Proceedings of the 12th European Conference on Knowledge ...

Anna Maria Costanza Rinaldi
state that a group is more efficient than <strong>the</strong> market (Khanna and Palepu, 1997), while it is not
comparable to <strong>the</strong> efficiency <strong>of</strong> an U-firm or a M-firm, as first stated by Chandler (1982).
Chandler compares <strong>the</strong> group with <strong>the</strong> M-form and determines that both organizations were born from
<strong>the</strong> same need in Europe and in <strong>the</strong> United States: to efficiently control diversified activities. The
author believes <strong>the</strong> main difference between <strong>the</strong> two is that <strong>the</strong> group is based on contractual
relationships between units formally independent, while <strong>the</strong> M-form is based on administrative
relationships. Chandler also believes <strong>the</strong> administrative coordination typical <strong>of</strong> <strong>the</strong> multidivisional
enterprise to be more efficient for <strong>the</strong> control <strong>of</strong> diversified activities, for <strong>the</strong> allocation <strong>of</strong> financial
resources and to take advantage <strong>of</strong> single economic resources. Chandler also maintains that <strong>the</strong>
persistence <strong>of</strong> groups in Europe in adopting <strong>the</strong> M-form is to be attributed to <strong>the</strong> persistence <strong>of</strong>
families' control in large enterprises and to <strong>the</strong> relative underdevelopment <strong>of</strong> <strong>European</strong> capital
markets.
Williamson (1985, 1986) confirms Chandler's idea, which states that <strong>the</strong> group is an embryonic form
<strong>of</strong> multidivisional firm. According to Williamson, <strong>the</strong> M-form main characteristic consists on <strong>the</strong>
subdivision between strategic and operating responsibilities, which allows <strong>the</strong> enterprise to more
efficiently manage <strong>the</strong> activities. The group represents an improvement in allocating financial
resources but lacks some characteristics typical <strong>of</strong> <strong>the</strong> M-forms. The worst case <strong>of</strong> subdivision <strong>of</strong> <strong>the</strong>
H-form (Williamson, 1986) is represented by <strong>the</strong> general management essentially used as an <strong>of</strong>fice
for earnings collection and <strong>the</strong> holding company acting as a risk-pooling agency. For <strong>the</strong>se reasons,
<strong>the</strong> group could generate inefficiencies in strategic and operating processes and in <strong>the</strong> internal capital
market. In <strong>the</strong> end, in Williamson's description, <strong>the</strong> group turns out as a segmented firm, where <strong>the</strong>
weakness <strong>of</strong> general management can never generate <strong>the</strong> inherent advantages belonging to <strong>the</strong>
<strong>the</strong>oretical model <strong>of</strong> <strong>the</strong> M-form.
Instead, in this paper one maintains that <strong>the</strong> group can be considered as an efficient organizational
form also with respect to <strong>the</strong> unitary firm, in a competence-based view. Therefore, it is necessary to
expand <strong>the</strong> meaning <strong>of</strong> <strong>the</strong> production function. We can state that <strong>the</strong> group arises as an answer to a
primary need <strong>of</strong> <strong>the</strong> firm to create competences, specializing its units that will handle single functions.
Therefore, it is necessary to take a systemic outlook and propose that <strong>the</strong> production function
performs a decisive role in <strong>the</strong> choice <strong>of</strong> this organizational form. This hypo<strong>the</strong>sis requires fur<strong>the</strong>r
specifications. We want to verify if <strong>the</strong> group allows to fulfill <strong>the</strong> tasks subdivision between different
functions and <strong>the</strong> possible phases <strong>of</strong> <strong>the</strong> production process. The tasks subdivision causes an
increased specialization <strong>of</strong> <strong>the</strong> elements involved in <strong>the</strong> process and allows <strong>the</strong> analytical review <strong>of</strong>
<strong>the</strong> different functions and phases <strong>of</strong> <strong>the</strong> production process and an easier and faster acquisition <strong>of</strong>
<strong>the</strong> affiliated units required, discarding <strong>the</strong> inefficient ones.
This might explain why in Italy <strong>the</strong> group phenomenon concerns mainly small and medium firms,
where <strong>the</strong> property is handled by <strong>the</strong> same person that exercises control and represents <strong>the</strong> typical
form <strong>of</strong> firm during <strong>the</strong> size expansion phase (Rosa and Scott 1999) or ra<strong>the</strong>r is a common way to
grow firm, fostering <strong>the</strong> entrepreneurial team (Iacobucci and Rosa, 2010). In fact, in 2008 in Italy,
apart from agricultural sector, <strong>the</strong>re are more than 76,000 groups, mostly small size: <strong>the</strong> 64% has
from 1 to 19 employees, <strong>the</strong> 66,5% from 20 to 99, <strong>the</strong> 7.7% from 100 to 499, while only <strong>the</strong> 1.7% from
500 to 4,999 and <strong>the</strong> 0.1% more than 5,000 employees (ISTAT 2010).
2. The production function from a systemic perspective: <strong>the</strong> cognitive
efficiency
The nexus among production function, manufacturing process and juridical/organizational
choices has never been investigated. The production function is central for <strong>the</strong> organizational choices
<strong>of</strong> <strong>the</strong> firm but this has been neglected for too long, while it could have opened <strong>the</strong> road to interesting
outcomes.
The economic <strong>the</strong>ory developed at least three approaches to <strong>the</strong> study <strong>of</strong> production: <strong>the</strong> mainstream
production function by Walras and Wicksteed; <strong>the</strong> linear approach based on <strong>the</strong> activities analysis by
Koopmans; and <strong>the</strong> funds-flows model approach <strong>of</strong> Georgescu-Roegen. The first <strong>of</strong> <strong>the</strong>se <strong>the</strong>oretical
analysis starts where <strong>the</strong> second one ends: <strong>the</strong> mainstream production function presumes <strong>the</strong>
problem solution by <strong>the</strong> efficient combination <strong>of</strong> elementary processes where it is possible to divide
<strong>the</strong> general production process <strong>of</strong> a certain commodity (Zamagni, 1985). Georgescu-Roegen's
approach is <strong>the</strong> only one that gets, even if partially, <strong>the</strong> link between production and organization. This
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