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Contents
1 Efficiency 2
1.1 The measurement of efficiency . . . . . . . . . . . . . . . . . . . . 31.2 X-efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51.3 Possible improvement onefficiency . . . . . . . . . . . . . . . 5
2 Orani!ational capabilities "2.1 Open an# Close Orani!ation . . . . . . . . . . . . . . . . . . . . 1$2.2 Competitive a#vantae . . . . . . . . . . . . . . . . . . . . . . . . . . .11
3 %nteractions bet&een efficiency an# orani!ation capabiliti
es 13
' (nalysis on %n#ian firms1)
'.1 %n#ian *ro&th . . . . . . . . . . . . . . . . . . . . . . . . . .
1)
'.2 +ifferent *roup of ,irms . . . . . . . . . . . . . . . . . . . . .
2$
'.3 +eterminants of efficiency . . . . . . . . . . . . . . . . . . . .
21
'.
' Consi#erations . . . . . . . . . . . . . . . . . . . . . . . . . .
2
'
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1
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The ole of Orani!ation Capabilities in hapin
Efficient ,irms
(lessio Patrinani/ 0icoletta ,errara/ ,erran Espunya
une 12/ 2$1'
(bstract
This paper &ants to investiate first the relationship bet&eenefficiency an# orani!ational capabilities/ an# finally a presentationon %n#ian challenin performances. %t starts/ in the first section/ by#escribin the concept of efficiency reportin some #efinition an# itsmeasurement in particular it focuses on X-efficiency &hich sho&sthe intrinsic connection &ith firms orani!ation finally somesuests on improvin it. %n the secon# section the orani!ationalcapabilities are presente#/ especially the #ifference bet&een openan# close# orani!ations an# clasificate# by the competitivea#vantae apporte#. Thus/ the thir# section &ant to analy!einteractions bet&een the t&o4 capabilities that lea# to efficiency arepo&er control/ formali!ation/ stratification an# less speciali!e# sills
as technoloy is more reliable. %n the last section theres an analysisof #ata collecte# an# elaborate# in multiple reression in or#er toe6plain %n#ian performance an# its #eterminants of efficiency.
1 Efficiency
Economic efficiency at the micro level focuses on the ability of firms toutili!e the best available technoloy an# to allocate resourcespro#uctively. Efficiency measurement has become a very popular fiel# inapplie# economics in recent years/ an# &ith this interest there has beena lare intellectual investment in refinin the empirical metho#s available
to researchers in the area.
2
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This chapter starts &ith#efinitions of pro#uctivity an#efficiency/ re-portin some of themost important contributions until
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aroun# 7$s. %t is particularlyinterestin the mo#ern i#ea of 6-efficiency/ an# finally someconsi#erations about efficientimprovement.
1.1 The measurement ofefficiency
(ccor#in to a classic #efinition89incent 17:";/ pro#uctivity is theratio bet&een an output an# thefactors that ma#e it possible. %n thesame &ay/ ual/ is the concept ofefficiency. Even thouht/ in theefficiency literature many authors #onot mae any #ifferences bet&eenpro#uctivity an# efficiency. ,orinstance/ enupta 81775; a an#Cooper/ eifor#
3
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a
n#Tone82$$$
;#efinebothpro#uctivityan#effici
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encya
stheratiobet&eenoutputan#input.
=e
can#escr
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ibeeff
iciencyasa#
istancebet&
eenthe>uan
tityofinpu
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tan#o
utput/an#th
e>uantityofi
nputan#outp
utthat#efi
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nesaf
rontier/theb
estpossible
frontierfora
firminitsi
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n#ustr
y.
Efficiencyan#pro#uc
tivity/any&a
y/aret&o
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coope
ratinconcepts.Themea
suresofeffi
ciencyar
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emore
accuratethanthoseof
pro#uctivity
inthes
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enset
hattheyinvolveacompa
rison&itht
hemostef
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ficien
tfrontier/an#forthatth
eycancompe
tethose
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ofpro#
uctivity.
uire#topro#uceth
eivenoutp
ut.
