Transcript Doing Business in Europe: Risks Rights and Regulations

Doing Business in Europe:
Risk, Regulation and Quality
Dr Charles Dannreuther
POLIS, University of Leeds
[email protected]
Overview
• Part one – the modern firm and national
capitalisms
• Part two – the post modern firm and global
capitalism
• Competitiveness and quality based
competition
• Conclusions
The business of uncertainty
• “A firm is likely therefore to emerge in those
cases where a very short term contract would be
unsatisfactory. … It seems improbable that a
firm would emerge without the existence of
uncertainty.” (Coase, 1937, p. 337–338)
• Transaction Cost Economics TCE
– Hierarchy when high market-based transaction costs
due to:
– bounded rationality, opportunism and asset specicity
critiques
• Bounded rationality
– Optimising does not mean “uncertain”
• “Ergodic” critique of Dunn 2000
– Assumes “that the future is the statistical
reflection of the past” – history? agency?
• Economic action is socially embedded
– Varieties of capitalism exist
• Radical change not included
– What happens when things go really wrong?
Risk versus uncertainty
• Frank Knight Risk, Uncertainty and Profit
– Risk versus Uncertainty
• Homogenous groupings = risk
• Heterogeneity = uncertainty
– Organise specialists into hierarchies
– Compute with modern statistical techniques
• Boundaries, hierarchies and knowledge
There are crises and there are
CRISES
• Regulation Theory
– Why does capitalism prevail?
• Stable periods of accumulation
– Supported by social institutions of state, schools,
welfare etc (modes of social regulation)
– Help to manage crises by guaranteeing certain
assumptions (eg health, wealth, property, security)
– High growth period of post war Fordism
• Periods of structural crisis
– When core assumptions fail eg 1930s, 1970s, today?
Risk and the large firm
• Risk?
– Cyclical crises can be managed when groupings are
homogenous
– Predictable institutions evolve:
• Market risk – EEC guarantees property rights for large
companies, consumption is price not quality related
• Labour risk – get social benefits from national compromises
• Political risk – have authority from mass parties, bipolar
international system and corporatist representations
– National varieties of capitalism
• States provide core rights of property, political representation
and social welfare
Uncertainty and the large firm
• Uncertainty?
– When groupings become heterogeneous
• Boundaries:
– National, social, and market boundaries dissolve with social
change
• Hierarchies:
– Single European Market harmonises standards to reduce non
tariff barriers,
– Regional economies and clusters out compete large economies
– ICT implodes corporate hierarchies
• Knowledge
– Authority of technocrats challenged
– Environment (Beck’s “boomerang effect”), BSE etc
C20th vs C21st Risk
C20th Century
C21st Century
Company
responses
Boundaries
Fixed and solid Shifting and Porous
(regional over national,
(national
culture over class,
markets)
gender and workforce)
Competitiveness in
global markets and
value chains for
quality based
competition
Hierarchies
Vertical and
authoritative
(nation states
and rule of law)
Flat and discursive
(subsidies and
regulations replaced by
benchmarks and good
practice)
Outsourcing,
innovation and
shareholder value
Knowledge
Scientific and
elite (eg
universities
and statistics)
Scientific plus popular
(popular debates and
experience challenge
academics)
Market prevails,
constant innovation
to react to change
Risk archipelagos
Risk under globalisation
• Competitiveness and quality based
competition
– Quality = brand and ISO
• Flexible Labour Markets and skills
agendas
– Quality = Employability
• Financialisation and credit ratings
– Quality = Share holder value
Why Quality Standards Matter
• “Now, there is a prime consideration in the craft- gild stage that
enhances the power of the merchant to shift his costs to the
consumer. This is the fact that his market is a personal one and the
consumer gives his order before the goods are made. On the other
hand, the bargaining power of the merchant is menaced by the
incapacity of customers accurately to judge of the quality of goods
as against their capacity clearly to distinguish prices. Therefore, it is
enough for the purposes of a protective organization in the customorder stage of the industry to direct attention solely to the quality of
the product rather than the price or the wage, and to seek only to
exclude bad ware and the makers of bad ware.”[1]
•
[1] See 44, John R. Commons 1909 “American Shoemakers, 16481895: A Sketch of Industrial Evolution” The Quarterly Journal of
Economics, 24, 1, pp. 39-84.
Case Study Emilia Romagna
• Italian high growth in 1980s
– From small industrial districts in Northern Italy
• “Flexible specialistion” key
– Specialist SMEs cooperating in loose chains to
produce high quality high value products
• Strong Municipal infrastructure
– Strong cooperative tradition
• Specialised in high quality
– To supply Turin industry and international niches
Competitiveness and Quality
competition
• What is competitiveness?
