Abstract: Chandler in a Larger Frame: Markets, Transaction Costs, and Organizational Form in History

Richard N. Langlois


In 1977, when Alfred Chandler's path-breaking book The Visible Hand appeared, the large vertically integrated "Chandlerian" corporation dominated the organizational landscape. A quarter-century later, however, the Chandlerian firm is under siege from a panoply of decentralized and market-like forms that often resemble some of the "inferior" nineteenth-century structures the managerial enterprise replaced. Recently, authors of two long essays attempted to reinterpret Chandler in a way that preserves the essence of his contribution while placing that contribution in a frame ample enough to accommodate both the rise and the (relative) fall of the large managerial enterprise. One is the work of the formidable trio of Naomi R. Lamoreaux, Daniel M. G. Raff, and Peter Temin; the other is my own paper called "The Vanishing Hand." There is much common purpose and a good deal of overlapping explanation in the two papers; and I see the essential differences that remain as complementary rather than contradictory. In the end, the papers offer quite similar solutions to what is perhaps the fundamental post-Chandlerian puzzle: why has a monotonic decline in transportation and communication costs since antebellum times resulted in a "reswitching" of organizational form back to what appears to be an "earlier" structure of decentralization, market orientation, and relational contracts?

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