IDEAS home Printed from https://ideas.repec.org/p/ecl/illbus/07-0111.html
   My bibliography  Save this paper

Chandler's Living History: The Visible Hand of Vertical Integration in 19th Century America Viewed under a 21st Century Transaction Costs Economics Lens

Author

Listed:
  • Bucheli, Marcelo

    (U of Illinois at Urbana-Champaign)

  • Mahoney, Joseph T.

    (U of Illinois at Urbana-Champaign)

  • Vaaler, Paul M.

    (U of Minnesota)

Abstract

Alfred Chandler's recent passing is cause to review and celebrate his many contributions to business history. It also presents an opportunity to highlight links between his rich historical analyses concerning organizational and industrial innovation and contemporary management studies of the firm and industrial organization. We illustrate this point by applying transaction costs theory to several case studies from his 1977 masterwork narrating the emergence of vertically-integrated firms in nineteenth-century America, The Visible Hand. Vertical integration, organizational control and innovation in manufacturing at McCormick Harvester and Singer Sewing Machines, in transportation and distribution at Swift and United Fruit reflect managerial responses to classic transaction costs considerations including commercial relationships requiring the creation of specialized equipment and knowledge. Transaction costs analysis provides complementary historical insight on organizational innovation at these and other firms in the nineteenth century, and suggests when and where we might expect vertical integration strategies in emerging industries of the twenty-first century. Chandler's Visible Hand transcends business history to provide timeless insights and fundamental lessons on how innovative firms re-draw organizational boundaries and structures for efficient and effective innovation.

Suggested Citation

  • Bucheli, Marcelo & Mahoney, Joseph T. & Vaaler, Paul M., 2007. "Chandler's Living History: The Visible Hand of Vertical Integration in 19th Century America Viewed under a 21st Century Transaction Costs Economics Lens," Working Papers 07-0111, University of Illinois at Urbana-Champaign, College of Business.
  • Handle: RePEc:ecl:illbus:07-0111
    as

