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British Entrepreneurship in the Nineteenth Century

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The Industrial Revolution A Compendium

Part of the book series: Studies in Economic and Social History ((SESH))

Abstract

The quality of British entrepreneurship in the nineteenth century is continually being reassessed. Until the mid 1960s a major leitmotiv in accounts of British economic development from the heroic days of the Industrial Revolution to the eve of the First World War was the steady dissipation of a fund of entrepreneurship which, it has been implied, reached its greatest abundance during and immediately after the Napoleonic Wars. From being organisers of change who were ‘instrumental in delivering society from the fate predicted for it by Malthus’ [254: 129] by having the ‘wit and resource to devise new instruments of production and new methods of administering industry’ [172: 161], British entrepreneurs had, by the latter decades of the nineteenth century, come to be responsible for Britain’s failure to retain its role as workshop of the world. Britain’s international economic dominance, once so obvious, had been yielded to indefatigable and enterprising American manufacturers and their ‘drummers’ (commercial travellers), and to persevering, multi-lingual, scientifically-trained Germans.

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Notes and References

  1. Arthur Shadwell, Industrial Efficiency, new edn (1909) p. 653. That Shadwell’s criticisms were not without foundation is apparent in several recent studies; see, for example, Mary Rose on Edward Hyde Greg [333: 92–5] Richard Wilson on Sir Walter Greene [198, vol. II: 673], and Maurice Kirby on Joseph Whitwell Pease [299: 55].

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  2. For an interesting discussion of entrepreneurship, business performance and industrial development, see Alford [231]; Casson’s economic theory of the entrepreneur [177] is valuable.

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  3. My own researches into the files of the early Scottish companies [52] makes me very sceptical of Kennedy’s argument that ‘at the root of this very hesitant development lay the fact that the legal requirements governing managerial behaviour and the disclosure of company affairs under limited liability were so minimally drawn as to place the company’s directors in virtually unchallengeable and unchecked possession of the company’s assets’ [31: 113, emphasis supplied].

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  4. Although, as Lazonick [34: 119–39] has recently emphasised, this took a remarkably long time.

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  5. The phrase used by Richard Wilson [226: 122] which, he asserts, bears no resemblance to the activities of the Leeds merchants.

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  6. There are, of course, exceptions. For an interesting — if not necessarily typical — example, see Minchinton’s study of the tinplate makers of West Wales [134: 106–7].

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  7. It has to be said that the motives which inspired some industrialists to invest in land were not confined to the quest for prestige. Mary Rose has shown that the Gregs purchased land because it was safe investment, and Tar from being a hindrance to the millowner, land might prove a positive advantage, by making mortgages easier to obtain in time of need, or by improving the return on capital’ [332: 79–88]; and Hudson has emphasised the importance of the ownership of landed property in gaining access to credit [115: 269].

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  8. Details of some of the houses built for Victorian entrepreneurs are provided by Mark Girouard’s fascinating study, The Victorian Country House (Oxford, 1971); for examples cited, see pp. 7, 8, 184, 186–7.

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  9. Byres has shown how the Bairds of Gartsherrie conformed to the Buddenbrook dynamic. Control of their great firm passed out of the hands of the family after the impressive efforts of the second generation had given it a position of supremacy in the Scottish iron industry [232, vol. II: 802–6]. One particularly odious member of the third generation, ‘Squire Baird’ as he was nicknamed, a backer of prizefighters, had the dubious, if appropriate, distinction of being accorded a pen-picture by the scurrilous Frank Harris in My Life and Loves (1964), vol. 3, ch. XIII.

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  10. It was observed by G. d’Eichthal in 1828 that: ‘Throughout Lancashire no family survives longer than two generations. Children brought up to habits of luxury and idleness are incapable of salvaging their business when fortune turns against them’ (quoted by Gatrell [18: 117]). Data on the West of England cloth industry in the first half of the century show a very high mortality rate, and even the names of the relatively few surviving firms may have concealed a change of partners [131: 104–5]. The volatility of firms in the cotton industry in the early nineteenth century, ‘with high exit rates compensated by high entry rates’, is demonstrated by Lloyd-Jones and Le Roux [41: 147].

