Common Knowledge,Interorganizational Networks and the Future for the Organization of Production

This paper seeks to investigate the potential for interorganizational networks (IONs) to facilitate a challenge to the current hegemony of integrated production. From a transaction cost perspective the choice between market and hierarchical modes of production depends upon their relative coordination costs. The argument developed here is that uncertainty has precipitated market failure and the consequent rise of large, integrated concerns. IONs, however, by facilitating the cost-effective diffusion of information can reduce the coordination costs associated with the market place and permit the deintegration of production. The greatest benefits are held to be realized where the development of common knowledge between connected trading partners permits the ‘free flow’ of information. Supporting empirical work consists of a comprehensive survey of the uptake of IONs in the Scottish electronics industry and the development of case studies in a variety of companies highlighting the specific processes at work. Tentative conclusions indicate that while IONs do represent an opportunity for the emergence of new, more collaborative modes of production such an outcome is by no means assured.

‘changes consist primarily in a relative decline in the importance of Fordist mass production and an enormous expansion of manufacturing activities based on less rigid and more highly adaptable (i.e., flexible) technological and institutional structures’ (Scott, 1988, p. 171).