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Mustafa Aldülmetin DİNÇER, Yasemin ÖZDEMİR, An Evaluative Perspective from Institutional Logic and Pragmatism on the Relationship between Industry 4.0 and Outsourcing in:

Alptekin Erkollar (ed.)

Enterprise & Business Management, page 205 - 226

A Handbook for Educators, Consultants, and Practitioners

1. Edition 2020, ISBN print: 978-3-8288-4255-7, ISBN online: 978-3-8288-7230-1, https://doi.org/10.5771/9783828872301-205

Series: Enterprise & Business Management

Tectum, Baden-Baden
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Mustafa Aldülmetin DİNÇER, Yasemin ÖZDEMİR An Evaluative Perspective from Institutional Logic and Pragmatism on the Relationship between Industry 4.0 and Outsourcing Learning Objectives The objectives of this chapter are to obtain a holistic perspective between different subjects such as industry 4.0, outsourcing and institutional logic. Once you have mastered the materials in this chapter, you will be able to: – Discuss the relationship between industry 4.0 and outsourcing. – Explain the main concepts such as institutional logic, industry 4.0 and outsourcing. – Identify pragmatism. – Understand one of the main reasons for outsourcing especially in technology-related areas like industry 4.0, which is pragmatism. – Conceptualize the loose coupling in the pragmatism logic and industry 4.0. Chapter Outline In this chapter of the book, outsourcing and industry 4.0 and the relationship between these two phenomena are discussed from the perspectives of institutional logic and pragmatism. To this end, first of all, industry 4.0, outsourcing, institutional logic and pragmatism are briefly defined and then the relationship between these phenomena is discussed. In this framework, some organizational theories and terms are used to expand the perspective of this debate, such as legitimacy and loose coupling. After this discussion, some samples from literature are given, and final stage of the chapter deals with the holistic perspec- 205 tive which is aimed to provide to the reader by the authors in the conclusion section. Keywords Industry 4.0, Outsourcing, Institutional Logic, Pragmatism, Loose coupling. The boundaries between organization theories and managerial phenomena such as outsourcing, organizational logic, pragmatism, outsourcing and industry 4.0 are becoming blurry and conductive, and this situation raises the need for a holistic view of these phenomena. In this theoretical study, a complementarity perspective was administrated to obtain a holistic view and try to enlighten the field with the new interpretations. Most of the scholars have related outsourcing to the transaction cost theory (TCT), due to the practical reasons and pragmatism, this approach is pretty valid for the logic of this phenomenon, especially from the angles of strategy and pragmatism. Institutional logic can explain the working mechanisms of this double looped structure, which are industry 4.0 and outsourcing, and we believe that it covers not only the logic of these patterns but also comprises the logic of TCT approach. The current paper advocates that organizations use institutional logics and pragmatism to produce and reproduce themselves in order to preserve organizational productivity. With the institutional logics, conflicting applications and opinions inherent in the institutions became a very pragmatic and useful tool to realize their strategic existence and aims. Moreover, through outsourcing and industry 4.0 implementations, organizations get a large movement field for their sustainability and strategic actions. Again, in this context, loose coupling become a very useful tool to realize produce and reproduce themselves in the market. And in this phenomenon, all these dimensions became a symbiotic form so as to sustain companies’ life in the markets. What is Industry 4.0? Industry 4.0 phenomenon has been defined in several aspects in different articles. However, as stated in Hofman and Rüsch’s study (2017: 1 An Evaluative Perspective from Institutional Logic and Pragmatism 206 33), there is no generally fixed description and perception of industry 4.0 in the field. For this reason, to refrain from the needless debates, industry 4.0 will be defined shortly. According to Hofman and Rüsch (2017: 33), this industrial revolution, which is called the Fourth Industrial Revolution, may be the best explained as the transformation in the production logic against exponentially diffused, the self-regulating approach of value creation which is facilitated by concepts and technologies. These facilitators are as follows: the internet of things (IoT), cyber-physical systems (CPS), internet of services (IoS), additive manufacturing and smart factories, which are to assist firms to fulfil the next manufacturing demands. Why is Industry 4.0 Important? There is an enormous opportunity for the fourth industrial revolution for the whole manufacturing ecosystem. As cited in Bartodziej’s study (2017: 36), Kagermann et al. (2013) portrayed eight essential transformation: “Meeting individual customer requirements, Flexibility, Optimized decision-taking, Resource productivity and efficiency, creating value opportunities through new services, responding to demographic change in the workplace, Work-Life-Balance, A high-wage economy that is still competitive” which are likely to be facilitated by the changing process. There is a powerful relationship between these changes and cost-reduction potentials. Even though it is difficult to make a prediction of reliable cost-saving potentials at present, the probable interventions and maximizations into continuing processes throughout the whole value chain will have an immense influence on energy cost, capital and labour costs (Heng, 2014: 7; Bartodziej, 2017: 37). As seen above, it is not easy to adapt all these changes effectively and efficiently in a short time. Because industry 4.0 is related to strategic decisions, technology requires human resources to be adopted in this process and change in a short time, with high acceptance of the technology. This is why businesses need to focus on strategic shifts in the direction of industry 4.0. In this context, they will prefer to outsource many of their activities, especially those with the technology focus. 