?oopm
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ans817
51;provi#e#a#efinition
of&hat&eref
ertotech
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nicale
fficiency4aninput-output
vectoristech
nicallyeffi
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cientif
/an#onlyif/in-creasin
anyoutputor#
ecreasin
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anyin
putispossibleonlyby#ec
reasinsome
otherout
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putori
ncreasinsomeotherinp
ut.
+ebreu81
751;offer
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e#the
firstmeasureofpro#uctiv
eefficiency&
ithhisco
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efficie
ntofresourceutili!ation/a
ra#ialmeasu
reoftec
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hnical
efficiency.a#ialmeasure
sfocusesont
hema6im
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umfea
siblee>uiproportionate
re#uctionina
llvariabl
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esinpu
t/orthema6imumfeasibl
ee>uipropor
tionatee
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6pansi
onofalloutput.
,arrell817
5);e6ten#e#
the&or
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ctiveefficiencyast
hepro#uctoftechnicalan
#allocati
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veefficiency.The
allocativeefficiencyinec
onomicth
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eorymeasuresafirm
ssuccessinchoosinan
options
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etofinputs&itha
ivensetofinputpricest
hisis#is
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tinuishe#fromth
etechnicalefficiencycon
ceptasso
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ciate#&iththepr
o#uctionfrontier/&hichm
easurest
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hefirmssuccessin
pro#ucinma6imumoutp
utfroma
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ivensetofinput
s.%mplicitinthenotionin
aspecifi
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cbehavioralassump
tionabouttheoalofpro#
ucer.
cal
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eeffi
ciencymeansthatfirmsareoftheappropr
iatesi!e
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soth
atnoin#ustryreorani!ation&illimprove
outputore
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arnin
s.
Theconcep
tofstructura
lefficiencyisanin#
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ustry
levelconcept
#ueto,arre
l/&hichmeas
uresin&
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hate6t
entanin#ust
ryeepsup
&iththeper
formance
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ofits
o&nbestprac
ticefirms.
'
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1.2 X-efficiency
@arvey
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lea#s to hiher costs an# an hih
#eree of X-inefficiency.
=riters on X-efficiency theoryfollo&in
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meithe
ranincreaseincustomer&
illinnesstop
ay8improv
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inth
e>ualityofthepro#uct;o
rfrom#ecrea
sinsupp
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lieropp
ortunitycosts8by/fore6am
ple/improvin
thephy
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sicale
fficiencyofthemanufactu
rinprocess
;8Collis/1
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77';.
eincapabl
eofimprovin
efficiencyi
safun#am
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entals
illofrunninanyfirm.?ey
assets&illinc
lu#ecash
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/emplo
yees/vehicles/patent/an
#accesstop
ro#uctsan
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#serv
ices.%nthissection&illb
eanaly!e#t
hemostre
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levant
factorsthatcanaffecteffi
ciency.
Out
sourceforefficiency
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Outsourcinisanytas/
operation/
Boborprocessthatcoul# beper-forme#byemployees&ithin anorani!ation/but
isinstea#contracte#to athir#party forasini
ficantperio#oftime. %na##i
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tion/thefunctionsthatare
performe#bythethir#partycanbeperforme#on-siteoroff-site.Outsourcincancrea
tecost-savinopportunities byfreeinup
principalstimethatcoul# bebett
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erspentonfin#in
&ays toimprovethefirmsprofit.
