Accountability and the internet editors david crowther and lez rayman bacchus

158 Access this journal online159 Abstracts & keywords 162 Guest editorialDavid Crowther and Lez Rayman-Bacchus 166 Social audit and accountability in ITmanagement Branka Mraovic´ 180 Co

158 Access this journal online

159 Abstracts & keywords

162 Guest editorialDavid Crowther and Lez Rayman-Bacchus

166 Social audit and accountability in ITmanagement

Branka Mraovic´

180 Contextualising corporategovernance

Lez Rayman-Bacchus

193 Strategy, accountability,e-commerce and the consumerRuth Murphy and Margaret Bruce

202 A critical appraisal of customersatisfaction and e-commerceChia Chi Lin

213 E-CRM: customer relationshipmarketing in the hotel industryDiana Luck and Geoff Lancaster

232 Stakeholder communication and theInternet in UK electricity companiesStuart Martin Cooper

244 Audit and control of the use of theInternet for learning and teaching:

issues for stakeholders in highereducation

Martin John Broad, Marian Matthewsand Kerry Shephard

254 Strategizing networks of power andinfluence: the Internet and thestruggle over contested spaceSteve Conway, Ian Combe andDavid Crowther

Managerial Auditing Journal

Volume 18 Number 3 2003

Accountability and the Internet

Guest Editors: David Crowther and Lez Rayman-Bacchus

See page following Contents for full details of what your access includes

Access this journal electronically

As a subscriber to this journal, you can benefit from instant,

electronic access to the content of this title Your access

includes a variety of features that increase the value of your

journal subscription

Automatic permission to make up to 25 copies of

individual articles

This facility can be used for teaching purposes, training

courses, meetings or seminars This only applies to articles of

which Emerald owns copyright For further details visit

www.emeraldinsight.com/copyright

How to access this journal electronically

To benefit from electronic access to this journal you

first need to register on the Internet Registration is

simple and full instructions are available online at

www.emeraldinsight.com/register Once completed, your

institution will have instant access to the journal content from

www.emeraldinsight.com or via the journal homepage

www.emeraldinsight.com/maj.htm

Our liberal institution-wide licence allows everyone within

your institution to access your journal electronically, thus

making your subscription more cost-effective Our Web site

has been designed to provide you with a comprehensive,

simple system that needs only minimum administration

Access is available via IP authentication or username and

password

Key features of Emerald electronic journals

Online Publishing and Archiving

You can gain access to past volumes as well as new material

from this journal on the Internet via Emerald Fulltext You can

browse or search the database for relevant articles

Key Reading

This feature provides abstracts of articles chosen by the

journal editor on the basis of their subject-matter These are

selected to provide readers with current awareness of

interesting articles from other publications within the same

field

Reference Linking

Direct links are provided from the journal article references to

abstracts of the most influential articles cited (where possible

this is to the full text of the article)

E-mail an Article

This facility allows you to e-mail relevant and interesting

articles in PDF format to another PC for later use, reference or

printing purposes

Additional Complementary Services Available

Your access includes a variety of features that add to the

functionality and value of your journal subscription:

E-mail ServicesEmerald’s range of free e-mail alerting services is designed todeliver personal notification of news and features in a number

of different interest areas

Emerald WIRE (World Independent Reviews)Emerald WIRE is a fully searchable, subject-specific databasebrought to you by Emerald Management Reviews It providesarticle reviews from the world’s top management journals Thedatabase is updated monthly and gives users details of how

to obtain the full text of original articles

Research RegisterLocated atwww.emeraldinsight.com/researchregister, theEmerald Research Register is an Internet research forumwhere you and your readers can identify information onresearch activity world-wide This feature is invaluable if youare seeking information or wish to disseminate informationabout your own research

Support ResourcesComprehensive librarian and user toolkits have been created

to help you get the most from your journal subscription.For further information about what is available visitwww.emeraldinsight.com/usertoolkit

Choice of Access

Electronic access to this journal is available via a number ofchannels, enabling end users and libraries to reach thecontent through their preferred delivery system The EmeraldFulltext Web site –www.emeraldinsight.com/ft – is therecommended means of electronic access, as it provides fullysearchable and high value-added access to the completecontent of the journal

Subscribers can also access and search the article content ofthis journal through the following journal delivery services:EBSCOhost EJS

journals.ebsco.comHuber E-Journalse-journals.hanshuber.com/english/index.htmMinerva

www.minerva.atOCLC Firstsearch Electronic Collections Onlinewww.uk.oclc.org/oclc/menu/eco.htm

RoweCom’s Information Questwww.informationquest.comSilverPlatter

www.silverplatter.comSwetsBlackwell’s SwetsWisewww.swetswise.com

Emerald Customer Support Services

For customer service and technical help,contact:

E-mailsupport@emeraldinsight.comTel +44 (0) 1274 785278

Fax +44 (0) 1274 785204

www.emeraldinsight.com/maj.htm

Social audit and accountability in IT management

Branka Mraovic´Keywords Accountability, Social audit,Management

A characteristic of the electronicallyoperated global capitalism is that it isstructured with the help of informationnetworks integrating capital interests at theglobal level The environment in which theselfness realises itself in the informationalsociety is the global networks and computercommunications, creating a wide range ofvirtual communities imposing a new type oflogic – the network logic In the new networklandscape, information technologies,

including the Internet, provide a technicalsupport for a greater justice and equality onthe virtual highways, thus affirming thevoice of an individual In this way, Foucault’sthesis that power relations are rooted intothe entire network of society comes intorealization Corporate behaviour is in linewith the dominant social norms, values andexpectations, but at the same time it can besignificantly modified by social pressuresand changes The same goes for the ways inwhich information technologies are

implemented within organisations, whichmeans that a continual evaluation of ITmanagement programmes is needed, not onlyfrom the point of view of its technicaleffectiveness but also from the point of socialaudit and accountability in management

Contextualising corporate governance

Lez Rayman-BacchusKeywords Corporate governance, Internet,Banking, Business schools, AccountabilityCorporate governance systems aim tosupervise and guide corporate behaviour.Information and communication

technologies and in particular the Internetare providing unprecedented scope forinnovative behaviour, both undesirable anduseful, and as means for greater scrutiny andcontrol There are calls to reform thegovernance system, to make it more sensitive

to what is seen as the primary purpose of theenterprise, that is the pursuit of economicprosperity through innovation Moreover,any reform needs to develop a sensitivity tothe social context of corporations, since this

is the locus of attitudes, strategy practicesand innovative capacity Through exploitingideas from cultural theory this paperproposes that corporations exhibit a limitedbut discernible number of ways of life orsocial realities, and these realities givemeaning to the system of governance in use

Strategy, accountability, e-commerce and the consumer

Ruth Murphy and Margaret BruceKeywords Electronic commerce, Strategy,Accountability

Whilst increasing numbers of firms havelaunched themselves on the Internet,evidence suggests that they are doing thiswithout any consideration of the strategicimplications of developing, implementing orrunning a Web site Adopting a strategicperspective, the aim of this paper is tocritically examine the potential growthopportunities of on-line retailers togetherwith identification of consumer value a Website may offer In being accountable to theirshareholders, these firms’ efforts must make

a profit For those wishing to recoup theirinvestments in a short time frame, it seemsthat putting funds into e-commerce firms isnot recommended Rather e-commerce is forlong term play

A critical appraisal of customer satisfaction and e-commerce

Chia Chi LinKeywords Consumer behaviour, Marketing,Electronic commerce, Customer satisfaction

In this paper electronic commerce(e-commerce) is examined in the context ofthe relationship between firms and theircustomers and the implications fororganisational accountability Thetechnology of e-commerce determines whatcan be offered to customers, but onlycustomers determine which of thosetechnologies will be accepted The authorargues that providing the highest customerdelivered value by e-commerce can be viewed

as making a real contribution to customers,i.e shopping through the Internet will beaccepted by customers Customer

satisfaction is of critical importance whenmeasuring perceived customer deliveredvalue that is offered by e-commerce Threemain scales which play a significant role ininfluencing customer satisfaction arecustomer need, customer value and customercost

E-CRM: customer relationship marketing in the hotel industry

Diana Luck and Geoff LancasterKeywords Relationship marketing,Electronic commerce, HotelsExplores the degree to which UK based hotelgroups had exploited the medium of

electronic customer relationship marketing(E-CRM) Research is incorporated thatinvestigated their use of the Internet to verifywhether customer relationship marketingwas being implemented within onlineoperations or whether their Internetpresence merely revolved around the basicfunctions of ‘‘providing information’’ and

‘‘hotel reservations’’ The findings andsubsequent discussion showed that on theInternet, hotel groups used their relationshipwith customers to provide rather than gatherinformation The majority of the hotel groupshad only embraced a few elements of E-CRMand even indicated that they had no intention

of being led online by the concept Althoughthe findings of the questionnaire indicatedthat hotel groups were generally aware of thepotential of Web technologies and strategies,they also showed that companies were notputting this knowledge into practice when itcame to implementing E-CRM Primaryresearch concluded that hotel groups based

in the UK were failing to take advantage ofthe many opportunities identified throughthe secondary research

Stakeholder communication and the Internet in UK electricity companies

Stuart Martin CooperKeywords Stakeholders, Internet,Electricity industry, Accountability,Information management

This paper is located within the corporatesocial reporting and stakeholder

management literature It is concerned withthe use of the Internet as a way of

communicating with stakeholders and theextent to which this communication is, or isnot, two-way The evidence from the

electricity industry in the UK is that theInternet is used, but this use is selective andthere is little true dialogue It appears thatthe Internet provides an opportunity forgreater corporate accountability in thefuture, but whether this potential will befulfilled is as yet unclear Further research of

a longitudinal nature is required to see howthe Internet and more specifically corporatesocial, or stakeholder, reporting developsover time

[ 160 ]

Managerial Auditing Journal

18/3 [2003] 159-161

Audit and control of the use of the Internet for learning and teaching:

issues for stakeholders in higher education

Martin John Broad, Marian Matthews andKerry Shephard

Keywords Audit, Control, Learning, InternetThe Internet is becoming more widely used

by academic institutions to support thelearning and teaching activities of studentsand academic staff Whilst this is a veryefficient mechanism, it is, arguably,important that there are adequate controls inplace to ensure that the information is notlibellous, defamatory, inaccurate, illegal orinappropriate The interactivity of theInternet, the immediacy of access to itscontents and the public accessibility to much

of its information, however, do provide adifferent operating environment andtherefore different audit and control issuesarise This paper discusses the roles andconcerns of a range of stakeholders andsuggests that the control mechanisms might

be failing, or might not be adequately policed

in practice A number of examples areprovided where the manner in whichcontrols are put in place do not operateeffectively, or where there may be controlloops that are open-ended For each of thestakeholder groups that are identified, anaccount is given of the use to which theInternet is put and where regulationcurrently exists or may be desirable

Strategizing networks of power and influence: the Internet and the struggle over contested space

Steve Conway, Ian Combe and David CrowtherKeywords Internet, Globalization, Localization,Postmodernism, Empowerment

Whilst some authors have portrayed theInternet as a powerful tool for business andpolitical institutions, others have highlightedthe potential of this technology for thosevying to constrain or counter-balance thepower of organizations, through

e-collectivism and on-line action Whatappears to be emerging is a contested spacethat has the potential to simultaneouslyenhance the power of organizations, whilstalso acting as an enabling technology for theempowerment of grass-root networks In thisstruggle, organizations are fighting for theretention of ‘‘old economy’’ positions, as well

as the development of ‘‘new economy’’power-bases In realizing these positions,organizations and institutions arestrategizing and manoeuvering in order toshape on-line networks and communications.For example, the on-line activities of

individuals can be contained throughvarious technological means, such assurveillance, and the structuring of thevirtual world through the use of portals and

‘‘walled gardens’’ However, loose groupings

of individuals are also strategizing to ensurethere is a liberation of their communicationpaths and practices, and to maintain thepotential for mobilization within and acrosstraditional boundaries In this article, theunique nature and potential of the Internetare evaluated, and the struggle over thiscontested virtual space is explored

[ 161 ]

Managerial Auditing Journal

18/3 [2003] 159-161

electricity had on our forefathers a centuryago Indeed some would go further, seeing theInternet as the most fundamental

technological development in human history,revolutionising the way we work, play andlearn – the differing thrusts of the articles inthis special issue go some way towardreflecting this diversity There is clearevidence to support the claim that theInternet is having a profound impact on theway we do business For example, according

to a new study by the University of Texas’

Center for Research in Electronic Commerce,

‘‘Internet economy forces are transformingtraditional companies and jobs’’ to the extentthat this technology is helping generate 70 percent of the new jobs in the US economy(Internet Indicators, 2002) Moreover, thesejobs are traditional non-IT jobs across allsectors One sector, Internet based tourismservices, more than doubled from $4.2 billion

in 1999 to $8.7 billion one year later Latestestimates of the growth of the US Interneteconomy show $830 billion in revenues in

2000, a 58 per cent growth over 1999 (InternetIndicators, 2002) These macro statistics showthe scale of adoption of Internet technologyand the blistering pace of that adoption

A cursory examination of some of thesocial and organisational processes reflected

by these statistics gives a sense of the degree

to which this technology is being enrolled bycorporations to transform organisationalcommunication and reporting mechanisms

Two examples will suffice First, within adecade e-mail and the Web site have replacedthe traditional typed memo and displaced thelaboriously produced corporate report Thefirst has enabled instantaneous – and attimes real-time – communication with allstakeholders, while the second has madepossible the provision of public andconstantly updated information aboutcorporate activities, both historical andanticipatory Second, earlier investmentsmade by corporations in PC and enterpriseresource management systems sought to

automate administrative and accountingprocesses These investments have largelybeen inward looking, concentrating onincreasing the efficiency of businessprocesses The exploitation of the Internethas built on these gains, transformingcommunication and transaction processeswith external stakeholders In addition toraising internal efficiencies, the Internet hasenabled similar and additional benefits to beexploited in developing relations withsuppliers, customers and investors alike.Indeed, stakeholders expect corporations tohave a Web site, as a mark of legitimacy.While these two examples highlight thetransformational nature of the Internet, theyalso suggest two concerns that have a bearing

on the content of what corporations reportand on how they report their activities Thesetwo issues are information asymmetry andvariation in institutional frameworks acrossthe globe

The World Wide Web (WWW) ischaracterised as being a repository of anoverwhelming amount of information, notjust within individual Web sites but alsoacross the millions of pages that constitutethe Web; an on-going proliferation facilitated

by the low cost of access to the Internet Notsurprisingly therefore, a major benefit of theWeb to any proactive stakeholder is that fastand relatively free access to this vastresource reduces the cost of gatheringinformation (Larsson and Lundberg, 1998).Information that is dynamic, being regularlyupdated as on-line information can be, seemsmore likely to be respected by visitors thanpoorly and infrequently updated Web sites.However, organisations and individualsalike commonly exploit the medium’sflexibility by posting material in such a waythat it is often difficult to distinguishbetween promotion and information Moregenerally, the Web site is simply anadditional medium that the corporationenlists in managing information exchangeswith its public Ackerlof’s (1970) pre-Internetobservation remains valid that there is a gapbetween what the corporation knows aboutits products and what customers are told.More critically, the stakeholders, be theyinvestor or potential customer, cannotevaluate the quality and reliability of on-lineinformation, thereby undermining theirwillingness to execute on-line transactions(Oxley and Yeung, 2001), and more broadlycompromising their ability to judge the[ 162 ]

Managerial Auditing Journal

18/3 [ 2003 ] 162-165

#MCB UP Limited

[ ISSN 0268-6902 ]

credibility of corporate claims andexpectations This asymmetrical distribution

of information between corporation andstakeholder reflects its political value

Variation in both the technologicalinfrastructure and institutional frameworksacross the globe mean that the exploitation ofInternet technology is not even (Oxley andYeung, 2001), and therefore issues ofaccountability will vary significantly Thedeveloped economies, in particular the USA,far outstrip developing economies in theirengagement with the technology Theexistence or otherwise of supportiveinstitutional frameworks have an importantpart to play, first in supporting the

engagement of the technology bycorporations, and second in the ways inwhich that engagement unfolds Of particularrelevance to issues of accountability is theexistence of differentiated legal and ethicalframeworks around the globe We have seenfor example that Internet service providersare treated differently in the USA andEurope In the USA they are not liable fordefamatory material generated by a user,while in the UK they can expect to be foundliable Also data protection legislation withinthe European Union prohibits corporationssharing customer information with theirUSA operations, where such protection doesnot exist

These concerns are inherent to relationsbetween corporations and their stakeholdersand between corporations and the state They

do not show up on any financial statementand leave no audit trail Traditionally theaccountability of companies to theirstakeholders has been recognised only to alimited extent, with a chief concern beingexpressed for accountability to shareholders

as owners of the business One of theprincipal mechanisms for ensuring thataccountability has been through themechanism of audit but even this audit of theactivities of an organisation has tended to be

an activity of relatively little importance inthe life of the organisation Such auditing hastended to be mostly in financial terms, on thebasis that it was only shareholders as thelegal owners of the business who mattered tothe managers (in accordance with agencytheory), and carried out in arrears(Crowther, 2000) Indeed for moststakeholders to an organisation the onlymechanism for that audit was the annualreport of the organisation, which waspublished some period of time after theactivity it recorded had taken place Thusauditing, like accounting, was an activitywhich happened after the action had takenplace and merely provided confirmation that

this action was acceptable Thus very often inthe past such an audit was a token

verification which at the same time, provided

a validation of the efforts of the management

of the firm In this respect auditing servesboth a legitimating purpose for managerialactivity and a focus upon that activity.More recently the activity of firms, andhence of their managers, has become ofconcern to a wider range of stakeholders tothe firm, particularly with respect to thesocial and environmental effects of thatactivity In this way the auditing of theactivities of a firm has been extended both interms of the scope of these activities and interms of the number of stakeholdersdemanding accountability from the firm andits managers for their activity Thus auditinghas been considerably extended in its scopeand accountability has become moreprominent The development of the Internet,and the increasing access to it by individuals,has the potential of increasing the extent ofaccountability of a firm, has providedindividuals with increasing power to maketheir respective voices heard, and has madeauditing a current activity rather than anexamination of the past Indeed auditing hasbecome a means whereby the variousstakeholders to the organisation caninfluence, or at least comment upon, theactivities of the organisation (Crowther,2002) Thus auditing has changed not just inscope, nor in range of stakeholders involvedbut also in its temporal immediacy In doing

so it has affected the way in which managerscan make use of information, and justify anydecisions made therefrom

