Modularity and the Organization of International Production
In many globalized industries, vertical outsourcing seems to co-evolve with horizontal integration in the component sector. In order to account for this phenomenon, I incorporate modularity into an industry-equilibrium model with monopolistic competition and perfect contracts that allows the organization of the firm to be endogenous in both the vertical and horizontal dimensions of production. The model illustrates that the co-evolution is most likely to occur in industries with modular product architectures and high increasing returns to scale in the intermediate good sector. This paper also provides a theoretical legitimation of Stigler's contentious conjecture that firm production structures become vertically disintegrated as an industry expands.
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Richard N. Langlois, 2002. "The Vanishing Hand: the Changing Dynamics of Industrial Capitalism," Working papers 2002-21, University of Connecticut, Department of Economics.
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