Summaries
Are the economic concepts of scale and scope still relevant in 21st century economies?
Provide scholarly evidence and practical examples to support your answer.
I.
Introduction
„Is the “new firm” small and flexible, engaged in a web of collaborations with other small enterprises, each specialized to perform at peak capacity? Or is it an ever expanding leviathan, bloated with acquisitions after a decade of unprecedented merger activity?‟
A quoted part of DiMaggio (2001, p.3) explains clearly the dilemma of the future firm of the twenty first century. He alleges that the only part where many scholars agree is that companies are interacting in a different way nowadays then what they used to. Daft (1993) expresses the need for new organizational forms, since they should co-evolve with the changing environment of organisations, as there has been a shift from industrial economy to knowledge economy (Carolla,2007). With unexplored new organisational forms, such as the prevalence of ‘digital ecosystem’, it is questionable if the same measurement methods can be used to estimate economies of scale and scope. Even, for example, in existing network industries, such as telecommunication industry, the model of measurement of scale and scope is questioned, because of the different structure of these networks (Liebenau, 2006). The main supportive arguments used below regard a decline in relevance of the concepts of scale and scope because of the change of organisational structure of firms. The prevalence of the economies of scale and scope is not questioned as the large-scale manufacturing companies involved in mass production and distribution will still exist. The concepts of theories of scope and scale have been analysed historically through altering models of main industries in centuries; prevailing more during formation of large-scale companies. Economies of scale occur when enlargement in size of a single operating unit, that produces or distributes a
Provide scholarly evidence and practical examples to support your answer.
I.
Introduction
„Is the “new firm” small and flexible, engaged in a web of collaborations with other small enterprises, each specialized to perform at peak capacity? Or is it an ever expanding leviathan, bloated with acquisitions after a decade of unprecedented merger activity?‟
A quoted part of DiMaggio (2001, p.3) explains clearly the dilemma of the future firm of the twenty first century. He alleges that the only part where many scholars agree is that companies are interacting in a different way nowadays then what they used to. Daft (1993) expresses the need for new organizational forms, since they should co-evolve with the changing environment of organisations, as there has been a shift from industrial economy to knowledge economy (Carolla,2007). With unexplored new organisational forms, such as the prevalence of ‘digital ecosystem’, it is questionable if the same measurement methods can be used to estimate economies of scale and scope. Even, for example, in existing network industries, such as telecommunication industry, the model of measurement of scale and scope is questioned, because of the different structure of these networks (Liebenau, 2006). The main supportive arguments used below regard a decline in relevance of the concepts of scale and scope because of the change of organisational structure of firms. The prevalence of the economies of scale and scope is not questioned as the large-scale manufacturing companies involved in mass production and distribution will still exist. The concepts of theories of scope and scale have been analysed historically through altering models of main industries in centuries; prevailing more during formation of large-scale companies. Economies of scale occur when enlargement in size of a single operating unit, that produces or distributes a
Bibliography: Chandler, A.D. 1990, Scale and scope, Cambridge Univ Press. Chandler, A.D. 1977, The visible hand: The managerial revolution in American business, Belknap Pr. Coase, R.H. 1937, "The nature of the firm", Economica, vol. 4, no. 16, pp. 386-405. Corallo, A. 2007, The digital business ecosystem, Edward Elgar Pub. Daft, R.L. & Lewin, A.Y. 1993, "Where are the theories for the" new" organizational forms? An editorial essay", Organization Science, vol. 4, no. 4. DiMaggio, P. 2003, The twenty-first-century firm: changing economic organization in international perspective, Princeton University Press. Gompers, P.A. 2002, "Corporations and the financing of innovation: the corporate venturing experience", Economic Review-Federal Reserve Bank of Atlanta, vol. 87, no. 4, pp. 1-18. Helper, S. & Sako, M. 2010, "Management innovation in supply chain: appreciating Chandler in the twenty-first century", Industrial and Corporate Change, vol. 19, no. 2, pp. 399-429. Lazonick, W. 2010, "The Chandlerian corporation and the theory of innovative enterprise", Industrial and Corporate Change, vol. 19, no. 2, pp. 317-349. Liebenau, J. & Bourdeau de Fontenay, A. 2006, "Modelling scale and scope in the telecommunications industry: problems in the analysis of competition and innovation", Communications & Strategies, vol. 61, no. 1, pp. 139-156. Powell, W.W. 2001, "The capitalist firm in the 21st century: emerging patterns", The 21st Century Firm: Changing Economic Organization in International Perspective, . Supple, B. 1991, "ESSAYS IN BIBLIOGRAPHY AND CRITICISM Scale and scope: Alfred Chandler and the dynamics of industrial capitalism", The Economic History Review, vol. 44, no. 3, pp. 500-514. Teece, D.J. 1993, "The dynamics of industrial capitalism: perspectives on Alfred Chandler 's scale and scope", Journal of economic literature, vol. 31, no. 1, pp. 199-225. 8