Last week I vehemently argued that the current economic crisis does constitute a phase transition. After this week’s readings I still believe this to be true, but not for the reasons that Powell and Ernst present.
Describing the impact of internet technologies and the Silicon Valley start-up trend of the 90s, Powell argues that architecture of the firm has fundamentally changed and that the 90s spawned a “disruptive” period of adjustment to this new logic of organizing.
Perhaps what turned me off from Powell’s argument was his many alarmist adjectives, describing internet technologies as “fragile” and asserting that the old firm has begun to “crumble.” Perhaps this sort of perspective is only natural for someone living through a sort of paradigm shift; we may look back on the current economic crisis with the a similar benefit of hindsight. So is the 21st century firm being rebuilt or simply reorganized?
I contend that firms have merely undergone a structural reorganization as a result of of the move from an information to a knowledge-driven economy. Yet the economic crisis was a dramatic moment that has fostered a phase transition in the structure of our economy. No doubt, then, that the structure of financial firms will also need to change. And these changes will have a ripple effect: bringing smaller changes to other sectors and the various firms organized within them. But I believe that the changes firms will undergo in the coming years will be evolutionary in nature and will represent a reorganizing rather than a rebuilding.
With the development of the internet and the resulting shift from an information to a knowledge-driven economy, there is no doubt that traditional work and the typical workplace have undergone and will continue to undergo some radical transformations. But to me, these shifts should be considered part of a larger evolution. The structural changes represent a reorganization of a network structure rather than an all out “crumbling” of an old version and the birth of another.
While there can be no doubt that internet technologies have brought about economic change at speeds unlike those witnessed previously, to call them “breath-taking” as Ernst does seems a bit hyperbolic. I struggled to understand many of the examples that Ernst provided as supporting evidence in his discussion of global flagship networks (what does that really mean, by the way?) but the gist I gathered was that social disaster was immanent unless the government moves faster to better regulate Internet technologies.
Perhaps Powell and Ernst need to account for network complexity. As we’ve learned from Buchanan, internet technologies have helped constitute what is currently a vastly complex network that is international in its reach. But the architecture of this network, made of many weak ties, actually protects against some of the dramatic shifts suggested by both authors.
Our current economic crisis is likely the result of many overriding factors, the speed of transactions fostered by internet technologies being one of them. Did this crisis result from the old architecture of old firms crumbling? I certainly don’t think so.
lalfrey
Juggernaut 