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  11. In both cases it is intended to subject the data collected by the galaxy of authors to computer-assisted analysis.

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  12. For these unique companies, see Roland Smith [160], R. E. Tyson [342; 343], W. A. Thomas [162: 145–68] and, particularly, D. A. Farnie [104: 244–73].

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  13. That some attempted to do so is evident from the pioneering study by Haydn Jones of Accounting, Costing and Cost Estimation [in] Welsh Industry: 1700–1830 [121].

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  14. After the first edition of this study appeared, Roy Church subjected this section to protracted critical examination [7: 19–43]. Since several of his strictures and suggested modifications are not only tangential but rest on foundations ‘only marginally less flimsy’ than my own, I have retained my original treatment of this period in the hope that it may continue to stimulate constructive debate and inspire further empirical inquiry. I would add only that my own explorations since the early 1970s, primarily into Scottish business archives [141; 52], have proved to be consistent with the majority of the hypotheses put forward in the following pages.

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  15. Of the surviving 1200 companies of the 30,000 firms registered as companies in London between 1856 and 1889, the majority are concerned with banking, insurance, food, drink and leisure or are professional associations. Industrial concerns are relatively rare. See Richmond and Stockford [365].

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  16. Professor Church regards this opinion ‘as quite simply untenable’ [7: 38] and chastises me for citing it. It must be confessed that I found it irrisistible! This is not the place to pursue our differing interpretations of the period, suffice it to say that the differences between us on the question of profits are briefly discussed by Mokyr [249: 866–9].

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  17. It must be confessed that this observation is founded on an acquaintance with a fairly limited range of railway equipment, the technical understanding of which took all too long to acquire.

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  18. Considerable evidence on this practice is contained in the Minutes of Evidence of the Select Committee on Trade Marks, 1862 (212, xii, pp. 431–627). See also Redford [146: 42], Alexander [65: 114–15, 126, 149, Jefferys [117: passim].

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  19. For a brief but cogent discussion of the advantages and disadvantages of employing commission agents both at home and overseas, see Stephen Nicholas, ‘Agency Contracts, Institutional Modes, and the Transition to Foreign Direct Investment by British Manufacturing Multinationals before 1939’, Journal of Economic History, XLIII (1983), 677–9.

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  20. As Platt argues, for the small manufacturer this often made good sense. ‘“Never thou put salt water between thee and thy money” was the advice which the British manufacturer received from his cradle’ [142: 142].

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  21. The foregoing argument — based upon a reading of a variety of business archives supplemented by numerous hints in secondary sources — is set down as an hypothesis requiring more rigorous empirical testing. Needless to say, it is only our general ignorance of marketing — and the significance attached to it by the author — which makes its inclusion permissible in a study such as this.

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  22. As William Rathbone of Liverpool wrote to his wife in July 1869: ‘My feeling with a merchant was that when he got over £200,000 he was too rich for the Kingdom of Heaven’ [308: 3].

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  23. It might be helpful to emphasise a point made by McCloskey and Sandberg: The opportunities foregone in neglecting the best technique have been expressed in a variety of ways and this gives a misleading impression of heterogeneity of purpose in the new work. The various measures used are essentially identical. Higher profits can be achieved if more output can be produced with the same inputs, that is if productivity can be raised. The measuring rod for entrepreneurial failure, then, can be expressed indifferently as the money amount of profit foregone, as the proportion by which foreign exceeded British productivity, as the distance between foreign and British production functions, or as the difference in cost between foreign and British techniques. All of these give the same result and each can be translated exactly into any one of the others. [247; 103] For a criticism of the methodological technique involved, see Nicholas [250].

