identify what they call cyclical or structural ratchet effects; which in simple terms refers to the varying abilities of metropolitan economies to weather national economic storms. Their argument and empirical evidence suggest that about half the urban economies studied were conformant to national business cycles, whereas some such as Chicago were subject to strong negative ratchet effects, and others such as Stamford, Connecticut had powerful positive ratchet effects, i.e., in successive booms, their employment base built up sufficient momentum to counteract any negative effects in national downturns. This is an economic statement of the winners and losers argument seen earlier in demographic terms. Other investigators such as Philips and Vidal (1983) support the - 104 -apparent dominance of producer services and FIRE activities (Finance, Insurance and Real Estate) as a key explanatory in predicting economic vitality of urban centres. What emerges from the analysts considered so far is that there is considerable empirical evidence for a spatial division of labour, in international, national and metropolitan terms. Second, that growth in the size of corporations and the development of the multinational, multilocation enterprise has had a profound effect on the spatial distribution of activities in the urban hierarchy. In terms of the attributes of centrality defined earlier, the findings so far suggest that there is a split between spatial, functional and organizational centrality. The spatial division of labour (i.e., different functions in different locations) and the tendency for the growth of producer services as a separate entity from corporations, are important factors in explaining changes in the functional centrality of a metropolis. The growth of the multi location enterprise presents a further split between the degree of functional centrality and organization centrality, e.g., Noyelle's differentiation between command, specialized management and consumer or production centres. It is clearly useful here to dig deeper into the behaviour of these large enterprises to determine what effects their decisions have on the relative spatial, functional and organizational centrality of large cities. Pred (1977) has argued that cities are enmeshed in networks of multilocational organizations. Similarly, Stephens and Holly .(1981) in an excellent analysis of changes in headquater location behaviour of the Fortune - 105 -500 companies, conclude that the largest cities, regardless of their location, tend to be steering points in the economic system: "although corporate headquarters have been decentralizing to the suburbs, they are able to do so without surrendering their accessibility to specialized contact networks, ancillary business services and inter metropolitan transportation networks". Their analysis confirms the dominance of major strategic decision centres in the U.S. They also identify a number of additional factors of importance. First, they identify that the apparent redistribution of headquarter activity from the north-east to the south and west of the U.S. can only be partially 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 in the south and west, into the top 500. Thus, these changes reflect the success of post-industrial enterprises rather than a "flight of capital". Secondly, they find confirmation for Pred's thesis that: "City systems in advanced economies have historically maintained stability in the national population rank of their leading metropolitan areas, because according to Pred these metropolitan 'complexes' offer corporate head offices and other high-level administrative activities with specialized information advantages usually not available in smaller urban centres. They are: i) greater propensity for interorganizational face-to-face contacts; ii) availability of specialized business services and iii) high levels of inter-metropolitan accessibility". - In the course of their analysis Stephens and Holly provide a very useful table derived from Warneryd (1968) that unites conceptually, for each level of a three level organizational hierarchy (head office, group head office and plant) the following attributes: - 106 -1) Organization - environment interaction - which they label orientation processes, planning processes, programmed processes for the 3 levels above. (There is striking similarity here between this framework and the Beer, Paterson and Amara and Lipinski formulations outlined earlier). 2) Contact Networks - the three levels had progressively less external and progressively more internal communication going down the hierarchy. 3) Functions - ranging from decision-making, planning and product development at headauarters; via control and direction of production at group head office to routine office work and production at plant level, (again the similarities to Paterson are clear). A) Position in urban hierarchy - headquarters in national metropolis, group headquarters in regional centres, manufacturing plants in local centres. This formulation brings together the concepts of spatial, functional and organizational centrality in one framework. It is in effect back to a central place theory of the firm.'! In that lies its major flaw, because this logical conception does not explain why some cities get plants or regional headquarters and others do not. Pred has found for example that various activities in the corporate structure, while possessing particular locational requirements, are not always found at the same level 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 earlier. The reason for including the Warneryd derived model in the discussion here is that it - 107 -presents an attempted theoretical model of organizational functioning in the multi-site enterprise and it tries to link internal organizational structure to location. However simplistic this model, it is a useful conceptual base for further research, since it does speak to issues of spatial, functional and organizational centrality. This model is in sharp contrast to the structuralist analysis of Simmie (1983) and Scott (1982) who try to derive alternative explanations for the phenomena described here using methods of political economy. Simmie follows on from Gershuny (1978) in being critical of the notion of post-industrialism and suggests that we are witnessing in advanced economies - the process of "corporatism" which he defined as: "A politico-economic system characterized by the exercise of power through functionally differentiated organizations seeking to achieve compromises in economically and politically approved actions which are as favourable to their particular interests as possible, and which are often legitimized by their 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 in the context of the U.S. economy is a rich source of data on employment and organizational changes, that would take too long to comment on here. Suffice it to say that the data generated is interpreted in 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 in manufacturing of goods by large corporations. He also adopts Gershuny's rationalization that, apart from health and education, there has been no rise in share of services, rather consumers have substituted capital for labour in their households. Perhaps the most serious flaw in his interpretation, is his - 108 -conclusion that the majority of the workforce is employed in 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 in firms of 100+ employees, Simmie feels safe in concluding that: "The majority of both the most significant and general employment in both areas is 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 critical components of many areas in the American economy, Simmie appears to have his theory and empirical evidence a little muddled. He is kind enough to provide a list of some of these large corporations in the Santa Clara case: they include the "dark satanic mills" of Apple computers, Intel, Measurex, Silconix, 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 virtually all employment growth in the last decade has been in small business that grew to be medium sized or even large businesses in competitive environments (see Birch (1981) and the early comment on Stephens and Holy (1981)). As a visitor from London to Berkeley, Simmie can probably be excused for not knowing the basic rule of Silicon Valley, which is that any company whose name ends in -ex is probably: - 109 -i) less than five years old ii) founded, owned and run by 2-ex Stanford engineers who wear running shoes and iii) going to be sold out to a large multi national when it has 300 employees and proceed slowly but inevitably into bankruptcy e.g., Atari. (Meanwhile the guys in running shoes have started another company with 10 people and a name ending in -tech). The point of this somewhat facetious attack, is first to identify the lack of appreciation that entrepreneurial skill and the application of human capital in innovative and competitive industries are the major contributory factors to employment growth and the dynamic nature of firms (which is at least recognized by Scott). Second, in terms of our discussion of centrality, Simmie's paper reflects the attitudes of much of the marxist and structural literature in this area in that organizational centrality and political centrality 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 capital "deepening" (i.e., higher capital/labour ratios), restructuring and reorganization of productive activities. Scott's model is essentially cast in the mould of functionalism but there is a useful logic explaining spatial decentralization of manufacturing processes. He sees four elements in the model. 