elatioship&ithsuppliers
Clearly itmaesoo#sense tohaverelia
blesuppliers.utovertimethey
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&illbeloointoincreasetheirpricesforthepro#uctsthatthey
sellinor#er toincreasetheirprofit.,orthisreasonbothpricesan#contractsshoul#
berevie&e#fromtimetotime
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. %nfactit ispossibletofin#cheaperpricesfromfreshsuppliers
thatanyonehasuse#before.imilarprinciplesshoul#beapplie#tobusinessutilities/
suchastelecommunicationsan#
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enery.Christian0ellemann/CEO ofbusinessservicesfirmX
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suppliershaveemere#tooffere6actlythesamepro#uctsbut
at alo&ercost.D
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ibilitiesforimprovin
theirbusinessvehiclean#travelefficiency/ho&ever
/&iththerihtvehiclechoicean#carefullois
ticsan#Bourneyplannin/ itcan
:
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be #one. Charlie Fullins/
foun#er of Pimlico Plumbers/&hich operates a fleet of G15$.$$$ 9ols&aen companyvans/ says4 DOur fuel costs roseby G 15$/$$$ last year. Otherthan our choice of vans/ &hichare e6tremely cost efficient interms of fuel an# maintenance/&e have improve# fuelefficiency by tain the shortestroutes an# monitorin spee#.*P tracin systems fitte# ineach of our vans also ives usinstant visibility of ourenineers out on the roa#/allo&in us to assin ne& Bobsto the closest enineer/ spotan# avoi# traffic Bams/ an# taethe most efficient route.D
ole of Technoloy
Computers an# technoloyallo& for faster processin of#ata/ easier retrieval ofinformation/ an# in some casesautomation can re#uce orreplace physical employees.=hen people perform tass byhan#/ it can be time consuminan# full of human errors. =hentechnoloy is use# for repetitiveoperations/ mistaes arere#uce# or eliminate#/ an# the
time it taes to complete thetas is reatly re#uce#. %na##ition to main processes>uicer/ technoloy also maesit easy to eep information upto #ate.
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elationship &ith ocial Fe#ia
ocial me#ia offers a po&erfulan# cost effective tool forpromotin the business bran#/
but often firms are alrea#y#oin it efficiently. The ey is toi#entify the platforms an#net&ors &here customers an#potential customers are foun#/other&ise time spent postinyour business ne&s an# #etailsof special offers in all the &ronplaces &ill be &aste#. CFservice provi#ers/ such asCubeocial.com/ allo& tomanae multiple social me#ia
accounts from a central point/enablin much reaterefficiency.
+atabase
,rom the moment customer #ataenters a #atabase/ it starts to#ecay. =ithin a couple of years/a #atabase coul# be hol#in asinificant amount of #ata that isliely to be out of #ate. Consi#erthe costs of mailin catalouesan# maretin campains to outof #ate a##resses/
)
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or re#irectin pacaes to the
correct a##ress/ an# the impacton the maretin bu#et can be
sinificant. 0atalie *reen/ from
business efficiency firm
Postco#e (ny&here/ says4
DCleansin soft&are is avail-able
that can cross-reference your
contact recor#s aainst
reconi!e# #atasets an# eep
them up to #ate/ resultin in a
more efficient maretin stratey
that #elivers better #irect
maretin response rates.D
Time is money
(re your members of staff#iliently servin yourcustomers/ or busy improvintheir score on (nry ir#sHEvery business o&ner no&sthat an employees time is his
money. %f this issue is affectinstaff efficiency/ you nee# setout some roun# rules to ui#eyour employees as to &hat isan# isnt acceptable/ or avoi#problems altoether byestablishin a no-phones-outpolicy.
Curiosity4 printin activity
One of the most &asteful/ an#potentially costly business
activities is printin. Professional
services firms in the A? coul#
collectively save more than G'5
Fln a year by chanin their
printin practices/ ac-cor#in to
research from Epson. The &orst
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e6amples inclu#e printin
#ocuments an# not rea#in
them/ failin to collect print-outs
from the printer/ an#
unnecessary printin. Epsons
A? business sales #irector 0eil
Col>uhoun says4 Det policies
an# intro#uce trainin to ensure
staff are a&are of ho& to print
#uple6 an# consi#er intro#ucin
s&ipe car#s to enable printin
s&ipin the car# aainst the
printer means your team is more
liely to pic up the print &hen
its finishe#.D
2 Orani!ationalcapabilities
( central problem in the stu#y oforani!ations concerns themeasurement of orani!ationalproperties or variables.Orani!ations are compose# ofin#ivi#uals &orin in various Bob&hich are arrane# in #ifferentstructural confiurations an# &or-
flo&.There are many #efinitions oforani!ational capabilities becausethere are many authors that arue thattopic. They can be classifie# into threecate
"
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or
ies.
