2 BB - Why did Big Business become so important and why did...

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“Why did Big Business become so important and why did the modern business organisation develop so differently in the United States and Britain?” (Essay TT08) (Comment on anti-trust law development holding company laws in US; development of finance/stock markets; limited holding companies; some more UK comparisons with US; note Hannah (1966). Transaction costs (Coase, 1937) and (Williamson, 1981) should play key role; as should economies of scale and scope; other issues include problems of distribution by mass production; role of telegraph; challenges to size of organizations to management (review of structure); access to capital and stock markets; cultural factors; geographical (natural resources) and demographic (population) factors - key phenomenon of last centuries; overpowered market mechanisms; Chandler (1977) “visible hand of management replaced Adam Smiths invisible hand of market forces”; multinationals, transactions, rise of salaried employees (Chandler, 1977) -1800 rarely any middle managers; in very little time such a massive institution evolved; definition – contains many business units and managed by salaried execs; lack of concrete literature about growth - mass distribution under one roof; Ronald Coase (1937) Nature of the Firm article addresses concept of transaction costs; why, given that we can produce without orgs, do we have them? Production internally erases transaction costs; Williamson (1980) developed theory further - limits to transaction costs, “decreasing returns to the entrepreneur function” (Coase, 1937) initially advantages but eventually decreasing returns will kick in; some firms have been downsizing in recent years - particularly in America, 1840 not many big businesses; eventually it was realised that visible hand of management was more effective than the invisible hand of market forces; Micklethwait (2003) notes rise of Sears from a hobby to a modern corp. - railroads vital; metaphor/symbol; examples of first big business; America borrowed concept from Britain; Micklethwait (2003) suggests railways directly responsible for creation of stock exchange because of demand for capital; railways ignited investor culture - emergence of retail markets; wholesalers; modern mass retail; new ways to reduce costs and technology; integration occurred mainly for commodities (Williamson, 1980) communication lines; - technological advances accompanied the increases in activity and productivity; Chandler (1977) notes tech advances allowed for increased production, distribution and transport; mergers and acquisitions - line production system by Carnegie made BB inevitable; although Ford first to make it, Carnegie exploited it “the larger the scale of operation, the cheaper the product” - differences between American and UK; Britain reluctant to accept concept; failed to capitalize on it and exploit; Mickelthwait provides two reasons 1; history and family firm preference 2; strong prejudice against BB; England felt no need for it; eventually the transition emerged and on a larger scale; vertical intergration was less
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2 BB - Why did Big Business become so important and why did...

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