Innovation in Investment Banking: The Dynamics of Control Systems within the Chandlerian Firm.

This paper extends the technological aspects of Chandler's "Scale and Scope" framework from 19th-century manufacturing firms that processed physical materials, to a modern service firm that processes information. The intangible nature of information-intensive service provision means that scale and scope economies in investment banking are constrained more by regulations on risk-exposure than developments in production technologies. Profitability and corporate dynamics are therefore dependent on innovation in risk-control systems. Drawing on a case study, the paper shows that risk control systems undergo qualitative changes as they increase in size and complexity. Copyright 2000 by Oxford University Press.