Thefirstcateoryofcap
abilitiesarethesethatreflectanability to
performthebasicfunctionalactivitiesofthe
firm/suchasplantlay-out/#istri
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butionloisticsan#maretincampains ina&aythattheyaremor
eefficientthancompetitors.
(mitan#choemaer81773;/fore6ample/#efinecapabilities
as#evelope#infunctional
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areas/fore6-ample/bran#manaementtal etal.81772;/
as asetofbusinessprocessesstrateicallyun#erstoo#*rant81771;observesthat
capabilitiescanbei#entifie#usin
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astan#ar#functionalclassification ofthefirmsactivitiesan#
Treacyan#=iersema81773;#efinethemasoneofthreevalue#isciplines-oper
ationale6cellence/customer
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i#entifycapabilitiesasrepeate#processorpro#uctinnovations/
manufacturinfle6ibility/responsivenessto
marettren#s/an#short#evelopmentcyclesTeece etal.8177';as#yn
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amicroutinesthatoverntheability ofanorani!ationtolearn/a#a
pt/chanean#rene&overtime.
The
thir#cate
ory
of
capa
bility/
altho
uh
clos
ely
relat
e#
to
#yna
mic
impr
ove
men
t/
com
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as
thos
e
ora
ni!at
ional
char
acte
ristic
s
that
ena
ble
an
ora
ni!at
ion
toconc
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choo
se
an#
impl
eme
nt
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&hil
e
@en
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on
an#
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bur
n
8177
';
referto
the
m as
the
ora
ni!at
ional
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abilit
ies
to
#e-
ploy
the
firm
s
reso
urce
s
an#
to
#eve
lop
ne&
ones
.
%tis#ifficu
lttomaeha
r#an#fa
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st#istinctionsamon
thethreec
ateoriesofcapabilitie
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ssincetheyallconc
erntheabilit
yoffirmstoperforman
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activity8beitstatic
/#ynamicorcr
eative;moreeffectively
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ments.%tisalsoimp
ossibleto#
evelopane6haustive
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an#mutuallye6clus
ivetypoloy
oforani!ationalcapab
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ilitiesbecauseofth
eirininfinite
variety.
7
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2.1 Open an# Close
Orani!ation,irst of all/ the &ay of thinin an#
min#set of people &orin in the firm
in influences the behavior a#opte# by
the firm itself. Consi#erin a close#
mo#el/ the attention focuses on the
insi#e/ an# #oesnt ive any
importance to e6ternal factors. %nstea#
if those &ho &or in the firm follo& the
open mo#el/ it become important to
pay attention on the outsi#e an# they
&ill have more pro t thans toinnovations comin from the e6ternal
environment. %n a close# innovation
mo#el the firms boun#aries are &ell
#e ne# an# &ithin the orani!ation are
conceive# several i#eas/ some lea#s
no&here/ &hile others are in-#epth an#
interate# &ith each other an# lea# to
innovation the limit is that e6ploration
of alternative i#eas is limite# to the
phase of esearch/ the #evelopment
phase is #e ne# from a crystalli!e#technoloy. On the contrary/ the open
innovations orientation to the outsi#e
is e6ten#e# to the stae of
+evelopment4 it is clearly a ris free!e
the i#ea because of the architecture of
innovation itself. %n the time in &hich a
firm #evelops the pro#uct it is possible
that there is an incremental innovation
propose# by a competitor/ risin in
that &ay to come out &ith a pro#uct
that is alrea#y ol#. %n that &ay is
fun#amental to eep the firm DopenDeven at the stae of #evelopment
closer to the maret. (n open
orani!ation is an orani!ation open to
anyone &ho arees to abi#e by its
purpose an# principles/ &ith complete
transparency an# clearly #e ne#
#ecision main structures/ o&nership
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patterns/ an# e6chane mechanisms
#esine#/ #e ne#/ an# re ne#/ by all
members as part of a continual
transformative process4
communication is a the critical
element.
