Howkins (2010) argues that creative ecologies required diversity, change, learning and adaption in order to flourish in a particular place. Grabher’s (2001) use of the heterarchy features in the ecological perspective and includes Howkins (2010) creative ecology factors. There are five features to the heterarchy: diversity, rivalry, tags, projects, and reflexivity. Each will be discussed in turn.
Diversity refers to a mix of organizational types and ownerships. Within a particular place, there should be tolerance for a broad scope of businesses providing many production inputs, varying business models, philosophies and organizational
47 practices (Grabher, 2001:353). Spin off firms are those firms that identify a gap in the market that can be filled by moving away from an established company and selling the service back to the company and others. This activity thus enlarges the “genetic pool” for the evolution of new organizational and project mutations (Grabher, 2001:363). Increased diversity in the locality, can lead to innovative forms of entrepreneurial activities. It is vital to the evolution and survival or the ecology that there be a diversity of firms and new organisational firms (Cohendet and Simon, 2007; Howkins, 2010; Lewontin, 1982). Within a diverse range of firms and ownerships types, the less efficient or less active firms are in producing value, the more likely the evolution of the ecology will stop. It is advantageous to have a diverse set of economic activities in close proximity. This is given as a strength to a particular location (Hall, 1998; Glaeser et al, 1992; Glasmeier, 2000). Likewise, it is argued that too much diversity within an ecology can have adverse effects, again halting the evolution and rivalry within the ecology (Grabher and Stark, 1996). Sabel (2001) argued that the greater the diversity, the more likely it is that firms can reach out to form partnerships that are more effective and broad reaching. Diversity can bring with it benefits and constraints. It is applicable to this research as both industries under investigation have a number of firms operating within them. By implication, of the diversity element of the heterarchy we can begin to unravel if the diversity we observe is a beneficial or constraining one.
Organisations are not fixed in static co-existence and are therefore implicitly or explicitly driven by rivalry. The rivalry between firms recreates different ways to organize, interpret and evaluate the same or similar business activities (Grabher, 2001; 2004). Rivalry comes from domestic and foreign firms requiring organizations to reposition themselves in the market over time. This repositioning can be proactive or reactive and can vary in terms of speed linked to responsiveness to market dynamics. Rivalry drives the organisation to think of new ways of conducting business activity and plays a direct role in catalysing innovation and improvements in products and service (Porter, 1990) as well as in business models (Zott et al, 2011). Firms can perform competitor analysis in order to understand and predict the rivalry that exists in the market place (Caves, 1984; Porter, 1990; Scherer and
48 Ross, 1990). Rivalry can be viewed at the industry level through existing frameworks such as Porter’s (1990) five forces. The framework lacks an in-depth appreciation of the individual firms that compose an industry, as well as large multinational enterprises (MNE) that coordinate activity across several places (Dunning, 1993, 1998). The five forces framework implicitly assumes that firms have the same internal structures. The empirical work underpinning this framework focuses on either one large market leading firm or firms that are highly successful. This prevents any comparison between industries with different levels of performance (Davies and Ellis, 2000:25). Porter’s diamond underestimates the significance of the globalisation processes, neglecting the cross-border linkages in production and markets for the competitive advantage of nations (Dunning, 1993). Additionally, there have been several critiques of the frameworks methodology and conceptual underpinnings, concluding that both have fundamental flaws (Davidson, 1991; Clark, 1991; Davies and Ellis, 2000). The relational and heterarchical approaches are complimentary by allowing rivalry in production to be explored at either the firm level basis or at an industry level, and providing theoretical insight into the examination of agglomerations of particular industries or firms. Looking closely at some of the relations within firms and between them, business models provide a lens and justification as to why some firms use particular connections. All firms employ a business model implicitly and explicitly (Teece, 2010). In terms of rivalry, supporting the relational and ecological approach, understanding a firm’s business model can as Zott and Amit (2010) argue uncover;
“The architecture of the firm’s activity system – shaped by the choice of activities, how they are linked, and who performs them – captures how the focal firm is embedded in its ‘ecology’ i.e., in its multiple network of suppliers, partners and customers, as well as defining who are the firm’s potential suppliers, partners and customers (and competitors) in the first place” (p.218)
The heterarchy is well placed to elaborate on the wider ecology of firms in a particular geographical location. This can yield a consensus on how firms within a
49 locational ecology are operating with or without each other. Overall, the business model is used in strategy in order to explain a new network and activity system- based value creation mechanism and sources of competitive advantage (Christensen, 2001; Zott et al, 2011).
