The Governance of Large Technical Systems

Olivier Coutard, Olivier Coutard

• Publisher: Routledge
• Year: 2002
• ISBN:
  9781134644940
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Business allgemein

This work examines the governance of large technical systems (LTS) at firm, imdustry and state levels and the interactions between the systems and society. In particular, international contributors explore the implications of major technological, economic and social changes during the last twenty years for traditional forms of LTS governance. Their research is centred around the following themes:
* traditional forms of governance
* new regulatory challenges
* the governability of complex technologies
* conceptual issues related to the governance of inter-organizational networks

1
INTRODUCTION

The evolving forms of governance of large technical systems

Olivier Coutard

In memory of Stephen M. Salsbury

The objects studied in this book are the capital intensive and often complex socio-technical organizations that have been deployed to meet the crucial needs of modern industrial societies. These organizations include telecommunications, transportation, and energy supply systems, as well as urban technical networks such as water supply or sewerage systems. Because these systems include complex technological artefacts, they are often viewed as ‘engineers’ stuff’, not worth the interest of the social sciences. One salient and longlasting exception to this embargo concerns economic studies, because these systems necessitate massive investments, and for this reason are traditionally organized as territorial monopolies. But it has long been considered that the social implications of these systems were limited to the economic regulation of the resulting monopolies. This book, together with a number of others (see in particular Hughes 1983, 1989, Mayntz and Hughes 1988, La Porte 1991, Summerton 1994a, and Braun and Joerges 1994b), takes a different stance, by assuming that the relations between these socio-technical systems and ‘society at large’ are essential to understand the evolution – the coevolution, one might say – of both the systems and the society.

The subject of the book is to examine how these systems have been governed in the past and how they may be governed in the future, at the level of the individual firms (management); of economic sectors (industrial organization and public regulation); and of the broader interactions of these systems with society at large. Previous books sharing the same perspective – the so-called ‘systems perspective’ – have obviously been concerned with control, management and regulatory issues; this book adds to previous findings and systematically develops some of the major aspects of the problem.

The book is thus about the ‘governance’ of large technical systems (LTSs). The use of the currently fashionable notion of governance calls for some justification. Indeed governance is a polysemous concept; as Jouve, Lefèvre and Offner point out:

Firstly governance . . . may designate either an action or an organization, either a process or an institution. Secondly . . . governance simultaneously refers to general categories (all forms of management of transactions; local government) and to particular ‘species’ (network transactions, between hierarchies and markets; fragmented local institutions). Finally the fact that the notion originates from two distinct disciplinary fields – economics and management on the one hand, political science on the other – adds up to the confusion . . .

(Jouve, Lefèvre and Offner 1995: 10)

I shall (boldly) argue below that I have retained the word ‘governance’ precisely for its polysemy! For, indeed, the subject of this book mirrors the wide scope of the concept of governance: it is concerned both with the economics and with the politics of LTSs; it deals with the general issue of the control of LTSs as well as with its more specific decentralized forms; and it also examines tensions between actions and institutions. I should add that it also deals with the interactions between the (various forms and levels of) governance of technological systems and societal governance patterns.

This book thus makes pragmatic use of the notion of governance; it is not primarily concerned with the clarification of that notion. However it would be a mistake to assume that the relevance of the notion of governance for the purposes of this book derives from its poor semantic specification. On the contrary, the scope of the notion emphasizes one important assumption of this book: namely, that the three levels of governance (the level of LTS firms’ management, the level of LTS sectors’ industrial organization and public regulation, and the level of LTS–society interactions) are closely linked. In this respect only can the chapters of this book provide some insights into the general problem of societal governance. Besides, as Bernward Joerges suggests elsewhere, ‘vague’ terms can act as useful gateways between intellectual cultures, disciplines or approaches.¹

That a governance perspective is heuristic for our purpose is also suggested by the numerous affinities it has with the notion of network, which is one of the central themes discussed in the book (in particular in the three contributions that form the last part of this volume). On the one hand, governance in its more general meaning (suggesting ideas of control or steering) is questioned by the emergence of networks (and the idea of self-organization suggested by the notion of network). Thus defined, the problem (the challenge) of the governance of networked organizations is a central concern of this book. On the other hand, the affinity with the more specified notions of governance (suggesting ideas of fragmented control) is obvious – whether one refers to ‘policy networks’ (Marin and Mayntz 1991), to networks as a specific form of (the management of) economic or social transactions (Thompson et al. 1991) or to networks as sets of interorganizational relations (see the discussion below). Both the notions of governance and of network emphasize the rise of multi-actor system builders (see Hughes 1996); of decentralized LTSs (see Braun and Joerges 1994a); of multi-organizations, multi-stakes sytems – which this book is about.

