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Modern Business Enterprise as a Capital-Saving Innovation

Published online by Cambridge University Press:  03 March 2009

Alexander J. Field
Alexander J. Field
Affiliation:
Actin Academic Vice President, Santa Clara Uhiversity, Santa Clara, CA 95053.
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Abstract

The introduction and diffusion of what Alfred Chandler called modern business enterprise had a profound capital-saving impact on the American economy. Given the availability of the railroad and telegraph, purchasing more managerial labor services paid off principally via increased speed of production and inventory turnover, which spread costs of holding capital over a larger volume of output. This article challenges the consensus that nineteenth- and early twentieth-century technological change in the United States was overwhelmingly labor saving and interprets the factor-saving bias of modern business enterprise as representative rather than anomalous.

Type
Papers Presented at the Forty-Sixth Annual Meeting of the Economic History Association
Information
The Journal of Economic History , Volume 47 , Issue 2 , June 1987 , pp. 473 - 485
Copyright
Copyright © The Economic History Association 1987

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References

I thank participants in the Organizations and Innovation session at the EHA meeting and seminars at Berkeley, Stanford, and the University of Michigan, Ann Arbor for their comments. Special thanks to Paul David for correcting an error in an earlier version of the paper. Responsibility for the argument is, of course, my own.Google Scholar

1 Chandler, Alfred D. Jr, The Visible Hand (Cambridge, Mass., 1977).Google Scholar

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3 For references to this literature, see Field, Alexander J., “Land Abundance, Interest-Profit Rates and Nineteenth Century American and British Technology,” this JOURNAL 43 (06 1983), pp. 405–31.Google Scholar

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6 William Lazonick has explored, in effect, the potential of modern business enterprise to raise utilization rates among production workers. See Lazonick, William, “Work Effort, Pay and Productivity: Theoretical Implications of some Historical Research,” (unpublished manuscript, 1984).Google Scholar

7 Labor-using, in the sense that managerial labor, like production labor, is a cost that the owners must pay.Google Scholar

8 Chandler, The Visible Hand, p. 229.Google Scholar

9 Nordstrom is an upscale specialty retailer, with salespeople trained to match customers quickly with merchandise they will wish to acquire. Price Club is a discount operation that manages to turn over its entire inventory once every two weeks on average (an annual rate of stockturn of 26).

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