Dynamist Blog

VERTICAL DISINTEGRATION

My latest NYT column looks at the trend away from vertical integration. An excerpt:

Since the 1980's, American corporations have been disintegrating--not falling apart, but becoming more specialized. Revenues or production volumes may be as large as ever, but even big companies tend to combine fewer stages of production under the same corporate ownership.

This trend presents a puzzle. As the business historian Alfred Chandler famously chronicled, the modern corporation succeeded in large measure by bringing many different stages of production under central ownership and control.

Why did vertical integration seem like the way to efficiency, predictability and riches? Was Mr. Chandler wrong?

Naturally, I think you should read the whole thing.

For more info on Dick Langlois's research, including a downloadable version of his paper, look here.

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