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  24. It is the consistent appraisal of entrepreneurial efficiency, using a variety of techniques, that makes the studies of shipping companies by Hyde and his colleagues at the University of Liverpool so valuable [293; 294; 308; 309].

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  25. A formidable list of new inventions and innovations more quickly taken up by Americans and Europeans than by the British was compiled in 1916 by H. G. Gray (a member of the Mosely Educational Commission to the United States in 1903) and Samuel Turner [236].

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  26. Byatt has illustrated the fact that in the electrical industries, ‘British businessmen were not very good at using their engineers’ [82: 190], and Pollard and Robertson that in shipbuilding, ‘few builders maintained even rudimentary laboratory facilities or employed any scientists’ [144: 137, emphasis supplied].

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  27. The study by Ross J. S. Hoffman [239] is heavily reliant on this source. It is interesting to compare his findings with those of Platt [142: 136–72], whose analysis of the same material is much more understanding of economic realities. See also Alfred Marshall [45: 135–6] and, for a more favourable view of the British overseas marketing performance in the decades before 1914, Nicholas [251].

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  28. Opinions of H.M. Diplomatic and Consular Officers on British Trade Methods, Cd.9078 (1898) p. 5. See the discussion by Aldcroft [230: 295–9].

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  29. For comparative figures of travellers in the Swiss market at the close of the century, see Chapman [6; 253].

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  30. Some idea of the expenses incurred in overseas representation is given by Platt [142: 143–4]. See also Payne [318: 190], Davis [281: 33–5] and Hoffman [239: 87]. J. H. Fenner & Co’s principal foreign representative, operating in southern and south-eastern Europe, was so generously remunerated with salary and commission that in 1910–13 he was earning more than the company’s managing director [281: 33].

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  31. For an interesting example — the way in which Singers built up its European markets — see R. B. Davis, ‘“Peacefully Working to Conquer the World”: The Singer Manufacturing Company in Foreign Markets, 1854–1889’, Business History Review, XLIII (1969) especially 306–11.

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  32. Ministry of Reconstruction, Report of the Committee on Trusts, Cd.9236 (1918), p. 3.

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  33. Ibid., p. 22. See Report of the Departmental Committee appointed by the Board of Trade to consider the position of the Textile Trades after the War, Cd.9070 (1918), p. 113.

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  34. This argument, based upon business archives to which the author has had access, receives some support from the Bolton Report, Report of the Committee of Inquiry on Small Firms, Cmnd.4811 (1971) pp. 37–9.

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  35. This point was made in a number of reports of the committees set up to consider the position of several trades after the war of 1914–18. See, for example, Report of the Departmental Committee appointed by the Board of Trade to consider the position of the Shipping and Shipbuilding Industry after the War Cd.9092 (1918), p. 31, paras. 89–90: ‘Whilst individualism has been of inestimable advantage in the past, there is reason to fear that individualism by itself may fail to meet the competition of the future in Shipbuilding and Marine Engineering, as it has failed in other industries. We are convinced that the future of the nation depends to a large extent upon increased co-operation in its great industries.’ How the existence of many mutually suspicious firms could constitute a formidable barrier to improvement in an industry is perhaps best illustrated in tinplate [134: 87–8, 198].

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  36. Although the central thrust of Allan’s article [68] is both sound and stimulating, it can and has been criticised in detail. I am grateful to Dr Gordon Boyce for allowing me to read his unpublished manuscript entitled ‘The Development of the Cargo Fleet Iron Co., 1900–1914: A Study of Entrepreneurship, Planning, and Production Costs in the Northeast Coast Basic Steel Industry’.

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  37. Mancur Olson, The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities (New Haven, Conn., 1982), see especially pp. 77–87.

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  38. See the criticisms of Wiener’s thesis by Saul [55: 69–70]; Coleman and MacLeod [235: 599–600]; McKendrick [42: 101, 103]; and J. M. Winter [42: 185–6].

