The information society

Lecture 3

Ewan Sutherland

The second industrial revolution

New industries

New organisational forms

New forms of labour

Managerial enterprise

Capital intensive industries

Unlike traditional labour intensive industries new industries arose with massive increases in economies of scale.

New and enlarged minimum operating efficiency in:

Distribution of world industrial production

Growth of the USA

Large size

Growth of population - net migration gain.

Growth of wealth: relatively even distribution of wealth

GDP per Capita in 1970 prices

Sectoral growth of the workforce of the USA

New communications infrastructure

United States of America

The building and operating of the rail and telegraph systems called for the creation of a new type of business enterprise. The massive investment required to construct those systems and the complexities of their operations brought the separation of ownership from management.

Alfred Chandler (1990), page 1.

American railroad companies

First trans-continental institutions after the Pony Express and the electric telegraph.

New economic order

Andrew Carnegie

Growth by merger

e.g. J P Morgan acquired Carnegie’s steel interests to create US Steel


German chemical industry

Investment in:

Drove down prices.

du Pont de Nemours

Organisational structure of Du Pont de Nemours

The rise of the motor car

No crisis in horse or steam powered transportation.

Development of technological capabilities:

Caught public imagination

Attracted entrepreneurs to:

Attracted individuals to buy, partly through public events:

Henry Ford

You can have any colour you want so long as it’s black.

Frederick W Taylor

The most serious of the delusions and fallacies under which workmen, and particularly those in many of the union, are suffering is that it is in their interest to limit the amount of work which a man should do in a day.

General Motors

In 1921 Ford had about 60 per cent of the total car and truck market in units, and Chevrolet had about 4 per cent. With Ford in almost complete possession of the low-price field, it would have been suicidal to compete with him head on. No conceivable amount of capital short of the United States Treasury could have sustained the losses required to take volume away from him at his own game.

Alfred Sloan (1963) page 69.

Growth of sales at General Motors

GM Divisions

Sears, Roebuck & Company

Miles of railroad tracks run lengthwise through, in and around this building for the receiving, moving ad forwarding of merchandise; elevators, mechanical conveyors, endless chains, moving sidewalks, gravity chutes, apparatus and conveyors, pneumatic tubes and every known mechanical appliance for reducing labor, for the working out of economy and dispatch is to be utilized here is our great works.
100,000 orders filled per day!


Products which don’t come back and customers which do.

Mass marketing

Packaging technologies:

National advertising:

Thomas Alva Edison

1847-1931 Little formal education.

A major inventor:

Edison successfully created research and development along “factory” lines.

A major invention every six months, something significant every week. Thomas Alva Edison
He changed perceptions of R&D worldwide.

American Telephone and Telegraph (AT&T)

Founded by Alexander Graham Bell.

Organisational structure:

A regulated monopoly.

Industrialisation in the USSR

The cost

Though confined to a single state, the number dying is Stalin’s war against the peasants was higher than the total deaths for all countries in World War One.

Robert Conquest (1991) Soviet Studies


United Kingdom

Provincial complacency
... on the whole the local and provincial business notables limited their influence to their trade and their locality. In their own cities and provinces they formed an elite of such high distinction and status that there was neither a need nor a wish to escape from it.

James (1990) page 121.

... by concentrating on lines that exhibited craftsmanship and individual character, consciously differentiated their products in order to secure a degree of monopoly power which permitted them to reap high profits on a relatively small capital and turnover. This, in turn, strengthened their resolve not to increase the scale of their operations beyond that which would have involved the recruitment of managerial talent and financial resources outside the family circle. This policy of product differentiation, sustained as it was by the lack of homogeneity in the domestic market depressed the national rate of economic growth and was partially responsible for the longevity of the small family firm and the slow adoption of corporate capitalism.

Peter Payne (1990) page 34.

Old school ties

... selection to senior positions and to the board depended as much on personal ties as on managerial competence. The founders and their heirs continued to have a significant influence on top-level decision-making even after holdings in the enterprise were diminished ... outside directors were selected as much for family connections and social position as for industrial experience.

Alfred Chandler (1990) page 242.

Socio-economic class

What Weiner has discovered is not so much a decline in industrial spirit as a reaffirmation of the stratified and hierarchical nature of British society. From an economic point of view, the significance of this is that the market confronting British manufacturers was similarly stratified.

Peter Payne (1990) page 34.

Pre-emption in electrical engineering



Organisational governance




Copyright © Ewan Sutherland, 1995.

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