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Competence or Omniscience? Assessing Entrepreneurship in the Victorian and Edwardian British Paper Industry

Published online by Cambridge University Press:  13 December 2011

Gary B. Magee
Gary B. Magee
Affiliation:
GARY B. MAGEE is a research fellow in the Institute of Advanced Studies at the Australian National University, Canberra.
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Abstract

In the literature on British economic decline entrepreneurship is typically assessed by its outcome. By contrast, this paper argues that the soundness of entrepreneurship is best tested by viewing it ex ante. In other words, it is the process, and not the product, of entrepreneurship that is important in determining its quality. When this is accepted, competence, rather than infallibility, becomes the criterion by which entrepreneurship is best judged. In the latter half of the article, this approach is applied to the British paper industry's search for a new source of cellulose in the second half of the nineteenth century.

Type
Articles
Information
Business History Review , Volume 71 , Issue 2 , Summer 1997 , pp. 230 - 259
Copyright
Copyright © The President and Fellows of Harvard College 1997

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References

1 For an introduction to this literature, see Pollard, Sidney, Britain's Prime and Britain's Decline: The British Economy, 1870–1914 (London, 1989), 1–57.Google Scholar

2 Dintenfass, Michael, The Decline of Industrial Britain, 1870–1980 (London, 1992), 12–26Google Scholar; Coleman, Donald C. and MacLeod, Christine, “Attitudes and New Technologies: British Businessmen, 1800–1950,” Economic History Review 39 (Nov. 1986): 588–611.CrossRefGoogle Scholar

3 Hills, Richard L., Papermaking in Britain, 1488–1988: A Short History (London, 1988), 119–55.Google ScholarHunter, Dard, Papermaking: The History and Technique of an Ancient Craft (New York, 1978), 309–340, 374–399.Google Scholar For a discussion of factors influencing the supply of rags, see Magee, Gary B., “Technology, Productivity and Performance in the British Paper Industry, 1861–1913” (D.Phil, diss., Univ. of Oxford, 1994), 134–46.Google Scholar

4 In the American industry wood pulp was commercially introduced in the 1850s and by 1863 newspapers such as the Boston Courier were successfully using it in their newsprint. Esparto, however, was relatively unknown in the United States. Guthrie, John A., The Economics of Pulp and Paper (Pullman, Wa., 1950), 3.Google Scholar For contemporary comments on this divergence, see the Paper Trade Review, 1 May 1863, 101 and 1 Jan. 1864, 1.

5 This is discussed, as is America's choice of raw materials, in Magee, “Technology,” 238–49 and 270–1. See also Bartlett, J. Neville, “Alexander Pirie & Sons of Aberdeen and the Expansion of the British Paper Industry, c. 1860–1914,” Business History 22 (Jan. 1980): 19.CrossRefGoogle Scholar

6 Vide Lindert, Peter H. and Trace, Keith, “Yardsticks for Victorian Entrepreneurs,” in Essays on a Mature Economy: Britain after 1840, ed. McCloskey, Donald N. (London, 1971), 239–74Google Scholar; McCloskey, Donald N., Economic Maturity and Entrepreneurial Decline (Cambridge, Mass., 1973)Google Scholar; Henning, Graydon R. and Trace, Keith, “Britain and the Motorship: A Case of Delayed Adoption of New Technology,” Journal of Economic History 35 (June 1975): 353–85.CrossRefGoogle Scholar

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8 Lazonick, William, “Competition, Specialization and Industrial Decline,” Journal of Economic History 41 (March 1981): 37.CrossRefGoogle Scholar For a similar view, see Allen, Robert C., “Entrepreneurship and Technical Progress in the Northeast Coast Pig Iron Industry,” Research in Economic History 6 (1981): 35–71.Google Scholar

9 Allen, “Entrepreneurship,” 60.

10 Arthur, W. Brian, “Competing Technologies, Increasing Returns, and Lock-in by Historical Events,” Economic Journal 99 (March 1989): 116–31CrossRefGoogle Scholar; David, Paul A., “Clio and the Economics of QWERTY,” American Economic Review 75 (May 1985): 332–37.Google Scholar