– competitive advantage through the processes used to
add value
• (not comparative advantage in factors of production)
– Domestic conditions (consumers, suppliers)
contribute to international competitiveness
– Practical and observable solutions, rather than free
market or mercantilist ideals
– Innovation at the core (often driven by necessity)
Porter’s Diamond
• Factor Conditions
– Specialists help industries lead
• Demand Conditions
– Where domestic markets reveal buyer needs
• Related and Supporting Industries
– Internationally competitive home based suppliers
• Firm Strategy, Structure and Rivalry
– Domestic competition spurs innovation and
improvements
The Competitiveness debate
• Innovation at the core
– National Innovation Systems
– Globalisation and diversity
• Beyond “left” and “right”
– Competitive corporatism (eg Ireland)
• The New Economy and competitiveness
– Hi tech SMEs and high value
• Value chain analysis
– And share holder value
Company Responses to
Competitiveness
• Global Value Chains and “Off shoring”
• http://www.globalvaluechains.org/
– Markets (traditional exchange)
– Modular value chains (stages)
– Relational value chains (industrial districts)
– Captive value chains (Toyotaism)
– Hierarchy (corporation)
• Coordination and benchmarks
– The knowledge economy?
Global Brands
• SMART cars and risk sharing
– Productivity and marketing
• Global brands – the “promise”
– Quality signal, global myth, and social responsibility
• Different consumers
– Global citizens, global dreamers, anti-globalists,
agnostics
– Local responses to global brands
• Service sector growth
– SME economy prevails (eg Service Directive)
Policy Responses to
Competitiveness
• Supranational
– EU response to globalisation is the Lisbon Agenda “to
establish a competitive, sustainable and inclusive
union”
• National
– Competitiveness councils and regulatory reform
– capabilities developed in National Reform
Programmes
• Regional
– Local institutional strengthening and innovation
clusters and SMEs
Competitiveness’ social agenda
• Inclusion
– to access variation in economy for innovation
• Economic rights
– that guarantee access to economy rather than
payouts
• Capabilities
– that provide the mechanisms linking inclusion
and competitiveness eg skills and VET
Key EU SME policies
• SME Charter
– Central element to EU Lisbon Agenda
– Coordinates and publishes good practices for
exchange
– “The SME Policy Index 2007 Process”
• Enterprise Action Plan
– Based on large scale consultation through Green
Paper
– Specifies key goals and policies to achieve them
• Enabling businesses
– Think Small First of 2008 Small Business Act
SME Charter 20001 Education and training for entrepreneurship
– at all levels of school, further and higher education
2 Cheaper and faster start-up
– simplifying the procedures to create a new firm
3 Better legislation and regulation
– assessing regulation for its impact on small firms, and where
possible simplifying or removing altogether obligations on SMEs
4 Availability of skills
– ensuring training institutions orientate courses to train people in
the skills needed by small enterprises
5 Improving on-line access
– reducing costs and making small firms’ dealings with government
more efficient
SME Charter 20006 More out of the Single Market
– continuing progress to remove barriers to trade and ensure fair competition
in the internal market
7 Taxation and financial matters
– encouraging investment in small firms through ensuring tax and regulatory
systems are favourable, and in particular that they reward success
8 Strengthen the technological capacity of small enterprises,
– ensuring that they are able to access and make use of any technology
which could benefit their business
9 Successful e-business models and top-class small business support
– encouraging and enabling small enterprises to make the most of new
opportunities in this areas
10 Develop stronger, more effective representation of small enterprises’
interests at Union and national level,
– ensuring that policy-makers are fully aware of the specific interests of
small firms
Searchable Best practice database on SME Charter:
http://ec.europa.eu/enterprise/enterprise_policy/charter/gp/index.cfm?fuseaction=practice.list
Enterprise Action Program
• Fuelling entrepreneurial mindsets
• Promote entrepreneurship and Education
• Encouraging more people to become
entrepreneurs
• Balance risk/reward address negatives of failure
and social security, promote business transfers
and new social enterprises
• Gearing entrepreneurs for growth and
competitiveness
• Esp women and BMEs, internatioanlisation,
access KBE and networks
Enterprise Action Program
• Improving the flow of finance
– Financial instruments, improve risk
assessments, promote risk capital, business
angels and venture capital
• Creating a more SME-friendly regulatory
and administrative framework
– Good governance, RIAs, internal market and
standardisation of rules, state aids etc
Enterprise AP evaluation
• Scored well against clearly defined goals
• Check list mainly completed
• Why so successful?
– Brought a series of initiatives together into a coherent and
integrated whole
– Success through dialogue and voluntary commitments with
Commission as a promoter and facilitator for ideas, acting as a
catalyst for others
– Practical measures illustrate how different actors working
together to their mutual benefit on policy initiatives can deliver
the goods.
– Many techniques used to raise awareness including brochures,
Commission communications on specific issues, and
conferences and Euro Info Centres
– Manageable goals
Risk under Globalisation
• Boundaries are loose
– ICT undermines geography
– Added value selects from traditional distinctions
• Knowledge is contested
– “Archipelagos of risk” including social agendas
– Evaluation and transparency are key
• Hierarchies are consensual
– Open and coordinating
– Problem solving over regulating
Conclusions
• Business environments change radically
• Quality and competitiveness as responses
to globalisation
• Enabling of enterprise is central goal
• Evaluation and benchmarks are key
• Limits to the model?