medium · GMAT Verbal Reasoning
In the late 20th century, many firms shifted away from vertical integration toward outsourcing to specialized suppliers.
What led to this shift?
- Falling transaction costs driven by improved technology and standardized contract law.
- Government regulations mandating the breakup of large industrial monopolies.
- A sudden spike in the cost of raw materials such as steel and oil.
- A worldwide shortage of skilled labor that made in-house production impossible.
- Newly available evidence that integrated firms are invariably less innovative than specialized ones.
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