The unrecognized connection between vertical disintegration and entrepreneurial opportunities

Abstract

This article shows how the emergence of vertical disintegration has been a major source of entrepreneurial opportunities in three sectors of the U.S. economy. Not only does it enable more than one hundred thousand firms to co-exist in these sectors, but changes in the levels of vertical disintegration continue to occur, and continue to create entrepreneurial opportunities. This suggests that recognizing how and when vertical disintegration emerges are critical issues for entrepreneurs. This article shows how reductions in transaction costs, which can come from the emergence of open modular designs, open standards, and legal, regulatory and firm decisions, drive the emergence of vertical disintegration and thus the emergence of many entrepreneurial opportunities. © 2011 Elsevier Ltd.