efficiency gains of using specialist suppliers or suppliers in locations with a

Efficiency gains of using specialist suppliers or

This preview shows page 169 - 171 out of 284 pages.

efficiency gains of using specialist suppliers (or suppliers in locations with a comparative advantage or low labor costs) and the problems encountered in writing (enforceable) contracts with them. Another part of the literature looks at the problems of incen- tives in organizations, asking how employees can be induced to meet their firm's objectives. 1 0 While new technologies may reduce the costs of monitoring, it seems unlikely that the problems of incomplete contracts are amenable to a technological fix. What evidence is there? On the one hand there has been a dramatic increase in the out- sourcing of activities to specialist suppliers in recent years, suggesting that difficul- ties in writing contracts and monitoring performance have been reduced. On the other hand a number of empirical studies point to the continuing importance, despite new technologies, of regular face-to-face contact. Gaspar and Glaeser (1998) argue that telephones are likely to be complements, not substitutes, for face-to-face contact as they increase the overall amount of business interaction. They suggest that, as a consequence, telephones have historically promoted the development of cities. The evidence on business travel suggests that as electronic communications have increased so too has travel, again indicating the importance of face-to-face con- tact. Leamer and Storper (2000) draw the distinction between "conversational" transactions (which can take place at a distance using information and communica- tion technology) and "handshake" transactions, which require face-to-face contact. New technologies allow the dispersion of activities that require only conversational transactions but might also increase the complexity of the production and design process, increasing the proportion of activities requiring handshake communication. Overall, then, it seems that there are some relatively straightforward activities for which knowledge can be codified, new technologies will make management from a distance easier, and relocation of the activity to lower-wage regions might be expected. But for more complex activities, monitoring, control, and information exchange still require contact that involves proximity and face-to-face meetings. Perhaps nowhere is this more evident than in the design and development of the new technologies themselves. Time in Transit New technologies provide radical opportunities for speeding up parts of the overall supply process. There are several ways this can occur. One is simply that basic infor- mation-product specifications, orders, invoices-can be transmitted and processed more rapidly. Another is that information about uncertain aspects of the supply process can be discovered and transmitted sooner. For example, retailers' electronic
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162 AnthonyJ. Venables stock control can provide manufacturers with real-time information about sales and hence about changes in fashion and overall expenditure levels. For intermediate goods improved stock controls and lean production techniques allow manufacturers to detect and identify
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