o/ better performance are #etermine#by an Dopen attitu#eD4 rms must acceptthe evi#ence that the best sills of itssector can also be foun# outsi#e of theorani!ation/ or purchasin ne&technoloy/ or by hirin employeesfrom other rm. ,or e6ample/ theconcept of the best of the sector &orin our rm has been the bane ofetama6 an# Xeno6. (ny&ay/ buyini#eas from the outsi#e is not enouh to
succee#/ %nternal + is the ey to#evelopin i#eas. This help in fiurinout &hy buil#in a oo# businessmo#el is often better than ettin tomaret first.
1$
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or
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abetterc
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&&hatthe
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environm
ent/orrespon#toa
nycompetitivethre
at/they&illbelucy
tosustainthec
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apability.
(ctually/ina##ition
tothethreatofbeinre
place#byoneofa
raneofalternat
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ivecapa
bilitiesthatcreateval
ueforconsumers
in#ifferent&ays8hori!o
ntalsubstitutio
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n;isthethre
attoanorani!ation
alcapabilityofbein
surpasse#byae
nericallybetter
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capability
8vertical#isplaceme
nt;.Orani!ationalc
apabilitiesarevuln
erableonallthre
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e#imensi
ons4thesustainabil
ityofacapabilitythatis
causallyambiuo
usisthereforeli
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elytobes
ome&hatlimite##
urationevenchan
esinconsumerta
stesnee#tob
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ereason
ablypre#ictable.
o/
ifafirmperformsan
yactivitymoreefficie
ntlythancomp
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etitors/itc
anpotentiallyposs
essacompetitive
a#vantae.%tmay&ellbeimpo
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ssibletolis
tthecompletesetof
allcapabilitiesthat
canbesourcesofcompetitivea
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#vanta
ebecausetheyc
anbefoun#inever
ysinleactivitythefirmper-forms/a
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n#alon
multiple#imension
sforeachactivity8s
uchasfaster/morefle6ibly/morecr
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eatively/et
c.;.
%tisfromherethat
&ea#vanceintoth
eareaof&hatmihtb
ecalle#meta-
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capabiliti
es.Thecapabilityth
at&instomorro&isthe
capabilityto#evelo
pthecapability
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to#evelo
pthecapabilitythatin
novatesfaster8orb
etter;/an#soon.Th
esecapabiliti
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esmihtin
clu#ethefle6ibilityto
shiftbet&eencap
abilitiesmoreeefficie
ntlyorfasterthan
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aeinap
articularlevelofanalys
is/an#claiminnormativevalueforthatlev
elofanalysis/isin
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appropria
te.Topre#ict&hich
rm&illbeahea#&enee#tono&allthe
levelsofcapa
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antae.
12
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3 %nteractions bet&een e
efficiency an#orani!ation capabilities
There is a hue in influence of basic
in#ustry con#itions an# strateic
choices on the relative profitability an#
e efficiency. The associations are
e6pecte#/ to be noisy because
orani!ational arranements are
con#itione# by historical influences as
&ell as by the incentive effects of
environmental continency an#strateic choice. The #iverence
bet&een actual orani!ational
arranements an# those that &oul# be
optimal is liely to be reatest &hen
perio#-by-perio# optimi!ation of
orani!ational arranements is
infeasible. 0umerous macro
orani!ational factors have in influence4
si!e/ lonevity/ maturity/ comple6ity/
#ecentrali!ation/ bureaucrati!ation/ an#
top manaement continuity.
