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A Study of Small Business Failure: Smith & Griggs of Waterbury

Published online by Cambridge University Press:  24 July 2012

Theodore F. Marburg
Theodore F. Marburg
Affiliation:
Head of Department of Economics and Business Administration at Hamline University
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Abstract

Historians have recorded some of the more spectacular failures in American business, but the subject of business failure in itself has not been intensively studied. To lay the groundwork for such a study, the experience of individual firms should be examined in detail and attention should be directed to small as well as large business units. The history of Smith & Griggs provides an example of “discontinuance” which came about not as a result of a single catastrophic event but by a process of long-time attrition involving every phase of the company's operations.

Type
Research Article
Information
Business History Review , Volume 28 , Issue 4 , December 1954 , pp. 366 - 384
Copyright
Copyright © The President and Fellows of Harvard College 1954

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References

1 There have been a number of recent historical studies of firms that failed or came so near to failure that they were absorbed, e.g.: Williamson, Harold F., Winchester, the Gun that Won the West (Washington, D.C., 1952)Google Scholar; Hutner, Frances C., “The Farr Alpaca Co.: A Case Study in Business History,” Smith College Studies in History, XXXVII (1951)Google Scholar; Passer, Harold, “E. H. Goff, An Entrepreneur Who Failed,” Explorations in Entrepreneurial History, I, No. 5 (May, 1949), pp. 17–25Google Scholar; Sweezey, Allan R., “The Amoskeag Manufacturing Company,” Quarterly Journal of Economics, LII, No. 3 (May, 1938), pp. 473–512CrossRefGoogle Scholar; Larson, Henrietta M., Jay Cooke (Cambridge, 1931).Google Scholar

2 One study of discontinuances indicates that only 28 per cent were failures in the legal sense. (Heilman, Ernest A., “Mortality of Business Firms in Minneapolis, St. Paul and Duluth, 1926–1930,” Bulletin of the Employment Stabilization Research Institute, II, No. 1 (May, 1933).Google Scholar This limits the usefulness of careful studies of the causes of bankruptcy such as Sadd, Victor and Williams, Robert T., Causes of Commercial Bankruptcies (Washington, Government Printing Office, 1932).Google Scholar

3 This article summarizes data pertaining to failure assembled as part of a more complete history of the Smith & Griggs Manufacturing Company, scheduled for publication in the New York University Press Business History Series, edited by Professor Ralph Hidy. In the early stages of the larger study assistance was received from a grant made by the Committee on Research in Economic History to Professors Kent Healy and Harold F. Williamson, for study of entrepreneurship in nonferrous metals manufacture. Acknowledgment for constructive criticism is due these men as well as Professor Arthur H. Cole, chairman of the above committee, and Professor Leland Jenks.

4 Because corporations were not at that time authorized to hold stock in other companies, the parent firm designated trustees to acquire and hold the Smith & Griggs Manufacturing Co. stock for its benefit.

5 For preparation of source and application of funds statements the author is obliged to Professor Carl L. Nelson, C.P.A. These were prepared from reconstructed income statements and from the corporate records. The reconstruction of income statements was carried out by Peter Reding with guidance from Dr. Philip W. Bishop.

6 Dean, Joel, Managerial Economics (New York, 1951), 11.Google Scholar

7 A. Stein & Co. to Smith & Griggs Manufacturing Co., 7 Nov. 1908. This letter, and all others not otherwise designated, is from the Smith & Griggs collection on deposit at the Yale University Library.

8 C. J. Haley & Co. to Smith & Griggs Manufacturing Co., 27 Oct. 1910.

9 Smith & Griggs Manufacturing Co. to George Frost & Co., 1 Sept. 1916.

10 Smith & Griggs Manufacturing Co. to W. T. Robinson, 20 Aug. 1912.

11 Smith & Griggs Manufacturing Co. to George Frost & Co., 18 May 1917.

12 Smith & Griggs Manufacturing Co. to A. Stein & Co., 7 Jan. 1918.

13 A. Stein & Co. to Smith & Griggs Manufacturing Co., 18 Jan. 1923.

14 Smith & Griggs Manufacturing Co. to W. A. Schaefer Pen Co., 17 June 1920.

15 Smith & Griggs Manufacturing Co. to W. A. Schaefer Pen Co., 19 June 1920.

16 Interview, Elton S. Wayland, 29 June 1948. Since Wayland did not serve on the Smith & Griggs board until 1934, this was based on accounts he heard from his uncle, John P. Elton. The general prevalence, in this period, of boards that filled merely the minimal legal requirements, rather than a policy-making function, is described in Baker, John C., Directors and their Functions (Boston, Harvard Graduate School of Business Administration, 1945), 133 ff.Google Scholar Further studies on the same theme bear out this thesis, e.g.: Copeland, Melvin T. and Towl, Andrew R., The Board of Directors and Business Management (Boston, Harvard Graduate School of Business Administration, 1947).Google Scholar Particularly pertinent as background for the Smith & Griggs problem is, Mace, Myles W., The Board of Directors in Small Corporations (Boston, Harvard Graduate School of Business Administration, 1948).Google Scholar

17 Minutes, Directors' Meeting, 23 Jan. 1933.

18 Minutes, Directors' Meeting, 26 Dec. 1934.

19 The first figure is from appraisal of estate of W. P. Bryan, 2 April 1932; Waterbury Probate Records, Inventory, Vol. 239, p. 110. The lower figure is from Waterbury American, 4 March 1936. This article reviewed briefly the decline of the firm and closed with reference to the decrease in share value.

20 Elton S. Wayland to David C. Griggs, 13 Feb. 1936. From files of correspondence between Waterbury Button Company and Smith & Griggs Manufacturing Co. made available to the author by Mr. H. William Baer, president of Waterbury Companies, successor to Waterbury Button Company.

21 Minutes, Special Meeting of Stockholders, 24 Feb. 1936.

22 Agreement, 9 March 1936.