Tags are the prescribed rules and limits to the heterarchy. Scott (2006a) and Pratt (2006) argue a favourable image creates entry barriers for products from competing places. Molotch (1996) argues there are reputational benefits from being in a place that is linked to your image. This image can be constructed by the people in the locality or by reputation through particular actors’ interests and actions. Shared self-understanding is linked to social capital directly, as social capital networks are usually built on shared experiences and a sense of shared outcomes. The tag a place carries is aesthetic, as in the case of the advertising industry in London. London is known as a centre for creative buzz, a place of creative stimulation in which the advertising industry is located and benefits greatly from (Grabher, 2001, Bathelt et al, 2004). This aspect of the heterarchy is closely related to the preceding theory on the anatomy of the city. It is also the physical infrastructures of the city that can sometimes give a place its tag or reputation (Grandadam et al, 2013). However, these are not always a positive and can cause significant harm to a place hosting an ecology of firms. For example poor road infrastructures or airport facilities can have an impact on the perception outside firms have on the city and thus the local firm. Labels used to describe the economic condition of a city, such as deprived, disadvantages, unhealthy can also have unwanted stigma attached (Know and Pinch, 2006). It is also the activities of firms or individual firms who, on a particular product, may generate interest from other firms to locate in their ecology.
Projects have become synonymous with the modern economy and are increasingly deployed as an important for of work organisation (Newell et al, 2008). This has been the case more so where innovation and creativity is key to industrial success. Broadly, projects have key defining characteristics. They are like a form of temporary organisation (Grabher, 2002; Grabher and Ibert, 2007; Newall et al,
50 2008) defined by the features shown in Table 2 (Lundin and Soderholm, 1995). Further, Lundin and Soderholm (1995) argue that ‘action’ is the fundamental concept needed when understanding temporary organisation. They outline four key interrelated demarcations of the temporary organisation from the permanent. These are time, task, team and transition. These are discussed in Table 2.
Hence, projects are viewed as being ‘initiated to accomplish pre-specified goals and objectives, within a defined period of time, and in a relatively autonomous way, unencumbered by established organisational routines and practices’ (Newall et al, 2008:33). Grabher and Ibert (2007:176) argue further that projects should not be seen as isolated from their history, stripped off their contemporary social and spatial context, and independent of the future. Instead we should be seeing them continually interacting with their wider contexts, hence making them a relational space with elements of contextuality, path dependence and contingency interlinked into their conceptualisation. Projects in this contextualised view connect the personal, organisational, and institutional resources utilised in performing a projects. Graber and Ibert, (2007:176) state ‘the relational space encompasses social layers on multiple scales from the micro level of interpersonal networks to the meso level of intra- and inter-organisational collaboration to the macro level of wider institutional settings’. Therefore the project is not bounded to a local cluster or city and can have geographical reach that extends to distant individuals, organisations or institutions.
Table 2 Demarcation of temporary and permanent organisation
51
Time There has to be some
conception of time. A limit or boundary that defines the start and termination of the project.
‘Planned to exist if not forever, then for the foreseeable future’ (Ekstedt et al, 1999:41) and a drive to survive.
Task These can be specific task
that maybe a ‘one off’ and unique (DeFillippi and Arthur, 1998); or
standardised and
repetitive.