1) More efficient production techniques let firms grow. 2) Increased use of technology (capital equipment) encourages standardization of processes and linkages within the firm. 3) Increased capital and process 2) above leads to "secular deskilling" - 110 -A) Capital deepening and restructuring leads to mergers and international geographic specialization in the internal workings of the firm. Three comments should be made. First, Scott does not recognize the findings of Dennison's (1975) study that demonstrated the relatively small effect that capital eauipment has on productivity improvement in U.S. industry, compared to the contribution of increased worker education and innovation in organization. Second, there are alternative explanations of merger activity that stem from the dominance of accounting professionals and business school management practices employed in organizations in the 1970s . (Peters and Waterman (1982) and Reich (1983)). Third, the model is another unidirectional causal chain that leads to simplistic conclusions. In summary then, there have been substantial economic transformations in the U.S. economy, that have spatial, functional and organizational dimensions and therefore effects on the centrality of the metropolis. Attempts to model these changes have ranged from rank-size conceptions of organizational and functional centrality, to structuralist/functionalist explanations of change as part of an inherent process of capital deepening or corporatism. What is clear is that in the North American and international context we are indeed dealing with a "far-flung network of transactional cities" that are dominated by information processing functions and office work. What is also clear is that this network has certain properties of a complex system - notably the notion of hierarchy albeit an asymmetric one, Pred (1979), and the idea of linkages and flows between elements in this hierarchy. - Ill -3.3.3 b) Office Location Literature The office has been demonstrated to be an important element in a transactional economy, Cohen (1979). It is also an important element in the employment system, and as such a potentially valuable policy instrument, Daniels (1979). Whereas the economic literature discussed above had a predominantly U.S. focus, and in many cases a structuralist theoretical base, the office location literature, in contrast, is U.K. based, and concerned more with empirical description and regional development auestions (Daniels 1979, Daniels 1982). In a recent editorial of an issue of Environment and Planning devoted to the office location literature, Taylor and Thrift (1983b) argue for a more sociological 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 in the machinery of the macro economy. The office location literature has relevance to the discussion of centrality because it has attempted to identify patterns of communication and linkage within enterprise and between enterprise, e.g., Gad (1979), Goddard and Pye (1977). It has also helped to identify the "industrial office", i.e. those activities involved in the routine processing of information on a relatively large scale, that can be more readily separated both functionally and spatially, to other locations in the urban system. Indeed, relocation of the industrial office in the U.K., e.g., the income tax centres in East Kilbride and Newcastle and the motor vehicle licensing centre in Swansea, Wales, was the principal policy outcome of such insights. (However, senior bureaucrats in the Ministry of Defence could not be induced to flock to - 112 -Glasgow from their comfortable Surrey suburbs or from the corridors of power in Whitehall). Despite such attempts at using office relocation as a policy instrument, office concentration continued in London throughout the 1970s, leading the office 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 earlier, e.g., Pred (1977,1979), Stephens and Holly (1981). The literature on office location has provided important insights on the way in which the city system is transformed by the behaviour of enterprise. There is still a fair degree of confusion in the minds of analysts as to whether the inherent processes that influence office location are processes of concentration or dispersion. The argument is analogous to the debate over the changing demographics of cities. The best conclusion that can be drawn is that higher order decision-making in large multi-national enterprise appears to require access to advanced corporate services that is afforded by only the very largest metropolises, sometimes termed the global cities (e.g., Hymer (1979) and Stephens and Holly .(1981)). However, such access can be secured by suburban locations in these global cities (Dunning and Norman (1983)). At the other extreme, there seems to be considerable potential for the dispersion of the "industrial office" activities of the multi-nationals to the lower order cities and to suburban locations in these cities. 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 oil companies in Houston or the Hi-Tech firms of Silicon Valley, Birch (1981) and Stephens and Holly (1983). Such firms have grown to be large in that location. A more infreauent phenomenon, but one that receives much publicity, is the relocation of headquarters from the Rust-Bowl to the Sun-Belt. In this case the senior decision-makers have opted for an alternative location because of access to capital, markets, labour (sometimes specialized, sometimes cheap), intelligence functions or amenity. These firms have overcome the considerable inertia that exists in the built environment and made a wholesale change in their spatial organization. Although little clear evidence exists, 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 liquidation of real estate assets. 3.3.3 c) Tele-communications and Location Research on office location has made a major contribution to the question of the impact of tele-communications on the spatial, functional and organizational structure of enterprise. Melvin Webber (1963) suggested, in an early paper, that there was potential for telecommunications to provide both households and enterprise with "community without propinquity". Heady talk of global villages, and time space convergence was common in the early and mid 1970s as technological developments in 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 all the propaganda by the technologists offering dispersal, especially of places of non-manual work, the conclusions reached (by other geographers) are in agreement with mine: there may be decentralization in some aspects but basically transactional activities are not likely to be scattered throughout rural territory just because technology is becoming able to overcome distance". Gottman (1983:p 24) What Gottmann does not really emphasize is the way in which telecommunications enables enterprise to consider alternative organizational, functional and spatial patterns. For example, office location analysts such as Pye (1979) identified that approximately 40 percent of meetings in certain types of enterprise studied, could be replaced by telecommunications (mainly by relatively inexpensive voice, data and graphics systems transmission). Abler and Falk (1981) suggest that telecommunications have both organizing and co-ordinating power (i.e. feedback capability), and not just one-way relationships. This enables the conferring (discussion) aspects of organization to be structured in alternative ways. There is some doubt whether these technologies can enable the deal-making aspects of communication to become aspatial. In summary then, the spatial division of labour described earlier is facilitated by the existence of telecommunications, if not totally predicated on such systems as a basis for co-ordination and control. There is however, considerable empirical and theoretical support for the notion that higher order decision-makers in enterprise require ready access to the support of advanced corporate services (or producer services) that have obvious tendencies to cluster in large nodal centres (see for example Dunning and Norman (1983)). The evidence suggests that certain of these services can be located in metropolitan suburbs particularly if they have attributes of the - 115 -industrial office, e.g., engineering services (Dunning and Norman 1983). Although not necessarily determining alternative spatial forms, or functional configurations of enterprise it is clear that new communications technology enables consideration of alternative spatial and organizational structures, e.g., Johansen (1984), Goddard (1980), Mandeville (1983). The major Question for research, is what factors influence the selection of which technologies with what spatial, functional and organizational outcomes. A preliminary set of conclusions with regard to technology and location are that: i) The choice whether a function is centralized or decentralized is not dictated solely by the technology, however it seems that in an environment that is hostile there is a tendency to centralize higher order decision making in both spatial and organizational terms. Contemporary computer and communication technology can indeed greatly facilitate such detailed central control, but it is questionable whether such a strategic choice is in the long-term interests of the enterprise or its employees. ii) Technology is enabling the dispersion and simplification of certain production activities that are involved with lower-order decision-making. This can apply to both goods producing and service producing industries. For example, the proliferation of Automated Teller Machines (ATM's) has increased the dispersion of banking services in both time and space. Similarly, the harnessing of telecommunications to emerging CAD/CAM technologies can enable the relocation of production facilities to less expensive sites offshore - such a development in the computer manufacturing industry was cited recently in Business Week - 116 -(1985). The emergence of such remote monitoring and control systems will allow enterprise to consider alternative locations that may lead increasingly to what could be termed a "spatially-exploded" organizational structure. iii) The capabilities of modern computer and telecommunications technologies has enabled the processes of centralization and decentralization, outlined above, to occur simultaneously. For example, many banks are simultaneously centralizing middle-order interpretive (C-Level) functions such as loans administration and decentralizing (as well as automating) certain lower-order operations such as cash dispensing. 