1.1 1 What is Industry 4.0? 207 What is Outsourcing? Outsourcing is a significant managerial decision for many organizations and it is a continuing trend. And it can also be defined in several ways with different aspects. Some of the definitions are as follows: “Outsourcing can be defined as the significant contribution by external vendors of the physical and/or human resources associated with the entire or specific components of the information technologies infrastructure in the user organization” (Aubert et al., 1996). “Outsourcing is a choice that lies in the corporate policy, not just business strategy area, as it modifies the firm’s boundaries as a legal entity and generally involves top management decision makers” (Quelin and Duhamel, 2003). “Outsourcing is a management strategy and operation form. That means a certain company, in line with the agreement reached with external other enterprise, outsources its business and function for which internal employees are responsible to the professional and efficient provider. Outsourcing is regarded as an effective means to help enterprise to administer the environment of end users” (Li-jun, 2012: 126–1269). “In the context of managing the potential risks of outsourcing, the various forms of outsourcing (e.g. IT outsourcing, business process outsourcing, out-tasking, infrastructure outsourcing etc.) should be considered. Because the boundaries of these forms are floating and change certain extent in the course of a customer relationship. Especially IT outsurcing, containing all the services based on IT infrastructure services, are provided by a service supplier to an economically and legally independent customers” (Rennung et. al, 2015: 758) Leeman and Reynolds (2012) stated that outsourcing is the application by a firm which outside organization to fulfill the tasks that have typically been conducted inside the firm. The most outsourced business processes or the functions in the USA and Europe are basic services such as IT services, human resources, telecommunication services and facilities management. The most outsourced business processes have different importance such as supporting/critical, supporting/non-critical, property product/service, affecting all the organization, supported by mature technology and strategic (Kakabadse and Kakabadse, 2002). 1.2 An Evaluative Perspective from Institutional Logic and Pragmatism 208 Why do Organizations Outsource? Several reasons make outsourcing a continuing trend. Outsourcing decision can be a result of organizational strategies or external factors. Generally, firms take some processes from an external service provider such as logistic or education to focus on their core competencies (El Mokrini et al., 2016). The primary motives that make organizations outsource some business process, which are emphasized in the literature, are probably to lessen the operational costs, concentrate on core competencies, derogate financial invest, upgrade ponderability of expenditures, getting access to external skills and develop value, convert fixed expenditures into variable expenditures and recapture control over internal divisions (Quelin and Duhamel, 2003). Furthermore, via outsourcing, organizations can concentrate on their core skills, improve quality and efficiency, become flexible, reduce the inventory-carrying and investment costs, reduce the need for capital assets, save money, improve response times, and feel the need for staff less (Leeman and Reynolds, 2012). Additionally, through these applications, organizations lower the risks, expand innovative capabilities and opportunities for creating value-added stakeholder returns (Kosnik et al., 2006). Outsourcing seems to be a solution when it is necessary to hire experts or train them, but the organization cannot afford this (McCauley, 2000). In the literature, there are lots of evaluations and classifications about the reasons for outsourcing in the organizations (e.g., Masten & Crocker, 1985; Haour, 1992; Alexander, & Young, 1996; Adler, 2003). But most of these classifications take this phenomenon in two or three dimensions. In this study, Belcourt's classification about outsourcing reasons for the organizations was used. Since his classification is more comprehensive and has more dimensions than the other typologies, the researchers got a more comprehensive comparison chance for the present study. Besides, through this classification, it is anticipated that the researchers will have a better opportunity to build the theoretical fiction on a more solid basis. In Belcourt's study (2006) depending on various reasons and assessments, it can be said that there are at least six prominent causes that firms apply outsourcing, which are: "financial savings, strategic focus, access to advanced technology, improved service levels, access to specialized expertise, 1.3 1 What is Industry 4.0? 