A missing link:the relationship between distribution and industrial compled formation*

Abstract

This paper explores the importance of merchant wholesalers in the early formation of industrial agglomerations. Merchant wholesalers are thought to reduce the size constraint of local markets by extending the market reach of an entrepreneur's product. The merchant wholesale function also appears to facilitate the formation of the division of labour by allowing greater local product specialization. Merchant wholesalers are hypothesized to be part of the complex formation process. For example, in the early stage of a complex's development, merchant wholesalers trade-in from outside as local demand warrants. Over time, local wholesale functions unfold. As a complex grows, they specialize creating a range of wholesale operations: This allows even greater product specialization within the complex. The process of merchant wholesaler formation is thought to be dialectical - prior generations of technology lay the basis of subsequent merchant wholesale specializations. The merchant wholesaler function may therefore be instrumental in industrial complex evolution. Trade outside of the complex facilitates the growth of specialized local firms. This explanation for (autonomous) vertical disintegration is production for non-local trade. This type of activity is in part dependent upon the existence of merchant wholesalers.