MANUFACTURING DEMAND FOR BUSINESS SERVICES IN A CORE AND PERIPHERAL REGION - DOES FLEXIBLE PRODUCTION IMPLY VERTICAL DISINTEGRATION OF BUSINESS SERVICES

This paper analyses the demand by manufacturers in Scotland and South East England for key strategic business services during the past three years, the source of supply of the services used and the location of external suppliers for Scottish and English manufacturers. Our evidence suggests that expansion of demand is the primary cause of increasing business service output and not restructuring strategies as predicted by the flexible firm model. Both externalization and internalization of business services are occurring simultaneously; the net balance is consistent with a marginal trend towards vertical integration in manufacturing and a stronger one in business services.