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"Chandlerís Living History: The Visible Hand of Vertical Integration in 19th Century America Viewed Under a 21st Century Transaction Costs Economics Lens"

Marcelo Bucheli, Joseph T. Mahoney, and Paul M. Vaaler

 

First Author :

Marcelo Bucheli
Business Administration
University of Illinois at Urbana-Champaign, College of Business
1206 S. Sixth Street
339 Wohlers Hall, MC 706
Champaign, IL 61820
USA

217-244-0208

mbucheli@uiuc.edu

http://www.business.uiuc.edu/facultyprofile/faculty_profile.aspx?ID=10771


Second Author :

Joseph T. Mahoney
Business Administration
University of Illinois at Urbana-Champaign, College of Business
1206 S. Sixth Street
140C Wohlers Hall, MC 706
Champaign, IL 61820
USA

217-244-8257

josephm@uiuc.edu

http://www.business.uiuc.edu/faculty/mahoney.html


Third Author :

Paul M. Vaaler
Strategic Management & Organization
University of Minnesota, Carlson School of Management
321 - 19th Avenue South
Minneapolis, MN 55455
USA

217-333-4504

pvaaler@uiuc.edu

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Abstract :
 
Alfred Chandlerís 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. Chandlerís 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.
 
 
Keywords :
 
Business history, contracting, transaction costs theory, vertical integration
 
 
Manuscript Received : 2007
Manuscript Published : 2007
 
 
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