Modeling firms in the global economy

I examine the apparent deverticalization of firms in the world economy and their adoption of relational contracting and modularization, necessitated by rapid product change, cheap and rapid transport, and new technologies. I argue that relational contracting is superseded by modularization when possible in the interest of more control over suppliers, and modularization in turn leads to consolidation, when possible, through buying up suppliers or making them captives. The result is increased concentration of economic power in the world economy, and examples of this are presented.

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Charles PerrowEmail:

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Charles Perrow   is Emeritus Professor of Sociology, Yale University. His most recent book is The Next Catastrophe: Reducing Our Vulnerabilities to Natural, Industrial, and Terrorist Disasters, Princeton University Press, 2007. In 2001, he published Organizing America: Wealth, Power, and the Origins of Corporate Capitalism, Princeton University Press. His current research concerns internet security and operating systems architecture, the organization of large technical systems, and the organizational aspects of climate change.