5 - Networks and the evolution of government–industry relations to 1860

Summary

Business behaviour is conditioned by a combination of external institutional forces and by the social and cultural environment of which they are part, which are, in turn, conditioned by historical factors. These influences, by affecting the expectations and attitudes of businessmen, themselves fashion the culture of individual firms leading to significant international variations in business behaviour. The firm embedding of family-owned cotton businesses in the social networks of local communities helped to give these businesses their distinctive characteristics and is reflected in the striking national and intranational differences in the ante-bellum period and also in the political behaviour and relative political power of interest groups.

Business decisions are not, therefore, the result just of the price mechanism but are also affected by both laws and that complex array of rules, formal and informal, which determine human behaviour. Moreover, if the expectations and responses of businessmen are shaped by the institutional environment in which they operate, their changing responses and sometimes their efforts to evade laws may also impact upon the development of the legal system and rules associated with the conduct of economic activity (North 1990: 3–8). This is because laws, whether they relate to property rights, inheritance, the status and regulation of firms or commercial policy, are not formed in an historical vacuum. Instead, they are the product of responses to changing conditions and to the interaction between governments on the one hand and business groups and other interested parties on the other. They may also be a response to particular pressures and events.