Business History

BUSINESS HISTORY

Why do firms and businesses operate the way they do today? To find out, we

study the history of business. In order to better understand the direction that

business is going in the future.

The three most important events:

- First industrial revolution c. 1750-1875

- Second industrial revolution c. 1875-1945

- Third industrial revolution c. 1945 - today

How much did our ancestors earn?

Income per person, BC 1000 – AD 2000

How did the west get rich?

- Common measures of richness: Output per worker (GDP per capita) or

income per person

- Simple answer to the question: We mechanized used machines to

produce a lot and sell it cheaply

entrepreneurial right

- All thanks to people in the environment

Supply and demand diagram What pushes the supply curve outward?

Technological progress!

So the real questions are:

What fosters technological progress?

1)

Explains why some countries grew rich

What prevents its diffusion?

2)

Explains why some countries remain poor

What fosters technological progress?

1) Encourage entrepreneurial people to take action

2) Help them to funding to conduct research and development (R&D)

3) Secure them the profits of their efforts (patents, monopolies, etc)

4) Make sure they have access to labour

5) Make sure the labour has the necessary training/education

6) Offer entrepreneurs the infrastructure needed to access raw materials

7) Offer them infrastructure to reach large markets (national and international)

8) Expose them to competition so that they keep improving themselves

9) But protect them during early phases of development

First Industrial Revolution, after c. 1750 Europe: England and Germany

Second Industrial Revolution, after c. 1875 North America (thanks to their

public role)

Third Industrial Revolution, after c. 1945 Japan and the Asian tigers (thanks to

public and private funding)

Countries which were open to globalization were much more successful.

CHAPTER 1

Modern economic growth since c. 1800 (Kuznets 1971) – why?

• Studied from the perspective of the key players: firms and businesses

massive

• Crisis of 2008 witnessed the effect of business on society

When why

• and did firms and business become so powerful?

long

• To find out, we study the evolution of firms (mostly in capitalism)

Modern economic growth (by Kuznets, nobel prize winner): Who are the main

responsible players in the hockey stick development?

Micro and Macro

Micro macro

(firm) and (nation) are polar opposites in some sense:

• Business history witnessed a strong relationship between the two

• The main character is the large enterprise that often dominates its

industrial sector

• nation firm

Book’s unit of analysis the rather than the individual

• However: large enterprises sometimes dominate a country’s industry

• One company might even determine wealth of a nation (Maradona)

Examples: Maradona single-handedly helped Argentina to win the world cup in

football, Novo Nordisk’s (medical company) market value is higher than the

Danish GDP.

Industrial revolutions

Industrial revolutions are:

Sharp

• transitions in technological regimes (emergence of electricity)

• capital-deepening

Mainly technical and linked to energy-use and

• Not always well-received when they first emerged

labour-saving

• Potentially thus causing unemployment

robotization Luddite

• Exemplified by and movement

• Long technological paradigm is at the same time both exogenous and

endogenous to the firm

• Technical progress is cumulative

Nowadays automation and robotization represent a threat to human employment.

th

In the early 19 century for example weavers had the same problem (their job

was replaced by machinery). Thanks to new technology new jobs were created.

Entrepreneurs vs managers

• Entrepreneurs: innovate, take risks, and make decisions at the highest