The advent of the WWW has enabled otherstakeholders to an organisation to

participate in the running of thatorganisation through their ability toundertake immediate on-line auditing of theactivities of the organisation and to

communicate their opinions to the managers

of the organisation At the same timeorganisations have supplemented thepublished, paper-based reporting of activitiesand resultant performance with on-linereporting Such reporting is different fromthe annual report in that more detail isprovided concerning performance, withmuch more non-financial data beingprovided This has been done byorganisations as part of the governanceprocedures to make their activities moretransparent and therefore the organisationmore accountable More significantlyhowever such reporting is readily available

to anyone who cares to look and is providedmore immediately than the retrospectiveannual report This has the potential of

[ 163 ]

Guest editorial

Managerial Auditing Journal

18/3 [2003] 162-165

opening up the discourse of corporateaccountability to a much wider range ofstakeholders and to facilitate a demand foraccountability in a time frame which enablesfuture actions of the organisation to be morereadily affected by those stakeholders Morespecifically it potentially holds the managers

of an organisation more directly accountablefor the actions of the organisation

The increasing availability of access to theInternet has been widely discussed and itseffects suggested, upon both corporations andupon individual members of society

(Rushkoff, 1997) For corporations much hasbeen promulgated concerning the

opportunities presented through the ability

to reach a global audience and to engage inelectronic retailing; much less has been saidabout the effects of the change in

accountability provided by this medium

Much of what has been said is based upon anexpectation that the Internet and the WWWwill have a beneficial impact upon the way inwhich society operates (see for exampleHolmes and Grieco, 1999) Thus Sobchack(1996) argues that this technology will bemore liberating, participatory andinteractive than previous cultural formswhile Axford (1995) argues that it will lead toincreasing globalisation of politics, cultureand social systems Much of this discourse isconcerned at a societal level with the effects

of Internet technology upon society, and only

by implication, upon individuals withinsociety It is however only at the level of theindividual that these changes can take place

Indeed access to the Internet, and the ability

to communicate via this technology to otherindividuals, without regard to time andplace, can be considered to be a revolutionaryredistribution of power (Russell, 1975)

Moreover the disciplinary practices ofsociety (Foucault, 1977) breakdown when theInternet is used because of the lack of spatialcontiguity between communicants (seeCarter and Grieco (1999) regarding theemerging electronic ontologies) and because

of the effective anonymity of thecommunication which prevents thenormalising surveillance mechanisms ofsociety (Clegg, 1989) to intercede in thatcommunication Thus the Internet provides aspace for resistance to foment (Robins, 1995)

Of particular interest however from theviewpoint of this issue is the way in whichaccess to the technology to use the Internetcan redefine the corporate landscape andchange the power relationship between largecorporations and individuals In this respectthe changes in these power relationships can

be profound and even revolutionary Thetechnology provides a potential challenge to

legitimacy and can give individuals theability to confront large corporations and tohave their voice heard with equal volumewithin the discourse facilitated bycyberspace Much of the discoursesurrounding this changed accountability has

a positive note to it, expecting the changes tobenefit stakeholders generally Dissentingvoices are much less prominent

It is the aim of this issue to question thisoptimism and provide evidence towards amore balanced view of accountability in theelectronic age With this in mind, thefollowing papers are presented in this specialedition, bringing together academics to sharetheir research and ideas on this importantissue The aim is to present a set of paperswhich reflects some of the current thinkingconcerning corporate accountability in theelectronic era The backgrounds andinterests of all of those who have contributed

to this special edition span variousdisciplines Furthermore the papers offerboth theoretical approaches as well asempirical investigations It is hopedtherefore that a combination of all of thesecontributions will improve and reinforce theexchange and discussion of research ideasbetween the different disciplines, and seek toenable a more balanced consideration of theeffects of the Internet upon corporateaccountability to take place

And so to the papers In the first paper inthis issue Rayman-Bacchus considers theeffect of the Internet upon corporategovernance He uses ideas from culturaltheory and shows that corporations constructtheir social realities based upon a variety offactors including their heritage From this heargues that any attempt to reform systems ofcorporate governance to make them moreresponsive to the various purposes of acorporation must take into account asensitivity to the social context in which anycorporation operates He therefore sees littlechange resulting from the increased

openness to accountability to the widerstakeholder community which arises fromthe scope of the Internet Cooper however isslightly less pessimistic but argues that moretime is needed to ascertain the effects of theInternet upon corporate accountability Heuses evidence from the UK electricityindustry to investigate the use of the Internet

as a mechanism for dialogue betweencompanies and their stakeholders Herecognises the potential for such dialogue butshows that there is little evidence of anydialogue and that companies use it mainly tomake information available Thus he arguesthat more information about corporateactivity is more speedily available to more[ 164 ]

Guest editorial

Managerial Auditing Journal

18/3 [2003] 162-165

stakeholders than previously but that littleelse has yet changed.

Murphy and Bruce consider the uses of theInternet from a very different perspective

Their concern is with accountability toshareholders alone and they consider thetrend for all companies to need to establish

an Internet presence and to evaluate thepotential for on-line retailing Adopting astrategic perspective, the paper criticallyexamines the potential growth opportunities

of on-line retailers together withidentification of consumer value a Web sitemay offer They argue that many companieshave developed a Web presence without anyconsideration of the strategic implication ofdoing so and that any benefits which mightaccrue will only materialise in the long term,rather than in the short term as expected bymany such companies

Broad et al are concerned with theaccuracy and reliability of informationpresent on the Internet, recognising thepossibility for ‘‘libellous, defamatory,inaccurate, illegal or inappropriate’’

information to be present without any means

of control They equally recognise that theinteractivity of the Internet allows

immediate access to anyone who presents adifferent operating environment who raisesissues of audit and control They use the role

of the Internet in the learning and teachingactivities of academic institutions toconsider a wide range of stakeholder groupswhich are affected and to consider whereregulation currently exists or may bedesirable

In the final paper of this issue Combe et al

recognise that the Internet provides acontested space that has the potential tosimultaneously enhance the power oforganisations, whilst also acting as anenabling technology for the empowerment ofgrass-root networks Starting from thisposition the authors evaluate the uniquenature and potential of the Internet, andexplore the struggle over this contestedvirtual space They accept that the Internetprovides a facility to give a voice to peoplewho would otherwise find difficulty inobtaining that voice and that, as far as thetechnology is concerned, that voice is equal

to all other voices Their argument, using arange of examples, however is that theliberating and vocalising power of theInternet, which is extolled by some authors,

is actually subject to many invisible andinsidious controls These controls can have

the effect of maintaining the prevailinghegemonic interests by control

masquerading as freedom

David Crowther andLez Rayman-BacchusLondon Metropolitan University,London, UK

References

Ackerlof, G.A (1970), ‘‘The market for lemons: quality uncertainty and the market mechanism’’, Quarterly Journal of Economics, Vol 84 No 3, pp 488-500.

Axford, B (1995), The Global System, Polity Press, Cambridge.

Carter, C and Grieco, M (1999), ‘‘New deals, no wheels: social exclusion, tele-options and electronic ontology’’, paper presented to Odyssey Workshop, Cornell University, August.

Clegg, S.R (1989), Frameworks of Power, Sage, London.

Crowther, D (2000), ‘‘Corporate reporting, stakeholders and the Internet: mapping the new corporate landscape’’, Urban Studies, Vol 37 No 10, pp 1837-48

Crowther, D (2002), A Social Critique of Corporate Reporting, Ashgates, Aldershot.

Foucault, M (1977), Discipline and Punish, in Sheridan, A (Trans.), Penguin, London Holmes, L and Grieco, M (1999), ‘‘The power of transparency: the Internet, e-mail and the Malaysian political crisis’’, paper presented

to Asian Management in Crisis Conference, Association of South East Asian Studies, University of North London, London, June Internet Indicators (2002), The Internet Economy Indicators, available at: www.internet indicators.com/execsummry.html (accessed

7 September).

Larsson, M and Lundberg, D (1998), The Transparent Market, St Martin’s Press, New York, NY.

Oxley, J.E and Yeung, B (2001), ‘‘E-commerce readiness: institutional environment and international competitiveness’’, Journal of International Business Studies, Vol 32 No 4,

pp 705-23.

Robins, K (1995); ‘‘Cyberspace and the world we live in’’, in Featherstone, M and Burrows, R (Eds), Cyberspace/Cyberbodies/Cyberpunk, Sage, London.

Rushkoff, D (1997), Children of Chaos, HarperCollins, London.

Russell, B (1975), Power, Routledge, London Sobchack, V (1996), ‘‘Democratic franchise and the electronic frontier’’, in Sardar, Z and Ravetz, J.R (Eds), Cyberfutures, Pluto Press, London.

[ 165 ]

Guest editorial

Managerial Auditing Journal

18/3 [2003] 162-165

Social audit and accountability in IT management

Branka Mraovic ´ Faculty of Geodesy, University of Zagreb, Zagreb, Croatia

Prologue

The main difficulty of the Modern Age mancomes from the fact that he is socialized insuch a way as to see obedience to authority asvirtue In this paper, we use informationtechnologies as a material in which weexplore the reasons of those who have hadthe courage, no matter how painful this mayhave been, to say no to the unacceptable

However, this no is not fatalist nor anarchic,destructive Thanks to the Internet, theoryhas finally got a necessary weapon forstruggle for a better world

of education and qualifications among theirpopulation (British Information Society Ltd,1990) As the changes of the informationtechnologies affect the overall changes insociety, it follows that these technologiesshould be the subject of general interest

Information technology strategy is acrucial part of the overall managerialstrategy and should not be consideredoptional However, information technologiesare implicitly understood as a factor having

an important, yet supporting andsubordinate role, as they are limited by theboundaries set up by market and businessstrategies Also, factors such as political,social and strategic choices significantlydiffer among countries, considering the ways

in which they respond to the developments inthese information technologies A productiveuse of strategic potentials of information

technologies is a principal condition for thepenetration of the technologies into nationaland international markets, which should befollowed by a synchronised action of themajor decision makers on the scene Theseinclude governments, industries,

corporations, research and development,trade unions and education systems

Computer networks are not mere technicalfacts, but social catalysts in the first place,which significantly affect human

relationships, especially when it comes toeconomic relations and power relations that

we find in the organisational culture of theglobal age Hence power struggles in ITenvironments do not arise from economicdevelopment only, but also from

opportunities to access communicationchannels The new system of wealthproduction comprises the global networksmade of markets, banks, governmentagencies, industrial centres and researchinstitutes, which, due to informationtechnologies, are able to have promptcommunication with one another,exchanging data, information and knowledge(Arnold, 1991; Dosi, 1984; Elliot and

Starkings, 1988; Gates and Hemingway, 2000;Rivlin, 1999)

It should not be overlooked, though, thatthe network society is a capital society, asCastells (2000) reminds However, the socialrelations between labour and capital haveradically been transformed At its core,capital is global Networks converge towards

a ‘‘meta-network’’ of capital, integratingcapital interests on the global level Bycontrast, although there is a unity of labourprocess within the complex global networks,labour is, in principle, local, disaggregated inits performance, individulaized in itscapacities, fragmentised in its organisation,diversified in its existence, and divided in itscollective action In this way labour and

The Emerald Research Register for this journal is available at http://www.emeraldinsight.com/researchregister

The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/0268-6902.htm

electronically operated global

capitalism is that it is structured

with the help of information

networks integrating capital

interests at the global level The

environment in which the selfness

realises itself in the informational

society is the global networks and

computer communications,

creating a wide range of virtual

communities imposing a new type

of logic – the network logic In the

new network landscape,

information technologies, including

the Internet, provide a technical

support for a greater justice and

equality on the virtual highways,

thus affirming the voice of an

individual In this way, Foucault’s

thesis that power relations are

rooted into the entire network of

society comes into realization.

Corporate behaviour is in line with

the dominant social norms, values

and expectations, but at the same

time it can be significantly

modified by social pressures and

changes The same goes for the

ways in which information

technologies are implemented

within organisations, which means

that a continual evaluation of IT

management programmes is

needed, not only from the point of

view of its technical effectiveness

but also from the point of social

audit and accountability in

management.

capital increasingly tend to exist in differentspaces and times, because the global capital

is no longer dependent on specific labour, but

is ever increasingly dependent onaccumulated generic labour led by virtualglobal networks Hence, a characteristic ofthe new type of society, Castells argues, is apre-dominance of social morphology oversocial action Also, for the majority of people,the network society is represented as a

Today’s managers, and those of tomorrow,must accept personal responsibility for doing

‘‘right’’ things Broad social and moralcriteria must be used to examine the interests

of multiple stakeholders in a dynamic andcomplex environment Decisions must always

be made and problems solved with ethicalconsiderations standing side by side withhigh performance objectives, be theyindividual, group or organizational(Schermerhorn, 1996, p 119)

Organisational accountability for ethical andsocial performance, as well as for economicperformance, implies inherently newparameteres for measuring its effectivness,including economic, legal, ethical, anddiscretionary performance criteria

Although it is not questionable that themajor power in the organisation lies in thehands of managers, the context in whichcontrol takes place requires an open system,which means that legislatory and regulatoryrequirements from the external

environment, as well as the organisation’sinteractions with its environment, should beconsidered In this way systems of controlbecome agents of social change (Tinker, 1985,1997; Munro, 1998; Vives, 2000) In thiscontext, corporate reporting becomes acrucial issue, as it can be seen then to whomorganisations are accountable, and who hasauthority to evaluate their performance(Crowther, 2002) Accountancy has a central

site in the organisation as part of the control

as well as evaluation system If we look at thepublications of annual reports by

organisations in the past, we can see thattheir primary function was to informshareholders, as the legal owners of thebusiness, while today a corporate publicationemphasizes the managers’ actions related tothe company’s future and its desirable form,taking into consideration a wide range ofstakeholders as well These changes arebrought about, as some authors (e.g

McDonald and Puxty, 1979, cited in Crowther,2002) think, because companies are not mereinstruments of shareholders, but theiraccountability towards a wider socialcommunity comes from the fact that they arepart of that community Others hold that theinformation architecture of reportingchanges under the influence of pressuregroups (e.g Lee and Parker, 1979; Aryana,

1979, both cited in Crowther, 2002) Thisopens up the issue of the criteria formeasuring business performance, and it ispossible that different evaluations willappear, implying different uses ofaccountancy in the process of measuring.Therefore it is evident that what is thought to

be the concept of good performance depends

on the points of view taken by the distinctivestakeholders’ groups This, however, opens

up the debate about the presentation ofaccountancy data, use of language and thecontrol of accounting discourse For Morgan(1988, cited in Crowther, 2002), accountancy

is an ‘‘interpretative art’’, while Puxty andTinker (1994) point out the need for policingaccounting knowledge to recognise thematerial nature of language Language is not

a mere communication device, but is acentral constituent of the communicationworld Hence the control of the signifierthrough the socialized gatekeeper is inessence a control of the material world.Control over the process of production ofknowledge is not only a control overcommunication media, but also over themateriality of the accounting knowledgeitself The way in which language is used inaccounting journals, whether it presents ormisrepresents the material world, becomes

an ideological means which supports capital,

as well as a means of censoring ‘‘dangerousminds’’ This is the way in which theacademic community manipulates a certain

‘‘thing’’, and not with the description of thething:

The key point here is that what appears atfirst to be merely an ideological state processbecomes, in its operation, part of a repressivestate process (Puxty and Tinker, 1994, p 258)

Since discourse constitutes the central form

of academic life, to control scientificdiscourse is the same as to control scientificlife itself

The same pattern of ideological formations

in handling accountancy, or any other data,can be applied in corporate practice as well

Considering the fact that managers performtheir working tasks at the critical crossroads,between people and organisations, as well asbetween organisations and their

environments, their work should continually

be subjected to the public’s evaluation

Hence, accountability in management is:

The process of making top corporate leadersresponsible for their actions, goals and so on,utilizing available objective measures(Rosenberg, 1993, p 4)

The positive element coming out of theseprocesses is a new social context in which thepublic expects business and other

organisations to incorporate socialaccountability into their action This meansthat the boundary between ethical and legalbehaviour is further moved so that theorganisation fulfils its ethical responsibilitynot only through its legally appropriateactions, but also through wider values andmoral expectations set by society As themanager’s job description is to evaluate otherpeople’s work, he or she is also a person whoassesses whether we benefit from ourinstitutions or whether they waste ourtalents (Schermerhorn, 1996)

At the organisational level, ‘‘social audit’’

becomes a key concept, which can be definedas:

an identification and evaluation oforganizational activities that are believed tohave a positive social impact (Rosenberg,

1993, p 313)

Organisations act in an environmentalcontext made of legal requirements,competitors, and social norms and values

The differences in cultural context, as well as

in the economic, industrial, political andlegal environment in which corporationswork, significantly determines the profile ofthe strategy chosen for their social

responsibility Organisations differ in thelevels of accepting their social responsibilty,depending on whether managerial

responsibility is taken only in the sense ofrunning the company to increase profit, orwhether the interests of all those involved inthe operation of the company are taken intoconsideration When viewed as a continuum,

at one end of it then there are companieswhich obstruct social accountability, while

at the other end are those which endeavour

to improve human rights Schermerhornemphasizes four distinctive strategies ofcorporate social responsibility:

1 obstructionist strategy (‘‘fight the socialdemands’’), when the company avoidssocial responsibility in the name ofeconomic priorities;

2 defensive strategy (‘‘do the minimumlegally required’’), when the companytakes that it meets legal obligations if itswork is not against the law;

3 accomodative strategy (‘‘do the minimumethically required’’), when the companyaccepts its social responsibility, actingresponsibly towards social community;

4 proactive strategy (‘‘take leadership insocial initiative’’), when corporatebehaviour is preventive in actions so as toavoid damaging social consequenceswhich could be brought about by thecompany’s operation (Schermerhorn,

1996, pp 117-18)

Experience shows that corporate behaviour

is normally in accordance with dominantsocial norms, values and expectations, butalso with social pressures and changes.Hence the voice of the public becomes adecisive factor

Power as essential component of accountability

Conceptualising power

A definition of power should meet thefollowing criteria:

1 coherence of theory;

2 its application in empirical data; and

3 measurability of its conclusions in theoryand practical action (Abercrombie et al.,1984)

Yet it is here where the difficulties arise.There are many definitions of power, and theconcept as such is confusing The maindilemmas are concerned with the issue ofwhether power should be taken intentionally

or structurally, or whether it is perhaps moreproductive to combine the two approaches(White, 1972; Tannenbaum, 1968; Dahl, 1968;Pfeffer, 1981; Fligstein, 1987; Perrow, 1972;Zald, 1969, 1970; Chandler, 1962, 1977; Rumelt,1974) According to Philip (1985), it is possible

to identify three major sources of dispute.First, different disciplines in the socialsciences focus on different sources of power(wealth, status, knowledge, authority).Second, there are various forms of power(influence, coercion, control) Third, thereare various uses of power (individual or[ 168 ]

collective goals, political or economic goals).

