Hierarchies without firms? Vertical disintegration, outsourcing and the nature of the platform

Abstract

New forms of labour intermediation through digital platforms such as Uber, Deliveroo or Amazon Mechanical Turk can be conceptualised as the latest stage of a long-lasting process of disaggregation of the firm and “disorganisation of labour law.” In particular, the rise of platform-mediated work can be seen as an instantiation of deliberate business strategies aimed at outsourcing labour while retaining intense and pervasive managerial prerogative. The phenomenon is exacerbating several unresolved tensions inherent in the contemporary world of work, let alone the perverse impact that “platformisation” is having on precariousness and social inequalities.
In short, new technologies allow platforms to abandon traditional methods of workplace governance and adopt a stronger version of the “command and control” logic. Direct interaction is replaced by a significant reliance on information communications technology: workers are monitored more closely and intimately than they ever used to be by means of tech tools, including algorithms, artificial intelligence and customers’ reviews. This leads to the question whether the existing concept of “firm” is appropriate to face this transformational new reality, whether minor or major adaptations may be necessary or whether we need a total re-invention of the underlying assumptions of the employment relationship.
After describing the theoretical antecedents of hierarchical outsourcing, the article explores the literature on the nature of “non-standard forms of firm” by applying transaction-cost economics. In an attempt to update the incomplete trichotomy among “hierarchies,” “markets” and “networks,” I present a complementary model combining pre-existing schemes. By building on theories unfolding the disarticulation of the formal employing entity and the pulverisation of work-related responsibilities, this paper demystifies the prototypical business model of rampant socio-economic actors.

Keywords: transaction cost economics, cerberus firm, business model, Uber, platform economy, gig work, sharing economy, misclassification

JEL Classification: K20, K30, K31, K33, K41