3.3.4 Summary and Conclusions on Urban Systems Transformation As pointed out earlier, it has been argued by Pred that cities are nodes enmeshed in the networks of multi-unit enterprises. As such it is incredibly difficult to isolate transformation in the urban systems environment from either the transformation in enterprise or from wider socio-economic transformation. The stated purpose of including the urban systems scale in this analysis was to identify spatial contextual phenomena that are largely ignored by observers viewing transformation at the level of society or the enterprise. Thus the conclusions here concentrate on those phenomena with a spatial component, recognizing that transformation in the wider socio-economic and enterprise environment are an integral part of urban systems transformation. Five principal conclusions can be derived: - 117 -3.3.4 a) Demographic and Economic Shifts: Rust Bowl to Sun Belt and the  Process of Deconcentration There has been a substantial restructuring of the demography of North America from the North East cities (the Rust Bowl) to the South and West (Sun Belt). This is paralleled by changes in the wealth, economic activity and political power of these cities and states. The viability and growth of enterprises in the Sun-Belt is both a cause and effect of these demographic shifts. Similarly, it was noted that there was a series of spatial and demographic shifts towards disperson of population within large metropolitan regions. There is considerable debate whether these reflect processes of concentration (at the inter metropolitan scale) or dispersion (at the intra-metropolitan scale). The most balanced work in this area suggests that both processes are operating but that methodological and measurement problems inhibit accurate assessment of the relative degree to which these phenomena have occurred, e.g., Bourne and Simmons (1984). b) Increased Competition between Nations, Regions and Cities The internationalization of the economy has had a profound effect on the urban system. Competition between cities for new development, (e.g., high tech parks) and competition between the enterprise based in different cities has led to greater "pulsation" or turbulence in individual urban economies (Birch (1981) and Bergman and Goldstein (1983)). For example, Detroit may be rooting for the "auto giants" but cities in Tennessee, Ohio and California have interests in attracting and supporting Japanese branch plants. Competition for manufacturing is only one element. There is competition for investment in schools, hospitals and unversities, independent of basic - 118 -population demand factors. In their attempts to attract such business and social investment, cities are using a wide variety of inducements which include conventional incentives such as tax breaks, and subsidized plants, as well as, more significantly, such factors as amenity, lifestyle and social/cultural facilities aimed at attracting critical decision-makers and their highly educated employees. c) Increased Spatial Division of Labour There has been a widely recognized spatial separation of command and production functions. Popular attention is often focused on the international dimension of these changes, but the wave of mergers and acquisitions from the late 1960s to the 1980s and the overall increase in the scale and organizational complexity of enterprise has contributed to the significant spatial restructuring of command functions (F, E & D levels of Paterson or the systems 5 and 4 of Beer) separating them from the operations level. The combination of these three factors: demographic/economic shifts, increased competition and increased spatial division of labour has led to the fourth major trend. d) The Two-Tiered Economy of the Urban System It has been suggested that the set of forces outlined above are contributing to the emergence of a two-tiered economy. There are winners and losers in the urban system, and within the metropolis. Some cities and some areas of the metropolis are better placed than others as habitats for enterprise, e.g., Bergman & Goldstein (1983). Thus there is imbalance at all scales: the international, regional, metropolitan and occupational scale. The role of consumer services, transfer payments and public sector activities - 119 -become more crucial for those cities in the urban system that fall into the "loser" category. These issues are important for our case study in that the economic base of many settlements in British Columbia may depend largely, on the flow of transfer payments and the investment decisions of government with regard to health and educational enterprises. 3.4 PERSPECTIVES ON THE TRANSFORMATION OF ENTERPRISE The previous sections of this chapter have examined the transformation in the organization of society and the organization of the urban system. It has been argued that these changes are closely related to the transformation in organization of enterprise. In this final section, transformation in the structure of enterprise will be examined and the relationships between the different levels of environment will be drawn together. This section is therefore divided into three main parts. The first considers the transformation in the environment of enterprise, the second deals with transformation in strategic choice and the third deals with the changing organizational and spatial structure of enterprise. 3.4.1 Transformation in the Environment of Enterprise Organization theory has in the last twenty years focused increasingly on environmental factors in parallel with the increasing prevalence of natural systems and open systems research (Scott (1981)). This has led to a wide range of research efforts aimed at associating environmental attributes with organizational attributes (Pfeffer (1982) and Mintzberg (1983)). An integral part of this research has been the development of typologies of organizational - 120 -environments that can be employed as a means of assessing environmental transformation. Mintzberg (1983) and Jurkovich (1974) provide two useful typologies of the nature of the environment facing enterprise. These two perspectives can be used to identify the dimensions in which transformation has occurred. Mintzberg (1983) provides one such typology in his cogent synthesis of the contingency tradition in organizational theory. He concludes that the literature in organization theory focuses on four particular dimensions (or scales) for the measurement of organizational environments. i) Stability/Dynamic. This dimension refers to the degree of unpredictability in the economy, market, technology, weather, etc, in which the organization operates. The emphasis here is not solely on change, but rather on unpredictable change. ii) Complexity. This dimension measures the degree of complexity of knowledge required by the enterprise. He confuses the reader somewhat by equating knowledge base with technology. However the essential thrust is that the "comprehensibility" of the environment is an important dimension. iii) Market Diversity. This dimension ranges from integrated to diversified, from the single product, single location enterprise to the multi-product, multi location enterprise. iv) Hostility. This dimension ranges from munificient to hostile. Hostility is "influenced by competition, by the organization's relations with unions, government and other outside groups and by the availability of resources to it." I - 121 -Similarly Jurkovich (1974) develops a "core typology" of environmental characteristics. Drawing on a wide range of organizational literature, Jurkovich identifies four critical dimensions: i) Complexity ii) Routineness or non-routineness of a problem-opportunity state. iii) The presence of organized or unorganized sectors in the environmental field. iv) The issue of whether such sectors are directly or indirectly related to the organization. Jurkovich concludes from the literature that environmental transformation operates across these dimensions, at varying change rates. The work of Burns and Stalker (1961), Lawrence and Lorsch (1967), Thomson (1967) and Hage (1980) provided the original contributions that emphasized these as the important dimensions of environment. The concepts of uncertainty, instability, variation in demand and comprehensibility or complexity of the task environment are central to the analysis of environment. Three criticisms of these kinds of approaches to the classification of the environment can be made. First, despite Mintzberg*s relatively broad definition of environment, there is a tendency for measures of environment to be operationalized from too narrow a perspective in organization theory. The wider societal context is of considerable importance to enterprise - yet despite this truism organizational theory, until recently, has focused on the immediate organizational environment (Huber (1984)). An exception of course is the literature dealing with cross-cultural organizational comparisons (for a review see England et al (1983) chapter 7). - 122 -The second criticism is that the dimensions for measuring or assessing the environment are neither mutually exclusive or clear. For example Mintzberg's use of the terms complexity and market diversity seem to be attributes of the enterprise, not solely the environment. Similarly, both Burns and Stalker (1961) and Thomson (1967) use technological complexity as an environmental attribute as well as a structural attribute. If these analysts are equating "technology" to the economists notion of a production function, then it is useful to differentiate between the complexity of the envelope of possible technologies (or candidate technologies) and the complexity of the technology actually employed in the enterprise, i.e. the portfolio of techniques used in the organization (see Chapters 1 and 2). The first is indeed an environmental factor - i.e., the range of choices available. The latter is an organizational attribute. (Further, Rattan and Hayami (1971) postulate the existence of a "meta production function." This is : "an envelope curve that goes beyond the production possibilities attainable with existing knowledge and described in a neo-classical