MDA Patterns of Industrial Organisation Paolo Gurisatti Kingston, 1 June 2009

MDA Vertical Integration The sequence of stages belonging to the same technical process may be vertically integrated either into a “private territory” (company) or into a “public/open territory” (industrial district or open source global network) The integration choice is conditioned by “social agreements”, transactional costs (O.Williamson) and knowledge distribution

MDA Integrated “Factory” The first choice is oriented to a social agreement of asymmetric dependence: –Common property of industry assets and intellectual property (knowledge) reserved for company members “only” –Subordinate contracts and agreements –Organisation based on hierarchy and “distrust” –Centralisation of power, capital and surplus

MDA Network Enterprise The second choice is oriented to a social agreement of asymmetric cooperation: –Divided property of industry assets, but common property of artifacts, knowledge and brand –Exclusive sub-contracting (franchising) –Organisation based on “negotiation and contract” –Centralisation of power and knowledge (IP), asymmetric distribution of capital and surplus

MDA Industrial District or Cluster The third choice is oriented to a social agreement of generative relationship: –Divided property of industry assets, knowledge and artifacts, but shared local identity (trust) –Supply chain co-management and co-design –Organisation based on “trust” and common “narrative structures” –Decentralisation of power, capital and surplus

MDA Patterns of industry organisation in footwear

MDA District’s (Cluster) Peculiarities In the district’s (cluster) pattern: –Artifact attributions and technology framework are shared by the stakeholders and knowledge is produced like as in an “open source” network –Head/Leading companies “do not” control all the available knowledge and “do not” plan providers’ supply (just design functional features of single components and services to be developed) –The value chain is composed by “accredited agents”

MDA Advantages of District (Cluster) District pattern exploits four advantages: –Flexibility: lower restructuring costs in front of unpredictable markets –Risk sharing: lower capital creation costs and benchmarking on investment processes –Profit sharing: surplus distribution and quick respons to incremental innovation needs –Knowledge sharing: knowledge production is not concentrated at the “top” of the value chain

MDA Generative Relationships District pattern reduces information and power asymmetries (transactional costs): –Independent social actors (neither friends, nor strangers... providers/partners co-designing work teams…) –Competition and cooperation (community participation to strategic issues of the territory, but transparent selection of competing solutions…)

MDA Working Conditions District pattern has to develop an efficient “market system”: –Commun history of local agents and knowledge, shared genealogy of independent units (spin offs and competence networks) –Commun institutions and rules promoting constitutional processes (rise of local specific intermediate structures – scaffolds – suited for supporting industrial evolution )

MDA Market Systems “By a market system we mean a set of agents that engage with one another in recurring patterns of interaction. These interactions are organised around an evolving family of artifacts.” (David Lane and Robert Maxfield, mimeo 2006) Innovation, production of new knowledge and design of new artifacts (functional systems)