Firm-Idea as a Vehicle of the Transition from an Opportunistic to a Relational Market Game

We can see more and more clearly that the concept of corporate social responsibility has its limitations. Its promotion does not significantly prevent market opportunism. The problem is increasingly serious given the fact that in the digital economy negative social consequences of market opportunism can be much more severe than in the industrial economy.

Examples of global service platforms clearly demonstrate that the countervailing power of the market and competition is now much less visible. Monopolization of the economy moves from the sphere of production to the sphere of distribution. Distribution monopoly is much more dangerous than manufacturing monopoly, also because economic regulation is capable of dealing with material property, but it turns out to be not very effective in the case of intellectual property. This is why global service platforms are formed much faster than global manufacturing corporations used to develop. Capitalization of the former is rapidly growing, it allows them to swiftly take over smaller technological and manufacturing companies and to block the access to the market for their competitors.

I am therefore convinced that a necessary condition for stopping economic opportunism and reducing the negative consequences of transactional market game are firms-ideas, which in order to develop independently and acquire their own agency have to shape their surroundings in a relational way based on partnership. They cannot remain isolated islands, they have to work with other organizations (not only businesses) forming an archipelago. They must have an idea for themselves, but this idea must be implemented in particular relations with other organizations.

This kind of archipelago is today necessary to prevent the monopolization of the market and to generate a relational rather than transactional gravity field the for the market game. Educational and regulatory support is essential, but especially necessary is a non-opportunistic approach of the companies. This will not happen without firms-ideas. They can abandon opportunistic behavior when they decide that it is not profitable, that they can act differently, that they cannot abuse trust, on the contrary, they have to strengthen it, for it will bring more benefits—they have to develop the manufacturing process rather than just maintain the sales of a particular product or service.

Every company needs its idea, not only to utilize its resources more effectively, but above all to recognize new possibilities for achievement and production. And this requires going beyond the existing patterns, adopting a different cognitive perspective. This empowers the company in its development, but it also requires entering into relations with other entities, relations which go beyond the transaction, which are based on partnership, and which generate circular interaction and management.

Circular management cannot be imposed. It emerges in a gradual change of relations between different kinds of organizations. Let us take a schematic look at two examples of development circularity which are particularly important for my city—Kraków, with its development potential based above all on science and higher education, as well as culture.

The first circular (development) processes I am interested in can be presented in the following manner:

An extensive university structure/a large number of students/offshore location/business centers. These links already exist, but we are still far from circularity. On the contrary, in the present arrangement we are dealing mainly with exploitation of the existing resources, with very little multiplication and qualitative transformation of them. For that to become possible we need other links: corporate research centers/their cooperation with universities in research and development/joint production of knowledge/higher various manufacturing processes. Such a circular process spreads around and leads to a systematic raising of the city’s development potential.

The second area of interest to me is culture. The starting point here is cultural heritage understood as a component of the city’s development potential. In this case, the circular process runs as follows:

Cultural heritage/high level of cultural capital/cultural activity of residents/ creativity of residents/intense business activity in the creative industries sector. Unfortunately, circularity encounters a bottleneck here. There is a continuation, but too weak to multiply the resources and raise their quality. The links which must be reinforced are cultural education/artistic education/ artistic creation. If these links were strengthened, the entire process would lead to a creative development and interpretation of heritage and to a systematic raising of cultural capital, which would mean increasing the city’s development potential.

It is easy to see that in the case of the first process its formation and intensification depends above all on the behavior of international corporations which place their business in the city in search of qualified and cheap labor. The key question is what could encourage them to form and facilitate partnership-based relations with universities. Of course, this to a large extent depends on the readiness and ability of universities to undertake such a mutually beneficial cooperation. The role of government structures is important yet only supportive. Some role can be played by the media, but more so by the education system, shaping the aspirations of future university students. We can see that the development process in question occurs only when relations between various actors stimulating it are established.

Without these actors nothing will happen, however, it is not enough for them just to be there. Things happen not because the actors are there, but because they enter into specific relations, create adequate links. The essence of circularity lies in the social mechanism of communication and cooperation rather than in individual factors. In this case, development reaction occurs when specific actors (wanting to achieve their development aims) deliberately enter into relations with other kinds of actors. Actors-particles and a favorable environment are the initial conditions, but the reaction will not take place if specific multilateral ties are not established.

In the case of the other process under discussion the situation is slightly different. Here much more depends on the behavior of government structures, and specifically on the municipal cultural policy.

One manifestation of thinking about shaping a circular economy is the verdict of the German constitutional court on the question if operators of nuclear power plants should receive compensation due to the introduction of a statutory deadline for closure of these power plants in Germany. The tribunal ruled that this law did not violate the federal constitution, but protection of property demanded that the legislative and executive provided an adequate compensation to investors. At the same time, investors and federal government are heading towards an agreement that investors would pay a total of €23 billion to the German budget, while the German government would take upon itself the responsibility and cost of storing radioactive waste until the end of time.