209 and organizational politics" (Belcourt, 2006). In addition to the aforementioned reasons, some external factors prompt the company to outsource as shown below (Quelin and Duhamel, 2003): “the frequency of technological process and product evolutions, the speed of new product launches on the market, seasonal nature of the activity, cyclical character of the firm’s markets, degree and frequency of fluctuations in the workload, uncertainty about future markets.” Outsourcing decision given for these reasons also confirms some risks. A business needs to assess the risk factors and how to manage them. Transaction cost and agency theory as the prominent theoretical roots can be useful to categorize the risk factors (Aubert, Patry and Rivard, 1998). Also, it needs to be keynoted that technological improvements are really useful while managing these risks. Furthermore, the business may reduce the uncertainties by redesigning workflows and dividing work between the multiple suppliers, enhancing the scope of tasks that are suitable candidates for outsourcing (Aron, Clemons and Reddi, 2005: 37). Some Samples for the Outsourcing Reasons in Different Countries Related with these reasons and factors, the results of a study are shown in Figure 1. The study aimed to reveal why businesses in America and Europe outsource some activities. In total, 747 respondents returned fully completed questionnaires (Kakabadse and Kakabadse, 2002): Figure 1 shows the first three important reasons why firms outsource: the purpose to realize the best practice cost control and concentrate on core competencies in the USA. The range for European firms is: cost control, accomplish the best implementation and promote service quality. Although the scope of the reasons is different from cost control, the best method seems to be the main reasons for outsourcing in both the USA and Europe. For the success of outsourcing decisions, an analytical model can be useful. This model contains three main steps as background and results in both internal and external, structure and process (relational governance structure in interaction with the selection, implementation, and institutionalization). This model can be more useful in different sectors to point out the importance of the transitional stage to ensure that both allies obtain advantages in the 1.4 An Evaluative Perspective from Institutional Logic and Pragmatism 210 short term and distinguish better opportunities for transition, it is necessary to add new aspects related to the dynamics among the diverse stakeholders and better understand the methods that promote the development (Beaulieu et. Al, 2018). To realize these aims, it is vital to find the most suitable partner. This decision is the main topic of the next section. (Kakabadse and Kakabadse, 2002: 192) All post graduate and doctoral theses in Turkey are accessible from the Council of Higher Education’s (shortly YÖK in Turkish) Thesis Center’s web site. In this context, when the theses written about outsourcing are examined, as a general view about outsourcing in Turkey it is seen that outsourcing in Turkey was investigated related to the following topics in last few years (https://tez.yok.gov.tr, 2019): -logistics, information technologies as services, -core competencies, resource dependence, service quality, employees' perceptions (organizational commitment, organizational citizenship behaviour), performance, cost, customer satisfaction as results, -banks, hospitals, foreign trade companies, defence sector, schools, aviation industry, textile companies as the sector that prefer outsourcing. Fig. 1 1 What is Industry 4.0? 211 Convergence Point of These Two Phenomena „Outsourcing and Industry 4.0“: Technology As seen above, technology is one of the most preferred areas in outsourcing decision, which is also one of the core components of industry 4.0. Furthermore, as depicted in Hofmann & Rüsch's study (2017: 23) last few decades, the demand of manufacturing industry to the new and more complex processes has increased much more than ever. The factors such as growing high competition, fluctuations in markets, claims for the products, which is more individualized, and the decreased product life cycles bring significant hurdles to the firms. [2]. It reveals that current "approaches" for the value creation are not enough to overcome the growing necessities about to cost efficiency, flexibility, adaptability, stability, and sustainability. In addition to all these, fast technological improvement in the last decade has created new business potentials and opportunities. This digitalization era which is called the cyber physical systems (CPS), internet of services (IoS) and mostly known internet of things (IoT) is becoming more significant and beyond. Considering these outsourcing and industry 4.0 patterns, a significant question mark and phenomena are emerging on the minds which is called institutional logic. And interestingly the relationship between these three phenomena, which are outsourcing, industry 4.0 and institutional logic, have not been emphasized sufficiently enough and researched together in the field. We believe that forming the complementarity perspective in this inquiry will enlighten many aspects and the dark sides of this field. As stated by Crouch (2010), the complementarity idea will be used as a combining pot for both phenomena (Crouch, 2010: 118). Although the everyday meaning of complementarity implies contrasts and differences in the constitution of elements deemed to be involved, these differences are clearly nested in certain kinds of similarity, or they would not ‘fit’. To revert to one of the mathematical examples, the two hemispheres that form a sphere contrast together, thus they have to face different directions in order to make the sphere. However, they are both hemispheres; it would not work if one were a cube (Crouch, 2010: 121). In the field, most of the scholars have related this phenomenon to the transaction