The Vanishing Hand: the Changing Dynamics of Industrial Capitalism
AbstractIn a series of classic works, most notably The Visible Hand (1977) and Scale and Scope (1990), Alfred Chandler focused the spotlight on the large, vertically integrated modern corporation. Put simply, Chandlerâs argument is this. In the late nineteenth century, the large vertically integrated corporation emerged in the United States to replace what had been a fragmented and localized structure of production and distribution. The driving force behind this transformation was increased population and higher per-capita income, combined with lowered transportation and communications costs made possible by the spread of the railroad and telegraph. Adam Smith had predicted an increasingly fine division of labor as the response to a growing extent of the market; and, although he was actually quite vague on the organizational consequences of the division of labor, Smith was clear in his insistence on the power of the invisible hand of markets to coordinate economic activity. Chandlerâs account challenges this prediction: internal or managerial coordination became necessary to coordinate the ânew economyâ of the late nineteenth and early twentieth centuries, and the visible hand of managerial coordination replaced the invisible hand of the market. Many would argue that the late twentieth (and now early twenty-first) centuries are witnessing a revolution at least as important as the one Chandler described. Population and income are again a driving force, but the railroad and telegraph have been replaced by the computer, telecommunications technology, and the Internet. In this epoch, Smithian forces may be outpacing Chandlerian ones. Management retains important functions, of course, including some of the same ones Chandler described. But as the central mechanism for coordinating high-throughput production, the visible hand â many would argue â is fading into a ghostly translucence. This paper is a preliminary attempt to explain why this is so â to provide some th
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Bibliographic InfoPaper provided by University of Connecticut, Department of Economics in its series Working papers with number 2002-21.
Length: 66 pages
Date of creation: Nov 2002
Date of revision:
Publication status: Forthcoming in Industrial and Corporate Change
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Other versions of this item:
- Richard N. Langlois, 2003. "The vanishing hand: the changing dynamics of industrial capitalism," Industrial and Corporate Change, Oxford University Press, vol. 12(2), pages 351-385, April.
- Richard N. Langlois, 2001. "The Vanishing Hand: the Changing Dynamics of Industrial Capitalism," Economic History 0110001, EconWPA.
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
- P12 - Economic Systems - - Capitalist Systems - - - Capitalist Enterprises
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-11-18 (All new papers)
- NEP-COM-2002-11-18 (Industrial Competition)
- NEP-ENT-2002-11-18 (Entrepreneurship)
- NEP-IND-2002-11-18 (Industrial Organization)
- NEP-TID-2002-11-18 (Technology & Industrial Dynamics)
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