Multiple Facilities, Strategic Splitting and Vertical Organisation

This paper explores comparative cost structures and the effects of scale in situations where a firm splits operations between separate production facilities in order to influence wage rates: one example of a ‘divide and rule’ strategy. We argue that the extent of this phenomenon may be partially masked by the manner in which its expression is mediated by technology and the vertical organisation of production. We make the case for a wider perspective on this issue, before setting out a simple integrated framework capable of highlighting key features of the different scenarios in which splitting for purposes of wage control might occur. We outline the implications for the contexts within which wage rates are determined, before exploring the issues this poses for contemporary policy debate on desirable industrial structures.