cost theory (TCT) (see: Huff, 1991; Gupta and Gupta, 1992; Aubert, Rivart and Patry, 2 An Evaluative Perspective from Institutional Logic and Pragmatism 212 1996; Ngwenyama and Bryson, 1999; Arnold, 2000; Wang, 2002; Quelin and Duhamel, 2003). Due to the practical reasons and pragmatism, this approach is absolutely valid for the logic of this phenomenon, especially from the angles of strategy and pragmatism but from a different perspective, indeed a more complementary perspective, which is institutional logic, can explain the working mechanisms of this structure. And we believe that it covers not only the logic of these patterns but also comprises the logic of TCT approach. To this end linked with the institutional logic, some organizational theory and terms are used in this study to expand the perspective of this debate, such as pragmatism, legitimacy and loose coupling. Through this theoretical lens, we assume that a new perspective can be put forward for the delineation of this phenomenon in the field. In this framework, this phenomenon is initially discussed in mainstream dimension then discussed in our perspective, and finally, we try to build a holistic perspective between these three approaches. In this sense, below in the next section, the relationship between these three approaches will be discussed. The Relationship between the Institutional Logic, Pragmatism, Industry 4.0 and Outsourcing Alford and Friedland (1985) used the institutional logic term to delineate "the contradictory practices and beliefs inherent in the institutions of modern western societies" (Thornton and Ocasio, 2008: 100–101). These authors depicted three contending institutional orders which are capitalism, state bureaucracy, and political democracy. And, according to them, all these three concepts have divergent applications and cults forming how individuals connect in political combats (Thornton and Ocasio, 2008). Then, scholars (1991) enhanced their opinion in the context of investigating the interrelationships among society, individuals, and organizations (Thornton and Ocasio, 2008: 101). As stated in Thornton and Ocasio (2008: 101) Alford and Friedland (1991) "accepts institutions as supra-organizational patterns of activity rooted in material practices and symbolic systems by which individuals and organizations produce and reproduce their material lives and render their experiences meaningfully". When this framework is considered for outsourcing 3 3 The Relationship between the Institutional Logic, Pragmatism, Industry 4.0 and Outsourcing 213 phenomenon, there is a structural overlap between the logic of outsourcing, industry 4.0, and the institutional logic. In the previous section, it was stated "Why Industry 4.0 is So Important? And Why Do Organizations Outsource?” And implementing the industry 4.0 and outsourcing reasons of the organization were expressed to be “decentralized, autonomous approach for the value creation, enabled by concepts and technologies like the internet of things (IoT), internet of services (IoS), cloud computing or additive manufacturing and smart factories, so as to help companies meet future production requirements” (Hofman and Rüsch, 2017: 33) and “financial savings, strategic focus, access to advanced technology, improved service levels, access to specialized expertise, and organizational politics” (Belcourt, 2006) reveal themselves clearly. All these dimensions make outsourcing and industry 4.0. necessary for the organizations to produce and reproduce themselves. In this context, other crucial phenomena, which are legitimacy, pragmatism and loose coupling, emerge as important dimensions and explanatory concepts for the fiction of the current study. As to Meyer and Scott (1983:201) “the view that organizational legitimacy refers to the degree of cultural support for an organization – the extent to which the array of established cultural accounts provide explanations for its existence, functioning, and jurisdiction, and lack or deny alternatives... In such a[n] instance, legitimacy mainly refers to the adequacy of an organization as the theory. A completely legitimate organization would be one about which no question could be raised. [Every goal, mean, resource, and control system is necessary, specified, complete, and without the alternative.] Perfect legitimation is the perfect theory, complete (i.e., without uncertainty) and confronted by no alternatives.” In James William's study, pragmatism is regarded as an apparatus or devise for the estimation, problem-solving and action, and the function of thought is rejected by the James to portray, symbolize, or mirror reality (William, 1909). In this context, Gutek (2014) notes that the pragmatism underlines the practical application of concepts by acting on them to test them in real life originally. Moreover, Gutek stressed that pragmatism concentrated on a dynamic universe rather than a stable universe as the Idealists, Realists, and Thomists had declared" (Gutek, 2014). In Weick’s (1976: 3) study, loose coupling was depicted as a “situation in which elements are responsive, but retain evidence of separateness and An Evaluative Perspective from Institutional Logic and Pragmatism 214 identity”. In his next study, Weick (1982: 380) stressed that when elements influenced each other abruptly, occasionally, insignificantly, indirectly, and eventually, loose coupling is imminent. When all these theoretical aspects are combined, outsourcing and industry 4.0 not only emerge as an important institutional logic but also appear as a vital legitimacy source. In this respect, organizations need outsourcing and industry 4.0 as an institutional logic to gain the legitimacy to produce and reproduce