The Rise of Big Business

1. The Rise of Big Business By Roy Fu

2. The Rise of the Modern Enterprise in the US • The rise of the railroad and telegraph • Transportation and Communication • Distribution • Manufacturing • Top-level managers replacing owners in making important decisions

3. Transportation and Communication • Railroads become the first big business • Managerial hierarchies appear • Cooperation among managerial hierarchies • 30 large railway companies owned and operated more than 2/3 of all rail in US • New Utility companies managed like rail companies • Western Union and AT&T dominant

4. Distribution • 1840: old-style marketing and distribution • The Beginning of The End for wholesalers • The Rise of the new mass retailers • “Stock-turning” • Family control in the distribution sector

5. Production • Revolution in production slower than in distribution • Importance of new availability of coal • Metalworking and management • Revolution in production slower than in distribution

6. The Integrated Industrial Enterprise (IIE) • Rise of IIE’s in 1880’s • New integrated industrial firms • Vertical integration • Oligopolies

7. Vertical integration • Livesay and Porter: Increase in vertical integration between 1899-1948 • Laffer: Hard to say, but perhaps a decline in vertical integration between 1948-1965 • Rise and (perhaps) fall in vertical integration • Backward integration: defensive strategy • Forward integration: offensive strategy

8. Oligopolies • Bain and Galbraith: Oligopoly is the dominant market form in modern economies • Wilcox: No they’re not! • Stonebraker: I agree with Clair (Wilcox)

9. Growth through Mergers • A different route to growth • Sherman Antitrust Act 1890 & New Jersey general-incorporation law 1889 • Success of mergers • Success and failure of mergers evident by 1917 • By 1917, Over 86% of 278 enterprises with assets of at least $20m had integrated production with distribution

10. The Continued Growth of Managerial Enterprise (part I) • Growing importance of managers • Evolution of management techniques • Replacement of founding family members by top-level managers • Invention of the multidivisional structure

11. The Basic hierarchical firm structure of the modern business enterprise (from Chandler) The multidivisional structure: manufacturing (from Chandler) The Multidivisional Structure

12. The Continued Growth of Managerial Enterprise (part II) • Professionalization of managers • Some Figures: • 1947: the largest industrial enterprises measured by assets accounted for 30% of the value added in manufacturing and 47.2% of all corporate manufacturing assets. • 1963: when most of the firms had diversified as well as integrated, they were responsible for 41% of the value added and 53.6% of assets. • By 1968, their share of assets had risen to 60.9%. • The 200 largest industrial firms accounted for more than half of the direct US investment in Europe. • Chandler concludes that “in the central sectors of the US economy, managerial enterprise had become the dominant business institution and managerial capitalism had triumphed.”

13. This presentation can be downloaded from the following URL: http://freespace.virgin.net/tim.fu/lse.htm