Page 17 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.71, # 1, 2014, pp. 4-25

If this fragmentation does not create undesired costs and does not lead to the loss of great scale

of economic changes, it is reasonable to proceed further. Plants physically separated from each other

and active in a limited market are natural candidates of fragmentation. Production lines physically

distinctive in a unity of that enterprise are next candidates of fragmentation. It is necessary to take

into account influence of costs spent for realizing physical fragmentation ensuring independent and

competitive management and enterpreneurship, and of competition as well.

Permanent costs of each particular production line and of production capacity is a

significant factor for production to be large-scale. This factor should be taken into account when

calculating proportionality of the number of created rivals and of achieved outcomes. Another

significant factor of a large-scale production is vertical echeloning of production stages. Vertical

echeloning derives its strength from a number of physically separated production lines or

facilities. For instance, a warehouse is similarly used for storage of products of several plants or

a workshop prepares tools and paints for a number of production lines manufacturing metal-

cutting devices. When effectively separating one stage of production from other stage through

vertical division, to put indicated factors of large-scale changes against the number of

independent supplier-companies would not be sound.

When horizontally separating the relevant funds, distribution of a state-owned intellectual

property among affiliate enterprises should be taken into account. If patents, licenses, drawings

and information gathered with experience is not properly distributed, then enterprises may be

deprived of legal usage of technology at their disposal or from maintenance of their outdated

equipment. Intellectual property may be distributed so that each affiliate enterprise could become

an owner of this intellectual property (including patents, licenses, drawings). In this case, this

problem could be solved. Intellectual property is owned by physical fund of enterprises.

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