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industrial organization

  The structure within which the functions of control and decision-making are exercised in the process of industrial production. The impact of industrial organization on the location of economic activity was neglected in the early development of industrial location theory, but subsequently became a major concern. This was partly because of shifts in theoretical perspective and partly because of changes in industrial organization itself.

In the early days of modern industrial development the typical unit of production was organized very simply, with a single owner-operator often exercising complete control. The theory of the firm in economics tended to perpetuate the figure of the individual enter-preneur making all the major production decisions with single-minded dedication to profit maximization. The growing complexity of industrial organization with increasing scale of operation proceeded somewhat ahead of the recognition of this change, both in economics and in location theory. However, a more realistic view subsequently emerged, stimulated by the adoption in location analysis of some concepts from organization theory (which seeks to explain the general behaviour of organizations). The single unit of production run by the individual owner-operator was replaced by the multi-plant, multi-locational firm in which the control functions are much more dispersed (see multinational corporation).

The expansion of industrial production in geographical space had an important bearing on this growing organizational complexity. The simple distinction between parent plant or head office on the one hand and branch or sales outlet on the other requires some division of responsibility. As industrial production become steadily more extensive in scale and in the spatial scope of its operations, a hierarchical structure of control grew up parallel to a hierarchical structure of spatial organization. The major control functions are exercised in major cities or centres of finance, secondary control and coordinating functions will be more dispersed in smaller towns and cities, while production and its day-to-day control will be most dispersed. Such a structure is typical of the modern transnational corporation. It has important implications for the economic development of those peripheral territories (generally the Third World) that perform the lower-order functions in the organizational hierarchy controlled from elsewhere (generally the advanced capitalist world).

The adoption of more flexible forms of manufacturing, involving less assembly-line mass production and more emphasis on various kinds of subcontracting, has added to organizational complexity and diversity in recent years. This has been accompanied by a resurgence of interest on the part of geographers seeking guidance from organization theories. Reflecting the trend towards deindustrialization, attention has been given to industrial restructuring and plant closure, as well as to the more traditional problem of the location of new capacity. (DMS)

Suggested Reading Carlton, D. and Perloff, J. 1990: Modern industrial organization. Glenview, IL: Scott, Foresman & Co.. Chapman, K. and Walker, D. 1991: Industrial location: principles and policies, 2nd edn. Oxford: Basil Blackwell. Clark, G.L. and Wrigley, N. 1997: Exit, the firm and sunk costs: reconceptualizing the corporate geography of disinvestment and plant closure. Progress in Human Geography 21: 338-58. Dicken, P. and Thrift, N.J. 1992: The organization of production and the production of organization: why business enterprise matters in the study of geographical industrialization. Transactions, Institute of British Geographers NS 17: 279-91. Hayter, R. 1997: The dynamics of industrial location. Chichester and New York: John Wiley. Smith, D.M. 1981: Industrial location: an economic geographical analysis, 2nd edn. New York: John Wiley, ch. 5.



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Other Terms : disorganized capitalism | spatial decision support systems | search behaviour
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