Competitive Advantage on the Shop Floor.

• Author: Shiman, Daniel R.

By William Lazonick. Cambridge, Mass. and London: Harvard University Press, 1990. Pp. vi, 419.

In this book William Lazonick has put together some old articles with some new work he has done to show that an understanding of the dynamics of management-labor relations on the shopfloor can explain how many manufacturing industries can follow different paths of development. His focus is on the interaction between industrial relations and changes in technology, and on the evolution of the arrangements made by employers and workers that determined wage rates and the level of effort put in. He argues that the types of arrangements made for a particular country's firms, concerning the incentive and management structures used, the expectations of workers and management, and the effort elicited from shopfloor workers to efficiently utilize more advanced machinery, were critically important in determining that nation's competitive advantage and long-term growth. This book is an important contribution to our understanding of how competitive advantages can be gained and lost by a nation's industries. In particular Lazonick's work has changed the way many economic historians view the causes of Britain's economic decline.

His work fits into that of the new institutional economics, though on a more applied level. Attention is paid to the institutional structures developed in the marketplace and within the firm, as well as to market forces. Following the path broken by Alfred Chandler, Jr., Lazonick emphasizes the rise of managerial capitalism and the large, high fixed cost, high-throughput firms associated with it, because of the crucial role they played in raising productivity and lowering costs in the development of the British, American and Japanese economies in the late nineteenth and early twentieth centuries. His analysis is thus restricted to those mass-producing manufacturing industries in which large firms developed, especially the textile and automobile industries.

Lazonick begins by analyzing Marx's framework for analyzing the dynamics of management-labor relations. He shows how Marx's predictions were wrong that wages would fall and effort would be kept at a physical maximum. Craft workers in the British industry were able to organize themselves and achieve higher wages and control of the shopfloor. Marx did not understand that firms found it useful to accommodate workers by giving them higher wages and better working conditions in order to...