Consequently, different aspects of theconcept have been emphasized, depending ontheoretical and practical interests

Also, authors differ in their views onwhether power has value connotations Forexample, McLachalan (1981) holds that there

is no formal-logical relationship between theconcept of power and the system of values

On the contrary, when we say that a personuses power in any way, we do not necessarilyexpress the moral values of the person

Unlike McLachalan, Lukes (1974) argues thatthe very definition of power, as well as any ofits uses, is inevitably related to given valueorientations determining the range of itsapplications Furthermore, Connolly (1974)says, competition in defining the meaningsand interpretations of the concept of powerbelong to the sphere of political action, whichmeans that the differences in the judgments

of what the phenomenon of power is areinevitably based on values

Power, the self and resistance

We believe that struggles for power in ITenvironments can be fruitfully analysed withthe help of Foucault’s conceptual framework,

as it includes productive reactions of theindividual, and this in the first place in thesense of resistance against things existing

Therefore, we shall, for the purpose of thispaper, borrow some of his ideas (Foucault,

1980, 2001) One of the key issues of Foucault’sphilosophy is certainly the way in whichindividuals, as thinking beings, constitutetheir identity On one hand, we constituteourselves indirectly, through excludingothers, such as the sick, the insane, thecriminals, etc., while on the other hand, we

do it directly through certain ethicalprocedures of the self, developed over thecenturies of thinking and practice in theWestern world In the basis of Foucault’spolitical technology of individuals are theissues of ‘‘technologies of the self’’ belonging

to the eighteenth century: what are we in ouractuality? In which way are we forced torecognize ourselves as society, as part of asocial entity (Foucault, 2001, pp 403-17)?

Following the philosophical tradition,Foucault postulates a contra-thesis and acontra-question: perhaps the goal of today’sworld is not to reveal what we are but rather

to reject what we are Hence, it seems that thepolitical, ethical, social and philosophicalgoal of the present times would be to try tofree the individual from his ‘‘double bind’’

related to his simultaneous individualizationand totalitarisation of modern powerstructures This is, Foucault argues, only

made possible through a continualimprovement of the new forms of subjectivity

by rejecting the type of individuality imposed

on us over the past centuries

The fact that political structures are made

of big destructive mechanisms andinstitutions that take care of the life of theindividual is one of the central antinomies ofour political rationality What Foucault isinterested in is techniques and proceduresthat give a concrete form to the new politicalrationality, and to the new kind of

relationships between social entity and theindividual Unlike the ancient polis, in whichthe individual was integrated into socialentity through the form of ethicalcommunity, in the modern state theintegration is achieved through the form ofgovernment of people, which is characterised

by that the individual exists in so far as hecan be of benefit to the state In other words,man exists only if he can be used for apurpose This is because the modern state is aform of political power which is based only

on the interests of totality or a certain socialclass Yet as Foucault points out, the modernstate is a distinctive form of power,

individualized and totalitarian at the sametime The form implies the knowledge ofconsciousness and the ability to guideconsciousness, and is related to theproduction of the individual’s truth as well.However, the issue is not that the state is anentity above the individual, but the issue ismore about a structure which can integrateindividuals, provided their individuality ismodified into a new form and subjected to arange of specific patterns A main

characteristic of modern rationality is thefact that the integration of the individual intocommunity or totality is a continual process

of interdependence between the growingindividualization and the growing influence

of totality, which in turn brings about theantinomy between law and order

What becomes the primary goal ofphilosophy after the development of themodern state and political management is tokeep watch over the excessive display ofpower of political rationality (Foucault, 2001,

pp 326-48) Unlike some authors of theFrankfurt School, Foucault is not concernedwith the phenomenon of ‘‘rationalization’’,which is specific of the modern culture of ourage, and dates back to the enlightenment era.Instead, he analyses specific rationalities ofpower relations through anatagonism ofstrategies used, as he believes that thisapproach implies a closer relation betweentheory and praxis The approach is

concerned with the resistance to variouspower forms, whereby the main aim of the

struggles is not to attack a particularinstitution or social group, but rather atechnique, or form of power in action Theseare the struggles against the ‘‘government ofindividualization’’ which connects theindividual with his identity in a limited way.

What is common to the struggles is:

. that they are ‘‘transversal’’ ones, that is,they are not limited to one country, or onepolitical or economic form of government;

. the struggles are aimed at the effects ofpower as such;

. they are direct, that is, are aimed at thenearest, and not the ultimate, instances ofpower;

. they assert the right to diversity;

. they are against privileges of knowledge,secrecy, deformations and mystifyingrepresentations imposed on individuals;

and. they reject abstractions of economic andideological violence that ignore theindividuality of human beings

Historically, three forms of social struggles,

be it separate or interconnected, could bedistinguished:

1 against domination forms (ethnic, socialand religious);

2 against economic exploitation; and

3 against the submission of subjectivity

The form power used in an immediate,everyday life, is the form which transformsindividuals into subjects

There are two meanings of the word

‘‘subject’’: subject to someone else by controland dependence, and tied to his own identity

by a conscience or self-knowledge Bothmeanings suggest a form of power thatsubjugates and makes subject to (Foucault,

2001, p 331)

The concept of power, therefore, Foucaultviews as a set of actions that will encourageother actions and follow one another Powerrelations are rooted in the entire socialnetwork, which means that they cannot bereduced to one primary and basic principle

In this way, an opportunity opens up to haveimpact on others, but also to define variousforms of power Considering the fact thatpower exists insofar as it is exerted overother human beings, that is, when it is putinto action, Foucault is not interested in thepower itself, but the subject of his analyses ispower relationships in all their multiplicity

of connections and interactions Powerrelations can be achived if two basicassumptions are met:

1 if the other, upon whom power is exerted,

is recognized as an acting subject; and

2 power relationships include in themselves

a range of responses, reactions, resultsand inventions

Perhaps the equivocal nature of the term

‘‘conduct’’ is one of the best aids for coming toterms with the specificity of power relations

To ‘‘conduct’’ is at the same time to ‘‘lead’’others (according to mechanisms of coercionthat are, to varying degrees, strict) and a way

of behaving within a more or less open field ofpossibilities The exercise of power is a

‘‘conduct of conducts’’ and a management ofpossibilities Basically, power is less aconfrontation between two adversaries ortheir mutual engagement than a question of

‘‘government’’ (Foucault 2001, p 341)

However, government in this sense relatesnot only to the forms of political andeconomic subjection, but also to forms ofaction To govern, in this sense, means tobuild up a potential field for action for others

In the game, freedom occurs as a majorprecondition for exerting power, which initself involves the recalcitrance of the will.Without the right, Foucault underlines,power would be an equivalent for physicaldetermination:

For, if it is true that at the heart of powerrelations and as a permanent condition oftheir existence there is an insubordinationand a certain essential obstinacy on the part

of the principles of freedom, than there is norelationship of power without the means ofescape or possible flight Every powerrelationship, implies, at least in potentia, astrategy of struggle, in which the two forcesare not superimposed, do not lose theirspecific nature, or do not finally becomeconfused Each constitues for the other a kind

of permanent limit, a point of possiblereversal (Foucault, 2001, p 346)

Social networks in the IT landscapeThe environment in which the self realizesitself in the informational society consists ofglobal networks of instrumentality andcomputer based communication that create awide range of virtual communities, imposing

in the process a new type of logic – thenetwork logic of its basic structure Theconcept ‘‘informational society’’ is muchwider than the concept of ‘‘network society’’,though the dominant social functions andprocesses in it are organised along thenetworks Castells (2000) makes an analyticaldistinction between the concept of

‘‘information society’’ and ‘‘informationalsociety’’ The former represents a type ofsociety in which information has a function

to communicate knowledge, and as such, itconstitutes the cultural history of mankind,[ 170 ]

and the latter represents a distinctive form ofsocial organisation in which data production,processing and transmission are majorsources of wealth and power.

For Castells, the pre-eminence of identityrepresents an organising principle of theearly stage of informational societies, whileTourraine (1994, cited in Castells, 2000)claims that in post-industrial society it is thedefence of the subject, his personality andculture, against the logic of apparatuses andmarket, that replaces the idea of classstruggle Information systems andnetworking increase human potential fororganisation and integration in that they linknodal points all over the planet, while at thesame time disconnecting and excludingwhole regions, countries and societies Hencenetworks are both inclusive and exclusive,enabling a whole range of reciprocialrelationships:

There seems to be a logic of excluding theexcluders, or redefining the criteria for valueand meaning in a world where there isshrinking room for the computer illiterate,for consumptionless groups, and for under-communicated territories When the Netswitches off the Self, the Self, individual orcollective, constructs its meaning withoutglobal, instrumental reference: the process ofdisconnection becomes reciprocal, followingthe refusal by the excluded of the one-sidedlogic of structural domination and socialexclusion (Castells, 2000, p 24)

There is no doubt that being connected, or forthat matter, disconnected in the network, aswell as the dynamics within and between thenetworks, are the key factors of dominanceand change in the informational society;

henceforth a special emphasis in anthroplogyand sociology literature is given to theresearch on social networks In this context,special attention is drawn to the

phenomenon of power, so the authors tend todeal with structural determinants of power

in exchange networks, which they test inlaboratory experiments and a computersimulation of bargaining in networkstructures (Cook and Emerson, 1977, 1978;

Blalock and Wilken, 1979; Granovetter, 1979;

Miller, 1980; White et al., 1976; Cook, 1982)

Cook et al (1983) sought to test twotheoretical traditions:

1 point centrality in graph-theoreticrepresentation of structure, as anapproach to power distributions; and

2 power-dependence principles applied toexchange networks

Their research has shown that measures ofcentrality can be applied to big and complex

networks, but that they are not adequate forforseeing power distribution On the otherhand, the power-dependence conceptgenerates the hypotheses on powerdistribution in all types of networks, but thehypotheses are cumbersome for the analysis

of complex networks As a contribution tosolving the difficulties, the authors offer twoconclusions:

1 a distribution between two differentprinciples of ‘‘connection’’ in socialnetworks suggest that current measures

of centrality might predict power in onetype of network but not in the other; and

2 it offers a first step toward a fusion ofpower-dependence theory and structuralcentrality in a way which might begeneral across networks of both types(Cook et al., 1883, p 275)

Marsden (1983) seeks to develop arelationship between Emerson’s power-dependence framework and the model ofpower and collective decision makingdeveloped by Coleman (1973, 1977) in that hemodifies Coleman’s model of purposiveaction (which includes a conception ofdependency in terms of the control of oneactor’s interests by another) He especiallyaims to integrate Emerson’s idea intoColeman’s model that dependency isinversely related to the number of alternativerelationships an actor may choose among inattempting to realize interests Marsdenholds that one useful way of doing this is toview differences in alternatives as a result ofthe different positions of individuals within anetwork of access relationships Hence theactors who have a favourable position inrelation to accessing the network have anopportunity to inflate the exchange value intransactions with peripheral actors Takentogether, these modifications enable theactors to influence the outcomes of events inthree distinctive ways

The first is through the direct control ofevents or resources with high impact onevents, as discussed by Coleman (1973) Asecond form of control is indirect; it involvesthe use of social status or control overinformation to persuade actors in possession

of the first type of control to pursue interestsconsonant with those of the actor exerting theinfluence (Marsden, 1981) The final form ofcontrol arises as a result of an actor’soccupancy of a nodal position in network ofpotential transaction routes; this allows such

an actor to affect the exchange value ofresources he controls ( Marsden, 1983, p 714)

These modifications begin to integrate socialstructural constraints into the framework of

the basic exchange model and to show hownetworks constrain individual and collectiveactions An advantage of the modifiedexchange model is that it can help in theinterpretation of features to be found in staticanalyses of social networks so that it enables

a description of the processes inherent in thegeneration of such models

A convergence of social evolution andinformation technologies has created a neweconomy organised along the globalnetworks of capital, management andinformation A network operated socialstructure:

. is a highly dynamic open system;

. is capable of expanding with nolimitations;

. is of variable geometry;

. unifies and commands;

. includes and excludes; and. acts in timeless space (Castells, 2000)

The integrated, global capital networks aresources of huge and dramatic

reorganisations in power relationshipsbecause the switches that connect thenetworks, and using signal codes in theprocess, have an ability to shape, guide andmisguide societies The networks areappropriate instruments of capital economy,and their interrelations and crossings reflectthe relations between corporations and smallfirms, sectors and geographical entities Thenew social organisation is defined by theevolution aiming towards the network forms

of management and production, and its mainingredient is information

A characteristic of the electronicallyoperated global capitalism is that it isstructured with the help of informationnetworks in the timeless space of financialflows Money has become almost totallyindependent of production, escaping into thenetworks of high-order electronic

interactions Capital network unifies and has

a command over specific centres of capitalaccumulation, structuring and conditioningthe behaviour of capitalists in globalnetworks By acting directly throughfinancial institutions, financial capital,

‘‘ mother of all accumulations that is theglobal financial network’’, determines thefate of industry and economy all over theworld (Castells, 2000, p 504) It is no surprisethen that it incites emotions, passions andcriticisms But, in any case, it does call fororganised responses

Castells, however, is not optimistic aboutthese processes, while we believe that theyopen up a space not only for new forms ofworkers’ resistance, but also for new

methods of struggle This certainlypresupposes a much greater ability of thelabour movement to adapt itself to anetworking logic as a major source of socialcohesion in the global capitalism In the newglobal environment, IT is an

omnipenetrating social force that changespower relations, provides mechanisms thatenable the shift of power from those whoabuse it to those who are their victims, whichultimately brings the issue of control of thecontrollers on the agenda

Munck (2000) focuses on the mainarguments of the left movement against theprocesses of globalisation that it is possible toderive a direct correlation between

globalisation and decreasing labour rights allover the world On the other hand, as ananswer to the ‘‘myth of globalisation’’ one canidentify:

a whole range of multi-faced, fluid andprobably contradictory responses by labourand other social forces (Munck, 2000, p 387)

Unlike Castells, for whom capital is fluid,mobile and proactive, while workers arepurely reactive, Munck points out animportant argument that labour should not

be understood as a passive recipient ofcapital and government strategies It seemsthat economic globalisation has createdcommon grounds for the struggles of workers

in many countries, and that culturalglobalisation minimalised or relativised theformer barriers of difference, or distancebetween labour movements Hence tradeunions were ‘‘going global’’ in the methodsthey used in their strategies in the 1990s.Therefore, globalisation has created a wholenew range of sites of resistance to capitalismand has helped generate a whole repertoire oflabour strategies and tactics The raising oflabour activities to the level of internationalcommunication is an important quality stepforward, in the sense of learning to interpretlanguage, because all social struggles are thestruggles related to interpretation on thediscourse level:

The new global agenda talks about the need

‘‘to make our voices heard for a new globalsocial development, for democracy andhuman rights and for the improvement ofworkers’ rights everywhere in the world’’(SID Global Labour Summit, 1997)

International labour organisations will play arole in this discursive construction of newreality, and the Internet will probably be aprivileged medium (Munck, 2000, p 391)

On the grounds of criticism of the corporatesector taking the example of financial andenvironmental reporting, Crowther (2002)[ 172 ]

also finds the liberating way out for theselfness in a technology of the Internet.

