Monday, November 01, 2010

Companies Changed the World

I have been reading The Company: A Short History of a Revolutionary by John MIcklethwait and Adrian Wooldridge. The authors make show how recent the development of the modern corporation has been. In 1840 businesses in the United States were all small -- very small by today's standards. On March 6, 1830 only 37 shares of stock were traded on the New York Stock Exchange.

The railroads were the first large corporations, but originally they were not joined in large networks but rather individual lines were run by individual companies. As railroads developed large networks, wholesalers and then retailers began to develop that served larger markets and thus were larger corporations. Still later manufacturing firms began to become larger as they reorganized to achieve economies of scale.

By the first World War the United States economy was dominated by large corporations, and indeed the U.S. economy had come to be larger than those of Britain and Germany combined. Mass production had been invented and corporations which employed huge numbers of people were managed by a cadre of professional managers.

When one thinks of the industrial revolution, perhaps one might also (or better) think of the institutional revolution that replaced the small firm and family farm as the dominant institution of society with the giant corporation.

The evolving global information infrastructure seems likely to change institutions again. Corporations which a century ago were largely located within a single country now include multinational corporations that are difficult for national governments to control. My son works with a small firm, but his fellow workers are not only located in several states, but include a set of programmers in Russia. I volunteer for the Zunia, which has its headquarters here locally, but its programming staff too is located in Russia and its content team is located in Bangladesh.

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