Business-Word Economy

Business-Word Economy

VERTICAL DISINTEGRATION

Vertical disintegration is to a particular organizational form of industrial production. Unlike vertical integration, in which production occurs with a singular organization, vertical disintegration means that different or several diseconomies of scale or scope have been broken down a production process into separate companies where each will be performing a limited set of activities for a finished product, (Chen and Yongmin 2005).

Filmed entertainment was once highly vertical integrated into a studio system only a  few large studios handled everything in production to a theatrical presentation. When the second world war ended, the industry was broken into small fragments, each specializing in a particular task within the division of labour required to produce and show a finished piece of filmed entertainment. Hollywood became highly vertically integrated, with specialized firms who only performed specific tasks such as editing, special effects, trailers etc. Bell system divestiture had a similar impact on a more massive industry later in the 20^th century, (Doellgast, Virginia, and Greer 2007).

One of the main reason for vertical disintegration is risk-sharing (Holmes and Thomas, 1999). In some situation, smaller firms can be responsive to new amendments in market conditions. Vertical disintegration is more likely when working in volatile markets(Jacobides and Michael 2005).Stability and standardized products are most typically engender integration, as it provides the benefits of scale economies..

The geography if the disintegrated industry is not given. Economic geographers mostly differentiate between knowledge-intensive, volatile, unstandardized activities, and standardize routinized production. The former tend to cluster in space, as they require proximity to building a common conceptual framework a share new ideas. The latter can be fat flung and are exemplified by global commodity chains such as apparel and automotive industries.

References

Holmes, Thomas J. “Localization of industry and vertical disintegration.” Review of Economics and Statistics 81.2 (1999): 314-325.

Jacobides, Michael G. “Industry change through vertical disintegration.” Academy of Management Journal 48.3 (2005): 465-498.

Chen, Yongmin. “Vertical disintegration.” Journal of Economics & Management Strategy 14.1 (2005): 209-229.

Doellgast, Virginia, and Ian Greer. “Vertical Disintegration of German Industrial Relations 1.” British Journal of industrial relations 45.1 (2007): 55-76.