Inspired by the thesis developed by Munro(1999) that one of the most effective ways ofaffecting a change is to stay outside and to try

to affect the stream of conduct at a distance,Crowther believes that the Internet providesmeans that could affect the dominantrelations of power in the corporate world Onthe practical plane, the Internet is aninstrument by which the selfness couldactivate its operating principle: resistanceagainst a big corporation Stakeholders haveincreasingly greater access to informationthat makes them more capable to cooperatevirtually in the form of pressure groups, thuscontributing to changes in corporate

reporting and conduct

Baker (2002) warns that although theInternet has a potential to intensify thepower of the individual to take control overtheir own lives, the darker side of thecyberspace is something that has to be dealtwith Crimes and fraud are market andcapitalism side effects in the same way as it isimpossible to define fraud and abuse in theworld of conflicting interests in a conclusiveway This problem is enlarged by the fact thatthe involvement of the state is constantlyinhibited by supporters of ‘‘the free market’’

Relying on Castells (2000), who claims thatglobal capitalism demands global regulation,Barker is in favor of a meaningful use of theInternet in order to improve society

IT management and change

Organisations as social actionsTheories of organisational structures andchange have traditionally been dividedbetween structural-functional approaches,which aim to explain the phenomenon oforganisation by means of its formalstructure, and action-oriented perspectives,

in which conceptions of organisations areunderstood as entities evolving through theactions of their actors (Wilkinson, 1983) If welook at these theories historically, then wecan conclude that the analyses of variousaspects of organisational life became thefocus of researchers as a response to thepractical questions asked by management

Hence their main intention was to serve themanagement, so it was no wonder that theconceptions emphasised the condition ofsystem’s equilibrium and the processes ofemployees’ adjustment as their major field ofstudy A main difficulty of the conceptionswas that they could not offer appropriateanswers to the questions raised by the speedy

development of new technologies, becausethey were not able to satisfactorily explainchanges and conflicts

The concept of the organisation we have inmind in this paper relies on the work ofSilverman (1987), who suggests that action istaken as a referential framework for

interpreting organisational phenomena Akey element in the approach is an

understanding of organisations as anoutcome of actions and interactions ofmotivated people who aim to solve their ownproblems and follow their own goals.Research into organisations is not a goal initself, but it is a means by which it is possible

to understand general social processes from aclear sociological viewpoint Silverman’smethodological approach, which emphasizesactions, perceptions and meanings oforganisational rules, now focuses its analysis

on language In line with this, theenvironment is initially defined as a source

of meanings for members of organisationswho themselves give meaning to theiractions and define situations in line with thegoals they want to achieve

Silverman’s major contribution is that hehas introduced an action oriented

perspective into the theory of organisations

In other words, he has found an alternative tothe then dominant system theory, whichunderstood organisational structure assomething immanent to human behaviour,and something that gave it its meaning anddefined its goals Silverman makes

distinction between three features of formalorganisations First, organisations can beperceived, more than any other form of socialrelations, as inherently human creations.Second, relations within an organisation areless taken for granted by those who havecoordination and control in it The thirdfeature is that planned changes in socialrelations and the rules of the game are openfor discussion Consequently, Silverman’scriticism of other theories of organisations isbased on the concept which sees an

organisation from the point of view of socialrelations prevailing in it, and which

concentrates on the ways in which its actorsinterpret and understand those relations.Why do managers need IT?

Over the past decade informationtechnologies have rapidly developed andchanged, offering to organisations in thisprocess better results and a higher level ofservices at lower costs, which in turn hasincreased their competitiveness in themarket This, however, means the opposite aswell A threat from the competitive

companies superior in their use of

information technologies means, warnsHinton (1988), that learning how to use andapply them becomes a priority In 1987,research was carried out under the auspicies

of the British National EconomicDevelopment Council (NEDC), which showedthat a big problem which British companieswere facing was a lack of well educatedmanagers, especially those with technicalknowledge (MSC, NEDC and BIM, 1987)

Eaton et al (1988) say that British managerswere, for a long time, at the mercy oftechnical experts, particularly in the field ofdata processing However, this can hardlyhappen in the world in which informationtechnologies permeate all aspects of businessand social life Information technologies haverapidly been changing and developing, sothat the learning of IT skills becomesimperative both at the individual and theorganisational level In any case, it isindicative that education in the field ofinformation technologies takes place withinthe limits of technical issues and practicalknowledge, ignoring the social context andthe consequences of technological

development (Finnegan et al., 1990) After theimplementation of technology, it is theknowledge and skills of employees, as well asthe abilities of managers, that will determinethe level of the company’s competitiveness inthe new technology Yet, despite the hugepotentials, the impact of these technologies

on management creates more difficultiesthan many other issues One of the mainreasons for this lies in that the technologiesimpose wide organisational implications

It is evident that the implementation ofnew technology should be followed by twocomplementary programmes – one related tochanging the structure of the organisation,and another directed at developing managers

as the actors of change The programmesneed to be set up and take place

simultaneously, and here a continualevaluation is decisive for the success of theentire process Information technologies dealwith information, and this is the mostimportant resource for the organisation andits managers They differ from all types oftechnologies which, though having animportant role in the organisation, have only

a partial influence on managers Informationtechnologies, however, are in the very centre

of the managers’ work and so become veryimportant to them Information technologieshave developed as an answer to the demandsfor data processing, and their development ismarked by a long evolution of processes andideas They have a wide range of applications

in the organisation, they enter theproduction sphere through robotics andautomation and into offices throughcomputers and telecommunications

Any implementation of informationtechnologies within the organisation dependsupon the social processes and is influenced

by the values held by the managers at the top

of the organisational hierarchy as the keyagents of change The top managers canradically change the culture and ethics of thecompany, and can select a desirable form oforganisation That is why they need toclearly define the company’s goals, takinginto consideration not only short term butalso long term planning, and they are alsoexpected to be socially responsible

Consequently, the differences in valuesrepresent a source of essentially differentviewpoints as to the usefulness of the offeredinformation systems, and to the issues arsingfrom their usage Individual characteristics

of top managers can significantly influencethe dynamics and range of changes Sinceinformation technologies comprisenumerous technologies and theirapplications, they interact with numerousand various organisational forms (Kling,1990; Street, 1990; de Sola Pool, 1990; Zell, 1997;Webb, 1996; Moss-Jones, 1990)

Patterns of IT influence

A study of literature on this comprehensivefield can identify three patterns of ITinfluence in organisations (Mraovic´, 1998).The first one is a determinist pattern of ITinfluence, which says that IT has directconsequences for organisational structure,culture and processes, and the advantage thatmanagers can take from this position is thatthey can achieve very specific goals if theyimplement the technologies (Jackson, 1986;Benchimol and Pomerol, 1987; Chorfas, 1987;Liebowitz and De Salvo, 1989; Wild, 1990;Freeman, 1990) The second is an additivepattern of IT influence; here informationtechnologies play an important part, yet still

a subordinate and supporting role in theprocess of designing business organisations,and their influence on the organisationalstructure and practice is additive compared

to other parameters within and outside theorganisation (O’Hare, 1988; Parker, 1989;Twiss and Goodridge, 1989; Booth, 1991;Wysocki and DeMichiell, 1997) The third is

an interactive pattern of IT influence, wherethe implementation of information

technologies is a result of the choices made

by the managers as the key agents of change.Once implemented, however, they can havetheir own effects which can enable or prevent[ 174 ]

certain choices (McLoughlin and Clark, 1988;

Finnegan et al., 1990; Brown and Scase, 1991;

Robey and Sales, 1994; Strassmann, 1997)

The range in which IT can contribute todesigning organisations and raising theireffectiveness will significantly depend uponthe questions of when, where and with whom

IT is being implemented The fact questionsmainly the technical connotations of theconcept of design and the way it is used intechnical sciences and architecture, andbrings forward the patterns of meanings insocial systems in organisations What is atstake here is a dynamic structure of causesand effects, that is, any application ofinformation technologies is essentially anapplication to a set of interrelated systemsand processes This means, as Hinton (1988)warns, that prior to any particular

implementation we need to know what kinds

of effects it will have on other interdependentsystems

Effective managers, as Robey and Sales(1994) point out, are those who are able torecognize the demands of their environmentand respond to them with an appropriatelevel of organisational change In theapproach that views the process of designingbusiness organisations as an emergentprocess, that they advocate, managers knowthat they are not the only actors in the designprocess, that is, they know that otherstakeholders influence the choice of design aswell Hence the final form of the organisationwill depend upon the actions of numerousactors So managers have partial control, that

is partially inaccessible to them This meansthat the external limitations, coming fromthe economic, political and culturalenvironment in which the organisationoperates, as well as the internal limitationsbeing the result of the available resourcesand the actions of other actors representingdiverging interests within the organisation,can significantly determine the final choice

of design In this way, the process of designbecomes a fluid activity full of unpredictablesituations such as ‘‘wrestling with jellyfish’’

(Robey and Sales, 1994, p 32) The emergentprocess to organisational design is achallenge for managers, because they choosethe moment for the organisation to react sothey bear the greatest responsibility for itseffectiveness

Creating an appropriate environment forthe development and implementation ofinformation technologies in the organisationshould be viewed in the context of

interdependence of the three aspects:

cultural, innovative and technical In thisway we can get an insight into the ways inwhich changes have been accepted in the

company’s culture, as well as into theirimpacts on the structure of the organisation,systems and style of management, and itstechnical effectivness An analysis of theresults related to the level of competitivenesscan reach a conclusion that the companyneeds innovation, but the endeavour willsucceed only if the internal corporate cultureagrees with this viewpoint In most cases,innovation is developed within a specifictype of corporate culture, different from theone that can be found in an establishedorganisation opposed to changes Flexibility

to change is a key determinant of the newculture of the organisation, which in turnincreases its opportunities in the market.Hence any consideration of possible changesshould start with an evaluation of theexisting values In the case of incongruencebetween the existing culture and innovation,chances to succeed will be small, so that iswhy it is necessary to do as soon as possible atransfer from an established into an

innovative organisation A company will besuccessful only if its members share the sameviewpoints, aspirations, values and needs,that is, consensus is a major precondition forco-operation

Once the new technology is implemented

in the organisation, we then need to see whatkind of effects it has after the

implementation, that is, we should beinterested in the range in which theimplementation of the new technologychanges power relations in the organisation

In other words, do integrated systems ofmanagement lead to a greater concentration

of power at the top of the organisation or canthey be used to help transfer of authoritytowards the lower end of the hierarchy?(Pfeffer, 1981; Blau et al., 1981; Clutterbuckand Crainer, 1988; Eaton et al., 1988; Hinton,1988; O’Hare, 1988; Pettigrew, 1988; Twiss andGoodridge, 1989) The results of up to dateresearch show that new technologies, andinformation technologies in particular, implythe following changes

First, IT systems are above the traditional,functional divisions, which means that theorganisation becomes a single integratedsystem The transfer from relatively separatestructural departments, characteristic of thebureaucratic model of an organisation,towards the systemic entity in an innovative

or integrated organisation, poses difficultiesfor many managers who take strong

functional attitudes In the innovativeorganisation, management is a holistic andintegrating process, and it is informationthat is used for this crucial role Second, teamwork replaces the autocratic styles ofmanagement, while centralisation and

decentralisation of decision making are notantipodes, but complementary elements.

Information technologies permeate jobs at allhierarchical levels, so strategy planningshould be a result of a wider consultationwith staff and their representatives Third,considering the fact that an effective use ofinformation technologies requires necessarychanges in work organisation and level ofcontrol, the final consequence of theirimplementation is a change in the structure

of the management pyramid This means that

a large number of jobs at the middlemanagerial level are supressed; polyvalentprofessionals replace field specialists, andthe individual’s influence in the organisation

is based on the level of personal contribution

to the company’s growth, and not from theposition in the hierarchy Fourth, thestructure of working tasks in theorganisation is changed Self-regulatingworking groups use the information systemsthat help them in the process of decisionmaking, which results in lower levels oftechnical uncertainty Instead of boring,repetitive, precisely defined and controlledworking tasks typical of a bureaucraticorganisation, the tasks in an innovativeorganisation are expanded with new content,such as responsibility for programming and

a certain level of responsibility for planning,labour process organisation and qualitycontrol In this way the level of autonomy isincreased at the working place

Nevertheless, it needs to be taken intoconsideration that, though new technologieshave an undeniable impact on all

organisations, there are no universalguidelines for managing technologicalchanges This will depend on the nature ofindustry, individual organisation andcharacteristics of its style of management

Hence each organisation should be analysedaccording to its own and unique IT path,which means that there can be nogeneralisations of various forms ofexperience (Mraovic´, 1995) In this manner away is opened up towards a great number ofoptions and opportunities for IT use,whereby the paradigm of organisation givesway to the paradigm of organising

Conclusions

This paper emphasizes the need for acontinual evaluation of IT managementprogrammes in the organisation, as well asthe importance of its assessment not onlyfrom the point of view of its technicaleffectiveness, but also from the point of view

of social audit and acccountability in

management It is evident that theprogramme of implementation of newtechnology should be followed by twocomplementary programmes; one isconcerned with the change of theorganisational structure, while the other isdirected towards the development ofmanagers as key actors of changes Theprogrammes need to be set up and take placesimultaneously, and here continual social aswell as accounting evaluation is decisive forthe success of the whole process Accountinghas a crucial role in the organisation as part

of the control and evaluation system.Although it is not questionable that themajor power in the organisation lies in thehands of managers, the context in whichcontrol takes place requires an open system,which means that legislatory and regulatoryrequirements from the external

environment, as well as the organisation’sinteractions with its environment, should beconsidered In this context, corporatereporting becomes a crucial issue, as it can

be seen then to whom organisations areaccountable, and who has authority toevaluate their performance In the newnetwork landscape, IT and the Internetprovide technical support to greater justiceand equality at virtual highways, affirmingthe voice of the individual The environment

in which the self realizes itself in theinformational society implies globalnetworks of action and computercommunication, which offer a wide range ofvirtual communities, imposing in the process

a new type of logic – the network logic Webelieve that struggle for power in ITenvironments can be productively analysedwith the help of Foucault’s (1982) conceptualframework, according to which powerrelations are rooted in the entire socialnetwork, which means that they cannot bereduced to one primary and basic principle

In this way an opportunity opens up toinfluence the actions of others, but also todefine various forms of power

Social audit becomes an important agent ofsocial change, providing for the involvement

of different actors in the realisation of thesechanges First of all, accountability inmanagement is increased, which triggerschanges in organisational behaviour not onlytowards the external environment in thesense of its greater responsivness andaccountability towards stakeholders, but alsowithin its internal structure, meeting therequirements for greater individual rights ofthe employees Through the social audit, andowing to the Internet, the technical mind issubordinated to social goals, giving

opportunity to men to become the masters oftechnology, not its victims In this waytechnology contributes to the changes ofpower relations in the sense that itemphasizes the impact of technology at theexpense of autocratic behaviour of managers,which then ultimately leads to changes ofstrategy related to corporate socialresponsibility.

References

Abercrombie, N., Hill, S and Turner, B (Eds) (1984), The Penguin Dictionary of Sociology, Allen Lane, London.

Arnold, D.O (1991), Computers and Society, Impact!, Mitchell McGraw-Hill, New York, NY.

Aryana, N (1979), ‘‘The influence of pressure groups on financial statements in Britain’’, in Lee, T.A and Parker, R.H (Eds), The Evolution of Corporate Financial Reporting, Thomas Nelson & Sons, Sunbury, Middlesex,

Blalock, H.M and Wilken, P.H (1979), Intergroup Processes: A Micro-Macro Perspective, Free Press, New York, NY.

Blau, P.M., McHugh Falbe, C., McKinley, W and Tracy, P.K (1981), ‘‘Technology and

organizations in manufacturing’’ in Grusky,

O and Miller, G.A (Eds), The Sociology of Organizations, The Free Press, London,

pp 425-50.

Booth, P (1991), An Introduction to Human – Computer Interaction, Lawrence Erlbaum Associates Ltd, Hillsdale, NJ.

British Information Society Ltd (1990), Future Impact of Information Technology, London.

Brown, P and Scase, R (Eds) (1991), Poor Work, Disadvantage and the Division of Labour, Open University Press, Buckingam and Bristol.

Castells, M (2000), The Rise of Network Society, Vol 1, Blackwell, Malden.

Chandler, A (1962), Strategy and Structure, MIT Press, Cambridge.

Chandler, A (1977), The Visible Hand: The Managerial Revolution in American Business, Cambridge University Press, New York, NY.

Chorfas, D.N (1987), Applying Expert Systems in Business, McGraw Hill Book Company.

Clutterbuck, D and Crainer, S (1988), The Decline and Rise of British Industry, Mercury Books.

Coleman, J (1973), Mathematics of Collective Action, Aldine, Chicago, IL.

Coleman, J (1977), ‘‘Social action systems’’, in Szaniawski, K (Ed.), Problems of

Formalization in the Social Sciences, Polskiej Akademii Nauk, Wroclaw, pp 11-50.

Connolly, W (1974), The Terms of Political Discourse, Lexington, MA.

Cook, K.S (1982), ‘‘Network structures from an exchange perspective’’, in Marsden, P and Lin, E (Eds), Social Structure and Network Analysis, Sage, Beverly Hills, CA, pp 177-99 Cook, K.S and Emerson, R.M (1977), Design of a Computerized Laboratory for the

Experimental Analysis of Social Interaction, Technical Report, University of Washington, Seattle, WA.

Cook, K.S and Emerson, R.M (1978), ‘‘Power, equity and commitment in exchange networks’’, American Sociological Review, Vol 43, pp 712-39.

Cook, K.S., Emerson, R.M., Gillmore, M.R and Yamagishi, T (1983), ‘‘The distribution of power in exchange networks: theory and experimental results’’, American Journal of Sociology, Vol 89 No 2, pp 275-305.

Crowther, D (2002), A Social Critique on Corporate Reporting, A Semiotic Analysis of Corporate Financial and Environmental Reporting, Ashgate Publishing, Aldershot Dahl, R.A (1968), ‘‘Power’’, International Encyclopedia of the Social Sciences, The Macmillan Company & The Free Press, New York, NY, Vol 12, pp 405-14.

de Sola Pool, I (1990), ‘‘Electronics takes command’’ in Finnegan et al (Eds), Information Technology: Social Issues, Hodder and Stoughton and The Open University Press, London, pp 19-32.

