The Key Institutional and Organizational Characteristics of National Business Systems - Essay Example

IMPACT OF INDUSTRIALIZATION ON THE NATIONAL BUSINESS SYSTEMS AND THE NATIONAL COMPETITIVENESS INTRODUCTION: The following paper analyzes the concept of industrialization and the procedure of its evolvement and the countries who were the beneficiaries of the process. Also the paper discusses the impact of early and late industrialization on the institutional and organizational structures of the national business systems and finds out the relevance of the two industrializations as far as the long term national competitiveness is concerned. To understand the questions completely, each of the fundamental terminologies which are to have an impact on the final question needs to be addressed and needs to be linked to the main question in pursuit. INDUSTRIALIZATION: The early phase of industrialization was from 1750 to the 1800s.Although, it can be debated over the exact timings of the industrialization in the different parts of the world, but it was the above mentioned period during which industrialization emerged in its totality. Europe in general and Britain in particular was the main element in crafting the early period of industrialization (Henderson, 1954). Until then, work was majorly done using manual labor and the amount of production, as a result, was squat. But it was end of the 18th century which actually saw the revolution in production processes and changed the dynamics of production and industry concepts. Enhanced use of machine-driven principles, including steam power, to develop in Great Britain produced an identifiable change in economic structure and growth (Spielvogel, 2011). The period saw the emergence of factory system where workers were grouped together and capital structures changed from the earlier used methods to cost effective technology driven methods. Cotton and iron were the key dynamics in this course (Thomas, 1964). Cotton was earlier processed through manual labor which tool time and effort but did not produce in mass volume. The production capacity was low and thus, the efficiency was significantly less. But now machines were developed which were, at first, powered by water and later on, with thw advancement in the system, by steam, and which now increased the production immensely. The number of people employed naturally increased. Moreover, the new process caused the cost of the final products to sharply decrease making them competitive. It was vital for Britain to acquire the new technology. It helped Britain to cement its dominance on the worlds economical and the resulting political sphere (Henderson, 1954). It took little time for industrialization to travel from Britain to the rest of the western world. It can be said that industrialization did not take more than fifty years to travel from Britain to the rest of the western world including America. But it has taken time to encompass the eastern boundaries. This statement is essential to understand because it has been one of the fundamental differences between the eastern and the western world.The eastern world could not be the recipient of the process of industrialization because its majority was under the colony system of one or more of the European countries. United States of America became a grateful receiver of the new dynamics in the production processes. The concept of corporations emerged whereby the people were given the new concept of working in huge setups and in a pronounced number of people.Because of the complexity of the new organization setup, several theories and ways of efficiently working in corporations were also developed. The early phase saw the owners of the corporations to receive the greatest benefit out of the sales and the workers in these firms to suffer the low wage rates and pitiable working conditions (Wilensky, 1965). It was natural for this phenomenon to take toll. This is because it was the part of the evolution through which the countries had to go in order to accept the new paradigm of industrialization. Also it is essential to understand that this was the time that capitalism as a new system was getting prominence. Darwin’s theory of ‘the survival of the fittest’ was incorporated in the new factory and corporation system and thus the actions of the firm owners can be explained. The other paradigm which got affected because of industrialization was transport. It was a multi folded breakthrough. The new and improved ways of transport made possible milestones in various realms of the geopolitical and economical arenas. This sharp decrease in the travel time caused different options to open up which were previously untouched. This included the economic arenas as well as the political arenas. The improved transportation was helpful in the warfare as well which enabled the dominance of the western world to get cemented. For further considerations, it is imperative that the concept of National Business Systems be discussed in detail so that the final linkage between the major concepts is made in more comprehension. NATIONAL BUSINESS SYSTEMS: The national business systems are a term coined for the different models of capitalism working in different regions. The capitalism is amalgamated with the different task environments to produce a fit of the national business system of a particular nation. It is imperative to understand that there are different models of capitalism currently in place (Hampden et al, 1993). There are models which talk about complete autonomy of the private sector including macro topics such as health, education and even defense. While there are other models which do not advocate for complete autonomy and support government’s intervention in few important aspects. The varying degree in the different models of capitalism is because of the different task environment present in the different parts of the world. The essentiality which needs to be cleared is that Task environment is not a term which is specific to only the factors that influence the direct business of the organization. Task environment refers to the internal environment or the internal factors which influence the decisions made by private producers on the extreme micro level and the government at the extreme macro level. The elements of the task environment can include the basic environment of a particular organization. This environment is shaped by factors like culture, outlook and the general attitude of the people working in that organization (Hofstede, 1980). This task environment can also be referred to the models of economic governance which can then affect the model of capitalism present in a country. NATIONAL COMPETITIVENESS: