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The Beginnings of “Big Business” in American Industry*

Published online by Cambridge University Press:  13 December 2010

Alfred D. Chandler Jr.
Alfred D. Chandler Jr.
Affiliation:
Massachusetts Institute of Technology
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Abstract

The growth of big business in America in the last two decades of the nineteenth century was primarily a response to the rise of urban markets — a result, in turn, of the spreading railroad network. Then, as a new century began to unfold, the dominant influence upon big business development came to be technological. Discernible patterns of integration, combination, diversification, and administration influenced and were influenced by the rise of huge companies and oligopolistic industries. Price competition yielded to other weapons, and the economy adjusted to make room for the young giants in its midst.

Type
Research Article
Information
Business History Review , Volume 33 , Issue 1 , Spring 1959 , pp. 1 - 31
Copyright
Copyright © The President and Fellows of Harvard College 1959

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References

1 The factors stimulating the growth of the American railroad network and the impact of the earlier construction and operation of this network on the American business economy and business institutions is suggested in Chandler, , Henry Varnum Poor — Business Editor, Analyst, and Reformer (Cambridge, 1956)CrossRefGoogle Scholar, especially chaps. 4, 6–9.

2 Swift's story as outlined in Louis F. Swift in collaboration with Vlissingen, Arthur Van, The Yankee of the Yards — the Biography of Gustavus Franklin Swift (New York, 1928).Google ScholarThe United States Bureau of Corporations, Report of the Commissioner of Corporations on the Beef Industry, March 3, 1905 (Washington, 1905)Google Scholar, is excellent on the internal operations and external activities of the large meat-packing firms. There is additional information in the later three-volume Report of the Federal Trade Commission on the Meat Packing Industry (Washington, 1918–1919). Clemen, R. A., The American Livestock and Meat Industry (New York, 1923)Google Scholar has some useful background data.

3 Report of Commissioner of Corporations on the Beef Industry, p. 21.

4 Some information on James B. Duke and the American Tobacco Company can be found in Jenkins, John W., James B. Duke, Master Builder (New York, 1927), chaps. 5–7, 10.Google Scholar More useful was the United States Bureau of Corporations, Report of the Commissioner of Corporations on the Tobacco Industry (Washington, 1909).Google Scholar

5 The story of Bell is outlined in Gray, James, Business Without Boundary, the Story of General Mills (Minneapolis, 1954)Google Scholar, and of Preston in Wilson, Charles M., Empire in Green and Gold (New York, 1947).Google Scholar

6 The early Singer Sewing Machine experience is well analyzed in Jack, Andrew B., “The Channels of Distribution for an Innovation: the Sewing Machine Industry in America, 1860–1865,” Explorations in Entrepreneurial History, Vol. IX (Feb., 1957), pp. 113–141.Google Scholar

7 Hutchinson, William T., Cyrus Hall McCormick (New York, 1935), Vol. II, pp. 704–712.Google Scholar

8 The major sources of information on combination and consolidation in the distilling industry are Jenks, Jeremiah W., “The Development of the Whiskey Trust,” Political Science Quarterly, Vol. IV (June, 1889), pp. 296–319CrossRefGoogle Scholar; Jenks, J. W. and Clark, W. E., The Trust Problem (rev. ed.; New York, 1917), pp. 141–149.Google Scholar The annual reports of the Distilling and Cattle Feeding Company and its various successors provide some useful additional data, as does the Industrial Commission, Preliminary Report on Trusts and Industrial Combinations (Washington, 1900), Vol. I, pp. 74–89, 167–259, 813–848Google Scholar, and Clark, Victor S., History of Manufactures in the United States (New York, 1929), Vol. II, pp. 505–506.Google Scholar Changes in taxes on liquors also affected the company's policies in the early 1890's.

9 Annual Report of the President of the Distillers Securities Company for 1903.

10 The information on National Biscuit comes largely from its annual reports.

11 Annual Report of the National Biscuit Company for the Year Ending December, 1901, January 3, 1902. References to centralizing of manufacturing facilities appear in several early annual reports. As this was written before Theodore Roosevelt had started to make the Sherman Act an effective antitrust instrument and Ida Tarbell and other journalists had begun to make “muck raking” of big business popular and profitable, the Biscuit Company's shift in policy could hardly have been the result of the pressure of public opinion or the threat of government action.

12 The background for the creation of the United States Rubber Company can be found in Norton, Nancy P., “Industrial Pioneer: the Goodyear Metallic Rubber Shoe Company” (Ph.D. thesis, Radcliffe College, 1950)Google Scholar, Green, Constance McL., History of Naugatuck, Connecticut (New Haven, 1948), pp. 126–131, 193–194Google Scholar, and Clark, , History of Manufactures, Vol. II, pp. 479–481Google Scholar, Vol. III, pp. 235–237. The company's annual reports provide most of the information on its activities.

13 The Fifth Annual Report of the United States Rubber Company, March 31, 1897, pp. 6–7.

14 This and the following quotations are from the Fourth Annual Report of the United States Rubber Company, May 25, 1896, pp. 4–5, 7–8.

15 Clark, , History of Manufactures, Vol. II, chap. 19.Google Scholar

16 The story of the shift from rails to industrials as acceptable investments is told in Navin, Thomas R. and Sears, Marian V., “The Rise of the Market for Industrial Securities, 1887–1902,” Business History Review, Vol. XIX (June, 1955), pp. 105–138.CrossRefGoogle Scholar Government securities were, of course, important in the years before 1850 and during and after the Civil War, but in the late 1870's and 1880's as in the 1850's, railroads dominated the American security exchanges. As Navin and Sears point out, some coal and mining firms were traded on the New York Exchange, but the only manufacturing securities, outside of those of the Pullman Company, were some textile stocks traded on the local Boston Exchange. The connections between the railroad expansion and the beginnings of modern Wall Street are described in detail in Chandler, Poor, chap. 4.

