After the outsourcing: Networks, institutions, and the new old economy

The so-called deindustrialization that hit the U.S. in the 1980s was accompanied by a systematic outsourcing of production to smaller suppliers, creating a “new old economy” dependent on greater explicit coordination of knowledge and goods across firms. This led academics and policymakers to identify a normatively attractive new production paradigm influenced by the importation and hybridization of Japanese production systems, but also to recognize the double-edge of this paradigm: there is no guarantee that all firms or regions can adequately follow its prescriptive tenets.; This dissertation examines the implications of this reorganization of manufacturing for sociological theories of economic coordination and for regional economic governance. Using interviews at manufacturing firms in the American Upper Midwest and a comparison to developments in the Italian Piedmont region, I engage three prominent sociological approaches—social embeddedness, Varieties of Capitalism, and learning by monitoring. These literatures agree that: (1) collaborative network production is often desirable; (2) inter-firm collaboration requires coordinating mechanisms to circumvent problems of incentive alignment and knowledge sharing; (3) the underlying coordination mechanisms are self-reinforcing such that inter-firm relationships fall into stable and dichotomous equilibrium configurations.; This third point, I argue, is misleading: interviews show the modal case of the customer-supplier relationship to be systematically intermediate between the arms-length and collaborative poles as firms hedge fundamental uncertainties caused by market and technological factors, uneven supplier competencies, and the frequent inability of firms to operate as coherent strategic actors. Nevertheless, shorn of the dismissal of systematic contradictions and strategic hedging in the inter-firm relationship as untheorized “noise,” these same sociological approaches provide the tools for a relational reconstruction of regional political economy: Sabel's learning by monitoring emphasizes that actors can use anomaly to foment change; the comparative political economy of Hall and Soskice identifies deliberative institutions as key to sustaining vertical inter-firm collaboration; and Granovetter's take on social embeddedness highlights the need to explain even functional economic institutions. This reconstruction shows the need for, and possibilities of, building the institutions required for a high-wage, high-productivity, high-collaboration manufacturing economy even in theoretically unpropitious contexts like the American upper Midwest and Northwestern Italy.