The division of labor in the firm: Agency, near-decomposability and the Babbage principle

Andreas Reinstaller ()

Journal of Institutional Economics, 2007, vol. 3, issue 3, 293-322

Abstract: This paper devises a simulation model that combines insights from the evolutionary perspective on the division of labor with ideas from the labor process literature. It characterizes technical change and the development of a near-decomposable production process as the outcome of technological search and of organizational problem solving, where the conflict between workers and firms over the organization of work plays a central role. It is argued that a near-decomposable organization of the production process also allows management to tighten its control over workers. Consequently, more extensive divisions of labor within a firm develop where the power of workers to oppose decisions by the management is low. In these scenarios the performance of firms is also highest. The model is used to interpret historical evidence about different development paths in technical change in the UK and the US at the beginning of the twentieth century.

Date: 2007
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