Another term which needs explanation before any further advancement can be made in the topic is ‘National Competitiveness’. The term National Competitiveness refers to the level of competition between countries which forces each country to develop its own core competencies and specialize in those specific areas. This competition between countries in terms of products causes the term “comparative advantage” to take the central stage (Lodge et al, 1987). Comparative advantage means that a country specializes in that product or products in which it has an advantage over its competitors comparatively (Boisot, 1998). This advantage could be in terms of opportunity cost, that is, the opportunity cost for a country of producing a particular good should be less than its competitors. Thus, national competitiveness would be achieved if the country specializes in the product in which it has comparative advantage (King et al, 2011). IMPACT OF INDUSTRIALIZATION ON ORGANIZATIONAL STRUCTURES: As it is already mentioned, industrialization, whenever and wherever it took place, caused the basic structure and the basic workings of the organization to change. Organizations previously followed the rule of thumb, whereby, anyone could be given any job to work on regardless of his/her capabilities and interests (Herbst, 1997). But after the industrialization, different psychologists developed different theories to reorganize the basic structure of the organization. For example, Taylor coined the theory of scientific management which stated that humans are like machines and should be divided into different scientific units and each unit should specialize in one aspect of production (Taylor, 1911). This theory encouraged the concept of division of labor which vastly increased the amount of production. Taylor was not alone in thinking about the organizational environment and structure. There were other psychologists also who pondered over the structure and derived theories to boost production and diminish costs. Another theory coined by theorists like Carl Roger and Abraham Maslow campaigned for the human aspect in this process (Walsh, 1970). They were of the view that humans are not machines and should be considered as different to machines. This difference should also be evident from the behavior of the top management. This theory was put forward because of the actions of the big owners of the corporations towards their workers as mentioned earlier. The theory further stated that motivation should be adopted as a key tool for taking the best from the workers. This motivation included practices like employee feedback and rewarding and appreciating employees for their work which was until now not present. Other theories like administrative theory proposed that the organization should be looked up as a whole and should be held supreme. Thus the goals of the organization should be held higher than individual goals. Thus, bureaucratic system of organization was propelled (Sapru, 2006), which stated that there should predefined rules and obligations which should be a directive for each employee to work efficiently towards a particular goal. Max Weber was the pioneer of this theory. Thus, we now understand the impact which industrialization and the resulting concept of mass production and factory system had on organizational structures. Conclusively, the organizations went from the informal structure of ‘the rule of thumb’ which means that the people were given the jobs as their availability rather than the person’s skills, to the different models explained above. IMAPCT OF INDUSTRIALIZATION ON NATIONAL COMPETITIVENESS: Now that the major terminologies have been explained, it is safe to consider the impact of industrialization on the national competitiveness itself. As it is mentioned earlier, national competitiveness comes from the decision of the country to specialize in the product it has a comparative advantage over its competitors (Hart, 1992). Now industrialization changed the very paradigms of specialization itself. Now, the competitiveness was measured through the different industries a country had. Thus, the comparative advantage changed from the factor endowment principle, to the opportunity cost principle and naturally, the countries that had huge industries had the comparative advantage in that industry even if they were not naturally blessed with the abundance of the particular product in their land. An example could be of the Great Britain. Britain had, by no means, any advantage in the production of cotton. But what industrialization did was that it gave Britain the cost advantage over its competitors. Britain’s production was cost effective as it enjoyed economies of scale. Thus, Britain’s national competitiveness emerged in cotton. It is important to understand that both early and late industrializations had the same impact on the regions they emerged in. Both industrializations changed the structures of the organizations according to the national business system prevailing in the country. For example, Germany did not regard human perspective in organization structure and so it followed the administrative or the scientific method (Armbrüster, 2005). Thus it was dependent on the country’s internal environment, which is also referred to task environment, to decide the form of structure it adopted. CONCLUSION: Industrialization first emerged in the European continent and in particular, Britain. With industrialization evolved the system of organization known today as corporations which instigated the idea of mass production. The different concepts of organizational structures are because of the different cultures present in the different countries. Every country has been affected by the course of industrialization, but the effect on each country has depended on its national business system which is influenced by the task environment, its traditions, attitudes and organization culture. Moreover, the long term national competitiveness now depended upon the level of industrialization that the country was able to achieve. This is because of the comparative advantage that the country was able to acquire as a result. Bibliography: 1. Ashton, Thomas. 1964.The Industrial Revolution: 1760-1830. 2. Henderson, William, Otto. 1954.Britain and Industrial Europe, 1750—1870: Studies in British Influence on the Industrial Revolution in Western Europe. 3. Boisot, Max. 1998.Knowledge assets: securing competitive advantage in the information economy. Oxford: Oxford University Press 4. Hampden-Turner, Charles, Fons Trompenaars. 1993. The seven cultures of capitalism. London: Piatkus. 5. Hart, Jeffrey. 1992. 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