Measuring And Understanding Hierarchy As An Architectural Element In Industry Sectors

Hierarchy is a generic structure in which levels are asymmetrically ordered. In an industry setting, classic supply chains display strict hierarchy, whereas clusters of firms have linkages going in many different directions. The empirical measurement and model analysis together indicate that it is the low transaction specificity that drives down the degree of hierarchy in the electronics sector. Differences in transaction patterns in turn may result from the differences in the power level of underlying technologies, which affect product specificity and asset specificity. Thus, the degree of hierarchy in an industry sector may be traced back to fundamental properties of the underlying technologies.