Introduction
It is generally admitted that the stockbroking industry was revolutionised by its' adoption of ICT. Transformation was widespread. Gharavi, Love and Cheng propose an ecological framework to provide understanding into the way technological innovation is embedded.
An evolutionary approach to the diffusion of innovation
Diffusion of innovation
Gharavi, Love and Cheng use Rogers who describes diffusion as a process of communication over time. The structuring of industry results in association with developing inter-firm networks - more than exchanging commodities, these relations are developed through sustaining long term transactions where both parties have no fear of opportunism. The authors suggest that networks operating between firms allow for improved efficiency over markets.
Diffusion of innovation and industry evolution
Gharavi, Love and Cheng cite Rogers and Haveman who see mimicry a form of practice, where practice is legitimised by industry. Controlled change is unpredictable in its outcomes, as it links strongly to environmental circumstance. The authors indicate that it can be assumed in particular environments, a total of x number of companies can be supported. The survival of different forms of organisation becomes competitive. Regulation and protocol guard against a flow of newcomers. The authors look to Cook and Morrisey who propose thinking of industry through ecology and a Darwinian approach to selecting legitimacy (e.g. a firms' role or function and the density of the given environment). Industry is affected by the evolution as firms undergo routine processes and are placed in a new framework. Macro-protocols outline industry best practice and serve to unify members by observing fundamentals.
Structural dynamics as a result of technology-induced diffusion process
Variety in organisation ensures effective change can help survival. Natural selection is based on the most adaptable and occurs during scarcity of resource. The environment chooses organisations that best represent the niche. Gharavi, Love and Cheng quote Hannan and Freeman who understand the adaptation process to include structures and forms that principally affect the population when organisations replace the old or less adapted. Using population ecology indicates that adaptation is external to the organisation. Gharavi, Love and Cheng propose further development through examining clusters.
A typical cluster structure has the stockbroker as an intermediary between the market and the organisation. Stockbrokers evolved into gate keepers. Individual knowledge in capacity and industry best serve market, individual and organisation. This was driven by conscious experimentation of industry in directing evolution. Gharavi, Love and Cheng note Singh's proposal that approaches to organisational evolution are not always straightforward. Factors that Institutional Theory examines include socio-cultural, influence, values, power and coalitions. As organisations are built on values, norms, traditions and other traits of individual members, blueprints on form in policy and procedure are established as best practice. Gharavi, Love and Cheng indicate that diffusion can be linked to the structure of industry. The authors point out that diffusion of innovation from an ecological perspective challenges considerations of efficiency.
The Australian stockbroking industry
Gharavi, Love and Cheng use Australia's evolution as an example. After the industry was computerised, established firms were undercut by internet brokers who charged less and were more convenient. Systems for computer based trading were designed and implemented. Smaller firms joined bigger firms and had access to more information. The difficulties they faced are listed.
- Start up costs to link with information sources that provide services for processing of information and transactions;
- Learning skills that are necessary to retain the advantage;
- Developing a model that guides to a successful future.
The main governing body of the Australian Stock Market is ASX. Entrance to the stockbroking industry is by way of registry. Tracing members is a legal requirement. Membership equates to adherence of rules. Once established, the members differentiate within the trace to capture a competitive advantage. Gharavi, Love and Cheng indicate that Porter's study on competitive advantage provides the foundation for Hannan and Freeman's ecological model and a broader understanding in diffusion of ICT. Variation stems from individual creativity in designing possible organisational structures that address all issues. Gharavi, Love and Cheng believe this method of practice clearly indicates that older firms can adapt.
While membership means access to information, there are tacit and implied understandings and protocols that regulate. The authors query how protocols emerge and suggest that while dominant players appear to set informal protocols, do patterns of change and diffusion include protocols set by small firms?
Conceptual ICT diffusion framework
By using an evolutionary approach Gharavi, Love and Cheng argue, the process of change and technology can be identified. Critical analysis of alliances and networks indicates the influence extended over the organisation. Investigation takes place at network level rather than organisation level. The authors make note of current literature that suggests networks can either improve or aggravate environmental conditions. In deconstructing diffusion of ICT through interorganisational networks, Gharavi, Love and Cheng develop a framework that portrays the dynamics of adaptation. Dominant players have controlling interest, but recognise firms that adapt and survive. The authors refer to Hannan and Freeman whose work is based on dynamic survival. Through results of internal and external adaptation, organisational survival uses innovation to ensure suitable fit to the environment. Organisational death is seen as the redistribution of resources.
While it is the environment that pushes for change initially, it also incurs protocol and understanding referred to in tracing. Literature indicates that some researchers view diffusion on an organisational use basis, while others view diffusion as a mechanism to structure organisations. Some literature simply defines the broader context of diffusion through dissection. Gharavi, Love and Cheng choose Gurbaxani and Mendelson to propose that unified systems create standardisation while differentiated systems are component parts that work in complementary ways. Clusters where the stockbroker works as the medium between market and industry are active ways of differentiation after uniform standardisation. Mutualism is regarded as resulting from two conditions: supplementary similarities and complementary differences or in other words pooling resources. The authors suggest that interorganisational relations between firms strengthen over time, and quote Granovetter on technology induced embedded relationships that consequently accumulate clusters.
The stockbroking industry response to the internet
Larger firms in industry were able to use the internet as a means to redistribute smaller firms' clients, citing lower running costs when outsourcing services. By changing behaviour characteristic of the organisation to adapt to the environment, competitive advantage is retained. Gharavi, Love and Cheng note that the generation of people who are skilled in ICT is replacing the generation of people who deal face to face.
Future research directions
Gharavi, Love and Cheng believe that a model on diffusion of IT and in the interest of "cross-industry isomorphism" presents future direction for testing in different industries. Analysis of the environment will determine patterns of diffusion.
Conclusion
Using this ecological perspective indicates that firms that respond to change and adapt are chosen by the environment. Gharavi, Love and Cheng question industry leaders' influence over evolution as the individual adapts to the environment. As the environment changes, old traditions die to be replaced with the new. Protocols and understandings of trace continue to apply as defined by leaders. Applications of power represent constraint to individual and collectives reflected in uptake and diffusion of innovation.