long-range envelope curve. It describes, rather, a locus of possibility points that can be discovered within the existing state of scientific knowledge. Points on this surface are attainable, but only at a cost in time and resources. They are not presently available in blueprint form." Rosenburg (1983:p 17) Thus, the environmental complexity associated with technology refers to first, the variety of technologies that are known to exist and second, the variety of technologies that can be discovered or developed given existing scientific knowledge. These nuances are not always clearly articulated in conventional organizational analyses and consequently there has been some degree of tautology in the arguments about technology and environment. - 123 -The third major criticism is a related one. Because of the considerable confusion over the dimensions of environment, overemphasis has been placed on developing singular dimensional scales, e.g., Lawrence and Lorsch's environmental uncertainty scale. Although uncertainty is indeed a critical environmental variable - unidimensional approaches to complex conditions seem inappropriate. These criticisms of conventional contingency approaches in organizational theory have been addressed in the more recent work of Huber (1984) and Trist (1980). Both attempt to integrate wider societal transformation with the transformation in the structure of enterprise. Huber suggests that the Post-Industrial context for enterprise involves three sets of changes: i) Available Knowledge - More and Increasing Huber emphasises that both the amount and availability of knowledge is increasing at an accelerating rate. ii) . Complexity - More and Increasing Huber suggests that complexity can be characterized in 3 ways: a) numerosity b) diversity and c) interdependence. The number, range and variety of different societal states, and components is increasing. In other literature, this has been seen as the development of pluralism in our society (Novak 1983). Huber sees increased interdependence as a consequence of increased specialization and pluralism. iii) Turbulence - More and Increasing Huber argues that the increasing rapidity of individual events will be brought about by the application of knowledge and technology. The - 124 -increased frequency of events and circumstances will increase the level and growth rate of turbulence in the environment. Similarly Trist (1980) defines the increases in environmental turbulence brought about by shifts in the behaviour of institutions and societal developments (identified earlier). In conclusion, then there has been a transformation in the environment of enterprise. The shifts identified at the societal and urban systems scale also apply at the immediate environmental level of enterprise. In addition we can incorporate the three conclusions outlined by Huber above as the critical factors in the transformation in the environment of post-industrial enterprise. In the previous sections the transformation in environmental factors has been explored. These transformations can be synthesized in two ways. a) From Pre-industrial through Industrial to Post-Industrial Table 3.1'shows a typology of transformation using three scales (societal, urban systems and enterprise) and across three developmental stages: pre-industrial, industrial and post-industrial. These terms are most often used to describe transformation over the last 200 years; but they are neither discrete or mutually exclusive phases in history. The argument in this thesis and in the work of Bell and others is that elements of a post-industrial society have emerged over the last forty years and that from certain perspectives these post-industrial elements are becoming the most prevalent in contemporary society. This is not to suggest that attributes of the industrial world have disappeared, rather post-industrial aspects are becoming enmeshed in the industrial world and transforming it to resemble more - 125 -TABLE 3.1 A TYPOLOGY OF TRANSFORMATION IN THE ENVIRONMENT OF ENTERPRISE ENVIRONMENTAL SCALE/FACTOR SOCIETAL PRE-INDUSTRIAL INDUSTRIAL POST-INDUSTRIAL Theory of Value Land Labour/Capital Knowledge Dominant Economic Activity Agriculture Manufacturing Services Stability/Complexity of Environment Simple/Stable Complex/Stable Complex/Turbulent Political Structure Autocractic/ Hierarchial Democratic/ Hierarchial Democratic/ Participative Fundamental Ethic Survival/Maintenance Growth Pluralism URBAN SYSTEMS PRE-INDUSTRIAL INDUSTIRAL POST-INDUSTRIAL Theory of Location Site Dominated Resource Dominated Footloose? Critical Flows Agricultural Products Goods Information Spatial Interaction Local National Global Spatial Division of Labour Limited Substantial division by industry or by enterprise Substantial spatial division within enterprise Critical Spatial Factor Access to high quality land Access to energy resources & markets Access to inform ation networks ENTERPRISE PRE-INDUSTRIAL INDUSTRIAL POST-INDUSTRIAL Organizing Principles Traditional (simple structure) Division of labour Formalization, Specialization (Mechanistic/Bureau cratic) Co-operation (organic) Available Technologies Manual Mechanical Complex Informational or Cybernetic Systems Sources of Uncertainty Weather, War Demand Shifts, War Multiple (incl. war) Sources of Innovation Exploration and . Capture Tinkering Organized R&D Fundamental Motivation Tradition Quantity, low cost Quality, effectiveness - 126 -and more the bench-mark state Bell and others have described. Thus the "post-industrial" attributes shown in the table are becoming more prevalent in our environment. b) 1945-85: Four Stages in Environmental Transformation The second synthesis focuses more specifically on the post-war period which is the major interest here. Many analysts agree that the shift towards post-industrialism may have begun after the Second World War but there is disagreement as to the extent of its development throughout that period. Four stages of environmental transformation can be defined for the enterprise and technology. i) Shifts in the Environment of Enterprise Four different stages can be identified since 1945: a) The period from 1945-60 in which growth in the economy was predicated on the pent up demand following war and the associated need for investment and development in public enterprises such as health and education. b) The period from 1960-1970 in which economic growth was associated with increasing affluence, consumerism, and increasing scale and diversification in enterprise. Further, a focus on social development in politics and enterprise took hold. c) The period from 1970-1980, that Robert Reich (1983)'has characterized as the Impasse when stagflation and paper entrepeneuralism dominated in the corporate sector and there was emerging the crisis of cost in public enterprise. Socially, - 127 -politically and culturally this was the "selfish" decade of hedonism and self-interest, d) The period from 1980 on, in which North America and the other advanced nations were finally confronted with the underlying need for fundamental restructuring of the economy and of enterprise, ii) Stages of Transformation in Technology These periods conform reasonably well to the historical development in information technology set out by Kates (1982) who has identified four phases of development a) 1945-1955 Massive Million dollar Vacuum Tube Technology - which was only acquired by a very few universities, defense facilities and government agencies. b) 1955-65 Solid State Technology - large "mainframe" systems that were aquired by most large enterprises. c) 1965-75 Start of Microelectronics - the development of minicomputer technology helped proliferate information technology applications to most medium sized enterprise and many small scale enterprise. d) 1975 on - Micro electronic Revolution - the proliferation of chip technology in "smart" appliances and products. Microcomputer applications adopted in small business and the home. Enormous development in computer and communication linkage systems and hybrid (or convergent) technology. These four phases will be used as approximate time horizons in our subsequent discussions. - 128 -3.4.2 Transformation in Strategic Decision Organization theory, social ecology and cybernetics all emphasize the critical interdependence between environment and goals. It could be argued that there has been a transformation in the predominant goals of enterprise associated with the wider environmental transformation described above. McDonald has suggested that there are three inter-related sets of interests that have to be accommodated in strategic decision-making these are: i) Financial or Capital Market Interests that are concerned with issues of profit, cost and return on investment. ii) Product Interests that are concerned with the choice of what to produce at what level of quality. iii) Organizatiqnal Interests are concerned with the way in which production is organized. These sets of interests can be usefully employed as a basic classification of policy parameters shaping strategic decision-making. A fourth group of interests not explicitly included in the McDonald model is the public interest. It is possible to identify transformation in the goals of enterprise across the forty year time horizon using the four sets of interests as the areas in which intelligence is gathered and strategic decisions are taken. It should be emphasized again that there may be considerable inertia operating in various enterprises. Just as society did not become post-industrial overnight in January 1, 1962 so the goals of certain enterprises may not change at all, or they may lag behind other enterprise. The intention here is to try and elucidate some trends in strategic decision-making and policy parameters that - 129 -have occurred. In the post-war boom, the financial goals of corporate enterprise were to create growth in sales and profits through increased production in large-scale, standardized production runs. This was facilitated by the product goals of planned obsolescence, a strategy whereby consumers would be induced to speed up their rate of consumption because of annual