themselves in their organizational environment and systems. Due to the fact that organizations do not want to lose their legitimacy in their organizational environment and their market, they build their structure loosely coupled. Thanks to this pragmatic approach by using outsourcing and industry 4.0., they produce and reproduce themselves in their organizational life. When all these examples are put together in the framework of the concept of pragmatism and loose coupling, double looped relationship between all these phenomena reveals themselves explicitly. In order to focus on core competencies or get competition advantages, organizations display an inclination for outsourcing and industry 4.0. applications. As stated in Leeman and Raynolds (2012), Kosnik et al. (2006), Hofman and Rüsch (2017), which were mentioned in the previous section, organizations focus core competencies, improve quality and efficiency, become flexible, reduce the inventory-carrying and investment costs, need more decentralization and self-regulation for value creation owing to the nature of market life and the requirements of the competitions. They also focus on lessening the requirement for capital assets, saving money, improving response times, hiring less staff, lowering risks, expanding innovative skills and opportunities for creating value-added stakeholder revenues. And all these realities or requirements make outsourcing and industry 4.0. as a fundamental institutional logic for the organizations in the industry or the other market fields for their survival. Through outsourcing and especially industry 4.0., the notions and technologies such as CPS, IoT, IoS, and smart factories were enabled in order to assist firms to fulfil future production necessities. Also, this survival pattern coincides with the Friedland and Alford's definition (1985), which is about the simultaneous existence of contradictory practices and beliefs in institutional logic. Above in Figure 1 in previous section, high and the diverse outsourcing practices in Europe and 3 The Relationship between the Institutional Logic, Pragmatism, Industry 4.0 and Outsourcing 215 America “most prominent reasons in Figure 1: aim to achieve best practice, cost discipline/control focus on core competencies, etc." reveal that our complementarity approach is accurate for these phenomena. As supra-organizational forms of operation which are originated in material exercises and symbolic systems, outsourcing and industry 4.0 revealed themselves as a supra-organizational pattern in the field. In Thornton and Ocasio’s study (2008), according to Jackall, Friedland and Alford, cultural assumptions and political struggles, which are embodied practices, have been sustained and reproduced by institutional logic. (Thornton and Ocasio, 2008: 101). These embodied practices have a pragmatic reason, and thorough these pragmatic reasons, they become more operational, and this operationalization will help produce and reproduce themselves in the market again. Transaction cost theory (TCT) (in ex: Huff, 1991; Gupta and Gupta, 1992; Aubert, Rivart and Patry, 1996; Ngwenyama and Bryson, 1999; Arnold, 2000; Wang, 2002; Quelin and Duhamel, 2003) is still a very powerful tool for the explanation of the outsourcing reasons in the field. But from a different perspective, indeed a more complementary perspective, which is institutional logic, can explain the working mechanisms of this structure in more detail. Besides, we believe that this comprehensive tool not only covers the logic of these patterns but also comprises the logic of TCT approach. When the Belcourt’s (2006) six-dimensional description is reconsidered, which is “financial savings, strategic focus, access to advanced technology, improved service levels, access to specialized expertise, and organizational politics”, all these practices gain embeddedness to the outsourcing practices. And also, these practices gain embeddedness to the industry 4.0. practices. Since we believe that there is a high convergence between Belcort’s (2006) six-dimensional description and Kagermann et al’s (2013) eight fundamental points “fulfillment the individual customer necessities, flexibility, optimized decision-taking, resource productivity and efficiency, value creation chance via the new services, responding to demographic change in the workplace, work-life-balance, a high-wage economy that is still competitive”. In this sense, we provided some sample titles and various combinations of these titles from the literature (Belcourt, 2006): Financial Savings, Resource Productivity, and Efficiency. According to Ngwenyama and Bryson (1997: 352), “the firms in different in- An Evaluative Perspective from Institutional Logic and Pragmatism 216 dustries have applied these applications for many years. In their study, they stated that Ford and GM (General Motors) have outsourced more than 50% of the components to compose their final products”. Financial Savings and Reaching Advanced Technology, Flexibility, Resource Productivity and Efficiency. Haour (1992: 181–182) reveals that companies concentrated on effectually applying technological development in a global way. Due to the financial necessities, some firms actually respond to that need partly by setting up their R&D as a local organization which works on projects directly sold to the department or business units. (Haour, 1992: 182). Highly complex R&D process swells the costs of research. And this high burden makes research less appealing without stakeholders to share the cost. Also, the company could not have the financial assets to apply research yet if it remains a charming offering. Besides, the obstacles among the scientific disciplines and technical branches