In economic geographic analysis the ‘firm’ has an ontological and epistemological privilege (Grabher, 2004). Since 1980s onwards the notion of firm as a ‘black box’ a coherent and unitary factor was challenged. There is an increase in investigation of the relation between firms. The concept of firm as a coherent and unitary economic actor was diminished by the concept of ‘projects’ (Grabher, 2002). This essay aims to discuss the centrality of ‘the firm’ in economic geography, and examine the concept of project that undercut the integrity of firm as a coherent and unitary actor by using the evidence from the recorded music industry.
The firm in neoclassic economics is defined as “the theoretical in which production take place”. This does not take the activities of the real firms or corporate organization into accounts (Williamson 1999: 1089). While market is viewed as the most efficient ways of organizing economic activities, much of neoclassical economic geography simply perceive the firm as “black box” (Hodgson, 1989) which means that it converts inputs into outputs according to the demand and supply in the market. In the perfect markets, all firms in the industry have an equal opportunity to access to perfect information without the need of human or social interaction (Hirchman, 1982). The firm is considered as ‘self-contained and homogenous’ (Yeung, 2005).
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Grabher also suggests that in economic geography the ‘firm’ have been unproblematised as coherent and unitary actor. This was evidence in “geography of enterprise” approach in which primary concerned with a dominant firm, rather than industry or a regions of firm (Yeung, 2000 ). Much economic geographic analysis was focused only with the role of motivation, location, and individual firm’s behaviour (Krumme, 1969). This was called as “pseudo-concrete analysis” (Sayer, 1982) because it does not take the complex organizational processes inside the representative firm into accounts. Therefore it reduces organisational structures of firm into simple dichotomies such as single-plant or multi-plant enterprises. However, single-plant firms are difference from multi-plant firms and separate plants within multi-plants firms are much more similar (Yeung, 2000). Hence, the notion of firm as a coherent unitary economic actor usually leads to misrepresentation of spatial organization of production.
However, the concept of firm as a ‘black box’ a coherent unitary economic actor was challenged by the practice of project-based organizing. Project is defined as system of productions that constituted by different agents such as economic, social and cultural agents with specialize, difference and complementary skills. They aim to accomplish usually a complicate task in which the task requires cooperation of multidisciplinary skills that it more economically efficient to bring together on a temporary basis (Lorenzen and Frederiksen, 2005 ). In order to coordinate the division of labor, it focuses on the ‘relational proximity’ instead of ‘spatial proximity’ and represents particular forms of temporal and spatial actor-networks (Boggs and Rantisi, 2003).
Project organizing diminishes the integrity of firm as a coherent and unitary actor because boundaries of project organization operate and cooperate across different firms (Gann and Salter, 2000). In many project-based businesses, project teams work closely with a variety of difference firms rather than their home base manager (Grabher, 2002). In addition, instead of assuming the firm as a single and coherent actor, projects focus on the role of individuals with in firms, specifically how individuals’ interest coincides with or differs from material interests of the firms (Boggs and Rantisi, 2003 ).
Grabher (2001) also illustrates a number of paradoxes that challenge the key assumptions of organizing. Projects often have high complexity, high risk and high stake outcome; however, they could be unorganized and lack formal structure that could coordinate the complexities. Since projects depend on collective knowledge and diverse skills; nevertheless there is little time for individuals to clarify members’ abilities and skills. Furthermore, there is not enough time to develop trust and confidence among the members.
However, Grabher (2001) argues that these paradoxes can be partly resolved by including the social context into projects. Networks, localities and institutions supply legitimation and trust that are preconditions for the ‘projectification’ of economic organisation. He further explains that reputation is essential for success in projects. Reputation in project organization is not about certificate; it is about how well we work with other people. In addition, the success of project also depends on inter-personal skills and co-operate attitude.
Furthermore, location plays a crucial role in the success of the project. Grabher (2001) explains that project collaboration often takes place in densely knit clusters. The co-location of project partners reduces transaction costs and increase face-to-face interaction. This also provides a local ‘communities of practice’ that serve as informal educational system for sharing knowledge. Moreover, rather than formal firm contractual networks, it is personal networks that provide the basic social infrastructure for learning.
In addition, he argues that since projects are embedded in an institutional context of normative structures that manage complex tasks, it allows the emergence of ‘swift trust’. Swift trust is where actors are viewed from their role instead of their individual personality. For example, engineers are trusted because they are engineers and they believe that engineers are trained to apply their principles. As a result, expectations are more standardised and stable because it is defined in term of tasks than personalities (Grabher, 2001). Nevertheless, since project becomes more popular, it has the impact on the employment. There will be more self-employ job and freelance labor in the future. There are some disadvantages such as short contact, job insecurity and uncertainty.
Grabher (2002) argues that project does not entirely replace the firm, but there are interdependencies between projects and firms as well as the personal relations, localities and corporate networks from which these projects mobilize essential sources; this is called project ecology. He uses example of the project ecology of record music industry. The recorded music industry is characterized by high innovation and task complexity that requires cooperation from difference skills. Recorded music industry illustrates that projects are more likely organized on the market instead of inside the boundaries of firm. However, the localized cluster in the advertising village shares the same basic principles of social organization with the global communication group. In addition, both ‘the village’ and ‘the group’ represents high level of diversity of organizational forms which is crucial in working. In addition the periods of ‘idleness’ in project work might be considered economic inefficient; however period of idleness is a part of the process that give a chance to rest and reflect.
Furthermore, the evidence from recorded music industry shows that geographical clustering has a significant role in market organized-project (Lorenzen and Frederiksen, 2005). Recorded music ecologies are often clustered in the world’s major cities (Scott, 1999). This because clustering allows people to interact with each; it creates social trust and allows information to be shared and available to all local firms (Grabher, 2005).
To conclude, the notion of the firm as a ‘black box’ was challenge by organizational practices which are built instead around ‘projects’’. Project organizing undercuts the integrity of firm as a coherent and unitary actor because boundaries of project organization operate and cooperate across different firms. There are some paradoxes of project such as there are a lack the normative structures, there is no time to clarify member’s ability and develop confidence building. However these paradoxes could be overcome by including the social context into projects. The evidence from record music industry also illustrates that the projects are not completely replace the firm, but there are the interdependencies between projects and firms as well as the personal relations, localities and corporate networks.
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The Project Ecology of Advertising. (2019, Mar 22). Retrieved from https://phdessay.com/in-economic-geographic-analysis-the-firm-usually-is-assumed-at-least-implicitly-as-a-coherent-and-unitary-economic-actor/