modifications in styling coupled with poor durability of products, e.g., Reich (1983) and Harris (1981). This focus on high volume production was supported by the goals of the organizational interests who could see higher rewards, status and prestige from controlling larger hierarchies making more profits. This set of goals continued into the sixties. With market saturation by the early-mid 1960s in many industries, large scale enterprise sought to diversify into other areas of production, seeking out market niches where the same principles of large scale production could be applied. This involved the enterprise in developing itself as a conglomerate of new businesses and in seeking new markets abroad. The product focus was on product differentiation and marketing as a means of preserving market share. By the seventies the multi-national conglomerate, and the multi-site public enterprise had begun the separation of product goals from financial and organizational goals. Paper entrepreneurialism, (i.e., financial manipulation of accounts, statistics and stock prices to provide the illusion of real growth) became rampant according to Reich (1983). Similarly, in public enterprise there seemed to be a growth in the self-serving nature of the "bureaucracy" driven not by concerns over auality and cost of services but by process goals such as professional autonomy etc. - 130 -In the 1980s waves of recession, deregulation, competition and technological change have forced enterprise, both public and private, to reappraise their fundamental strategic goals. The current financial goals are survival and real growth (without benefit of double digit inflation on paper assets). These can only be achieved, according to many analysts, through a rededication of attention to both product and organization (people). Thus in the eighties we see a proliferation of management texts emphasizing, hands-on, market-driven, product-oriented, people-oriented approaches to "excellence". There is an increasingly strong argument being made in the 1980s for the integration of strategic, financial, product and organizational goals, Deal and Kennedy (1982), Peters and Waterman (1983). Not all organizations conform to these highly generalized transformations. Many enterprises instead seek maintenance of privileged regulated positions in which they can pursue their financial goals and/or organizational goals, e.g., theoUS steel industry. Others recognize environmental change but take a unidimensional view of how to react to it. The most prevalent uni-directional school of strategic decision-making is the "Lean, mean and tough" school in which organizational and product goals are subsumed under the primacy of cost cutting. A fundamental conclusion drawn from contemporary organization theory, cybernetics and management literature is that strategic goals are formed in an interactive way with the environment. If enterprise faces a more turbulent, hostile and complex environment dominated by uncertainty and the need for dynamic information flows, then, it is argued, the enterprise's primary strategic goal is survival through adaptation. This in turn involves the - 131 -integration of financial, product and organizational interests in the goal formulation process. Integration of potentially divergent goals requires, it would seem, a political process of strategic control. One in which the trade-offs between economic, organizational and product parameters can be made through consensus building. This is the underlying process in Theory Z, in "In search of excellence" and even in the pronouncements of the new Canadian Conservative government. Requirements for concensus building and integration of interests have been met to some degree in many enterprises. In others these requirements have been given lip-service, but the tokenism is flaunted across the pages of the business press. At the other extreme many enterprises have reacted to turbulence by divisiveness, retrenchment and protectionism. The health care system in both the US and Canada faces many of these environmental changes but it is by no means clear as yet what strategic directions will be taken. 3.A.3 Transformation in the Structure of Multi-Unit Enterprise In this final section we will draw on both the theoretical foundations laid out in Chapter 2 and on some of the more empirical and synthetic observations of transformation in the earlier sections of this chapter, in order to draw some conclusions on the transformation in the structure of multi-unit enterprise. 3.4.3 a) The Relationship between Organization and Control This sub-section draws on Mintzberg, Beer and Paterson for its vocabulary to investigate the transformation in organizational structure and - 132 -management and control over the last four decades. It would appear that the emerging forms of enterprise are professional bureaucracy, adhocracy and the so called missionary form (i.e. the organization controlled through corporate culture or religion) and the xerox form (i.e. the franchise operation in which many identical units operate under an umbrella organization that has rights of control without the responsibilities of ownership). Table 3.2 identifies more specifically the dominant organizational structures in each time period across a variety of forms of enterprise. Although this is admittedly a sweeping generalization of a large number of complex and inter related changes. It is consistent with Mintzberg's observations on which organizational forms are fashionable, and with Beer's criticisms of the large multi-unit enterprise. A number of observations can be made. First, there has been a trend towards organizational forms in which decision-making is decentralized and forms that are professionalized with high levels of skill (professional bureaucracy and adhocracy). Second, there is a counter trend towards -organizational designs where operations are controlled centrally through inculturation of employees, i.e. the missionary form, or through formalization and standardization of tasks, e.g., machine bureaucracy, but more particularly, the franchise or "xerox form". For example, McDonald's may be decentralized in the eyes of Peters and Waterman, but there is only one way the corporation allows its franchise holders to make Big Macs or set prices for them. These kinds of developments in organizational design go a long way to explaining the two-tiered effect in the labour market outlined by Stanback (1981,1982), Noyelle (1983) and others. First, these organizational designs TABLE 3.2 TRANSFORMATION IN ORGANIZATIONAL DESIGN AND CONTROL Type of Enterprise 1945-60 1960-70 1970-80 1980-Predominantly machine bureaucracy Predominantly simple structure or internal to the enterprise (eg techno structure or support) Professional bureaucracy Simple structure Goods production and distribution Producer services Health and Education Consumer Services Increasingly divisionalized form Increasingly professional bureaucracy internal to the firm Professional bureaucracy Machine bureaucracy Increasingly divisionalized form/HQ services separated Increasingly prof bureaucracy external to the firm. Operational ahocracy Multi-unit professionalized bureaucracy or missionary form Xerox form Admin Adhoc and Prof bureaucracy Professional bureaucracy Xerox form or missionary form Xerox form Prof bureaucracy Machine bureaucracy Xerox form or missionary form Source: Adapted from Mintzberg (1983) - 134 -employ, on the one hand, higher level "professional staff", e.g., teachers, health care professionals and on the other, unskilled workers, e.g., fast food employees. Second, these forms are consistent with the observed environmental trends and with the "best fit" approach to organizational design and environment described by Mintzberg, in that the relatively complex environment of corporate services or health tends to favour adhocracy and professional bureaucracy and the more stable and simple consumer services or distribution functions favour franchise and missionary forms. Third, the transformation in organizational form relate to the findings of Pred (1979), Stephens and Holly (1981), Stanback (1982), Hardwick (1983) and others who emphasize the critical role played by the "intelligence" functions of enterprise (i.e. culture setting, goal setting, advanced corporate services and the "true" quaternary or strategic planning functicns) in the status of cities and the shape of the urban systems hierarchy. 3.4.3 b) Environment, Organization, Control and Technology. This argument can be extended to include developments in environment and technology. The longstanding debate over the degree to which information technology determines or affects the organizational structure of enterprise is related to synergistic developments in technology, environment and organization. Robey (1977)'in an important review article found that the literature on the relationship between computers and organizational structure fell into four common categories: - 135 -1) Computers cause or are strongly associated with centralization of decision making and control. 2) Computers cause or are strongly associated with decentralization of decision-making and control. 3) Computers have no impact. 