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Research, Patents, and the Struggle to Control Radio: A Study of Big Business and the Uses of Industrial Research*

Published online by Cambridge University Press:  11 June 2012

Leonard S. Reich
Leonard S. Reich
Affiliation:
Assistant Professor of History, Rensselaer Polytechnic Institute
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Abstract

The advent of high-technology industries around the turn of the century created the modern industrial research department and placed a new emphasis upon the search for patentable innovations. While some of this research led to advances in basic scientific knowledge, and much of it produced product or process improvements that were directly applicable to a firm's business, a great deal was undertaken to enhance firms' bargaining powers with each other in order to preserve monopoly positions. In the early years of radio, the structure of the industry changed repeatedly with every innovation in apparatus or circuitry, a situation that led, as Professor Reich shows, to heavy investment in “non-productive” research.

Type
Research Article
Information
Business History Review , Volume 51 , Issue 2 , Summer 1977 , pp. 208 - 235
Copyright
Copyright © The President and Fellows of Harvard College 1977

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References

1 See, Maclaurin, W. Rupert, Invention and Innovation in the Radio Industry (New York, 1949)Google Scholar; Passer, Harold, The Electrical Manufacturers, 1875–1900 (Cambridge, Mass., 1953)CrossRefGoogle Scholar; Enos, John, Petroleum Progress and Profits (Cambridge, Mass., 1962)Google Scholar; Hughes, Thomas, Elmer Sperry, Inventor and Engineer (Baltimore, 1971)Google Scholar; and Jenkins, Reese, Images and Enterprise (Baltimore, 1975)Google Scholar.

2 Quoted in Broderick, John, Willis Rodney Whitney (Albany, N.Y., 1945), 188Google Scholar.

3 Federal Communications Commission Investigation Pursuant to Public Resolution #8, 74th Congress, Docket #1, Exhibit #2112, p. 105. (This is an FCC investigation of the Bell System undertaken in 1934 and published in seventy-seven volumes. Copies are available at the FCC Library at 1919 M St., NW, Washington, D.C. A condensed, one volume report was issued in 1938, then revised and reissued in 1939; see the following two footnotes.)

4 Federal Communications Commission, Investigation of the Telephone Industry in the United States (Washington, D.C., 1939), 189–190Google Scholar. Italics added.

5 Federal Communications Commission, Proposed Beport Telephone Investigation (Washington, D.C., 1938), 212–213Google Scholar.

6 Maclaurin, Invention and Innovation in the Radio Industry, 89, 90.

7 FCC, Investigation of the Telephone Industry, 196.

8 Ibid.

9 Electrical World, October 9, 1915, p. 790; About such pronouncements, Lloyd Espenschied, an engineer in the AT&T laboratory and a participant in the long-distance radio tests, later noted: “[T]he company was fearful that its own success [would] lead the public [to] believe that wires were about to be supplanted by radio, whereby they might sell their telephone stock! So, credit was given to no one, save a blanket commendation of its own workers, and the company began to preach the limitations of radio — the words spread all over creation, were not secret, were subject to interference, only a limited number of stations could operate in the common medium. … So much for the great radio events of 1915 — the company had a bear by the tail!” Quoted from a manuscript titled “Advent of Electronic Telephony,” Box 8, Lloyd Espenschied Papers, Division of Electricity and Nuclear Energy, Smithsonian Institution.

10 Espenschied, Lloyd, “The Origin and Development of Radiotelephony,” Institute of Radio Engineers Proceedings, vol. 25 (September, 1937), 1109Google Scholar.

11 Maclaurin, Invention and Innovation in the Radio Industry, 93.

12 Ibid.

13 Ibid., 85.

14 Danielian, N. R., AT&T: The Story of Industrial Conquest (New York, 1939), 109–110Google Scholar.

15 “License Agreement, General Electric Company and American Telephone and Telegraph Company, July 1, 1920,” Article V, Paragraph 4, Section d,3. In Federal Trade Commission, Radio Industry (Washington, D.C., 1923), 134Google Scholar.

16 FCC Investigation, Exhibit #2112, pp. 27–28.

17 “License Agreement, July 1, 1920,” Article V, Paragraph 4, Section e,l. In FTC, Radio Industry, 135.

18 FCC, Investigation of the Telephone Industry, 209.

19 Archer, Gleason L., Big Business and Radio (New York, 1939), 245Google Scholar.

20 Electrical World, vol. 79 (March 4, 1922), 419Google Scholar. An historian of radio has written: “The least expensive vacuum-tube receiver [1922] was a one-tube set manufactured by Westinghouse and marketed by the Radio Corporation … for $79.50. General Electric receivers employed three tubes and sold for $250. And even at these prices for simple sets, it was a year before suppliers were able to catch up with orders on hand.” Quoted from McNicol, Donald, Radio's Conquest of Space (New York, 1946), 341–342Google Scholar.

