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Vertical Disintegration in Lancashire: A Comment on Temin

Published online by Cambridge University Press:  03 March 2009

Michael Huberman
Michael Huberman
Affiliation:
Associate Professor of Economics, Trent University, Peterborough, Ontario, Canada K91 7B8.
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Type
Notes and Discussion
Information
The Journal of Economic History , Volume 50 , Issue 3 , September 1990 , pp. 683 - 690
Copyright
Copyright © The Economic History Association 1990

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References

2 Temin, Peter “Product Qulity and Vertical Intergration in the Early Cotton Textile Industry,” this JOURNAL, 48 (12. 1988), pp. 891–907Google Scholar

2 H. Lazonick, William, “Industrial Organization and Technical Change: The Decline of the British Cotton Industry,” Business History Review, 57 (Summer 1983), pp. 199–200.CrossRefGoogle Scholar

3 The standard analysis of the managerial constraint and firm expansion is T. Penrose, Edith, The Growth of the Firm (Oxford, 1980).Google Scholar Sydney Chapman gave an early version of the Penrose effect in cotton: “We may lay it down as a rough approximation to the truth that in each industry and branch of an industry a typical magnitude tends to be attained. Where this magnitude is surpassed the waste involved in defective supervision begins to counterbalance the economies of further specialization.” J. Chapman, Sydney, The Lancashire Cotton Industry (Manchester, 1904), p. 168.Google Scholar For a more recent statement on the Penrose effect, see Lloyd-Jones, Roger and Lewis, M. J., Manchester and the Age of the Factory: The Business Structure of Cottonopolis in the Industrial Revolution (London, 1988), pp. 206–7.Google Scholar

4 Temin, “Product Quality,” p. 893.Google Scholar

5 “Reports of the Inspectors of Factories,” Parliamentary Papers, vol. 22 (1842), pp. 370–99.Google Scholar For a detailed study of the 1841 survey, see Gatrell, V. A. C., “Labour, Power, and the Size of Firms in Lancashire Cotton in the Second Quarter of the Nineteenth Century,” Economic History Review, 30 (02. 1977), pp. 95–139.Google Scholar

6 A. Farnie, Douglas, The English Cotton Industry and the World Market, 1815–1896 (Oxford, 1979), P. 303. Fine yarn is defined as counts above No. 60.Google Scholar

7 Cowell's, John survey of 1833 is reproduced in Andrew Ure, The Cotton Manufacture of Great Britain (London, 1836), vol. I, pp. 334–42. My calculations are based on the 144 firms listed in Ure. Temin added 21 firms from the original survey, but the estimation results of the larger and smaller samples do not differ greatly. The estimation results of columns 2–6 in Table 3 are for the smaller sample. In his estimation Temin used the number of spinners to capture the size of firm effect. Because the 1841 sample gives only the total number of workers (spinners and weavers) in integrated firms, I have re-estimated the model for 1833 using total workers. For 1833 the number of spinners and workers are highly correlated (R2 = 0.86).Google Scholar

8 Following Temin's orginal model, column 6 reports the estimation of the 1833 survey using spinners as a measure of the size of firms. The coefficients have the predicted sign, although the spinner coefficient is significant at the 0.15 level. In general, the estimation of the reformulated model for 1833 using spinners does not perform as well as teh model with total workers. This may be the result of using data for the three towns only to estimate the reformulated model.Google Scholar

9 Butterworth, Edwin, Historical Sketches of Oldham (Oldham, 1856)Google Scholar; and sources cited in Foster, John, Class Struggle and the Industrial Revolution (London, 1974), p. 230.CrossRefGoogle Scholar

10 For the 1833 and 1841 samples firms were grouped into four categories: firms with less than 100 workers; 100 to 199; 200 to 299; and greater than or equal to 300 workers. The actual values of 1833 were compared to their expected values, which were calculated using the distribution of firms found in the 1841 sample. The calculated chi-squared statistic is 9.18 with three degrees of freedom. The null hypothesis that there was no difference between the two samples could not be rejected at the 0.025 level of confidence.Google Scholar

11 Rogers, H. B., “The Lancashire Cotton Industry in 1840,” Transactions and Papers of the Institute of British Geographers, 28 (1960), pp. 135–55.CrossRefGoogle Scholar

12 Easy access to capital encouraged the entry of specialized firms after 1850. Alfred Marshall's views on specialization are summarized in Lazonick, “Industrial Organization,” p. 200;Google Scholar and Farnie, D. A., “The Structure of the British Cotton Industry, 1846–1914.” in Okochi, Akio and Yonekawa, Shin-Ichi, eds., The Textile Industry and its Business Climate (Tokyo, 1982), p. 59.Google Scholar For an assessment of the external economies of specialization, see Lee, C. H., “The Cotton Textile Industry,” in Church, Roy, ed., The Dynamics of Victorian Business (London, 1980), pp. 172–80.Google Scholar Lee rejected transportation and organizational factors and argued instead that after 1850 demand for yarn stabilized and it was no longer necessary for spinning firms to expand into weaving. Recent research has raised doubts about Lee's view that integration was a defensive strategy. S. Lyons, John, “Vertical Integration in the British Cotton Industry, 1825–1850: A Revision,” this JOURNAL, 45 (06 1985), pp. 419–26.Google Scholar

13 Lazonick, William H., “Industrial Relations and Technical Change: The Case of the Self-Acting Mule,” Cambridge Journal of Economics, 3 (09. 1979), pp. 231–62.Google ScholarHuberman, Michael, “How Did Labor Markets Work in Lancashire? More Evidence on Prices and Quantities,” Explorations in Economic History, 27 (forthcoming, 01 1991).Google Scholar

14 Farnie, English Cotton, p. 297.Google Scholar

15 Chapman, Stanley D., The Cotton Industry in the Industrial Revolution (2nd edn., London, 1987), p. 25.CrossRefGoogle Scholar

16 Chapman, Lancashire Cotton, p. 163, wrote that integration “implies a minute knowledge of machinery and hands, of what they can do, and of the stage to which the work in hand has rogressed; a knowledge which is seldom consistent with the management of very large works.” Real wage patterns are consistent with the managerial constraint hypothesis. Between 1833 and 1849 real wages of overseers in Manchester remained stable, but wages of spinners fell. For wages, see Wood, G. H., The History of Wages in the Cotton Trade During the Past Hundred Years (Manchester, 1910), pp. 14–15.Google Scholar For price index, see the Rousseaux index in Mitchell, B. R., Abstract of British Historical Statistics (Cambridge, 1962), p. 471.Google Scholar

17 Lee, “Cotton Textile Industry,” p. 177.Google Scholar

18 Chapman, S. J. and Ashton, T. S., “The Size of Businesses, Mainly in the Textile Industries,” Journal of the Royal Statistical Society, 77 (04. 1914), p. 501.CrossRefGoogle Scholar

19 The methods of supervision in spinning and weaving had implications for the regional organization of the industry. An alternative way of monitoring workers was to use the threat of dismissal. The threat was more likely in weaving because it demanded a larger proportion of unskilled operatives. But to enforce the threat, firms required an excess supply of labor. After 1850 weaving became increasingly concentrated in northern Lancashire where there was a surplus of young adults and women workers. Farnie (English Cotton, pp. 295–301) gives evidence to support the view that weaving firms migrated north to tap the excess supply of workers. Integrated and weaving firms in the south could not attract workers because labor was immobile, as evidenced by the persistence of wage differentials (ibid., p. 296).