4) Computer impact is moderated or mediated by other factors. Robey's conclusion was: "that (organizational) structure does not primarily depend on any internal technology for information processing, but rather on the nature of the task environment. Under stable conditions, computers tend to reinforce centralization. Under dynamic conditions, computers reinforce decentralization. Earlier positions (in the literature) are difficult to support because they are locked into the idea that computers "cause" changes. The present review points to the value of looking beyond computers to more theoretically grounded causal variables in the organization's task environment". Similarly, Herbert Simon (1979) provides a classic auote: "whether we employ computers to centralize decision-making or to decentralize it is not determined by any inherent characteristics of the new technology. It is a choice for us to make whenever we design or modify our organizations. The technology does offer us a wide range of alternatives for fitting our decision-making systems to our requirements, whatever they may be". Changes in environment and technology can be integrated with the transformation in organization and control. The environmental transformations outlined earlier, in particular Huber's work on the post-industrial enterprise and Amara and Lipinski's views on business planning for an uncertain future suggest that more sophisticated scanning and probing systems are required to provide the information base necessary to adapt to environmental change. Information is gathered and synthesized, not only through central data banks, but through continuous and rapid interactions between managers, employees and 136 FIGURE 3.2 EMERGING FORMS OF MULTI-UNIT ENTERPRISE a) MACHINE BUREAUCRACY b) DIVISIONALIZED FORM c) RESTRAINT MODEL d) SELF-DEVELOPING MODEL KEY: 5 = Board Functions 4 = Strategic Planning 3 = Monitoring and Control 4^—A— 2 2 1 1 2 = First Line Management 1 = Operations - 137 -customers, Huber (1984). In order to make appropriate, adaptational, survival-oriented, responses in turbulent environments, enterprise is adopting forms of monitoring and control, scanning and probing and overall organizational structure that best suits their activities and their goals. The responses are plural, however, depending on the complexity of what the enterprise does, on its goals and ideology, on the corporate culture it espouses and on the resources it has available. The responses made by enterprise are made more plural in that the potential technological solutions to communication, monitoring and control, scanning and probing functions are becoming more varied. The emerging trend for multi-unit enterprise seems to be towards what could be termed Beerian structures of organization (see Fig 3.2). The first two forms (Figures 3.2 a and b) are analogous to Mintzberg's machine bureaucracy and divisionalized form. The critical difference between these two is in the role of the monitoring and control (system 3) and strategic planning (system 4) components. In machine bureaucracy the system 4 function is involved in rule setting. In the divisionalized form, the system 4 functions do include more scanning probing and corporate planning activities but these functions are generally conducted by staff rather than line positions (senior technostructure). Divisionalized forms are well suited to meeting the goals of paper entrepreneurialism and can survive in complex but relatively stable environments. The multi-national divisionalized conglomerates live or die dependent on the quality of their "intelligence functions" and their political and economic clout. Some may survive the turbulent eighties if, as Trist suggests they - 138.. -reach some form of "macro-regulation". Their thirst for Quality intelligence leads them to spatially congregate around the best intelligence networks and close to the corridors of economic and political power. This helps to explain the prevailing high prices of New York office space sought after by the multinational divisionalized conglomerates and the findings of Pred (1979) and Stephens and Holly (1981). The machine bureaucracies are dying, particularly in the older more established manufacturing sectors of steel and heavy manufacturing, Bluestone and Harrison (1982). There are so few environmental niches that remain untouched by turbulence and change that it seems unlikely that either public sector or private sector machine bureaucracies can survive long without extraordinary political support. The "new" or emerging Beerian structures are becoming more prevalent. The first "new" structure is what could be termed the restraint or systems maintenance model (Figure 3.2 c). In this model there is one very large and important goal, which is to maintain the same level of operation with no increase in cost or reduction in profit. The Board function (System 5 in Beer's terms) who are involved in setting the goals for the enterprise is then assumed away rather like a chicken with its head cut off. The enterprise continues to reflex according to the stated goal. There is no scanning or probing because systems maintenance must be continued regardless of environmental fluctuation. Any "steering function" is performed by the monitoring and control functions (system 3 group) who simply turn on and off funding taps if specific criteria are not met. From the perspective of the strategic decision makers this model requires "good soldiers" in the - 139 -line-management (level 2) functions. Ironically, this model is increasingly being adopted in the normally complex environment of health and education. The 'crisis' of costs leads to the establishment of the "lean, mean and tough" policy parameters as primary constraints on organizational functioning. The model is inherently unstable if we are to believe open systems theory or structural contingency approaches in that the organizational structure is not suited to its environment and tasks. The irony is compounded in the fourth Beerian structure (Fig 3.2d) which is somewhat analogous to Mintzberg's Professional Bureaucracy. In this model, it is recognized that complex environments require 'hands on', strategic decision making. This organizational form involves highly-skilled operators interacting with the external environment and with strategic decision-makers. This has been termed simultaneous, "loose-tight coupling" between strategic and operations levels. Each of the sub units is run by a line manager (level 2 function) with a close strategic planning (level 4) adjunct (sometimes in the same cranium). This model has operated in large enterprise in health and education (as Mintzberg describes). Increasingly however, it is advocated for private enterprise involved in production and distribution, e.g., see Peters and Waterman (1982), Huber (1984) and the "atomistic structure" described by Deal and Kennedy (1982). The predominance of divisionalized and machine bureaucratic structures for much of large scale private enterprise throughout the seventies is borne out by Reich (1983). But the self developing model is certainly being advocated for private enterprise and the proponents of this model cite - 140 -numerous examples of its emergence. The restraint model on the other hand is prevalent in the private enterprise operating under receivership, in the machine bureauracy in its death throws, and increasingly in the public sector enterprise put under fiscal restraint and tight government control. The critical point to note is that developments in information technology and automation have enabled all these forms to emerge. Centralized, divisionalized forms needed the kinds of information technology readily available from the mid 1960s on -. However, the more recent developments in computerization, automation and telecommunications associated with micro-electronics, have enabled both the restraint model, by facilitating real-time access to information by centralized monitoring and control (system 3) functions, and the self-developing model, through rapid communications with strategic decision makers and intelligence functions. Technology has caused neither one. Yet both forms of enterprise, divergent as they are in philosophy, in organizational structure and ultimately in performance, are made possible by technological developments. 3.4.3. c) Integration of Location into the Relationship Among the Variables In this final sub-section, an attempt will be made to integrate the ideas about the structural transformation of enterprise with the spatial phenomenon outlined earler. Oust as Robey (1977) and Simon (1979) synthesized neatly, their conclusions about technology and organizational structure, so Mandeville (1983) provides us with a synthesis from a spatial prespective: - 141. -"The conclusion emerging from comparing many studies is that information technologies can indeed encourage and also substitute for the physical movement of goods and people, with conseauences for centralization and decentralization.- Which of the two effects will appear in any given case appears to depend more on factors other than the choice of technology". Mandeville (1983:p 65) It has been argued in previous sections that the restructuring of enterprise is an integral part of the transformation in the environment, strategic choice, internal organization, and technology of enterprise. These factors are synergistic in their relationship. Spatial structure, it could be argued, is increasingly becoming a product of the interaction of these other variables rather than a contributory factor. It is more an outcome than a co-determinant in many forms of enterprise. There are however some exceptions to this generalization. As stated in Chapter 1, spatial factors and location still play an important role where services have to be delivered physically to people (especially in those human services such as health and education where the client, or customer is an integral part of the process of service delivery). Similarly, even in an information-oriented society there are still certain aspects of organizational behaviour, e.g., deal-making, that require face-to-face contact, though it has been argued that these aspects are sometimes over-emphasized, e.g., Gad (1979), Goddard (1980). A limited literature is emerging that deals with the geography of enterprise in a behavioural way. This literature attempts to integrate the relationship between technology, organization and location within the context of environmental factors and strategic choice. The foundations of this literature are in the melding of organization theory and location theory. The - 142 -contributions made by Pred (1979), Gottman (1983), Hardwick (1983), Stephens and Holly (1981) and others have been described earlier. Two more recent studies bring out the inherent complexity of analysis in this area and provide us with a useful empirical comparison. Both studies are on banking and they shed some light on the critical role of environment, strategic choice and technology in shaping spatial structure of service oriented enterprise. The first