Added by PI Blogger, 13 weeks ago

• Location: somewhere

Can the public sector effectively apply the principles of External Economies to its procurement practice?

“External economies of scale (ES) occur outside of a firm, within an industry. Thus, when an industry’s scope of operations expands due to, for example, the creation of a better transportation network, resulting in a subsequent decrease in costs for a company working within that industry, external economies of scale are said to have been achieved. With external ES, all firms within the industry will benefit.” (What Are Economies of Scale? By Reem Heakal, January 2003)

While the principles of external economies have traditionally been associated with the manufacturing industry, the emergence of clustering and the global value chain has in effect redrawn the boundaries of its applicability. Ironically, the idea of looking beyond the “localized” or “regionalized” structure normally associated with external ES, is a concept that was first presented by E.G. Robinson in 1931 and expanded upon in his book The Structure of Competitive Industry (Cambridge Economic Handbooks, 1958).