Let us now consider the organization of the book, and the thirteen contributed chapters it includes.

New insights on the development of large technical systems

The focus, in the systems approach, on coevolutionary mechanisms has proved very useful in analysing the expansionist dynamics of LTSs, from local to regional to large-scale, integrated, hierarchical systems (Mayntz and Hughes 1988). On the one hand, the importance of ‘load factor’² and ‘economic mix’³ has been repeatedly demonstrated: these economic factors act as major forces in the spatial growth of power systems, and of LTSs in general. On the other hand, the problems raised by the expansion of systems across institutional (political, jurisdictional) borders have also been borne out.⁴

None the less, the development of LTSs does not necessarily imply spatial expansion. Offner (in this volume) distinguishes between ‘extensive’ and ‘intensive’ development patterns. Although extensive development (the interconnection of heterogeneous networks to form a new, ‘hybrid’ system) usually involves the upsizing of the resulting system, it sometimes occurs that the system is actually downsized (as the Paris region express subway system described by Offner exemplifies). ‘Intensive’ development consists of the ‘densification’ of the network, through the integration of flows of different nature;⁵ it does not necessarily involve any change in the system’s size.

Moreover, the development of LTSs cannot be reduced to their spatial dimensions. Sometimes the ‘largeness’ of an LTS does not even refer to its size at all. Such is the case for the sewerage systems considered by Chatzis (this volume): if sewerage systems readily qualify as ‘large’ technical systems, this is not because of the large size of individual systems, but because these systems are designed and operated according to standard rules and practices endowed with large-scale validity. Rather than by technical devices, Chatzis suggests that sewerage systems are interconnected by immaterial devices such as standards and professional associations.

That the development of LTSs is not always a spatial phenomenon is also clear from a recent collection of essays on reconfigurations in LTSs (Summerton 1994a). In her introduction to that book, Jane Summerton identifies three types of reconfiguration: the territorial expansion and interconnection of similar systems across political borders; the crossing of functional system boundaries; and the reorganization of former monopoly systems into new configurations based on principles of competition and free access (Summerton 1994b: 5–6). Only the first type of reconfiguration is primarily spatial.

The chapters by Chatzis, Griset, Kaijser and Tarr in Part 1 of this volume all concern the development of LTSs; yet they do not focus on spatial-economic dynamics. Rather they explore other dynamics, and thus offer new insights into the traditional forms of governance of LTSs.

Joel Tarr describes the evolution of the manufactured gas system in the US, and its transformation into a natural gas system. His study places more emphasis on technological and regulatory aspects, and less on organizational and managerial ones. Indeed it is striking that the transition to natural gas, a major reconfiguration,⁶ was achieved without any significant change in the industry structure: technological change was implemented from within existing companies. Parallel to his discussion of technological choices throughout the US gas history, Tarr analyses the importance of municipal, state and ultimately federal regulation in shaping the natural gas system. Even though he emphasizes the ‘corporate structure’ of the US gas industry, Tarr shows how all significant steps in the transition were supervised by regulatory authorities. This is not to suggest, however, the existence of one wise regulator preventing the industry from going astray; on the contrary, Tarr provides striking examples of regulators faced with similar problems in similar contexts, and reaching very different conclusions.

Arne Kaijser’s study also deals with the transition from manufactured to natural gas, but in a very different context, and from a different perspective. Kaijser examines the consequences of the discovery of a huge gas field in the Netherlands in the late 1950s. He focuses primarily on the new gas ‘regime’ (‘the legal framework, organizational structure and rules of the game’ within the industry) that was designed to derive the highest benefits from the discovery. He analyses the ‘game’ among political and corporate actors. But his study goes beyond the influence of individual actors: by describing the leading role played by the successive Dutch ministers for economic affairs, Kaijser clearly shows that public leadership in this matter was ongoing, even if consensus was frequently obtained due to the fact that political and corporate actors shared a number of common values (including the value of consensus).

In a chapter on telegraphy, Pascal Griset examines the competition between wireless and cable systems in the early twentieth century. Griset’s account of the expansion of wireless telegraphy refers repeatedly to space. But the notion of space at stake is not ‘economic space’ that can be interpreted in terms of load factor and economic mix; it is ‘geopolitical’ or strategic space – a peacetime battleground for nations in search of international influence. Griset also sheds new light on the attitude of politicians towards technology, in that particular case, in favour of centralized, big technologies.