study by Marshall and Bachtler (1984) follows Goddard (1980) in viewing technology as a "permissive factor" rather than a determinstic factor in the process of change. They argue (p 437) that: "there is a missing meso-level in studies of technology. National studies have been conducted- on industries or techniques and there have been microanalyses of particular applications, but little work has been done to examine the way in which adoption of technology by business organizations is mapped into space". They therefore examine the effects of adoption of information technology in the banking industry. "The introduction of technology is considered in the context of the main trends in the banking environment, and the organizational structure of the main institutions". They suggest that because of parallel shifts in the environment and organization, it is "impossible to identify an independent technology effect". However, offer the conclusion that a combination of organizational and technological initiatives, though not reducing employment overall, would restructure activities spatially and organizationally, encouraging "both the centralization and decentralization of banking activities". "The evidence suggests that in the future the automation of routine branch office functions may be associated with a concentration of administrative work at key local centres. In addition, some banks are focusing labour intensive personal and corporate business at regional office level. Further, although centralized computer systems are likely - 143 -to be retained and updated, computer processing is likely to be more distributed given the centralized structure of banking organizations, this is unlikely to go beyond the regional office level". Marshall and Bachtler (1984:p 448) The second study, on the restructuring of the Australian trading banks by Taylor and Hirst (1984) also argues that there is an interaction between environment, organization, technology and location. They are critical of monocausal deterministic approaches to investigation in this research area. Instead in their model: "Technology and environment are seen as sets of forces influencing organizational structure, but mitigated by the performance of the organization under study". Taylor and Hirst (1984:p 1056) These two studies are informative at a number of levels. First, they take an important step towards less deterministic analysis in their stated intent, although both studies lapse into causal jargon, e.g., "the impact of technology". The second point to note is that they differ slightly in their conclusion. Indeed, Taylor and Hirst take an academic shot at Marshall and Bachtler's slightly more "decentralist" conclusion. It could be argued that the explanation for the difference lies in the interaction of environment and strategic choice. In relatively "overbanked" Australia (from a consumer banking perspective) rationalization and centralization would be a strategic response consistent with the restraint model described earlier. In the U.K. case, the prospect for some decentralization of autonomy to regional offices may be consistent with the perception of strategic decision makers that because of the U.K.'s relatively low penetration of consumer banking services, there is potential for growth in the customer base. Decentralist approaches - 144 -to organization (i.e., the self developing model) could be considered as more appropriate forms for a growth environment. It is difficult to tell from the papers whether this is a reasonable explanation of the differences in their findings, even though both studies claim to recognize the relative independence of strategic choice as a variable. Thirdly, despite their claims of open systems approaches to their analysis both groups seem to attribute changes in organizational structure to changes in technology (albeit in response to environmental pressures). Given the fact that the studies found varying degrees of spatial decentralization associated with similar technological change it seems remarkable that Taylor and Hirst would be critical of their U.K. counterparts. The divergence in the studies' results seems to add further weight to Goddard's (1980) conclusion that technology is a permissive or an enabling factor in location. These case studies suggest that as multi-unit enterprise has moved into a more turbulent environment, the "performance gap" has increased to a point where action becomes warranted. The organizational and locational outcomes are not dictated by either environment or technology. Rather, they are driven by a synergistic combination of factors, most notably the strategic choices of senior decision makers based on their interpretation of environmental circumstances and the likely outcomes of transformation (cf Corning (1983) in Chapter 2). What seems to be apparent from these banking studies is that even in similar environments and with similar technologies, different structures can emerge. The explanation in this case may lie in the basic environmental perception and goal orientation of senior decision makers in the enterprise. An orientation towards growth leads to self developing structures that are - 145 -functionally, organizationally and geographically decentralized. An orientation towards tight fiscal control leads towards correspondingly centralized restraint structures. These generalizations should be modified because technological developments in networking, automated teller systems and distributed processing can enable both decentralized and centralized structure for multi-unit enterprise. They can also amplify the extent of organizational and geographic restructuring in either direction. A final conclusion from these studies and perhaps one that is uniaue to current technologies is that they can simultaneously enable both centralization and decentralization in spatial and organizational terms. 3.5 CHAPTER 3 CONCLUSIONS: This chapter has attempted to review a wide range of literature on the transformation of multi-unit enterprise. An open systems view of structural transformation was adopted in Chapter 1 and the precedents for such an approach were reviewed in Chapter 2. In this Chapter, analyses of transformation using this model leads to both methodological and substantive conclusions. 3.5.1 Methodological Conclusions a) Synergistic Models of Structural Transformation In order to investigate properly, the transformation in structure of multi-unit enterprise, it is necessary to develop a synergistic, open systems approach to analysis. Many studies have reached the stage of using multiple - 146 -variables but there is still an underlying focus on prime movers and uni-directional deterministic links. This can be partly attributed to a lack of conceptual and methodological tools for the investigation of complex systems and partly to the compartmentalization of knowledge and research activity. It is argued here that an interdisciplinary approach is imperative in order to further our understanding of structural transformation in complex systems, in general, and spatial restructuring, in particular. b) Case Study Approaches The breadth of understanding reauired in any inter-disciplinary approach makes analysis tend towards superficiality unless that analysis is bounded in some way. Important contributions can be made where the analyst restricts investigation to a specific case, particularly a case were he/she has considerable working knowledge of the system. Six years of research experience in the clinical laboratory system of B.C. leads the author to select this multi-unit enterprise as a case study. 3.5.2 Substantive Conclusions The literature reviewed so far has provided four substantive conclusions (although somewhat tentative at this stage) about the relationship among technology, organization and location. a) Transformation is multi-dimensional and synergistic There are times of structural change when a number of dynamic factors overlap and interact to create a profound impact on society. A number of - 147 -variables have interacted in the last decade in the economics, demographics, technology and culture of North America that have crashed like a giant wave on enterprise. Yet the transformation in enterprise that is occurring is not simply a rote response to any one or a combination of these changes, but is to some degree being steered by strategic perceptions and strategic choices. What does seem clear is that the culmulative pressures of multiparametric change is forcing a reappraisal of strategic directions. b) Technology is Neutral Information technology is essentially neutral in the direction of its effects on the organization and spatial configuration of multi-unit enterprise. Thus information technology is not the critical driving variable causing centralization or decentralization of decisions or activities in a spatial or organizational sense. Rather it is an enabling factor that can amplify or attenuate the magnitude of the effects of other variables, This is true of all tools - they can increase the range of options and they can increase the leverage of the operator, but they do not dictate what the operator does. However, an important conclusion is that emerging information technology can enable elements of centralization and decentralization to occur simultaneously in the same organization. c) The Role of Environment and Strategic Choice The structure of enterprise in general and its spatial structure in. particular seems to be conditioned by decisions about how to organize and in turn by the goals of the enterprise and the environmental opportunities and - 148 -constraints that it faces. Therefore any centralization of decision making or spatial centralization of functions is a result of a synergistic interaction of factors that is guided more by transformation in corporate policy and the interaction with its changing environment, than by technological change. d) Growth versus Restraint It appears that the critical variable in determining the degree of spatial dispersion of activities and control is whether the enterprise is interested in growth or in systems maintenance and restraint. Growth is fostered