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Flexibility and Stability in the Innovating Economy$
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Maureen McKelvey and Magnus Holmén

Print publication date: 2006

Print ISBN-13: 9780199290475

Published to Oxford Scholarship Online: May 2006

DOI: 10.1093/0199290474.001.0001

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The Effects of Technological Change on the Boundaries of Existing Firms

The Effects of Technological Change on the Boundaries of Existing Firms

(p.201) 8 The Effects of Technological Change on the Boundaries of Existing Firms
Flexibility and Stability in the Innovating Economy

Paul L. Robertson

Gianmario Verona

Oxford University Press

This chapter explores the reciprocal relationship between technological innovation and the boundaries of the firm, and the paths in which firm boundaries might be expected to follow under different circumstances. It argues that while one might follow Langlois (2003) in believing that there will be a tendency for large, vertically-integrated firms to become less common in the technological environment that is currently unfolding, other tendencies will also be afoot, leading to a spectrum of different types of inter- and intra-firm relationships. This includes the creation of new giant enterprises whose evolution in the early 20th century was described by Chandler (1962, 1977) as the imposition of a ‘visible hand’ to reduce uncertainties in market-based relationships.

Keywords:   industrial dynamics, technological innovation, boundaries of firms, visible hand, vertical integration, relationships of firms

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