Perspectives in Industrial Organization. - book reviews

Business Horizons, Sept-Oct, 1991 by Alfred Diamant

The reviewer, Alfred Diamant, is a professor of political science and West European studies at Indiana University, Bloomington.

Collections of essays are often condemned out of hand for being held together only by their bindings, but this is certainly not the case with the volume reviewed here. If the title of the book, Perspectives in Industrial Organization, provides only the vaguest of connections to its contents, what makes up that content is eminently worth the attention of interested readers. It seems to be a case of the parts being bigger-or rather better-than whole.

The editors, from the University of Maastricht and Erasmus University in the Netherlands, have collected papers and addresses from the 15th Conference of the European Association for Research in Industrial Economics. Their selections have been authored by a broad spectrum of European social scientists. The editors deserve special credit for their catholic tastes, for this is a volume in which voice and space are given to many "schools" and there clearly is no room for any sort of orthodoxy. They do this even though there seems to be a tendency in many academic disciplines and areas of research to demand adherence to a methodological cause. It is both refreshing and instructive to confront in the same volume a true Chicago School economist (Reuven Brenner, pp. 235-257) with those now skeptical of the dual virtues of modeling and neo-classical economics.

The editors manage to set this tone of methodological openness in their introductory essay (pp. 1-28). They first outline the four major topics to which this volume is devoted: globalization, technological change, mergers and acquisitions, and goverment intervention. They also express their skepticism of what is, at least in the U.S., the reigning paradigm: "There is a plethora of rigorous and quantitative analyses of relatively insignificant problems" (p. 2). Especially in works dealing with multinationals (MNCS), they believe it necessary to get away from abstract and theoretical microeconomics because they see MNCs as complex networks that need to be understood, not as "games" of traditional rationality, but as "learning games." Furthermore, MNCs, which exist in a world increasingly populated by national and supra-national governments, take on increasingly more pronounced political properties. All this, the editors argue, calls for a shift from purely deductive to more inductive methodologies.

The editors' introductory essay is followed by 15 substantive papers, plus a chapter consisting of a number of addresses given at the conference that are generally discursive and hortatory in nature. There is more than a hint that the "old lions" of the profession are less than enchanted with the methodological predilections of their successors: "Each paper they send me is more elegantly mathematical than the last, and increasingly I am only able to understand the first two sentences and the conclusion" (Roger Mavis, p. 43)-a fate shared by this reviewer in his own profession. This generalized unhappiness is reinforced in some of the substantive essays, such as the one that wonders how it is possible that the several computer models of U.S.-Canadian trade reach such widely diverging conclusions (Tim Hazeldine, pp. 75-94). Another author, examining neo-classical models of industrial organization 10), rejects the micro-micro framework of classical 10 and argues instead for a micro-macro political economy framework (Christo N. Pitelis, pp. 63-72).

The 15 chapters are divided into five sections entitled "Assessing Industrial Economics," "Aspects of Internationalization," "Innovation Strategies and Technological Development," "Mergers, Acquisitions and Competition Policy," and "Institutional and Structural Change." The tone of the first section is set by the opening essay, which uses the concept of "market theory" for the conventional IO designation because it is considered necessary to extend consideration from the organization itself to its environment. However, for this wider focus, "perfectly rational behavior--the homo economicus--is rejected as an explanatory concept for both the entrepreneur and the consumer" (Henk D. De Jong, p. 30).

In the second section, in addition to the paper by Hazeldine noted above, there is an intriguing examination of Japanese export pricing in its relation to domestic price disturbances. The author argues that such disturbances triggered dumping abroad for some commodities, such as steel, but not for others, such as VCRs, Tvs, automobiles, and semiconductors (Hideki Yamawaki, pp. 95-106).

In the third section, the paper dealing with innovation in advanced materials (AMs) has particular interest for a wider social science audience. It discusses the rapid development of the new AMs (new ceramics, high performance polymers, new metals, and advanced composites), the high degree of inter- and multidisciplinary R&D activity, and the seemingly never-ending appearance of new AMs, which presents users with what has been termed a hyperchoix des materiaux" (Roberto Malaman, pp. 151-170). The other two papers deal with learning patterns and strategic partnering in the technology area (Joseph Shachar and Ehud Zuskovitch, pp. 133-150, and John Hagedoorn and Jos Schakenraad, pp. 171-191, respectively).