Morelli, Carlo Joseph
(1997)
Making of the market: Oligopolistic business in Britain, 1945-c.1960.
PhD thesis, London School of Economics and Political Science.
Abstract
The theory of the firm and transaction cost analysis provide the starting point of this institutional study of business co-operation in the aftermath of World War Two. It is suggested that the market is an institution which is subject to the visible hand of business. The aim of business in this process is to control information flows and reduce uncertainty. Utilising business history case studies, of the oil industry through the Anglo-Iranian Oil Co., the electrical engineering industry through General Electric Co. and the grocery retailing trade through J.Sainsbury, the hypothesis that the firm aims to create market governance procedures in order to alter the structure of the market is tested. The study finds that inter-firm co-operation is central to understanding the development of markets and that co-operation is a dynamic process, which responds to changes in market conditions and government competition policy. The growth of government as a consumer is considered to be a significant factor affecting the development of co-operative agreements between firms. The study also finds that collusion and co-operation between firms, leading to a reduction of competitive pressures, was central to the development of organisational capabilities in the oil and grocery retailing industries, but hindered the emergence of organisational capabilities within the electrical engineering industry. Finally, the study finds that the internalisation of market transactions occurs when market governance procedures break down and competition becomes intense. The study concludes that firms are not primarily transaction cost minimisers but are maximisers of market power. It is suggested that the maximising of market power is the rationale behind the creation of organisational capabilities and the development of the division of labour under conditions of supervision and discipline.
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