Flexibility, Plant Size and Industrial Restructuring

Throughout the twentieth century there has been a general movement towards larger minimal optimum plant size. Sands (1961) found that average physical output per plant increased between 1904 and 1947 by about 3 percent per annum. Blair (1972) found the share of industry sales originating in the eight largest plants declined from 1947 to 1958 thereby concluding that this seeming reversal of past trends was attributable to fundamental changes in the direction of technological advances away from centralizing innovations and towards decentralizing technologies.1 Shepherd (1982) found a substantial increase in the scope of competition within the four-digit Standard Industrial Classification (SIC) industries between 1958 and 1980 confirming the trend identified by Blair. Also, Carlsson (1989a) showed that both firm and plant size decreased between 1972 and 1982 in manufacturing as a whole and especially in metalworking industries in several industrial countries. He hypothesized that the emergence of new computer-based technology has improved the quality and productivity of small and medium scale production relative to standardized mass-production techniques which dominated previously. According to Piore and Sable (1984) the emergence of this new technology represents, in fact, an “industrial divide” where firms and society are confronted with a choice of technological modes.2