21 “License Agreement, July 1, 1920,” Article V, Paragraph 4, Section 2. In FTC, Radio Industry, 134.

22 FCC Investigation, Exhibit #289, p. 78.

23 Banning, William P., Commercial Broadcasting Pioneer: The WEAF Experiment, 1922–1926 (Cambridge, Mass., 1946), 55CrossRefGoogle Scholar.

24 Internal company memo, “Radio Telephone Broadcasting”, quoted in Ibid., 74.

25 Archer, Big Business and Radio, 54.

26 Archer, Gleason L., History of Radio to 1926 (New York, 1938), 276Google Scholar.

27 FCC, Investigation of the Telephone Industry, 388.

28 Ibid., 389.

29 For example, see Radio Dealer, vol. 1 (April, 1922), 30Google Scholar.

30 Maclaurin, Invention and Innovation in the Radio Industry, 114.

31 Banning, Commercial Broadcasting Pioneer, 136.

32 Sales of sets grew rapidly. The gross sales figures for RCA in its first three years in the receiving set market were: (1921) $1,469,000; (1922) $11,286,000; (1923) $22,465,000. Figures from Archer, Big Business and Radio, 139.

33 The 1922 Annual Report, Engineering Department, Western Electric Company (copy at Bell Telephone Laboratories, Murray Hill, N.J.), p. 44, stated: “During the year development work was carried out on receiving equipment and this resulted in the design and manufacture of a number of different types of receiving equipment. The types of receiving sets which have been designed cover the whole field efficiently and we are in a position to meet any reasonable commercial demand.” On the set in the White House, see letters from D. Sarnoff to F. P. Guthrie (April 30, 1924) and to J. G. Harbord (May 19, 1924), quoted in Archer, Big Business and Radio, 143, 145.

34 Archer, Big Business and Radio, 78.

35 Ibid., 25; White, William C., “The Story of Electronics Development at the General Electric Company,” unpublished MS, c.1955Google Scholar (copy at Division of Electricity, Smithsonian Institution), p. x-c-2.

36 Maclaurin, Invention and Innovation in the Radio Industry, 129.

37 FCC Investigation, Exhibit #2112, p. 57.

38 Maclaurin, Invention and Innovation in the Radio Industry, 136.

39 John F. Rider, “Broadcast Receiver Equipment Then and Now: History of Receiver Design”, Radio News (May, 1931), 1072; Eoyang, T. T., An Economic Study of the Radio Industry (Doctoral dissertation, Columbia University, 1936), 75Google Scholar.

40 “License Agreement, July 1, 1920”, Article XIII. In FTC, Radio Industry, 138.

41 Archer, Big Business and Radio, 207–208.

42 DeForest Radio Co. v. General Electric Co., U.S. Circuit Court of Appeals for the Third Circuit, 44 F. (2nd) 931 (1925). This point seems to have been missed by Archer and by those who, like Maclaurin, used him as a source.

43 In fact, the Supreme Court ruled in 1931 that high-vacuum was not a patentable invention and therefore all patents relating to it were invalid. DeForest Radio Co. v. General Electric Co., 283 U.S. 664.

44 FCC Investigation, Exhibit #2112, p. 30. The AT&T revenues for this service amounted to over $28,000,000 between 1926 and 1935.

45 Danielian, AT&T, 127.

46 FCC Investigation, Exhibit #2112, p. 20. Italics added.

47 For example, R. A. Heising of AT&T applied for three patents on modulating circuits within a year, one of which he acknowledged to be a minor modification to that of another AT&T researcher. See R. A. Heising patents 1,137,315; 1,199,180; and 1,343,562. Heising's, statement in “Modulation in Radiotelephony”, Institute of Radio Engineers Proceedings, vol. 9 (1921), 316Google Scholar.

48 FCC Investigation, Exhibit #2112, p. 2.

49 Maclaurin, Invention and Innovation in the Radio Industry, 155. The license agreement had a further advantage for RCA: it assured that the licensees recognized the validity of RCA patents.

50 FCC Investigation, Exhibit #1946, pp. 15–16. Italics added.

51 FCC Investigation, Exhibit #2110, p. 99.

52 FCC, Investigation of the Telephone Industry, 210.

53 Bartlett, Howard R., “The Development of Industrial Research in the United States”, National Resources Planning Board, Research — A National Resource (Washington, D.C., 1940), vol. IIGoogle Scholar.