Limits to learning from the west: How western management advice may prove limited in Eastern Europe

Abstract

AbstractThe West's aid to the emerging Eastern European economies includes consultancy and education. This will have considerable impact on their economic and managerial activity, even though the theories of organization and management on which it is based are much criticized here. As these theories are applied in the extreme economic, social and political circumstances of the Soviet collapse, we are likely to be both surprised and pushed into a period of critical organizational theorizing.Much of the criticism comes from institutionalists who reject a generic approach to economics and management. They argue instead that organizations are embedded within a specific environment of social, legal, economic, and technological institutions which fashion their activities. They are saying “things are different over there and we should recognize that our advice presumes our own institutional arrangements.”The first part of this study reviews the reasoning behind this critique. It has two threads: (a) the institutional context and the way that shapes economic transactions and their costs; and (b) the way institutions develop as collective responses to social uncertainties. We look at organization theory's dependence on the social institutions, such as contract law, professional training, and the market for insurance. We take these and many other Western institutions for granted, and seldom stop to analyze them. In Eastern Europe, managers lack such institutional infrastructures and face uncertainties beyond our experience.This article's second part focuses on the processes by which organizations respond to uncertainties. There are many types of uncertainty and we pick out that of adopting a new technology. Problems arise because of “gaps” between the organization's in‐place work practices, knowledge, and attitudes, and those which they must eventually adopt if they are to use the new technology effectively.Recent research into workplace know‐how suggests that such gaps are bridged by workers developing a new “tacit” understanding of the technology through learning‐by‐doing. This knowledge generation (KG) works best when it is also communal, when creative teams form. By definition, this kind of team cannot be managed bureaucratically, in ways that depend on an understanding of the task in hand. We see that bureaucracy is a theory of knowledge application (KA) which breaks down in the absence of the necessary knowledge, rules, measurements, communications, and sanctions. Creative teams can operate under the conditions of bureaucratic failure because they are held together by institutional forces rather than by rational administration. The context of social institutions outside the organization becomes important because it defines the institutional bases for such teams.In the final section we look beyond creative teams as internal uncertainty resolvers. The new institutional economists argue that firms should internalize the uncertain transactions that are difficult to contract, and so precipitate market failure. We suggest that entrepreneurs also look outside the firm at those social institutions which enable them to externalize uncertainties.In general, the institutionalist critique reveals that entrepreneurs have several domains of action. The formal KA part of the firm, the focus of classical organization and management theory, is but one of these domains. Other equally important KG domains lie both within the firm and in the interorganizational networks and social institutions beyond its boundaries. The uncertainties of the Soviet collapse move us on from the simplicities of Western organization theory toward a richer set of ideas more relevant to our Eastern European colleagues—and to ourselves.