Dosi, G (1984), ‘‘Technological paradigms and technological trajectories: the determinants and directions of technical change’’, in Freeman, C (Ed.), Long Waves in the World Economy, Frances Pinter, London.

Eaton, J., Smithers, J and Curran, S (1988), This

Is It!, A Manager’s Guide to Information Technology, Philip Allan Publishers, Oxford Elliott, G and Starkings, S (1998), Business Information Technology, Systems, Theory and Practice, Longman, London and New York Finnegan, R., Salaman, G and Thompson, K (Eds) (1990), Information Technology: Social Issues, Hodder and Stoughton & The Open University, London.

Fligstein, N (1987), ‘‘The intraorganizational power struggle: rise of finance personnel to top leadership in large corporations, 1919-1979’’, American Sociological Review, Vol 52 No 1, February, pp 44-58.

Foucault, M (1980), Power/Knowledge, in Gordon, C., Marshall, L., Mepham, J and Soper, K (trans.), Pearson Education Ltd, Harlow Foucault, M (2001), ‘‘Power’’, in Faubion, J.D (Ed.), Hurley, R et al (trans.), Essential

Works of Foucault 1954-1984, Vol 3, Salaman,

G and Thompson, K (Eds) (1990), Information Technology: Social Issues, Hodder and Stoughton & The Open University, London, Allen Lane, London.

Freeman, C (1990), ‘‘The case for technological determinism’’, in Finnegan, R., Salaman, G.

and Thompson, K (Eds) (1990), Information Technology: Social Issues, Hodder and Stoughton & The Open University, London (Eds), Information Technology: Social Issues,

A Reader, Hodder and Stoughton and The Open University Press, London, pp 5-18.

Gates, B and Hemingway, C (2000), Business @ The Speed of Thought, Penguin Books, London.

Granovetter, M (1979), ‘‘The theory-gap in social network analysis’’, in Holland, P and Leinhart, S (Eds), Perspectives on Social Network Research, Academic Press, New York, NY, pp 501-18.

Hinton, R (1988), Information Technology and how to use it, A Handbook of Effective Practice, ICSA Publishing, Cambridge.

Jackson, P (1986), Introduction to Expert Systems, Addison-Wesley Publishers, Reading, MA.

Kling, R (1990), ‘‘Value conflicts and social choice

in electronic payment systems’’, in Finnegan,

R Salaman, G and Thompson, K (Eds) (1990), Information Technology: Social Issues, Hodder and Stoughton & The Open University, London., pp 38-57.

Lee, T.A and Parker, R.H (1979), The Evolution of Corporate Financial Reporting, Thomas Nelson & Sons, Sunbury.

Liebowitz, J and De Salvo D.A (Eds) (1989), Structuring Expert Systems, Prentice-Hall, Englewood Cliffs, NJ.

Lukes, S (1974), Power, A Radical View, Macmillan, London.

McDonald, D and Puxty, A.G (1979), ‘‘An inducement – contribution approach to corporate financial reporting’’, Accounting, Organizations & Society, Vol 4 No 1/2,

Marsden, P.V (1981), ‘‘Introducing influence processes into a system of collective decisions’’, American Journal of Sociology, Vol 86, pp 1203-35.

Marsden, P.V (1983), ‘‘Restricted access in networks and models of power’’, American Journal of Sociology, Vol 88 No 4, pp 687-717.

Miller, J (1980), ‘‘Access to interorganizational networks as a professional resource’’, American Sociological Review, Vol 45,

pp 479-96.

Morgan, G (1988), ‘‘Accounting as reality construction: towards a new epistemology for accounting practice’’, Accounting,

Organizations & Society, Vol 13 No 5,

Mraovic´, B (1998), ‘‘Managerial implications of IT: control versus autonomy?’’, paper presented at the Sixteenth Annual International Labour Process Conference, UMIST Manchester School of Management, Manchester.

MSC, NEDC and BIM (1987), The Making of Managers, A Report on Management Education, Training and Development in The USA, West Germany, France, Japan and The UK.

Munck, R (2000), ‘‘Labour and globalisation: results and prospects’’, Work, Employment & Society, Vol 14 No 2, June, pp 385-93 Munro, R (1998), ‘‘Ethics and accounting: the dual technologies of self’’, in Parker, M (Ed.), Ethics & Organizations, Sage Publications Ltd, London, pp 197-220.

Munro, R (1999), ‘‘Power and discretion:

membership work in the time of technology’’, Organization, Vol 6 No 3, pp 429-50 O’Hare, M (1988), Innovate!, How to Gain and Sustain Competitive Advantage, Basil Blackwell, London.

Parker, C (1989), Innovate Through Technology, Successful Strategies for Management, British Institute of Management, Kogan Page, London.

Perrow, C (1972), Complex Organizations: A Critical Essay, Scott, Foresman, Glenview, IL Pettigrew, A (Ed.) (1988), The Management of Strategic Change, Basil Blackwell, London Pfeffer, J (1981), ‘‘Who governs?’’, in Grusky, O and Miller, G.A (Eds), The Sociology of Organizations, The Free Press, London,

pp 228-47.

Philip, M (1985), ‘‘Power’’, in Kuper, A and Kuper, J (Eds), The Social Science Encyclopedia, Routledge & Kegan Paul, London, pp 635-9

Puxty, T and Tinker, T (1994), ‘‘The sociology of knowledge as praxis’’, in Tinker, T and Puxty, T (Eds), Policing Accounting Knowledge, The Market Excuses Affair, Markus Wiener Publishers, Princeton,

pp 241-70.

Rivlin, G (1999), The Plot to Get Bill Gates, Times Business, Random House, New York, NY Robey, D and Sales, C.A (1994), Designing Organizations, Irwin, Boston, MA.

Rosenberg, J.M (1993), Dictionary of Business &

Management, John Wiley & Sons, New York, NY.

Rumelt, R (1974), Strategy, Structure and Economic Performance, Harvard Business School, Boston, MA.

Schermerhorn, J.R Jr (1996), Management, John Wiley & Sons, New York, NY.

Silverman, D (1987), The Theory of Organizations, Gower House, Aldershot.

Strassman, D.A (1997), The Squandered Computer, Evaluating the Business Alignment

of Information Technologies, The Information Economics Press, New Canaan, Connecticut, CT.

Street, B.V (1990), ‘‘Models of ‘computer literacy’’’, in Finnegan et al (Eds), pp 33-7.

Tannenbaum, A.S (1968), Control in Organizations, McGraw-Hill, New York, NY.

Tinker, T (1985), Paper Prophets, A Social Critique of Accounting, Praeger Publishers, New York, NY.

Tinker, T (1997), ‘‘The dialectic of the value form:

the social evolution of capital markets in the US’’, in Knights, D and Tinker, T (Eds), Financial Institutions and Social Transformations, Macmillan Press and St Martin’s Press, London and New York,

Development: From Strategy to Action, Pitman Publishing, Marshfield, MA.

Vives, X (2000), ‘‘Corporate governance: does it matter?’’, in Vives, X (Ed.), Corporate Governance, Theoretical and Empirical Perspectives, Cambridge University Press, New York, NY, pp 1-21.

Webb, S.P (1996), Creating an Information Service, ASLIB, The Association for Information Management, London.

White, D.M (1972), ‘‘The problem of power’’, The British Journal of Political Science, No 2 White, H.D., Boorman, S.A and Breiger, R.L (1976), ‘‘Social structure from multiple networks I Blockmodels of roles and positions’’, American Journal of Sociology, Vol 81, pp 730-80.

Wild, R (Ed.) (1990), Technology and Management, Cassell Educational Limited Wilkinson, B (1983), The Shopfloor Politics of New Technology, Heinemann, London.

Wysocki, K and DeMichiell, R.L (1997), Managing Information across the Enterprise, John Wiley & Sons, New York, NY.

Zald, M (1969), Power in Organizations, Vanderbilt University Press, Nashville, TN Zald, M (1970), Organizational Change: The Political Economy of YMCA, University of Chicago Press, Chicago, IL.

Zell, D (1997), Changing by Design, Organisational Innovation at Hewlett- Packard, ILR Press/an imprint of Cornell University Press, Ithaca and London.

The author is sincerely

grateful to Professor Tony

Tinker for encouraging me

to write and further develop

this paper Also, I am

indebted to Professor David

Crowther for helping me,

through personal dialogue

and e-mail communication,

to conceptualize new

opportunities arising from

the developemt of network

Contextualising corporate governance

Lez Rayman-Bacchus London Metropolitan University, London, UK

Introduction

There is broad agreement that corporategovernance is a process comprisingaccountability to shareholders, supervision

of managerial action, and setting strategicdirection (Tricker, 1984) The strategicdecisions of companies are routinelymonitored by institutional investors andregularly debated in the public domain, fromscrutiny of executive salaries and interests,

to the appropriateness of this or thatacquisition or investment, to the social orenvironmental impact of corporate action

Many of these debates reflect a widespreadbelief that information and communicationstechnology (ICT) will transform the way thatcompanies work and how societies function

Some embrace the prospect of change butworry regulation will spoil the story, whileothers worry about the risk to society ofuncontrolled corporate freedom to exploitICT The outcome of these debates can havereal consequences for how companies work

Today stakeholder groups, representingshareholders, consumers and theenvironment, hold corporations to accountfor their decisions and actions, on pain ofpublic vilification Much of this activity isglobal in scope, and made possible throughthe Internet These developments suggestthat corporate behaviour has become moreopen to scrutiny and action (Whysall, 2000)and more subject to democratic process(Samuels, 2001) Nevertheless, some arguethat this shareholder model of corporategovernance needs reforming if sustainableprosperity is the aim (Porter, 1990; Blair,1995; O’Sullivan, 1998) Governance systems,argues O’Sullivan, should be based on atheory of the innovative enterprise In herproposal, the innovative enterprise is a

‘‘learning collectivity’’ where those makingthe investment decision:

Must be integrated into the relevant learningcollectivities if they are to have the abilitiesand incentives to transform inherentuncertainty into sustained competitiveadvantage (O’Sullivan, 1998, p 201)

Underlying O’Sullivan’s model of governance

is the assumption that engaging the decisionmaker in this way leads to personal

commitment and enlightened self-interest.This managerial commitment is precisely thebasis of start-ups During the late 1990s manyhighly respected executives were enticedonto the boards of Internet start-ups Theseemingly unlimited financial support inpursuit of Internet start-ups was based on acommon belief that the Internet wouldbecome the basis for a new economy Within

a short time a large pool of innovativeInternet-based enterprises was beinglaunched by committed executives, many ofwhom had a track record of success in the oldeconomy Indeed intensity of the belief in thetransformational force of Internet start-upswas reflected in the recruitment of high flyerexecutives, high profile investing

institutions, supported by a blaze ofpublicity

However, as is common knowledge, the dotcom bubble did not last In a study of thecollapse of Internet start-ups, Finkelstein(2001) found a number of weaknesses in thegovernance arrangements First, althoughthere was strong board commitment (apredominance of board members heldsignificant shareholdings, and therebyvested interests), independent directors werescarce, and by implication, so was

supervision Second, although venturecapitalists were present (providing bothvested interest and oversight experience),they tended to be on too many boards to

The Emerald Research Register for this journal is available at http://www.emeraldinsight.com/researchregister

The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/0268-6902.htm

Corporate governance, Internet,

Banking, Business schools,

Accountability

Abstract

Corporate governance systems

aim to supervise and guide

corporate behaviour Information

and communication technologies

and in particular the Internet are

providing unprecedented scope for

innovative behaviour, both

undesirable and useful, and as

means for greater scrutiny and

control There are calls to reform

the governance system, to make it

more sensitive to what is seen as

the primary purpose of the

enterprise, that is the pursuit of

economic prosperity through

innovation Moreover, any reform

needs to develop a sensitivity to

the social context of corporations,

since this is the locus of attitudes,

strategy practices and innovative

capacity Through exploiting ideas

from cultural theory this paper

proposes that corporations exhibit

a limited but discernible number of

ways of life or social realities, and

these realities give meaning to the

system of governance in use.

provide any effective vigilance and control.

Third, the experience of high flyers from theold economy seems not to have successfullytransferred to the new context

Start-ups have a high probability of failure,Internet-based or otherwise Nevertheless,the failure of veterans, with experience ofrunning complex old world corporations, tomake their mark in the new economysuggests that recipes for success are contextdependent Moreover, the failure of

experienced venture capitalists in providingadequate oversight might have been lessened

or avoided had they been more intimatelyinvolved with the implementation ofstrategy While accepting that governancesystems should more explicitly acknowledgethe centrality of innovation to corporate andsocietal prosperity, any reform should also besensitive to the contextual nature of

corporate governance This corporate context

is important since it locates ‘‘firm specific’’

expertise (Kay and Silberston, 1995) andthereby innovative capacity and potentialsources of competitive advantage

This paper explores corporate governancesystems as social contexts, wherein thepractice of strategy gives rise to particularand shared attitudes, practices andinnovative capacity The argument presentedhere is that corporate behaviour is rooted inthese social contexts, discernible as

particular ways of life From this perspectivecorporate governance should not be regarded

as a dispassionate overlay, easilytransferable between corporations Rather,

in seeking to strike an effective balancebetween vested interest and independentoversight, strategy overseers might benefitfrom recognising the social context ofcorporate governance systems Beforepresenting the findings and analysis, the nextsection will review ideas that help establishthe intellectual foundations for the analysis

Background

The practice of strategy in an organisation isthe embodiment of a way of life for itsmanagers, whose sense of value andrelevance comes from their shared reality

Understanding why the practice of strategy

is the way it is requires understanding theway of life that practitioners take forgranted First, writers on strategy agree thatorganisations can be characterised ashaving shared commitments However theydisagree on the role of these commitments,some seeing them as providing benefits as

‘‘recipes’’ (Grinyer and Spender, 1979),others seeing them as the source of cognitive

blinds or ‘‘paradigms’’ (Johnson, 1989) thatdistort managers’ understanding of thecompetitive world Second, writers onorganisation culture agree that there islimited number of cultural types, but cannotagree on what those types are Third, thesecategorisations are ad hoc, failing to providethe underlying dimensions that support thecategories

Consequently the aim here is to offer newinsight to the strategy process from theperspective of cultural theory This theoryoffers a simplified view of the world, using acoherent theoretical framework, and

provides categories that are mutuallyexclusive and jointly exhaustive (Hood, 2000).The framework is enriched by Bloor’s (1983)analysis of Wittgenstein’s ‘‘language games’’and ‘‘forms of life’’, and by ideas aboutdistinctive ‘‘styles’’ of rationality(Wettersten, 1995)

A typology of social realitiesMany writers have developed descriptiveframeworks to offer comparative accounts ofvarious societies and communities, forexample cultures (Douglas, 1982a, b), andpolitical regimes (Swanson, 1969) Douglas, asocial anthropologist, developed her ‘‘group/grid’’ construct to describe and comparecultures of entire communities Her ideas arebased on many years of studying the cultures

of societies, both ‘‘primitive’’ and industrial,and her work has been very influential in anumber of different contexts, and at differentlevels of aggregation For example as a toolfor assessing the experiences of researchscientists moving from academia to industry(Bloor and Bloor, 1982), and for explainingthe rationalities and conflicts engaged inmacro technological policy development(Schwarz and Thompson, 1990)

The analytical framework below (Figure 1)draws on the work of Douglas (1982a) Her

‘‘group/grid’’ construct provides the basis forcomparing organisational social reality It is

a useful structure because it accommodatesthe sense that people construct their way oflife through the way they work together,their taken for granted practices, andthrough adherence to collectively sanctionedrules of behaviour

The degree to which people maylegitimately work alone or whosecontribution to their organisation depends

on working collectively, influences the form

of an organisation’s social reality Thisdimension is labelled ‘‘social commitment’’.Juxtaposed with these ways of working is thedegree of constraint that rules of behaviourimpose on how people work together, rules ofbehaviour that the organisation’s members

are only dimly aware of and are taken forgranted This dimension is labelled ‘‘socialcontrol’’ These considerations produce fourdiscernible archetypal social realities:

organisation It is about the balance betweenthe calculated acceptance of practices, andthe internalisation of social values, normsand rules This dimension describes anindividual’s guiding of their own actions tocomply with a perceived expectation ofothers; the transactional process betweenindividual and organisation

The rules of admission to a group, and itscontinued support by its members, may bestrong or weak, explicit and implicit, makingmembership more or less exclusive Groupcommitment can be rooted in a variety ofcommon concerns, manifest in a variety ofways: as a common pride in its ancientlineage and the common view that

‘‘stewardship’’ is needed to ensure thecontinuity of that heritage; as an evangelicalcommitment to some purpose; or as acommitment to ‘‘the bottom line’’, or pursuit

of personal gain

Social controlThis defines the extent of prescriptivebehaviour, regulation and formal controls,both within and outwith the group Some ofthese ‘‘dos and don’ts’’ are abstract, othersmore definite rules Choice over one’s actionsrange from ‘‘freedom of choice’’ (civilian) tohighly regulated behaviour (military orprison) At one end of the spectrumrelationships and compliance are negotiable,while at the other end everyone knows theirplace in the institutional order Socialcontrol reflects the degree of influence orpower exerted by the organisation’ssocialised membership to ensure thatmembers use their knowledge and expertise,and fulfil their commitments to the

so, this analysis is not about technology, butabout strategy processes It explores howalternative realities coalesce as a result of thetension between the constraining effect of abody of ideas, social prescriptions, and thereconstructive effects of social interaction.Telco

Telco is a 30 year old company, designing andinstalling data networks (intra- and extra-nets) for globally distributed businesses,mainly in financial services It was one of thefirst to offer modem communicationstechnology Today companies like Telco are

at the heart of a sector in explosive growth aswell as financial despair

Legitimate decisions are routinely madeamong participants acting more out ofindividual interest than as representatives ofdepartments Individuals are free to

negotiate and enter transactionalrelationships with anyone, within andoutwith the company, even betweencolleagues Some have left to set up inbusiness, motivated by a belief thatcustomers invest trust in individuals, morethan in the (faceless) company There is a lot

of money to be made in this business if oneworks hard, so why not claim the rewards forthemselves rather than the (ungrateful)company

In this and other examples managers andengineers alike are more committed to the

‘‘exciting gamble for big prizes’’ (Douglas,

1982a) This attitude is pervasive, implicit inthe practice of strategy, taken for granted.

