Vertical disintegration refers to a specific organizational form of industrial production. As opposed to

vertical integration In microeconomics, management and international political economy, vertical integration is a term that describes the arrangement in which the supply chain of a company is integrated and owned by that company. Usually each member of the suppl ...

, in which production occurs within a singular organization, vertical disintegration means that various

diseconomies of scale In microeconomics, diseconomies of scale are the cost disadvantages that economic actors accrue due to an increase in organizational size or in output, resulting in production of goods and services at increased per-unit costs. The concept of dise ...

or scope have broken a production process into separate companies, each performing a limited subset of activities required to create a finished product. Filmed entertainment was once highly vertically integrated into a studio system whereby a few large studios handled everything from production to theatrical presentation. After the second world war, the industry was broken into small fragments, each specializing on particular tasks within the division of labor required to produce and show a finished piece of filmed entertainment.

Hollywood Hollywood usually refers to: * Hollywood, Los Angeles, a neighborhood in California * Hollywood, a metonym for the cinema of the United States Hollywood may also refer to: Places United States * Hollywood District (disambiguation) * Hollywood, ...

became highly vertically disintegrated, with specialized firms who only performed certain tasks such as editing, special effects, trailers etc. Bell System divestiture had a similar effect on a larger industry later in the 20th century. One major reason for vertical disintegration is to share risk. Also, in some cases, smaller firms can be more responsive to changes in market conditions. Vertical disintegration is thus more likely when operating in volatile markets. Stability and standardized products more typically engender integration, as it provides the benefits of scale economies. The geography of a disintegrated industry is not a given. Economic geographers typically differentiate between knowledge-intensive, volatile, unstandardized activities, and standardized, routinized production. The former tend to be clustered in space, as they require proximity to build a common conceptual framework and share new ideas. The latter can be far flung and are exemplified by global

commodity chain A commodity chain is a process used by firms to gather resource Resource refers to all the materials available in our environment which are technologically accessible, economically feasible and culturally sustainable and help us to satisfy our ...

s such as apparel and automotive industries. Even in those industries however, design and other creative and non-repetitive tasks tend to exhibit some geographical clustering.

References

* Coase, R.H. (1937). ‘The Nature of the Firm.’ Economica, 4(16), p.286 * Storper, M., and Christopherson, S. (1987) ‘Flexible specialization and regional industrial agglomerations: the case of the US motion-picture industry.’ ''Annals of the Association of American Geographers'', 77, p.260. * Storper, M. & Walker, R. (1989) ''Capitalist Imperative: Territory, Technology, and Industrial Growth''. Blackwell

References

See also