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  39. This is not the place to take up this major question but it is worthy of note that Kennedy [22: 151–83; 30; 31] implies that even entrepreneurs of Schumpeterian stature would have found it difficult to achieve rapid structural change in the late Victorian economy because of the inadequacies of the capital market, cf. the cogent, if brief, discussion by Lee [37: 66–70].

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  40. It is not without significance that Elbaum, Lazonick’s co-editor of The Decline of the British Economy, remarks in the course of his illuminating paper: ‘That British firms none the less lagged behind their competitors was less the result of entrepreneurial failure — as the term is conventionally understood — than of the constraints on individual entrepreneurial action posed by market conditions and a rigid institutional environment’ [15: 54, emphasis supplied].

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  41. Manufacturing labour productivity in the United Kingdom in 1870 was only 71 per cent of that in services; in 1913, only 46 per cent [38, Table 1]. Even so, an important component of the service industries, insurance, has not escaped criticism from Trebilcock for entrepreneurial failings in the late Victorian period [42: 137–72].

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  42. C. Wilson, ‘Canon Demant’s Economic History’, Cambridge Journal, VI (1953–4), p. 286.

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  43. See Jonathan Boswell, The Rise and Decline of Small Firms, (1973), pp.36, 68–74; Donald A. Hay and Derek J. Morris, Unquoted Companies (1984).

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  44. See, for example, K. Cowling, P. Stoneman et al., Mergers and Economic Performance (1980).

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  45. S. G. Checkland, review of Coleman’s Courtauld’s in Economic History Review, 2nd ser. XXIII (1970), 559–60.

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III The Entrepreneur: Definition, Motivation, Recruitment and Role

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IV The Entrepreneur: General Assessments of Performance

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  8. D. C. Coleman, ‘Gentlemen and Players’, Economic History Review, 2nd Ser., XXVI (1973).

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  13. Ross Hoffman, Great Britain and the German Trade Rivalry, 1875–1914 (Philadelphia, 1933).

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  14. D. S. Landes, ‘Entrepreneurship in Advanced Industrial Countries: The Anglo-German Rivalry’, in Entrepreneurship and Economic Growth. Papers presented at a Conference sponsored jointly by the Committee on Economic Growth of the Social Science Research Foundation and the Harvard University Research Centre in Entrepreneurial History, Cambridge, Massachusetts, 12–13 November 1954.

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  18. R. R. Locke, ‘New Insights from Cost Accounting into British Entrepreneurial Performance, c. 1914’, The Accounting Historians Journal, VI (1979).

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  19. R. R. Locke, ‘Cost Accounting: an Institutional Yardstick for Measuring British Entrepreneurial Performance, c. 1914’, The Accounting Historians Journal, VI (1979).

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  20. Donald N. McCloskey (ed.), Essays on a Mature Economy: Britain After 1840. Papers and Proceedings of the M.S.S.B. Conference on the New Economic History of Britain, 1840–1939 (1971).

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  21. Donald N. McCloskey and Lars G. Sandberg, ‘From Damnation to Redemption: Judgements on the Late Victorian Entrepreneur’, Explorations in Economic History, IX (1971).

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  22. Donald N. McCloskey, ‘Did Victorian Britain Fail?’, Economic History Review, 2nd Ser., XXIII (1970). See the later comment by N. F. R. Crafts and the reply by McCloskey, Economic History Review, 2nd Ser., XXXII (1979).

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V Studies of Particular Firms and Entrepreneurs

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  54. Sheila Marriner and Francis E. Hyde, The Senior: John Samuel Swire: 1825–98 (Liverpool, 1967).

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Payne, P.L. (1988). British Entrepreneurship in the Nineteenth Century. In: Clarkson, L.A. (eds) The Industrial Revolution A Compendium. Studies in Economic and Social History. Palgrave, London. https://doi.org/10.1007/978-1-349-10936-4_2

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