This paper &ill #efine orani!ationalcapabilities as the socially comple6routines that #etermine the efficiency&ith &hich firms physically transforminputs into outputs. %n this role/capabilities function as theorani!ational complement to thetechnoloical #eterminants of theefficiency of pro#uction. Orani!ationalcapabilities are not only manifestationsof observable corporate structures an#
processes/ but also resi#e in thecorporate culture an# net&or ofemployee relations.
One &ay of relatin business strateyan# efficiency orientation is in terms ofthe t&o eneric competitive strateiespropose# by Porter 817"$;4 lo& costan# #ifferentiation. @e suests that
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the pursuit of a lo&-cost position oeshan#-in-han# &ith an emphasis onefficiency an# the pursuit of a#ifferentiate# position &ith an emphasison innovation 8strateies that involvevertical #i #ifferentiation seem to tie in
most closely &ith the pursuit ofinnovation;.
Orani!ations that emphasi!e oals ofefficiency 8an# the >uantity of clientsserve#; are the one &ith more routine&or. Their social structures are foun#to be more centrali!e#/ moreformali!e#/ an# to have lessprofessionally traine#/ but norelationship &ith stratification is foun#.
0o&/ a #etaile# e6amination on
social structure an# relative capabilitiesthat lea# to efficiency.
Orani!ation characteri!e# bycentrali!ation of orani!ationalpo&er
%f orani!ational member neverface &or situation characteri!e#by
13
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hihly varie# clients nee#/ then
reater orani!ational po&er neverac-cure to orani!ational members.
%t &ont be necessary to have
constant reports an# its not
re>uire# #etaile# coor#ination
bet&een members.
Orani!ation characteri!e#by formali!ation oforani!ational roles
%f an orani!ation iscoor#inate# via plannin/this &ill be reflecte# in ahih #eree of formali!ationof orani!ational roles. uchformali!ation &ill bereflecte# in various types ofrules an# reulations#efinin role obliations.One &ay to brin aboutsuch formali!ation is toestablish a series of &ritten
#ocuments that specify &hois to #o &hat/ &hen/ &here/an# &hy. This process offormali!ation obviouslyfacilitates oals of eefficiency by provi#in thestability or lac of variety in#ifferent tass. uch#ocuments are variouslycalle# policy manuals/ Bob#escriptions or evaluationproce#ures. The use of a
rules manual an# of Bob#escriptions are t&o basicmechanisms for establishinorani!ational control.
Orani!ation characteri!e#by no relationship bet&een
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stratification an# efficiency
There is little nee# forinteraction in fact theinteraction that #oes occurcan be proramme# inrituali!e# reports to the
boss. This suests thatthere may be consi#erablesocial #istance bet&eenlevels of hierarchy or chaincomman#. There are t&o#imensions oforani!ational stratification4the #eree of affect to&ar#supervisors an# the #ereeof social #istance bet&eensupervisors an# staff .
Orani!ation characteri!e#by less professional trainin
%f the orani!ation iscoor#inate# byprorammin/ there is lessnee# for a variety ofoccupational specialities orfor &ell-traine# occupants.%n other &or#s/ theprorammin of the
orani!ation allo&s forsimplification of the socialstructure. (s technoloybecomes efficient/ it is lessnecessary for anorani!ation to hire men&ith hihly speciali!e# sills.
1
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'The capabilities that #erive fromsuch structure elements are4
- fin#in the riht &ay for manaepo&er eepin it close# the topmanaer
- manae to achieve an hih span ofcontrol on every activity &ithin an#outsi#e the firm
- clearly #e ne each role an# itsboun#4 everyone has to perfectlyno& &hich are his tass an# &hathes not e6pecte# to #o. 0ocoor#ination is nee#e#/ so the role ofthe aents is to strictly respect everyrule - its e6-e6tremely important ainthe access to the ne& technoloyeepin the firm up-to-#ate. The
focus in#ee# is on reliable machinesrather than professionalism ofaents.
