The corporate imagination: how big companies make mistakes

317

BOOK REVIEW Peter

Earl,

t&es.

Wheatsheaf,

The corporate

ittmgincttion:

Brighton.

AON* big

1984.

comptrnies

pp. xvii&236.

nde

f7.95

mis-

(paperback).

f 15.95 (hardback). Peter

Earl

structure theory

has tried

to write

and evolution. of steady

state corporate

tions of assuming

ments

are criticized.

chapters

Earl

economies

provide

two

making

in complex

and

patterning spcctivc

Ic~is

mcnting

major

cvolulion through product

Chnndlcr’s lures

familiar

curves.

economic

tion-processing making.

0167-4X70,‘85/S3.?0

’

draws

Not

heavily

of dcvcloping Secondly.

between U-form

The

concluding

approach

focusing

limits

on Earl’s this

turns

the mcchani-

some

Throughout.

Earl

and the structures to corporale

firm

behaviour,

IYX5. lilwzvicr Scicncc I’uhlkhcrs

1i.V.

of human where costs

(NorhI ioll;d)

at

struc-

wide-ranging

extensive

thus imposed

set by the transactions

of

looks

is bused on that developed

on the limitations

to the

understanding

and M-form with

pcr-

may be misguidccl

a proper

for

and the

and implc-

Earl

argues

policy.

;I Kuhnian.

surprisingly.

and criticizing

industry

It is now exlcndcd within

former

divided decision

proccssing

paradigms

mergers.

capabilities

agents operate

The

that

arguments of

utilizing

inf~mnation

the

These

follows.

life cycles. In the last few chapters.

on government itttuginrrIion,

activities. Eari’s

how diversification

He

dislinction

made of case studies.

cnvironmsnts,

strategy.

showing

and al corporate

comments

of

recent argu-

the implications

on lhc difficulties

to outmoded

and process

he considers

Moss’s

hctwccn

ittqintrtiotr.

in corporals

cal use of Icarning

implica-

boundaries

of certain

link

individual

rcsponscs.

of strategies. arlhcrcnce

Next,

core of the hook

analysts

uncertain

to emphasis shifts

The

EarI

The cwtnotttic

book.

corporate

well-known

the drastic

managers.

operation

substantial

view of both

of corporals

previous

of

makes much of the concept of ‘synergy’.

theory.

Firstly.

showing

In the process.

costs.

the only

chunks.

paradigmatic

Marris’s

of the appropriate

from joint

and rcceivcd economic into

theory

by discussing

informed

question

as set by transactions

is. possible

a behavioural

growth.

less than fully

the Cease-Willinmson firm.

out

He begins

use is in

The

informa-

on decision interacting of different

modes of organization types of activity This

linkage

Leaving

unnecessarily

seems to flow economics

from

inspired

building

in economics

dialogue

between

Kay’s

induces

arguments

rational

economic

latter

have perforce

actor

niodcl,

rcpudiatcd tion.

is

emergetlt

and could

from

excsllcnt

where

thought, whose

an

from

its

of non-price but

reason

relevant

chologists, continue

theory,

interested of their

inforrnation~ll

of

but

in

the

rational

assumptions

guided

arc

social organiza-

Williamson

is far

from

costs model is one of the Icss

its air of implicit

in Arrow’s parallel

and

7’lr~

EarI’s.

theorizing.

others

have

hlorc all

spccifi-

dcvclopccl

lirfrils of orguni:rtfiorr; fllmly ol’ his Earl

is clearly

who

pcrspcctivc.)

it is important

they deserve might

find

when

to bc at cross-purposes

account is a reasonable reflection offer. Secondly. Earl’s arguments

will

he fails

Likewise, Earl’s

tribute

This

is

with

not Firstly,

not give Earl’s

concepts

economists

if

be sharpened

just

an

for the of obvi-

especially

psy-

attractive.

will

they

bclicve

of the best that economists could

of

arguments

to take account

non-economists,

USC of their

lint

to Kornai,

of gcncral equilibrium

for two reasons.

that many economists

developments.

aware of this

book hc pays generous

informational

sour grapes;

the consideration ously

in consumer

rinri-c~ylrifihrifrl~~is ;III cxtcndcd critique

pragmatic

same is true

information closely

economist’s

the

model

which advances read in conjunction

at the limitations

Arrow

since in his previous

theory

formal

of a reasonable

(The

Economists

occupation

with

Marschak.

discussion

conclusions

of the latter, of

~iiotlcls ol‘ organization~ll bchaviour hascd on concepts theory. (Sec. for cxamplc. the concise and

sophisticatccl drawn

the merits

be usefully

difficult.

to look seriously

approaches,

the

view of

usefulness

as exemplified

more

a context

Radncr.

between

and a ‘subjectivist’

inurgirurtiort Earl targeted the central model of

may bc a minority

satisfactory

made by Earl

This

corportrfion,

alone, ;~ncl in sonic ways his transactions tally,

it off

business

economics.

to the development

by the very existcncc

This

the

into

book. is the aay in which

and economists.

behaviour.

behaviour in

Whatever about

2%

to Earl’s

with it.) In The ecommic corporate

various

Earl carries

lapses

mainstream

connection

is inimical

book.

from

in economics

psychologists

recent

his earlier

himself

by Shackle. it

unfortunate

as with

models

scepticism

and. on the whole.

some

the dubious

extreme

similar

aside

distances

use of psychological

Neil

programme

the main worry,

schoolese.

from

and evolution.

is an ambitious

persuasively. Earl

and the view taken of the benefits

his have to

up by drawing

E,nA

329

W,‘,t%

explicitly on economics-of-information models. as in his occasional tendency to slip into talk of corporate personalities. quite at odds with his vigorously individualistic model of social action. It is noticeable that many of Earl’s corporate horror stories involve cases where one individual has allegedly imposed an inflexible vision on the organization, rather than with failures in the structure of communication when messages become unprecedented or contradictory. On both counts, an informational perspective might be helpful in showing a potential commonality of models between economists and psychologists. Earl is aware of this perspective on psychological models but seems neglectful of the extent to which economists interested in social organization have employed and developed it. There is no denying that many economists construct models with firms maximizing well-defined functions, often with situationally determined responses. It is important. though. to distinguish the high brow reason for doing this. that it explicates the remarkably stringent conditions necessary for the price system to be. in any sense. an efficient allocator of resources, from the low-brow reason, as sold to undergraduates, that it is supposed to be a first approximation to how the economy works - or could be made to work. The latter justify Earl’s charges of misrcpresctitation. but the worst that can be said of the former is that they arc irrelevant: howcvcr. such a view can equally well he a route into the sort of issues of concern to Earl witness Arrow. Thcsc criticisms arc meant to bc constructive. Earl reasonably hopes that his hook will bc read by managers. as well as those with a more academic intorest in thcsc matters. The latter should find it a stimulating, occasionally infuriating, read. Adrian Winnctt Utliwr.viIy of llrilll .Si~lwol(J/Iliu~urnilic3b

Bath,

Socird Sciencw Clmertwi hJ\lVl BA.? 711Y. UK