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14 The influence of culture is best discussed in Casson, Mark, The Economics of Business Culture: Game Theory, Transaction Costs and Economic Performance (Oxford, 1991)Google Scholar and Casson, Mark “Entrepreneurship and Business Culture,” in Entrepreneurship, Networks and Modern Business, ed. Brown, Jonathan and Rose, Mary B. (Manchester, 1993), 30–54Google Scholar, While culture may have a significant role in influencing differences in national, regional or ethnic economic performance, it plays little part in the case studied in this article, which, after all, concerns the choice of one industry, in one country, over a relatively short period.

15 Machlup, Fritz, Knowledge and Knowledge Production (Princeton, N.J., 1980), 179Google Scholar; Kirzner, Israel Mayer, Discovery, Capitalism, and Distributive justice (Oxford, 1989), passim.Google Scholar

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18 Nelson, Richard R. and Winter, Sidney, An Evolutionary Theory of Economic Change (Cambridge, Mass., 1982).Google Scholar Other recent examples of the evolutionary approach include Rahmeyer, Fritz, “The Evolutionary Approach to Innovation Activity,” Journal of Institutional and Theoretical Economics 145 (1989): 275–97Google Scholar and Marco Iansiti and Khanna, Tarun, “Technological Evolution, System Architecture and the Obsolescence of Firm Capabilities,” Industrial and Corporate Change 4 (1995): 333–60.Google Scholar

19 To illustrate this approach with reference to the present case study, a producer of low grade newsprint, who refused to experiment with wood pulp in the 1890s when its commercial and technical viability had already been well and truly demonstrated, simply because he continued to believe that wood pulp could never make acceptable paper, could be seen as a clear example of what I would call entrepreneurial failure. Similarly, a firm that persists in experimenting with a material, despite its continued failure in its own mill and elsewhere, might be said to be showing a degree of entrepreneurship, but certainly not a competent form of it.

20 It should be pointed out that I am not suggesting that all firms in an industry or country have to be successful for the entrepreneurial failure thesis to be rejected, only that a significant body of them must demonstrate entrepreneurial competence.

21 Given the ever-evolving nature of entrepreneurial decision making, its assessment cannot be adequately captured by a single, simple decision rule. This is obviously an inconvenience to the researcher, but is unavoidable if we are to have a more realistic way of judging the quality of entrepreneurship.

22 Report from the Select Committee on Paper (Export Duty on Rags), Parliamentary Papers 1861, XI [hereafter cited as S.C. on Paper], 270, 342, 344, 304; Ketelbey, C.D.M., Tullis Russell: The History of R. Tullis and Company and Tullis Russell & Co. Ltd., 1809–1959 (Markinch, Fife, 1967), 107.Google Scholar

23 S.C. on Paper, 292.

24 Office, Patent, Patents for Invention: Abridgements of Specifications, Class 96, Paper and Paper-making (London, 1855–1885).Google Scholar

25 Coleman, Donald C., The British Paper Industry: A Study in Industrial Growth (Oxford, 1958), 196.Google Scholar

26 Patent Office, Patents for Invention.

27 See S.C. on Paper, 270.

28 Paper Trade Review, 1 Jan. 1863, 42, and 1 March 1864, 73.

29 For full details of this comparison and its calculation, see Magee, “Technology,” 153–63.

30 See Paper Trade Review, 1 July 1863, 145, and 1 Sept. 1863, 177.

31 Magee, “Technology”, 161.

32 Net present value is:

where R is the annual gain from using wood instead of esparto, r the discount rate, K the cost of the machinery, and t time.

33 Paper Trade Review, 1 Oct. 1863, 200.

34 Spicer, A. Dykes, The Paper Truth (London, 1907)Google Scholar, appendices V and IX; E. Henry Phelps Brown and S. Andrew Ozga, “Economic Growth and the Price Level,” Economic journal 65 (March 1955): 2.

