Week 5: Opportunity emergence

Helping new Organisational Formats emerge

Background

new forms can differ in "newness" - some significant others marginally

Newness distinguished based on 4 dimensions

new

technology

structure

goals

served markets

challenge: new forms need to become accepted

not automatic process , entrepreneurs need to work to convince others. This involves justifying & legitimising

Social movements can contribute to process

Key Scenarios

inadequacy of normal incentives

failure of market mechanisms to reduce social costs

Failure of Trade Associations

Organisation Forms that are novel, must acquire support to become accepted. Assumed this happens through trade associations, enable securing of support from consumers and financial markets

can be very complex, difficult to manage

different members want different things

try and influence decisions to own good

= agreements hard to negotiate and coordination to get new form accepted can fail

EXAMPLE

Early automobile manufacturers

when emerging, previously relied on horses -> A lot of fear resulted in opposition from groups concerned about speeding

some automotive trade associations emerged to campaign on behalf of car manufacturers, disappeared again bc financial issues and disagreements

early fans banded together in clubs and promoted automobiling movement

promoted image in 2 ways:

support of state-wide laws on speed, to reduce criticism

official rules for races, building trust by professionalising activity

Overall: efforts helped manufacturers and product be accepted and be seen legitimate by society/government

central problem of establishing new form: free-rider problem

Why? -> Those who incur the costs/efforts of working to establish new form are not sole beneficiaries, those who benefit may not have shared the cost

Eg. early entrepreneurs incur costs of developing technical standards/ establishing supply and distribution networks

entrepreneurs play key role in familiarising consumers, financial markets, governments with new form

of course: once established, benefits also extend to later entrants

Central idea: when faced free-rider problem and thus demotivated, SM activists can help by investing own time, energy, efforts and resources to help establish new form

EXAMPLE:

Standard-setting organisations

in 1894, association of insurance companies commissioned to certify the fire-resistance of wires and lights for houses. By that, they became first standard setting organization

however, even increasing need for standard setting, it did not lead to emergence of further standard setting organizations, because free rider problem

only when activists gathered at national conferences and formed "standards movement" - focus reduce waste and inefficiency in industrial production

campaigned against "wasteful variety" , recruited business to follow

success of activists in recruiting big companies showed importance of standard setting and organisations -> acceptance

Overall: passionate activist helped establish idea of standard setting, thereby overcoming need for single organisations to do all the work

Helping new Markets Emerge