In dealing with systems of a local nature, sewerage systems, Konstantinos Chatzis is at variance with most LTS research.⁷ In his careful study of engineers’ design and operation practices, Chatzis emphasizes yet another dimension of system control. Analysing the role of (communities of) engineers in the design of supposedly technical rules, Chatzis describes how these rules in fact incorporate social norms and values. Interestingly enough, although there is no explicit mention of public oversight in Chatzis’s study, the engineers responsible for the conception of design and operation rules in France are all civil servants in the national roads administration (‘corps des ponts et chaussées’), and therefore all strongly committed to the ‘public interest’; and the implementation of these rules was definitely a top-down process, with the rules being elaborated at national level and then forced upon local authorities and technical bodies through legislation.

These four case studies remind us that the development of these systems does not boil down to spatial expansion fuelled by technical-economic considerations and (possibly) impeded by political parochialism (see also e.g. Salsbury 1988, Coutard 1995, Offner and Pumain 1996). This, of course, has always been common knowledge within the systems approach to technology. But the dynamics exposed here (the re-use of an existing system, the role of moral values, of ‘geopolitics’ or of ‘technical-scientific referentials’) have seldom been explicitly dealt with; they have more often been mentioned as part of the ‘cultural’ context in which LTSs develop.

A changing background

These historical case studies, despite their diversity,⁸ share a common ‘background’ that can be characterized by four important features: (1) the predominance of hierarchical organizations, both in government and in industry; (2) a strong influence of national public (or regulatory) authorities; (3) general acceptance of LTSs by the public;⁹ and (4) shared interests between LTS companies and national governments.

This background was substantially challenged over the past two decades. First, the economic performance of hierarchical systems of production has been increasingly questioned. The most frequent critics have emphasized the lack of responsiveness of hierarchical systems to consumer needs, and their poor achievements in terms of technological and organizational innovation. In contrast, decentralized systems are perceived as flexible, innovative and efficient. More generally, mass production is losing ground to just-in-time, client-oriented and rapidly-evolving manufacturing processes, calling for more and more complex forms of coordination within and among firms, and within and among markets (Veltz 1996). Hierarchies in government were also criticized. In particular, the role of national governments as the central public actors and as the ultimate judges of the ‘general interest’ was challenged.

Second, these critics of ‘Fordian’ forms of industrial organization were accompanied by a growing distrust of governmental action, and in particular of public intervention in economic activities. LTSs were therefore criticized both as hierarchical organizations and as strongly regulated economic activities. In many instances they were perceived as symbols of the shortfalls of economic policy. In a way, this distrust of centralized governmental action echoes, at the political level, the complexification of economies and societies already mentioned; Mayntz (1995) thus argues that the increasing functional complexity of societies calls for new forms of societal and political governance.

Third, popular enthusiasm for LTSs has greatly declined. As a larger and larger part of the population gained access to LTS services, these services lost their ‘wonderful’ character. In advanced industrialized countries they are now taken for granted, as the current debate on ‘universal services’ demonstrates: the issue is now to ensure that virtually everybody has access to ‘basic’ services (such as telecommunications, postal services, electricity and water supply, etc.). At the same time, attitudes opposed to the expansion of LTSs are on the increase. Although not specific to these systems, the so-called ‘NIMBY syndrome’ (‘not-in-my-backyard’; see Dear 1992) strongly affects the building of nuclear (and non-nuclear) power plants, new roads, airports or electrical grid lines. Also important in this respect is the increasing concern for the environment and for the well-being of ‘future generations’. In particular, environmental externalities and the risk of catastrophic failures increase fears in a growing part of the population.

The traditional economic tools (cost–benefit analyses) seem inadequate to deal with these emerging regulatory issues. The demonstration of the economic, social and even environmental benefits of a project (assuming that a methodology can be agreed upon), are not appropriate responses to NIMBY attitudes; and cost–benefit analyses cannot easily integrate sustainable development concerns. Besides, as the debate on universal service reveals, the regulation of LTSs cannot be separated from the increasing concerns about the economic, social, and spatial fragmentation processes at work in contemporary societies (see Guy et al. in this volume); but the microeconomics of regulation and the macroeconomics of welfare are not easily reconciled.

Finally, the community of interests between LTS industries and national governments is also under increasing pressure. Corporate strategies now develop at other territorial levels, as the neologism ‘glocalization’ suggests: there is an increasingly global (supranational) competition for increasingly local (infranational) markets – mostly markets for urban infrastructures or services (see Lorrain 1995). Even state-owned companies are more and more at odds with their governments or with the legislator. Managers complain that their strategy is hindered by outdated legislation, or that governments are unable to provide their companies with new capital, due to fiscal crises, but that they are only too willing to appropriate their profits – for the same reason.

Taken together, these evolutions radically transform the frame of governance of LTSs, at the firm level (in terms of management), at the industry level (in terms of public oversight) and at the societal level (in terms of how LTSs shape, and are shaped by, societal governance patterns). They raise new, complex strategic and policy issues, some of which are the subject of the chapters in the second part of this volume.

Strategic and policy ...