Year

2002

Degree Name

Doctor of Philosophy

Department

School of Economics and Information Systems

Abstract

Firms such as Toyota in Japan and Dell in the USA have been pioneers in introducing organizational innovations (OIs) such as the lean production system (LPS) or its equivalent just-cum quality control (JJT/QC) system. Through these OIs, they have become leaders in their respective industries, and in turn the latter became leaders in their national economies. In addition, Dell successfully copied the JIT/QC system from Japan. Furthermore, these companies did not introduce any significant technical innovations (TIs), thus reinforcing the importance of OIs. The growth of firms and industrial sectors positively depends on OIs as well as other factors such TIs. There is a strong need to include OIs in the analysis of sectoral industrial development so eventually the process of economic growth is better understood. Though OIs have been one of the research topics in management disciplines at a firm level, they have generally been ignored by economists at a firm, sectoral, and macro growth level in favor of TIs.

This study attempts partially to fill this gap in the literature. The qualification 'partially' the focus on the firm and sectoral analysis, both theoretical and empirical, thus excluding the macro economy. Briefly, the aims of this thesis are threefold: First, theoretically, to justify separate inclusion of OIs in explaining industrial and hence economic growth by using some wellknown economic theories of the firm and their extension presented in this study. Second, empirically, to provide some basic evidence that sectoral industrial growth differences are also attributed to the presence and evolution of OIs, such as the LPS. Third, to test the hypothesis it is possible to successfully transfer a major OI such as the JIT/QC from one country to another. To attain these threefold aims, the various OIs have been historically identified in the two largest economies -the USA and Japan- from the late part of the 19th century until the present. Then, these OIs are linked with economic theories in order to justify their relevance. Finally, the empirical analysis brings some evidence to this thesis.

Within the apparently wide range of OIs, the focus is put on the 'scientific management cum Fordism' versus 'scientific management cum JIT/QC axis, though other OIs such as vertical integration, multidivisional form of firms, are also recognized. All OIs are interrelated and form three interlinked axes of OIs: mass production versus lean production, vertical integration versus vertical disintegration, and networks. The empirical exploration focuses on the most recent post World War II period for which there is more precise data. The theoretical part of the thesis is equally distributed between the USA and Japan, however the empirical part is more related to the USA for two reasons. First, data availability; and second, American firms and industrial sectors successfully copied the LPS resulting in their sustained growth and hence overall economic development over the last 20 years.

The theoretical justification for the inclusion of OIs in explaining economic growth is gradually built on the core of such growth, namely the firm. It is shown that the various OIs are distinct forces, not only reducing transaction costs, increasing capabilities and competences, but also decreasing the 'kinetic costs' of firms. These latter costs are related to the five fundamental processes of firm operations as identified in this thesis. The main preoccupation is the link between OIs and economic growth, mainly by scrutinizing the axis of mass production versus lean production within firms and not so much between firms; hence the emphasis is on the internal structure of firms. The end result of the reduction in kinetic costs and other costs is a corresponding increase in productivity, which in turn leads to economic growth. Furthermore, the importance of leading firms and leading industries is carefully demonstrated either theoretically quantitatively by linking them to OIs.

The empirical parts of this study show that effectively, at different points of time, there have some key firms and industrial sectors that pulled the rest of the economy ahead because of the presence of OIs. In addition, the quantitative part of this study cannot be properly evaluated we understand well the theoretical foundations.

The consequences of the findings in this study are substantial for economic policy at all levels (government, industrial firm, or any other firm). We should encourage the implementation of policies that promote the appearance or transfer of OIs because the later are a necessary condition for sustained economic growth.

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