Permanent organisations are more naturally defined by goals rather than specific goals (Lundin and Soderholm, 1995:439)
Team Individuals organise
around a task in hand for a particular amount of time. Individuals will commit their ability to the different sequences of the project: creation, development and termination. A holistic working organisation with functional departments.
Transition Temporary organisations
are concerned with
progression and
achievement or
accomplishment. There is the creation of a new setting or arena for action.
Focus on entire
production processes and continual development of the organisation.
(Adapted from: Lundin and Soderholm, 1995)
Earlier conceptions of the temporary organisation or project have been associated with ‘drafts’ or ‘proposals’ in relation to when architects propose a new building or an investment banker presents a project for new investment opportunities
52 (Grabher, 2002:207). Modern understandings of the project evolved from US based project management of defence contracts. Grabher (2002:207) argues that ‘development processes that earlier were conceived as separate activities were now conceptualised as an integrated entity, called a ‘program’, ‘system’ or ‘project’. This literature is based upon engineering principles whereby the projects are manageable systems designed to improve efficiency with defined sequences and involved strict planning and control over resources (Lundin and Soderholm, 1995; Grabher, 2002; Turner and Keegan, 2001; Turner and Muller, 2003). This literature is overly focused on the project, neglecting the ties and networks that are formed and maintained through the project or even those ties and networks brought into the project from individual social networks (Gann and Salter, 2000; Grabher, 2002). Equally, projects are embedded in layers of networks based on reputation, localities whereby projects operate in milieus of recurrent collaboration and institutions where ‘swift’ trust and learning by switching occurs (Grabher, 2001).
Projects provide trading zones for different business models, allowing a firm to choose the best practice or morph their current business model into something different. Projects are temporary social systems (Grabher, 2004a, 2004b, 2004c), however, the time scales can vary considerably from weeks to years, creating trading zones crossing inter and intra firm boundaries (Maskell et al, 2006). These new ways of working, allow the firms to challenge their own way of thinking and how the production processes can be carried out. Business models provide a good ‘genetic code’ for understanding how firms are organising and managing relations in the production process. Baden-Fuller and Morgan (2010) state that the basic and fundamental goal of the business model is to act as a descriptor concentrating on value capture, creation and delivery. They state that not all firms are the same, but equally, they are not all completely different. They argue that there is a generic business model or benchmark within an industry that is then built upon and tailored to a particular firm.
53 “There are generic kinds of behaviour which are distinctly different. And it is these generic kinds of behaviours – that form the set of known business models at any point in time” (Baden-Fuller and Morgan, 2010:159).
Firms therefore reconfigure the generic business models to current conditions facing that firm and the best ways to create, capture and deliver value (Teece, 2010). This reemphasises the focus on the firm that this thesis takes along with other scholars who have seen business models as firm-centric yet boundary spanning activity systems (Applegate, 2000; Morris et al, 2005; Shafer et al, 2005; Stewart and Zhao, 2000; Weill and Vitale, 2001; Zott et al, 2011). Hence the business model can be seen as “a system that is made up of components, linkages between components and dynamics” (Afuah and Tucci, 2001, p4). Therefore the business model defines the value creation and process (activity system) from the inputs of raw materials through to final consumption. Projects are made up of collectives of individuals within one organisation or several specialised firms working towards a common goal set by an individual or lead firm striving to satisfy self-interest (Field, 2008). There are clear links here to social capital and the use of local buzz and global pipelines in order to bring together specific individuals or firms within or beyond a specific place (Bathelt et al, 2004). This concept is highly applicable to the creative sector were the production system can be structured around a project, with firms providing the required inputs to complete the product or service (Ibert, 2004, 2007).
