The Case of Western Counterpart

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Next, I will use an American case to discuss characteristics of rules set by Western self-organized units. Compare how the City L Steel & Wood Furniture Association (―the furniture association‖ stated above) in China and Semiconductor Manufacturing Technology (SEMATECH) operate, and we can get some interesting theoretical insights.

(1) Semiconductor Manufacturing Technology

Founded in 1987, SEMATECH was America's first ever large-scale, intra-industry R&D consortium and is believed to be a paradigm of cooperation organizations. Given its initiative and huge influence, American scholars have made in-depth research on how it was established, together with detailed records of its history (Browning and Shetler, 2000).

In the 1970s, a crisis was sweeping the then fragmented U.S. semiconductor industry as a result of fierce competition with Japan. It was in this context that SEMATECH was formed by fourteen members, including Intel, IBM and AT&T, which were all high-tech leaders in the semiconductor industry and combined to represent 85% of the U.S. semiconductor market. They are the critical mass of this association, and jointly established SEMATECH as equal partners. Its staffing mechanism was noteworthy during the formation of this consortium.

SEMATECH has staff members in two categories: Assignees from its member companies and full-time employees. The assignees typically work for two years, after which they will mostly return to their companies and continue with their jobs. These people generally are middle or senior managers or technologists, who, as senior industry professionals, have superior professional and managerial capabilities and thus are able to assure that the consortium can promote industry growth. While working at the consortium, they may also be still working at their companies and, during the operation of the consortium, protecting the latter ones' interests. On the other hand, the full-time employees specialize in organizational work of the consortium, make sure that it operates in a sustained and stable manner, and act as third-party coordinators during conferences to promote discussion and communication among the companies.

The assignees in SEMATECH provide a variety of professional skills and industrial judgments for the consortium to make decisions, while the full-time employees enable it to maintain a relatively impartial position when it is necessary to coordinate interests of all relevant parties. Particularly important are SEMATECH provisions concerning the president's qualifications: The president shall not be an assignee from a company and must cut off all the business ties with his/her original company to work on a full-time basis.

If the president is from one of the fourteen SEMATECH members, which have equal rights and obligations, the other members will feel that their interests are threatened. As a result, the president can receive trust from all the member companies only when he/she is not from any of these companies and plays a third-party role. The first elected president of SEMATECH was Robert Noyce, a co-founder of Intel who was then a member of its board of directors. And he resigned from Intel, as required, after he was elected as the president of SEMATECH.

The founders of SEMATECH were aware, at the very beginning, of the importance of creating a trust mechanism. Given a fragmented industry, Noyce received trust from all the member companies thanks to his third-party status, despite that the election of president was made more difficult by the provision that the president shall be a person from outside the member companies (some executives with rich experience and superior qualifications are unwilling to abandon their positions in their respective companies and, hence, to serve as the president). As was said by Charlie Sporck, a co-founder of SEMATECH, this is an important precondition for SEMATECH to develop smoothly without the threat of breaking up owing to disagreement on interests.

(2) The Code of Conduct

Shortly after they founded SEMATECH, the founders developed specific regulations with regard to various matters and compiled them into a book. This four-inch-thick book details the consortium's future main tasks, work plans, behavior, etc. The code of conduct is divided into four parts: Organizational framework, funding, personnel arrangements and government relationships. And each section consists of numerous, more specific issues, including Total Quality and other sections. This book was drafted by several persons in charge before it was submitted to a plenary session for discussion. There were heated debates among the assignees who were racing to recommend modifications to both provisions and details on behalf of their respective companies. To be able to gather all the members' opinions, the plenary session and debates lasted for two days before an agreement on the main provisions was reached. These provisions detailed all relevant parties' rights and obligations, and the members gained a clear picture of the consortium's main tasks and detailed arrangements in the next few years. The exhaustive institutional regulations cover the members' actions and the consortium's work alike. Everybody knows his/her obligations and the penalties for violations of the agreement. Since these provisions were passed at the plenary session and thus are effective to all, the members work together under the formal provisions, leading to a well-operating consortium.

With clear constraints and expectations for the members, the code of conduct constitutes the cornerstone for the operation of SEMATECH. Nonetheless, such exhaustive regulations also have caused some problems. While the consortium is developing and tasks are being carried out, people come to realize that some regulations do not align with reality. SEMATECH has therefore held meetings, along with heated debates, regarding how to modify the code, adding to its operating costs.

(3) Lunch Bunch: Social Network as a Watchdog

Although the book of code of conduct is the cornerstone for the operation of SEMATECH, the social network as a watchdog still plays an auxiliary role, which is demonstrated by an incentive mechanism for the assignees. During the operation of SEMATECH, communication between the consortium and the member companies is realized mainly through the assignees, who will work on behalf of their respective companies to produce a result favorable for them, whenever possible, when the consortium is making a decision on a matter. In the meantime, they are responsible for communicating the consortium's final decision to their respective companies and for urging them to implement it. The assignees' dedicated participation is a precondition for the successful operation of the consortium since they play an important role as bridges for communication.

As we have explained above, however, the assignees tend to be middle and senior managers of their respective companies, where they also hold particular positions. As a result, they are often unavailable for the work of the consortium because of some affairs at their respective companies. Nearly half of the assignees frequently asked for a leave in the early period of the consortium. Their failure to fulfill their obligations had a severe impact on the operation of the consortium. To address this problem, Intel manager Rick Dehmel launched an activity called Lunch Bunch – all the consortium staff members would gather in a meeting room every Wednesday at noon, when they ate sandwiches and participated in a brainstorming session. The topics included a review of the work done in the last week, a preview of the work plan for the next week, the announcement of new things and dissatisfaction among the colleagues. Lunch Bunch would soon turn into a condemnation against the absent assignees, as the attendees would complain against them. It was under this pressure from the peers' opinions that the attendance rate of the assignees greatly increased later on. Lunch Bunch provided an opportunity for regular communication among the consortium staff members, who then became increasingly familiar with one another and formed a social network. An absent member would be rejected and condemned by all the other members of this network, and no assignee dare violate the rules at will because of the pressure from opinions in the network as a powerful watchdog. As the work of the consortium was carried out, the staff members had more opportunities (e.g., meetings and project teams) for face-to-face communication, which further promoted the development of social networking among the members and cooperation among the assignees.

 
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