Philosophy of Management

Volume 4, Issue 3, 2004

Fakes, Copies and Originals

Industry Reform in Australia
Privatisation/Corporatisation of the Electricity Supply Industry

The neo-classical economics paradigm postulates a hypothetical model of perfect competition as the ideal environment for business success. Yet the model has great difficulty in apprehending the day-to-day operations of actual business organisations. This paper explores some of the apparent inadequacies of the neo-classical paradigm, drawing on business strategy theory to suggest a potentially more fruitful mode of analysis. It is argued that conventional business strategy theory not only can provide a better framework than neo-classical economics for explaining and informing public policy on utilities, but that it also can provide an additional dimension to critical management theory. The process of public sector ‘reform’ that gained momentum in the late 1970s was driven largely by neo-classical economic assumptions. While there has been a plethora of literature published on the need to ‘reform’ various public enterprises, there has been little analysis of the strategic behaviour of enterprises and industries that have been privatised or targeted for this change. Whereas neo-classical economics has been chiefly concerned with the performance of markets in the allocation and coordination of resources, business strategy is primarily about coordination and resource allocation within the firm. In contrast to neo-classical economics, business strategy theory is inherently interdisciplinary, integrating the social sciences: it is not applied microeconomics.