through dispersed or dissapative structures in which sub-units interact freely with a dynamic environment but are guided by an overall philosophy or creed and supported from the centre. Conversely, a common approach to systems maintenance and restraint is through the development of simplistic central control and prescribed limits on the range of action of sub-units. Information technology plays a neutral role in this choice because it can enable both forms of control. The challenge for those designing policy for enterprise is in making the trade-offs between the five E's: efficiency, effectiveness, eauity, employment and enjoyment. The danger is that policy impairs all or most of the five E's with technology taking the blame. - 149 -PREFACE TO THE CASE STUDY In the previous chapters it was concluded that structural transformation in enterprise is driven by a synergistic process in which environmental, strategic, technological, organizational and locational factors interact. It was argued that transformation in the environment, changing strategic perception of environment and shifts in the goals of enterprise play a stronger role in the process of structural transformation than do developments in organization and technology of enterprise. It was also argued that technology is essentially neutral, in that it is not the necessary and sufficient condition that determines the choice between centralized and decentralized structures for enterprise. Rather, it can enable a wider range of organizational forms to be considered and can amplify the magnitude of effects in either direction. These conclusions will be tested in this case study by examining structural transformation of the clinical laboratory system of B.C. over the period 1954-1984. Selection of this case study can be justified for a number of reasons. First, health care in general has become an increasingly important component in the economy of advanced nations. As Bell (1976) has pointed out, the growth in relative importance of health care and other human services such as education is an important hallmark of emerging post-industrial society. The importance of health care as an economic and organizational entity warrants close investigation of its institutional dynamics. Over the last two decades, a variety of research approaches have been forthcoming in economics (e.g., Arrow (1963), Culyer (1971), Feldstein (1971), Evans (1981,1984)) and to a - 150 -lesser extent in organization theory (e.g., Thomson (1967). However, spatial-oriented analysis of health care services by geographers and health planners have tended to characterize such services as conforming to the classic central place hierarchy models or to other "rational" and mathematically derived location-allocation models, e.g., see Dear (1978) and Teitz (1968). This has led certain geographers to argue that greater understanding is required of: "the spatial structure of the systems of supply of hospital facilities, primary medical care and associated pharmaceutical services." (Herbert and Thomas (1982) p247) This seems to be a plea for closer investigation of the relationship between the organizational and spatial structure of health care delivery. Such analysis seems to be required to explain why health services do not perfectly conform to Christalleran spatial patterns, e.g., Knox (1978). The second set of reasons for the choice of case study relate specifically to the clinical laboratory system itself. This system has many attributes that are typical of the post-industrial or emerging form of enterprise. Specifically, the clinical laboratory system of B.C. has the following characteristics: i) The clinical laboratory system in B.C. is a multi-unit system delivering services to physicians through a network of hospital-based laboratories and multi-site chains of private laboratories. ii) Clinical laboratories are in the information business, in that they exist to generate "answers to questions" (Hardwick D.F. et al (1981)). - 151 -iii) Clinical laboratories provide "producer services". Laboratory test information is used by the "producers" of medical services, i.e., physicians. The growth in producer services in the post industrial economy is well documented (Cohen (1979), Stanback (1982), Noyelle (1983)). Analysts have argued for a better understanding of the spatial and organizational dynamics of producer services in general because producer services are critical elements in differentiating levels in the urban systems hierarchy (e.g., Cohen (1979), Dunning and Norman (1983)). Such a view can be extended to advocate analysis of producer services for health and educational enterprises. iv) The clinical laboratory system in B.C. has elements of both public and private ownership. Although both sectors are ultimately publicly funded, the differences in ownership, control and mission provide a useful basis for comparison and reflect the blurring of boundaries between the civic system and the business system, Reich (1983). v) Over the last three decades the clinical laboratory has experienced successive waves of change in technology. As such, the laboratory system provides a useful case study of the role of technological change in the structural transformation of enterprise. vi) The growth in utilization and cost of clinical laboratories in the U.S. and Canada has brought them under closer scrutiny by analysts and policy-makers, (e.g., Conn (1978), Hardwick, D.F. et al (1981, 1985)). All these attributes make the clinical laboratory system worthy of study for the analyst interested in structural transformation of enterprise. In addition, the author has had considerable research experience in the analysis - 152 -of policy, organizational, technological and economic issues in the clinical laboratory. It was concluded at the end of the previous chapter that detailed knowledge of any case study was a critical asset when undertaking an interdisciplinary research study of this nature. Structure of the Case Study The three chapters in the case study follow the conceptual framework outlined in Chapter 1 where the external environment, strategic decision and internal operational structure were described as the three critical components in structural transformation. Thus, Chapter 4 analyzes the attributes of the external environment shown in Table 1.1 and reviews the transformation in the wider environment facing clinical laboratories under a number of headings. In particular, the chapter first describes the social/demographic transformations in Canada and B.C. that have relevance for policy-making for laboratories. Second, it reviews the political/economic context of clinical laboratories in Canada and B.C. to show both the relative importance of the laboratory component within health care and how the increasing cost of health care services in general, and laboratories in particular, have become a significant policy issue. Thirdly, Chapter 4 reviews the wider medical context surrounding increased clinical laboratory activity in North America and attempts to demonstrate how changes in the functional focus of medicine may have led to changes in the demand for, and organization of, clinical laboratory services generally. The final section of Chapter 4 focuses on the candidate technologies available in the environment, reviewing the relative rates of penetration of these - 153 -technologies in North America and their apparent organizational effects. Thus, Chapter 4 is intended to both describe these wider environmental conditions and hypothesize about their possible effects. As such the chapter draws on a range of North American literature and data sources. In Chapter 5, these broader environmental changes will be integrated into a model of policy-making, in order to demonstrate how and why specific strategic choices have been taken in B.C. over the period. These choices will be set in the broader context of Canadian policies for laboratories. Chapter 6 has a much more empirical focus and examines in detail the B.C. Clinical Laboratory System from 1954 to 1984 in order to describe the relationship of technology, organization and location in the laboratory system, to evaluate the system's performance against strategic goals and to identify emerging factors, at several critical points in time, that contribute to subseauent structural change. In Chapter 7, the conclusions that are reached from the case study will be integrated with the general findings from the first three chapters. Finally, in Chapter 8 a series of alternative scenarios for the future of the clinical laboratory system of B.C. are developed and evaluated. - 154 -CHAPTER 4 - TRANSFORMATION IN THE ENVIRONMENT OF  CLINICAL LABORATORIES 1954 - 1984 4.1 INTRODUCTION Clearly the clinical laboratory system in B.C. operates within the wider context of socio-economic change described in Chapter 3. This chapter, concentrates on those elements of the environment specific to clinical laboratories and, where appropriate, outlines links to broader trends of social transformation. In particular four areas will be considered: 4.2 The Social/Demographic Environment 4.3 The Political/Economic Environment 4.4 The Medical Environment 4.5 The Technological Environment These sub-environments conform well to the environmental dimensions identified in organization theory (see Table 1.1 and Chapter 2). In particular, the medical and technological sub-environments encompass the notions of task environment and technological complexity outlined by Thomson (1967), Burns and Stalker (1961) and Mintzberg (1983). Similarly, analysis.of the political/economic environment enables identification of the degree of hostility and munificence that the enterprise faces (Mintzberg (1983), Pfeffer (1982)). Finally, the social/demographic aspects of the environment incorporates cultural factors and changes in market demands, Mintzberg (1983). Each of these sub-environments examined in general terms to identify the salient transformations that have occurred during the time period and the potential policy and operational implications of these changes. - 155 -It will be argued that the changing social and demographic environm