Individuals that like to be given a broadcanvas thrive in this environment Here thetask of leaders is to paint the vision of thefuture, and leave the interpretation andrealisation of that future, in short thestrategy, to others with initiative and adesire to shape their own career path

Internal competitiveness characterisesindividuals’ belief in the scope to shape orcarve out a niche for themselves; throughindividual enterprise they would determinethe order of things

The tensions common betweendepartments is seen as healthy rivalry and aspur to innovative behaviour and

productivity gains

Those few not committed to the pursuit ofglory and gain for self may complain that theorganisation lacks strategy and direction,seeing anarchy not loose integration Theyare apt to accuse their superiors of greed, ofexploiting their position at the top of thecompany These critics fail to see that in thisorganisation’s reality strategy is what theindividual makes of it; that they are not beingsubjected to some form of organisationalpsychosis

Respondents stressed the irregularitiesand instabilities of the telecommscompetitive environment rather than itsorder The competitive environment is seen

as responsive to the special skills ofindividuals who pay attention to it Managersand engineers move among competitorsalmost at will The industry is rich withopportunities because new products arealways appearing, as well as chances ofpromotion in growing and new companies

There is a constant turnover of staff in Telco,

in common with many firms in this sector

Managers and engineers account for the highturnover of staff in terms of career

opportunities within the sector, and thecontinual need for new blood to remaincompetitive The risk of redundancy isconstant, keeping staff on edge, but that’show things are Anyway, the attractions ofentrepreneurialism seems to overshadowsuch fears, in that staff are much morepreoccupied with creating and exploitingopportunities Redundancy is just oneexpression of the risk and uncertainty thatcharacterises the environment In order toremain flexible and adaptive in the dynamicdata comms environment, managers transactwith the market (more than rely on internalhierarchy) to provide both essential andsupport services (field service engineers,producing technical literature, management

accounts, management information system,car fleet management)

Knowledge is traded through personalnetworks It’s about knowing how usefulindividuals are to you, personal recognitionand prestige are highly prized Routine work

is subordinate to novelty The marketability

of novelty is more interesting, and tends toreflect much more on the individual that thecollective, and there is considerable scope forindividual initiative

There is minimal use of long-term planningand devices to order and sequence activities.Such devices as exist (a problems escalationlog) may have less to do with organising thefuture than recording history: as a record ofactivities, therapy and communication, andpublic relations that everything is undercontrol (Langley, 1988)

Projects with a clear beginning and ending,with time scales of months rather than yearsare favoured, then move on to the nextinteresting problem Managers organisetheir work so that this happens leavingsubordinates to sort out the detail andadministration Subordinates in turn maycomplain that their manager is not interested

in the detail, but praise them for being good

at manipulating the system and getting newbusiness The attraction of new opportunitiesand the relative disinterest in the routine isinstitutionalised Here customer servicestrategy is shaped by the customer that hasthe greatest financial muscle, or shouts theloudest

The individual is expected to be dynamic,entrepreneurial, go getting Learningthrough mistakes is natural here Bloor andBloor’s (1982, p 97) assessment of theirindustrial scientists’ attitudes to risk seemequally applicable in this context:

It is beneficial to take risks [and] is a waste oftime to cover oneself too fully against thepossibility of failure, for some failures areinevitable

Here rewards are based on getting results,whatever it takes, and being competitive.While self-interest reigns, the group is heldtogether by a common belief in ‘‘the bottomline’’, the notion of market forces, and

‘‘survival of the fittest’’ This commitment isshared by its competitors, and reinforced bycustomers always ready to exercise theirright to choose between competingalternatives, and to demand value for money.Customers and competitors alike appear tosupport the principle of minimal-interference

in the market place This is apparent by thevast array of technical alternatives that comeand go, the fierce price and service

competition within most segments of thetelecommunications and computing

industries, and the competitive turbulence asthe fortunes of companies wax and wane.

Global companies like Telco have globalinformal social networks that transcendnational boundaries, undermining attempts

by senior managers to control informationflows within formal reporting structures Inthis environment where the stakes are highand job security is fragile, conspiracytheories abound and everyone is suspicious

of threats, from within and without

While the commitment to unbridledentrepreneurialism is common to all staff,departmental competitiveness breedsdistrust and conspiracy theories Theseinternal divisions induce differentiatedinformation flows resulting in staff holdingdifferent perspectives on what the strategy isand should be These boundary issuesencourage speculation about what is reallygoing on, so that conspiracy theories remain

an inherent feature of this individualistreality

Generally, group barriers are weak, as isgroup support This is because informalnetworks, and a shared commitment toindividual freedom to contract, weakensbarriers People may have two or threedifferent responsibilities, cutting acrossfunctional barriers, thus defining individuals

as ‘‘a network node’’ as much as an element

in a hierarchy

Telco’s way of life is dominated by anindividualist reality, but this fluidenvironment needs the counterweight ofhierarchy and egalitarianism Unhappycustomers can and do pull on the internalchain of command to allocate resources totheir problem, or if necessary will invokestatutory powers of compliance Also,hierarchy exerts influence through settingstrategic direction, the allocation of budgets,and attempts to control information flow

There is also an atmosphere ofegalitarianism Staff belief that the company

is a meritocracy, where everyone has anequal chance of success; a claim supported bycountless examples of staff progressingrapidly up the career ladder

The bankThe bank provides clearing services to thewhole UK community The bank is proud ofits 300 year history, and of being the firstbank to offer remote banking services in the

UK in the 1980s

Staff are content to rely on the existingpattern of role allocation within a complexbusiness They look for satisfactoryhierarchical principles to guide decisionmaking Here there is little individualfreedom to transact or negotiate without

reference to a higher authority If adivisional general manager wanted topurchase an air ticket, s/he must get writtenauthorisation from the bank’s generalmanager The validity of the hierarchyprinciple is reflected in staff at various levelsexpressing the uniform view that manystrategies are ‘‘bottom up’’ The hierarchy istaken for granted

The bank is a multi-layered andcompartmentalised society There are at leastseven layers of managerial titles, and thedegree of specialisation is partly reflected inthe divisional structure The provision ICTcapabilities is centralised as the managementservices division (MSD) Scope for disorderand individual independent action isstrongly circumscribed by the protocol ofhierarchy, formal rules of title, bankingqualifications, and the pride of staff inupholding the bank’s traditions

There is a strong belief that there arecorrect methods of work and if properlyfollowed these practices will automaticallyproduce desired results The importanceattached to following procedure is like aritual to maintain purity, rather than amechanical ritual It is seen as necessary forestablishing a ‘‘proper’’ relationship with itscompetitive environment, showing

reliability, ensuring financial prudence, anddemonstrating transparency of

accountability to stakeholders There areformal procedures for guiding every facet oflife here, from routine administration toentrepreneurial initiatives: assessment ofproduct development, lending criteria,financial exposure assessment Theseformulae seek to ensure that all routines aremeticulously followed

Staff do not feel restricted or somehowcircumscribed by their way of life Indeed,many describe the bank’s approach tostrategy as ‘‘opportunism’’, a reference totheir dismissal of the once fashionablestrictures of corporate planning as being toorigid In fact at least one division does follow

a detailed planning framework, including thepublication of strategic plans

‘‘Opportunism’’ in their terms is not at oddswith very regulated work practices, andgroup unity All opportunities are subject tothe same evaluation and selection

frameworks ‘‘Opportunism’’ also meansidentifying and pursuing ways for improvingthe bank’s efficiency and effectiveness Thiscan be seen in the preoccupation with costcontrol In one division, detailed instructionsand scripts guide telephone conversationswith customers, accompanied by formulaefor measuring the productivity of every call

In another division regular reports on notice[ 184 ]

boards testify to the rivalry amongdepartments to show cost control successes.

Regulatory authorities and users expectfinancial stability from its banks Clientsexpect the bank and its competitors that holdclient deposits, to be risk averse Thiscommitment is published in its annualcorporate statement, report and accounts

Where risk is taken the bank must satisfystakeholders, including regulatory forces,that it can afford to suffer a loss and absorbthe risk The bank’s concern with prudenceand reliability explicitly recognises thatpublic trust depends on showing the exercise

of strong control Here, taking risk isaccompanied with giving up as little control

as possible

The bank’s preferred way of life is to beopportunistic in an orderly fashion, toanticipate outcomes Entrepreneurialbehaviour is regulated, in contrast with its

‘‘unbridled’’ individualist cousin, Telco

Relations with external and potential sources

of innovation is cultivated, and regulated,through the posting of a senior nominatedexecutive, an entrepreneurial broker

The pattern of innovation in the bank isless likely to be revolutionary because it doesnot depend on an imbalance of power amonggroups; the distribution of power is stableand not negotiable When the bank perceived

a major environmental anomaly, such as thethreat from the English banks, it

accommodated those threats through aconsidered and orderly internal change andresponse, with little disruption to thefunctioning of the company Revolutionarychange is also less likely because

institutional power relations within thebanking sector is largely stable andregulated The Government’s initiativesduring the 1980s to deregulate the sector didproduce a few significant anomalies,removing some of the barriers to competitionbetween building societies and banks

However even here the bank accommodatedthese anomalies through changes more akin

to ‘‘rearrangement’’ than any

‘‘transformation’’ of its banking practices(Barnes, 1974, p 86)[1]

In an organisation where the combination

of strong social control and strong groupcommitment is the norm, the pattern ofinnovation is more likely to be incrementalextensions to existing practice The

‘‘entrepreneurial brooking’’ between thebank and one technology supplier (andclient), NCR, will enrich rather than disruptthat process The bank’s 300 year history isone of progressive change For this

organisation, progressive change meanshaving a relatively high expectation that

anticipated outcomes will be realised Therewould be little tolerance here for a ‘‘trial anderror’’ approach

Nevertheless, this does not rule out thepossibility of major technological shifts Anexample of a major shift, from the bank’sperspective, is home banking, introduced in

1984 and held up by both the bank and thepress at the time as an example of a majorinnovation This was the bank’s response tothe English banks crossing the border, andthe bank sought to accommodate or ‘‘absorb’’(Schwarz and Thompson, 1990, p 67) the risk.There was no major investment in

infrastructure, and therefore low financialrisk Investment followed on incrementally

as the bank learnt the technical andcommercial implications of providing aremote banking service It neverthelessregarded the enterprise as a risk to itsreputation The competitive threat of theEnglish banks delivered that risk Doingnothing presented a greater threat thanaccommodating that risk It had a duty torespond, but in a controlled way Homebanking extended existing technologies andknowledge within the bank, and involvedlittle immediate organisational change.Nevertheless, this ‘‘rearrangement’’ (Barnes,1974) of knowledge provided the first marker

in the construction of a new sector or remote(electronic) banking services

The bank developed over the decades asignificant level of expertise in ICT Thisexpertise grew out of the bank’s concern forprudence, and constant search for ways ofreducing cost The majority of the bank’sinnovations are a result of seeing costanomalies within its internal processes Thepattern of behaviour within the financialservices environment is an extension of thebank’s concern with internal order, and viceversa The bank, its competitors, andcustomers support the principle of anordered and predictable environment, and inthe right of the state to regulate, in whatSchwarz and Thompson (1990, p 67) call

‘‘Leviathan governance’’

The business schoolThe business school provides distancelearning management courses, and isperhaps the first organisation to applydistance learning innovation to managementeducation Although market leader, thebusiness school now shares the distancelearning market with others Perhaps morethreatening is that ICT based innovations inthe provision of training and education meanthat the business school is competing with awider range of providers Its own definition

of distance learning, which has for 30 years

guided thinking (both within and outwith theuniversity) is being overtaken by an evenbroader definition that include coursedelivery via the Internet, and ‘‘e-learning’’

initiatives

An assessment of strategy development inthe business school’s way of life demandsmore than a passing reference to its parentuniversity and the wider social framework

The parent university was a Labourgovernment sponsored innovation It was anassault on privilege and class that inDouglas’ (1987, p 7) terms sought ‘‘to rejectpointless rituals and to preach direct tomen’s [sic] hearts’’ It shares most of the highsocial ideals of its parent, about equalopportunity However the business schoolcharges market rates for its courses, whichreflects the pragmatic demands of operating

in a competitive environment

The university, like the bank, ischaracterised by procedures Unlike the bankmany of these procedures uphold theegalitarian spirit and factionalism, ratherthan extending ascribed hierarchy Forexample, the equal opportunity principle isenshrined in formal selection procedures

These principles are institutionalised andmanifest as the equal opportunities unit andfaculty equal opportunities groups

Team effort is highly regarded There is ahigh tolerance of deviant behaviour amongthe academic community Individualfreedom is negotiable and determined muchmore by group commitments than anyregulatory mechanisms For example, atleast one faculty has ‘‘gone its own way’’ onproducing course material, rather than waitfor the university’s senior managers ‘‘to sortthemselves out’’

While deviance from prescription istolerated, there is less tolerance of deviancefrom group norms Thus the first director ofthe embryonic business school, and hissuccessor the first dean, grew the businessschool at a meteoric pace; a rate of growththat also bred internal dissent and discontentwith the leadership, contributing to theireventual loss of office[2] There was a sharedsense that the dean was unaccountable,taking the business school in variousdirections without internal support He wasreplaced by the second dean, whose electionmanifesto was based on promising a strategy

of consolidation and instituting greatercontrols on the dean’s powers Peers,administrative staff and the university

‘‘godfathers’’ perceived him as a team player

The university collective felt that thebusiness school, its credibility now securedthrough the efforts of two predecessors,needed to return to consensual decision

making Arguably the first director and deancontributed to their own demise throughfailing to recognise a distinction betweennegotiated freedom and unfettered freedom,that their freedom to govern was given bycolleagues on the basis of consensualdecision making

The creation of more formal committeesand centres of academic excellence weremeant to circumscribe the freedom of futuredeans[3] This strengthening of internalgroup boundaries was a reaction to whatmany saw as the previous dean’s

individualistic and favour ridden approach

At the same time, although the second deanwas elected on the promise to establish suchcontrols, many staff initially resisted joining

a centre, seeing it as a layer of managerialcontrol This compartmentalisation as a way

of strengthening group support wasacceptable, but not as a way of greaterregulatory control In Bloor and Bloor’s (1982,

p 142) terms these centres are ‘‘secondaryelaborations’’ to enhance the protection ofthe business school’s egalitarian way of life.There are also strong compartmental linesdrawn between secretaries and

administrators, course managers, academics.Decision making is based on the

interdependence of these groups, expressed

as a myriad of committees and teams Staff isvery conscious of a group identity, a sense ofshared expertise, a collective commitment to

a social mission, and a keen appreciation ofthe business school and university’sboundary with the external environment.Staff in the business school enjoysignificant freedom within the very broadparameters of the school’s declared researchand teaching interests There is no

comprehensive analytical mechanism forscreening and selecting new projects Agroup of academics can band together todevelop a course around a subject that theyconsider to be interesting, and lobbyindividuals and the school board to supportthe new course idea Despite argumentsabout market forces and appeals from thedean, many uneconomic courses

nevertheless emerge Responsibility forcommitting the business school’s resources

is shared between the dean, boards,committees, and course teams This freedom

to create, the plasticity of obstacles, and therelative subordination of rules to groupcommitments controlling all aspects ofbehaviour, is shared with Telco

The pattern of innovation in anorganisation dominated by an egalitarianreality is predicted to be periods of normalstrategy interrupted by revolutionarydiscontinuity (Bloor, 1983) Increasingly staff[ 186 ]

has viewed developments in the externalenvironment (the explosion of

communication technologies) as threateningthe supremacy of its distance teachingexpertise Internally this has generated muchheated debate and division, leading to afragmented range of views about the nature

of the threat, and how the university shoulddeal with it A myriad of committees hasinvested considerable time and energy,gathering information, disseminating it, andmaking proposals for action At the sametime faculties have been experimenting andimplementing their own ideas on teachingand learning employing electronic

communications technologies Following alengthy period of debate (about two years) theuniversity planners did develop a

comprehensive vision of providing life-longlearning through the innovative use of ICT

Nevertheless, the university, once thevanguard of social change through distancelearning, is now almost indistinguishableamong a bewildering variety of educationproviders exploiting the seemingly limitlessscope of ICT in delivering training andeducation

According to Bloor (1983, p 142), theseexternal threats leading to internal disordercan be understood as responses to anomalies

Such anomalies will accumulate and maylead to crisis Revolution will depend on thebalance of power between the relevantgroups Bloor predicts that:

The revolutionaries might win and sweepaway the old guard They will proclaim awonderful new beginning and, for a while, allwill be well Then the whole pattern willrepeat itself (Bloor, 1983, p 142)

Undoubtedly there have been powerstruggles, yet preferences have beenexpressed Some ideal standard has not beenapplied, nor have groups fragmented to thepoint of individuals pursuing personalstrategies While a longitudinal study of theuniversity’s development might shed morelight on Bloor’s proposition about

revolutionary change, it is clear that therehas been internal disorder over the future ofthe university The evidence suggests thatdisorder is an inherent feature of theegalitarian way of life, sustained by thetension between the fluidity of individualismand the orderliness of hierarchy

There is increasing tension between a pulltoward individualism from the businessschool, against a pull toward hierarchy fromthe university Within the business schoolacademic freedom to create seems to beunder increasing scrutiny, and

administrators are increasingly underpressure to ensure that academics work

within budget It is also a tension between ajustification based on respect for history andelaborated social prescriptions and

procedures, and a justification based on thefreedom to generate new knowledge andteaching practices The first can regulatecreativity and bring status differentials,while the second can dissipate resourcesthrough extreme factionalism

Many of the preferences and tensionsfound within the university and the businessschool are common across the highereducation (HE) sector In recent yearssuccessive governments, as a significantsocial institution and stakeholder in HE,have initiated change to make HEinstitutions more accountable for state funds,teaching standards and research quality (andquantity) across the sector The amount andprocess of debate within HE (sometimesheated), surrounding these issues highlights

a suspicion that their academic freedom isbeing eroded by stifling regulation on onehand and by a Philistean culture of marketforces on the other In the wake of thesepolicy changes, new debates are emerging: agreater concern with quality and marketrelevance, and a fear of creeping inequalitiesbetween institutions in terms of wealth andstatus Its principles are more in tune withwhat Schwarz and Thompson (1990) call

‘‘Jeffersonian governance’’ (ideal socialism,

or parliamentary or referendum democracy).Disagreements between the HE communityand the government are rooted in a failure toagree on what the goals of HE should be, whatthe problems are, and what is an appropriateframework for moving forward The

government’s notion of ‘‘consultation’’ mayfall outwith the HE expectation of

‘‘Jeffersonian governance’’, so that a clash ofrealities remain

General discussion: drawing comparisons

IntroductionThe framework provides a means forassessing how setting strategic direction andexercising control is rooted in different ways

of life and patterns of innovative behaviour.These realities yield alternative guidingprinciples and assumptions for sanctionedbehaviour:

that are also used for judging others andjustifying [oneself] against others (Douglas,1982a, p 5)

These realities are stable, taken for granted,and a product of social interaction

Individual organisations are not a jumble ofchoices and preferences, moving freely and

collectively from one reality to another Norare preferences and expectations for thefuture somehow detached from the collectivememory All decisions are framed by theexisting practice of strategy, which in turnreflects a commitment to a package ofassumptions and social prescriptions abouthow to behave in the organisation’senvironment.