17 Hidy, Ralph W. and Hidy, Muriel E., Pioneering in Big Business, 1882–1911 (New York, 1955), pp. 176–188.Google ScholarNevins, Allan, Study in Power, John D. Rockefeller, Industrialist and Philanthropist (New York, 1953), Vol. II, pp. 1–3.Google Scholar Nevins adds that another reason for the move into production was “partly to limit the number of active wells and reduce the overproduction of crude oil,” Vol. II, p. 2, but he gives no documentation for this statement.

18 Annual Report of the American Agricultural Chemical Company, August 14, 1907 also the same company's Annual Report dated August 25, 1902. In addition to the annual reports of the two companies, Clark, , History of Manufactures, Vol. III, pp. 289–291Google Scholar, provides information. There is a brief summary of the story of the International Agricultural Corporation in Haynes, Williams, American Chemical Industry — A History (New York, 1945), Vol. III, p. 173.Google Scholar

19 The information on the Carnegie Steel Company is taken from Hendrick, Burton J., The Life of Andrew Carnegie, 2 vols. (New York, 1932)Google Scholar, Harvey, George, Henry Clay Frick, the Man (New York, 1928)Google Scholar, Bridge, James H., The Inside Story of the Carnegie Steel Company (New York, 1903.)Google Scholar

20 Nevins, , Rockefeller, Vol. II, p. 252.Google Scholar

21 The experience of the other steel firms comes primarily from their annual reports and from prospectuses and other reports in the Corporation Records Division of Baker Library. A company publication, J & L — The Growth of an American Business (Pittsburgh, 1953)Google Scholar has some additional information on that company. Also, books listed in footnote 26 on the United States Steel Corporation have something on these companies. Two other steel companies listed in Table I made major changes somewhat before and after the period immediately following 1898. One, the Colorado Fuel & Iron Co., established in 1892, quickly became an integrated steel company in the Colorado area. The Bethlehem Steel Corporation was formed in 1904 when Charles F. Schwab, formerly of the Carnegie company and the United States Steel Corporation, reorganized the finances, corporate structure, and administrative organization of the bankrupt United States Shipbuilding Company.

22 Information on the mining companies came from their annual reports and from Marcosson's, Isaac P. two books, Magic Metal — the Story of the American Smelting and Refining Company (New York, 1949)Google Scholar, and Anaconda (New York, 1957), also Clark, , History of Manufactures, Vol. II, pp. 368–369.Google Scholar

23 The story of the leading explosives, paper, salt and coal companies comes from annual reports and also from Beachley, Charles E., History of the Consolidation Coal Company 1864–1934 (New York, 1934)Google Scholar, Love, George H., An Exciting Century in Coal (New York, 1955)Google Scholar, the company-written, The International Paper Company, 1898–1948 (n.p., 1948), William Dutton, S., DuPont — One Hundred and Forty Years (New York, 1940)Google Scholar, and U.S. ν;. E. I. DuPont de Nemours & Company et al. in Circuit Court of the United States for the District of Delaware, #280 in Equity (1909), Defendants' Record Testimony, Vol. I, and for the paper industry, Clark, , History of Manufactures, Vol. III, pp. 245–252.Google Scholar The American Writing Paper Company, though less successful, had many parallels to International Paper.

24 The best brief summary of these mergers and the formation of the United States Steel Corporation is in Jones, Eliot, The Trust Problem in the United Staten (New York, 1924), pp. 189–200.Google Scholar The companies' annual reports and prospectuses provide additional material.

25 Hendrick, , Carnegie, Vol. II, pp. 116–119.Google Scholar

26 The beginnings and the operation of the United States Steel Corporation are outlined in Berglund, Abraham, The United States Steel Corporation: A Study of Growth and Combination in the Iron and Steel Industry (New York, 1907)Google Scholar, Cotter, Arundel, The Authentic History of the United States Steel Corporation (New York, 1916)Google Scholar, Tárbeli, Ida M., The Life of Elbert H. Gary, the Story of Steel (New York, 1925).Google Scholar

27 This generalization is based on the annual reports of the several companies.

28 As is well described in Passer, Harold C., The Electrical Manufacturers (Cambridge, 1953).Google Scholar

29 The development of new lines by Allis-Chalmers, International Steam Pump, and American Locomotive is mentioned in their annual reports in the first decade of the twentieth century. International Harvester's similar “full line” policies are described in McCormick, Cyrus, The Century of the Reaper (New York, 1931), chaps. 6–9Google Scholar, and United States Bureau of Corporations, The International Harvester Co., March 3, 1913 (Washington, 1913), especially pp. 156–158.Google Scholar

30 Hidys, , Pioneering in Big Business, chap. 3 and pp. 323–388.Google Scholar

31 Schumpeter, Joseph A., “The Creative Response in Economic History,” Journal of Economic History, Vol. VII (May, 1947), p. 151Google Scholar, and also his Theory of Economic Development, trans. Redvers Opie (Cambridge, 1934), pp. 74–94.

32 This point has only been considered briefly here, but has been developed at some length in my “Development, Diversification and Decentralization,” to be published in a book of essays tentatively titled The Postwar American Economy under the sponsorship of the Department of Economics, Massachusetts Institute of Technology.