%n the previous section/ it &as clear that
its impossible to mae a list of all the
capabilities of firms/ because every
activity is a potential capability
follo&in this #irection the capabilities
sho&n here are not the only possible
alternative. Foreover theyre e6pecte#
to be po&erful in a eneric analysis/
an# thats more precisely their
areation that success in emphasi!e
efficient orientation. (ny&ay each firm
has its o&n frame&or that nee#s to be
analyse# in or#er to #ra& appropriate
conclusions.
y the &ay/ surely in such structures
the orani!ation is liely to emphasi!e
the oal of efficiency in preference to
other oals such as morale. imilarly/
orani!ations &ith routine &or
structures are liely to emphasi!e the>uantity of clients service# rather than
the >uality of those services4 the
routine orani!ation is liely to be
concerne# &ith stability an# hih profits
achieve# via >uantity of pro#uction an#
an avoi#ance of innovation.
@ere is reporte# a Table sho&in the
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values of correlation coefficient4
15
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(se
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6pecte#/
thecorrelationbet&eenroutine&ora
n#participationinor
ani!ational#
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ecisions
isneativeasthe#ereeofhierarchy
ofauthorityin&or#
ecision.Onthe
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contraryth
e#ereeofrulesobservationan#the
specificityof
Bob#e
scriptionarep
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ositivelyc
orrelate#.
outine
&orispositivelyrela
te#toanemphasis
onefficienc
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yasasy
stemoal.Theroutini!ationofthe&or-
o&allo&sfortheeffi
cienthan#lin
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oflaren
umbersofclientsatlo&cost/efficienc
ytherebybecomin
asystems
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oal.Effc
iencyisfacilitate#viatheformali!ation
ofreulationsan#c
arefulplannin
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oftheor
ani!ation.
ystem *oals r p
Emphasis on e effctiveness .$$ 0
Emphasis on effciency .'5 .1$
Emphasis on morale -.3) 0
Emphasis on ne& prorams -.$5 0
Tablein#icates
thattheorani!ation
alvariables#
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ereeofro
utinenessan#em
phasisonefficien
cyarerelate#8rJ.'
5;4thatstheonl
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ycoeffici
ent&hichispositiv
e.
1:
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4 (nalysis on %n#ian firms
4.1 %n#ian *ro&th
%n 1771/ %n#ia a#opte# liberal an#free-maret principles an# liberali!e#its economy to international tra#eno& the economy of %n#ia is thetenth-larest in the &orl# by nominal*+P an# the thir#-larest bypurchasin po&er parity. (s pointe#out by many stu#ies/ the successstory of %n#ia has not been base# on
stron ro&th in manufacturin8os&orth et al. 2$$);. %n fact/ %n#iaintro#uce# substantial pro#uct maretreforms in this sector since the mi#17"$s e6pectin lare pay-o s interms of hiher ro&th an#employment eneration. Theempirical evi#ence on the benefitsan# losses o&in to such reforms ismi6e#. The main factors #etermininro&th in %n#ian manufacturinector are4
hih #eree of heteroeneity#isplaye# amon firms evenin the same sector &hich is&i#esprea# 8across allsectors; an# persistent 8overtime;
evi#ence of coe6istence of#ifferent types of firms &ith#ifferent characteristics an#performance &ithin the samesector
relation bet&een e6portinactivities an# firmperformance surprisinly/ failsto fin# evi#ence of positiverelation bet&een the t&o
impact of + coul# not bei#entifie# as a sinificant
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factor
,iure #isplays the time series tren#of the ro&th rates of total value ofsales of firms an# total value ofoutput for selecte# sectors.
epresentin the micro an# themacro #ata/ the ure con rms thepotential of the micro #ata to replicatethe properties observe# in theareate tren#.
1)
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T
heanalysisraises
>uestionsonthefir
mlevelcharacteristics&hich#et
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erminesth
ero&thoffirmsovertime.
Profitabil
ity
Table 5reportstheO