Externalising these elements of the production, that are not as standardised and do not have a large market and require specialised skills and technology, to the market is more productive and efficient. What we have increasingly seen in the disintegration of production systems is networks of flexibly specialised small firms providing inputs to lead firms or organising production through projects. There is criticism levelled at project-based organisation. As Table 2 shows, there is a time limit on projects, meaning that there is less opportunity to build confidence using traditional practices (Lundin and Soderholm, 1995). Additionally, projects lack the institutional safe guards like conventions (Storper, 1997) and normative structures
54 in order to minimise risk and the prospect of failure (Grabher, 2002). However, given the perceived drawbacks, project organisation is no longer confined to a select few industries such as film and television, construction or shipbuilding (Winch, 1986; Faulkner and Anderson, 1987; DeFillippe and Arthur, 1998). We see project based organisation in industries such as life sciences, chemicals and automobile industries (Todling and Kaufmann, 2001; Grabher, 2002; Lampel and Macmillan, 2008). As part of the heterarchy, we can acknowledge the make-up of the ecology in the diversity section and include many different actors. Even though projects can be a way of organising several firms in production, they also allow an internal analysis of one particular firm and their project(s). Therefore a diverse range of firms and institutions can be analysed with this approach.
Due to the environmental uncertainties that exist, the organization has to be able to reassess its own organizational behaviour and be reflexive (Grabher, 2001; Teece, 2010). Reflexivity is like the immune system to the herterarchies. This demonstrates the ability to adapt to the unknown environment and be able to call upon resources. However, Grabher (2001) does not mention failure in stable or unstable environments. Like a human’s immune system, a firm’s attempt to respond can ultimately lead to failure. The result of the failure can rest in the organizations behaviour or strategic decision-making and the resources the firm has available. Likewise if the firm fails to respond to changes over time, through implementing a new business model, they can see a loss in value and subsequent lower yields (Chesbrough, 2010). If these are inadequate at any point in time, the firm will increase its risk of failure thus damaging and cause a reconfiguring of the ecology. As Amin and Cohendet (2000) argue, learning to adapt can be one of the greatest challenges to a firm overcoming knowledge-based or competence-based learning. This depends on the firm’s ability to monitor and negotiate a change in its own governance structure.
The five features of the heterarchy have been outlined above showing the supporting elements towards the relational approach. Both of the theories discussed so far will give this theoretical framework the ability to look at a
55 geographical place and the firm ecology that exists within it. Heterarchies allow the understanding of economic, social and historical contexts. The approach is also more responsive to change and the need to replicate assemblies of a wide number of actors.
‘Rather it is interested in elucidating how these ties are dissolved on one organizational and spatial level just to be reconfigured on another level in order to mobilize basic ingredients for the practice of episodic project collaboration’ (Grabher, 2002:246)
Overall, the main focus of the ecological perspectives is that of adaptability, change and growth. Firms, individuals and economic milieu do not stay static; they change over time and space. Adaptability is forward looking, as it seeks to mitigate adverse economic impacts to the organization and look to the future. It is also a statement of the organization’s ability to cope with unforeseen circumstances and how it manages its many resources. Project ecologies do not just denote an organization of production but the logics and individual identities, values and loyalties within the ecologies (Grabher 2004).
The ecological approach has been widely used to research the creative sector (Grabher, 2001; 2002; 2004; Grabher and Ibert, 2006; Ibert, 2004 and Johns, 2010) and provides a framework in order to understand the increasingly fragmented production processes that are systemic in this industry. There has been limited application beyond this sector. In management literature there have been papers published on managing firms though project ecologies in biotechnology firms (Lampel et al, 2008; Newell et al, 2008) but there has not been a focus on the organization of production using an ecological approach within that particular sector. The existing work makes limited use of the heterarchy and the six features outlined here. Although there are papers that discuss certain elements of the heterarchy such as diversity (Lowe and Gertler, 2009) or rivalry (Chen, 1996), but in isolation, rather than together, as this framework intends to do. The framework will give a standardised set of elements to apply to both the life science and video game
56 industry under investigation in the same geographical context. The following section will move onto the anatomy of cities finalising the theoretical framework.