are also overcome as the exchange among research and development improves (Howells, 2009: 21). Financial Savings, Reaching Advanced Technology, Specialized Expertise, Flexibility, Optimized Decision-Taking and Strategic Focus, a Competitive Economy with a High-Wage. The elements, which are linked with employing CRTOs, are probably to concentrate on cost, the pace of delivery and the existence of professional expertise, yet it should be underlined that there probably appears quite national distinctness in the light of motives for research and technical collaboration (Howells, 2009: 22). According to the Commission of the European Communities study carried out under Ringe's (1992: 7) editorial indicated: “the UK has a large body of organizations that are able and willing to undertake contract research. These organizations are, in general, well established and technically sophisticated with close links with the UK (and overseas) industry. They are well placed to disseminate new technologies rapidly and effectively to a wide industrial base.” Since the contract research & development market became more aggressive, many firms took some measures to empower their status. This has brought about the incorporations of CROs and the conversion of status from a research association to a private limited company (Ringe, 1992: 43). Moreover, Ringe’s (1992: 43) study reveals that most of the “UK CROs are relatively small, well-run technological organizations that could be incorporated into a consortium, to both work on particular projects and to remain as a prof- 3 The Relationship between the Institutional Logic, Pragmatism, Industry 4.0 and Outsourcing 217 itable technological arm”. According to Ringe's report, there are some reasons underlying this situation, which are needed to tap additional manpower- desire to get strict control ability of research & development timelines and financial plans so as to finish the job and the progress of research and technical outsourcing. Strategic Focus and Access to Specialized Expertise, Flexibility, Value Creation Facilities by the Agency of New Services, a Competitive Economy with a High- Wage. In the strategic field making innovation capability as seen being one of the strategic competencies, Arora and Gambardella's (1990) study gives us a significant proof of the relationship between strategy and outsourcing phenomenon. Arora and Gambardella (1990:374), who conducted a research on biotechnology firms, revealed that there is a positive correlation between biotechnology firms, which make research agreements with universities, even they have small participation, albeit they try to control the firm characteristics. Arora and Gambardella (1990) infer that these approaches are complementary to each other because firms which have these strategies target distinct and complementary sets of resources. The results of their study indicate that major companies are no more the unique centre of innovation activities. The core of innovation should be seen as the "network" of the inter-organizational tie. Strategic Focus, Reaching Advanced Technology, Reaching Professional Expertise and Organizational Politics. As revealed in Howells’ study (2009: 20–21), many facilitators of scientific and technical discoveries have now been realized, firms have to handle with much more complicated, difficult and rigid scientific obstacles. Moreover, according to Howells, the amount of technology used for each product increases in several consumer and business products since it varies from mechanic to electro-mechanic systems in the automobile industry (Howells, 2009: 21)”. Most of the firms do not have all the requirements of scientific resources to handle these obstacles and extra burdens (Haour, 1992). Additionally, many of these new elementary realities embrace several scientific and technical disciplines as well as prompting the association among organizations with strengths in various fields (Howells, 2009: 21). Howells's study (2009: 17–18) displays that focus on technology outsourcing and supply, dynamics is important for many causes. An Evaluative Perspective from Institutional Logic and Pragmatism 218 "Firstly, because of the absolute and relative growth of R&D externalization and outsourcing in advanced industrial economies; it, therefore, represents a growing phenomenon that deserves more attention. Secondly, this approach is valuable because it seeks to posit such change from the perspective of research and development as a corporate function and activity. The internal R&D process is changing, and it is no longer the sole generator of a firm's innovation stream; it now has an important technological scanning role and as a purchaser and adapter of other organizations' technology. Much of the analysis of inter-firm research and technological collaboration has focused on the wider issues to do with the external relations of the firm and competitive performance and treated the R&D function as largely given. Thirdly, because the growth in the external sourcing of R&D and other design and technical activities by firms has played an important role in the creation and development of the ‘research market', in terms of the commercial purchasing and trading of R&D and technology. Fourthly, and related to this, the establishment and growth of organizations serving this contract research and technical market. This includes what may be termed ‘Contract Research and Technology Organisations' (CRTOs) as well as a wider group of companies and organizations with some involvement in the CRT market. This has significant implications for the development of the innovation support infrastructure in national and local systems of innovation (Howells, 2009: 17– 