A number of more specific observationsmay be drawn from the foregoing analysis, inparticular

. forms of collective control;

. risk and rationality, the nature and scopefor change; and

. boundary management within theorganisation

These differences are not exhaustive; theyhighlight features of corporate strategicthinking These features are discerniblerather than definitive They give a sense thatorganisational life is plastic and

developmental, while at the same timereinforcing existing practice

Collective controlRegulatory mechanisms, anchored in widersocial institutional structures, tend toexercise strong control over thoseorganisations to the right of the framework(the business school and the bank),

demanding conformity on pain of expulsion

Those toward the top of the framework, such

as the bank, are least able to perceivealternatives For them:

The situation of being closely controlled andinsulated from free social intercoursestabilises a perception of having no options(Douglas, 1982a, p 6)

Increasing or relaxing the criteria for entry

to the organisation results in more or lessdistinct compartments The flow of ideas andknowledge may depend on personal

networks, as in Telco; or a mixture ofpersonal networks and group sanction, as inthe business school; or be highly regulated,

as in the the bank’s use of an entrepreneuralbroker In this latter case many ideas are

‘‘bottom up’’, but in the interests of beingefficient and prudent, higher authority must

be given before any commitment or contractcan be entertained Otherwise, as Douglas(1982a, p 6) says, ‘‘to open small gates oncontrol desensitizes the control centres toflood warnings’’

Decisions to give up control of both contentand process results in separation, a loosening

of the regulatory chains that hold theorganisation together This tension betweenmore or less control describes the

relationship between the business school and

its parent the university Many in theuniversity see the business school as pullingtoward individualism, while those in thebusiness school see the university as pullingthem toward hierarchy

The individualism of Telco and theegalitarianism of the business school, have incommon the right of individuals to pursuetheir particular interests They differ in theform of socialisation necessary for doing so:loose integration of individuals or individualautonomy granted by group sanction Incontrast the way of life of both the businessschool and the bank share an intolerance ofTelco’s unbridled individualism as a basis forchoosing alternative strategies They differ

in the degree to which the force of regulatorymechanisms guide choice

Risk and strategic rationalityEach way of life features a distinctive style ofreasoning, based on an inexhaustive andlargely complementary range of taken forgranted ideas Each alternative reality, taken

as a whole, appears to be incommensuratewith others, in that their features cannot bemeasured against some common standard,and these features have meaning only as part

of a particular reality Moreover, they do nothave more or less of ‘‘rationality’’ relative toeach other Rather, embedded in these socialrealities are alternative ‘‘styles of

rationality’’ (Wettersten, 1995)

Weber’s (1964) formal or proceduralrationality and Allison’s (1971) ‘‘organisationprocess paradigm’’, are consistent with thehierarchist’s overriding concern with rulesand roles Following procedures will deliveracceptable outcomes Substantive rationality(Allison’s ‘‘rational actor paradigm’’) putsoutcomes first, ‘‘the bottom line’’ mattersabove all else How ‘‘the bottom line’’ isachieved is of secondary importance.Schwarz and Thompson’s (1990, p 7) criticalrationality describes the egalitarian concernwith ‘‘communal and voluntaristic

co-operation’’ Both outcome and process areimportant Here Allison’s ‘‘governmentalpolitics’’ describes the negotiated andpolitical dimension of rational choice, andcomplements the ‘‘co-operative’’ perspective

of ‘‘critical’’ rationality

Differing styles of strategic rationalityperceive and manage risk and uncertaintydifferently Anomalies present risks anduncertainty, and opportunities forinnovation, and each organisation handlesthem differently in ways that seem akin toSchwarz and Thompson’s (1990, p 105)proposed categories for explaining howpolicy makers, like government bodies, dealwith technological risk: anticipatory,[ 188 ]

opportunism, resilience Telco’s strategicrationality is characterised as

‘‘opportunistic’’ All levels of managementalways keep an eye open for the unexpected

Sticking their necks out makes theadrenaline flow and is often rewarded Telcostaff seize them eagerly as opportunities todemonstrate substantive outcomes, whereintrial and error with its attendant risk offailure are taken for granted The bankthrough its ordered way of life tries toanticipate anomalies, and to accommodate orabsorb those anomalies within its existingorder Anticipating external anomaliesremain feasible through the professionalbanking social network, co-operativerelationships with some competitors, socialrelations with financial regulators, and aformal role on the boards of many customers

The business school’s members are morecritical or ‘‘resilient’’ in their risk takingattitudes They do not go out of their way to

‘‘court danger’’ (Schwarz and Thompson,

1990, p 105), preferring to debate andevaluate the implications of different futurescenarios, what Schwarz and Thompson(1990, p 66) call the ‘‘trial without error’’ of

‘‘critical rationality’’

Plural realities and strategic changeWettersten (1995) argues that we shouldaccept the possibility of different rationalitystyles and seek to integrate them, rather thantry to evaluate alternative rationalities asbeing more or less developed Different styles

of reasoning produce:

New interesting problems and permitsreconciling differences better than [trying tobanish alternatives to] the absent uniquestandard (Wettersten, 1995, pp 87-9)

While these social realities appearincommensurable, it does not mean that anorganisation cannot be host to more than one

at the same time Indeed, these alternativeways of life need each other Despite Telco’sindividualism, there remains in the

background a chain of command, andexternally legislation and regulation,available as a last resort if negotiation fails

Behaviour within the banking world may beheavily prescribed, but the bank, along withother providers of financial services, operate

in a competitive market

The business school may be thrusting tobuild market share, but its strategy is inlarge part based on exploiting theestablished and respected reputation of itsparent, the university While they differ inimportant ways, they are held together by acommon commitment of providing openaccess to higher education Staff working inthese two organisations, engaged in

conventional activities, are unconsciouslycommitted to a common social reality There

is little chance in the two becoming alien toeach other while they have this commoncommitment

Obvious market and technologicalupheavals do not necessarily mean that theway of life within an organisation or itssector will be revolutionised Rather it showsthe plasticity of, and scope for innovationwithin a given reality

The business school feels that it is at across roads in the development of distanceeducation, and as noted above has spent acouple of years researching and evaluatingdifferent scenarios Consistent with itsstrategic rationality, the business school hasnow started implementing an approach thatseems designed to encompass as much oftheir technology’s interpretive flexibility asthey can conceive of, by recruiting expertise

to cover a broad range of possibilities Telcotoo is at a crossroads, having built a veryprofitable business on modem technologicalexpetise that now looks like a liability, isinvesting in new expertise around local areanetwork and wide area network technologies,

‘‘trying to come from behind to being infront’’ within 18 months It is trying to do this

as fast as possible, recruiting and firing staffwith equal facility, endless rounds of re-organising, and making extravagantpromises to both themselves and customers.Change within Telco is so incessant that newwork organisation schemes overtake

preceding ones before they are completed.Stakeholder have grown to expect this level

of uncertainty from the telecomms sector.The bank, in common with its competitors isremodelling its relationship with users,trying to re-educate a distrustful public toengage in remote financial transactionsthrough online banking

Boundary managementPolitical arguments may be about whethergroup boundaries should be tightened orrelaxed, and about the need or not for morerules These discussions and arguments arejustified in terms of perceived demands of theexternal environment Many of the bank’sdivisions are in a constant argument aboutthe extent to which they should control theirown management information systems(MIS), and about centralised versusdistributed management of that information.They argue that being customer responsivemeans having control of these resources.Some divisional managers would like theright to choose between the internal MIS,provided by MSD, and external competitors

of MSD Most accept the veto on such choices

as necessary to support an internal MSD

Telco’s two main revenue generators,customer support and sales, are constantlyarguing about redrawing the boundarybetween them, as if it were something that isnegotiable The protagonists claim to bebetter placed to serve the customer; fromtheir opposing positions each side feels thatthey hold the ‘‘natural’’ vantage point

Similar arguments rage among theuniversity’s faculties The business schoolpoints to its own performance in the marketplace as evidence that it should have greatercontrol over the distribution of its ownincome within the university

These arguments about where groupboundaries should be drawn are attempts toeffect competing interpretations of strategicdirection In the process practitionersconstruct an innovation space, whether ornot the argument is resolved The constantthreat to each group’s competitive scope andpolitical legitimacy creates space for

innovative problem – solutionconfigurations Innovation (of which projectsare a crystallisation) are thus constituted,and build on Fincham et al.’s (1994, p 133)observation of innovation projects in thefinancial services sector:

Innovation provides a critical juncture for thenegotiation and reconstruction of the sector,whereby preconceptions and alliances may bechallenged, and new avenues of knowledgedeployment and occupational mobilityopened up

In this reconstruction each argument ispresented as a ‘‘strategic rationale’’,comprising assumptions about outcomes,benefits, and drawbacks, and is the basis foreconomic and technical justification Itreflects the mobilization of arguments aboutthe significance and utility of specialknowledge for the success of an organisation

as a whole – that is, the adoption of adiscourse about strategy (Fincham et al.,

1994, p 133) These arguments about control

of strategic resources do not undermine thestability of the natural order While thebank’s way of life may drift a little byrelaxing or tightening group commitment, orregulation, for example toward more or lessreliance on the market to meet its ICTrequirements, it will remain fundamentallyhierarchical in outlook The justifyingarguments and ideas that characterise Telco

as operating in an essentially individualistreality are not challenged by internalarguments about where the groupboundaries should be drawn, for examplebetween customer support and sales

Conclusions

While corporations are economic units, theyare at the same time social units Each socialunit is host to a cocktail of social realities,although one tends to be dominant Socialreality is not bounded by any formalorganisational boundary, but is constituted

of social relations that include customers,suppliers, competitors, regulators, and otherstakeholders, much like Fleck’s (1979)

‘‘thought collective’’ The dominant socialreality is different in each organisationstudied, and is not a product of

organisational design

Each social reality describes a bundle offeatures that separately mean little, buttogether give meaning to the way thatcorporations develop strategy and controldecision making Individuals are not loneatoms, but socialised beings, with acommitment to one or other socialinstitution Individuals carry a piece of asocial jigsaw, and strategy practice, whilepurposive, involves many decisions beingroutinely and unconsciously made through ataken for granted strategic rationality.Conflict within organisations may be theresult of competiting institutionalcommitments, like the tensions between thebusiness school and the parent university, orbetween the outward facing operatingdivisions of the bank and their internalrelationship with the inward focusedmanagement services division

The analytical framework employed here,the strategic rationality model, presents aqualitative and useful way of comparing andcontrasting the practice of strategy

development across the three organisations.This is not accidental The framework wasadopted because of its explanatory value insocial anthropological settings that, whiledifferent from organisational settings, sharethe sense that strategy development practices

do vary in distinctive ways

The framework highlights the complexityand sociality of ‘‘choice’’, and give a flavour

of its inaccessibility to practitioners It is asDouglas (1982a, p 6) suggests:

[In examining] the principles of individualchoice and conflict of rights we have no way

of considering the effect of institutional formsupon moral perception Yet something aboutinstitutional forms is generated by

elementary choices and the resultantinstitutions incorporate judgements whichreciprocally influence further perceptions ofchoice Once any of these elementary choiceshas been made, it entails a package ofintricately related preferences and secondarymoral judgements

The concept shows that when practitionersappeal to commonsense and rationaljudgements as the basis for action, they areinvoking a constellation of knowledgeclaims, rooted in taken for grantedexpectations and beliefs, heritage, andexperiences in the ‘‘here and now’’ Whenthere are too many exceptions to the rule,they leap from one set of socially constructedrational judgements to another that seem tooffer a better account of material reality.

The evidence shows that there are multipleand equally valid interpretations of the truth,supported by different styles of reasoning

These different styles go beyond theattributes of ‘‘rational’’ and ‘‘non rational’’

judgements, showing that such labels aregrounded in a taken for granted reality

There is also evidence that strategic changelabelled as ‘‘incremental’’ or ‘‘revolutionary’’

are ‘‘after the fact’’ social constructions thatvary with the observer’s perspective

Significant strategic change may take placewithin a given social reality, withoutupsetting its fundamental nature, or anorganisation may switch social realitiesalthough this is likely to be a more traumaticexperience for those involved Incrementalchange measured over centuries, such asexperienced by the bank, may be labelled assignificant or transformational when looked

at over the whole of its history

It seems likely, though not certain, that thestrategic rationality framework can explainvariation between a broad range of

organisations, and at different levels of focus

All three in this study exist in what appears

to be a largely individualistic American socio-economic setting, yet thethree are sufficiently different to suggest thatnational culture does not blur differences

Anglo-Even within the same industry it is possiblethat the same differences in social reality can

be shown For example, it is conceivable for

BT, Britain’s largest telecommunicationservices provider, to have a hierarchicalprofile in contrast to Telco’s individualism

Business units within BT need not behomogeneous; some could be individualistic,while others – perhaps the research orientedunits – be more egalitarian The framework’sexplanatory power in some settings is moreunclear For example, family ownedbusinesses might be hierarchical, yetdifferentiated in different ways other thanthose used in this analysis Also, whether theframework would throw light on

organisations in different socio-economicsettings, such as companies in Japan orKorea, is unknown These settings offer otherpossible areas for research

Notes

1 Barnes’ (1974) review of Kuhn’s analysis of scientific progress provides an analogy Barnes (1982, p 86) also notes that ‘‘major cultural change can be brought about not just

by the accumulation of many small deviations from routine, or extensions of routine, over a period of time, but even by activity carried out

in meticulous conformity of routine’’.

2 One of the university’s social prescriptions for maintaining its way of life takes the form of

‘‘dean by open election’’, with the elected dean holding office for five years This mechanism supports accountability of the dean, and circumscribes the incumbent’s power (through manifesto and term of office).

3 ‘‘Centres’’ are career development homes for groups of like minded academics and administrators Centres would be a forum for developing personal or collective agendas.

References

Allison, G.T (1971), Essence of Decision:

Explaining the Cuban Missile Crisis, Little, Brown & Company, Boston, MA.

Barnes, B (1974), Scientific Knowledge and Sociological Theory, Routledge & Kegan Paul, London.

Barnes, B (1982), T.S Kuhn and Social Science, Macmillan, London.

Blair, M (1995), Ownership and Control:

Rethinking Corpoarte Governance for the Twenty-First Century, The Brookings Institution, Washington, DC.

Bloor, D (1983), Wittgenstein: A Social Theory of Knowledge, Macmillan, London.

Bloor, D and Bloor, C (1982), ‘‘Twenty industrial scientists: a preliminary exercise’’, in Douglas, M (Ed.), Essays in the Sociology of Perception, Routledge and Kegan Paul, London.

Douglas, M (1982a), ‘‘Introduction to grid/group analysis’’, in Douglas, M (Ed.), Essays in the Sociology of Perception, Routledge & Kegan Paul, London.

Douglas, M (1982b), Natural Symbols:

Explorations in Cosmology, Pantheon Books, Random House, New York, NY.

Douglas, M (1987), How Institutions Think, Routledge & Kegan Paul, London.

Fincham, R., Fleck, J., Procter, R., Scarbrough, H., Tierney, M and Williams, R (1994), Expertise and Innovation: Information Technology Strategies in the Financial Services Sector, Clarendon Press, Oxford Finkelstein, S (2001), ‘‘The myth of managerial superiority in Internet startups: an autopsy’’, Organizational Dynamics, Vol 30 No 2,

pp 172-85.

Fleck, L (1979), Genesis and Development of a Scientific Fact, translation of original published in 1935, University of Chicago Press, Chicago, IL.

