Organizational Embeddedness, Economic Resilience and New Modes of Production: Insights from Four Case Studies

Friday, June 24, 2016: 9:00 AM-10:30 AM
201 Moses (Moses Hall)
Lampros Lamprinakis, NIBIO, Oslo, Norway
Atle Wehn Hegnes, NIBIO, Oslo, Norway
Neoliberalism defines contemporary capitalism and has become the dominant ideology in most parts of the West as well as in several developing and transition countries. It is both economic theory and political stance: the first advocates towards an unregulated capitalist system, while the latter involves the dismantling of the regulationist (welfare) state. Neoliberalism therefore aims towards a strictly rationalized economic system, wholly dependent on impersonal and sometimes globalized market forces, and free of any form of non-market constraints and restrictions. Such a system becomes inevitably characterized by economic activity that strives to be both fully rational and completely efficient, and therefore is typically dis-embedded from any form of localness. Even though it is still possible to observe different degrees of embeddedness in contemporary capitalism, these instances remain on the fringe of the dominant dis-embedded market economy.

Dis-embeddedness is particularly evident in the agro-food industry where modern agricultural organizations (both cooperatives and investor-owned firms) operate in globalized and highly competitive economic environments that promote efficiency and shareholder value. However, there is an emergence of new initiatives that are characterized by a strong sense of identity and purpose, democratic traditions in decision-making, localness and co-management practices - properties that conflict with the opportunistic neoliberal approach. As such, these new initiatives can become potential breeding grounds for the development of alternative approaches to economic activity that realigns the organization with its community, while ensuring its economic viability and resilience.

The aim of this paper is to explore the interaction between organizational embeddedness, economic resilience and new modes of production and consumption. We examine through four comparable case studies, how organizations can adapt to market conditions (economic resilience), while maintaining ties to their communities (high embeddedness), and provide goods and services that remain relevant for their communities and stakeholders (through new modes of production). A starting point in our approach are the four case studies of cooperatives (coops), community owned enterprises (COE) and other grass-root-based organizations in Finland, Norway and Canada. The case studies illustrate organizational dis-embeddedness, re-embeddedness and finally what we designate as organizational natural embeddedness. The latter refers to organizations with the capacity to challenge the neoliberal paradigm; they are naturally embedded within their communities while remaining relevant in their markets and economically resilient.

First is the case of the Saskatchewan Wheat Pool (SWP), a historic and dominant grain handling, agri-food processing and marketing coop in Saskatchewan province (Canada). For many years the coop enjoyed high and robust member support and strong financial results. In the 1990s the SWP had to face several changes - NAFTA, rail deregulation, ongoing market liberalization. The Board of the SWP hired an overly ambitious CEO who initiated a series of actions towards aggressive expansion, modernization of its facilities and streamlining of operations. The managements' plan pushed the organization away from its historic roots and its members massively abandoned their coop. The organization suffered significant economic damages that resulted in debt reorganization and ultimately its demise. The SWP case illustrates dis-embeddedness: an already well embedded organization that moves away from its roots and alienates its members. Management adopted the standard neoliberal doctrine and the resulting dis-embeddedness becomes a defining factor in organization's failure to adapt.

The second case is the case of the dairy company Valio, a "national institution" in Finland for over a century, with a rich background on cooperative traditions and extensive regional spread. In the early 1990s Valio went through a restructuring process in order to address the challenges arising from Finland's EU accession; these challenges required a streamlined, cost-efficient and highly competitive company. A new CEO was invited and he initiated a massive restructuring program combining downsizing and streamlining of operations with investments on R&D and changes in the production side. Contrary to the SWP case, Valio's transformation was in accordance with its identity and the needs of its stakeholders. The members remained supporters of their coop and the organization successfully changed. The Valio case illustrates re-embeddedness: the organization changes while becoming embedded in its unique localness. Management introduces strategies consistent with organization's identity and in accordance with stakeholders and members, thus securing a continuing member and community support.

The last two cases come from Norway where local communities are actively involved in setting up structures that provide services and products that are highly relevant for their members: a coop farm in Community Supported Agriculture (CSA), and a bioenergy plant in Troms County. CSA relies on collective governance structures and aims towards access to local food, provide knowledge on food production for consumers, access to organic food, and to bring consumers closer to the production of their food. The farm also offers learning activities in cooperation with local schools. In overall, the CSA farm by-passes the competition from the super-market chains by offering products and services not provided by the capitalist market, in governance structures that directly associate producers and buyers on equal grounds. The other case is a forest-based bioenergy production plant that has its production based exclusively on local resources and provides green energy to local municipal buildings. The founders and operators are local forest owners that remain fully engaged and supportive of their plant (even under historically low hydro-energy prices) arguing on the extensive positive effects and the importance of the plant for their region - effects that extend beyond present economic results. These two cases from Norway illustrate what we call organizational natural embeddedness: it is the emergence of economic organizations that actively involve their local communities, bringing closer the demand for certain goods and services with the production. Such organizations are naturally embedded within communities, offer products or services that are of particular importance to their stakeholders, while maintain their resilience and relevance to their markets.

Preliminary cross-case comparison shows that organizations with high degree of embeddedness are more likely to demonstrate economic resilience and continue to provide goods and services that are highly relevant to their respective markets. These cases also provide empirical insight towards a typology of organizational and production embeddedness, and its implication on economic resilience.