18).” Reaching Professional Expertise and Organizational Politics, Flexibility and Financial Savings, Work-Life-Balance. There are several reasons for outsourcing companies’ services to the external firms and this phenomenon is exemplified in a detailed way in Belcourt's study (2006); British Petroleum company outsourced HR services to Exult Company which is specialized in HR services. As the vice-president for HR stated "Our cost of delivering HR activities was uncompetitive, and the quality of the delivery was uncertain. Further, the burden of administration on the HR departments in the business units was preventing the function from performing more effectively in the more strategic HR services (Belcourt, 2006: 269)". Also, Belcourt notes that “through this way, the following results were obtained by BP company: a 40% reduction in HR staff, a reduction in operating costs of $15 million a year, and the avoidance of funding $30 million in capital costs for technology. The outsourcing allowed HR professionals the time to support the business lines” (Adler, 2003; Oshima, Kao, & Tower, 2005; Belcort, 2006: 269). As cited in Thornton and Ocasio's study, (1999: 804) these three scholars which are the pioneer definers of the institutitonal logic, Jackall (1988), Fried- 3 The Relationship between the Institutional Logic, Pragmatism, Industry 4.0 and Outsourcing 219 land and Alford (1991), have defined the institutional logig as “the socially constructed, historical patterns of material practices, assumptions, values, beliefs, and rules by which individuals produce and reproduce their material subsistence, organize time and space, and provide meaning to their social reality”. In this sense, due to pragmatic reasons, outsourcing and industry 4.0. emerge as a fundamental issue on the organization agenda and the environment. Also, other contemporary organizing structures such as network organization, clusters, and strategic unions prompt organizations to apply outsourcing and industry 4.0. As to this approach, institutional logics create a tie among the cognition, social rules, individuals and socially constructed institutional practices. Although Friedland and Alford's, and Jackall's approaches are slightly different from each other, Thornton and Ocasio (1999) unite the structural, normative, and symbolic phenomena with institutional logic in a single pot as three essential and interconnected dimensions of institutions, more than detachable structural (coercive), normative, and symbolic (cognitive) transmitters, as proposed by other scholars (e.g., Scott, 2001) (Thornton and Ocasio, 2008). In their study, Thornton and Ocasio (2008: 104) stated that three dimensions, which are competing and negotiating individuals, contradicted and interdependent organizations, conflicting and coordinating organizations, build society levels. When the limitations and chance gradually emerge in organizations and institutions for individuals' actions, these three embedded levels are essential to understand society in detail (Thornton and Ocasio, 2008: 104). As the institutions and organizations are socially constructed and established by the individuals' actions, rather than dominance one to over, this viewpoint proposes that individual and organizational action are embedded inside institutions (Berger and Luckmann, 1967; Thornton and Ocasio, 2008: 104). The recent studies on institutional entrepreneurship (i.e: Battilana, 2006; Greenwood and Hinnings, 2006) have combined the connection among the levels as an essential treatment for organizational and institutional transformation (Thornton and Ocasio, 2008: 104). Monitoring the society as an inter-institutional order enables the roots of heterogeneity and agency to be theorized and perceived from the inconsistencies among the logic of various institutional systems. Rationality is not based on a single source, on the contrary, it is based on multiple An Evaluative Perspective from Institutional Logic and Pragmatism 220 sources according to a holistic perspective (Meyer et al., 1997). Institutional logics perspective regards every context as possibly affected by competing logics of various societal sectors, more than asserting homogeneity and isomorphism in organizational fields. For instance, the field of healthcare is formed by the institutional market logic, state democracy logic, and the professional medical care logic (Scott et al., 2000; Thornton and Ocasio, 2008: 104). Conclusion The boundaries between organization theories and managerial phenomena such as outsourcing, industry 4.0., organizational logic, pragmatism, and loose coupling are becoming blurry and conductive day by day, and this situation raises the need for a holistic view to these phenomena. Hence, in this theoretical study, a complementarity perspective was administrated to obtain a holistic view and try to enlighten the field with the new interpretations. According to our theoretical fiction, which we tried to create in this study, organizations use institutional logics and pragmatism as a tool to produce and reproduce themselves in order to preserve organizational productivity. In this context, thanks to the institutional logics, contradictory practices and beliefs inherent in the institutions became a very pragmatic and useful tool to realize their strategic existence and aims. Moreover, these structures support loose coupling for the organizations, such as outsourcing and industry 4.0., and they get a large movement field for their sustainability and strategic actions. As in the examples given in the previous section, the relationship between financial savings, access to advanced technology, access to specialized expertise, flexibility, optimized decision-taking, resource productivity and efficiency, pragmatically serve as the strategic focuses of the organizations. Institutional logics which were created by all these concepts give organizations a loosely coupled movement field to produces and reproduces themselves and their strategic focus. Conclusion 221 References Adler, P. S. Making the HR Outsourcing Decision. 