THE POLITICAL ECONOMY OF PRODUCTION SYSTEMS Power, Governance and Learning in Industrial Networks Andrea Gallina PhD Program in “Society, Business and Globalisation” Department of Social Sciences Roskilde University Supervisor: Ass. Prof. Göran Serin 1 Acknowledgements It is practically impossible to list all the people that, in a way or another, helped or encouraged me to write this thesis. My first thanks goes, of course, to my supervisor Göran Serin for his support in helping to define the research, for his useful and extensive comments on each part of the thesis, and for his patience in rescheduling our deadlines. Then, I am very thankful to the Innovation Research Group at the Department of Social Sciences, to the director of the PhD Program Jon Sundbo, and to my fellow PhD students for the exchange of thoughts and the fruitful discussions during the PhD seminars. I would also like to thank Paul David and Paul Geroski for their comments on the preliminary drafts of the research project design, and the theoretical part of the thesis, these were made during the stimulating tutorial sessions at the ESSID Summer Schools. Then, I am very grateful to the enterprises’ general directors and purchasing managers that enabled me to interview them. Without them this study would have not been realised. Last but not least, I wish to express my gratitude to the researchers affiliated to the Federico Caffè Centre, and in particular Bruno Amoroso for his intellectual guidance and for being a continuous source of intellectual inspiration and challenge. The responsibility for what is written remains, of course, entirely mine. 2 Table of Contents CHAPTER ONE Researching into Contemporary Industrial Production Systems: Introduction, the Research Problem and the Method 1. Introduction................................................................................................. 211 2. The state of the art: “Concentration without centralisation” and the emergence of the “relational firm”..................................................................... 15 2.1. Concentration without centralisation ................................................................... 17 2.2. The emergence of the relational firm ................................................................... 19 3. Towards a new approach: The “Structural dynamism” of business networks23 4. Defining the research objectives, strategy and problems ............................. 26 4.1. The field and object of study................................................................................ 27 4.2. The Danish context............................................................................................... 29 4.3. Formalising the problem ...................................................................................... 30 4.4. The research hypotheses....................................................................................... 31 5. The outline of the thesis ............................................................................... 32 6. Learning and governance in industrial networks: Some methodological considerations .................................................................................................. 34 6.1. The rationale behind the selection of the cases.................................................... 36 6.2. Data Collection..................................................................................................... 39 6.3. Network structure................................................................................................. 40 7. Measuring knowledge development in firms and networks .......................... 41 8. Conclusions.................................................................................................. 43 CHAPTER TWO Resources, Forms of Governance, and Innovation in Industrial Networks 1. Introduction................................................................................................... 45 2. Defining the ‘language’................................................................................. 49 2.1 Types of inputs-output systems............................................................................. 49 3. Developing the notion of production systems............................................... 53 3.1. Power, Hierarchy and Governance....................................................................... 54 3.2. Core and rings in industrial networks .................................................................. 56 4. Towards a taxonomy of production systems ................................................ 58 4.1. Horizontal governance ......................................................................................... 59 4.2. Coordinated production systems .......................................................................... 61 4.3. Hierarchical governance....................................................................................... 62 5. Resources development and forms of governance ...................................... 64 5.1. Opening the Pandora’s box of knowledge management...................................... 66 3 5.2. Knowledge development as a strategically reflexive process.............................. 69 5.3. Knowledge development in networks.................................................................. 73 6. The structural dynamism approach to production system analysis .............. 77 7. Conclusions.................................................................................................. 82 CHAPTER THREE Structures and Markets Dynamics in the Danish Manufacturing Sector 1. Introduction................................................................................................... 87 2. Small open economies facing globalisation.................................................. 89 3. Danish industrial structure: too little big firms and too much low-tech? ........ 91 3.1. Danish Small and Medium-sized Enterprises ...................................................... 94 4. Trends and structures in the selected markets............................................. 97 4.1. A overview on the packaging industry for the food and pharmaceuticals........... 97 4.2. Trends in the core-firm industries ...................................................................... 102 5. Conclusion.................................................................................................. 105 CHAPTER FOUR Three Industrial Production Systems: Structure, History and Specialisation 1. Introduction................................................................................................. 108 2. Production System No. 1............................................................................ 109 2.1. Introduction ........................................................................................................ 109 2.2. History, markets and specialisation of the Consumer Good Producer............... 111 2.3. Presentation of the Suppliers.............................................................................. 112 2.4. Preliminary Considerations................................................................................ 114 3. Production System No. 2............................................................................ 116 3.1. Introduction ........................................................................................................ 116 3.2. History, markets and specialisation of the Consumer Good Producer............... 117 3.3. Presentation of the Suppliers.............................................................................. 118 3.5. Preliminary considerations................................................................................. 120 4. Production System No. 3............................................................................ 121 4.1. Introduction ........................................................................................................ 121 4.2. History, markets and specialisation of the Consumer Good Producer............... 123 4.3. Presentation of the Suppliers.............................................................................. 124 4.4. Preliminary considerations................................................................................. 125 5. Conclusions................................................................................................ 126 4 CHAPTER FIVE Power, Governance and Learning in Industrial Networks 1. Introduction................................................................................................. 129 2. Circumscribing the governance structure ................................................... 132 2.1. Governance and learning trajectories................................................................. 134 3. Capabilities development in small firms ..................................................... 140 4. Rents creating and destroying activities ..................................................... 144 5. The dynamic of innovation.......................................................................... 147 5.1 Sources of knowledge ......................................................................................... 149 5.2. Learning trajectories........................................................................................... 151 6. From firm capabilities to network capabilities ............................................. 153 7. Conclusions and implications for the process of innovation