The Political Economy of Work Security and Flexibility by Fabio Berton, Matteo Richiardi and Stefano Sacchi. Policy Press, Cambridge, 2012, 190pp. ISBN 9781847429070, £70, hardback.

Published date01 June 2013
Date01 June 2013
DOIhttp://doi.org/10.1111/bjir.12028_3
BOOK REVIEWS
Corporations in Evolving Diversity: Cognition, Governance and Institutions by Masa-
hiko Aoki. Oxford University Press, Oxford, 2010, 216pp. ISBN 978-0-19-
921853-0, £32.50 hardback.
Aoki’s book proposes a theoretical typology of viable corporate architectures based
on the nature of their cognitive assets, that is the skills and knowledge workers and
managers contribute, and their relationship with the physical assets provided by
investors. As in any economic collaboration, the parties share a joint productive
interest, but they may diverge when it comes to sharing the fruits. He uses game theory
because he wants to show how these architectures can be self-sustaining, but he does
so in a manner accessible to non-specialists. He enriches the typology of corporate
architecture beyond the well-known ‘A-firm’ and ‘J-firm’ of his 1988 book, Informa-
tion, incentives and bargaining in the Japanese economy. This is timely because of the
major changes that have come about in both the American and Japanese economies
since the 1980s. The enriched typology includes also co-determined firms, small
entrepreneurial start-ups, such as those in Silicon Valley, and knowledge-intensive
service firms.
What should be of special interest to employment relations readers is his emphasis on
the role of skill formation and knowledge creation within firms, and the distribution of
these cognitive assets between workers and management. He shows how they affect the
respective bargaining positions of these two parties in a three-way relationship with
the owners of the firm’s physical assets. The key to their relative power lies partly in the
ability to form a coalition with one of the other parties, and partly in the strength of
each party’s ‘outside option’, that is its ability to quit and find profitable alternative uses
for its assets. Thus, in the traditional ‘A-firm’, managers can form a coalition with
investors, because they can enhance their own productivity by means of their control
over the use of the firm’s physical assets, albeit at the expense of workers who are
confined to narrow specialist roles. By virtue of their wider job roles, the managers take
control of coordinating and problem-solving activities so that they effectively monopo-
lise new learning opportunities. This makes it hard for the owners to dispense with
management’s services. On the other hand, workers’ bargaining power is limited by
their restricted learning opportunities, which means that they are easily substituted by
external hiring. Thus, as the party that is least essential to the productivity of the other
two, they are at the back of the queue for the benefits of the collaboration.
In contrast, in the traditional ‘J-firm’, extensive knowledge-sharing between
workers and management makes both parties inter-dependent. Managers’ need
for workers’ cooperation prevents them from forming a coalition with investors. Both
workers’ and managers’ cognitive assets are ‘quasi-essential’, as neither can enhance
its own productivity by virtue of its control over use of physical assets without
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British Journal of Industrial Relations doi: 10.1111/bjir.12028
51:2 June 2013 0007–1080 pp. 412–423
© John Wiley & Sons Ltd/London School of Economics 2013. Published by John Wiley & Sons Ltd,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.

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