The rise and spread of big businesses

In the second part of the nineteenth century new large-scale business organizations have appeared in America and Britain. Modern business enterprise by Chandler (1977; 1) “contains many distinct operating units, and it is managed by a hierarchy of salaried executives”. The emerging large-scale “managerial firms” can be contrasted with the traditional “entrepreneurial firms”, which “were small enough to be personally managed by their owners” (Schmitz, 1995; 8). These modern enterprises were growing at different rates and in varying forms between the 1850s and 1930s.

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The development of big businesses widely varies from country to country and from one industry to another. The growth of big business occurred at different speeds and took on distinctive forms in different societies. There were some common features in the rise and spread of big businesses in The United States and Britain but I want to look close to the differences of this development. Railway management The building of the railroad network in Britain and the United States between the 1840s and the 1860s was one of the most important developments in the history of these countries and in the development of big businesses.

The railroad opened new markets for the production of agriculture and industry. The railroad made possible for freight and information to move more quickly than natural forces or animal (or human) muscle could propel them. They could be build everywhere and as boats they didn’t have to follow the course of the rivers or canals. Railroads could operate even during the severest weather. Rails provided cheaper, faster and more reliable year round transportation.

Parallel improvements in the development of shipping helped to expand world markets, especially for Britain. Railways had a more dramatic impact on economic growth in America than in Britain. “As the United States experienced rapid growth and regional shifts of its population, the railroad served as the major means of transforming rural and agrarian America into an urban and industrial nation. A huge national rail network had knit the nation together and had made a gigantic market accessible to business people” (Chandler, McCraw and Tedlow, 1996; 2-6).

Railway companies in America and Britain were also important because they were themselves the first the first modern, managerial enterprises. At that time there were no other businesses that operated on the same scale. The size and technological complexity of railway systems, organizational complexities of railway operations and a level of fixed costs changed the railway management. Professional managers were placed in important positions and there was also a “divorce of ownership and control”. The salaried managers had a great influence over all level of management.

“The early generation of railroad managers became the first significant body of professional, salaried managers to appear in the business world” (Chandler, 1977; 94-187). In Britain railway companies “led the way in developing relatively advanced techniques in business management, making progress in the fields of accounting, costing, pricing, marketing and statistics and did much to raise the status and augment the role of the non-owning, salaried manager” (Gourvish in Wilson, 1995; 37). However, British railway companies were not as efficient as American businesses.

Railway companies in Britain insisted on regional rather than on national traffic strategies. Chandler (1990; 253) has also argued that British railroad managers were less challenged to pioneer new methods of organization and of internal control than their American counterparts. Because of the fact that British railway companies were not as advanced as American, they were more influenced by socio-cultural pressures. Another difference in operating railway businesses was the lack of mobility of British railway executives.

Gourvish (1973; 297-316) shows that some of the executives had diverse business background, but most of them were resistant to further innovation. He also discovers that most chief executives were recruited from the upper middle classes and the bureaucratic elite were an important part of social structure in British business as a whole. The railways had a big impact on the development of modern businesses and management training during the nineteenth century, but the progress achieved was limited by institutional features.