Equality, Participation, Transition: Essays in Honour of Branko Horvat

106 Employee Involvement and the Modern Firm
major changes, which deeply influenced management science, are
described below.
First, there is a revival of entrepreneurship. Entrepreneurship has
become accepted as one of the central forces of economic growth. The
entrepreneurial firms are defined by two elements. First, they pursue
continuous improvement in methods, products and processes. And
second, they are firms in which entrepreneurial activity is transformed
from its traditional individualist activity into collective activity
(Best, 1990).
Economists have noticed this change towards entrepreneurship, and
the promotion of new firm formation became an important part of proposed
policies as it is still within the economists’ conceptual framework.
However, most of the new literature on entrepreneurship is coming from
the field of management (Drucker, 1985, 1991; Stevenson, Roberts and
Grousbeck, 1985; Timmons, 1990), an area unfamiliar to most economists.
There is now a vast literature on entrepreneurship and there are
about 20 professional journals specializing in this field. The entrepreneurship
bibliography currently contains over 30 000 entries.
The second major change was the replacement of hierarchical management
models by models with different degrees of decentralization
of management decision-making (Nadler, 1977; Peters and Waterman,
1982; Walton, 1987; Sengenberger and Loveman, 1987; Cole, 1989;
Kanter, 1989; Kochan and Useem, 1992; Hamel and Prahalad, 1994;
Nonaka and Takeuchi, 1995).
Economists have largely ignored changes concerning company management
because those changes fell outside the economists’ conceptual
framework. In our view, the key changes have actually occurred in this
sphere. This change in the management paradigm was triggered off by
the quality movement (continuous changes in product, processes, and
being first on the market). It was started by W. Edwards Deming and
Joseph M. Juran in Japan. The movement then spread to the US and is
now rapidly proliferating throughout the world (Deming, 1982). A small
group of economists working in the area of Industrial Organization
followed this development and have identified these major changes in
global competitive conditions. Their work has become known through
Michael Best’s writings as the ‘new competition’ (Best, 1990; see for
example also Lazonick, 1991; Piore and Sable, 1984; Porter, 1990).
The policy advice developed from these ideas encouraged the government
to speed up the dissemination of knowledge on how to adapt
to the new competition through introduction of new principles that
include focus on quality, focus on customers, continuous improvement,