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Internet Sources https://Tez.Yok.Gov.Tr/Ulusaltezmerkezi/Tezsorgusonucyeni.Jsp An Evaluative Perspective from Institutional Logic and Pragmatism 224 Key Terms Organization Theories Strategy Outsourcing Industry 4.0 Institutional Logic Finance and Loose Coupling Core Competencies Pragmatism Questions for Further Studies in the Field Explain the main motivation of organizations to outsource. Why is industry 4.0 so important for companies? What is the common point of outsourcing and industry 4.0? Explain the relationship between the institutional logic, pragmatism, industry 4.0 and outsourcing. Explain how industry 4.0 affects outsourcing decisions. Discuss that if there are any differences for various manufacturing sectors in outsourcing decisions related with industry 4.0. What are the main benefits and risks of outsourcing? Explain how the outsourcing risks can be managed. Exercises It became more difficult for your company to compete in the new conditions caused by industry 4.0 with your rivals. In this sense which technical issue will you take support for your company? Suppose you are the human resources (HR) manager of a company, do you think that it will be necessary to outsource some HR activities in the industry 4.0 transformation? If you think it is necessary, which HR activities will be outsourced and how? When you analyse the market which institutional logics (competition, core competencies, legitimacy, etc.) stimulate your company to outsource and which institutional logics motivate your company to use industry 4.0? Think about your ideal manager position. And you decided to outsource. Which criteria will you use to determine which areas you will outsource and which organizations will be your partners? Exercises 225 Industry 4.0 causes many changes in several business just as in job requirements. Think about which HR qualities will become more important to be hired. Imagine that you are the manager of a business and you see some problems in the annual reports after the outsourcing decision. How will you solve these problems? Further Reading Kluyver, C., & J. A. Pearce, Strategic management: an executive perspective. Business Expert Press. 2015. Lasi, H., P. Fettke, H. G. Kemper, T. Feld, & M. Hoffmann, Industry 4.0. Business & Information Systems Engineering, 6(4), 2014, 239–242. Rüßmann, M., M. Lorenz, P. Gerbert, M. Waldner, J. Justus, P. Engel,, & M. Harnisch, Industry 4.0: The future of productivity and growth in manufacturing industries. Boston Consulting Group, 9. 2015. Brettel, M., N. Friederichsen, M. Keller, & M. Rosenberg, How virtualization, decentralization and network building change the manufacturing landscape: An Industry 4.0 Perspective. International Journal of Mechanical, Industrial Science and Engineering, 8(1), 2014, 37–44. Weyer, S., M. Schmitt, M. Ohmer, & D. Gorecky, Towards Industry 4.0-Standardization as the crucial challenge for highly modular, multi-vendor production systems. Ifac-Papersonline, 48(3), 2015, 579–584. Schumacher, A., S. Erol, & W. Sihn, A maturity model for assessing industry 4.0 readiness and maturity of manufacturing enterprises. Procedia CIRP, 52, 2016, 161–166. Oesterreich, T. D. and F. Teuteberg, “Understanding the Implications of Digisation and Automation in the Context of Industry 4.0: A Triangulation Approach and Elements of a REsearch Agenda for the Construction Industry”, Computers in Industry, Vol. 83, December, pp. 2016, 121–139. Yen, C. T., Y. C. Liu, C. C. Lin, and C. C. Kao, “Advanced Manufacturing Solution to Industry 4.0 Trend through Sensing Network and Cloud Computing Technologies”, IEEE An Evaluative Perspective from Institutional Logic and Pragmatism 226

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Abstract

Organizations have always been dependent on communication, information, technology and their management. The development of information technology has sped up the importance of management information systems, which is an emerging discipline combining various aspects of informatics, information technology, and business management. Understanding the impact of information on today’s organizations requires technological and managerial views, which are both offered by management information systems.

Business management is not only about generating greater returns and using new technologies for developing businesses to reach future goals. Business management also means generating better revenue performance if plans are diligently followed.

It is part of business management to have an ear to the ground of global economic trends, changing environmental conditions and preferences, as well as the behavior of value chain partners. While, until now, business management and management information systems are mostly treated as independent fields, this publication takes an interest in the cooperation of the two. Its contributions focus on both research areas and practical approaches, in turn showing novelties in the area of enterprise and business management.

Main topics covered in this book are technology management, software engineering, knowledge management, innovation management and social media management.

This book adopts an international view, combines theory and practice, and is authored for researchers, lecturers, students as well as consultants and practitioners.