What we see here is a deliberate action of the judiciary preventing the occurrence of socially disastrous externalities and a parallel cooperation between businesspeople and the government aimed at neutralizing these effects. This demonstrates that for a circular economy to develop, certain rules must be formulated and respected, and also there must be partnership- based cooperation.

The idea of a company contains the answer to the question of “what is it for?”—the problem is that for this answer to make sense, namely to provide the firm with an operational mode and development direction, it must be internalized not only by the owner or owners of the company, but also by its key stakeholders. In this case the idea is to become a project for organizing the company and its specific manufacturing process. We may cite here the concept of “design thinking,” only not in relation to the company’s product but to the company itself, as an agent creating a certain economic value.

Implementation of such a project is based primarily on shaping specific relations between many kinds of actors who are stakeholders of this particular company. These relations regard especially communication and cooperation. And they cannot be established once and for all, they cannot be rigidly imposed, turned into an algorithm, be purely routine. They must be flexible and malleable to a significant degree. Otherwise the firm could not develop. So their shaping is a constant and unending task.

It should be noticed that designing a company, especially when moving on to the next development stage, various points of view, various social and professional perspectives must be superimposed. So the company may and should be understood and interpreted also as a specific social and cognitive space where its stakeholders act and cooperate. Otherwise the idea of the firm could not be shaped and modified. Such a space emerges from intense social and communicative relations occurring in the business as an organization. And it is these relations which create the institutional (axiological-normative) dimension of its functioning.

As a result, on the one hand individual actors jointly create the institutional order of the company, on the other hand they act within this order. Fulfilling the company’s idea also means that its stakeholders deliberately form the social space of the company through generating new meanings and forming new points of reference and relations. Coming back to design, we can metaphorically say that a company functioning in this way not only creates specific products and services, but also shapes its distinctive style. This style constitutes the production process of the company, becoming a component of its idea.

Lester C. Thurow wrote: “Our future does not depend on the stars, but on understanding the paths we set for it.” It is significant that in this sentence, used as a kind of motto for the book, Thurow talks about understanding the paths we set and not just about setting them. We may assume that setting paths is obvious for him, as if heading towards something was natural and not necessarily accompanied by reflection. Only when reflection is turned on, the future is defined. In that case we not only act, but also make a deliberate, premeditated choice of our behavior and we modify the selected path in accordance with the changing circumstances. Which means, among other things, that we reflect on further consequences of this choice. We not only realize what they are, but also assume (co-)responsibility for them. Reflection on development is not simply planning.

With such an interpretation, the line from Thurow’s book would illustrate the essence of agency and development. The thing is to understand where we are heading and what path we take to arrive there, and to assume responsibility for the consequences. The idea of a given company is expressed in that. Understanding the paths which have been set shapes the company’s future and empowers it to determine its development trajectory.

One component of agency is the ability to problematize the situation of a given actor—individual or collective, in our case a company—which means both defining problems and identifying ways of solving them. This ability depends not only on the knowledge possessed, but also on experience, that is, on the ability to learn. Without that the company can effectively respond to various changes, both external and internal. Still, they will be opportunistic, ad hoc reactions without a strategic edge. Even if they produce good results, such reactions inevitably deprive the company of its agency, that is, the ability to define its development trajectory. It starts to resemble a drifting sailing boat, for which even the best winds are of little help since the crew does not know where it should sail.

The distinguishing mark of the firm-idea is not declaring its values in the form of a code of ethics or a code of good practice. This could be a helpful tool, but the point is whether the company produces any values and what they are. It is not enough to say that we want to build on trust, what matters is whether trust is systematically produced. It is easy to undermine and difficult to sustain. In addition, generating trust within the company must be specifically associated with producing other values, because only then trust is permanent, it becomes a component of the firm’s axiological-normative order. If you treat trust in an instrumental way, you conceive it shallowly, in terms of efficiency, it becomes brittle, and might as well be used for destruction rather than producing other values.

Jerzy Hausner

Jerzy Hausner is a Full Professor of Economic Sciences, works at the Department of Public Economy and Administration, Cracow University of Economics, Rector’s Plenipotentiary for Culture and Sport. Member of the Polish Economic Society. Member of the Monetary Policy Council (24.1.2010–24.1.2016). Member of the Economics Committee of the Polish Academy of Sciences Committee. Since 2014, he has worked in Bruegel, Brussels European and Global Economic Laboratory. Since 2015, Member of the Polish National Commission for UNESCO. Member Winner of the Kisiel Award.

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