Grinyer, P.H and Spender, J.C (1979), ‘‘Recipes, crises and adaptation in mature businesses’’, International Studies of Management and Organisations, Vol 9, pp 113-23.

Hood, C (2000), ‘‘Control over bureaucracy:

cultural theory and institutional variety’’, in Mars, G and Weir, D (Eds), Risk

Management, Vol I, Ashgate, Aldershot.

Johnson, G (1989), ‘‘Rethinking incrementalism’’,

in Asch, D and Bowman, C (Eds), Readings

in Strategic Management, Macmillan, Basingstoke.

Kay, J and Silberston, A (1995), ‘‘Corporate governance’’, National Institute Economic Review, August.

Langley, A (1988), ‘‘The roles of formal strategic planning’’, Long Range Planning, Vol 21

No 3, pp 40-50.

O’Sullivan, M (1998), ‘‘Sustainable prosperity, corporate governance, and innovation in Europe’’, in Michie, J and Grieve Smith, J.

(Eds), Globalisation, Growth, and Governance, Oxford University Press, New York, NY.

Porter, M.E (1990) Competitive Advantage of Nations, Free Press, New York, NY.

Samuels, W.J (2001), ‘‘The political-economic logic of world governance’’, Review of Social Economy, Vol LIX No 3, September,

pp 273-366.

Schwarz, M and Thompson, M (1990), Divided We Stand: Redefining Politics, Technology and Social Choice, Harvester Wheatsheaf, Hemel Hempstead.

Swanson, G.E (1969), Rules of Descent: Studies in the Sociology of Parentage, University of Michigan, Ann Arbor, MI.

Tricker, R.I (1984), Corporate Governance, Gower Publishing Company, Aldershot.

Weber, M (1964), The Theory of Social and Economic Organization, Free Press, Glencoe, IL.

Wettersten, J (1995), ‘‘Styles of rationality’’, Philosophy of the Social Sciences, Vol 25 No 1,

pp 69-98.

Whysall, P (2000), ‘‘Retailing and the Internet: a review of ethical issues’’, International Journal of Retail & Distribution Management, Vol 28 No 11, pp 481-9.

Further reading

Berger, P and Luckmann, T (1966), The Social Construction of Reality: A Treatise in the Sociology of Knowledge, Penguin, London Douglas, M (1982), ‘‘Cultural Bias’’, In The Active Voice, Routledge & Kegan Paul, London Huff, A.S (1982), ‘‘Industry influences on strategy reformulation’’, Strategic Management Journal, Vol 3, pp 119-31.

Kelly, G., Kelly, D and Gamble, A (1997) (Eds), Stakeholder Capitalism, Macmillan, London Knights, D and Morgan, G (1991), ‘‘Corporate strategy, organizations, and subjectivity: a critique’’, Organization Studies, Vol 12 No 2,

pp 251-73.

Knights, D and Murray, F (1992), ‘‘Politics and pain in managing information technology: a case study from insurance’’, Organization Studies, Vol 13 No 2, pp 211-28.

Kuhn, T.S (1970a), The Structure of Scientific Revolutions, University of Chicago Press, Chicago, IL.

Mintzberg, H (1978), ‘‘Patterns in strategy formation’’, Management Science, Vol 24 No 9,

pp 934-48.

Nelson, R.R and Winter, S.G (1977), ‘‘In search of useful theory of innovation’’, Research Policy, Vol 6, pp 36-76.

Schutz, A (1964), Collected Papers (II), Studies in Social Theory, Martinus Nijhoff, The Hague, Netherlands.

Williamson, O.E (1975), Markets and Hierarchies: Analysis and Antitrust Implications, Free Press, New York, NY.

Strategy, accountability, e-commerce and the

consumer

Ruth Murphy The Business School, University of North London, London, UK Margaret Bruce

Department of Textiles, UMIST, Manchester, UK

One of the reasons for this may be that manybusinesses fear that without an Internetpresence, the firm will get left behind Hence

a number of companies have turned theirfocus towards e-commerce, often byemulating the business module of anotherfirm, as ‘‘me too’’ entities In all, firms havebeen seduced by suggestions that e-commerceprovides opportunities to access biggermarkets at lower costs For instance, Bloch et

al (1996) propose that e-commerce offers costadvantages to firms via less expensiveproduct promotions, whilst Benjamin andWingand (1995) suggest that it offers a morecost effective distribution channel andoverall reduction in physical distributioncosts Bloch et al also advocate thate-commerce can enable a company toimplement customer focus strategies throughbetter customer relationships Together withvarious reports regarding the growingnumbers of consumers who now have access

to the Internet and use it for purchasing, it isunderstandable that e-commerce is seen as

an attractive way forward for many firms(Mintel, 2001) In all, the characteristics ofvirtual markets presented to firms viae-commerce open new opportunities forwealth creation (Amit and Zott, 2000)

As a consequence, a number of firms haveeagerly launched Web sites some, withconsiderable financial success to date Suchfirms include the auction site eBay and theportal site Yahoo However other firms haveeither experienced relatively little success to

date or they have gone out of business.Evidence suggests these companies have setthemselves up without consideration of thestrategic implications of developing,implementing and running a Web site Forexample, Neal and Veitch (2000) indicate thatmore than a third of 102 UK based Web sitessurveyed by the Trading Standards Institute,including those of high-street shops and well-known on-line specialists were problematic.For instance, 38 per cent of orders did notarrive on time, and 17 per cent of orders wereunfulfilled because of system crashes, out-of-stock items, forgotten orders, or companiescollapsing

In the eagerness to have an Internetpresence it is likely that firms may neglect toask themselves whether their Web initiativetargets their existing customer group,whether it attracts a new customer group andmost significantly, what value is the siteoffering to any customer group Indeedconsumers may be drawn in to a Web site viavarious advertising initiatives, however oncethere they do not find the product offeringscompelling enough to purchase and

subsequently don’t return to the site (Adamsand Heraghty, 2000) One reason for failure isthe neglect of on-line retailers to develop anadequate business model to achieve

profitability, due either to their lack offoresight in calculating total operating costs

or they have overestimated the size of themarket for on-line shopping (Ring and Tigert,2001)

In all, whilst the media has paid muchattention to the Internet as a way of offeringprofit potential, conversely there areindications that firms need to take caution

At present it seems as though any companywith real ambitions for the Internet mustpermanently live with a high degree of riskand uncertainty For as Ody (1997) notes:

The Emerald Research Register for this journal is available at http://www.emeraldinsight.com/researchregister

The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/0268-6902.htm

Whilst increasing numbers of firms

have launched themselves on the

Internet, evidence suggests that

they are doing this without any

consideration of the strategic

implications of developing,

implementing or running a Web

site Adopting a strategic

perspective, the aim of this paper

is to critically examine the

potential growth opportunities of

on-line retailers together with

identification of consumer value a

Web site may offer In being

accountable to their shareholders,

these firms’ efforts must make a

profit For those wishing to recoup

their investments in a short time

frame, it seems that putting funds

into e-commerce firms is not

recommended Rather

e-commerce is for long term play.

Experiments by retailers are more notable fortheir failure or low profitability than for theirsuccess.

Watson et al (2000) suggest that iforganisations are going to take advantage ofnew Internet technologies, then they mustadopt a strategic perspective, and in doing so,take into account stakeholders needs Theypoint out that in terms of shareholders, giventhe low or zero financial performance of anumber of Internet retailers to date, they arebeing asked to pay now for long term futurevalue creation

Adopting a strategic perspective, thepurpose of this paper is to identify the growthopportunities for firms functioning as on-lineretailers, and critically assesses the viability

of such growth strategies Secondly, in order

to be profitable, on-line retailers need to offersome kind of value to consumers Therefore

an examination of consumer value in anon-line environment is also undertaken

Growth strategies: new market opportunities through e-commerce

Strategy is concerned with planning and thelong term survival and success of a business

It defines the direction for a firm; it specifieswhere the business is going and determineshow it will get there It also guides thecompany towards its financial objectives(Davies and Brooks, 1989) The essence ofstrategic planning lies with the consideration

of current alternative strategic decisions,given possible threats and opportunities Inall, a major objective of any organisation isthe acquisition of a competitive advantage,which results from its appropriately selectedstrategic choices (Simomkos and

Vrechopoulos, 2000)

E-commerce provides retailers with themeans to buy, sell and provide support forbusiness transactions via computernetworks In effect all the activities whichare common to the combined efforts of each

of the three channels conventionally used inthe buying and selling process, these being,marketing communications, transactionsand distribution channels Consequently in

an on-line environment a Web site is able toadvertise products, allow consumers to payfor them, and in the case of digital softwaredistribute the product via a download (Li etal., 1999) With regards to non-digitalproducts such as food and clothing,communications and transaction functionsare achieved on a Web site but not

distribution With such functionalities, theInternet has the potential for both existingand start-up retailers to pursue growth

strategies as the technology has the potentialfor firms to achieve an additional source ofrevenue made possible by the existence ofthis alternative marketing and distributionchannel The strategic potential of theInternet can be understood by applyingAnsoff’s (1965) product-market matrix (seeTable I) as it functions to illustrate the maingrowth vectors available to a company.Documented below are current examples ofgrowth strategies pursued by various on-lineretailers used to illustrate each of the foursegments of the matrix

Market penetrationThe Internet can be used to sell more existingproducts into existing markets This can beachieved by using the Internet for increasingthe awareness of the firm as illustrated by

UK supermarkets such as Tesco andSainsburys’ plus the bookseller WH Smithand numerous clothing retailers includingthe Arcadia Group, Next and Marks andSpencer who all pursue a multi-channelstrategy selling both via the Web, the highstreet and/or mail order to their existingcustomers Finlay (2000) suggests that marketpenetration fits strategically for a firm whenits present customers can be induced to buymore and typically, when a company wants

to attack the market share of theircompetitors, they will undertake marketpenetration as a way of increasing their ownshare in the market

Given that generally the market forconsumer goods within the UK is mature,then penetrating these markets by targetingconsumers who are looking for convenientways to shop via a Web site would seem to be

a viable growth strategy Typically for thesemulti-channel retailers, it is not important tothem where the customer shops, that is,using the firm’s Web site or in the high store

or mail order catalogue, the key is that theyshop with them Whilst multi-channelretailing offers consumers this kind ofchoice, from a strategic perspective it isimportant to the retailer to co-ordinatecustomer data information, such asidentifying the channel with the highestvalue customer, in order to exploit Internettechnologies for the purposes of marketintelligence

Table IAnsoff’s (1965) product market matrix

Product/service

New Market development DiversificationExisting Market penetration Product development[ 194 ]

Ruth Murphy and

Market developmentE-commerce facilitates market development.

For example, Amazon initially used this as agrowth strategy by taking their existinge-commerce strategy of book selling in the USmarket and developing it for the UK

However the success of this growth optionrequires that the firm’s product or servicesatisfies the requirements of any newcustomer group (Doyle, 1992), which may bedifferent from those of the original customermarket (de Chernatony and McDonald, 1995)

For example offering a Web site in only onelanguage will not swiftly facilitate thecreation of worldwide customers

In all, firms need to balance the decreasedcosts of distribution associated with

marketing communications and transactionfacilities using the Internet with theincreased costs of support in terms of theresources required to target differentaudiences For instance according to Duncan(2001) after English, the languages that arelikely to get the greatest return on

translation investment are French, German,and Spanish and looking in to the future, hepredicts Chinese He suggests that

consumers are far more likely to complete atransaction on-line if the Web site is in theirown language rather than English Further

to this he suggests that in order to reach 70per cent of the consumer audience in Europe,the content of the Web site would need to betranslated into five languages Additionalconsiderations include tax, VAT anddifferent local legal requirements togetherwith an understanding of data protection andapproaches to registration of domain namesfor each of the local markets

Perhaps the most significant factor to beconsidered in terms of market development

is logistics Indeed the Internet is providing

an increasing number of opportunities tobetter manage logistics activities such asinventory management as it providesconstant connectivity between firms engaged

in logistics management Hence facilitatingmarket development However the orderfulfilment and logistics requirements forhandling e-commerce are much greater thanthose in traditional retailing The reasonbeing that the greater geographical spread of

a market, will inevitably result in finalproduct destinations being more widelydispersed, particularly in the case of the B2Cmarket, where the final destination is to thecustomer’s door (UNCTAD, 2001) Ring andTigert (2001) sum this up quite clearly intheir paper, and in doing so, identify a majorlogistics challenge for on-line retailers,quoting from the Wall Street Journal:

In retrospect it seems clear that loading up10,000 consumer items in a van and truckingthem to a central location (known as a

‘‘store’’) is cheaper than sending 10,000 vans todeliver the same goods individually to 10,000doorsteps

Product developmentThe Internet has facilitated the development

of new products and services that can bedelivered via a download to an existing targetmarket Examples of such Internet basedproducts include on-line newspapers,magazines, market reports, films and music.However perhaps the most significantdevelopment of a growth opportunity viaproduct or service development can be seen

in on-line banking services Indeed the UKbanking industry has made great strides toprovide this, for example Barclays Bank,Abbey National and the Royal Bank ofScotland all have a number of initiatives todeliver new services to existing customers.On-line banking provides an opportunity forgrowth as it can facilitate the offering offurther new services for customers Forinstance an on-line bank customer is likely toaccess their account from home on a regularbasis, more so than, for example, a customerwho buys their car insurance on-line Thissubsequently provides the bank with anopportunity to offer the existing customernew services available from their portfolio.Alternatively, the bank may act as a brokerfor an insurance company, promoting theirservices on the bank’s Web site A furtherrationale for this type of service development

in the banking industry is in the cost savingsmade via administrative tasks For instancefunds can be transferred between accountsand responses made to queries without anybank staff needing to intervene

A recent survey by consulting firmCapGemini Ernst & Young found thatcurrently just 4 per cent of all banktransactions in Europe are done on-line, this

is expected to rise to 25 per cent by 2003(Bachelor, 2001) However the currentopportunities for fully exploiting this type ofservice development, to date, is limited Forexample, current UK Internet based accountsare restricted to banking within the UK,neither can UK customers trade in thecurrency of their choice nor dabble inoverseas stock exchanges

A number of current consumer benefitsfrom on-line banking can be identified, such

as access to banking services 24 hours a day,the facility to check current account balancesand pay bills from home, all contributing toraising customer service standards by givingconsumers new and more convenient ways ofhandling their money However evidence

suggests that consumers would rather preferpersonal attention rather than use the newservices offered via the Internet For instanceBachelor (2001) suggests that a vast majority

of bank customers think that an on-linebanking service is not important in theirrelationship with a bank nor are many ofthem even aware that their bank provideson-line services Therefore at present, there

is a major divide between what consumerswant and the kind of new service

development, which the high street banks arekeen to push In terms of strategic fit, Finlay(2000) suggests growth through product orservice development is appropriate when afirm’s brand reputation is high, thecompetitive arena is characterised by rapidtechnological developments, the business hasespecially strong research capabilities andeconomies of scope are significant All ofthese apply to the UK banking industry

DiversificationWith regards to this quadrant of Ansoff’s(1965) matrix, new products and/or servicesare developed, which are sold to newmarkets Amazon.com again is a goodexample of a firm who has followed thisgrowth strategy For whilst the companybegan by selling books in one market, the US,moving gradually on to audio and videoproducts, it quickly moved into newgeographical markets for example the UK Itsmost recent new market is France According

to McDonald (2000) the firm is keen toconcentrate upon the European marketbecause of its high population density, whichmeans lower transportation and shippingcosts As well as developing into newmarkets, in July 1999 it began an expansiveproduct diversification strategy consisting ofhaving 18 million items of merchandiseacross 14 different categories Such adiversification program includes sellingelectronic equipment such as DVDs, lawnand patio furniture, garden products,hardware supplies and cars Similarly, the

UK site includes, along with books and CDs,cameras, computer software and electricalgoods plus an auction facility Advantages ofsuch a strategy include embedding the firm’sbrand as a leader in on-line retailing plus theability to capture customer data aboutpurchase behaviour from each productshipment and subsequently use in directmarketing activities

Such diversification has led critics toconsider that it could prevent Amazon.comfrom achieving any sustainable longtermprofitability as its too diversified range ofproducts may increasingly stress its complexdistribution infrastructure Finlay (2000)

points out that whilst diversification may be

an advantage to the firm, the costs ensuedmay be significant For it is unlikely thatunrelated diversified firms will add valueunless there are managerial or financialsynergies

Strategic success and corporate governance

Applied to e-commerce, Ansoff’s productmarket matrix is a useful strategic tool inidentifying the possible growth strategiesavailable to a firm in terms of how the it maygrow The matrix shows how e-commercefirms can generate new sources of revenuesand look at additional opportunities to offernew products and services in addition tothose it traditionally offers However itevident that all cases of the examples offered,the success of the outcome or otherwise is notguaranteed

Consumer value

Achieving customer satisfaction is animportant goal for retail businesses In all,customers will spend their money on whatthey expect will give them the mostsatisfaction (Bach et al., 1987) and thereforeincreasing this satisfaction leads to improvedprofits, positive word of mouth and lowermarketing expenditures (McDougall andLevesque, 2000) One way of achievingcustomer satisfaction is throughunderstanding consumer value (Woodruff,1997) Perceived consumer value may bedefined as benefits customers receive inrelation to total costs, or what Zeithmal (1988)refers to as the overall assessment of what isreceived relative to what is given HoweverBowman and Ambrosini (2000) suggest thatthe concept is more complex than this Theypropose that:

Customers perceptions of a value of a goodare based on their beliefs about the goods,their needs, unique experiences, wants,wishes and expectations

Further to this, in line with the classicaleconomists, they identify two types of value,use value and exchange value Each aredefined below:

Use value: specific qualities of the productperceived by customers in relation to theirneeds Here subjective judgements are madepertaining to the individual that, in turn,translates into what the customer is prepared