Monday, February 6, 2012

Organizational Innovation influenced by Societal Context

In the last blog, we looked at a short case where a new concept - Spaghetti Organization was discussed. In today's blog we look at the societal institutions influence the organization form and its innovative ability.

We have discussed 2 forms of organization in pretty detail with respect to the organization's innovative ability - The J Form and the Adhocracy. We also mentioned that organizations were said to be of J form given the structure followed in Japan. However we would require to broaden the horizon from Japan and ask if there is a larger social context that drives such organization structure. While understanding Adhocracy too we used the example of Silicon Valley to talk about labor market which is a component of society!

Research has indicated that there is a relation between the type of "capitalism" and the innovation stype persued. If we could classify the capitalistic economies into 
  1. Coordinated Market Economies (CME) and
  2. Liberal Market Economies (LME)

we begin seeing some patterns. CME and LME differ from one another in labor market organization, training systems, soceital norsm, values governing business and economic relationships.

CME is followed in countries like Japan, Germany etc. These have deleveoped institution that encourage long-term employment and business relationships, facilitating the delevopment of distinctive organizational comepetencies conducince to continuous but incremental innovation. LMEs on the other hand, are follwed in contries like the US and the UK, where a certain type of adhocracy is followed to be able to rapidly and radically innovate. It is not just the labor markets that aid these types of organization structures - the financial markets, education systems etc too play a major role. 

What one needs to remember is that the relation between instutions, organization and innovation are more complex than the simpified difference between the J-Form and Adhocracy. they are more dependent on the social context and the institutional framework that is developed. Infact the societal institutions play the dual role of creating constraints and also possibilities for the firm to evaluate the type of oganization they could evlove into

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