    Download full text from publisher

    File URL: http://www.business.illinois.edu/Working_Papers/papers/07-0111.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Lazonick, William, 2002. "Innovative Enterprise and Historical Transformation," Enterprise & Society, Cambridge University Press, vol. 3(01), pages 3-47, March.
    2. Passer, Harold C., 1952. "Electrical Manufacturing Around 1900," The Journal of Economic History, Cambridge University Press, vol. 12(04), pages 378-395, September.
    3. Harold Barger, 1955. "Appendices and Index to "Distribution's Place in the American Economy Since 1869"," NBER Chapters,in: Distribution's Place in the American Economy Since 1869, pages 101-220 National Bureau of Economic Research, Inc.
    4. Livesay, Harold C., 1989. "Entrepreneurial Dominance in Businesses Large and Small, Past and Present," Business History Review, Cambridge University Press, vol. 63(01), pages 1-21, March.
    5. Teece, David J., 1980. "Economies of scope and the scope of the enterprise," Journal of Economic Behavior & Organization, Elsevier, vol. 1(3), pages 223-247, September.
    6. Teece, David J, 1993. "The Dynamics of Industrial Capitalism: Perspectives on Alfred Chandler's Scale and Scope," Journal of Economic Literature, American Economic Association, vol. 31(1), pages 199-225, March.
    7. 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.
    8. repec:mes:jeciss:v:30:y:1996:i:4:p:1212-1216 is not listed on IDEAS
    9. Atack, Jeremy, 1986. "Firm Size and Industrial Structure in the United States During the Nineteenth Century," The Journal of Economic History, Cambridge University Press, vol. 46(02), pages 463-475, June.
    10. Goldin, Claudia, 1986. "Monitoring Costs and Occupational Segregation by Sex: A Historical Analysis," Journal of Labor Economics, University of Chicago Press, vol. 4(1), pages 1-27, January.
    11. Michael Mayer & Richard Whittington, 2004. "Economics, Politics and Nations: Resistance to the Multidivisional Form in France, Germany and the United Kingdom, 1983-1993," Journal of Management Studies, Wiley Blackwell, vol. 41(7), pages 1057-1082, November.
    12. Richardson, G B, 1972. "The Organisation of Industry," Economic Journal, Royal Economic Society, vol. 82(327), pages 883-896, September.
    13. Bucheli, Marcelo, 2004. "Enforcing Business Contracts in South America: The United Fruit Company and Colombian Banana Planters in the Twentieth Century," Business History Review, Cambridge University Press, vol. 78(02), pages 181-212, June.
    14. McCurdy, Charles W., 1978. "American Law and the Marketing Structure of the Large Corporation, 1875–1890," The Journal of Economic History, Cambridge University Press, vol. 38(03), pages 631-649, September.
    15. Harold Barger, 1955. "Foreword to "Distribution's Place in the American Economy Since 1869"," NBER Chapters,in: Distribution's Place in the American Economy Since 1869, pages -9--7 National Bureau of Economic Research, Inc.
    16. Ralph L. Nelson, 1959. "Merger Movements in American Industry, 1895-1956," NBER Books, National Bureau of Economic Research, Inc, number nels59-1.
    17. James, John A., 1983. "Structural Change in American Manufacturing, 1850–1890," The Journal of Economic History, Cambridge University Press, vol. 43(02), pages 433-459, June.
    18. Erik Brynjolfsson & Thomas W. Malone & Vijay Gurbaxani & Ajit Kambil, 1994. "Does Information Technology Lead to Smaller Firms?," Management Science, INFORMS, vol. 40(12), pages 1628-1644, December.
    19. Laura Poppo, 2003. "The Visible Hands of Hierarchy within the M-Form: An Empirical Test of Corporate Parenting of Internal Product Exchanges," Journal of Management Studies, Wiley Blackwell, vol. 40(2), pages 403-430, March.
    20. Eccles, Robert G., 1981. "The quasifirm in the construction industry," Journal of Economic Behavior & Organization, Elsevier, vol. 2(4), pages 335-357, December.
    21. Galambos, Louis, 1997. "Global Perspectives on Modern Business," Business History Review, Cambridge University Press, vol. 71(02), pages 287-290, June.
    22. Clark, Gregory, 1984. "Authority and Efficiency: The Labor Market and the Managerial Revolution of the Late Nineteenth Century," The Journal of Economic History, Cambridge University Press, vol. 44(04), pages 1069-1083, December.
    23. Bittlingmayer, George, 1996. "Antitrust and Business Activity: The First Quarter Century," Business History Review, Cambridge University Press, vol. 70(03), pages 363-401, September.
    24. George J. Stigler, 1951. "The Division of Labor is Limited by the Extent of the Market," Journal of Political Economy, University of Chicago Press, vol. 59, pages 185-185.
    25. Smith, Adam, 1776. "An Inquiry into the Nature and Causes of the Wealth of Nations," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number smith1776.
    26. Shaw Livermore, 1935. "The Success of Industrial Mergers," The Quarterly Journal of Economics, Oxford University Press, vol. 50(1), pages 68-96.
    27. Kaouthar Lajili & Joseph T. Mahoney, 2006. "Revisiting agency and transaction costs theory predictions on vertical financial ownership and contracting: electronic integration as an organizational form choice," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(7), pages 573-586.
    28. Blanche E. Hazard, 1913. "The Organization of the Boot and Shoe Industry in Massachusetts Before 1875," The Quarterly Journal of Economics, Oxford University Press, vol. 27(2), pages 236-262.
    29. Harold Barger, 1955. "Distribution's Place in the American Economy Since 1869," NBER Books, National Bureau of Economic Research, Inc, number barg55-1.
    30. Williamson, Oliver E., 1980. "The organization of work a comparative institutional assessment," Journal of Economic Behavior & Organization, Elsevier, vol. 1(1), pages 5-38, March.
    31. Kujovich, Mary Yeager, 1970. "The Refrigerator Car and the Growth of the American Dressed Beef Industry," Business History Review, Cambridge University Press, vol. 44(04), pages 460-482, December.
    32. H. B. Malmgren, 1961. "Information, Expectations and the Theory of the Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 75(3), pages 399-421.
    33. Paul L. Robertson & Gianmario Verona, 2006. "Post-Chandlerian Firms: Technological Change And Firm Boundaries," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 46(1), pages 70-94, March.
    34. Barzel, Yoram, 1982. "Measurement Cost and the Organization of Markets," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 27-48, April.
    35. Zakim, Michael, 1999. "A Ready-Made Business: The Birth of the Clothing Industry in America," Business History Review, Cambridge University Press, vol. 73(01), pages 61-90, March.
    36. Alfred D. Chandler, 1992. "Organizational Capabilities and the Economic History of the Industrial Enterprise," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 79-100, Summer.
    37. Buttrick, John, 1952. "The Inside Contract System," The Journal of Economic History, Cambridge University Press, vol. 12(03), pages 205-221, June.
    38. Chandler, Alfred D., 1969. "The Structure of American Industry in the Twentieth Century: A Historical Overview," Business History Review, Cambridge University Press, vol. 43(03), pages 255-298, September.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecl:illbus:07-0111. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/cbuiuus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.