The Rise of Big Business

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The Rise of Big Business

• By Roy Fu

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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

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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 ATT dominant

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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

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Production

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

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The Integrated Industrial Enterprise (IIE)

• Rise of IIEs in 1880s
• New integrated industrial firms
• Vertical integration
• Oligopolies

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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

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Oligopolies

• Bain and Galbraith Oligopoly is the dominant
  market form in modern economies
• Wilcox No theyre not!
• Stonebraker I agree with Clair (Wilcox)

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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

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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

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The Multidivisional Structure
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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.

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