35 S.C. on Paper, 300. Also see Evans, Chater, Bruce, and other's comments on 293–4, 296, 305, 341, and passim.

36 S.C. on Paper, 303. American manufacturers of the time also showed the same initial resistance to non-rag fibres. Smith, David C., History of Papermaking in the United States, 1691–1969 (New York, 1970), 133Google Scholar; Clark, Victor Seiden, History of Manufactures in the United States (New York, 1929), IIGoogle Scholar, 485, and Magee, “Technology”, 238–43.

37 Weatherill, Lorna, One Hundred Years of Papermnking: An Illustrated History of the Guard Bridge Paper Company Limited, 1873–1973 (Edinburgh, 1974), 20.Google Scholar Also see Hills, Papermnking in Britain, 138, 147–8.

38 Directory, Paper Mill, The Art of Papermaking: A Guide to the Theory and Practice of the Manufacture of Paper (London, 1876), 100.Google Scholar

39 Paper Mill Directory, Art of Papermaking, 6.

40 S.C. on Paper, 345.

41 For example, Calder, Lou, The First Hundred Years: Perkins-Goodwin Company (New York, 1946), 19.Google Scholar

42 S.C. on Paper, 341.

43 S.C. on Paper, 270.

44 S.C. on Paper, 283. This is, of course, not a precise figure. Coleman, British Papern Industry, 214, does in fact suggest a less important role for imported rags than we do. As we know rag did steadily lose its share and as we are, after all, more interested in the progress of the other materials in this period, any possible underestimation of rag usage implicit in the calculations is unlikely to be sufficient to significantly alter the nature of the picture given by Figure 1.

45 For a description of Routledge s process for treating esparto, see Hills, Papermaking in Britain, 139–40.

46 Between 1878–1888, rag prices fell on average from £16 to £11. Spicer, Paper Trade, 32–3.

47 Hills, Papermaking in Britain, 150–3; Hunter, Papermaking, 391–3, 575.

48 Paper Makers Circular, 10 Dec. 1886, 400.

49 Like rag, esparto did not totally disappear, as the material found a niche for itself in the high quality printing and writing paper sector of the trade. In 1938, 316,000 tons of it were still imported into Britain for such purposes. Hills, Papermaking in Britain, 141–3.

50 Board of Track Journal, Jan. 1891, X, no. 54, 59. Some other references to wood pulp in the same journal are found in Jan. 1893, XIV, no. 18, 89; May 1895, XVIV, no. 106, 580; and Nov. 1895, XIX, no. 112, 580. Similar articles can be found in all the other trade publications. See, for example, Paper Trade Review (1 Feb. 1889): 1; Paper Maker's Circular (10 Dec. 1883): 272, (11 May and 10 June 1885): 131–4 and 167–70, and (10 March 1887): 100.

51 A type of quality writing paper where a size is applied after the paper web has been dried by immersing the paper in a mixture of alum and warm gelatine. This reduces the rate at which the paper absorbs water. Hills, Papermaking in Britain, 223.

52 A more detailed account of the firm's history is given in Magee, “Technology,” 167–76.

53 GD 311/1/8: 30 Aug. 1864, Alexander Cowan and Sons Limited Collection, Scottish Records Office [hereafter cited as Cowan Collection].

54 GD 311/1/8: 5 March 1867, Cowan Collection.

55 GD 311/1/9: 16 July 1867, Cowan Collection.

56 GD 311/1/9: 20 Aug. 1867, Cowan Collection.

57 GD 311/1/10: 30 Oct. 1882, Cowan Collection.

58 CD 311/1/10: 1 Jan. 1883, Cowan Collection.

59 Pavitt, Keith, “Patent Statistics as Indicators of Innovative Activities: Possibilities and Problems,” Scientometrics 7 (Jan. 1985): 77–99.CrossRefGoogle Scholar

60 See, for example, Sindall, R.W., Bamboo for Papermaking (London, 1909), 7.Google Scholar Fear of a depletion of wood supplies were even appearing in the mid-1880s. Paper Maker's Circular (10 Dec. 1886): 400.

61 Board of Trade Journal, Sept. 1895, XIX, no. 110, 333.